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How Colocation Can Help Retailers Handle the Holiday Rush

By: Ernest Sampera on December 4, 2020

With the coming of the holiday shopping season, many retailers are struggling to handle the demand for their goods and services. In light of the COVID-19 (coronavirus) outbreak, online shopping has seen a particularly sharp increase in demand.

However, there is more to the holiday shopping season than just a simple uptick in sales. Major holidays can put other stresses on a business’ IT infrastructure (and some businesses may be more affected than others), and big data and knowledge management in retail can be crucial for getting through this high-stress period.

Additionally, colocation data centers can prove useful for alleviating the burden on a company’s IT resources and ensuring stable and consistent access to their mission-critical business applications.

What are some holiday retail trends to keep in mind? How can colocation help retailers adapt to these trends? What are some best practices for getting the most out of your collocated data center?

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Holiday Retail Trends—and How Colocation Helps Retailers Adapt

Consumers Are Shopping Online More Often

Even before the outbreak, shoppers were starting to trend towards online shopping for convenience reasons—as noted by HubSpot, “65% of shoppers will choose to buy products online instead of in-store to avoid crowds in 2020.”

This little piece of retail analytics data showcases how online shopping has grown in the last decade. It also means that businesses both need online store fronts and data centers that can handle the load of ever-increasing online shopping during the holidays. Colocation data center services can help businesses quickly build out the IT infrastructure they need to ensure a stable online storefront.

On a side note, data cited by CBRE reveals that “brick-and-mortar” sales are slowing down compared to previous years, with a projected “retail sales growth of less than 2%.”

Black Friday Is Growing Even Larger

Black Friday is one of the biggest shopping events of the year. In some recent years, the big day for deals had seen a slight depression as some retailers expanded the duration of their Black Friday deals. However, if Black Friday 2020 is any indication, the shopping holiday is still going strong—and poised to keep growing.

According to Forbes, “Black Friday hit a new record with consumers spending $9.0 billion, an increase of 21.6% over last year.” This record sales number for the holiday may be indicative of potential future growth.

This, in turn, means that organizations will need to prepare for even larger spikes in bandwidth usage and demand for their online storefronts in the future as the holiday shopping season continues to grow.

Credit Cards Remain the Most Popular Payment Option

retail-analytics-show-credit-cards-are-the-most-popular-online-payment-optionAccording to PYMNTS.com, “Credit cards, debit cards and cash – in that order – were what Black Friday shoppers used to pay for their purchases,” with roughly 50% of shoppers using credit whether online or at a physical store. Debit cards were a close second, accounting for 42% of purchases in-store and 36% of purchases online.

The PYMNTS article noted that PayPal also saw a significant increase in online payments, with “roughly a quarter of all Black Friday online shoppers using it to make a purchase.” It should be noted that some shoppers used different payment methods at different retailers.

Because of this, online retailers need to maintain a solid and secure infrastructure for processing customer payments—one that is compliant with PCI DSS requirements.

The Majority of Holiday Shoppers Plan to Keep Shopping after Black Friday

Another important highlight of the PYMNTS article is that “Eighty-two percent of the consumers in our survey plan to finish purchasing holiday gifts after Black Friday, with 6 percent saying they will not be done until after Christmas.” In other words, retailers can’t simply rest easy after Black Friday is done—the holiday shopping season isn’t over until the end of December!

Because of this, businesses with online storefronts and applications can expect to need increased data processing capabilities for an extended period of time—something that a colocation data center can provide.

Smartphones Are Becoming a Key Spending Channel

In the last decade, the use of smartphones has exploded. According to the Pew Research Center, in May of 2011, about 35% of U.S. adults owned a smartphone. In 2019, that number reached 81%.

Increased smartphone ownership means more people using smartphone apps for daily tasks—including shopping. As noted in the Adobe Analytics Holiday Forecast 2020, “42% of all online shopping [is] done from smartphones (up 55%).”

With the increased role of smartphones in holiday shopping trends, it’s more important than ever for organizations to have mobile-friendly websites and applications that allow shoppers to order goods and services from their phones. This may mean adding more data centers to process the increased load or provide more stable service with less lag by putting data centers near to where customers live.

How Colocation Enhances Big Data and Knowledge Management in Retail

A big holiday shopping season means that there’s a need for big data and knowledge management in retail. As millions of shoppers go for new deals and try to buy up the latest big holiday gifts, retailers need to learn to anticipate retail trends so they can better prepare.

Having a mastery of big data and retail analytics can mean the difference between massive profits (with happy shoppers who will come back) and sitting on warehouses full of holiday reject goods that don’t sell.

As noted by Merrimack College, some big data in retail examples include*:

  • Using data from customers in loyalty programs to gain consumer insights, which can lead to better-targeted marketing.
  • Using transaction data with delivery time windows, inventories, and weather forecasts to create accurate demand forecasts and to better manage stock replenishment and procurement.
  • Making pricing decisions based on margins and the actions of competitors.
  • Heat-mapping in-store traffic to improve store layout planning and increase exposure of less popular items.
  • Using the knowledge gained from consumer insights data to identify long-term buying trends.

*Bullet list pulled from the Merrimack College website on 12/01/20.

Colocation data centers help provide the additional processing power and data storage organizations need to keep track of their retail analytics and make better predictions about retail trends. This, in turn, allows for better business planning that helps maximize profits.

Additionally, using collocated data centers on the “edge” near where retail activity happens helps to reduce latency in communications, which helps provide a better user experience for consumers using the organization’s online applications.

Best Practices for Retailers Leveraging Colocation Services

So, how can your organization make the most out of colocation services to get through the holiday shopping season (and the months beyond)? Here, following a few basic best practices can help you maximize your data center ROI:

  1. Collect Performance Data. From power consumption to bandwidth requirements, it’s important to track your data center’s performance so you can optimize your allocation of data center resources in the future.
  2. Identify and Eliminate Inefficient Servers. Removing outdated or incompatible servers and equipment from the data center can have a significant impact on its performance and stability in the long run. Eliminating some legacy systems can also close some security vulnerabilities from unpatched or unsupported software and hardware.
  3. Perform Periodic Load Tests. Before entering a “busy” season like the holiday shopping season, it’s important to perform load tests of the data center to verify that it can handle the projected load—and to expand the data center’s capabilities if it cannot.
  4. Consider Your Connectivity Options. Being locked into a single internet service provider (ISP) can be a limiting factor on data center performance. Partnering with a colocation service provider who is ISP-agnostic can increase your options and keep ISPs competing for your business (which helps lower costs and ensure better service overall).
  5. Check for Uptime SLA Guarantees. What’s the service level agreement (SLA) for the colocation service’s uptime? Is it 99.99%, or 99.999%? 99.99% sounds like a high availability, but it still means roughly 52 minutes of downtime a year. If that downtime coincides with the peak of the holiday shopping season, that could cost your business dearly.
  6. Don’t Forget about Security. If a colocation data center isn’t properly protected against intrusion, then it isn’t worth considering. Look for a colocation service provider that can keep your business (and your customers) safe from malicious actors looking to steal data and commit fraud.

These are just a few best practices to keep in mind to get the most out of your collocated data centers.

Do you need additional data center capabilities to help your organization through a busy shopping season? Reach out to vXchnge to get started on maximizing your IT capabilities!

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