Part one: Business motivation

 

When people think about omnichannel retail experiences, they often start by considering in-store and digital as two distinct elements. But for a modern retailer, in-store is just another kind of digital, sometimes referred to as “phygital”.

 

It’s now a given that customers expect the store experience to be well-integrated into the retailer’s online presence and that they have little tolerance for services or data that are available in one touchpoint but absent in another.

 

Progressive retailers go further and take advantage of physical presence to address a customers’ needs contextually – someone browsing in a store requires different inspiration than the same person ordering from their couch at home.

 

As the relationships between different digital touchpoints become more complex, we need to develop new architectures that are resilient enough to keep stores running, powerful enough to support rich digital experiences and responsive enough to change that we can evolve them alongside the business.

 

Above all, we must not let the increasing digitalization of retail cause business fragility. Recent high profile cases have shown that when digital service is interrupted, it can cause massive business disruption.

 

My colleague Alessandro mentioned to me a system he was working on that deploys Docker containers to servers running in the stores of a large food retailer. They power point-of-sale systems that serve customer experience as well as store back office systems for processing payments and orders.

 

When I first heard this, it sounded like an odd mixture of technologies, as I had previously only encountered containers used in data centers or for local development environments. But when he explained the goals and trade-offs of the system architecture, I understood containerised on-site servers as a pattern that is likely to become more important as businesses bring the physical and the digital ever closer.

 

Digitally-powered stores

 

Chris Ford: Why does a store need to be integrated into a wider digital architecture in the first place?

 

Alessandro Salomone: Retailers have recognized the benefits of digitally-enabled stores for a long time now. One key motivator of a digital architecture is the ability to get to know your customers and to offer them targeted promotions based on their needs and tastes. This is especially true in food retailing, my client’s sector. Customers may consume products in more than one of your shops, so having a system that aggregates customer information will ensure a consistent and personalized experience wherever they shop from. 

 

And of course, you want your infrastructure to bridge the online and in-store shopping experiences, with the opportunity for the user to browse products, electronic receipts and benefit from personalized vouchers for the products that they are likely to love and buy.

 

In a post-Covid environment, retailers are actively looking to experiment and cultivate customer engagement and are particularly focused on attracting customers back to stores. Point-of-sale systems and in-store digital experiences are important investment areas to achieve this.

 

And on a practical level, as your business model gets more complex, you want to make sure that business processes in all your stores are supported by an infrastructure that ensures a consistent experience and implementation of such processes.

 

Lastly, collecting data from your stores can help you gather insights on your business in terms of fine-grained financial projections. You will have data coming from all your stores to discover the seasonality of your offering as well as to gather visibility on product waste, and appeal of your product to regional markets, just to mention a few. All this can lead to better targeted marketing and promotion design, that can help you strengthen the foundation of your business and let it grow and adapt to the ever changing landscape of the market.

 

Running servers in stores

 

CF: What reason do retailers have for installing local servers in their stores? Wouldn’t it be simpler to just talk directly to a central server running in a data center?

 

AS: Talking to a central server would be indeed simpler. And that's how you want everything to appear to your customers and attendants when they are shopping or operating the store — everything is connected and it all just works. You want to launch new products and promotions from a single, central point, and ensure all stores receive the same information at the right time and, as we mentioned earlier, you want to be able to identify your customers and offer them tailored services and products.

 

In practice, there are a few technical constraints to consider. Running a business in a store means having several classes of in-store devices that operate together to provide a seamless experience to the customer and the store personnel: security cameras, handheld devices for inventory and price labeling, scales, payment checkout tills, not to mention back office applications for stock management and solutions for walk-out checkout customer experience. 

 

The overriding business consideration is to ensure availability of critical services that support an uninterrupted shopping experience. The most likely disruptive event is the loss of network connectivity from the store to the central services. Crucial customer flows, like checkout and payment, must be guaranteed in this scenario. The benefits of digitization count for nothing if our technology introduces fragility that threatens business continuity.

 

Beyond plain checkout, how can you guarantee that the customer who just grabbed a three for two deal on roasted coffee beans can enjoy their anticipated discounts even when the internet connection goes down as the cashier is scanning them at the till? All product, price and promotion information should be readily available. Perhaps a network interruption means you can’t access promotions based on the shopper’s personal history, so how do you gracefully degrade service and still provide product level discounts? 

