“The future of retail is literally in our hands,” The Retail Collective’s Juanita Neville-te Rito told the crowd at a recent seminar hosted by Microsoft. She was, of course, referring to the smartphones, iPads and tablets that come paired with almost every customer we see in a retail outlet these days.
The usage of hand-held hardware by shoppers has really dominated the debate over digital, and what it means for retail. We’ve become very hung up on how integrated our website is with our business as a whole, whether we can effectively utilise beacons and how we can use customer data combined with technology to push a sale in an innovative way.
The real story, however, is what is happening in the back end – the cloud-based apps that are allowing small businesses to utilise services once only available to large corporations, reducing cost and giving increasing access to ever-widening markets.
Clouds on the horizon
So what is the cloud anyway? To tell this story we need to don a pair of flares, jump into our Tardis and head back, way back, to the 1970s. In the hallowed halls of IBM, Remote Job Sharing (RJE), is becoming an increasingly popular term, and platforms are being developed to facilitate this.
Hop forward to 1990, where telecommunication companies are slowly replacing point-to-point dedicated data connections with Virtual Private Networks (VPNs). This new, more cost-effective model allowed remote users to send information securely across a shared, public network, as if they were directly connected to the private network. This is a model we are pretty much used to today, but 25 years ago it was as mind-blowing as an illegal rave.
Quick now, register your .com business domain and hop into the 2000s. This is really when the cloud as we know it was born. In 2008, NASA’s OpenNebula became the first open-source software for building private, public and hybrid cloud networks. It is considered to be ‘Infrastructure As A Service,’ and allowed users to construct a virtual location where information could be stored without being anchored to a physical server.
This was superseded in 2010 by OpenStack, a Nasa-backed project assisting businesses operating cloud-based services on standardised software. Developments in this area picked up speed, with IBM and Oracle launching new frameworks in 2011 and 2012, and with access to ever-increasing bandwidth, Wi-Fi becoming commonplace, and smartphones more prevalent, cloud-based services slipped effortlessly into everyday life.
If you use OneDrive to store files, Dropbox to share files or any Adobe product, then you use ‘the cloud’.
What’s that got to do with the price of fish?
Quite a lot, actually. Especially when the price of the fish you sell at your local premium grocery outlet is affected by your own overheads. Let me offer you an example.
Jim the fisherman spends three days in Hauraki Gulf, and manages to land himself some marlin. When working out the price he needs to take it to market at, he factors in the depreciation cost of his boat, fuel, additional resources needed at sea like food and fresh water, storage costs and the cost of his own time. He also has to factor in things like the amount of money he pays his accountant, the running cost for his website, any advertising he does and the price of a stall at the wholesale market.
Jane the fishmonger goes to market to buy some fish. She wants marlin as it’s premium and popular. But the amount she can afford to pay for the marlin is affected by her outgoings, such as the cost of her store, website and advertising, staff, accountancy fees, fuel, depreciation on her hardware and running costs like electricity. Those costs are high, but there is a maximum amount her customers will pay for even the best fish, and Jim’s unit price – affected by his own outgoings – is too high for Jane. She goes back to her store with hoki, and Jim’s marlin goes unsold.
Now imagine that Jim sells his fish wholesale direct via his website, and has switched out his accountant for software like Xero or MYOB on demand. He is able to update his website via his cloud-based stock inventory software on his smart phone, an hour out from the harbour. The price is good because his overheads have been reduced.
Jane gets a tweet alerting her to Jim’s website update. She checks the price and likes what she sees. She puts in an order for her units and drives to the harbour to meet Jim – cutting Jim’s storage, fuel and marketplace costs. She collects the fish, Jim’s accountancy software sends her an invoice, her accountancy software pays it, and Jim’s stock inventory system updates his website.
Meanwhile, Jim is having a well-deserved beer, and Jane is selling her marlin to a local restaurant owner for a tidy profit.
“The huge benefit of the cloud is that you can reach customers anywhere, from anywhere,” says Sally Gordon, senior brand and communications manager for Spark. “Businesses who recognise the reach that they have will prosper.”
“Historically, applications were ‘on premise’, tied to hardware – and they were a big investment for three to five years,” says David Masters, managing director of Flow Software.
“Cloud-based apps can offer costs savings. If you are maintaining apps on premise you have storage costs, database management expenses, you have to pay staff to maintain the infrastructure – not to mention the initial outlay. Cloud-based apps reduce the need for hardware or infrastructure, so the cost of cloud applications can be cheaper than the traditional price.”
This has meant that small businesses like Jim and Jane’s can become really professional and streamlined, accessing SaaS [Software as a Service] propositions in the area of accountancy, stock management, warehouse management, logistics and even digital store frontage at an affordable price, where previously these professional services were only available to the big boys.
