Tuesday May 19, 2015

Insights from OIC: ULTA Beauty Fuels Growth with Tech-Enabled Personalization and Participation

In March several of our customers shared some fantastic experiences at Oracle Industry Connect 2015. ULTA beauty was showcased as the keynote. We thought this story would be relevant as we approach the Internet Retailer Conference and Exposition in Chicago on June 2-4, 2015.

Here is a glimpse of what you missed from the sessions....

ULTA Beauty is a favorite success story among industry watchers. The retailer is growing fast, offering a wide variety of beauty products (including cosmetics, fragrance and hair products) at price points ranging from mass to prestige, and also combining its beauty superstores with on-site salons. ULTA also believes in the uniqueness of each of its customers/guests, emphasizing personalization and participation fueled with online, mobile, and in-store technologies.


The 774-unit chain has opened approximately 100 stores per year for the past two years and is continuing this expansion rate for 2015. The retailer’s fast-growing e-commerce business benefited from 2013 site improvements using Oracle Commerce (formerly Oracle ATG and Oracle Endeca) solutions. Home, category and product pages now feature product metadata and easier access to user reviews, along with offering ULTA guests the ability to check available inventory of specific products at the store/salon they’re planning to visit.


New online enhancements include more shoppable “haul” videos, according to David Kimbell, Chief Merchandising and Chief Marketing Officer of ULTA Beauty, who along with CIO Diane Randolph discussed ULTA’s strategies at Oracle Industry Connect 2015.


“Guests can click on products to buy while watching video content, which is a great way to organically get people engaged with our business,” said Kimbell. “We’ve also launched live interactive chats with entrepreneurs and trend experts, which are supported with rich content linked back to the site for more detailed information and authority-building content.”


ULTA has also enhanced its mobile commerce capabilities, with an iPad-optimized site offering new ways for guests to share and engage via social media. “Guests can share things they’re interested in, including products, trends, and new looks – including a haircut she particularly liked at one of our salons,” said Randolph.


E-commerce is also helping to build store traffic, with the recent addition of the ability for guests to schedule salon appointments online. ULTA has also seen an uptick in the number and types of salon services guests are opting for when they can see them online prior to the appointment.


A pilot clienteling program puts iPads in the hands of ULTA associates in a few of its stores. The program builds on ULTA’s loyalty program, which already includes 15 million active members. “Something like a makeup consultation or brand preferences can be easily recorded on an iPad,” Randolph explained. “If it’s a guest already in our system, the associate can bring up their purchase history, and it’s also easy to enroll her in the loyalty program if she’s not a current member. We can list the guest’s concerns, and those are shared across all channels, so if she goes to another one of our stores, that information is available. We can also alert people about in-store events with our vendor partners.”


“This requires our associates to be ‘front and center,’ but it also helps our goal of being the beauty connection for our guests,” said Kimbell. “Our goal is provide value at every touchpoint – in stores, on desktops and via mobile technology.”

For more insights from OIC, see the remarks by Nordstrom and watch here for more Oracle customer stories. For more on ULTA’s transformation, click here.

We encourage you to demonstrate the Oracle solutions and see the ULTA vision come to life at www.ulta.com or visit a store near you. Oracle Commerce and Oracle Retail Xstore will also be available for demonstration at booth #709 during the IRCE conference on June 2-4, 2015 in Chicago.

Tuesday May 12, 2015

Insights from OIC: Oracle Helps Retailers Turn Today’s Most Disruptive Trends to Their Advantage

In late March, retail executives gathered at Oracle Industry Connect 2015 to share perspectives. Here is a glimpse of what you missed from the sessions....

Retailers at the recent Oracle Industry Connect sessions talked about numerous “forces of disruption” that are changing their business and creating new opportunities.  Setting the tone for two days of presentations by retailers, for retailers, Jill Puleri, Senior Vice President and General Manager of the Oracle Retail Global Business Unit, talked about what retailers are doing to thrive in the midst of new market opportunities.

The most disruptive forces, said Puleri, are often consumer-driven and offer subtle but important insights.  Among them:

● People using their mobile devices differently: “Instagram has a 25% greater engagement rate than Facebook, which tells you that visual is more engaging than text on these devices,” said Puleri.

● Greater willingness of consumers to reveal where they are to third parties: “People are using Uber to hail a cab, which says the ‘creep factor’ about revealing their locations is lessening,” she said. “That’s important because people are keeping their mobile devices within one meter of their body for 23 hours a day.”

● However, people are still wary about data breaches, which have not been limited to retail but have spread to health care and other industries.

● With same-day delivery, “Amazon has set the bar,” said Puleri. Even though the e-tailer loses money on many of its lower-value shipped orders, it has raised consumer expectation levels about service. In addition, the growth of third-party companies handling the “last mile” of delivery have the potential to disintermediate the customer’s loyalty to the retailer. 

Puleri revealed results from New Consumer Study: Retail Without Limits that surveyed 5,000 consumers in 10 countries: 83% insist on the adoption of new technology by retailers, “Because they want to use that technology in their shopping process,” she said. “In addition, 70% rate stock transparency to be very important in e-commerce. Consumers don’t understand that this is a hard thing for many retailers to accomplish; they just want it. And 50% of respondents expect to use their mobile devices for product research, which points to the need for responsive design” that provides optimal experiences on different mobile devices.

