“Retailers are not known for disruption,” says Rick Terlep of VMware. "They’re not in the business of disrupting the infrastructure. They’re in the business of selling things."
Terlep, along with his colleague Chris Scrudato, shared their thoughts in a session titled “Solving the Problems of the Modern Retailer Through Virtualization” at the VMworld 2012 conference in San Francisco recently. But even if retailers are not disruptive themselves, as Terlep noted, when change happens, retailers have to adapt or they could lose out tremendously.
The change started with the introduction of digital commerce, which made a large selection of merchandise available online, along with detailed information about retailers, and reviews and opinions of other customers. It became easy for consumers to research products and even shop before going to a physical store.
Higher customer satisfaction for online stores
Customer satisfaction for online stores is about 11 percent higher than for brick-and-mortar stores. Amazon claims that they are the highest-ranked retailer ever in terms of customer satisfaction. During the 2011 holiday shopping season, over half of adults used smartphones for purchase decisions. By 2014, experts expect that 90 percent of phones will be smartphones, Terlep said.
Many retailers are unfortunately stuck in the analog era. Some were burned by eCommerce 1.0. Retailers like incremental change, but they’re now selling through multiple channels, or “omni-channel retailing,” and that changes the dynamic greatly, said Terlep.
Omni-channel retailing means seamlessly bringing the digital and physical together. Shoppers now have limitless selection available, price transparency, personalized recommendations, face-to-face interaction with experts, and the ability to examine or try-on products in person.
This is all a very different shopping experience for consumers. For retailers, it requires organizational and technology changes, Terlep said.
Recommendations for the redesign of retail IT
From the technical standpoint, Terlep recommends:
- Production of flexible architectures to enable faster changes that are less disruptive.
- Reducing in-store endpoint count/truck rolls. For example, a virtual point of sale, digital signage, and/or kiosk.
- Creating the ability to access volumes of data near real-time.
From the organizational standpoint, Terlep suggests the following:
- Design a new application with a new look and feel.
- Fulfill the special needs of eCommerce.
- Improve integration between line of business and IT. Retail IT is funded on a project-by-project basis from the line of business. This isn’t as big a problem in retail as it is with other industries.
- Hiring a staff of builders not administrators.