Phygital Retail and the New Age IT Infrastructure ServicesPoornalingam Sukumar & Nilesh JoshiConsumer Practice

www.hexaware.com

WHITEPAPER

Table of Contents

1. Digital store 3

2. Smart Warehouse and Logistics 4

3. Retail Centric Infrastructure Management Services 5

01. Integrated RUN 5

02. Digital Workplace 5

03. Application Operations 6

04. Digital Operations 6

05. Hybrid Cloud 6

4. References 7

5. Abbreviations Used 7

2

3

Growing customer expectations on delivering omni-channel, personalized content, constant connect, instant responses and well informed store associates, demand retailers to adopt new age technologies to further enrich retail value chain. Retailers are investing more in both physical stores, as well as, digital channels for a superior customer connect. New technologies will drastically change the way retail business is carried out in the coming years. A retail chain’s higher sales curve and customer experience will be driven by innovative technologies like; the Internet of Things (IoT), beacons, high-tech cameras, sensors, AR and VR solutions.

Any new technology is heavily dependent on a strong backend IT infrastructure to meet its digital demands. The biggest pain-point for most retailers is the incapability of existing infrastructure to support new-age devices. IT networks have become more vital in delivering essential data to different business systems. New-age retail networks must fully support machine-to-machine communication, device communications in-store, warehouses, connected vehicles and customers hand-held devices. IT infrastructure must ideally be designed inclusive of data from these connected devices, in the most reliable, secured and consistent way. In addition to retailer’s internal system data, e-commerce data and social media data,massive digital data is generated across digital stores, smart warehouse and logistics. Retailers feedback on Digital store, smart warehouse and logistics have been captured below along with the potential digital enablers:

Digital store

Stores providing a unique store experience alone will thrive in future. Retailers are leveraging all possible digital and mobile technologies to enhance the customer’s showroom experience. Irrespective of the size of the retail business, most people are moving towards equipping store associates with digital technologies, to make information readily available for customer service.

A typical customer journey in a digital store is depicted below:

Beacons identifying customers as they enter

the store

Smart shopping carts helps navigating customers

through the store

Digital kiosks for browsing the store layout and product

availability

Personalized digital coupon at exit

Contactless or self checkout

Customer’s smart phone scanning product codes looking

for social media review

Smart shelfs tracking the product availability and perishables conditions

Connected Digital signages at prime spaces

RFID in SKUs for inventory tracking and smart price tags

tuning to instant price changes

Smart hand held of store associates enabling product search, billing, payment and customer support enhances the customer experience.

67%of retailers surveyed*, believe that the in-store digital transformation is now vital for retail business survival

34%of retailers accept that the adoption of newer forms of digital disruptions in customer engagement has created a highly competitive environment in the retail business

Smart Warehouse and Logistics

Robot-driven warehouse operations deployed by Alibaba has reduced workforce by 70% and improved the overall capacity of picking by around three times.

For a warehouse to be IoT-enabled, the integration of Warehouse Management System (WMS), Warehouse Control System (WCS) and Building Automation System (BAS) is a must, to facilitate seamless information flow between systems. In addition to this integration, data flow between legacy warehouse systems and new-age devices, must be enabled. Potential digital enablers in the warehouse are as follows:

Integrated vehicle solutions for live tracking, product shelf life monitoring

Unified yard management solutions, yard allocation based on ASN

IoT-driven cross docks sharing data between sensors and EDI

Smart handhelds with mobile document imaging for receiving

Automated labelling for put away / storage, Cameras for pallet damage detection

Voice driven or Robotic picking with automated inventory update

Connected mobile device scanning the outbound material, communicating with mobile printer for outbound workflows

The above listed data-generating avenues provide a snapshot of retail distribution center operations.

One of the largest multinational retailer was the early adopters in launching virtual stores for frequent grocery purchases, where a customer can scan QR codes associated with images and will subsequently be re-directed to the mobile shopping application or the retailer’s dot-com site to check out with their desired goods. The retailer displayed products with QR Codes in the busiest parts of the city’s bus stations, train stations, where people can utilize the waiting time for their personal shopping. The launch was highly successful in Korea and some similar launches were then followed by other retailers in North America, Australia and some parts of Europe. Retailer ensured the IT infrastructure behind the virtual store is meeting the network capacity, which behaved as the backbone to their success.

More than half of the world uses smartphones now* and nearly 50% of web traffic comes from the oft-used mobile phone. Retailers are finding newer ways to engage with customers for improving their sales and holistic margins. They are facing an increased real estate cost across the globe, which has induced them to explore uncommon options for attracting people in a crowded place.

