As retailers work to adapt ageing systems for an omnichannel world, will ecommerce platforms provide the basis for tomorrow’s customer-facing solutions?
In an idealised omnichannel world customers receive a consistent experience at every touchpoint; their journey is seamless; and both customer and product information are available in each and every channel, and updated in real-time.
Reality, however, tends to be rather different from this vision, not least because the vast majority of retailers operate with a mish-mash of IT solutions, each with its own replacement cycle. In addition, retailers are notorious for never replacing IT until it starts falling apart. The problem, of course, is that in a rapidly changing retail world, yesterday’s IT can be totally inadequate and CIOs are faced with a major redesign of their systems to meet today’s cross-channel needs.
Customers are redefining how retailers view operations. Up to 75 per cent are now accessing information through a mobile device or using mobile for some part of the customer journey
Views on what that redesign should look like vary: some argue that the ecommerce platform is becoming the ERP of the front end, effectively controlling every customer interaction in every channel. Others suggest a commerce engine with single product and customer files accessible by channel-specific applications. In this model, the ecommerce platform is confined to the website and management of rich content, with order management tools contained within the core commerce engine. Some suggest that traditional point-of-sale systems are rapidly becoming a thing of the past (to be replaced by a comprehensive ecommerce platform), while others maintain that PoS will always be needed as there has to be some means of taking the cash in store if the network goes down.
Putting off investment
Faced with systems that are sometimes straining to cope with the complexities of cross-channel retail, it is thus hardly surprising that boards prevaricate. “It is very tempting for retailers to go and buy a point solution to solve a pressing problem,” says Simon Evetts, European commerce lead with IBM Global Business Solution [IRDX VIBM], “but you have to think about the total end-to-end solution. If you buy piecemeal, you gets bits and pieces and destroy agility. Many retailers have old ERP systems which have been implemented over time and they are struggling. With ecommerce the world is changing much faster, so retailers need to have a total vision of what they need and build towards that.”
He also suggests that in many cases better systems integration can significantly improve performance, as can upgrading applications to a later version: “People tend to throw servers at things but you can often achieve a better performance with what you have. We’ve seen cases where performance has doubled by speeding up existing systems with better configuration. You can build a site quickly but you can’t build something that is very scaleable very quickly. It can be hugely complicated and bringing some really skilled systems integrators on board can often solve the problem without investing in a totally new system.”
Evetts adds that when it comes to strategic vision, “Three years is probably the furthest you’d want to go, and for most retailers implementing best practice will be a three-year programme.”
The question, of course, is what defines best practice. For Evetts it includes both a single view of the customer and, from the customer’s perspective, a single view of the organisation. “[Best practice] must deliver the capability to do one-to-one merchandising,” he adds.
For Frank Lord, VP global sales at Oracle Retail [IRDX VORC], a key priority is for the system to “support the seamless journey across multiple devices”. He adds: “Customers are redefining how retailers view operations. Up to 75 per cent are now accessing information through a mobile device or using mobile for some part of the customer journey. There is also an expectation of immediacy when it comes to choice of delivery or pick-up. It is vital that retailers have the capability to support this and that is challenging.”
System replacement rates in retailing vary: typically every 12 years for logistics, just over 11 years for merchandise management, a little more for merchandise planning and nearly nine years for point of sale (EPoS). According to Martec International, for example, the average age for existing EPoS systems is more than nine years old. Averages being what they are, this suggests that a great many retailers have kit that is significantly older than that.
Speaking from experience
“At the very least the platform has to be capable of delivering same day click and collect and handle returns to store. Currently most retailers do not have that same day capability and they
are barely meeting customers expectations. Shoppers have been tolerant – but that will change.”
Frank Lord, VP global sales, Oracle Retail
No single solution
“Even if it is described as an ERP for the front end, the ecommerce platform doesn’t do everything. There is not a single total solution, although one vendor may supply all the components. You still need a payments provider and probably a bureau service for reviews, for example. There will always be new things to plug in although eventually many of them may be incorporated into the ecommerce platform.”
Simon Evetts, European commerce lead, IBM Global Business Solutions
“The ecommerce platform is increasingly less about features and function, and more about how it can be extended across the whole enterprise. It needs to be the system of record when it comes to products, inventory, customers, orders and price, and that information then has to accessible across all channels.”
Rob Garf, VP for industry strategy and insights, Demandware [IRDX VDMW]
Deliver on the promise
“There has to be a single view of the customer and the ecommerce platform is good at identifying customers, but many retailers also want to fulfill from store and point of sale gives better real-time stock information, so it becomes the enabler. Multichannel retailing is about delivering the promise, so you need both rich customer interaction and real-time capability.”
Asif Khetabi, director of ecommerce, BT Expedite [IRDX VBTE]
The age factor
“Retailers have to start with whatever is the most broken,” says Lord. “They need to look at the vision for the end state, develop a possible path to achieve that and start replacements. If the core merchandise or logistics system is broken, then they have to do that first.”
