How cloud tech moves purchases from the warehouse to the fridge

Billions more are spent on New Year’s, the Labor Day and Memorial Day weekends, and Juneteenth celebrations. Every three months, retailers discount to mark the end of a season with more deals. And then there are retail-specific events, like Amazon’s Prime Day.

“The seasonality is unique to the retail business, with surges of promotions and demand,” says Anil Madan, corporate vice president of cloud data platforms at Walmart. 

That ebb and flow of demand is what makes cloud computing so alluring to retailers. The elasticity of the cloud allows retailers like Walmart to migrate quickly to public cloud services when demand surges, but only pay for that computation power when it’s needed.

Experts say that retailers are adopting cloud effectively compared with many other sectors, especially brands that were built on e-commerce, like Wayfair or Warby Parker. And the cloud has vast applications for retailers, ranging from transactions; management of their supply chain; pricing, tracking, and accounting for returns; and figuring out shoppers’ every attribute to more effectively recommend goods, which ultimately increases sales. 

“They are playing 3D chess,” says David Linthicum, Deloitte’s chief cloud strategy officer. “They are able to understand how you buy things and move you to another retail site and upsell you there. They are leveraging cloud strategically as an innovative weapon.”

All the major retail players are talking up how they are using the cloud to better connect with customers. Starbucks’ systems that record digital ordering and loyalty run on Amazon’s AWS, using analytics and data to better understand customers’ preferences. Best Buy also leans on AWS to allow shoppers to virtually interact with experts and see live demos of physical items. Whole Foods, which is owned by Amazon, last month announced it would use AWS’s palm recognition service to identify customers at all U.S. locations by the end of the year. Target takes a hybrid-multicloud approach—relying on AWS, IBM, Google, and Microsoft, saying each server has its own strengths for the retailer to leverage.

Walmart pairs public clouds from Google and Microsoft with the retailer’s own private cloud to connect distribution and fulfillment centers with Walmart and Sam’s Club stores, ensuring a speedy system to meet demand for shopping habits that are increasingly blurring the lines between in-person and online experiences. Madan says there’s also greater flexibility and resiliency in Walmart’s triple-cloud model.

“Cloud today powers every part of our omnichannel experience,” says Madan, who spoke with Fortune in July.

Walmart’s customers, Madan claims, are shifting their mindsets from “do it with me” to a more proactive demand that retailers “do it for me,” meaning they want a more seamless end-to-end experience when buying goods.

An example of the role of cloud computing can be seen in voice assistant ordering through smart-home devices like Google Home. A Walmart shopper can add items to their cart—a loaf of bread, orange juice, a dozen eggs—and preselect how they want these orders to be filled, including deliveries to their home. Cloud enables fulfillment of the purchase from warehouse to fridge.

Courtesy of Walmart

Cloud also can help improve the in-person shopping experience. When shoppers visit a Walmart or Sam’s Club today, if they need help finding headphones or a piece of furniture, associates can use the Ask Sam app on their phone to pull up store maps and locate the product. 

Walmart doesn’t differentiate between an online and in-person shopper, and this represents both the greatest challenge and the biggest opportunity as retailing continues to evolve. “How do you blend these experiences?” asks Madan. “Recognizing more and more that consumers are omnichannel in nature.”

Broadly, retailers are using cloud to manage their supply chain and logistics, as the technology allows for greater automation to obtain data, better strategies for how to use it, and stronger prediction models. 

“You don’t need to be sitting on a pile of inventory to make sure you don’t run out,” says Sebastian Bak, managing director and partner at Boston Consulting Group. “You can run much leaner because you are more sophisticated and you anticipate things better.”

Scott Russell, a member of SAP’s executive board and head of global customer success, sees the trend similarly. “More recently, we’ve seen a lot of companies in the retail segment use cloud technology to manage their returns, their supply-chain process, and demand signals to better predict what supply they need and manage that more effectively,” he says.

Consumers return more than $816 billion worth of merchandise annually in the United States. The use of cloud for more intelligent return management can help predict where those returns are coming from, guide customers on how to make a return efficiently, and better track the returns that flow back into the supply chain.

SAP works with major retailers and consumer-product companies on their cloud strategies and says all the major players are predominantly cloud first. Apparel makerHanesBrands uses cloud to better inform decision-making in managing its supplier base. Cloud helps athletic retailing giant Nike better target customers by using consumer insights to ensure its campaigns reach the right shoppers.

Russell says retailers today are more focused on the life-cycle behavior of their customers—not only what they bought and when, but whether they returned to buy the same item. Did they return anything? And if so, why? And what other products did they attach to that order?

“Retailers are getting sharper at this,” says Russell. “So they can not only predict the demand signals, but they are able to predict what a customer’s next ongoing steps will be as a result of these recommendations and insights.” 

And while retailers often talk about their omnichannel expertise—the connection between their brick-and-mortar stores and online channels—experts say those points of interaction are often limited to a single email address. Retailers are looking to create a more continuous connection, and one way to do that is with generative A.I. and cloud. This technology, while not used much yet, could better empower virtual assistants that interact with shoppers to make recommendations more effectively than a human could.

Generative A.I. and cloud can also help unlock better models to determine what prices to charge for goods. “Today it is almost impossible to be a sophisticated pricing retailer without having cloud infrastructure in the background,” says Bak.