PIM 360º FOR ECOMMERCE & MULTICHANNEL COMMERCE

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2 CONTENT Product Information Managment (PIM) is the prerequisite for multichannel commerce... 2 Longtail... 3 Multi-site... 4 Changes in category management... 5 Summary... 6 Heiler Software... 7 Author: Michael Fieg Enterprise Product Information Management White Paper Chapter 2 1

3 Product Information Managment (PIM) is the prerequisite for multichannel commerce From the point of view of businesses that specialize in the acquisition, preparation, and distribution of product information, the motivational factors for the initiation of customer projects have changed massively over the past several years. Enterprise Product Information Management (PIM), which has become an uncontroversial, important business process, provides a variety of solutions to problems that occur as marketing and sales-related product information makes it way through the business landscape. Looking back, the drivers of enterprise PIM have been on the selling side. Specialist solutions for output processes print, in particular had been available for many years. But it was not until people started to realize that PIM was particularly useful whenever data were generated by a PIM process based on a standardized, enterprise-wide repository that the solutions that exist in the enterprise PIM segment today were arrived at. The subjects on which projects focused, along with Enterprise PIM, were the consolidation of supplier data, the creation of the "golden record" as an enterprise "place of truth," internationalization linked with a process-secured ("global-local") creation process, and of course in depth integration with the back-end. Responsibilities also changed within corporations. The head of marketing's partially-automated print solution became the CIO's enterprise PIM. Just as enterprise PIM emancipated itself between 2002 and 2004 by staking a new claim for the all-encompassing significance of product information as a business process, it is now on the cusp of a new stage in its development. The marketplace is increasingly focusing on enterprise PIM as the "long-lost brother of e-commerce." But let's start at the beginning: what issues drive PIM projects today? Andrew White, a Gartner analyst, first introduced the "MDM era" as the successor to the "ERP era" in the fall of Gartner positions MDM as an enterprisewide repository. In the scope of this repositioning, Gartner took the opportunity to coin a new term: "MDM for product data" instead of PIM. Multiple channel distribution is becoming increasingly important, irrespective of whether the businesses in question are B2C or B2B-focused. Target-oriented distribution over different channels such as online stores, print catalogs, and point of sale opens up new target markets and increases awareness in the marketplace. It is precisely these developments in the area of multichannel commerce which make the idea of a centralized PIM solution attractive. The key drivers are the long tail, multi-site, and changes in category management. Enterprise Product Information Management White Paper Chapter 2 2

4 Longtail Particularly in the area of distance selling, product selection policy has seen major changes. Previously, category management meant always having to deal with limited space. In a print catalog, only a certain number of pages were available. The logistics were also limited: storage limited the possibilities so clearly that most dealers attempted to find the perfect "catalog selection" with the highest number of top-selling items. In our projects, we see these product selections in companies. It quickly becomes evident that compromises have been made in the selection of products. In most cases, only certain brands are carried, or a segmentation of the product and target groups is performed. This is certainly useful for print catalogs, but online stores don't have these limitations! In stationary retailing, the product range must be closely geared to reflect customer demand, due to the limited selling space. In doing so, particular account is taken of the demands of the majority, while anything that is not sufficiently profitable is often ignored. Many products remain unsold for this reason it is precisely these which are the "long tail." The term derives from a graphical representation of a frequency distribution. When one considers the margins, this distribution also has a highly interesting meaning: in most industries, the fastmoving items intended for the masses have a particularly low margin. Consider the market for music. What do you think has a higher margin: a top ten CD single, or a rare collectable album? The rare album, of course! This means that in the past, retailers had to forgo high-margin products due only to limited floor space, limited pages in catalogs, or perhaps due to limitations in their IT systems! The long tail consists of a wide variety of products: a rare bottle of wine, special interest music, exotically spiced roasted peanuts, films that have been deleted from back catalogs, highly specific spare parts for which there is little demand. The list is endless. There is no shortage of products for which there is little demand. They are seldom available, however. Enterprise Product Information Management White Paper Chapter 2 3

