Omnichannel Grabs All the Attention, But Stores Aren't Going Away

7/24/2013
At the Oracle Retail CrossTalk conference in June, key retail executives gathered in downtown Chicago seemed to agree on one thing: omnichannel gets all the buzz these days, and e-commerce is hot, hot, hot — but the brick-and-mortar store remains as important as ever.

Saks Fifth Avenue — in the midst of a five-year, $100-million CapEx plan heavily focused on transforming core IT systems — points to the 2008 recession as a critical learning period. The luxury retailer lost 30 percent of its business during the downturn and CIO Michael Rodgers says company CEO Stephen Sadove charged execs not to "let the recession go to waste."

Saks took that opportunity to invest in its direct business, which accounts for 30 percent of company revenue, by overhauling its pick, pack and ship operations with Kiva fulfillment robots in its warehouse, spurring a significant drop in cycle times.

Even as the company focuses on eliminating "technical debt" by implementing robust IT systems to enable omnichannel capabilities, Rodgers says brick-and-mortar is "still the Big Kahuna." Stores aren't going to disappear, he adds; rather, the online and physical store channels will continue to merge over the next several years.

Migrating toward omnichannel operations forced Saks to reexamine what it thought it knew about its customers; for example, execs assumed that its highest-value "Diamond" customers primarily shopped in-store, but a look at company data revealed that the majority of those shoppers were active across online, in-store and mobile — the channel where Saks is seeking the fastest growth in traffic.

The retailer also found that email marketing generated $5 of in-store business for every $1 customers spent on the web, largely because Saks shoppers tend to be clustered near to physical stores, Rodgers explains. Due to its clienteling-oriented business model, Saks can identify the purchaser in 95 percent of its sales.

For fellow IT leaders approaching similar large-scale projects, "this is a business transformation enabled by technology," Rodgers says. "Don't view it as just an IT project."

Express builds IT from scratch
After separating from its parent company, going private and now being publicly traded, Express got a chance to do what many retailers cannot: build its IT shop from the ground up without worrying about legacy systems. The $2-billion retailer operates 600 stores throughout the U.S., Canada and Puerto and now has set its sights on expanding internationally.

"Think about this — we're running our existing business, we're going to get into the outlet business, and we have a large retail management system project going on," says Keith Pickens, senior vice president, CIO, Express.  "Those three things are colliding." Strong growth in e-commerce took Express by surprise, with sales jumping 48 percent in the first quarter of 2012.

The company takes a best-of-breed approaches to its applications, which especially helps with its international expansion plans. "Our globalization is going to be store operations and HR, not a full home-office build out," adds Pickens. "We're trying to keep it very simple so that we can deploy a new company — we can put up a new franchise partner within 30 days."

With Oracle applications as its foundational glue, Express is using Oracle's Fusion suites to integrate 14 additional third-party vendors onto its core platform. "We built a very scalable virtual hardware configuration that also has capacity on demand and that has real-time interaction," Pickens says. "Scaling in real time is very important to us."

Pickens echoes Saks' sentiments about the future of stores. "At the end of the day, I think brick-and-mortar and e-commerce become one channel," he says, adding that online retailing offers better service for customers. "We really see Oracle's ATG e-commerce engine being where the consumer comes in and interacts with us.

"It's where they go in and get electronic coupons, it's where they get their sales histories. Today, it is where our loyalty is," Pickens continues. Going forward, Express sees ATG's recommendations and personalization engine as driving not just a customer's in-store experience but also the online experience. "Our direction with this is a customer clienteling application," he says.  

Strategies and more at Groupe Dynamite, John Lewis and New Look
On a fashion-focused panel, IT leaders from Canada's Groupe Dynamite and the UK's John Lewis and New Look shared their strategies and pain points.

Acknowledging that the convergence of stores and e-commerce is coming quickly, Groupe Dynamite CIO Michel Joncas says his company is piloting mobile POS in a 2,500 square-foot location, with an eye toward converting some traditional cash wrap into selling space.

The fashion retailer also emphasized the importance of social media in helping its 100-percent in-house design team take the pulse of customer interests. Designers poll shoppers through social networks to get real-time input on proposed styles and designs, and then deliver the resulting products to stores within weeks. Groupe Dynamite tracks how well those products sell to determine if eliciting fan feedback so early in the design process makes a noticeable difference at retail.

New Look CIO Dan West says that like Saks, his firm is also focused on eliminating its technical debt, upgrading legacy systems so that the retailer can maximize the value from Big Data to drive informed decisions. As smartphone-equipped shoppers change the retail game, mobile numbers may become more important than email in the future, he adds. New Look is considering the many possibilities around geolocation, such as steering shoppers toward a different part of a store if they're browsing primarily in one area.

In the closing keynote, John Lewis CIO Paul Coby pointed to six disruptive technologies set to make waves in the industry, from Big Data, augmented reality and robotics — such as Kiva's fulfillment bots — to the Internet of Things. 3D printing can enable companies to manufacture products such as accessories and mobile phone cases quickly and cheaply, he adds, and wearable computing, such as Google Glass, is poised to enhance the store experience.

"If you put a good online and store experience together, you've got a bit of magic," Coby says.
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