WHITE PAPER: Achieve Unified Commerce with the Right Technology Boston Retail Partners October 2014 Sponsored by
Table of Contents Introduction... 3 State of Retail Technology... 4 Silos The Achilles Heel of Retail Technology... 4 Unified Commerce The Catalyst to Move Beyond Channels... 4 Technology Enabling the Experience... 6 Unified Commerce Laying the Foundation... 6 Single Commerce Platform... 6 Middleware/SOA... 7 Master Data Management (MDM)... 7 Business Process Management (BPM)... 8 Use Cases: Unified Commerce in Action... 8 Customer Engagement: Personalized Selling and Promotions... 8 Store Operations: Monitor and Respond in Real-time... 9 Supply Chain: Enterprise Inventory Visibility In Real-time... 9 Conclusion... 10 About Boston Retail Partners... 10 Sponsor Perspective: Retail Agility Platform Powers Unified Commerce... 11 Achieve Unified Commerce with the Right Technology Page 2
Introduction It s very simple, customers perceive and shop retail brands not channels. This simple premise is the catalyst for retailers shifting their focus to a holistic customer experience and what we term unified commerce. Retailers can no longer fragment that experience by channel, but must deliver a customer experience that transcends channels. Unified commerce is the new retail paradigm, driven by the customer that is forever redefining retail. In this year s Boston Retail Partners CRM/Unified Commerce and POS/Customer Engagement surveys, retailers indicated that establishing a unified commerce approach is a top company priority. However, only a small percentage of retailers have successfully achieved a unified commerce model. Unified commerce is a transformational undertaking that forces retailers to look not only outward at the customer, but also inward at themselves. Retailers can no longer to afford to operate from within silos, and must transform their organization, business processes and technology if they want to align with their customers. Our objective with this paper is to take a deeper dive into the technology that enables unified commerce. We are at a strategic inflection point, where retailers can only hope to achieve a unified commerce experience by leveraging the right technology. This is daunting to say the least, as retailers consider new solutions and approaches that are quite different than the legacy thinking and technology that is so prevalent in retail today. Retailers can no longer afford to operate from within silos, and must transform their organization, business processes and technology if they want to align with their customers. Achieve Unified Commerce with the Right Technology Page 3
State of Retail Technology Silos The Achilles Heel of Retail Technology Retailers understand that to deliver a next-generation customer experience they must have technology that supports the seamless convergence of in-store and digital experiences. Today s customer can quickly, but not yet as effortlessly as needed, navigate multiple touch-points, and expects real-time feedback to personalize their experience. This means gathering, analyzing and disseminating customer, product, pricing and inventory data in real-time. The problem is legacy retail technology hasn t been architected to handle these real-time requirements and harmonizing of business processes across all customer touch-points. The technology most retailers have in place is siloed by channel, as exampled by disparate solutions for POS and ecommerce and, in many cases, mobile. The complexity is even greater when you consider that the other platforms that enable commerce are disparate solutions as well, like customer relationship management (CRM), order management and merchandising. The inherent weaknesses of this model have become very apparent, as retailers chasing omni-channel capabilities have to overcome the almost impossible hurdle of integrating disparate legacy systems. Fortunately, retail technology has evolved, and retailers have many choices to consider, but they must move beyond the siloed thinking of the past. Unified Commerce The Catalyst to Move Beyond Channels Unified commerce goes a step beyond omni-channel, putting the customer experience first, breaking down the walls between internal channel silos and leveraging a single commerce platform. To put unified commerce in perspective and understand how it differs from its strategic predecessors, let s review the evolution of retail sales channels: First, was single channel, most retailers started with a single channel offering (i.e. only brick-andmortar or only Web-based). Second, retailers evolved to multi-channel, offering multiple channels, but with little to no integration and frequently an inconsistent customer experience. Third, retailers attempted to adopt an omni-channel approach, integrating channels and the customer experience, but from a standpoint of still operating in separate silos and utilizing disparate technologies across channels. Enter unified commerce, which eliminates individual channel silos and offers a holistic customer experience across all customer touch points, and solves the omni-channel integration challenges by leveraging a single platform. Achieve Unified Commerce with the Right Technology Page 4
In a recent study, 63 percent of respondents are currently operating as multi-channel retailers and 14 percent operate in an omni-channel environment (Exhibit 1). 1 Furthermore, only 2 percent of retailers surveyed have adopted a unified commerce approach, suggesting the majority of retailers have their work cut out for them to offer a truly seamless customer experience. 2 Exhibit 1 Current Channel Integration 13.6% 2.2% Single channel - a single type of customer purchase point (i.e. only brick-and-mortar or only web-based) 63.6% 20.4% Multi-channel - multiple customer purchase points but limited integration among touch points Omni-channel - multiple customer purchase points with seamless integration Unified Commerce - a holistic customer experience across all customer touch points with no individual channel silos 1 Boston Retail Partners. 15 th Annual POS/ Customer Engagement Benchmarking Survey. N.p. 2014 2 Boston Retail Partners. 15 th Annual POS/ Customer Engagement Benchmarking Survey. N.p. 2014 Achieve Unified Commerce with the Right Technology Page 5
