Unified, Connected Commerce
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1 Unified, Connected Commerce Retail s Next Frontier Page 1 of 9
2 Next Frontier After Omnichannel By 2017, 85% of customers expect one-click-away commerce and fulfillment from all retailers, and those retailers will beat peer revenue growth by 200 basis points. IDC: Worldwide Retail 2016 Predictions 1 The retail industry has evolved significantly in the age of the internet, from single channel (bricks-and-mortar stores) to multichannel (stores and ecommerce) to omnichannel (sell in one channel and fulfill in another). In terms of industry evolution, omnichannel and providing a seamless customer experience is table stakes now. In the world of omnichannel retailing, coupled with consumers desire for instant gratification, consumers use various touchpoints such as mobile, in-store, social, and web during their purchase journey where they buy from one channel and expect fulfillment from another channel. For example, consumers can buy product online and pick up in the store, or buy product online and return in the store. This has created numerous challenges for retailers in both customer experience and supply chain arena, as it has amplified the challenge to predict consumer demand, especially around when and how the consumer would like the fulfillment of the order. Therefore, retailers are shipping products from stores, and stores are now functioning as minidistribution centers. The business process and systems that were designed for retailers over the course of time were meant mainly for typical stores replenishment. Therefore, the question is how retailers can delight consumers in a cost-effective manner. By 2017, 85% of customers expect one-click-away commerce and fulfillment from all retailers, and those retailers will beat peer revenue growth by 200 basis points. IDC: Worldwide Retail 2016 Predictions 1 The concept of unified, connected commerce means a convergence of physical and digital channels. Leveraging a unified, connected platform across all channels allows retailers to differentiate and innovate across customer experience and supply chain dimensions, enabling revenue growth and improving margins. It enables Page 2 of 9
3 commerce-anywhere strategy and provides a seamless consumer experience in today s hyper-connected world. 64% of all in-store retail sales are influenced by digital navigating the new digital divide. Deloitte Digital % of all in-store retail sales are influenced by digital navigating the new digital divide. Deloitte Digital As the majority of store purchases are driven by digital engagement, the concepts of physical and online have become irrelevant. Hence, the need for a platform that merges and blends the physical and online worlds into a single, unified platform that is connected across all the channels, providing a seamless experience to consumers. To achieve these desired business outcomes, retailers need to start thinking in terms of building single view of customer capability that provides better understanding of customer behavior, demand, and where the customer is in the shopping journey, as well as single view of inventory capability to provide a real-time visibility of inventory and, subsequently, lay the foundation for an agile supply chain to reduce stockouts, increase inventory turnover, and better margins. To further amplify these capabilities, they have to leverage the transformational technologies such as cloud, big data, mobile, and Internet of Things (IoT), as they embark on the unified, connected retail business model transformation. And no business transformation is successful, if Retailers don t consider the key ingredient People in the People, Process and Assets paradigm. It s Not About Channels, It s About Consumers More than 80% of Millennials use their mobile devices while shopping in-store to access digital coupons, research products, check prices, and pay for purchases. PwC, 2016 Total Retail Survey 3 Consumers today are highly sophisticated and well informed about Page 3 of 9
4 More than 80% of Millennials use their mobile devices while shopping in-store to access digital coupons, research products, check prices, and pay for purchases. PwC, 2016 Total Retail Survey 3 brands and products, and have high expectations of customer experience irrespective of the channel. Therefore, retailers have to evolve their thinking from channels, whether offline or online, and start thinking in terms of consumers, especially around consumer shopping and purchase journey. So the question for retailers is how they can understand the consumer better and align with the consumer need. The challenge in providing this capability is compounded by the fact that today s consumer uses various touchpoints across web, in-store, mobile, social, call center, and in their shopping journey. Therefore, the relevant, associated data resides in siloed, fragmented systems. Complicating it further, this data is in a variety of formats structured, unstructured, and semistructured. This is the key barrier in providing a single view of customer capability. Therefore, to eliminate this complexity, retailers have to unify the data by implementing an enterprisewide platform that provides the ability to integrate consumer data from various sources in structured and unstructured formats, and across multiple touchpoints and interactions. They also need to leverage big data technologies on this centralized data to do the predictive analytics modeling and leverage consumer insights to make better business decisions. Retailers need to analyze this data in the right context and develop insights on a timely basis to maximize the opportunity for delighting customers. For example, they can use a data management platform for offline spend data, do social listening, use data aggregators, and weather data, thereby enriching consumer insight and providing meaningful insights in the right context, at the right time. To further personalize the customer experience, retailers need to build IoT capabilities such as Beacon (in-store GPS), enabling retailers to interact with consumers in a meaningful way as they navigate the store. By leveraging Beacon sensor technology, retailers can get a better understanding of the consumer and his/her spend history and Page 4 of 9
5 preferences, thereby delivering more-targeted and relevant promotions and also enabling store associates to provide personalized service. Real-Time Visibility in an Ever-Complex, Interconnected Supply Chain Overstocks and out-of-stocks cost retailers US$1.1 trillion globally in lost revenue. IHL 4 Overstocks and out-of-stocks cost retailers US$1.1 trillion globally in lost revenue. IHL 4 Delivering on customer experience requires understanding consumer demand so that retailers can better plan and be prepared for where and how much inventory to carry. Consumer expectations of fast, easy, and convenient delivery of products requires an agile supply chain that can enable flexible business processess around orders processing, inventory shipments, and returns handling. The complexity of order fulfillment due to siloed business processes, fragmented data sources and systems, and lack of single view of inventory visibility on a real-time basis are among the key barriers in achieving successful omnichannel execution and meeting consumer expectations. Therefore, retailers have to evaluate their siloed supply chain business processes and understand how they can make their supply chain align with consumer demand coming from various sources in today s digital world. To orchestrate the agile supply chain, retailers need to first and foremost develop a single view of inventory capability as they simply can t run their business operations if they don t have the capability to see the complete end-to-end picture of what inventory is available for consumers and where. In addition, an agile supply chain and better forecasting will subsequently enable better pricing, marketing, and promotions, driving efficient and effective merchandising operations and order fulfillment. Page 5 of 9
