David Jones Ltd. IBM helps one of the world s oldest department stores transform into an omni-channel retailer. Overview

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1 IBM helps one of the world s oldest department stores transform into an omni-channel retailer Overview The need recognized that to remain competitive, it needed to transform its business model and engage customers through multiple channels, offering new services and delivering a consistent experience across channels. The solution IBM helped David Jones re-create and integrate new online shopping channels, adding services supported by a new warehouse, as well as merchandising and inventory systems, delivering a seamless customer experience. The benefit The retailer can now engage existing and new customers across multiple channels and has experienced a 1,000 percent year-on-year quarterly increase in online sales. Founded in 1838, is one of Australia s oldest singlebrand department stores and one of the oldest department stores in the world still trading under its original name. The company employs roughly 10,000 people in 38 stores across Australia and has annual revenues of approximately AUD2 billion. With weak conditions for retailers following the global financial crisis and a growing threat from online competition, David Jones realized it needed to make significant changes to survive in the rapidly evolving world of global retail. Led by chief executive officer (CEO) Paul Zahra, David Jones decided to reinvent the way it interacted with customers and the experience and choices it delivered. This goal involved a complete transformation of the business to become a true omni-channel retailer, capable of delivering the superior service and high-end products David Jones s customers have come to expect across any channel. The company also considered it vital to expand the choices available to customers and ensure they could start and complete transactions through any of the store s existing or new channels quickly and seamlessly. To achieve this vision and transform to become a leader in the digital economy, David Jones turned to IBM. Using a host of new technology designed to help retailers meet the needs of today s consumers, over 100 IBM technical and industry specialists successfully supported the transformation for David Jones in a limited timeframe. Customer experience challenges Throughout its 176-year history, David Jones has been known to Australian consumers as one of the country s most prestigious destinations for high-end cosmetics, fashion, home wares, electronics, furniture and gourmet food. However, spurred by the global financial crisis, the company was facing the dual challenge of muted consumer spending and rapid growth of local and foreign online competitors.

2 In the first quarter of 2014, online sales increased by over 1,000 percent, contributing substantially to the quarter s profits. Our sales have certainly exceeded our expectations. They are growing week on week, month on month, quarter on quarter. David Robinson, group executive of marketing, financial services and customer innovation for In 2010, David Jones decided to counter competition from overseas retailers by opening its own dedicated online store. Although the launch was a success, the store s limited functionality meant that it did not meet performance expectations. Ultimately, design constraints and low levels of product information meant the store failed to deliver the same high-street retail experience customers had come to expect from the department store. Rather than refreshing its online, mobile and social presences as distinct platforms, David Jones needed to find a way to adapt to the evolving competitive digital retail environment. In 2012, Zahra led David Jones management in a decision to transform the business into an omnichannel retailer, capable of delivering the same level of service, quality and purchase satisfaction to customers however they chose to interact. David Jones is and always has been a premium brand in Australian retail, with service and quality central to the store s prestige and appeal and key to its future success. The purpose of the transformation was twofold: it would give customers the freedom to shop at David Jones when, where and how they wanted, and it would equip the business to continuously adapt to customer purchase trends as they evolved in the future. An omni-channel retailer gives customers the same retail experience, regardless of how they choose to shop, explains Andrew Stevens, managing director, IBM Australia and New Zealand. To be successful in the future, all retailers will have to become omni-channel. This transformation wouldn t be the first time David Jones pioneered new ways to extend its in-store experience to customers. In the 1960s, many retailers viewed mail order as a frivolous novelty, but David Jones saw it as an opportunity and pioneered the industry in Australia, completely reinventing itself in the process. Its omni-channel transformation would require a similar reinvention. David Jones decided that its omni-channel strategy would comprise four new online channels: a new website, a mobile site, mobile and tablet applications, and a social commerce platform. However, the business s infrastructure at the time was not able to support the seamless shopping experience that David Jones envisioned. The transformation would also require new inventory and warehouse management systems to allow employees across the business to find and serve individual orders. David Jones needed more powerful computing and greater storage capacity to realize its new digital channels. The business also needed a solution that would allow it to integrate these channels and deliver a consistent retail experience to customers, regardless of how they chose to shop. 2