Technology Enabling the Experience Unified Commerce Laying the Foundation Unified Commerce requires retailers to carefully consider technology choices, as it only takes one weak link in the new paradigm to determine success or failure. Never has retail been more transparent than it is now, and retail systems need to all work in concert if a retailer is to deliver on unified commerce. There is firstmover advantage for retailers that act quickly and implement the right unified commerce technology. Single Commerce Platform As we previously mentioned, a key tenet of unified commerce is leveraging a single commerce platform. The simplest way to support instantaneous transactions and real-time capabilities across all customer touch-points is to implement a centralized commerce platform. This greatly simplifies the integration challenges that are inherent in omni-channel initiatives. A unified commerce platform is not simply the future point-of-sale or Web platform, but combines point-of-sale, mobile and Web into one platform to deliver a single shopping cart that can follow the customer as they interact with a retailer at multiple touch-points. Not only is a centralized model more conducive to support the customer experience, it also affords retailers additional benefits. A centralized commerce platform offers retailers the opportunity to leverage a leaner and more flexible store-level environment through the consolidation of servers, operating system and applications at the data center or within the cloud, rather than at the store. Centralization allows for fewer devices and licenses to deploy and maintain, and helps application updates be deployed centrally to improve efficiency. Cloud computing is the quickest and surest path to enabling next-generation store systems. The speed and agility of cloud computing gives retailers a solution to support the ever-increasing dynamic and complex needs of back-office commerce solutions. The first step for many retailers is to implement this single centralized commerce platform, but there are other considerations in designing an end-to-end unified commerce architecture. Retailers must construct the right foundation by investing in both a robust middleware or service-oriented architecture (SOA) layer for Achieve Unified Commerce with the Right Technology Page 6
integration or the glue between retail systems, and a master data management (MDM) solution that guarantees all systems are operating with consistent and accurate data. Finally, retailers should consider implementing a business process management (BPM) solution to provide process automation and optimization, which is key to enabling and supporting a consistent customer experience across all touchpoints. Middleware/SOA A robust middleware layer, or service-oriented architecture (SOA), is essential in effectively enabling realtime capabilities and uniting various retail systems to deliver unified commerce. Many customer interactions or retail transactions require data from various retail systems to be gathered, analyzed and disseminated in real-time. Therefore, every customer or associate transaction traverses the middleware layer, which brings the commerce platform to life. Utilizing middleware or SOA, retailers construct Web services that enable these instantaneous transactions by supporting the integration amongst several different retail systems. These Web services reduce application development time and costs, as they are reusable and can be leveraged across the enterprise. Specifically, application development complexity and time to deployment decreases as developers can leverage standard Web services across multiple applications. For example, a common transaction is a customer contact search by attributes like name, phone number or loyalty ID. Developers leveraging middleware or SOA will build a common set of Web services that can be reused in any application that requires a customer search or lookup. Legacy integration approaches, such as point-to-point integration, were often not built to support robust real-time requirements nor do they offer the benefits of reusable Web services. Middleware Master Data Management (MDM) While middleware enables a centralized platform and other retail systems to effectively supply data across the enterprise, a MDM solution ensures this data is consistent, accurate and up-to-date. By utilizing business rules and data governance to harmonize and merge the information from various retail systems, MDM provides a central repository for master files. Acting as a central repository, MDM maintains a single version of the truth for product, customer, vendor, location and asset information. Inaccurate or inconsistent data works against the goals of unified commerce and a holistic customer experience. MDM significantly decreases data errors within an organization, driving operational efficiencies and enhanced reporting and analysis. Achieve Unified Commerce with the Right Technology Page 7
Business Process Management (BPM) A BPM solution is what enables the definition, execution, monitoring, and optimization of business processes across the retail enterprise. Furthermore, a modern BPM system is able to identify structured and unstructured processes that involve system interactions and human interactions, including both internal (within the four walls of the retailer) and external (suppliers of goods and services). This is especially valuable since retail processes include multiple systems, channels and touch-points. Once processes are identified, BPM enables process automation to reduce errors, maximize profits and ensure processes are unified. Additionally, a BPM solution can be leveraged for active business activity monitoring. An example is real-time store operations monitoring, which could provide employees with realtime visibility to store conditions based on key performance indicators (KPIs). A retailer starts the process by setting business rules and deviation thresholds in a closed loop structure. If a threshold is met or an anomaly occurs, a manager can be alerted immediately, enabling real-time corrective action. BPM improves processes by identifying inefficiencies and bottlenecks within processes so retailers can quickly make adjustments. Finally, with the