Why the cloud does not take off: how loyalty systems work in stores

Image: Dean Hochman , Flickr

In our blog, we have already talked about how the new law on online cash registers , the modifications of our software to its requirements and changes in the maintenance process of hardware used in the field of iron trading, is arranged .
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Today we will look at another interesting topic - the introduction of loyalty systems in stores, and also talk about why while companies prefer to build their own infrastructure, rather than using cloud services.

How and where do loyalty systems work?

Loyalty systems can allow retailers to increase customer loyalty and increase revenue. However, in order for its introduction to benefit the audience and allow the business to increase sales, a number of conditions must be met. One of the main things is that purchases in the store should be made regularly by regular customers.

In this case, the product itself must be high-marginal - then it will be possible to give a discount to it relatively painlessly. A good example of such a business is a cosmetics shop, which regularly goes both for goods for yourself and for buying gifts.

If the store sells something that is not necessary to buy often - for example, large household appliances, and buyers, for the most part, are different every time, then their points for a discount will simply accumulate, and they will not be spending any particular need. As a result, demand will not happen.

Also, the loyalty system is unprofitable for stores selling goods with a small margin - for example, for grocery retail discounters, especially for small stores. Suppliers do not give them big discounts, so that when a loyalty program is introduced, a business will lose some of its small profits.

Infrastructure: what you need to run the system

To implement the loyalty system to the store, you need to build the appropriate infrastructure. There are two possible options, in general. The first implies that for each store a local server is allocated, on which the loyalty system server is deployed.



There is also a second option, in which only one server is allocated for the loyalty system, which is available to each store.



The devices involved must be connected to the local network at the store or outlet network level. In this case, all cash desks will be able to punch through goods with the use of a personalized discount or to award points to customers.

At a minimum, it is necessary to provide for the deployment of additional servers on which the system will work, as well as to integrate it with the cash registers used. If the cash software does not have a module for working with a loyalty program, then its functionality will have to be “finished”.

The ideal situation for the implementation of the loyalty program - the simultaneous purchase of cash solutions and software loyalty system from one supplier. For example, we in the Pilot company developed the cash program Profi-T and it has a built-in module from the loyalty system. This solution allows you to apply a loyalty program as a point for each store, as well as the distribution network as a whole.

Out of the box, the system includes: a cash module that can work with a loyalty server for charging / redeeming points, an API server and a website for administering the system.

Training personnel to work with the loyalty system entails additional expenses. At the same time, high-quality cash software can minimize employee errors - for example, by asking them simple questions during work (“is there a loyalty card - if yes, write off / add points, if not - issue a card”).

In addition, you can save money - for example, more and more stores refuse to issue physical discount or savings cards. It is possible to identify a client using a mobile phone or email, so it is not necessary to spend money on “plastic”.

So everything works now - the stores buy hardware and software, support the infrastructure for the work of loyalty systems. However, abroad, many retailers have long and successfully used cloud loyalty systems, let's talk a little about their prospects in the Russian market.

Clouds: Pros and Cons

In many countries, the segment of cloud loyalty systems has been actively developing for a long time. There are a number of advantages for business:

• Savings - the company gets rid of the need to incur costs for the purchase and maintenance of its own servers, pay for software licenses, as well as employees supporting it.
• Fault tolerance - the load is smoothly distributed across the cloud, so the failure of one server will not lead to the inoperability of the entire system.
• Simplicity - for small retailers, working with a cloud solution is often easier to implement and maintain your own loyalty system infrastructure.

However, in Russia, cloud loyalty systems have not yet received wide distribution, for which there are several reasons:

• Migration challenges - moving to the cloud may not be so easy, especially for large networks that have already invested a lot of resources in their own loyalty systems. Considering that “everything already works,” there are no special incentives for the transition.
• The need for an Internet connection - to work with the cloud system, in all stores of the network there must be permanent and duplicate access to the Internet.
• Distrust of cloud systems is a problem that is characteristic not only of the retail sector. Not all domestic companies are ready to entrust important data to third-party services, this factor also limits the spread of cloud loyalty systems.
• Insufficient competition is a problem in many regions of the country, even such large and developed ones as, for example, the Moscow Region. Where federal and regional retail chains are not represented, competition between sellers is low. Therefore, they do not think about the introduction of loyalty systems.

Perspectives

Despite the small spread of cloud loyalty systems in Russia at the moment, in the perspective of 3-5 years, the alignment may change in their favor. Technical limitations will gradually disappear - if earlier many sellers did not see the point in organizing a permanent Internet connection for stores, then with the introduction of the Unified State Automated Information System and the adoption of the FZ-54 (“law on online ticket offices”), the situation has changed. In addition, the rates of Internet providers are constantly decreasing.

The difficult economic environment is also pushing companies to find ways to reduce costs — many stores have seen lower average receipts, fewer purchases, and increased price sensitivity of customers. All this contributes to the growth of competition, and therefore to the spread of loyalty systems - if a large network comes to a region with a low level of competition, local players have to either close down or quickly implement simple loyalty systems, such as discounts on all goods on the store card.

All of the above allows predicting a massive transition to cloud loyalty systems over the next five years.