Retail Digital Transformation and Network Intelligence

Posted by on May 9th, 2018
May 9th, 2018

With the rise of e-commerce and well-publicized troubles among so many traditional players in the retail landscape, it is sometimes tempting for technophiles to think that in-store retail is a vanishing species. However, the facts and recent developments belie that outlook. E-commerce was only 9.1% of U.S., retail sales in 2017, and is projected to grow to 12.4% by 2020. In the UK, online retail is a larger proportion—at 12% by the end of 2016 and growing at a 10% or greater rate per year. Meanwhile, Amazon, the leader in e-commerce in western countries, has been busy building its in-store presence and expertise with the acquisition of Whole Foods and new experiments such as the Amazon Go retail concept store. However, whether in-store or online, digital is a reality that affects retailers profoundly. To quote a March 2017 Forbes article, “Retailers are no longer selling things. They’re selling the experience of buying those things.” Consumers expect retailers to provide instant, coordinated, automated and personalized shopping experiences in an omni-channel fashion. Retail digital transformation is a major challenge and the focus of much investment across the retail industry today.

What Exactly is Retail Digital Transformation?

Most retailers (at least those who have a prayer of surviving) have launched and maintain e-commerce websites and mobile apps. Retail digital transformation refers to the omni-channel integration of digital technologies for the in-store customer experience. This means that customers can have seamless experiences that, for example, could start with an e-commerce website, transition to a mobile app that helps find items in physical stores with the help of IoT location beacons, and then end in a mobile device, digital point of sale kiosk or via sales associates roving equipped with digital check out.

How products are delivered is a significant element of the omni-channel experience. Customers not only want to be able to browse, choose, identify inventory and buy-in variable online and in-store interaction flows, but they want to be able to arrange in-store pick-up or delivery in a flexible manner. Walmart’s hundreds of new, automated pickup towers are a great example.

Walmart pickup towers for online orders
Figure 1: Walmart has installed hundreds of pickup towers in retail stores for fast pick up of online orders.

There are many other examples of the transformation of interactions with retail customers. These include in-store mobile app modes which present information that is contextual to a particular store location. Another example is real-time coupon and loyalty program offers via mobile app and social media when a customer is near a retail business’ brick and mortar stores. As part of retail transformation initiatives, many retailers are moving towards a mobile-first stance, where new digital technologies and functionality are released first to mobile apps.

Vodafone is building new digital fitting room retail experiences in conjunction with Spanish clothing retailer Mango and JogoTech, where shoppers can utilize digital-mirror systems to request different sizes and colors, see related accessories or alternate outfit choices, and add them in real-time to their shopping carts.

Retailers in-store experiences
Figure 2: Retailers are building more digitally enabled in-store experiences.

And experiments with new technologies such as augmented reality are also playing a part in making the retail experience more engaging by offering deeper messaging that corresponds to physical signage.

The Challenge of Delivering Digital Experience

No matter which retail channel customers engage through, speed and responsiveness are critical to digital experience. Just as a retail customer interacting with an e-commerce website will abandon a cart if response times stray above the 2-second line, the user experience that drags when attempting inventory location, gaining customer service or a digital check-out in a brick and mortar store will create costly friction for in-store conversion. Digital experience is not just a point of competitive advantage for retail business; it is an existential matter.

However, delivering that sort of snappy digital experience isn’t trivial. Modern e-commerce websites and mobile apps are already tremendously complex and rely on a large constellation of apps, services, infrastructure and networks—a majority of which are out of the direct control of retail IT teams. Multiple third-party providers play an integral role in every digital customer experience, such as Internet, CDN, DNS, DDoS security, IaaS, SaaS, and cloud API gateway providers. Specifically, many retail Point of Sale (PoS), e-Commerce and marketing technology solutions from the likes of SAP, Oracle, Microsoft, Demandware and Marketo are now SaaS-based.

