Cloud-Based Innovations Offer Retailers Cheaper Path to Cutting Edge

In a year filled with belt-tightening and challenges, retailers are tapping cheaper cloud-based tech solutions.

From the ongoing Ukraine crisis and supply chain issues to an energy crisis and decreased consumer spending caused by rising inflation, this tough economic period has caused cutbacks and revisions, especially in new tech investments that have been powering their omnichannel transition since the start of the pandemic.

“Many retailers in Europe are coming straight out of two years of COVID so their ability to invest in very large sums upfront into retail IT projects is very limited,” Carsten Wulff, vice president of Europe at LS Retail, told PYMNTS in an interview.

But despite the pressure on their bottom lines and the tendency to tighten the purse strings on digital capabilities, Wulff said hosting IT solutions on the cloud is fast becoming a favorite for many retailers who see the critical role it plays in accelerating their digital transformation.

Read more: Scale up Digital Capabilities Now to Stay Ahead Tomorrow

In fact, he pointed to a growing interest in the retail ecosystem for cloud-based solutions, which he said are less costly and require little to no capital expenditure in IT infrastructure such as hardware or software assets.

The challenge, however, is the concern many brick-and-mortar merchants have around a breakdown in communication lines, Wulff noted.

It’s a concern that LS Retail, which specializes in developing point of sale (POS) and business management software systems for retailers, has been addressing with a hybrid all-in-one cloud software solution that enables clients to stay on the cloud with an in-store backup feature that takes over if connection breaks down. “[With that] you don’t lose data [and] you don’t lose business,” he explained.

And as retailers realize the advantages of migrating their entire data operation to the cloud, many of them are choosing to outsource that need to companies like LS Retail, which operates a software as a Service (SaaS) solution, LS Central, hosted on Microsoft Dynamics 365 cloud.

“Traditionally retailers always wanted to have their data servers or their [IT] infrastructure in-house and under their control. This, of course, is expensive in terms of manpower, and recently also extremely expensive in terms of energy,” he noted, pointing to the benefits the cloud offers beyond simply saving cost.

One of the key advantages he highlighted is protection from fraudulent attacks, a predicament retailers who have been in charge of their own IT operations have continued to endure in recent years.

This trend has made cloud outsourcing something they can no longer afford to avoid to secure their data, pushing it to the top of merchants’ agenda. “For them, it’s an additional benefit if they can outsource the entire security element to someone who is very experienced and professional in doing so.”

Preventing ‘Technology Debt’

Looking ahead, Wulff pointed to sustainable retail and the rise of the circular economy, a popular trend across Europe, as some of the major driving forces that will shape the future of retail.

“It’s necessary for retailers to be able to follow products all the way down to the producers to make sure everything is sustainable and correctly managed all through the production and supply process,” he said.

Resale retail is also booming, he added, and has now moved beyond the secondhand luxury market to include restored furniture and pre-owned machinery and construction equipment that was previously limited to rentals.

Learn more: Third-Party, White-Label Solutions Boost Luxury Recommerce Growth

Another fast-growing trend is the metaverse and the use of artificial intelligence (AI) and virtual reality (VR) to create immersive real-world experiences for online consumers. It’s one that Wulff said fashion retail has been very fast to adopt, transporting the shopping room from the store right onto the screens of customers.

“We are only seeing the beginning of this. It will grow and I expect that when [the National Retail Federation, the world’s largest retail trade association,] opens their doors in January [2023 for Retail’s Big Show], there’ll be all sorts of examples of how to use the metaverse in a retail environment,” he said.

See also: Checkout’s Unattended Future

Overall, scaling up digital capabilities will remain critical to staying ahead and adapting quickly to fast-changing consumer behavior and demands, with Wulff suggesting that merchants who are not yet fully on board start with less sophisticated software solutions that can still get the work done.

“Make sure that you are agile [and] consider [a solution] which is fast, lean and can be rapidly updated, so you don’t build up technology debt,” he said.

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