Since 2020, digital transformation in the retail industry has accelerated as consumers quickly pivoted to touchless or digital shopping due to the global COVID-19 pandemic. This sudden shift in consumer behavior left some retailers scrambling to accommodate these changing IT requirements, or in some cases, resulted in retailers going out of business due to inability to adjust. These instances are reminders that successful digital transformation requires foundational infrastructure that can quickly interconnect existing and emerging technologies to meet changing customer needs.
For retailers who are trying to accelerate their digital transformation, a flexible, vendor-neutral network architecture is crucial. At Equinix we believe digital transformation for retailers begins with deploying digital infrastructure, exchange, and edge interconnection hubs in strategic locations to increase their digital advantage. As illustrated in the diagram below, the following retail use cases are highly dependent on this strategy:
How digital business connects
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Transformation of the retail industry
In the new post-COVID world, the goal of retailer digital transformation is to provide optimal user experience through seamless transition across multiple omnichannel purchasing experiences. In these new use cases, combination of customers’ data and real-time visibility into supply chain status and current inventory is becoming ever critical.
In order to enable this type of real-time response, digital infrastructure must have the agility to adopt to spikes in network traffic that are not just seasonal but are long term and ever increasing. Traditional brick and mortar stores that have hundreds of locations and use a main data center that houses all the company’s data find that this infrastructure model no longer works. Given the amount of traffic growth today, this type of network architecture is not sustainable as it creates latency issues and has a negative effect on application performance, and thus, user experience.
The key to becoming an agile retailer is the fast access to distributed networks and consumer data processing/analysis at the edge. In other words, instead of data being housed in a centralized location, data processing should be moved to where customers are. Localizing traffic flow and applications at the edge, or where customer data is generated or consumed, improve both cost and performance. In addition, retailers need direct and secure interconnection with multiple business ecosystem partners to exchange applications and create new value for their customers.
Deploying digital infrastructure with interconnection hubs
Retailers can place regional interconnection hubs in Equinix International Business Exchange™ (IBX®) data centers close to consumers at the edge for fast access to retailer’s ecommerce and contactless payment platforms using low-latency private connections. They can also directly and securely access dense ecosystems of network, cloud, SaaS, financial services and supply chain partners on Platform Equinix®. According to the fourth annual Global Interconnection Index (GXI), wholesale and retail businesses’ private interconnection bandwidth capacity will grow 35% annually between 2019 – 2023.[i]
With Equinix Fabric™, they can aggregate virtual connections to multiple service providers leveraging software-defined interconnection through a single physical port, enabling significant savings on networking costs. And Equinix Internet Exchange™ allows Internet and network service providers to peer consumer IP traffic for greater scalability.
Equinix Fabric also interconnects on-premises databases adjacent to cloud platforms in hybrid multicloud architectures that support real-time, cloud-based analytics. This allows retailers to gain greater visibility into customer buying behaviors, while enabling new online purchasing and home delivery services. Retailers can also bolster their mobile presence on Platform Equinix, quickly developing and delivering applications with partners that provide relevant, timely and personalized content/offers in an easy-to-consume, reliable format.
National grocery chain steps up its digital transformation
A prime example of retail transformation is a U.S. grocery chain with more than 28 brands that embarked on the digital transformation of its IT infrastructure to improve its customers’ overall in-store and digital shopping experience. During the pandemic, the retailer also needed to improve its online shopping and home delivery services. To accomplish this, it merged two critical projects of unifying and optimizing its network infrastructure and operations across all brands. This meant migrating hundreds of its 1,500 applications to the cloud to better capture and analyze customer interactions to transform their shopping experience.
Equinix and World Wide Technology (WWT) worked together to replace the retailer’s legacy MPLS network with a Cisco® SD-WAN to connect its more than 2,200 retail stores via regionally distributed Equinix Fabric™ interconnection hubs on Platform Equinix (see before and after diagrams below). The retailer expanded its network, internet and cloud interconnection capacity from single providers to multiple networks, ISPs and clouds. It then moved more than 50% of its applications to best-in-class cloud/SaaS providers, enabling agility and a consistent user experience across all of its brands and stores.
The Equinix and WWT solution brought all of the retailer’s brands under a unified network that optimized and simplified operations and store integration, increased its bandwidth capacity for greater performance and reliability, and reduced overall IT and network infrastructure costs.
Centralized, Legacy MLPS Network Architecture
Modern, Distributed Network Architecture
Retailer Wing On modernizes its data-driven business
Wing On Group of Department Stores is one of the oldest retailers in Hong Kong, serving the city for over 110 years. Wing On needed to build a digital edge, looking to facilitate its transformation with a hybrid cloud model.
Wing On chose Equinix to host its business-critical data and applications, with access to an ecosystem of partners and providers to help it accelerate its digital transformation. The ease of provisioning connectivity to major cloud service providers (CSPs) via Equinix Fabric provided agility and flexibility, and alleviated concerns about vendor lock-in.
With Equinix, Wing On deployed its hybrid cloud architecture using the interconnection services available in the Equinix IBX data center in Hong Kong to consolidate connectivity between applications hosted in public clouds and on-premises. With Equinix Fabric, Wing On easily integrated its ERP, loyalty program and POS systems, while maintaining high-performance connectivity between its systems. The retailer significantly improved its up-time and reduced its latency between its cloud based and on-premise applications, resulting in a better customer experience, and has realized an overall cost savings of over 60% with its hybrid multicloud approach.
Wing On’s Digital Transformation on Platform Equinix
These use cases show how retailers can build and interconnect digital infrastructure, exchange and edge locations to accelerate their digital transformation and accommodate customers’ changing needs.
Learn more about optimizing your network and accelerating your retail digital transformation with Equinix Fabric.
Learn more about connecting with Internet and network service providers via Equinix Internet Exchange to enable peer consumer IP traffic for greater scalability.
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Consumer Retail Playbook | Equinix Whitepaper
[i] Global Interconnection Index, Volume 4, a market study published by Equinix, September 2020.
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