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Retailers turn to the cloud as online becomes king

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As retailers race to deliver more unique and personalised customer experiences, the use of cloud, IoT and Big Data will accelerate in stores, online channels and distribution centres. However, one quarter of retailers are still lagging in the process of adopting new technologies and integrating them across operations to enhance customer experience, according to a new report from Vertiv. 

For the report, participants included executives from 50 of the world’s largest retailers, with a combined annual revenue of $953 billion USD in 2017. The study, ‘Into uncharted territory: Retail transformation and its impact on digital infrastructure’, co-sponsored by Vertiv and DatacenterDynamics, revealed a heightened focus on online retail, as businesses transform their digital resources and capabilities to address changes in customer behaviour.

Over the next two years, the amount of data centre space dedicated to online retail – both on-premise and colocation – is expected to increase by 20%, while cloud hosting would increase by 33% to support store applications.

An important part of the retail digital evolution includes a massive transformation of distribution centres. The research suggests the number of distribution centres and warehouses will increase by about 26% over the next two years as retail companies increasingly realign operations to meet consumer demand for online purchasing. The amount of data centre space dedicated to distribution/logistics is expected to increase by 10% and the use of cloud hosting to support distribution will increase by 87%.

“It’s no secret that online retail is driving significant IT investment for retailers. However, as this study makes clear, digital transformation in the retail space is about more than e-commerce,” said Lucas Beran, analyst, data centre infrastructure at IHS Markit.

“Today’s retailers are striving to improve the IT systems in their stores and distribution centres as they pursue impactful customer experiences across all interactions with their brand. More business-critical online, distribution and in-store environments require new approaches to physical infrastructure to increase IT reliability, speed time to market, hold down costs and reduce management complexity,” Beran added.

The survey confirms that more computing power is being moved into stores to support edge computing types of applications providing greater customer immediacy and influencing them at the point of use.

“Retailers today are evolving their stores as a result of changing consumer behaviour and technological advancements,” said Karsten Winther, vice president of sales at Vertiv in Europe, Middle East and Africa.

“Specifically, they are investing to enhance customer experience and influence buyers closer to the point of decision by expanding the IT footprint in stores. This is underlined by our forecast showing investment in stores and distribution will double that spent in the core data centre for the next few years.”

To support their transformation, retailers are adopting new physical infrastructure options that provide higher reliability and are easy and fast to deploy. These technologies are based on standardised, modular designs that are scalable with capacity demand and future-proofed for next-generation technological advances.

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