3 Creating a seamless customer experience David Jones teamed with IBM Global Business Services to support its vision of an end-to-end omni-channel platform. The first step was to find a way to make each transaction consistent across all of the retailer s divisions and purchasing channels. Omni-channel retailing is the ability for a customer journey to start in any channel and finish in any other channel explains Brock Douglas, strategy and analytics leader, IBM Australia and New Zealand. The customer should be able to work across those channels in a seamless way. So I might start on the website, but I might still pick up my product in the store. IBM Sterling Selling and Fulfillment Suite software gave David Jones a way to manage the complex supply chains demanded by its omni-channel vision. The suite centers on IBM Sterling Order Management software, which lets the department store consolidate its inventory and online order fulfillment into a single virtual software hub. Add-ons for the store and call center systems allow staff members in these divisions to view and update orders laterally as they move through the fulfillment process. IBM Sterling Warehouse Management System software then helped David Jones transform its warehouses into online fulfillment centers. This process involved rolling out 8 km of racking in the business s warehouses, which now serve two functions: warehouse employees manage inventory and stock picking as usual, but they now also perform the service flourishes, such as gift wrapping, that distinguish David Jones from other retailers. Omni-channel retailing is the ability for a customer journey to start in any channel and finish in any other channel. Brock Douglas, strategy and analytics leader, IBM Australia and New Zealand IBM WebSphere Commerce software has also helped the business integrate each piece of the omni-channel puzzle so that it works together as a coherent whole. The system is hosted using an IBM Cloud Managed Services (formerly IBM SmartCloud Enterprise) solution and operated with the aid of the IBM SmartCloud Data Virtualization offering, which has accelerated the system s development and delivery. The Sterling Suite and IBM WebSphere are integral to the whole omni-channel picture, adds Douglas. It means that staff across all facets of the business s operations can isolate and work to process the same order, regardless of which stage in the fulfillment cycle it is or whether the customer is purchasing or returning the item. 3

4 Comprehensive integration With the help of a dedicated, 100-strong team and technology from IBM, David Jones has not only created four new digital shopping platforms, but it has also integrated these platforms with its existing call center and retail channels. By bringing the physical stores, web and mobile stores and applications, call centers, and social commerce platforms together, David Jones has given customers a seamless retail experience and enabled them to shop whenever and however they want. Our goal as a retailer is to provide an exceptional customer experience by taking full advantage of data-driven insights and technology platforms across our business. Paul Zahra, chief executive officer (CEO), What the customer sees when they put through a transaction is only the tip of the iceberg, says Douglas. About 80 percent of the work we ve put into this platform is in the systems comprising the back end. The platform facilitates a single customer experience across all platforms. A shopper can start a transaction on a mobile device, modify it online or through the call center, and return it in person, if required. The fully integrated platform also assures David Jones customers that they are getting consistent pricing across any channel, meaning that in-store promotions are also available on the web and mobile stores, on the mobile app and through the call center. The new cross-business view of the inventory and fulfillment system lets customers benefit from the same range that would greet them in David Jones high-street stores and lets them review stock levels in near-real time. In addition, the platform improves existing David Jones services valued by customers; for example, wedding registry customers can now create and maintain a gift list and allow guests to purchase gifts using whichever channel they prefer. Besides the benefits of integration, the omni-channel transformation has improved David Jones s web store functionality, providing online shoppers with a search engine, a shopping cart, shoppable videos, customer reviews and a range of payment plans, among other features. Our goal as a retailer is to provide an exceptional customer experience by taking full advantage of data-driven insights and technology platforms across our business, said Zahra. David Jones selected IBM s Interactive Experience practice because we were seeking a partner that could effectively combine global industry experience, customer strategy, analytical insight and design capabilities, which would enable us to transform our customer engagement. 4

