As part of a plan to cut costs by $500 million, Staples says it plans to close up to 225 North American stores by ...
The Web’s Attic
The amount of data that retailers are collecting is creating demand for web-based storage systems that make information instantly available.
Shoppers today want flexibility in how, when and where they shop, and many retailers oblige them with a growing range of online and offline options and services. At retailers who have figured out how to execute these offerings well, this has increased customer satisfaction levels and driven up sales.
It also has created a ton of customer buying data. And that, in turn, has created a booming market for data storage technology-a market projected to grow 30% a year for the next five years. “We’re seeing a lot of storage growth, because companies really want the agility to react quickly to changing business,” says Phil Goodwin, a storage technology analyst with Meta Group Inc., Stamford, Conn.
As retailers learn how customers shop in different channels-and how they shop across channels-the whole area of customer data is emerging as an invaluable tool for perfecting multi-channel strategies. Customer relationship management applications, highly segmented marketing campaigns, loyalty programs and customer lifetime value calculations are only a few of the many different kinds of data that retailers are collecting now that they weren’t a few years ago.
That massive build-up of data is also becoming a major challenge for retailers’ back-end storage systems, many of which were not designed to support the kind of multi-channel shopping activity that many merchants are now experiencing. Storage isn’t sexy, but without it, retailers lose out on a gold mine of information.
Demand from retailers is part of the reason that research and analysis firm Hurwitz Group, Framingham, Mass., projects sales of storage resource management technology to grow a compound annual growth rate of 30% between 2001 and 2005, from $397 million to $1.47 billion.
Much of the data captured by retailers relate to customer buying behavior, showing streams of shopping preferences for individual customers. Retailers mine these data within each selling channel for insight on how to better market products within each selling channel. But to make the most use of the data, retailers need a central storage environment where the data can be combined with data from other channels, including catalog, web and stores.
“This data avalanche has to be centralized and consolidated,” says Liz Thibeault, global manager, retail industry, EMC Corp., Hopkinton, Mass. “There is not a retailer that doesn’t bring up customer data today, and particularly the amount of data coming from online, where it accumulates much faster than offline.” Noting that multi-channel shoppers generate substantially more revenue than single-channel shoppers, retailers recognize a need “for any multi-channel retailer to pull information from all channels,” she says.
The rise of the Internet is what’s behind the rise in data storage needs, analysts say. The Internet has made it possible for retailers to gather extremely detailed information about how their customers shop. And since that information is important to understanding how to relate to customers, it can’t just be analyzed and dumped. It’s all got be stored somewhere. “Web-enabled applications are always hitting servers, and every time you do that, storage is involved,” says Stephen Elliott, research director for storage management technology at Hurwitz Group.
Trends in brick-and-mortar stores are also increasing the importance of storage systems, as retailers move into such developments as self-checkout and self-service kiosks used in several areas, including researching and purchasing products, e-learning programs and job applications. These are trends that will continue, causing data to grow at an increasing rate, says Brian Slaughter, manager of retail industry storage systems for Dell Computer Corp., Austin, Texas, a major provider of storage hardware systems as well as a big user of storage to supports its own online retail operations. “Information will drive retailers’ business more than ever before,” he says.
A tripling in capacity
The demands for storage are growing so rapidly that retailers are taking more than just incremental leaps as they boost their storage capacity. Sears, Roebuck and Co., for example, tripled its data storage capacity earlier this year to 140 terabytes from 45 terabytes. The increase allows Sears to better manage data among several applications, enabling it to more tightly integrate data on customer buying behavior with point-of-sale data and inventory data. “The result is that we can better correlate various data points and improve our decision-making about assortments, promotions, margins and inventory,” says Jonathan Rand, director of merchandise planning and reporting at Hoffmann Estates, Ill.-based Sears.
Effective data storage systems require more than just larger capacity, however, and retailers are beginning to recognize and demand greater interoperability among their storage servers.
If retailers can organize data on an integrated infrastructure of storage hardware and software, experts say, they can reduce the cost of managing information while increasing the amount of data they can manage.
Sorting though the alphabet soup of options, though, can be daunting. For starters there are SANs- storage area networks-that companies use for extensive storage capacity. SANs, which can be networked via the web, tap the power of multiple storage servers. For specifically storing fixed content, such as customer receipts and medical prescriptions, there is content addressed storage, or CAS. Then to make all that data work together, SANs and CAS applications can be combined in automated network storage-or ANS-platforms.
Learning from history
The combination of these technologies in an ANS platform, such as from EMC Corp., can play a key role in maintaining multi-channel retailing strategies. For example, product pricing can be updated on one server and replicated to multiple servers in real time, so that each channel can have instantly updated information. The same advantage in real-time multiple server updates is also used at retailers like Home Depot Inc. in employee training and support systems, which can distribute updates in product specifications to salespeople on the floor as well as to back-office managers.