From the Warehouse to your House: How Interconnection is Transforming the Retail Supply Chain

Matthew George

Cyber Monday sales this year broke all records to become the biggest single shopping day in US history, with customers spending $12 million (£9.2 million) per minute at its peak. US shoppers spent a total of $9.4 billion (£7.21 billion) on Cyber Monday, a 19.7% increase from $7.9 billion (£6.06 billion) in 2018, according to figures from Adobe Analytics1. This was driven by a massive late-night shopping peak between 10pm and 2am where shoppers spent $2.9 billion (£2.2 billion) – nearly a third of the entire day’s spend. In Europe, spending is forecast to be the highest in the UK, with a growth of about 3.4% on the previous year, totaling around £8.56 billion during this year’s Black Friday weekend.

To continue this success, and maximize these sales, companies must prepare their commerce platforms for a significant uptick in both web traffic and digital payments, ensuring all the different moving parts are working together seamlessly, to provide the optimum consumer experience. Traditional bricks-and-mortar stores must also prepare for a spike in payments as customers flock to high streets on a bargain hunt. Indeed, the ‘death of the high street’ may seem like an empty threat should you venture out to your local shopping center between Christmas and New Year.

It is imperative that retailers prepare for this surge in customers both online and instore by implementing robust, scalable digital infrastructures, or else they run the risk of decreased sales, dissatisfied customers and significant reputational damage. This is because legacy, siloed enterprise IT deployments will struggle to keep the supply chain in sync with the increasing expectations of the digital shopper.

The retail transformation

Equinix customer RELEX Solutions helps retail businesses digitize and improve their competitiveness through localized merchandise assortments, enhanced use of retail space, accurate stock forecasting and replenishment, and optimized workforce planning. This is all delivered via a SaaS solution that their customers can leverage from dispersed locations.

Having a complete overview of a store’s operations is crucial – particularly during the holiday shopping period – because there is an incredibly high turnover of products in both traditional bricks-and-mortar retailers and online only e-commerce platforms. A comprehensive end-to-end category management strategy, from initial insights all the way to point of sale, ensures retailers are constantly stocked with the ‘must have’ festive products and therefore don’t lose revenue to better-prepared competitors.

To enhance the speed at which they could gather, process and analyze data for tangible business benefit, and to ensure this could be reflected in real-time on their platform, RELEX Solutions leveraged an interconnection-first approach on Platform Equinix™. Initially operating out of Equinix’s HE6 International Business Exchange™ (IBX®) in Helsinki, the company’s ambitious growth plans saw them expanding their services into the U.S., which in turn gave them the opportunity to expand their deployment with Equinix.

As part of its expanded global rollout, the company developed a digital edge strategy on Platform Equinix™ to establish a roadmap leading to greater use of cloud services. The shift placed strategic control points next to users, clouds and networks, enabling the business to have a truly global reach.

RELEX Solutions now bases its U.S. operations out of two Equinix IBX data centers: Dallas (DA7) and Atlanta (AT1). Both data centers combined Performance Hub®, which features direct access to Equinix Cloud Exchange Fabric™ (ECX Fabric™) with Data Hub™ to specifically address the robust management tiers of data.

Not only does the deployment provide increased business agility with the means to quickly onboard new customers, it also strengthens business continuity through the ability to distribute operations across multiple sites, and gives a clarified future roadmap, simplifying their customers access to cloud services.

Perhaps most importantly, RELEX Solutions’ partnership with Equinix allows store managers to accurately plan shifts, maintain backroom and front-of-store products and plan deliveries from suppliers, to maintain the smooth operation of their store throughout the entire festive retail period, regardless of the number of shoppers.

Paying at the Edge

In addition to leveraging retail management solutions, companies need to make sure they have a robust and scalable digital payment infrastructure. For e-commerce platforms, if payments systems and website load times are working efficiently, spike periods such as cyber Monday and Black Friday can be a hugely advantageous sales period. If managed badly, they can be an administrative nightmare.

Multinational credit card and payment service provider Barclaycard, which processes almost £1 of every £3 spent in the UK, claimed this year’s Black Friday was their most successful yet. The company stated that transaction value was up 16.5% compared with last year, with the total volume of transactions up 7.5%. Barclaycard also noted that Cyber Monday got off to a strong start, with transaction volume up 6.9% on 2018. This increase in payments is now expected to continue throughout the holiday retail period as customer spending peaks.

This rise in payments is alluded to in the Global Interconnection Index Volume 3, an annual market study published by Equinix, which predicts that interconnection bandwidth across the retail and wholesale sector is expected to grow at a 68% CAGR between 2018-2021, to 473 Tbps.

This rapid growth is being driven by customers in both e-commerce and traditional high street retail, interconnecting all aspects of their supply chain in a digital ecosystem at the edge – close to major retail hubs where there are vast quantities of data being produced, processed and analyzed.

Leveraging an interconnection-first approach in this way gives a competitive business advantage because it allows companies to not only increase their speeds of data transfer, but also scale up during spike periods for digital payments.

Interconnection can also help to cut enterprise IT costs. According to an independent survey of 1,143 IT decision-makers across EMEA, two out of five use interconnection to reduce the cost of connectivity. The same number of IT professionals also use interconnection to improve security – this is all-important when handling huge swathes of highly sensitive financial data.

Digital payments require a huge amount of real-time collaboration across mobile networks, banks, retailers and fraud protection services – this is a complex process with many moving parts. Interconnecting all these moving parts within the walls of an Equinix data center means partners can all work together seamlessly whether their data is stored on site or in the cloud, to provide real-time payment solutions and seamless integration to websites.

Optimizing your network

It’s not just traditional high street retailers that are struggling with rapid digitization, even dedicated online retailers are caught out by the converging trends of electronic payments, mobile networks and the cloud. To mitigate these challenges, there has been a noticeable uptick in the number of companies coming to Equinix to leverage hybrid, software-defined models that give a choice of cloud and network service providers.

At Equinix, we sit at a crossroads where networks, clouds and enterprises meet, affording us a unique perspective of the developing trends and resulting infrastructure changes across the retail industry. No longer can companies rely on outdated digital infrastructures that don’t offer flexible solutions. They must begin to review their IT infrastructure and ensure they have what it takes to stay relevant.

Read more on how retail organizations can leverage a marketplace of ecosystems: Consumer Retail Playbook.

 

1) Adobe Data Shows Record Cyber Monday with $9.2 Billion in Online Sales, Adobe Blog, 12/02/2019

Matthew George
Matthew George SME/Senior Manager: Enterprise Solution Marketing: EMEA