Retail Cloud Market

The global retail cloud market size was valued at USD 47.0 billion in 2023 and is expected to grow at a CAGR of 19.6% from 2023 to 2028. The revenue forecast for 2028 is projected to reach $114.9 billion. The base year for estimation is 2022, and the historical data spans from 2023 to 2028.

In recent years, cloud adoption in retail sector has evolved as many retailers began to adopt hybrid cloud solutions that combined public and private clouds. This allowed retailers to keep sensitive data on private clouds while using public clouds for less sensitive applications. Further, cloud-based POS systems began to gain traction in the retail industry. These systems allowed retailers to process transactions in real-time and access data from anywhere, making it easier to manage their operations. Many retailers are also integrating cloud-based solutions with other technologies such as AI and IoT. Retailers are utilizing cloud-based IoT platforms to collect and analyze data from sensors in stores and warehouses, while AI-powered chatbots are being utilized to offer personalized customer service through cloud-based platforms. The global recession caused by the COVID-19 pandemic has had a mixed impact on the retail cloud market. The pandemic has increased demand for retail cloud solutions and services with the growth in ecommerce. This trend is expected to continue post COVID-19 to manage the surge in demand and changing customer preferences.

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Recession Impact on the Retail cloud market

The global recession caused by the COVID-19 pandemic has had a mixed impact on the retail cloud market. Factors like Russia-Ukraine war, the global pandemic, inflation, rising interest rates, and rising oil prices has resulted in recession across the various regions. These market uncertainties have resulted in reduced spending by organizations that may impact the demand for cloud solutions and services in the retail sector in the short term. Russia invasion of Ukraine has impacted the entire value chain of retail industry such as raw materials, manufacturing, transportation, and trading. This has significantly disrupted the global supply chain as well. In addition, Cloud providers and internet service providers are under constant pressure to not to service the clients in Russia. This is likely to impact the data center construction cost due to inflation, rising energy price, and supply chain disruptions for materials and semiconductor devices that are being produced in Russia and Ukraine.

While the recession has had a mixed impact on the retail cloud market, the long-term prospects for the industry remain positive. The continued growth in internet penetration, the increasing popularity of mobile devices, advent of technologies such as AI, IoT, cloud, and growth of ecommerce, are likely to drive continued growth in the market. However, the impact of the recession on the market is likely to be felt for some time, particularly in terms of investment and advertising revenue.

Retail Cloud Market Dynamics

Driver:  Accelerated adoption of multi-cloud architecture

Multi-cloud adoption has become a prevalent trend in retail as businesses seek to leverage the benefits of using multiple cloud service providers. The retail sector has specific requirements, including the need for scalable, flexible, and secure IT infrastructure to support both online and brick-and-mortar operations. Multi-cloud environments provide retailers with the ability to customize their IT infrastructure to meet their specific needs while also reducing the risk of downtime, data loss, and security breaches.

One of the trends in the retail industry is the use of multi-cloud environments for eCommerce operations. Retailers can leverage the scalability and redundancy of multi-cloud environments to ensure their eCommerce platforms are always available and can handle high volumes of traffic. By using multiple cloud providers, retailers can also ensure they have geographic redundancy, which helps to protect against outages and data loss. Retailers are also using multi-cloud environments for data analytics. Retailers generate vast amounts of data from various sources, including online sales, in-store transactions, and social media. By leveraging multiple cloud providers, retailers can ensure they have access to the tools and resources they need to manage their supply chain effectively. For instance, a retailer can use one cloud provider for inventory management and another for logistics management. Thus, multi-cloud adoption in the retail industry is expected to grow as retailers seek to leverage the benefits of multiple cloud providers to meet their unique requirements and improve their business operations. By adopting multi-cloud environments, retailers can gain a competitive advantage and improve their agility, scalability, and flexibility while reducing costs and improving their security posture.

