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Retail Gets Smart

Illustration by Kim Rosen

Remember when comparison shopping meant spending the day in the car, driving from store to store to check prices and features? Today, a shopper can walk into a retail outlet, pull out a smartphone and cross-check cost and product availability at virtually every competitor—not just across town, but around the globe.

Innovations like mobile devices and social media have profoundly altered the competitive landscape in the retail sector. They’ve changed everything: branding techniques, preferred shopping channels, the supply chain, and most of all, consumer behavior. Empowered by a wealth of information and feedback from friends, family and fellow consumers, customers today expect better quality and service. They’re more discriminating, more prepared, and they’re smarter. To remain competitive, your retail strategy must become smarter, too.

Retailers are under pressure to increase sales and build customer loyalty while cutting costs and streamlining operations. Smarter commerce applications, enabled by IBM systems and technologies, give retailers the tools to do just that. IBM Power Systems* servers are workload-optimized systems designed to rapidly handle large volumes of structured and unstructured data, enabling retailers to apply sophisticated analytics to draw insights from the ever-growing volume, velocity and variety of data available in the modern market.

As a result, retailers can source and deliver the optimal merchandise mix and align personalized offers to specialized customer segments, helping cement a strong brand experience. These insights may lead to new sources of revenue as well as improved margins.


Managing the Message

These days, the retail industry is undergoing a transformation to address new customer buying behaviors, technologies and channels. With growing acceptance of e-commerce, competition has risen to unprecedented levels. Consumers now shop through a variety of sales channels beyond brick-and-mortar stores. In the U.S. alone, consumers spend more than $3.4 billion annually on mobile transactions, a number expected to rise to $163 billion by 2015, according to ABI Research. They’re increasingly buying products online, through third-party distributors and gift registries, over the phone and on mobile tablets. Retailers must coordinate and manage transactions and communications across multiple shopping channels to create a single view of customer behavior in order to deliver a personalized, relevant and timely shopping experience.

Before the growth of online and mobile shopping, retailers were largely in control of their brands through advertising, customer-direct communications and the in-store shopping experience. That is no longer the case: Consumers are not only better informed than ever before, they’re also more skeptical of corporate messaging. Surveys suggest a majority of people place more credence in online reviews and social-media recommendations than in retailer communications, no matter the channel (see “By the Numbers”).

“All of these pressures are putting the retailer in a position where they need to not just have access to more data but to really understand what to do with it,” says Marcia Assor, Worldwide Retail Industry marketing manager, IBM Systems and Technology Group (STG).

The Internet hosts a wealth of consumer feedback on nearly every product sold, from social media postings of how easy it was to return a pair of shoes to how poorly a dishwasher dries plates and glasses. This unstructured data represents a trove of information that can be analyzed—in addition to more traditional structured data such as sales and inventory information—to better understand customer behavior and anticipate future buying preferences. Insight from this information helps retailers deliver the products and services that will build brand loyalty and lead to sales growth. “It’s a matter of figuring out what customers want based on past experience, what they might want in the future, and taking quick action. Only then can retailers earn the trust of their customers and build enduring relationships,” Assor says.

The right computing platform and software can harvest insights from this vast wealth of data to proactively deliver timely, relevant offers to shoppers regardless of their preferred shopping channel, while simplifying supply-chain management and vendor relationships. Meanwhile, the system also must ensure the company’s e-commerce site is fast loading, easy to navigate and utterly reliable. And that’s just the start, says Karl Cama, CTO–Retail Industry, IBM STG.

“The other side of it is, once you’ve had that experience, how do I keep you coming back as a loyal customer?” he asks. “This is where we get into targeted campaign management and loyalty programs, just keeping the brand in front of you so that when you begin the process of another purchase, you think of me first.”

He points to a project designed to coordinate location data from mobile platforms with customer profiles and entries on Facebook and Twitter to allow retailers to recognize nearby customers and reach them with targeted offers.

“It could be as simple as you’re driving to a particular destination and you’re going to pass one of my stores,” Cama explains. “How about if I send you an invitation to stop by and have a cup of coffee on me? Maybe I offer you a 20 percent discount if you visit in the next 48 hours. Our systems allow you to structure and deliver those kinds of offers.” The Power Systems platform, for example, can run big data analytics in real time to convert information to insights that may lead to an immediate, personalized customer offer.

For a smarter commerce strategy to succeed, the application requirements must be supported without fail. Order fulfillment and tracking operations have to be reliable and highly available to guarantee order delivery without delay. Standing in line at a brick-and-mortar store, a consumer might wait several minutes if the point-of-sale system goes down before abandoning their shopping cart. Online, where the competition is just a click away, a delay of even a few seconds can result in a lost sale.

“Before, retailers worried only about possible systems outages due to network, power or server failure,” Cama says. “Now, in addition, they need to consider that an overly successful e-commerce campaign and the resulting website volume may be so high that it causes server failure.”

The easy answer is to build a system with excess capacity that can accommodate the type of traffic spikes generated by key shopping days like Cyber Monday, but then those resources sit idle during slower times, dropping utilization levels. Dynamic scalability provides a better solution. “You don’t want to scale up and then remain there,” he says. “You want to handle the situation of the spike, but once that’s past you want to scale back down and redeploy resources.”

With the advancement of mobile and social platforms, applications and workloads are moving to the cloud. Back-office functionality at many retailers is being consolidated and made available via cloud services. The Power Systems platform provides dynamic and rapid provisioning, systems management and scalability to address the most demanding needs of cloud-based services. Leveraging cloud services allows retailers to reduce server sprawl, consolidate software licenses and reduce application footprints. The resulting cost savings provide them with the capability to address today’s dynamic market by rapidly provisioning and deploying targeted campaigns or introducing new services.

PowerVM* enables virtualization provisioning to be automatically adjusted in accordance with preset parameters. The approach helps optimize the use of resources and ensure the system will remain stable during high-traffic periods. At the same time, its virtualization capabilities make it easy to return resources to the pool after the need passes or to provision temporary virtual servers to support a short-term project such as a specialized marketing campaign.

Kristin Lewotsky is a freelance technology writer based in Amherst, N.H.



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