How digitisation of IT infrastructure is transforming the retail industry

John Knuff, Equinix
- Technology - Apr 27, 2017

The proliferation of digital devices and services in the age of the Internet of Things continues to gather momentum at a truly remarkable pace – and the retail industry, like many others, is facing seismic changes as a result.

The rise of disruptive technologies such as Apple Pay, Android Pay and WeChat wallet coupled with consumers’ voracious demand for smart and wearable technologies have brought financial transactions to consumer fingertips in a way that wouldn’t have been imaginable a few short years ago.

Retailers and e-commerce companies must now deal with the rapidly increasing number of consumers completing transactions on their mobile phones via apps and online stores. In the US alone, Forrester projects that the mobile payments market will hit $142 billion by 2019. Meanwhile, according to Adobe Digital Insight, global online sales during the most recent ‘Cyber Monday’ in November 2016 reached $3.45 billion – smashing the previous year’s total by 12.1 per cent.

The benefits to retail businesses are myriad, from driving sales in new markets to enabling direct interaction with customers. But this dramatic shift also brings with it a number of complex challenges – and those slow to react to this rapidly shifting landscape face an existential threat.

Digital pressure

Larger market incumbents are facing stiff competition from lower-cost competitors that have been born digital, for whom online and mobile transactions are the lifeblood of business. Traditional retailers such as Zara and H&M have had to swiftly improve their online offer in order to compete with specialist e-retailers such as ASOS, Gilt and Nelly.

Whether born a digital business or reinvented as one, all retailers face huge pressure to continuously reinvent their business models to keep pace with technological change and consumer demand.

While events such as Black Friday, Cyber Monday and Alibaba’s single’s day festival steal the headlines when it comes to online retail, few understand the real impact these major events, or the general trend towards digital shopping, places on retailers and their IT infrastructure. Alleviating this pressure requires a robust digital infrastructure and a collaborative approach across the digital supply chain that can be hard to achieve for retailers finding their feet in the digital age.

Interconnected ecosystems

It takes a host of elements – mobile, retail, finance, advertising, to name just a few – all working in concert for mobile payments to be processed at the level consumers have come to expect. Retail companies who want to capture the increasing market share of mobile payments have to make sure they have the digital infrastructure in place to facilitate these elements coming together in harmony.

Many retailers are finding the answer to this by moving their digital infrastructure into an ecosystem which accommodates every part of the digital payments supply chain, including network and mobile carriers, cloud service providers, banks, e-commerce providers and programmatic advertising companies. We are seeing a huge upturn in interest from retailers wanting to use our data centres to secure direct interconnection to these disparate players – consolidating and expanding their network.

Because there is no connection more secure than a direct connection, this directly interconnected approach also offers significant security benefits. Bypassing the public internet can eliminate many of the data liabilities which keep company bosses awake at night, while also cutting latency times and boosting infrastructure reliability.

A digital future

Demand for innovation in mobile payment and online retail is only going to grow. With Ovum predicting that by 2019 there will be 1.09 billion mobile proximity payment users globally, companies that fail to respond are putting themselves at serious risk of irrelevance.   

It is easy for retailers to focus on the headline-grabbing aspects of online shopping and digital payment, but the key to long-term sustainable success is a robust, scalable and flexible digital infrastructure – one which allows direct interconnection to key partners and which streamlines and optimises the digital supply chain. Retailers that can move to an ecosystem which provides this will find themselves at a distinct advantage as this burgeoning global trend continues to evolve.

John Knuff is Vice President of Global Ecosystems at global interconnection and data centre company Equinix.

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