TRADITIONAL ERP < OR > ERP FOR ECOMMERCE? How to evaluate your options to choose the right direction for your retail business. SALESWARP.COM
TRADITIONAL ERP OR ERP FOR ECOMMERCE? The retail industry is quickly evolving. Customers have become the center of the retail experience, with access to retailers from the Web, their phones, in-stores, by contacting call centers and through any platform in between. The omni channel retail environment is in turn demanding that merchants be more flexible to suit the needs of shoppers. Retailers can no longer operate on a channel-by-channel basis - they need to operate a dynamic empire that can serve customers regardless of where they are and how they prefer to shop. Moreover, merchants need to carry out this effort seamlessly and ensure the shopping experience is optimal across all channels. The retail landscape has always been a competitive one, and this remains the case today. In order to deliver a satisfactory shopping experience, merchants must leverage accurate data to engage customers in meaningful ways. Having the right information empowers merchants to react more efficiently and quickly across channels. For many retailers, this calls for increased investments in ecommerce software and solutions. The right technology will play a pivotal role in aiding merchants as they develop the agility needed to keep up with the modern omni channel customer. To this end, enterprise resource planning systems can be crucial in helping retailers store and manage data across business functions. P. 2
WHAT IS ERP? In the context of the retail industry, ERP systems are software packages that integrate data and related processes in a single space. They span a variety of business-specific functions, everything from inventory to finance. According to a study conducted by Emerald Insight, a successful ERP implementation is tremendously beneficial and has several notable benefits. After integrating an ERP system, businesses that responded to the study experienced procurement cost reduction, financial cycle reductions, productivity improvements, personnel reduction and lower IT costs. Given the radical changes the retail industry has gone through over the past two decades, particularly with the rise of mobile shopping, it only makes sense that merchants would need to rely more heavily on technology. ERP systems can be an effective means to tie all of these functions across channels together and get them working toward a single goal. ERP systems can be an effective means to tie all of these functions across channels together and get them working toward a single goal. P. 3
THE PROBLEM WITH TRADITIONAL ERP SYSTEMS Retailers have particular needs that require their own industry-specific solutions. To take that one step further, online merchants have different needs than traditional brick-andmortar retailers, and they too require niche-specific technology. The problem, however, is that many traditional ERP systems aren t designed with the ecommerce industry in mind meaning they lack ecommerce-specific features online merchants need. Because ecommerce ERP is relatively niche, merchants don t know what to look for and often end up trying to attach best-of-breed systems to traditional ERP, which can lead to costly and lengthy integrations, in addition to settling for less than optimal functionality. The systems that some merchants use can be up to two decades old and made for a time when most telephones still had cords and the Internet was accessed by dial-up modems. These legacy systems may not play well with the new systems that merchants are leveraging for other functions. Trying to make these old platforms work can be a challenge - they often don t scale well, require a lot of maintenance, are limited in scope and present a risk to the overall business. Perhaps one of the biggest issues for a retailer using a traditional ERP system is that it can t be easily customized, or in some cases, not customized at all. As ERP providers release new product updates and enhancements, previously implemented customizations often will be wiped out when merchants upgrade, and their IT teams will have to start customizing from scratch. Between all of these downsides, ERP systems can end up costing retailers a lot of wasted resources, in terms of development and integration time as well as financial funding. Many traditional ERP systems lack ecommerce-specific features online merchants need. Customization is just the tip of the iceberg. Many legacy systems are efficient when it comes to managing inventory and supply schedules, but lack recent advancements, including support for marketing and promotion functions, analytics and product information in addition to multichannel management. This affects the agility and nimbleness of retailers, which can set them back in a highly competitive market. P. 4
Real-time data visibility is particularly important, especially considering the increasingly global nature of ecommerce and the modern regulatory environment that governs the retail sector. Increased regulatory scrutiny puts pressure on retailers to improve process visibility, data accuracy and produce real-time reports. Legacy ERP systems, however, may not offer that level of flexibility, DMS Retail added antiquated solutions may not be able to produce the necessary information needed by regulators in a timely and efficient manner. Finally, because operating a traditional ERP system can be such a complex challenge, retailers may need to hire specific staff and devote more resources to ERP operations. Integration can already be a big expense, so having to devote personnel to maximize a traditional ERP system for ecommerce functionality may create even more costs for merchants. Traditional ERP systems come with rigid constraints that require custom development and the aid of specialized consultants. These are major obstacles that any business implementing a traditional, non-industry specific ERP solution will have to address. Even established organizations with the resources to deal with these challenges may still find a traditional ERP to be too much of an expense, impeding their ability to deliver a quality shopping experience to customers. P. 5
LEVERAGING AN ERP FOR ECOMMERCE SYSTEM Because of all the drawbacks of a traditional ERP, merchants may want to consider utilizing an ERP system specifically designed for the needs of online merchants. These platforms allow for better integration between consumer-facing online storefronts and back-end inventory and accounting systems. An effective ERP for ecommerce system also enables the merchant to better utilize different options depending on the needs of the business. Retailers are no longer locked into unwanted feature sets, but at the same time they have the potential to utilize multiple systems in complex ways. ERP for ecommerce systems can assist with achieving core retail functions, including merchandise management, order management, retail planning, inventory management and supply chain execution more effectively than traditional ERPs. Merchants have specific needs, so utilizing software specifically built to accomplish those goals can be a significant boon. Merchants looking to invest in an ERP for ecommerce solution should look for an offering that is scalable, flexible, customizable and affordable, as well as one that will result in reduced labor costs, time and resources. A solution with these characteristics will help retailers avoid massive organizational changes and allow retailers to keep up with the breakneck speed of the online retail industry. According to Lumenia Consulting, speed is a fundamental characteristic for ecommerce ERP. ERP for ecommerce platforms allow for better integration between consumerfacing online storefronts and back-end inventory and accounting systems. P. 6
