As an industry heavily influenced by consumer behaviour and trends, it probably comes as no surprise that the ‘next big things’ in technology for retail are mobility and social media – based on their potential to literally reach out and grab consumers’ attention and build loyalty and engagement. Freya Purnell reports.
Having battled through the wilds of the global financial crisis, retailers in Australia and overseas are still facing a tough climate. Consumers are more conservative than ever, opting to save rather than spend, and some of the old ‘hot buttons’ like clearance sales just aren’t working the way they used to to get the cash registers ringing. Add to this the growth of online retailing as a credible competitor to ‘bricks and mortar’ shopping, and retailers must innovate to remain profitable and indeed, viable, over the coming years.
A 2009 report commissioned by IBM and conducted by the Bathwick Group, ‘Rethinking the Retail Technology Platform’, authored by Gary Barnett, found that retailers must constantly deliver improvements to their processes and application platform in order to remain competitive.
“Retail and distribution organisations have to have a continual focus on cost reduction while at the same time offering what customers want in terms of price, product and customer experience. These challenges were present before the arrival of the new economy, now they are amplified,” Barnett wrote.
Barnett concluded that to meet these challenges, retail and distribution organisations must be able to do more with less so they can offer more for less to their customers. “This mandate means that IT has to be able to deliver continual incremental change to their business processes in order to:
• Drive yet more cost out of the supply chain;
• Deliver the right shopping experience – retaining their customer base;
•Optimise their merchandising process to create a lean, demand-driven supply chain that is capable of responding to local customer demand; and
• Improve their operation to be more agile and adaptable to increasing rates of change,” Barnett wrote.
Capturing consumers’ attention
According to CIBER ANZ director of innovation, Michael Niestroy, the biggest buzz at this year’s National Retail Federation in New York, the world’s largest retail conference and exhibition, was reserved for mobility and social media integration.
Stefan Gruler, SAP AG’s global head of trading industries (retail), believes this is driven largely by the changing behaviour of customers, and what he calls the mobile revolution.
“The business will always be connected, and they have different channels they can use via mobile. There has to be a new way of interacting, and in that regard we will see completely new patterns,” Gruler says. “The other trend is globalisation – many retailers do go global, but at the same time, they need to be clear on what is happening in the local space as well.”
Niestroy says we are not necessarily seeing the trend to mobility coming out strongly overseas replicated in Australia – yet.
“It is definitely hot on the agenda for some of the retailers. However, in most cases, they need to have an e-commerce platform or system in place, which not many of them have,” he says.
Major players such as David Jones are looking to rectify this situation, with the department store giant recently releasing an RFP for the commissioning of a new e-commerce platform – two years after they decided to get out of e-commerce. Niestroy attributes this resurgence in interest in this space to a recognition of Australia’s position as three to four years behind the rest of the world.
“The e-commerce percentage in Australia at the moment is about 3 per cent, whereas in Europe and the US it is 8 and 10 per cent respectively, so there is a huge market being unexplored at the moment by some of the local retailers,” he says. “That money, because of the strength of the Australian dollar at the moment, is being exported.”
For this reason, Niestroy says all of CIBER’s retail customers are looking at some form of e-commerce system – whether that be with SAP or another vendor. “I think they are laying the foundations now to leverage some of the e-commerce and social media aspects that will be relevant in three to four years’ time because consumers
are asking for it,” he says.
Efforts to use mobility in the retail space are considerably more advanced overseas, however, and Gruler cites an initiative by large French retailer Casino Group as indicative of how the world will change with mobile.
Currently in the prototype phase, Casino Group’s SAP system allows shoppers with loyalty cards to be identified as customers, with personalised offers sent directly to their smartphone, based on the information they have provided to the retailer about their preferences and shopping habits. “For example, if they only want to buy fat-free foods or support fair trade, we can have offers which cater to that customer. These are elements which are supporting a dialogue with a consumer, which is where the mobile revolution really starts,” Gruler says.
Choosing the channel
With multichannel or omni-channel retailing gaining momentum, the rules of the game have changed in the last year, according to Gruler. “The next generation of consumers are not playing by the traditional rules – they don’t need to go to the shops and buy what’s available. They can choose the channel, they can choose the time they want to buy, they can choose the combination of things they want to see, so that brings the retailer a lot of new opportunities, but at the same time, they need to be ready to react to those challenges,” Gruler says.
He says SAP provides a good platform to base a multichannel retailing strategy upon, particularly when the power of in-memory technology is leveraged. All the information required about product information, stock and sale data, and even product pictures, can be easily stored in the one repository, and utilised by each channel.
