Facing Up to the BI Challenge for Multi Channel Retailers

Transcription

1 Facing Up to the BI Challenge for Multi Channel Retailers Tony Bryant January 2010

2 Tony Bryant K3 Business Development Manager for Multi Channel How often do the various teams in your organisation have to work frantically on a Sunday to pull together the relevant reports for a board meeting early on the Monday morning? The answer is probably far too often as the reality for most businesses is that their reporting capabilities are sadly lacking. For many years information management has taken on numerous different guises but the bottom line is that for most retailers the precursor to that all-important board meeting still involves the pulling together of a jumble of information from across the business. From this is created home-produced reports that contain little intelligence on key statistics. They are predominantly simple and contain only top-level data such as: sales, stock availability, stock commitment and possibly staffing levels. Tony Bryant heads up the Multi Channel Solutions group within K3 Retail Business Solutions. Tony has had many years experience (he says too many to be published!) working in a retail environment, the majority of which was spent at Marks and Spencer. Tony covered roles from Store/Area Manager, Divisional Operations Manager, and Retail Project Manager to Food Senior Programme Manager managing a large end to end supply chain transformation. Tony has a passion for the fast moving industry and has detailed knowledge of the key functions - Plan, Buy, Make, Move and Sell and understands the interdependencies of information, products and services. Since joining K3 he has taken a pro-active role in helping the company deliver its multi channel vision to the retail sector. His deep understanding of the commercial issues facing retailers and developing IT solutions and business processes to improve product availability, drive profitable sales and reduce costs has been invaluable in establishing K3 as a leading provider of multi channel solutions. Outside work Tony plays drums in a local band and tries very hard to maintain a very old Caterham 7 (Car). He also has four Daughters who also require high maintenance and a permanent taxi service. This whitepaper examines the principal challenges that face the bricks and mortar retailers as the transform their business into an integrated multi channel operation. #1: The Distributed Retailer Part of the problem relates to the data in most organisations being dispersed across a retail estate. The head office has its own discrete repository holding information on merchandising and finance, while the data related to stores is held separately and consists of transaction information and statistics such as local staffing levels. One of the big issues is the lack of visibility that head office has on the activities in the stores. #2: Accuracy What makes matters worse is that a large proportion of the data held in the supply chain of most retailers is simply incorrect. Consultant AT Kearney calculates that as much as 30% of item data in retail catalogues is incorrect. The ramifications of this dirty data traversing through the veins of the industry is that 2.1 billion of sales are lost each year across the supply chain of UK retail. This equates to 3.5% of all sales effectively being allowed to slip through the industry s hands and not find its way into the till. To clean up the problems caused by this incorrect data is no mean feat as AT Kearney found that rectifying the wrong decisions made as a result of the poor information and incorrect reporting would cost a further 2% of sales in terms of staffing costs. 2

3 The unfortunate situation is that many retailers have sought to improve their reporting capabilities by investing substantially in Business Intelligence (BI) solutions but this has been a flawed strategy as these tools have simply been fed with the inaccurate data held throughout retailers businesses. Be smart These tools may well provide retailers with the ability to send sales data to mobile phones and provide dashboards showing real-time forecasting information but because of the poor quality of the input data the BI solutions have not resolved retailers problems with reporting and accuracy. On the contrary in fact, they have simply compounded the problem. Despite this problematic backdrop, many retailers have made great efforts to improve their reporting capabilities and there has been a reduction in the level of frenetic activity before those worrisome Monday board meetings. #3: Complexity But for most retailers the problems with information management persist because many have chosen to develop their businesses into multi channel operations with the result that the information flowing through them has become far more complex. 3 Multi channel means the data moves from stores to the web to the call centre. As such, supply chains have had to be adapted to take into account the new fulfilment requirements including the handling of returns and the need for clear visibility of stock across the various channels. Thankfully the cost of storing this data has reduced significantly over recent years, thereby allowing retailers to store vast quantities of information at relatively low cost. But this leads to its own problems as many merchants now find themselves drowning in information. The ability to hold unlimited terabytes of data also raises questions about how a retailers data warehouse should be constructed. It must allow them to benefit from the added complexity inherent in their businesses today while also helping them sort out the issue of inaccurate data flowing through their organisations.

4 #4: Turning Business Information into Insight On top of all this retailers also have to try to grasp the potential that customer insight now presents. There is no mistaking the fact that this is playing an increasingly significant part in whether or not retailers are ultimately successful. As should be abundantly clear, BI is no longer just about reporting. Today it also encompasses predicting customer behaviour, what future stock levels are likely to look like, and assessing what other trends are on the horizon. Such is the continual evolution of BI that before making any changes to their businesses a relevant exercise for retailers is to step back and consider what exactly it comprises and how it can benefit their organisation. At its heart BI involves reporting on things that have happened in the past (including basic business reporting) and from this retailers should then, through their experience, be able to make informed judgements on how to adapt their organisations. Be connected However, in today s market all credible BI solutions should also incorporate predictive and forecasting capabilities with the what if? query available to interrogate the data. BI needs to be a fundamental forecasting tool that provides informed answers about what to do in the future, based on an accurate history of data. So if the school half-term is approaching and the weather forecast looks bad then retailers need this information to go into their BI solutions and for it to work out a plan of action for this period. #5: Getting that 360 o view of the business The crucial requirement of effective BI tools is that all data within a business is fed into them. There has to be a single data set. There is no doubt that by pulling all the data held within a merchant s business into a single repository then it is possible for the BI solution to be sufficiently valuable as to contribute to defining the way a whole business operates. 4 Consider a retailer bringing in a fraud management tool. Rather than operating it as a standalone tool it could be linked directly to the rest of the business through the BI solution. This arrangement can add value on a much broader basis than pure fraud management as it can also help deliver intelligence on productivity and staffing. Such a strategy can provide many additional benefits such as triggering a report to be run in the BI tool if incorrect pricing is being entered into a stock file. It is clear that the BI toolset can become extremely powerful as a management aid far beyond simple reporting. It is