 

What if your customer is entering your walk-out store by tapping their loyalty card at the gates and there’s no, or slow, internet connection? You don’t want to make them wait: they should be swiftly welcomed by an opening gate, while the system will figure out how to identify them and eventually charge their preferred payment method as they walk out.

 

A store server that caches the critical business information and is able to autonomously implement business flows acts as a buffer between the store and the central services, ensuring that local store operations can go on undisturbed, and that any changes will be synchronized as soon as the connection is restored.

 

Another motivation for having a local server is the local management of store-specific data. The device that prints the tags to be placed on the shelves shall show the same prices and promotions that will be printed on the customer’s bill. It’s standard for retailers to vary pricing based on store considerations like location and nearby competition. But what about dynamic factors, for example whether a store has excess stock of a specific good that should be effectively depleted?

 

Be it a consumer electronic product imminently obsoleted by an upcoming new model, or a bottle of milk soon reaching its expiry date, the store could apply a dedicated promotion campaign targeted at reducing stock, that is going to potentially cause waste, while making customers happy. This requires the in-store personnel to be able to set up a campaign for their store from the back office application, overriding set prices and promotions, while ensuring that all the devices in store are ready to show the same information.

 

CF: Doesn’t this contradict the prevailing wisdom that businesses should migrate to the cloud?

 

AS: This architecture is not about going back to on-premise data centers. In the terminology of cloud computing, this is more like an edge computing architecture – augmenting cloud capabilities with compute situated closer to the customer. Edge computing isn’t in competition with the cloud, but a complement to it. Your favorite cloud provider almost certainly has a story around edge computing, because the advantages around resilience and latency are compelling for some use cases.

 

That being said, having to manage and deploy to on-premise machines and devices is more complicated than operating in a purely virtual environment. Perhaps we can talk later on about the engineering needed to pull it off.

 

CF: Could I think of running retail software on-site servers like installing apps on my mobile phone? A lot of the time, I happily rely on websites that are hosted in remote data centers, but for some things it’s better if the program is installed on the device in my hand.

 

AS: Correct, websites are fine if you don’t mind being interrupted if you lose mobile phone signal. But when you run an app locally, you get better performance and integration with the rest of your mobile experience. With an app, depending on what operations you want to do, some of them can still be performed even when you have an intermittent internet connection.

 

An example you may be familiar with is Google Docs. If you install the app on your mobile it lets you continue to work even when you are offline, and transparently syncs with the server when you have connectivity again.

 

In the same way, having servers in the store means having your business data and logic here, next to where you need them, without being dependent on something external to operate. Having smart devices communicate with a local server that orchestrates your business processes allows your stores to operate independently, while remaining aligned with the overall business implementation and its evolution dictated by the central services.

 

CF: Can you give me an idea of the scale of the architectures you’ve worked on? How many stores, how many services etc?

 

AS: In one of our projects we worked with a client supporting 40,000 devices in more than 2000 stores. Each device would be configured to receive daily business data updates and to send near real-time telemetry and analytical data to the central servers. At this scale, device failures and network interruptions happen all the time, so your system better be prepared to deal with them.

 

Related use cases from other industries

 

CF: Do you see on-site servers being used in other industries or contexts?

 

AS: On-site servers are a concept applicable in several other industries. This architecture brings advantages wherever there is the need for data and operations being available for highly-critical business processes or in businesses where good network connectivity is an inherent issue or cost.

 

One example that we have discussed with clients is hospitals. A modern medical center is a sophisticated information technology hub. It runs various software that manage sensitive clinical as well as operational data. Applications running on local servers offer a way to support these applications and also to gracefully upgrade them. Tolerance of network failure is essential as the hospital cannot stop treating patients in the case of an outage.

 

Another is cruise ships. The digital expectations of passengers are rising. Entertainment, schedules, menus, communications and even digital room keys are becoming an essential part of a luxury experience. On-board servers give a way to support these experiences without relying on connectivity that is often unavailable at sea.

 

Thank you Alessandro for relating your first-hand experience developing software for in-store servers and explaining why retail businesses are motivated to adopt this architecture.

 

In the next part of this series, I talk with Alessandro about the engineering challenges that come with developing such a system. Deployment, testing and observability require some different approaches relative to systems hosted in data centers.