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Three challenges for retailers going online

The three challenges for retailers going online

By Aidan Tudehope, MD of Hosting, Macquarie Telecommqhosting_aidan_tudhope

With the rise of consumer migration online, Australia seems to be right on the cusp of true internet retailing adoption. There is in fact a huge potential for online retail in Australia that is not being exploited.

The growing penetration of internet and broadband services in Australia means that there’s an increasing appetite for online shopping, media entertainment, travel and news and all aspects of digital media consumption by consumers and businesses.

Australians currently spend considerably less money shopping online than other countries. According to eBay, online currently represents 3 per cent of retail spending in Australia, compared to 7-8 per cent in Britain and the United States.

The Australian market is ripe and ready for retailers to offer online shopping, particularly to combat the increasing number of savvy consumers that are shopping on overseas websites that offer online bargains.

Stumbling block to online retail

The current, simplistic approach by retailers to capture the attention of online consumers is focused on web advertising. This is to encourage shoppers to the bricks and mortar store rather than a sophisticated retail website.

Investing in the expertise and IT infrastructure to truly harness the world of online business is a huge undertaking, resulting in a notable hesitance from the retail market. In particular, there are security and compliance challenges that retailers must address.

The IT demands to achieve a seamless online/offline shopping experience are becoming more complex, presenting a challenge to in-house teams.

With online strategies becoming a boardroom focus, though, retail organisations need an increasing understanding of the technology that underpins digital services and a plan of action to ensure they are ready to capitalise on this opportunity.

IT crash course for retailers

The imminent National Broadband Network roll out will bring greater network penetration and higher broadband speeds to homes across Australia. For retailers, this will enable even greater opportunities not only to sell online but even to migrate their business to an online model where appropriate.

The result is that technology infrastructure is no longer an issue reserved for the IT department. Businesses are increasingly driven by the management team and marketing team to outsource web hosting to help build an online sales and marketing channel.

Three challenges retailers need to address

There are three challenges for retailers looking to drive revenue through the internet – scalability, reliability and security.

1. Scalability

    Online campaigns are highly visible to consumers. As a result, retailers require scalability on demand – a website and online applications that can cope with high web traffic. For example, automotive website, Carsguide.com.au, decided to partner with managed internet hosting provider, Macquarie Hosting, to coincide with an increased demand from its advertisers for more diverse and creative online marketing opportunities.

    New data-indexing software improved search functionality for customers and delivered more targeted opportunities for marketers. This increased both search volume and time spent on site. Through Macquarie Hosting, Carsguide.com.au has access to a more scalable and fully available IT infrastructure for its website, enabling it to service the higher web traffic and maintain a leading position in the online automotive sector.

    If consumers are prohibited from accessing online information due to poor IT provision, there is an inevitable loss of business, not to mention brand reputation damage.

    Consider, as a consumer, the frustration in not being able to log on to a website because it is unavailable. Or worse, having a website crash mid-way through a financial transaction.

    In as little as five years time, online shopping may dominate the way that consumers spend money. As with any industry, the best performing websites will maximise this opportunity. It will become increasingly important to offer multimedia experience online which requires high bandwidth and reliable IT systems.

    To support future growth and prepare for the e-commerce opportunities that Australia’s new National Broadband Network is set to deliver, retailers should prepare a long term online strategy that includes systems which carry far greater volumes of internet traffic.

    Requirements include scaling storage and servers, sometimes rapidly to meet ongoing growth and the impact of sales and marketing projects in driving more peaks in web traffic.

    2. Reliability and speed

      As online presence evolves from a simple, static website towards a multimedia experience, retailers are increasingly finding that they can’t deliver the IT infrastructure required without support.

      As with offline retailing, too many poor reliability experiences and the consumer will not come back again.

      To ensure that this does not occur, it is critical that the underpinning IT architecture is fully redundant i.e. it has a back up system in case for any reason the primary system crashes.

      Disaster recovery is also key, enabling a continuation of services – website visitors will be unaware of any fault and the website will still be able to process transactions with the same level of security.

      3.   Security

      A huge barrier to widespread uptake of online shopping is fear around security. It is vital that a retailer can demonstrate that personal and financial information is secure.

      The Payment Card Industry Data Security Standard, PCI DSS, is a security standard that retailers are forced to comply with. From September 2009, the first wave of compliance is required by large entities that store, process or transmit high levels of cardholder data.

      Many retailers are currently unprepared and oblivious to the challenges they’ll face in trying to rapidly achieve compliance. Although the date for compliance for each organisation depends on the number of transactions they typically process in a year, what is certain is that it is ultimately inevitable.

      Compliance can be a costly procedure and retailers must ensure that they are comprehensively covered. Beyond the fines associated with breaching the mandate, the brand damage of a security failure can be catastrophic.

      A solution is for the retailer to partner with a payment gateway or managed hosting provider that stores the information on their behalf. This removes a large proportion of the burden of compliance with the legislation.

      Developing an IT platform in-house that is capable of hosting rich content online, such as streamed multimedia, can be costly and time-consuming. The result is that businesses increasingly need to draw on the IT infrastructure and expertise that is typically reserved for big business and governments.

      The future for online retail

      Forrester Research says that Australians spent $23 billion online in 2008, with estimated growth of 9 per cent annually to $32 billion by 2012.

      With other industries such as online travel and financial services leading the way in online service delivery, the IT community is already knowledgeable and equipped to support the evolution in retail and take advantage of the speeds that the NBN will deliver.

      To keep up with the early adopters, now is the time to partner with IT providers to overcome these challenges and be at the forefront of online retail in Australia.

      About…

      Aidan Tudehope is the MD of Macquarie Hosting, a division of Macquarie Telecom that works with organisations such as WebJet, online payment gateway eWAY, SBS TV and Quickflix.mqhosting1
      Macquarie Telecom provides customers with critical application hosting services to meet the explosive demands of Web users, as well as a full range of voice, data and mobile communications solutions.

      mqhosting2

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