Vertical Markets

Data challenge

by Mark Rowe

Data management is a whole new challenge for troubled high street brands going online; writes Alan Back, Director, Data Continuity Group.

The grim predicament facing the UK high street needs no introduction. Insolvency specialist Begbies Traynor recently predicted a rise in uncertain futures for retail chains, with a worrying tally of 140 on its ‘critical watch list’. This means that they are unlikely to survive, in their current form at least, during the next year.

‘In their current form’ is a noteworthy phrase. It is certain that the high street will not continue to exist in its traditional guise. Even if Mary Portas’ valiant efforts are successful there will still be a dramatic change among the survivors. There can be no doubt that alongside their bricks and mortar outlets, retailers will be increasingly reliant on online sales or even an integrated high street and e-presence.

Online is clearly the place to be. According to recent Capgemini data in spite of an overall decline in retail sales last year online shoppers’ baskets brimmed at £8bn in the peak month of December, which was up 16.5 per cent on the previous year. Capgemini has also said that growing numbers of retailers are launching or expanding online businesses, a sentiment echoed by Joshua Bamfield, director at the UK Centre for Retail Research.

“It’s the bricks and mortar sector that has by far the largest online market share and also highest growth,” said Bamfield. “Smaller niche retailers and chains are a particular online growth area as technology has made it far easier for them to move online. But what they don’t always appreciate is that the online business model is quite different to their norm.”

Traditional retailers should be a degree cautious. By going online, their business, infrastructure investment and reliance on data will evolve dramatically. This is evidenced in data from the IT recruitment company Greythorn showing a staggering 89% increase in new online retail IT roles in 2012 over 2011. These roles were particularly in web development – the online ‘front end’ – but retailers should take heed that their back office is also due to go boom.

Data as asset

As a data management company we have experienced consistent outgrowth of forecasted data capacity and management requirements among our retail customers. Despite having realistic data retention policies in place, the exponential rate at which online retail is driving collection, creation and replication of valuable data means these have to be redefined on a wholly different scale. Data is a compelling and evolving asset for retailers, arguably now the most valuable of all. As McKinsey recently predicted, a retailer using big data to the full (analysis of large complex datasets for customer insight) could increase its operating margin by as much as 60 percent.

But for retailers, aiming to simply store all of the valuable online data they collect and create is a big challenge. The cost quickly becomes untenable and gaining access to data once created, for analysis or customer service for example, becomes more difficult if data is not managed. The onset of increased online trading means retailers must pay as much attention to their back office data management as they do to their online shop window. Firm data management policies ensure that accessibility of data is balanced against cost of storage and access requirements. It’s vitally important that technology and security professionals are collaborating with business functions to ensure data is managed to its optimum effectiveness. Quite often the business functions don’t have a view of what data they are accessing in order to evaluate what data is important and equally those on the technology side don’t have full insight into the data driven processes that they use.

But beyond this shared understanding of data importance, online and multi-channel retailers must consider what would happen to their businesses if data became inaccessible. What would happen to online sales, customer loyalty and broader reputation if systems went down or data was lost due to unforeseen circumstances? Would critical and increasing volumes of data be covered by an adequate back-up strategy and how quickly would disaster recovery plans ensure that the business could run as usual despite the issue? A changing data landscape driven by the move from high street to online creates a requirement for these policies to be reviewed and updated regularly. Traditional high street chains have the advantage of being widely dispersed geographically, so if a fire or flood shut one outlet down, others could easily continue running as normal. If an online store goes down it’s equivalent to an entire network of shops being afflicted all at once.

Disaster recovery

When we think of disaster recovery, most people imagine the cause to be a fire or flood, and while these are high profile, more common causes of disaster include malicious viruses, power outages, hardware and software failures or human error, which are all more often to blame for any system downtime. Particularly at critical sales periods, online retailers need to know that they can operate through a disaster, returning to business as usual within pre-defined timescales.

Most retail organisations have some form of data back-up in place, ranging from manual tape processes to sophisticated cloud-based managed services. But it’s a common misconception that back-up is the same as disaster recovery. While critical, back-up merely ensures that your data is not lost forever. This is important to online retailers in terms of, amongst other things, having historical customer and sales records which are vital elements of building customer insight and targeting products and services. A back-up strategy will however not ensure that retailers can continue operating and taking orders during a disaster. That requires full disaster recovery where a replicated version of your IT systems and data can be brought into operation temporarily as your core systems are recovered. An effective disaster recovery procedure may ensure that you are able to trade fully again within four hours, for example.

Of course many large, purely online retailers or those with a major multi-channel presence will be well equipped in terms of both back-up and disaster recovery. But for the growth areas highlighted by Bamfield at the UK Centre for Retail Research – smaller boutique chains or specialist online stores – internal IT skills may be scarcer as will their understanding of the complexities of data management. Particularly as these IT skills get channelled into front end web optimisation, one effective option for data management is outsourcing. Cloud based back-up and disaster recovery managed services can provide the reassurance of standards based data security without the large operational expenditure and skills investment needed to manage burgeoning data volumes in your own data centre. For small but growing retailers where their data is often growing fast than their business finding a partner to stop this data becoming burdensome and risky is an essential business IT strategy.

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