75%of retailers surveyed*, have said they are investing in new technologies in warehouses to increase the total volume of items shipped. It is also their endeavour to equip staff with digital technology

62% of retailers have already started investment in IoT in warehouses

Image credits: http://www.shop2mobi.com Image credits: http://itwarmup.com

4

Retail Centric Infrastructure Management ServicesSoaring customer expectations on unified shopping experience, force retailers to look ahead in upgrading their IT infrastructure. Infrastructure becomes pivotal in delivering a unified shopping experience. From being in silos to being deeply integrated in the overall IT ecosystem, application and infrastructure have come a long way. Below are the key infrastructure services that can be enabled for retailers:

01. Integrated RUNToday’s retail customers have become more tech savvy than ever. With an increasing demand from customers for wireless connectivity in stores and connected devices within stores, retailers need to ensure optimal bandwidth of connectivity through constant monitoring of LAN/WLAN and WAN. Spikes and drops in network are to be monitored though network operations center, triggering predictive alerts on demands on network. Retailers IT service desks must strive to support centralized network operations and infrastructure management, ensuring disruption-free network.

For the aforementioned reasons, a comprehensive and flexible retail IT service desk is crucial. Lean and an under-resourced IT service desk may be cost-effective for a retailer, but the solution targeting an integrated service desk that continuously monitors and increases uptime of the point-of-sale, is lost. It is important to automate support resolution as much as possible. Once a problem triggers, it is automatically routed to a quick self-help portal for L1 categories and then assigned to the right person or the team for L2/ L3. Improved systems availability, increased user productivity, reduced service costs and greater accountability for problem resolution are the key benefits derived from an efficient retail IT service desk.

02. Digital WorkplaceRetail stores in 2020 will look different and so will the workforce in stores. By 2020, Generation Z will constitute 40% of all U.S. consumers and 20% of the workforce. Retailers need to equip themselves for the arrival of new age tech-native workforce to leverage their mobile first capabilities. Adding to that,stores are also moving towards acting as fulfilment center, delivering products for omni-channel orders. To keep up with the pace of change, store associates need to be equipped to handle operational realities. Customer expectation on interacting with store associates is growing exponentially, which is now being addressed by retailers, through the single hand-held devices with multiple features to support the customer queries, as well as, cross and up sell products. Store managers lack information, on-demand visibility and an assortment plan for the upcoming events, due to the lack of integrated systems and siloed communication. Most retailers have invested in productivity tools in the corporate offices, but not in stores. Through corporate team collaboration, workforce analytics and workload specific automation (assigning omni-channel orders to store associates), retailers need to establish clear integration between newer devices and enhance user experience through a committed and well-informed workforce. SI Partners to engage in co-innovation initiatives with retailers on workplace engineering, disaster recovery services on work area continuity solutions through continuous replication of critical data and applications in alternate work environment.

5

01 02 03 04 05

Integrated RUN

Digital Workplace

Digital Operations

Application Operations

Hybrid Cloud

03. Application OperationsIn the software lifecycle, majority of costs go towards application and platform maintenance. Over the years, retailers have bought or built different sets of applications, where some of the applications are similar to their predecessors with some minor add-ons to the existing one. Application portfolio rationalization and consolidation is the key action on cards for most retailers. At any stage of rationalization, governance of application management is crucial for reducing cost and improving service levels. Success factors include; defining business requirements, operational objectives, KPIs, defining quantitative and qualitative variables, target state snapshot and phased plans of action. A successful application service partner to be an expert in the retail domain, in understanding key business processes and undertake transformation complementing business needs. In addition to domain knowledge, the partner to be an expert in the retailer’s choice of COTS product.

In depth, technical and business know-how of retail application reduces the risk and improve the efficiency of the application service provided. IT service providers should adopt the best practices and methods, increase the skill flexibility and move on further for application rationalization, enabling horizontal integration and collaboration. Moving all applications from one platform to another, without evaluating business value, is a wasted opportunity. Solution providers to group applications based on functional components and create application containers. Decision on deploying containers on bare metal or virtual machines to be taken based on the capacity, scaling and business needs. Through Dockers, moving the application to a different platform is achieved without any friction.

04. Digital OperationsRetailers wanted to know more and more about their customers to identify the target buyers. Data is being collected in different formats, aspects and through multiple channels. Effectiveness of data usage becomes the big question for data officers. Growing size of data, velocity of data flow, adds pain to the effectiveness of the data-related investments. Other aspect, is using the collected data and making it a game changer. Big data analytics can be applied in every process of retail, like predicting the customer demand, improving allocation, predicting SKU trend, optimizing pricing, supply chain predictions, targeting the right customers, reducing churn, and improving customer experience.

