App Modernization

Edge in Retail: investment versus expense?

Arron Lock, retail industry go to market lead, EMEA, VMware

The retail sector is experiencing radical change. At the forefront of this is the store – getting consumers back in, gaining back their trust and loyalty and offering them as good an experience as online. But this can be a challenge. The Edge offers real-time access to data processing – ​​leveraging technology, connectivity, and the skillset of an emerging digital workforce, to improve operational efficiency, better understand the customer and deliver targeted storytelling that will unlock consumer value and loyalty over a lifetime.

The importance of Edge to retailers is the basis for partnering with IDC on this free-to-download report – ‘How Retailers Use Edge for the Greatest Benefits Both Inside and Outside of Stores’.

Data-intensive applications that shoppers want

The Edge is fundamental to many of the data-intensive applications that shoppers want. Innovations such as contactless payments, buy online pick-up instore (BOPIS), and virtual try-on apps enabled by augmented reality are some examples. Another increasingly prominent application use is in grab-and-go stores – where products are automatically scanned in a basket and charged as the consumer leaves the shop. Pioneered by Amazon, major UK retailers including Tesco, Aldi, Sainsbury’s, and Carrefour have now got skin in the game.

But it also supports the store operations developments like retail analytics and in-store sensors and cameras to help reduce shrinkage. To give an example of the potential impact of this technology, the 2020 National Retail Survey found that shrinkage is at an all-time high, accounting for 1.62% of the average retailer’s bottom line. That’s costing the entire industry US$61.7 billion per year – cutting shrinkage by 1% would save retailers over $600M per year.

So, is Edge technology becoming ubiquitous? We’ve spoken to more than 100 customers in the last few months and found that it is a priority technology for them, and there are four common areas of consideration retailers are navigating.

Four considerations for Edge in retail

In an era where every penny counts and with many retailers still reeling from the financial impact of the pandemic, it should come as no surprise to find that competition for spending is a recurring theme. The benefits Edge can bring to the store are clear, but its deployment comes at a cost so developing the ROI is critical. This can typically span several business and IT initiatives to bring about a full analysis and leads directly to our second consideration: integration. Highlighted as something retailers are working through, integration is something that needs to be factored in and balanced with other priorities, such is the pace of change across the retail market. Arguably, the brick-and-mortar side of the sector has had to adapt more than any other because of the pandemic and many are still catching up to massive changes in consumer shopping habits and socio-economic behaviours.

Retailers also point to the challenges associated with existing technology stacks. Many already have solutions to manage and track inventory, work with a delivery partner, have security analytics and so on, all from multiple providers. As a result, there is some time and effort going into introducing Edge as a platform, without duplicating existing services or bolting on ‘just another service’. Retailers understandably want their investment in Edge to be right-sized and future-proofed from the get-go. 

Finally, when we talk about the major and massive benefits that the Edge can deliver, we’re talking retail at scale. Yes, it can help individual stores but when extrapolated to every shop in a chain and in every country the potential impact is massive. But the issue of how leveraged their Edge solution can become – and how quickly it can deliver ROI – is the question retailers are looking for answers to.

The good news for retailers is that none of these considerations are unanswerable – especially with the right foundational technology in place.

A major competitive advantage

Retailers using VMware already have a major competitive advantage. Not only do they have a platform in place that can support all applications, but by virtue of doing so, are already primed to support developments and innovations that rely on the Edge to run. It means that retailers only need to extend this foundation across their estate to enable them to have a universal basis for apps, monitoring and maintenance, security, and storage capabilities.

Not only does this address the challenges of scaling and dealing with existing technology stacks, it can also be leveraged to prioritise applications and deployments specific to target shops or other areas in a retailer’s supply chain. It’s flexible and fluid in a way to suit the changing pace and demands retailers face. And because applications can be deployed quickly and seamlessly, it means that ROI is much quicker to be realised, creating something of a self-fulfilling prophecy.

Maintaining competitiveness with Edge

As retail data volumes continue to explode with the growing deployment of 5G and the proliferation of IoT and mobile and video applications, Edge deployments are becoming critical for maintaining competitiveness. IDC forecasts strong growth in retail spend on Edge solutions through 2024. It also predicts that by 2025, top Edge use cases of digital shelves, real-time inventory visibility, robotic fulfillment, and automated checkout will boost retail edge investment incrementally.

You can read more on this by downloading How Retailers Use Edge for the Greatest Benefits Both Inside and Outside of Stores’. Of course, if after reading you have any questions or would like to speak with a member of our team, please contact us at alock@vmware.com

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