For ecommerce, he argues, that mobile capability is essential, especially for developing markets such as India or China. “The platform also has to be integrated with EPoS as that is the only way the customer can achieve a seamless journey or you can have real-time stock visibility for store fulfilment,” he says. “If you have to increase store stock to deal with online orders then that is a system failure, retailers have to be able to replenish at a day’s notice.”
In the past, retail changed slowly, but today it is different and we’re seeing some very rapid implementations to meet rapidly changing needs
In June, Oracle acquired EPoS specialist Micros [IRDX VTOR] and Lord clearly sees a continuing role for dedicated point-of-sale systems, which have to connect with the ecommerce platform so that online orders can be expanded in store to produce a consolidated transaction.
Others take a different view: “Traditional point-of-sale is dying,” says Rob Garf, VP for industry strategy and insights at Demandware. “Currently it is going through a not-so-slow death. PoS architecture was designed to allow offline capability in case the network went downs; it operates in standalone mode but that creates a disconnect between the store and other channels.” He quotes research from the National Retail Federation and the CIO Council in the US, which suggests that within the next three years 70 per cent of retailers will replace existing EPoS technology, with two thirds of those planning to implement an ecommerce platform in-store. “Speed and agility are vital,” he says, “and existing store systems do not allow for a rapid response, so if you are going to match consumer demand you have to change.”
Given typical replacement rates and the age of existing systems, Garf believes that we are currently “on the cusp of a significant refresh”, with a high proportion of major players needing to replace point-of-sale systems over the next couple of years. “Demandware is looking to provide PoS capability in future,” he says. “With 90 per cent of transactions still taking place in-store, a software provider cannot be truly omnichannel unless they have that capability.” While Oracle and many other vendors see a future for conventional EPoS systems, Garf sees the ecommerce platform taking on PoS attributes to enable in-store transactions from a raft of mobile and other digital devices.
In contrast, Mike Long, CTO at BT Expedite, suggests that both EPoS and the ecommerce platform are likely to change in future. He argues the case for a “commerce engine” which contains single real-time customer and product files, which can then be accessed by both PoS and ecommerce: “PoS will become thinner,” he says, “and ecommerce will be more about rich presentation but they will both have access to central databases. The architecture doesn’t really matter as long as the systems talk to each other. PoS is good at merchandise but usually weakest on CRM with no means of identifying the customer.
“We are having many conversations with retailers interested in using ecommerce to run the store, but there is still a fear that the network will go down and then how do you take the cash? If everything is purely online then the store cannot do transactions in the event of a network failure. It’s an interesting prospect but at the moment there is no real vendor who has brought ecommerce and the till successfully together.”
While Brian Walker, chief strategy officer at Hybris [IRDX VHYB], would perhaps dispute this, he also urges the need for single databases accessible to all. “Typically we often advise retailers to start by creating single files for orders, products and customers,” he says. “Then they need to add their various channels to the model, usually starting with the direct digital channels and finally adding the store. Five years ago we certainly were not in a position to say that Hybris could run the store, but now we can. Retailers need to develop a roadmap of where they want to be and then work to achieving that. In the past, retail changed slowly and retailers were conservative about embracing technology, but today it is different and we’re seeing some very rapid implementations to meet rapidly changing needs.”
Having decided on a vision of the future, complete with suitable roadmap, retailers will want reassurances. Traditional KPIs and methods of calculating RoI can have little relevance in an omnichannel world. With shoppers transiting several channels on their customer journey, measuring the financial contribution each makes becomes little more than a guesstimate, while calculating website conversion rates becomes meaningless as numerous visitors then opt to buy in-store.
“Ecommerce used to depend on traffic, conversion rate, and unique users as a measure of success,” says Rob Garf, “but while they are still important you need to look at the impact on the over-all business: margin, inventory turn, comparative store sales so the KPIs start to look and feel more like traditional retailing metrics.”
Simon Evetts suggests that a reduction in the returns rate, for example, can be a good measure of how successful upgrading product information on the website can be, along with Net Promoter Score from social media. “You can also look at how people are using technology in-store – are they using mobile apps and is that impacting sales or increasing revenue?” he says.
With omnichannel here to stay, and with the pundits predicting a generation of impatient and intolerant shoppers as the spending power of millennials grows, replacing those ageing systems, built for a simpler retailing world, has to be a strategic priority.
With the gradual upturn in the economy the mood has shifted from make do and mend to a realisation that significant investment is needed to deliver retail systems that are fit for purpose in an omnichannel world. In the past year, many major retailers – such as Arcadia and John Lewis – have announced significant investments based on a well thought out strategic vision of what the business needs to offer its customers over the next three to five years. An expanded ecommerce platform may play a part in some of these models, but more significant is the emphasis on real-time databases of customers, products and orders that are accessible from any device at any time.
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