5 therefore not just a solution for running analytics across a business but can be a real driver of all elements of a retailers business. #6: Realising BI s true potential The more sophisticated the tool, which picks up on all touch-points throughout the organisation, then the greater the potential for it to be driving more aspects of a retailers business, with the scary possibility for IT directors that investment in technology could in future be justified by the value that it ultimately brings to bear on BI tools. Even though the single data set at the heart of any decent BI solution is vitally important and clearly enables it to provide visibility across an entire business, BI can also bring empowerment to individual business areas. For each store it is possible for the relevant data to be stripped out of the BI tool and for decisions to be made on a myriad of business areas including their own single-store business plan, estimates, staffing waste, fraud management and customer insight. Managers are therefore able to undertake their own analysis and by employing the what if? capability they should be able to run through many potential scenarios. The result being that they can be proactive in the way they run their stores. Another essential component of a credible BI solution is to operate within real-time. When this capability is combined with the single data set it is possible for vastly improved customer insight to be derived from an organisation s information management function. 5 #7: Focussing on the Customer This provides retailers with the opportunity to begin to have fullyaligned thinking around the customer and it opens up the prospect of the customer being truly placed at the centre of a retailers decisionmaking. This provides the platform for retailers to finally employ an effective CRM (Customer Relationship Management) capability. Rather than simply being an overused acronym that has proved a costly diversion for many companies, CRM can finally be utilised by taking data from all the relevant customer touch points in the retailers business and then analysing it through the BI tool and acting upon the results. Be profitable This arrangement makes it possible to see how the customer shops, where they shop, and where they spend their money. From this insight there is the potential for retailers to better target and market to their customer base. With discrete data sets retailers will continue to see both a store spend and an online spend but will remain in the

6 dark about whether it is the same customer purchasing over these two different channels. By putting this behavioural data into the BI analytics engine it is possible to undertake what if? queries on the customer and their spending patterns. If a customer has spent X pounds in the past six months then they could be put through the BI analytics engine and an investigation initiated into what marketing has worked best to influence their behaviour and spending in the past. This can then be used to help determine what type of targeted marketing would be most appropriate in the future. There have been some examples of large multi-channel retailers such as Marks & Spencer successfully following this path of using customer data to drive insight and determine their future marketing campaigns. There have also been many pure play merchant s including Amazon and ASOS that have been able to capture lots of data on their customers and then use it to very effectively target them with relevant marketing. Be ahead #8: Scaling the BI solution For smaller multi-channel retailers that have taken the decision to move online there should be the opportunity with a BI capability to collate data from across their entire business and use the customer insight accrued from this to drive sales both in-store and online. In addition, for these smaller operators with fewer resources than their bigger counterparts there may also be a requirement for insight to be created at the store level rather than at head office (where larger retailers are likely to benefit from having sizeable teams working on analytics). Therefore, if there is customer spend online then this can be fed into the BI tool and the resulting insight used by specific stores. 6 #9: Planning for Success To experience these many benefits it is important that retailers do not move forward by simply spending vast sums on an all-encompassing BI solution. There is an alternative cost-effective route that can be taken and it involves undertaking some initial steps. Firstly, retailers should seek to integrate the various data sets across their business and understand where it is coming from, whether it is visible throughout their organisation, and if it is accurate. The aim is to have one version of the truth or one best way. Without understanding this fundamental aspect of the data within their business a

7 retailer can never produce accurate reports or make predictions and forecasts with any value. Secondly, it is also possible to avoid spending huge amounts of money on very clever and sophisticated analytical tools to interrogate the data in the BI repository. There are alternative products on the market that enable simple data sets to be constructed that encompass the five key areas of reporting stores, products, staffing, customers and third-parties. Be confident These structures can then be used as the bases on which to build reports that can then be interrogated with quite sophisticated Excel spreadsheets with simple drag-and-drop methods. Such solutions can also incorporate built-in alerts and traffic light -type signals. Thirdly, if more predictive and forecasting analysis is required then it is possible for additional functionality to sit on top of these data sets, which provides the necessary what if? query capability across the whole business or on specific stores. For all retailers, regardless of size, there is a necessity to understand their reporting strategy and the timing of when BI tools are likely to be needed. Companies may decide they need BI immediately but rather than rushing into costly and lengthy implementations they should first work through the stages outlined above and decide the best way to introduce the capability into their business. 7 This should enable them to take the most cost-effective and pain-free route to positioning themselves in the best place to ultimately achieve the most impressive long-term results from BI. K3 Retail & Business Solutions Corrinthian Court 80 Milton Park Abingdon Oxon OX14 4RY T. +44 (0) E. enquiries@k3btg.com W. K3 Business Technology Group plc December 2009 About K3 With more than 18 years experience in delivering business solutions, K3 have grown to become the UK s leading supplier of Microsoft Dynamics in retail. As a Gold Level Partner we offer a clearly defined roadmap and a product with a proven track record backed up by a $2 billion annual investment in Research and Development. Customers that have benefited from a K3 retail solution include: Adidas, Alliance Boots, Agent Provocateur, American Golf, Beales, Booths, Carpetright, Clinton Cards, Dobbies Garden Centres, Dreams, Gamestation, GameStop, Jigsaw, Kiddicare, Leekes, National Gallery, Rugby Football Union, Ryman the Stationers, Shoon, Smyths Toys, Space NK, The Steinhoff Group and The White Company.