increased agility BPM offers, if evolving customer demands require a new process to be created, BPM enables business users to rapidly collaborate and construct this new process. With BPM, retailers are able to make more informed decisions, improve performance and ultimately deliver a unified, continuous customer experience. Use Cases: Unified Commerce in Action With a unified commerce approach and the right enabling technology, retailers have the ability to quickly add new unified commerce capabilities that leverage real-time customer and product information. This provides retailers opportunities to personalize the customer experience and sense and respond in real-time to optimize revenue and margins. Customer Engagement: Personalized Selling and Promotions Real-time retail allows retailers the ability to offer an innovative experience to their customers, through guided selling, personalized promotions and clienteling. Specifically, retailers can use tools such as proximity identification systems to identify a customer when they enter the store. The retailer is then able to leverage legacy customer information, via Web services, to locate the customer master data in real-time and display this to a sales associate providing a powerful 360-degree view of the customer including past purchases, preferences and online and in-store browsing history, available from a centralized commerce platform. BPM then uses business rules, developed by leveraging internal expert knowledge, to prompt the sales associate with pre-defined processes for guided selling. These processes are generated to exclusively meet the needs of the specific customer. For example, the customer mentions she is looking for a new scarf and the sales associate can instantly provide recommendations based on items that can be paired with the customer s closet clienteling in action, powered by Web services and MDM accessing real-time inventory, product and promotion data. The details of this transaction are instantly updated via Web services to the centralized commerce platform as well as the CRM system. This data can then be leveraged for future customer interactions, online or in the store. Achieve Unified Commerce with the Right Technology Page 8
Store Operations: Monitor and Respond in Real-time Retailers can more effectively monitor in-store KPIs and react in a proactive manner with the help of unified commerce. One example is a retailer running a special on a high-margin item with a devoted end-cap to the product in all stores. With real-time KPI monitoring enabled by BPM, the retailer is able to oversee and gain visibility of all stores to ensure the product receives the intended sales lift by setting rules that if a store is performing below a certain threshold (sales or movement), the store manager is notified. By utilizing centralized commerce and inventory data accessible via Web services, the BPM solution identifies that at one store, the product has not seen any lift and the store s manager is prompted to inspect the specific end-cap. The manager finds the wrong product at the end-cap and immediately takes corrective action. BPM allows the retailer to gain data insights from the entire chain and quickly identify problems and react; instead of recognizing issues after the damage is done. Retailers can also use BPM to monitor real-time data and dynamically react to local demands. Traditionally, promotions were driven by batch information and were not associated to local trends. However, utilizing data from the centralized commerce and inventory systems, BPM via Web services can determine once a store has sold all their most popular sizes (specific to demographics of the area). This location can then be notified to markdown the remaining sizes in that style at the store and the retailer is able to more effectively meet demand and manage profit margins. Similarly, retailers can use real-time data to improve loss prevention by setting rules to identify exceptions that are considerably outside the normal ranges. For instance, a retailer notices an increased number of post voids are occurring hours after the sales are recorded. Using a BPM tool, the retailer can set rules for the loss prevention department to be alerted immediately if a post void occurs after a certain threshold. By identifying anomalies, retailers can catch the thief in the act, rather than days later, if ever. Supply Chain: Enterprise Inventory Visibility In Real-time Customers not only want, but demand visibility to inventory. For instance, a customer is in the store and is desperately searching for a one-of-a-kind item that very few retailers sell. This retailer unfortunately does not have the item in stock at the store but is able to utilize Web services and centralized commerce to perform a real-time, enterprise-wide store inventory lookup. Real-time inventory visibility requires complete visibility of inventory throughout all stages of the supply chain. Middleware or SOA provides the integration between commerce systems, order management, merchandising and the warehouse management system (WMS) to assemble the view of real-time inventory. Furthermore, BPM provides business rules for inventory fulfillment routing and margin optimization. BPM business rules are leveraged for margin optimization, by analyzing data such as lowest cost freight, shipping times, inventory proximity, and inventory levels. Using the centralized commerce platform, the sales associate completes the transaction and has the product sent to the customer s home address or to the store for pick-up when it arrives. Achieve Unified Commerce with the Right Technology Page 9
