Cloud native, Miscellaneous

How Retailers Use Cloud Native Technologies to Capitalise on Existing Physical Assets

Most forward-thinking retailers have an ecommerce side to their business. Offering products for sale online opens up their business to new target markets, extends their reach, increases their revenue and increases their profit.

However, consumer demand has moved on from simply expecting the choice between buying online or buying from a physical store. The more order and delivery options a retailer can offer, the better customers like it. The best way to meet this demand is through an integrated, or omni-channel approach.

One of the leading innovators and proponents of omni-channel retail is Argos, the major UK retailer. It has 850 physical stores, a very popular website and consumer apps. Customers shopping at Argos have several options available to complete their purchase:

  • They can go to their local store, order and purchase their item.
  • They can reserve the item online through Argos’ website or mobile app and collect it in their local store, in many cases on the same day.
  • They can purchase the item online through the website or mobile app and then collect it in their local store.
  • They can purchase the item online and have it delivered to their address – for many product lines, this delivery can be same-day.

Integrating Online and Offline Sales
Central to the process of achieving this integration is efficient, cloud based software systems, that allow sales teams and customers access to real-time stock, sales and delivery information. This drastically lowers the instances of unrecorded sales and inaccurate inventories, ultimately saving time and money in terms of the order fulfilment process.

In addition to cloud based solutions however, the business must be structured as efficiently as possible. The way that Argos approached this is to develop a hub-and-spoke business model.

The hub-and-spoke business model is not new, but Argos have implemented it efficiently and to great effect.

The model involves designating larger stores in the network as hubs. Those hubs carry larger volumes of stock and they feed the spoke stores through a fleet of local vehicles. This enables a much faster movement of stock, whilst allowing smaller stores to carry lower stock levels, and improving the customer’s experience.

Argos has utilised its hub and spoke model, together with its efficient software systems giving very accurate information, enabling them to meet the ever-growing demands and even exceed the expectations of their customers.

Argos is now able to deliver to customer’s homes, often the same-day, 364 days of the year. At the same time, stock levels are reduced, product availability increased, and the customer experience improved, with one customer reporting that their order arrived 2 hours and 45 minutes after purchase. Needless to say, they were impressed.

An Opportunity (and Warning) for Retailers
As outlined above, the benefits of omni-channel retail are huge and Argos’ hub and spoke distribution system together with their cloud based software systems have given significant benefits in terms of increased revenue and improved customer experiences.

Established retailers have a key advantage over their up and coming digital rivals: they have existing physical assets waiting to be taken advantage of. This is exactly how existing retailers should have beaten Amazon. Instead what happened was that Amazon replicated the physical assets of retailers quicker than most retailers could replicate Amazon’s digital assets. This is a dire warning to those still waiting around or hoping that a simple ‘clicks and mortar’ strategy will work - it won’t, because brand is nothing to millennials (or for that matter even to my mum) when compared to fulfillment time.

POS systems based in the cloud enable accurate sales and inventory information, saving time in terms of order fulfilment. A hub and spoke distribution model enables fast delivery between stores and fast delivery direct to customers. The two together increase revenue, by speeding up order fulfilment and improving customer experience. This means that retailers with physical assets and a distribution model have a unique opportunity to increase their revenues by using cloud native technologies. But the window for that opportunity is closing fast as Amazon and other digital rivals encroach into established retailers’ territory. It is to this topic I will turn in my next blog.

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