Dear Retail community,
Omni-channel commerce is going beyond the hype phase towards being mandatory for every retailer across all retail segments, as it promises to address the customer in a personalized way with offerings harmonized across all channels, called “omni-channel”, resulting in superior customer experience and satisfaction. This expects to boost revenue for omni-channel driven retailers over channels-specific, silo’ed operating businesses.
While revenue so is increased, costs would be cut by harmonized business management processes across all sales channels. This would cover sales organizations, purchasing departments, marketing department(s), warehouse management, store operations, and, in the middle of it: IT, to drive, operate and orchestrate all activities in an omni-channel way.
But the switch from a grown-up zoo of channel solutions and sales department heritage to a unified omni-channel strategy is far from being a simple task and can take years or even a decade to transform a company. Read also this McKinsey publication about Omni-Channel.
In this first article of the series I want to describe a realistic situation many retailers may face today when it comes to their channel business:
- As of now retailers are serving various sales channels: brick & mortar stores, e-commerce, m-commerce, TV sales via call center and digital interaction TV, selling platforms like eBay, Alibaba, etc.
- Some retailers have own stores, others also have franchisees or subsidiary brands with different assortments, prices, target groups, location strategies …
- IT wise, some channels may run on SAP systems, other channels on best of breed, legacy, homegrown, … Some channels may be integrated with a central merchandise system like SAP Retail, some may run independent, some may periodically be populated with central master data, etc.
- Most channel solutions allow a customer registration, but not all are linked to a customer loyalty program.
- There is no central pricing and promotion management, bonus buy rules maintenance, campaign planning, channel-specific stock allocation.
- Often assortment planning and sourcing are affected by detached channel strategies.
- In the worst case there prices, promotions and bonus buy discounts can vary per sales channel.
- Different article texts, attributes and product photos are causing confusion among customers, resulting in buying hesitance and increased churn rates.
- Returns across channels are cumbersome to process or simply not allowed.
- Marketing campaigns are rarely synchronized or even not aligned across affected channels (e.g. TV, print, web, mobile, social media, store, …). Targeted marketing and personalization is way sub-optimal.
- CPG manufacturer advertisements are not centrally managed and hence may hit one or another channel marketing team by surprise.
Multiply this situation by country organization/region with local sales, brand, marketing and assortment strategies, and you get an idea how big the mess can possibly be.
Despite of mandatory organizational business changes within the so far independent channel departments towards a central management, most topics need to be also addressed by IT.
As we focus here on how IT solutions can support retailers in their omni-channel approach, let’s imagine how an ideal Retail Omni-Channel IT solution could look like:
- Product Master Data is harmonized across all sales channels.
- Product Attributes and sales texts for different purposes, devices and languages are maintained in a central PIM solution.
- Long-Tail Products can be included in omni-channel sales processes like any other assortment product.
- Customer Data Records of the various channels are consolidated, duplicates are eliminated or at least linked to each other, and a “best record” is derived out of the different customer data records. This “best record” is then replicated back into the various channels.
- 360° Customer Information is collected centrally from various sources, like SAP ERP(‘s), digital channels, CAR, CRM systems, loyalty management solutions, 3rd party systems, social media networks, market research data (e.g. AC Nielsen), geospatial data, etc. This makes a “360 degrees” customer insight possible.
- A Personalized Customer Experience is achieved leveraging the vast customer information knowledge the retailer is continuously collecting. Customers can be more precisely segmented into target groups. Even individual customers can be analyzed and predicted for their behavior, likes, interests and buying patterns.
- A personalized channel marketing becomes possible by adjusting the digital content displayed for target groups, while individual product recommendations and even personalized offers are possible in real-time and orchestrated across all channels along customer journeys.
- Marketing and Campaign Planning is synchronized or even harmonized across all sales channels, leveraging the detailed knowledge about the customers down to the individual consumer. CPG campaigns are factored in with the retailer’s campaign, marketing and assortment planning.
- Prices and Bonus Buy rules are centrally managed and distributed across all channels. Promotions are planned and executed across all or per channel, as desired.
- A Customer Loyalty program is implemented across all customer touch points and channels, allowing customers to collect and redeem points everywhere.
- Stock Inventory Information shown in the digital channel can be trusted, as it is determined in real time, covering DC’s, stores and incoming returns. This goes especially for limited promotion stock. Products are reserved right at the moment when they are added to the shopping cart. No surprises when placing the order.
- Shipping Conditions, Sourcing, Order Split, Taxes and Freight Costs are determined in real-time and shown before the customer places the actual order.
- Cost Reductions are the result of a better sales forecast across channels factoring in customer buying patterns, leading to an optimized buying forecast, benefitting in cost savings by a central sourcing.
- Channel-Specific Stock Allocation and Reservation allows to balance or level the attraction of the various channels, resulting in better customer experience and lower churn rates.
Can SAP address all these topics consistently as of today in a perfect manner?
With the new Omnichannel innovations released in 2016 the majority are already addressed by leveraging new capabilities in SAP CAR Feature Pack 3 with SAP Hybris Marketing 160x co-deployed on SAP HANA, and with the SAP Hybris Commerce, integration package for SAP for Retail.
In my next blog I give a deeper insight into the new SAP Omnichannel capabilities, scenarios and components.
All information around SAP Retail Omnichannel Commerce will are consolidated in the Customer WiKi.
Dr. Ingo Woesner
Global Director, Outbound Product Management Retail Omnichannel