Conclusion While the road to unified commerce seems daunting, the retailers that take action now will reap the first mover advantage. Many retailers have embraced the imperative for change, but have struggled with the integration of existing channels, disparate technologies, and siloed processes. More so than ever, the customer is in the driver s seat and smart retailers are adopting a unified commerce approach to win and meet the expectations of today s and tomorrow s customer. It s clear the time to start the unified commerce journey is now, as customers and competition will not wait. The next step is selecting the right agile technology and partners that will enable the seamless customer experience your customer is demanding. About Boston Retail Partners Boston Retail Partners (BRP) is an innovative and independent retail management consulting firm dedicated to providing superior service and enduring value to our clients. BRP combines its consultants' deep retail business knowledge and cross-functional capabilities to deliver superior design and implementation of strategy, technology, and process solutions. The firm's unique combination of industry focus, knowledge-based approach, and rapid, end-to-end solution deployment helps clients to achieve their business potential. BRP s consulting services include: Strategy Business Intelligence Business Process Optimization Point of Sale (POS) Mobile POS Store Systems and Operations CRM Unified Commerce Customer Experience & Engagement Order Management ecommerce Merchandise Management Supply Chain Information Technology Private Equity For more information or assistance on any of the topics covered in this white paper, please contact: Brian Brunk, Principal (405) 590-0542 bbrunk@bostonretailpartners.com Ken Morris, Principal (617) 880-9355 kmorris@bostonretailpartners.com David Naumann, Director of Marketing (916) 673-7757 dnaumann@bostonretailpartners.com Walter Deacon, Principal (781) 337-2060 wdeacon@bostonretailpartners.com Boston Retail Partners Headquarters Independence Wharf, 470 Atlantic Ave., 4th Floor, Boston, MA 02210 www.bostonretailpartners.com 2014 Boston Retail Partners. All rights reserved No part of this publication may be reproduced or transmitted in any form or for any purpose without the expressed permission of Boston Retail Partners. The information contained herein may be changed without prior notice. Achieve Unified Commerce with the Right Technology Page 10
Sponsor Perspective: Retail Agility Platform Powers Unified Commerce The world of retail is going through a fundamental transition. Customers have forced a transformational realignment of retail by demanding a seamless, consistent and continuous experience unified across all channels and systems of engagement. The challenge is that many traditional retail business systems and processes are too rigid and disjointed to adapt to these demands. Meeting customer expectations today and in the future requires a technology that extends beyond the siloed architectures prevalent today it requires a technology that enables retailers to unify strategic initiatives, processes and technology in single, comprehensive commerce platform. Delivering on today s customer expectations is forcing retailers to focus on a holistic experience across all customer touch points. Achieving this goal requires a unified commerce approach that leverages a single platform to eliminate individual channel silos and integrate disparate technologies used across multiple channels. The technology used by retailers to enable this transformation is critical and requires the right architectural foundation, including robust middleware (SOA), Business Process Management, Master Data Management, and an Agile application development framework. Fujitsu Interstage Retail Agility is a comprehensive solution that enables the transformation to unified commerce by offering retail-specific framework that includes data models, processes, business rules, operation applications, e.g. single customer view or single view of inventory. Retail Agility takes full advantage of Interstage Business Operations Platform (BOP) -- a comprehensive and unified platform that delivers unprecedented agility, flexibility and speed to help retailers adopt an all-encompassing unified commerce approach to meet their customer expectations. Interstage BOP is a single, unified platform available on-premise or via the Cloud and provides core technology components vital to the success of unified commerce initiatives: Service-Oriented Architecture (SOA)-based system integration to unlock business data and logic from existing retail systems with scalability, performance and efficiency. Complete Business Process Management (BPM) capabilities to automate, manage and improve retail processes that span multiple systems, channels, and touch points. Business Rules - manage complex business rules to ensure a unified and cohesive customer experience. Master Data Management to maintain a single version of truth for data across multiple sources of information to provide a holistic view of data across any organization. A Composite Application Framework (CAF) for easy-to-use development environment to create rich, interactive retail applications that combine a wide range of information sources and services. Achieve Unified Commerce with the Right Technology Page 11
Interstage Retail Agility solution is a completely unified platform that enables retailers to deliver on the promise of unified commerce a must to be successful in today s incredibly customer-driven and hypercompetitive world of retail. Retail Agility boosts the agility and flexibility of retailers and helps them unlock the benefits of unified commerce by allowing them to deliver superior and seamless customer experiences faster and at a lower total cost of ownership. With flexible deployment options, retailers can leverage Fujitsu global resources to deliver superior service performance for a truly global deployment, onpremise or in the Cloud, that addresses global initiatives while meeting regional requirements and business practices. To learn more about Interstage Retail Agility and BOP, please visit www.fujitsu.com/interstage. About Fujitsu Fujitsu is the leading global information and communication technology (ICT) company and the world s 3rd largest IT services provider, offering a full range of technology products, solutions and services. Fujitsu is delivering value for over 500 retailers in 52 countries and powering over 82,000 stores worldwide. With over 30 years experience in retail and a broad portfolio of retail solutions backed by enterprise ICT products and services, we are in a unique position to deliver real business results worldwide. Over 170,000 Fujitsu people support customers in more than 100 countries. For more information, please see http://www.fujitsu.com. Achieve Unified Commerce with the Right Technology Page 12