Using the same analytical model for prediction will not improve the results any further. Machine learning is becoming very powerful, and the model keeps improving every time. Once trained, the algorithm creates loads of decision trees for prediction. Machine learning helps retailers automate data analytics to discover patterns in customer buying behaviour, competition levels, wallet share, dynamic market trend analytics, predicting customer need and trigger the right products to shoppers, before they buy it. Retailers to focus on their core business, building big data and analytics solution can be done by leveraging the solution providers. Solution partners to enable retailers with different type of storage for different analytical needs. Say analytics storage for mission critical CXO level dashboards to be designed in high performance in-memory platforms for instant results, whereas other analytics can be hosted in cost effective platforms.

05. Hybrid CloudRetailer’s database is as complex as running a retail business. Earlier retailers had preferences for on-premise deployment owing to reduced initial price, data security and higher customization options. Now, retailers operating in multiple markets with a huge data flow have started moving towards cloud data storage, which helps them with ease of deployment, agility, scalability at a lower cost.

Traditional security practices are unable to keep pace with the emerging threats through the digital devices. The retail world was shocked when one of the largest North American retailer reported the theft of 40M credit card accounts. It resulted in a $200M spend on replacing the customer cards and an embarrassing public fall out. In a recent survey of retailers by PwC, 16% of retail organizations have suffered a loss of more than a million dollars, through cyber security incidents. By defining the roles IN, OFF the cloud, micro segmentation of the cloud with high performance firewalls, retailers can have a much secured environment. By moving to IaaS, retailers can avoid spending on a dead or under-utilized infrastructure.

Some retailers have already started their journey towards Software Defined Data Center (SDDC), where all infrastructure is virtualized and delivered as a service. Key advantage in SDDC is that, as a solution, it provides support to both legacy enterprise application and cloud computing services. SDDC built on hyper-converged architecture, extending across public and private clouds, helps retailers in reducing the operational cost. Retailers are bound to store data up to seven years; this period varies between regions and government regulations. Storing huge data in legacy system comes with a huge cost. Moving data to either home-grown, or distributor-based big data environment, enables the retailer to reduce the storage cost by 30%, as well as, data can be provisioned for warm archival. System integrators to provide solutions balancing data storage between different entities and achieving the hybrid cloud state enabling retailers with better margins, control and security.

6

References*: • Digital transformation survey report of Economist Intelligence

• Resources of National Retail Federation

• Zebra Technologies Survey on future warehouse

• Retail weekly magazine

• Retail Gazette UK

• Digital in 2017:Global overview report by We Are Social

• Adweek -Engaging Gen Z

Abbreviations Used: • IT - Information Technology

• QR Code – Quick Response Code

• ASN - Advanced Shipment notification

• EDI - Electronic Data Interchange

• LAN - Local Area Network

• WLAN - Wireless LAN

• WAN - Wide Area Network

• L1/2/3 - Levels of IT Support tickets

• KPI - Key Performance Indicator

• COTS - Commercial Of The Shelf

• SKU - Stock Keeping Unit

7

8

India Headquarters152, Sector – 3Millennium Business Park‘A’ Block, TTC Industrial AreaMahape, Navi Mumbai – 400 710Tel : +91-22-67919595Fax : +91-22-67919500

EU HeadquartersLevel 19, 40 Bank Street,Canary Wharf,London - E14 5NRTel: +44-020-77154100Fax: +44-020-77154101

APAC Headquarters180 Cecil Street,#11-02, Bangkok Bank Building,Singapore 069546Tel : +65-63253020Fax : +65-6222728

NA HeadquartersMetro 101, Suite 600,101 WoodAvenue South, Iselin,New Jersey - 08830Tel: +001-609-409-6950Fax: +001-609-409-6910

About HexawareHexaware is the fastest growing next-generation provider of IT, BPO and consulting services. Our focus lies on taking a leadership position in helping our clients

attain customer intimacy as their competitive advantage. Our digital offerings have helped our clients achieve operational excellence and customer delight by

‘Powering Man Machine Collaboration.’ We are now on a journey of metamorphosing the experiences of our customer’s customers by leveraging our

industry-leading delivery and execution model, built around the strategy— ‘Automate Everything, Cloudify Everything, Transform Customer Experiences.’

  We serve customers in Banking, Financial Services, Capital Markets, Healthcare, Insurance, Manufacturing, Retail, Education, Telecom, Professional Services

(Tax, Audit, Accounting and Legal), Travel, Transportation and Logistics. We deliver highly evolved services in Rapid Application prototyping, development and

deployment; Build, Migrate and Run cloud solutions; Automation-based Application support; Enterprise Solutions for digitizing the back-office; Customer

Experience Transformation; Business Intelligence & Analytics; Digital Assurance (Testing); Infrastructure Management Services; and Business Process Services.

  Hexaware services customers in over two dozen languages, from every major time zone and every major regulatory zone. Our goal is to be the first IT services

company in the world to have a 50% digital workforce.

Safe Harbor StatementCertain statements in this press release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Hexaware has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry.

www.hexaware.com | marketing@hexaware.com © 2019 Hexaware Technologies limited. All rights reserved.