5 Ten times the range for online customers and growing Limited range had been a problem with David Jones s previous digital presence. With the new solution, the department store has increased the number of products offered in all channels from 9,000 to 90,000, and this figure continues to grow. This increase effectively lets customers anywhere across Australia access the same range that they would find in a flagship David Jones store. Reduced cost of goods sold, increased margins The efficiencies of David Jones s new system will bring substantial cost savings and greater margins on products over time. Because the business s warehouses now double as fulfillment centers, the company can ship goods directly to customers, bypassing the need for secondary handling in stores. Such efficiencies have also enabled initiatives such as Click and Collect, which the company rolled out in August It s common for retailers of David Jones s size to struggle with such functionalities. A customer will often make a purchase online, only to wait three days for the retail staff to check the shelf, report that the item is out of stock and cancel the order. That s why we encouraged David Jones to do the heavy lifting first integrating merchandising, inventory and supply chains, says Douglas. With David Jones s new system, the product is already there 98 percent of the time. If it s in stock on the website, the customer knows it s available, and the order is completed with minimal difficulty. That seems simple, but it has a very powerful effect on the customer. Now that basic functionality is in place, David Jones can really begin to leapfrog its competitors. IBM s work has allowed David Jones to complete six years work in six months. Paul Zahra, chief executive officer (CEO), Online sales take off Since the new platform went live in October 2012, David Jones has been able to drive new opportunities with customers through online channels and increase their participation in online promotional events. The launch of the platform in late 2012 also meant that it was the first year David Jones had ever been able to trade on Christmas Day, with similar results. In the first quarter of 2014, the business reported total sales revenue of AUD424.2 million, a 2.1 percent increase on the first quarter in

6 A large part of this growth was driven by strong sales across the business s new digital channels. Wednesday, November 6, 2013, marked the new web store s first anniversary. To date, the average online order is three times larger than equivalent in-store purchases. The performance of our mobile site and the performance of our ipad site has also exceeded our expectations about 30 percent of our traffic comes using those devices. Click and Collect has proved to be extremely popular with our customers, which we are very pleased about, and once again, exceeded our expectations, says Robinson. We believe we ve done all the hard yards and heavy lifting to get us from what we saw as a right to play to a right to win. Paul Zahra, chief executive officer (CEO), Analytics and future steps David Jones has deployed IBM Digital Analytics and IBM Product Recommendations software to capture information about how customers use its new omni-channel systems, meaning they can now not only capture greater amounts of data, but also understand how and when customers are using the omni-channel platform to shop for products. Although the current system has integrated social commerce and social media recommendations for customers, the next step is to incorporate social media analytics to better understand how platforms such as Facebook and Twitter inform purchasing cycles and enhance customer experiences. All of this information will be invaluable to David Jones from a planning perspective, as it will eventually allow the company to anticipate overseas retail trends. The ability to predict what s going to happen next and adapt accordingly is crucial. In 2014, David Jones plans to capitalize on its new analytic capabilities and investigate new ways the omni-channel platform can drive sales and improve service for customers. This is only the start for David Jones, and with IBM s support, it is well equipped to adapt with the changing landscape of Australian and global retail. 6

7 Solution Components Software IBM WebSphere Commerce IBM Integration Bus For more information To learn more about IBM Global Business Services, please contact your IBM marketing representative or IBM Business Partner, or visit the following website ibm.com/consulting/au IBM Sterling Order Management IBM Call Center for Commerce IBM Sterling Warehouse Management System IBM Sterling Selling and Fulfillment Suite IBM Cognos IBM Digital Analytics IBM Product Recommendations Services IBM Global Business Services Business Consulting Services IBM Global Business Services Application Innovation Services IBM Global Business Services Application Management Services IBM Interactive Experience IBM Cloud Managed Services IBM SmartCloud Data Virtualization IBM SmartCloud for Smarter Commerce 7

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