The Hyper-Competitive Retail Environment

The retail industry is one of the most competitive  industries today, placing enormous pressure on the retailers who are  continually striving to reinvent, reinvigorate, and rejuvenate their position  with buyers, who are more informed than ever due to readily available online  resources, long before they enter a brick and mortar store. The same assets  that consumers use to become increasingly informed can and are also being  leveraged by retailers to best become the store of choice to sell their  products – networks and data analytics.

Rise of the Consumer Ninja

The wealth of readily available and free online  resources allows customers to perform advanced reconnaissance by researching  product specifications, product field performance, as well as comparative  product analysis pricing, performance, warranty, and user experience. This  means that consumers are extremely informed before they purchase a product and  often more so than the salesperson. In short, the digital transformation has forever reshaped  customer behavior and the shopping experience, which means retailers must change  to this new shopping environment often by leveraging the very same tools that  created the shopping ninja – networks and analytics –  which allow retailers to create the required digital shopping experience that  today’s consumers want and need.

The digital transformation has forever reshaped customer behavior and the shopping experience, which means retailers must change to this new shopping environment often by leveraging the very same tools that created the shopping ninja – networks and analytics.

Although e-commerce (online) sales are steadily  increasing quarter over quarter, it currently represents less than 10% of total  retail sales in the US, based on the latest data from the US Department of  Commerce. However, over  half of every dollar spent “is influenced  by a digital interaction” showing the growing importance of engaging consumers  along their buying journey before they even walk into the store. Clearly  some form of online presence is absolutely critical to retail success. The  network that interconnects consumers and retailers, directly and indirectly,  ensures a seamless and more effective consumer journey, meaning a retailer’s  network connectivity must be highly reliable, secure, agile and cost-effective.  Being offline for any period of time is simply unacceptable and often  disastrous.

The  Network Is Critical Infrastructure

Network security and connectivity is a critical topic  for retailers and often represents challenges for independent retailers lacking  the necessary resources, skillsets, and expertise that their larger competitors  can maintain. Even with a wealth of resources at their disposal, even large retailers  have been hacked leading to significant challenges, liabilities, and loss of  brand image. As the digital experience is critical to the consumer’s buying  journey that is changed forever, retailers both large and small must ensure  that their network connectivity is highly reliable, available, and most  importantly, extremely secure.

From a strictly network perspective, retailers are  faced with the following rather daunting challenges:

  1. Payment Card Industry Data Security Standards (PCI DSS) compliance
  2. Maintaining highly reliable network  connectivity for various business functions (ex. authorizing and processing  payments)
  3. Maintaining increasingly complex,  multi-vendor network equipment environments (ex. Routers, Firewalls, Encryptors)
  4. Maximizing the ROI for network  equipment purchases, installation, and ongoing maintenance
  5. Delivering  cost-effective, premium network experiences to current and future retail stores
  6. Managing large  numbers of remotes sites and ongoing changes with tight control
  7. Ongoing updates and patching of network  equipment to close security holes that may be uncovered and discovered
  8. Ensuring a highly secure environment to  prevent unauthorized network intrusions

In short, the network is the foundation for retail  digitization and is thus (rightfully) considered critical infrastructure.

Over half of every dollar  spent “is influenced by a digital  interaction” showing the growing importance of engaging consumers along  their buying journey before they even walk into the store.

Distributed Network Function Virtualization (D-NFV)

Network Function Virtualization (NFV) is a relatively  new technology that leverages the software development innovation cycle while  leveraging COTS (Commercial Off the Shelf) x86-based hardware that is available  from a broad, and thus secure, supply chain. What was once implemented in  standalone purpose-built physical platforms (ex. Routers, Firewalls, and  Encryptors) that are interconnected with a nest of electrical and optical patch  cords, is replaced with multiple software-based network functions (ex.  vRouters, vFirewalls, and vEncryptors) that are hosted and run on a single,  common server platform. This results in a far simpler (ex. power, space,  sparing, and complexity) implementation that meets or exceeds current network  requirements and expectations.

Distributed Network Function Virtualization chart

Although software-based (virtual) network functions  can be hosted on a server located anywhere in the world, where the virtual  network function (ex. vEncryptor) is hosted is important so physical server  placement is critical. For example, a retailer concerned with ensuring a highly  secure network would likely want their firewall and encryptor to be hosted  within their premise to ensure a secure connection to the Internet before data leaves their  building (encryptor) and to keep out hackers (firewall). This is readily  achieved with Distributed NFV (D-NFV) that hosts the  required network functions within a customer premise, although it can be  managed and maintained remotely (ex. to rapidly patch a vEncryptor application  to close any uncovered security holes).

Extending best  practices to the network, beyond the point-of-sale, is recommended for  compliance to PCI DSS. This is achieved via  the following recommendations that are best implemented with a D-NFV solution  based on virtual routers, firewalls, and encryptors.

  1. Mandate Point-to-Point Encryption  (P2PE) for all connections
  2. Install a firewall to securely segment  your internal network
  3. Update network appliance software on a  regular basis

There are numerous advantages to migrating from a  standalone appliance-based network function implementation to a simpler and  consolidated D-NFV solution, and is why retailers are seriously considering  adopting this network transformation. Additional benefits related to reductions  in complexity, power, space, and overall costs are at the forefront of D-NFV  discussions, as is the ability to rapidly and remotely patch network functions  (ex. vFirewall) to ensure the most secure implementation is in place on the  live network.

Want to Know More?

The highly attended National Retail  Federation (NRF) annual convention and  EXPO, also referred to as “Retail’s Big  Show”, is being held from January 14 to 16 at the Jacob K. Javits  Convention Center in New York City. To find out how D-NFV allows  retailers to address the many challenges and opportunities of  digitization, visit our partner Acuative, a global provider of wall-to-wall technology  solutions and support for retail chains, in Booth 1575. You’ll learn how to Accelerate Your Digital  Transformation and improve retail business competitiveness with new  technological advancements. You’ll also have the opportunity to test your  driving skills and win prizes in an exciting virtual reality Indy car race game.

We hope to see you there!

The New Digital Divide, 2016 (Deloitte)
Quarterly Retail  E-Commerce Sales, 3rd Quarter 2017, November 17, 2017 (US Department  of Commerce)