Setup and maintenance should also be a high priority - although ERPs can provide retailers with tremendous advantages, these benefits will be for naught if merchants have difficulty with customization and implementation. As ERP Focus noted, Nike once invested $400 million into an ERP solution. However, integration struggles ended up costing the sports apparel brand $100 million in lost sales. Merchants must look for an ERP for ecommerce solution that can be integrated with their online sales channels and supply chains seamlessly and one that can be maintained quickly and cost-effectively. Finally, retailers should keep the operations of their ecommerce business in mind. An ideal solution will have pre-built connectors to shopping carts and marketplaces, allowing product, inventory, order and customer data to be easily managed from one system and synchronized in real-time across every online store and sales channel. Merchants looking to invest in an ERP for ecommerce solution should look for an offering that is scalable, flexible, customizable and affordable. P. 7
THINK OF THE CUSTOMER FIRST Although many retailers consider their own needs as they integrate ERP solutions, it s important to keep the needs of customers in mind as well. An effective ERP system can help merchants improve the overall customer experience and enable them to capture more shoppers and convert market opportunities. A core advantage of leveraging ERP solutions designed specifically for ecommerce is that they streamline order history and tracking functionality. For example, they can help merchants track items purchased by shoppers in the past and offer re-order templates, which enables customers to quickly make repeat purchases. In the business world, it s widely known that it s easier to serve loyal customers than it is to win over new ones, so this type of functionality can go a long way in bolstering shopper loyalty and ensuring people can quickly and seamlessly make repeat purchases. Whereas a traditional ERP may often be built with the business side in mind, with most functions and features built for the internal user, ERP systems for ecommerce often have broader functionality, enabling merchants to create a better customer experience that helps them stand out from the crowd. For consumer-facing retailers, this can be critical to their success and should be a top consideration when deciding between a traditional ERP or one catered to the needs of the retail and ecommerce sector. Retailers need to operate a dynamic empire that can serve customers regardless of where they are and how they prefer to shop. P. 8
A LOOK AT ERP VENDORS TRADITIONAL ERP There are numerous ERP vendors that retailers can take advantage of to improve their ecommerce operations. When it comes to the retail sector, it s crucial that merchants consider their needs and go with the vendor that offers the right solutions for the challenges they face. First, there are the traditional ERP vendors that provide merchants with proven, robust solutions that are used by some of the most successful companies around the globe. Traditional ERP vendors include: > SAP Business One > Oracle > Microsoft Dynamics > JD Edwards > Sage > Epicor It's an ongoing partnership between retailers and vendors that is working to align the ERP system with the merchants changing business needs and goals. Although these traditional ERP vendors are used by some of the world s most successful businesses across a variety of industries, that doesn t mean they are the perfect fit for every organization. In fact, they may present significant drawbacks for retailers, particularly as they try to tackle industry-specific challenges. As Manufacturing.net noted, these ERP systems come with rigid constraints that require custom development and the aid of specialized consultants. P. 9
OPEN SOURCE Similar to the traditional ERP system, open source ERPs can span a variety of departments including purchasing, warehouses, accounting, manufacturing, human resources and more, and scale with enterprise retailers. The real advantage to using an open source ERP system is first, the ease in which it can be downloaded and utilized on most web browsers, and second, the flexibility a user has to modify the freely available code base to meet business needs. Several open source ERP systems can be downloaded online and are offered free of charge. Users can try the system out for free to see if it meets their needs without any risk of upfront licensing fees for software that may not work for their businesses. Others may charge a monthly subscription fee that includes support and upgrades. However, even though most of these solutions are customizable and easily accessible from any Web browser, retailers will need to rely on technical professionals or on an open source community for most support, upgrades and customizations. Some vendors that offer these solutions include: > OpenERP > WebERP > ERP Next An ideal ERP solution will have pre-built connectors to shopping carts and marketplaces. P. 10
ERP SYSTEMS FOR ECOMMERCE Because of these disadvantages, merchants may want to consider leveraging an ERP made specifically for ecommerce retailers. Some vendors that offer these solutions include: > RetailOps > Netsuite > SalesWarp Regardless of whether retailers opt for a traditional ERP, an open source ERP or one designed specifically for ecommerce, vendor selection is always important. Investing in an ERP system often isn t a one-time deal where merchants purchase the system, implement it and let it run. It s an ongoing partnership between retailers and vendors that is working to align the ERP system with the merchants changing business needs and goals. Whichever type of ERP is required, retailers need to choose a vendor that grants them a platform for growth and the flexibility to evolve with the changing retail landscape. The flexibility and rigor granted by an ERP system specifically designed for online merchants can be a key weapon in the arsenal of online retailers as they move forward. A core advantage of leveraging ERP solutions designed specifically for ecommerce is that they streamline order history and tracking functionality. P. 11
ABOUT SALESWARP SalesWarp provides an end-to-end omni channel software solution that consolidates and manages all product, order, inventory and customer data across multiple sales channels and fulfillment locations. With powerful, cross-channel integration and advanced automation, you can streamline your retail operations, gain real-time data visibility across your organization, and deliver a seamless omni channel experience from one unified system. For more information, visit SALESWARP.com. To learn more on how SalesWarp can help your retail organization, visit SALESWARP.com.