And I celebrate my return to blogging on SCN. People who are on SCN from the early days of 2005 and 2006 would faintly remember a short Indian guy writing his experiences about entering SAP world. Occupied by daily chores of life, I had quit blogging and joined the race of expressing myself in 140 characters.
Six months back, I had joined Retail development team in SAP. I am amazed by this ever evolving industry and the ways SAP is enabling the retailers to run better. During last six months, I have talked to so many of our customers(both old ones, new ones and prospective ones). We all are excited about the journey we are about to start. But 140 characters were not enough for me this time and I return to blogging. And I am celebrating it with writing a blog on how I see retail going forward and how SAP is helping retailers to keep up with evolution. In this blog post, I will talk a little about the trends I see in Retail, how SAPs ensure that our retailers are on-trend and give an overview of our SAP Retail product landscape.
Retail is all about the end-users or consumers. Consequently the trends that effect end-users will affect the retail business. SAP Co-CEO Jim Snabe said at SAPPHIRE Now in Orlando that smartphones are increasing by 20% every year, so this is a trend that is already having a knock-on effect in retail. As I talk to retailers, I see three prominent trends:
In the United States, 10% of all retail business is done on the web and 60% of all buying decisions are influenced on the web. When you buy something in a shop, you might get recommendations from your friends, from Facebook, from the reviews on the web, or from the commercials. I see that more and more people use the web, while TV ads are now playing less of a role. Young people don’t really watch TV – they watch videos on YouTube or movies on Netflix. Multi channel – the mix of web and in-store shopping – is clearly a trend, and one that is strongly influenced by Mobile.
2. Customer insight
There is an enormous amount of customer information and some wise ones put this in category of BIGData. Retailers know preferences and sentiment from social networking websites and can see what their customers like so that they can target their products very efficiently to customers. It is all about analytics going forward my friends. Dont be shocked if Walmart employee comes to you while you are shopping there to give you a 20% discount straightaway on a product that you really wanted to buy.
The boundary between manufacturers and retailers is blurring. When you go Frankfurt airport and see fashion retailers(such as Boss), which used to be pure manufacturer 10 years ago, and now have their own brand shops. Look at Nike and Adidas. What are they? Are they retailers or manufacturers? In emerging markets, Nike and Adidas are now doing 40% of their own retail. This trend is also happening the other way around – if you go to a grocery store you see more and more own brand products. So the boundaries between retailers and manufacturers across all industries are blurring. Everybody is a retailer now.
How does SAP ensure that our customers are on-trend?
SAP interacts very closely with the customers to see what they are doing, so that we can reflect these trends in our products. Not only that, we are the though leaders with respect to technology with retailers. It is a closely knit ecosystem of customers, partners and SAP that is driving what you buy and how you buy.
One segment of the SAP Retail solution is called Customer Insight. Part of this is Merchandising and Assortment Planning (MAP) – which helps retailers to plan products and assortments according to consumers’ needs. The time is over when retailers had a yearly planning cycle and bought the stuff in advance. Now they have to be much more flexible and adaptable. And ofcourse we want this to be done fast and more effecively, so MAP will be based on HANA in future.
The other product that plays a role is the Customer Activity Repository (CAR), which connects all the history of what a customer has bought – in a shop, online, on the mobile, wherever. Retailers can keep track of this history via the CAR. It’s great to know what customers want but more importantly retailers have to be able to fulfill these needs, so they need to have the right products, in the right place and manage them across the channels. That’s important. Retailers don’t want to have products in stores and run out of them on the web, but they don’t want the reverse either, keeping reserves for the web without filling the demand in the physical stores. So Forecast and Replenishment gives retailers a firm logistic view on demand. I see another blog on SCN that is written on the Science of Forecasting. I highly recommend that blog.
Then we have Corporate Functions. This is where SAP historically has been strong – in FI, HR and Workforce Management. SAP CF is based on the same logic as F&R, in that it ensures that retailers have the right people and the right number of people staffing shops, according to customer demand.
The last part of the solution is Customer Interaction, which is very important. We have POS solutions, but also POS partner solutions. And we have the Web Channel solution, which helps you to shop online and has very tight integration with mobility.
How do all these products integrate with each other?
And now the most important question: How do these amazing products talk to each other. Customers interact with retailers via web browsers, mobiles or cash registers. The SAP Web Channel solution brings the first two together. It resides on the consumption platform, which allows us to provide solutions for the mobile and the web in a harmonized way. It is not necessary to develop separately for mobile and web, as the base underlying functionality is the same. This harmonization helps retailers to offer their customers the same pricing on web and mobile as at the cash register. It is a big challenge for today’s retailers to synchronize pricing and with the POS partners, SAP can ensure that pricing is synchronized across all channels. Multi Channel provides interfaces to the various back-ends, firing services against CRM for loyalty management and product availability and ERP system to check availability to promise.
F&R, Promotion Management, Markdown Optimization, Price Optimizing and Merchandizing Planning all reside on the CAR, which then integrates with the Web Channel. With this kind of integration, retailers can make a decision in the Web Channel to give a customer a specific price based on shopping history, product availability, loyalty and click behavior. We use HANA as the underlying technology for customer prototyping – observing how long a customer spends in a certain transaction in the web and which clicks are made, and then, based on all this information, retailers can make a special, targeted offer to that particular customer. SAP is offering all this integration right down to the cash register, so that customers can buy something in the web shop, return it at the cash register, and be sure that they receive the correct refund. And I believe that this kind of integration across all these topics makes for a unique value proposition from SAP.
I am really excited to talk about Retail to you guys. And to start with, there will soon be a webinar with SAP Mentors, where Thomas Vetter, head of Retail development in SAP and myself will take you through what amazing things we are doing at SAP. I look forward to meeting you in that webinar.