“Accessing cloud-based SaaS products also means a company may not be as tied to their investment,” says Masters. “You can buy an app without any additional costs, and if after a couple of months of using it you find it isn’t right, it’s easier to move to something else. This has given businesses a wider degree of choice and control, and introduced competition in the market that has driven down price.”
Connecting with customers
“Where I see customers doing great things is when they think beyond the borders of their own town. They begin to think of themselves as a global brand,” says Gordon.
The ability to expand your business outside your geographical location without a huge investment is revolutionising the face of retail in New Zealand, particularly in the provinces.
“Ecommerce has meant that it doesn’t really matter where you are physically anymore, you can access a wide customer base,” says David Masters.
“Businesses who recognise the reach that they have will prosper,” says Gordon.
But while larger enterprises and younger, more tech-savvy start-ups have definitely embraced this philosophy, it’s true to say it’s taking a bit more time for existing regional SMEs to get to grips with change. Spark has attempted to address this for its customers by introducing local business hubs in provincial areas.
“We encourage our customers to get a website, optimise it, keep it up to date and be responsive,” says Gordon. “People are less forgiving these days. If it’s hard to buy from you they will go elsewhere.”
This can all be quite daunting for many small business owners. Going back to Jim, our fisherman, the thing we haven’t told you is that he’s 65, has lived in Leigh his whole life, and until a year ago he could barely work the microwave.
“Spark local business hubs have been designed to answer the questions people don’t know how to ask,” says Gordon, acknowledging that many very good small businesspeople are also complete technophobes. “We use language our clients will understand.”
Spark has 28 hubs around New Zealand to support local small businesses. It launched this endeavour three years ago so it could engage more small businesses on a face-to-face level, and encourage them to invest their money wisely. It offers a tool provide businesspeople with a roadmap to make their business more digital and access cloud-based offerings.
“A lot of businesses think about the cloud in terms of storage,” says Gordon. “But it has many more applications. We curate this information and present it to our clients in an easy to understand way, and we also offer a suite of apps and plugins through commercial partnerships with software companies like putty products and Xero.”
What’s your cloud strategy?
If you went out and launched a business today, it’s likely that you would purchase a complete suite of cloud-based products, and structure your business around the streamlined offerings that have been made possible by cloud technology.
“The reality is that most businesses are transitioning,” says Flow Software’s David Masters. “And that is a real challenge. Integration is very important to those businesses as you need your cloud-based software to work seamlessly with your on-premise software and hardware to keep your business working smoothly.”
However, businesspeople who want to begin using cloud-based apps shouldn’t panic, think it is too hard or imagine they need to replace everything. Transitioning can be done gradually, at a pace that suits your businesses’ needs and fiscal retraints – but it does require a strategy.
“The cloud isn’t just a buzzword, it’s in widespread use, but a complete transition will take time,” says Masters. “You need a plan to move from where you are to where you want to be while maintaining business continuity.”
Spark local business hubs find many of their clients have big concerns about moving to the cloud.
“Security is a big issue,” says Gordon. “Plus there are the cost implications of moving from paper to cloud. In the past people have paid out big money for consultancy services and web design and it has not been right. The knock on effect from those decisions has resonated for some time.”
However, the benefits of integrating cloud based technology can’t be emphasised enough.
“Imagine you sell t-shirts,” says Masters. “And you sell through online marketplaces like Amazon and Trade Me, because they are easier to find and give you global reach. But every time you alter the price or colour, you need to update it in six different places. Well, there’s an app for that. An app that can pull all those different sites together so you only need update your product information in one place.”
Then of course, there are warehouse management and delivery issues.
“More and more retailer are not holding any stock, but using 3PL and 4PL providers instead,” says Masters. “Their stock sits in a warehouse, waiting to be shipped once an order has been placed.”
Masters says that the use of cloud-based apps to streamline businesses, and the cost efficiency of those apps themselves, means that many small business are able to launch, even in the most remote locations, with minimal overheads.
“It’s possible you could have a couple of people sitting in a room in Motueka with just a couple of computers, buying goods from China and selling them globally,” says Masters. “They never even come into contact with their product, or their customers – every aspect of the business is outsourced and managed by apps.”
Social media is another area that causes transitioning businesses stress, says Gordon.
“Many businesses don’t use social media, and have a minimal online presences,” she says. “They are working too hard on the day-to-day business and feel they can’t keep up with the demands of Facebook or Twitter. But they need to keep an open mind, and engage with what is happening online.”
“At Spark we’re not going to stand still. Change is still on the horizon,” says Gordon, who bellieves SMEs have a real oportunity in this new digital landscape. “The internet of things, Uber, these weren’t even part of our vocabulary a year ago. Small businesses need to keep on top of these tech trends, they need to embrace the change to come.”
This story originally appeared in NZ Retail magazine issue 745 August/September 2016