“Based on that, you are relatively independent of what channel is being used. That is very much the strength of SAP – we can optimise a demand-driven supply chain, necessary to support personalised offers, and we can understand what the consumer really wants at what time and which quality, so we can deliver at exactly the right time at the right store to exactly that consumer,” Gruler says.
SAP is also looking at how it can assist retailers with a cloud-based offering, either for large retailers which need support for subsidiaries, or for particular applications, such as the social media area.
Marketing in a social media world
Also to be considered when looking at how to leverage technology, according to Gruler, is just how networked the consumer is through social media. “He is giving feedback to the retailer, and at the same time, he expects something back from them, so therefore he needs to be immediately gratified for what he is doing. He wants to get the right combination of the best product, the best price, the best quality and the best service,” he says. One example of how retailers can tap into their consumer community is an SAP solution currently available in the US (and under consideration for the Australian market), which allows an organisation to monitor its brand on all social media platforms, including Facebook and Twitter, but also specific blog sites.
“It uses BusinessObjects software, text analytics and dashboarding visualisation, so you can monitor what people are saying about your brand online so that when you are doing marketing events or promotions, you can gauge the reaction in your community, positive or negative,” says Merijn Helle, SAP Australia industry principal – consumer and trade. “You can then start to tune your marketing programs very effectively and effect a more positive reaction in your consumer community.”
Enterprise-level efficiency for retailers
Retailers are also interested in how they can utilise mobility from a supply chain and business process perspective, to improve productivity and efficiency at the enterprise level. “For example, in the stores, mobilising replenishment processes, their sales force and also some of the executives by providing them with workflows and multiple data interfaces (MDIs),” Niestroy says. “When it comes to looking at mobilising some of the business processes that they have internally, it is basically sweating the asset that they have in the system – making SAP more user-friendly, as you don’t have to deal with the SAP general user interface (GUI) any more.”
Helle says mobile solutions could also help retailers manage their workforces better.
“There is a very high proportion of Gen Y in that workforce, and they don’t have ready access to a desktop, because they are out on the shopfloor all the time,” Helle says. “We’re now working on a program around viewing their roster, and putting in leave requests or shift preferences, and deploying them to their personal smartphones. That will give retailers a huge productivity boost, and it will be a very easy to use format for those employees.” Niestroy says retailers are also looking for innovations that address common challenges such as managing the creation of new products.
“Every season, a fashion retailer has to create up to 20,000 products in a very short period of time. We have come up with a solution that allows them to very efficiently create those products in SAP with very little error, because if you create a master record in SAP with insufficient data it will hurt you down the track. It is just becoming a bit smarter with the SAP systems they have implemented.”
The right strategy for local customers?
According to Helle, there are currently more than 20 core retail SAP customers in the ANZ marketplace, with large implementations at Woolworths and Harvey Norman currently ongoing.
He says that those who have implemented SAP previously have been able to quantify their results, with some crediting it with their survival during the GFC. “Others have said they are getting an 0.82 per cent increase on margin, based purely on the increase in visibility, increase in pricing, and increased sales they are getting because they are ranging and replenishing better in stores.” This has led to many of these retailers pursuing a ‘why not SAP?’ strategy.
“They have seen it as a platform, as a foundation through implementing ERP for Retail, and are now looking at new things in terms of technology,” Helle says. “One of the biggest areas is BI, so if we look at some of the new Rapid Implementation solutions we are implementing, we have a particular scenario called Sales Analysis for Retailers, which allows retailers in real time to analyse their point of sale (POS) data, look at basket analysis and the spread of sales from the day, and use that data to be a better retailer.”
And as the mobility use cases start to stack up, SAP expects further success in the retail sector – based on the results they can gain.
“Within the past month, we have had some innovations around new solutions like promotions management, which is very well-received by our customers, so there is a big interest in how we can use those solutions much more effectively in the future. If you look to the NZ market, where it has been said that close to 50 per cent is done through promotions, you do see how relevant our solutions are to improve the business performance of our customers,” Gruler says.
“One of the customers tells us that just by using those mobile scenarios he will increase, through customer loyalty and personalised offers, the sale per customer by 50 per cent.”
As for how others in the market perceive the SAP mobility strategy, Niestroy says it is still early days for customers to truly understand what is on offer.
“SAP’s mobility strategy is centred around Sybase, and I think up until now they were coming more from a technology perspective. So that didn’t necessarily relate very well to some of the business process owners in retailers, because they were approaching it from a mobile device management perspective, rather than the business processes,” Niestroy says.
“That has changed since SAPPHIRE, where I think 30 or 50 mobile apps have been presented which address certain business processes, some of which will be relevant for retailers.”
One thing is for certain – innovative retailers will be taking every opportunity to continue to compete in what will surely be a tough market in the future.
This article was first published in Inside SAP Winter 2011.
