Diverse choice and higher standards across the board drives IT investment in retail sector

In the early weeks of 2016, the insights we’ve gleaned from discussions with retailers throughout 2015 and especially in recent months suggests increasing commitment to investment in new technologies to keep up with evolving customer demands and industry standards.

Our economy is recovering, and increased consumer confidence combined with lower fuel prices and historically low mortgage rates is expected to mitigate lower disposable incomes. We saw growth of nearly 3 per cent through 2014, and despite a slowdown through 2015, we can expect consumer spending to act as the primary driver of business growth this year.

Taking advantage of this trend with be critical for business success in 2016. The main trends in customer’s expectations are speed and interactivity; retailers get an average of three to four minutes ‘goodwill’ time where purchasing is delayed before customers start abandoning their purchases.

So much choice

BLE beacons have been on the market for a little while now, with early adopters using them to send targeted push notifications to inform nearby customers of deals and promotions in keeping with their known preferences. Interactive digital signage is allowing customers to get full details (e.g. range of colour available) on items just by holding them up to a screen, while cloud-based store management solutions allow data to be handled centrally, simplifying many procedures.

Expanding into new payment technologies has risen to the top of the major action items list for the 85 HQ-level senior executives surveyed, chosen by 46 per cent of respondents to the 24th Retail Info Systems study as a top priority. IP-CCTV systems (online surveillance cameras) in combination with Video Analytics are also expected to be on the rise this year. Capable of both facial and more general recognition, these systems can count, measure speed and monitor direction, letting a retailer pick out all sorts of customer behaviours as well as offering more sophisticated loss prevention.

Some of these solutions are already well established, but they’re likely to see more widespread use in the coming 12-18 months, being picked up by mainstream retailers who’ve seen the benefits these systems afforded to early adopters. With so many options available, the biggest challenge for retailers in 2016 is likely to be finding the right solution and integrating it with their existing situation.

Retailers aren’t alone

We expect increasing reliability and complexity to lead to more retailers upgrading and rolling out new solutions and upgrading existing provisions alongside experienced service providers. To date, some of the most explosive growth has been made by companies in partnership with service providers, with Pep & Co’s unprecedented opening of 50 stores in 50 days being handled in partnership with Barron McCann.

Being able to draw on the wealth of experience possessed by a service provider with comprehensive experience in the application of new technology to the relevant business sector can greatly enhance the planning process. Retailers may find themselves introduced to new solutions of which they weren’t aware, or warned off potential problematic systems they’d been considering. Retail technology systems is an increasingly specialised field which is somewhat removed from the normal demands of running a retail business, and using a service provider saves the often substantial costs of generating this expertise and knowledge internally, e.g. through training.

While planning is critical, one of the biggest practical benefits of using a service provider is to let someone else deal with the complexity of installation. This we anticipate to be in demand throughout 2016, in light of current trends. In particular, expansion across multiple sites is a strong theme in the retail world right now, with German discount chains Aldi and Lidl having lodged 93 and 78 new store planning applications respectively. The growth of new locations and especially locations which differ in format can increase the complexity of installation considerably. Combine this with the need for different devices for different purposes, and integrating all of this new technology into day-to-day running can be a real challenge.

Protecting the bottom line means protecting customers

All businesses handling card payments are required to comply with PCI DSS regulations or face substantial penalties for losing card data while out of compliance, meaning that some retailers face the challenge of particularly complicated upgrades. In order for a pin entry device (PED) upgrade to comply with PCI DSS regulations, every device must be logged on arrival from the manufacturer, traced through every change of hands and verified on install. There’s also a requirement for decommissioned devices to be recorded as such on removal.

Engaging a service provider to roll out a PCI PED upgrade on behalf of one’s business deals with all of these issues in the most elegant way possible: by making them somebody else’s problem. Point-to-point encryption (P2PE) solutions, which protect card data from PED to receiving bank, are now required of all retailers. PCI-listed P2PE solutions can greatly simplify the process of PCI DSS compliance by reducing the scope of the cardholder data environment.

PCI DSS 3.1 brought some wide-reaching implications. The update ruled that TLS (the standard Internet encryption protocol, which succeeded SSL) may not be used in new implementations. On the 30th of June, this decision will come into full force and SSL/TLS will no longer be permitted as security controls in any shape or form.

Prevention is better, but the cure should be quick

Where IT provisions are managed by a service provider with broad manufacturer experience, this provides retailers with a one-stop shop for repairs and maintenance, allowing them to define SLAs which are both straightforward and comprehensive. Minimising downtime by e.g. specifying 2-hour fix rather than NBD for business critical systems, like main servers, can prevent substantial loss of revenue, but the opportunity to prevent downtime in the first place is one of the biggest benefits.

A good service provider will assign a committed account manager to any project, who will monitor the business systems’ operations to identify any devices which are at high risk of failure. Analysing e.g. heat, speed, average load levels and fault calls of a server can predict and prevent downtime before business interruptions occur in the first place.

In a fast-paced retail world increasingly characterised by its use of technology, the need for managed rollouts, bookended by the initial surveys and ongoing support which should accompany them, is likely to continue to rise. For a competitive edge in 2016, retailers are likely to focus on improving insight, boosting productivity and increasing security by implementing new solutions, in order to optimise operations and ensure that customers have the experience they’re looking for; the experience which turns a browser into a loyal customer.

Alan Watson – Managing Director, Barron McCann

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