Restraint: integration of cloud-based systems with legacy systems

Integrating cloud systems with legacy systems is one of the major hindrances to the adoption of cloud computing systems in the retail sector. Many retailers have invested in legacy systems over the years, and these systems often handle critical functions such as inventory management, order processing, and payment processing. Integrating these systems with cloud-based systems can be challenging, but it is essential to ensure that retailers can leverage the benefits of cloud computing while still maintaining their existing systems. Legacy systems are often built on older technologies that may not be compatible with newer cloud-based systems. This can result in issues with data migration and data exchange, which can impact the overall performance of the systems. To overcome this problem, retailers need to adopt a well-planned and structured approach to integrating cloud systems with legacy systems. This involves understanding the requirements of the business, assessing the compatibility of the legacy systems with cloud-based systems, and identifying the right integration tools and technologies. Retailers also need to ensure they have the necessary resources to manage the integration process effectively, including skilled personnel and adequate budgets.

Opportunity: adoption of new retail technologies to integrate online and offline shopping experiences

New retail adoption is driven by the increasing demand for a seamless and personalized shopping experience. Retailers are adopting new technologies to collect and analyze customer data to understand their preferences and shopping behavior, which can be used to provide personalized recommendations and improve customer engagement. This includes the use of technologies such as artificial intelligence, machine learning, big data analytics, augmented reality, and virtual reality, among others. New retail adoption is also helping retailers to optimize their operations by streamlining processes, reducing costs, and improving efficiency. For instance, automated inventory management systems can help retailers to keep track of stock levels and reorder products automatically, reducing the likelihood of stockouts and overstocking. Amazon, Apple, Alibaba, and Walmart are some top companies offering new retail stores. Amazon Go stores are a prime example of how new retail technology is being used to enhance the customer experience. With the use of computer vision, sensors, and machine learning algorithms, customers can simply walk in, pick up the items they need, and walk out without having to go through a checkout counter. The system automatically detects the items and charges the customer’s account. In addition, Apple and Alibaba have also been experimenting with cashier-less stores and leveraging AI for customer personalization. Apple’s “Today at Apple” sessions provide personalized learning experiences to customers based on their interests and skill levels. Alibaba’s Hema stores are another example of how new retail technology is being used to enhance the customer experience. These stores use a combination of mobile apps, AI-powered recommendation engines, and in-store robots to provide a seamless shopping experience. Thus, new retail will offer ample opportunities for retailers to enhance the customer experience, streamline processes, and gain a competitive edge.

Challenge: Concerns over data security in the cloud

Data security is a critical concern for any business, including those in the retail industry that use cloud solutions. When retailers store their data in the cloud, they must ensure it is protected from unauthorized access, data breaches, and other security threats. There are several practices that retailers can follow to ensure data security when migrating to the cloud, such as choosing a reputed cloud vendor, using strong passwords and authentication, monitoring access & usage, and developing a disaster recovery plan in the event of a natural disaster or cyber-attack. In addition, it is also important for retailers to stay up to date with the latest security threats and to continually evaluate and update their security measures as required.

Retail Cloud Ecosystem

Based on service model, the SaaS segment is projected to hold the largest market share during the forecast period.

SaaS has become increasingly popular in the retail industry as a way to manage key functions such as inventory management, point of sale (POS), and customer relationship management (CRM). By using SaaS solutions, retailers can take advantage of the benefits of cloud computing, including lower costs, scalability, and accessibility from anywhere with an internet connection. One common use of SaaS in retail is for POS systems. Cloud-based POS systems offer several benefits over traditional POS systems, including faster implementation, easier upgrades, and the ability to access sales data and reports from anywhere. Additionally, cloud-based POS systems can be integrated with other SaaS solutions, such as inventory management and CRM, to provide a more complete retail management system.

Based on deployment model, the hybrid cloud segment is projected to witness the highest CAGR during the forecast period.