With retail digital transformation, that constellation grows larger and more complex. Mobile apps enabled with location now provide real-time data to retail systems. In-store IoT beacons must communicate seamlessly to back-end systems that then must curate big data and machine learning-driven recommendations to digital mirrors and mobile apps. Social media, coupon offers and inventory notifications must present immediately.

Successful omni-channel experience requires aggressive on-boarding of new technologies and platforms. In 2017, Target acquired Grand Junction, a technology platform that came with a supply chain of third-party carrier partners and allows selection of the fastest and most efficient carrier, to help Target enable same-day delivery service. Target also purchased Shipt, a technology platform with a network of personal shoppers who pick-up goods and deliver them door to door.

The availability and performance of any of these apps, services, providers or the multiple Internet networks and paths that connect them can dramatically impact digital experience.

Cloud Blindness Syndrome

Unfortunately, traditional approaches to IT operations visibility have been left in the dust by the move to the cloud. Passive monitoring techniques such as network packet captures, SNMP device polling and network flow telemetry work fine within the four walls of infrastructure owned and operated by IT, but flatline outside of those walls. The simple reason is that it’s simply not possible to collect passive data from networks and infrastructure owned by other organizations, like all those third-party networks and SaaS providers. Even APM technology, which serves an important role in managing digital experience, is limited since you can’t inject APM code into SaaS software or third-party API endpoints. Making things worse is the fact that the Internet itself is a highly unpredictable, shared infrastructure that functions on a fragile chain of implied trust. Internet routing and DNS are prone to disruptions caused by human error or malicious intent, as in the case of the Amazon Route 53 DNS outage that was caused by a BGP hijack. In too many cases, retail operations are blind to their digital supply chain that stretches across the Internet.

Speaking of the Internet, retail digital transformation is also spurring a move to hybrid WAN architectures where stores are getting direct Internet access (DIA) connections to enable better performance from cloud and SaaS resources. Often, those DIA connections are funneled through a secure web gateway (SWG) provider such as Zscaler. This means that instead of traditional WAN links that are highly predictable, retail locations will rely on highly unpredictable Internet paths transiting multiple ISP networks to the SWG, then to each of multiple SaaS or cloud IaaS providers. As my colleague Angelique Medina so elegantly titled her recent article, Toto, We’re Not on the WAN Anymore.

To point out an obvious but often overlooked issue that goes along with these Internet-based dependencies is the fact that assuring service and resolving problems in a cloudy and hybrid WAN world requires a fundamental change in operations procedure. In the historical scenario where IT-owned and operated everything, it was possible for you to “find” problems within that owned domain, then “fix” them with a turn of a screwdriver, some typing on a CLI or some clicking on a UI. In the cloud, the operations team often can’t directly fix the problem. This means that you have to move to an “evidence and escalation” process, whereby operations teams must assemble enough evidence to identify which of a multitude of providers is the source of the problem or can intervene to solve a problem, present the evidence in a fashion that overcomes plausible deniability on the part of the provider and spurs action until the issue comes to resolution.

Network Intelligence Helps Retail Digital Transformation

This is where Network Intelligence from ThousandEyes comes in—-it’s data, technology, algorithms, visualization that all adds up to the ability to see, understand and improve connected experiences everywhere. That means from every user to every app, like from your customers to your websites and mobile apps, or from software processes to cloud APIs. It means seeing across every network path, from your branches, data centers and cloud VPCs to every app, SaaS or API endpoint. It gives you the ability to understand to which provider to escalate a problem, and the evidence from the app layer down to network metrics and Internet routing to make those escalations stick and gain resolution. If you’re embarking on retail digital transformation, we’d love to explain how we’ve helped 18 of the 20 top SaaS, five of the six top U.S. banks, and 55 of the Fortune 500 including large retailers to deliver exceptional digital experiences. If you’re a techie, start a free trial. If you’re an executive and would like to get a walkthrough by our experts, request a demo.

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