Sunday, March 6, 2011

Advantages of Cloud Computing– Part VII – Disruptive Technologies

How will Cloud Computing greatly reduce costs in your convenience stores? We have already seen an unprecedented shift from a market made up of several hundred  companies having large numbers of stores to a market composed of tens of thousands of single-store operators.

Why is this happening? One word: ‘Cost’ pretty much sums it up. When we started working with convenience stores in the early 1980s, it wasn’t unheard of to see gasoline profits of forty-cents a gallon, even more. Inventory was put inside the stores as almost an afterthought.  After the great recession and financial debacle at the turn of the decade, grocery prices leveled off and stabilized. The economy bounced back and consumers not only expected to pay higher prices in convenience stores, they readily accepted it, because they weren’t that far off from what items cost in a regular grocery store environment.

Then came Walmart. Sam Walton’s crusade caused a dramatic shift in the thinking of the American consumer. Just how he did this should have been a lesson, but the majority of retailers have yet to learn it, even to this day. Put simply, Walmart created their own Cloud Computing environment called Retail Link. In 1986, Walmart spent over $1 Billion to create this network because Sam Walton knew something that’s still a mystery to hundreds of thousands of retailers today. 

There are very few retailers that can afford to invest $1 Million, let alone $1 Billion to create their own Cloud Computing environment, but here’s the catch; because of a quarter of a century of technological advancements since 1986, a Retail Link type of network could be easily created and shared by more retailers than Walmart has stores and the cost of entry into this network would be less than what retailers are spending today just to keep their ancient, inadequate systems running.

According to a book called “Retailing” by Patrick Dunne, Retail Link provides Walmart and their suppliers the location of any stores with low or no stock on hand, sales performance by store of all vendor SKU’s, what other items were purchased when one of the supplier’s SKUs was purchased, the current week’s of inventory on hand at each store, the effect of promotional activities on sales, and sales by time of day and time of week and current financial projections. 

To this day, we have been unable to get one convenience store operator to tell us how many Snickers he has in his stores. The above information is viewed as Star Wars technology, so far out of their capabilities they don’t even think about it.

The time has long passed when you can throw $30,000 worth of merchandise on your shelves and come back at week’s end to see if there’s any money in the cash drawer. The CEO of Walmart said, “Retail is detail.” We will take that a step further and say “Detail is that insignificant can of tuna that has been occupying space in your store since 2009.” You know the one. The side is bent, the lid has a quarter inch of dust on it, and your customers side-step it like it was a roadside bomb – or do you?


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