Hybrid cloud is increasingly being adopted by retailers as it offers the flexibility to integrate various retail applications and workloads across public and private cloud environments. Retailers are using hybrid cloud to support their critical retail functions such as supply chain management, inventory management, customer relationship management, and e-commerce. One of the main advantages of hybrid cloud in retail is that it provides a more cost-effective solution compared to running everything on-premises. Retailers can use public cloud services for non-sensitive workloads such as website hosting, data analytics, and application development, while keeping their sensitive data on-premises or in a private cloud environment. However, hybrid cloud in retail also presents some challenges. Retailers need to ensure that their data and applications are secure across both public and private cloud environments.

Based on Region, North America to hold the largest market share during the forecast period

North America is expected to lead the retail cloud market in 2023. The US is estimated to account for the largest market share in North America in 2023 in the retail cloud market, and the trend is expected to continue until 2028. The growth is mainly due to the growing adoption rate of cloud services across enterprises. In a survey by LogicMonitor, 87% of IT decision-makers in the US said that they plan to increase their use of cloud computing in the coming years. Also, According to Flexera, 97% of organizations in US are now using some form of cloud computing in 2020, up from 93% in 2019. Further, cloud service providers are focusing on launching cloud initiatives to drive the cloud adoption in retail sector. For instance, AWS launched its "AWS Retail Competency" program in 2019, which recognizes partners who have demonstrated technical proficiency and proven customer success in retail-specific categories.

Key Market Players

The retail cloud market is dominated by a few globally established players such as AWS (US), Microsoft (US), Google (US), Oracle (US),  Salesforce (US), among others, are the key vendors that secured retail cloud contracts in last few years. These vendors can bring global processes and execution expertise to the table, the local players only have local expertise. Driven by increased disposable incomes, easy access to knowledge, and fast adoption of technological products, buyers are more willing to experiment/test new things in the retail cloud market.

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Scope of the Report

This research report categorizes the retail cloud market to forecast revenue and analyze trends in each of the following submarkets:

Based on Component:

• Solutions
  • Supply Chain Management
  • Customer Management
  • Merchandising
  • Workforce Management
  • Reporting & Analytics
  • Data Security
  • Omni-channel
  • Other Solutions
• Services
  • Professional Services
  • Managed Services

Based on Service Model:

• SaaS
• PaaS
• IaaS

Based on Deployment Model:

• Public Cloud
• Private Cloud
• Hybrid Cloud

Based on Organization Size:

• Large Enterprises
• SMEs

Based on Region:

• North America
  • US
  • Canada
• Europe
  • UK
  • Germany
  • France
  • Rest of Europe
• Asia Pacific
  • China
  • Japan
  • India
  • Rest of Asia Pacific
• Middle East & Africa
  • Saudi Arabia
  • UAE
  • Rest of Middle East & Africa
• Latin America
  • Brazil
  • Mexico
  • Rest of Latin America

Recent Developments:

• In April 2023, AI Babtain Group, a trading business in Kuwait extended its use of Oracle Cloud by replacing its legacy applications with Oracle Retail Store Point of Service (POS) systems and Oracle Retail Customer Engagement Cloud Service to provide customers with personalized experience.
• In March 2023, Salesforce announced Einstein GPT for Commerce Cloud to offer personalized customer experience with AI.
• In February 2023, Google Cloud announced a collaboration with Accenture to support retailers in modernizing business, including new updates to Accenture’s ai.RETAIL platform, which integrated Google Cloud’s leading capabilities in data analytics, AI, and product discovery.
• In January 2023, Google Cloud announced four new and updated AI tools to offer a smoother online shopping experience to retail customers and assist retailers in inventory management in the stores.
• In November 2022, AWS launched AWS Supply Chain, a cloud application which will improve supply chain visibility and provides actionable insights and overcome risk related to supply chain risks, lower costs, and improve customer experiences.
• In August 2022, Accenture acquired The Stable, a commerce company to help consumer companies operate and build their digital channels and drive sales across the North American region.
• In February 2022, Best Buy, a consumer electronics retailer, partnered with AWS for cloud infrastructure services and its strategic partner for developing cloud engineering talent.
• In February 2021, Virgin Megastore was an international retailing chain partnered with SAP to implement SAP Commerce Cloud to provide an omni-channel experience.

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