Peak performance and profit troughs

As seen published on Retail Bulletin.

The retail calendar isn’t like everyone else’s; it contains more peaks and troughs than the foothills of the Himalayas, to the extent that some fast fashion retailers now talk about 24 seasons rather than the traditional two; and that’s just for business as usual. Add to this Christmas, Black Friday, Easter, Valentine’s Day, Golden Week, Halloween, Mothers and Father’s Day, and it is clear that there is very little flat ground on the retail landscape.

At every peak, there is an opportunity for success or failure. And for some retailers, the stakes are alarmingly high – given that some online retailers generate as much as 10% of their revenue during the Black Friday Peak. In short, the increasingly ‘spiky’ nature of online retail means that most organisations will generate the lion’s share of their profits over a few peak trading days during the calendar year. Optimising their business in a variety of ways will therefore be important to ensure they can fully capitalise on the opportunity.

Online, the first certainty retailers need to have is that their business can handle the huge surge of orders. Most will immediately book higher capacity with their hosting companies, but something isn’t working out using that strategy. During every peak period, retailers, often very large and well-known ones, find their websites falling over.

Over the recent Black Friday weekend, Currys PC World (the irony), QuidCo, Macys, Dell and GAME were alleged to be notable casualties. This proves a triple whammy to their profitability, as they lose the income, lose the sale opportunity to a competitor, and possibly lose the customer forever.

Scale, Capacity and Availability

The truth is, there are differing opinions over what scale, capacity and availability really mean. Some of the largest ecommerce platform providers will claim to offer infinite scale, but they must be promising something they can’t deliver, because sites continue to fall over as soon as transactions ramp up during Peak.

And when it comes to availability, the industry average of 98.9% may sound OK, until you consider that this adds up to four whole days a year. In monetary terms, the potential loss is enormous; just one hour of downtime during Peak for a large ecommerce site could represent as many as 10,000 transactions. Assuming each transaction is worth an average of £25, that equates to a total potential loss of £250,000. And over four days, the total loss will run into the millions.

Even where the site stays up, availability may be compromised by multi-second page loading speeds, during which customers are not prepared to wait before moving on.

10%

of annual revenue made during the Black Friday Peak

98.9%

Availability = four full days of downtime a year

New Breed of eCommerce Solution

It’s time to talk about a new breed of ecommerce solution that enables hyperscale transactions during peak trading, which, since the advent of Black Friday, has become business as usual, not an anomaly. It is still a secret to many that some of the largest ecommerce sites in the world run on-premise on a fixed number of physical servers, rather than in the cloud, meaning that scaling at speed is not an option; consider that when commissioning new servers the business will need to order, build, install and load software before they are ready to cope with increased demand – a process that can take weeks, long after the peak trading opportunity has passed. In addition, once the additional capacity is installed (and paid for by capex), it will sit there under-utilised until the next peak period, where it may not be fit for purpose, and the cycle of adding new hardware starts again.

Some of the largest ecommerce platform providers will claim to offer infinite scale, but they must be promising something they can’t deliver, because sites continue to fall over as soon as transactions ramp up during Peak.

A Distributed Solution

Add to this all those online retailers that operate abroad, which do not have the same SLAs from their suppliers in more remote territories than they do at home. Even allowing for limited capacity local WiFi or 4G comms, page loading speeds may be more than 10 seconds even while home speeds are only a couple of seconds. Any brand looking to build a global business will absolutely have to provide a globally consistent service.

For those retailers with real ambition, sustainable growth depends on having a solution that can deliver real scale by managing both unpredictable demand and multi-territory trading. A distributed solution in the cloud will bring the platform closer to customers in all markets, simultaneously reducing loading speeds and adding elastic scalability to smooth out the peaks in the retail calendar.

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