6 To accurately identify the demand signal from consumer behavior and develop relevant insights, retailers need to develop big data analytics capability to organize these fragmented structured and unstructured data sources and analyze them by doing predictive analytics to gain better insight into consumer demand. This capability will enable retailers to see the signals in consumer demand and how marketing campaigns and promotions are progressing, thereby taking corrective action to minimize out-of-stock inventory issues. To further optimize the operations, retailers need to leverage radio frequency identification technology, which will provide real-time visibility of inventory via automated tracking. Better understanding of the inventory will also subsequently enable retailers to synchronize price across different channels, and enable consistent pricing and promotions across the physical and digital worlds. This will result in higher sales, better margins, and satisfied and happy customers. At the end of the day, it s all about right product, right location, right price, and right time. Key Ingredient for Successful Transformation: People No business transformation is successful if we don t consider the key ingredient of people in the people, process, and assets paradigm. Navigating through the culture will be critical as the transformation takes place across the entire organization where lines of business (LOBs) and IT have to collaborate as they break down the siloed channels, business processes, and systems. Retailers have to clearly understand, articulate, and justify the critical need and urgency for this business transformation in the hyper-competitive retail marketplace. Collaboration among LOBs would be extremely critical since the transformation would require change at multiple levels such as business process, organizational structure, and enterprise- level metrics as they transition from channel to customer mindset. Page 6 of 9
7 This will require alignment not only between LOBs and IT, as retailers simplify the business process and move away from the competition between digital and physical stores, but also in incubating the collaborative culture with the customer focus. The framework needs to include why business transformation to unified, connected platform is important, what the future/end state (organization structure, business process, enterprise customer-centric metrics) will look like, how the business success will be measured, and who is accountable/responsible for the benefit attainment as the change progresses. Retailers also need to plan for training and employee engagement plans, and celebrate short-term wins. Leveraging this approach will not only reduce the degree of organization confusion during the transition to unified, connected platform, but will also accelerate the benefit attainment, thereby ensuring long-term sustainability of the business transformation initiative. Retailers believe a unified commerce platform will improve consumer response and associate productivity by better supporting omnichannel strategy and execution. NRF survey 5 Conclusion According to a recent National Retail Federation (NRF) survey, retailers believe a unified commerce platform can better address the following business imperatives: 5 1. Quickly respond to consumer demands: enabling organizational agility to effectively execute merchandising, marketing, promotional, and loyalty initiatives 2. Increase store associate productivity: in addition to increased efficiency and lower costs, arming associates to enhance customer interaction and increase conversion 3. Support omnichannel strategy and execution: providing the backbone to manage data and functionality related to customers, product, price, inventory, orders, and content across channels It s all about evolution. Retailers have to be laser-focused on the goal Page 7 of 9
8 of developing unified, connected commerce by breaking down silo channels, processes, and systems, thereby providing a single view of the customer across all consumer touchpoints and enabling a buya cost-effective anywhere/fulfill-anywhere business model in manner. The associated challenges are further amplified as retailers have to also prioritize the technology investment dollars between the two competing agendas: keeping the lights on while simultaneously investing in laying the foundation for successful business transformation. To execute the unified, connected commerce business transformation, retailers need to develop a roadmap highlighting clear line-of-sight visibility between business needs and retail solution capabilities. The business transformation roadmap in this phased approach will show business strategy execution, highlight business impact, prioritize investment requirements, manage risk, and highlight dependencies across various businesss units, enabling retailers to map the transformation timeline and chart the course of the business processes and critical capability changes that are necessary to achieve unified, connected commerce. As retailers evaluate key foundational technologies to merge the digital and offline worlds, and enable a mobile-optimized platform, they need to adopt a cloud-first or, in some cases, a cloud-only mindset. For example, in leveraging cloud for omnichannel retailing, big data, and IoT as a service, cloud provides an agile way for retailers to access data and applications in an agile, scalable, and secure manner, and enables retailers to rapidly implement the unified commerce business model. Additionally, retailers can leverage the cloud platform framework, tools, and services to extend existing or new applications across the enterprise (marketing, commerce, IT), enabling retailers to transform business into an uninhibited deployment model and thereby providing better customer experience, reducing out-of-stock conditions, and preserving brand value. Page 8 of 9
9 With these concepts laid out, Oracle works with retailers to identify targett areas and opportunities aligned with a unified commerce transformation. To learn more about Oracle s unified commerce platform, visit oracle.com/retail. Authors Dan Conway, Retail, CG Industry Lead Sharad Kala, Business Value, Lead References 1. IDC FutureScape: Worldwide Retail 2016 Predictions IDC Webcast, Nov. 4, Navigating the New Digital Divide Deloitte Digital Retail, May Total Retail Survey 2016 PwC, February Retail s $1.1 Trillion Inventory Distortion Problem IHL Group Research Study, June Building the Business Case for a Unified Commerce Platform National Retail Federation, Executive Research Report, Copyright 2016, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only, and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document, and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Page 9 of 9
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