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The Current Business Model

Retailers struggle to make margins. Most business is based on high volumes to make up for low margins. This model causes

retailers to be extremely cost conscious. When purchasing IT

solutions they do everything they can to drive margin out of the solution including: unbundling solution software, and reverse auctions using competition to

force lower costs. In this environment, retailers save a few

bucks and vendors make no money.

Changing Landscape of IT in Retail

Retailers are seeing increased competition, not just from other

retailers but also from on-line websites that drive prices down.

Retailers have responded by creating their own web presence, using business information (BI) to

target customers, promote the right products and enhance the

in-store experience for their shoppers . These trends have

forced retailers to consider cloud-based solutions.

Solution as a Service:

Phone: (801) 623-8252 emai l : vrs lack@gmai l .com

Vernon R. Slack

A Fresh Approach for

the Retail Industry

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“Can This Model

Work?” Vendor Response

SaaS solutions will require vendors, especially IT manufacturers to change their infrastructures. No longer can the front-end of solutions such as POS, digital signage, and kiosks

be built on PC based systems with a relatively expensive CPUs. A switch to System on Chip (SOC) i.e. tablet or phone technology based solutions will be the standard. This removes

significant hardware cost and eliminates the operating system cost. Front-end software needs to be inexpensive or freeware. The margin needs to be in the services that can be performed in

New Business Model Overall the move to cloud based solutions is a positive trend for retailers and vendors. Properly designed SaaS solutions will give retailers great tools accompanied by real savings in decreased IT staffs. Solutions such as POS, POS analytics, Planograms, kiosks, shelf-edge digital signage, when built with a cloud backbone and the accompanying services of remote management, maintenance, integrated analytics, and content creation are changing the game. Now retailers can trim support staffs, analysts, and creative artists to a small crew of vendor liaisons while the vendor provides the services previously performed by the retailer.

For retailers, this model will actually produce the cost savings they have been

craving. The elimination of salary and benefits of non-customer facing

personnel in their organizations will provide an annual savings that far out weigh the pennies they have saved in

their capital expenditure model of purchasing solutions. The savvy retailer will utilize these savings to focus in on a differentiated customer experience that will increase loyalty among their base and greatly enhance their profitability.

But can this model really work? It already does in the mobile phone industry and surveillance industry.

When they sell to customers they sell a monthly service including front-end

appliances and software, a cloud based back end and a myriad of profitable but

affordable services that meet their goals and improve the overall performance of

their customers. This model, when applied profitably in the retail industry

will have the same out come.