As Cloud Becomes Retail’s Digital Middleman

Service Assurance Matters More Than Ever

digital middleman
Ron Lifton

In July 2016, you may have heard that Nordstrom acquired a minority stake in a company called DS Co. DS Co. offers supply chain software called Dsco, which acts as a digital middleman between suppliers and the retailers who sell their products.

When retailers like Nordstrom display supplier inventory, and then ask suppliers to drop ship products to customers instead of storing inventory in their own warehouses, they can offer a wider range of products while lowering shipping and inventory management costs. Nordstrom may keep the most popular color of a particular shoe style and brand to ship from its warehouse, but it can display other colors for the same shoe on its e-commerce site and drop ship other shoes directly from the supplier.

Nordstrom’s use of a cloud-based service acknowledges a new reality in retail: the disappearing middleman. Thanks to apps and the web, customers have global views of pricing and shipping timeframes from multiple retailers and manufacturers for the products they want. If you can cut out the middleman and automate processes to lower prices and increase order fulfillment speeds, you’re more likely to get the sale. If you can’t, you risk getting left behind in the digital economy.

Connecting Directly to Customers
On one side the cloud eliminates the retail middleman, but on the other side it means relying on applications and services to assure business continuity. That includes automation that alerts human decision-makers about increased demand, both reactively and predictively, and coordination with suppliers to deal with demand spikes. It is an added level of system, software and services complexity in an industry already going through digital transformation for many years.  Retailers have been embracing digital transformation with automation in their warehouses, and within e-commerce platforms – think of the simple “Customers Who Liked This Also Bought” recommendation engine. Automating processes increases productivity and accuracy, but powering it requires an increasingly complex cloud services ecosystem.



The cloud does not just eliminate the middleman in warehousing and vendor relations, either. Retailers also take their messaging directly to customers through social media and mobile marketing. To compete, retailers must deliver exceptional digital experiences, improved cross-channel connections, and targeted mobile marketing. Cloud powers these services, becoming the digital middleman that must not only be always up and running, but also enable retailers to innovate with confidence.  To make that happen requires a service assurance solution to help accelerate deploying new applications and services perhaps tens or hundreds of times a day and support potentially millions of daily transactions within the cloud and on-premises IT infrastructure.

The Death of Retail as We Know It
Former Walmart CEO Mike Duke said in 2012 that his biggest regret as CEO was not investing more in e-commerce to better compete with Amazon. In September 2016 Walmart spent $3 billion dollars on for their innovative pricing software and to strengthen their e-commerce infrastructure. According to Fortune, Walmart has over 15 million items online and adds around 1 million a month. It came too late from Warren Buffet’s perspective: he has paired most of his stake in Walmart, a company he started to invest in 2005.  Buffet, who admits he does not know much when it comes to technology, said at his annual shareholders’ meeting in 2016 that Amazon “is a big, big force, and it has already disrupted plenty of people, and it will disrupt more.” When it comes to the digital economy Buffet thinks Amazon’s competitors “have not figured the way to either participate in it or to counter it.”

While cloud technology is table stakes for retail success, retailers are already looking at embracing IoT to further disrupt the industry. With IoT devices like iBeacons and local resources for processing data, retailers can connect immediately with customers, collect and interpret data in real time and deliver personalized pricing, promotions, and recommendations. IoT enables smart shelves, smart pricing and smart shopping. But marrying IoT with cloud adds more complexity to the IT environment. Performance degradation happens, especially as more “things” (software, systems, devices) are added to the service delivery path.  Database errors, QoS misconfigurations, DNS issues, failed microservices, and a lot more can take place anywhere along the digital value chain. Getting ahead of cloud and IoT problems before they become business problems requires understanding service interdependencies and relationships, today and tomorrow.

Using cloud services in place of the middleman as many retailers have done puts more power in the hands of customers. At a minimum, delivering a great experience requires end-to-end availability, fast connections, and reliable data delivery. NETSCOUT can help by providing end-to-end visibility of the entire IT environment and deliver real-time, actionable intelligence.  To learn more about how NETSCOUT nGeniusONE Service Assurance platform helps deliver a seamless customer experience take a look at case studies, infographics and more at Voice of the Customer.