5 Compared to all other distribution channels, the Internet offers us considerable cost advantages. The digital mall consists of servers which can be readily expanded when necessary. Adding a new product takes little more than a few additional database entries. And perhaps a little space in a logistics center with efficient operations, or possibly run by the service provider and in the case of purely digital products not even that: sending a digital music track over the Internet costs the retailer practically nothing. The only question is why retailers haven't been massively expanding their product ranges for years. Why are we seeing product selections numbering 300,000 items with typical B2C dealers, instead of 3 million items? The leading store systems and search engines are designed for these large product ranges. It would not pose any major problems. There is a problem, of course: before products can be presented in a store, the product data must be obtained from suppliers and processed. In many cases, product ranges are also limited by the fact that the product data cannot be efficiently maintained. It is here that the new PIM strategies are brought to bear: with an enterprise PIM solution, retailers can build and maintain extremely large product portfolios. For the first time, retailers can now use an integrated process: suppliers provide their product portfolios in electronic form. These data are checked and stored in a central repository. They are then structured and prepared for presentation in the stores. Multi-site A strong tendency towards vertical integration on the part of manufacturers has become evident in the retail sector. Manufacturers have not only set up flagship stores to attract more demanding customers and position their brands, but they have also attempted to boost their turnover by setting up their own product presentations in retail outlets. This integrated product presentation is referred to as shop-in-shop. Retailers are showing an increasing tendency to set up brand and manufacturer-specific web stores. Beside shops-in-shops, manufacturers are increasingly setting up target-market specific presences. If one investigates the online strategies of the large mail-order retailers, one finds both an increasing diversification of brands, and an increasing tendency to cross-sell. SportScheck sells a pair of Adidas sport pants in the Adidas-branded store on sportscheck.de while also cross-selling them on otto.de and on other platforms such as amazon, for example. Enterprise Product Information Management White Paper Chapter 2 4

6 The complexity of handling product data arises from the multiplication of language, sales area, target group, brand specifics, and platform. With every additional website that requires product data, enterprise PIM gains greater importance as a central clearing house. Enterprise PIM is a precondition for the successful management of a large number of stores! Changes in category management Changes in the area of product selection strategies represent a further factor for the re-orientation of enterprise PIM. The massive growth of product portfolios in the marketplace has led to fundamental changes in the area of data management. These changes are most clearly evident in the area of mail-order sales. In the context of a multichannel strategy, PIM is typically positioned with the following process requirements: centralized data administration, increased automation, reduction of manual processes, reduction in media discontinuities, strengthening of clear responsibilities, early data capture, accelerated data availability, reduction of errors. In a real business, the following points would trigger an enterprise PIM project:» Several employees are continuously occupied with copying and pasting image and text data from an existing database, in order to make them available to third-party users.» Catalog page briefings (for print catalogs) typically involve the use of pen, paper, and scissors.» Raw image data cannot be used for the design of web pages.» 60% of all items in the web store were "re-digitized" from the print catalog.» A call center employee has to check up to four systems simultaneously in order to supply the customer with all the required product data.» In some cases, the same piece of text is translated multiple times per target language; and separately for online and print. Enterprise Product Information Management White Paper Chapter 2 5

7 Growth of product portfolios has thus had an enormous impact on the data maintenance scenario. Until recently, back office staff may have manually maintained product group information article by article, but now this is no longer possible, or at least not as a sequential task. New processes are required here! In order to promote the "relevance" factor in data maintenance, we now import customer ratings from the various online stores into the PIM system. The employee simply navigates to the poorly-rated products. These are usually the products that have to be described more accurately... online stores thus provide an excellent source of real-time data quality ratings. Organizationally, these changes in category management will lead to a restructuring of departments that have traditionally been responsible for data acquisition, maintenance and output planning. In many businesses, the publication specialists responsible for the print channel are organizationally separate from those responsible for the Internet channels. This often leads to redundant product data maintenance, and a failure to exploit synergies. The tangible indirect effects of this are different product presentations in print and on the Internet, different product portfolios, a huge manual overhead when transferring content between media, and redundant storage of product facts within the enterprise. In the case of leading mail-order retailers, there has been a realization in the past few years that the convergence of presentation channels leads to a restructuring of departments. Reorganization serves two objectives:» Simplifying and standardizing data creation. The purchasing department now has a new role as a supplier of highest possible product information quality.» Publication planning is becoming increasingly flexible and will typically span multiple output channels. Any differentation between online and offline channels should be consciously avoided. Summary Following the emancipation of enterprise PIM as an independent business process, it now stands on the verge of a new stage in its development. Enterprise PIM (or Gartner's "MDM for product data") is once again gaining importance in marketing and sales: enterprise PIM is a prerequisite for successful e-commerce! * Gartner Master Data Management Summit, October 5-7, 2009 Hyatt Regency Century Plaza, Los Angeles, CA Enterprise Product Information Management White Paper Chapter 2 6

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