More than 160 Oracle customers shared their success stories at OIC. Apparel retailer Lilly Pulitzer’s CIO Keary McNew revealed that Oracle helped the company implement responsive design for its e-commerce offerings last year, and that the retailer would launch a new mobile app for iOS integrated with the Oracle Open Commerce platform in May 2015.

For sports apparel retailer LIDS, the Oracle Retail Locate solution provides visibility into 800 of its stores’ inventories to the retailer’s e-commerce website, and also gives in-store associates tools to find items on the shelves at other stores, and also to arrange for these items to be shipped to different stores or to customers’ homes, according to Vice President of Information Technology Larry Havlik.

Offering these customer-friendly services can create additional challenges to how retailers operate. “In many cases, process changes are harder than technology,” said Puleri. When instituting ship-from-store, for example, “questions arise such as, Where do stores get packing material? What happens when someone cancels an order? Oracle is documenting these processes from retailers all over the world.”

In other remarks, Mike Webster, SVP and General Manager of the Retail and Hospitality Global Business Units at Oracle Webster noted that in addition to its technology offerings, Oracle has deep retail expertise that it makes available to customers. “Omni-channel is an enterprise opportunity that involves getting to a single enterprise view of inventory, customers, orders, price, and promotion,” said Webster. “Focusing just around the edges won’t help: the conversations now are about what retailers need to be thinking about in planning, supply chain, e-commerce, point-of-sale, business intelligence, and customer engagement to support omni-channel. We’ve built that out into our Oracle Retail Reference Model.

“That’s important because ultimately omni-channel isn’t about channels, but about how we bring the power and the process of the entire organization to deliver a differentiated customer experience,” he added.

Dive into the research a little further: Read the full research report


Friday May 01, 2015

Five Quotes from Amazon's Shareholder Letter

If you're serious about understanding the retail industry, you have to closely study Amazon.  I've come to have great respect for the company and its leader, and I continue to be amazed at their accomplishments.  That said, here are my five favorite quotes from Jeff Bezo's most recent annual letter to shareholders:

Jeff Bezos graduated from Princeton and started his career in the financial industry, so he's always been interested in business models.  This first quote references Tinder, a dating site where "a swipe can change your life."

A dreamy business offering has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time – with the potential to endure for decades. When you find one of these, don’t just swipe right, get married.

Jeff is very proud that Amazon is not just a single business, but many related businesses with synergy.  In his letter he called out three main businesses: Marketplace, Prime, and Amazon Web Services.  This next quote refers to Amazon's ability to efficiently fulfill orders quickly.

Our worldwide network of fulfillment centers has expanded from 13 in 2005, when we launched Prime, to 109 this year. We are now on our eighth generation of fulfillment center design, employing proprietary software to manage receipt, stowing, picking, and shipment.

While Prime started out focused on free shipping, many additional benefits have been added including instant video. This year, Transparent, an original series won a Golden Globe award.

I’m pretty sure we’re the first company to have figured out how to make winning a Golden Globe pay off in increased sales of power tools and baby wipes!

Combining the benefits of Prime and Marketplace has been a successful endeavor that accelerates growth in both programs, or in Bezos-speak "powering the flywheel."

Every time a seller joins Fulfillment By Amazon, Prime members get more Prime eligible selection. The value of membership goes up. This is powerful for our flywheel. FBA completes the circle: Marketplace pumps energy into Prime, and Prime pumps energy into Marketplace.

No doubt you know Amazon's $5B cloud business is growing fast.  What started as a platform mostly used by start-ups is now maturing to attract many established enterprises.  This quote refers to AWS:

What customers really want in this arena is “better and faster,” and if “better and faster” can come with a side dish of cost savings, terrific. But the cost savings is the gravy, not the steak.

Whether you love Amazon or hate them, you have to respect what they've accomplished.  And there are lessons we can all benefit from in our ongoing quest to serve shoppers.

Thursday Apr 30, 2015

A New Kind of Discount Retailer

It used to be that I always assumed Amazon had the lowest price.  Now I have to double-check before placing an order.  Lately Amazon has been focused more on customer experience than price, offering lots of goodies for Prime customers and really fast shipping.  Might that allow a new competitor to enter the market?

In the early days, Diapers.com sometimes had to buy diapers at Costco to ship to its subscription customers, sacrificing margin for share while the rest of infrastructure caught up.  The company was based on supply chain efficiencies and a lower cost to acquire and retain customers.  It worked so well that Amazon first fought them, then bought them.

So after spending two years with Amazon, Marc Lore is on his own again building a new kind of retailer. Jet.com is a cross between Costco and eBay with a huge focus on squeezing out every nickel of savings.  Consumers pay a $50/year membership fee, which is the only income for Jet.com.  Then Jet.com offers products from various retailers at deep discounts.  Those discounts come from passing on sales commissions, using the most economical shipping, combining orders, and avoiding credit cards.

To be successful, Jet.com must have the world's most efficient supply chain.  Perhaps more efficient than Amazon and Walmart.  The lynchpin will be an intelligent order management system that can efficiently source, combine, and ship products at the lowest cost.  Then there will also need to be lots of creative deals with merchants to lower prices in exchange for waiving the right to return merchandise, sharing customer data, or establishing subscriptions.

Of course this business plan requires massive scale, so the trick will be staying in business long enough to establish a large and loyal customer base.  Jet.com has already raised $220M before the website is even live, every penny of which is required for infrastructure and marketing.  But I just don't think Amazon and Walmart will stand by idly.  I think a major online price war is on the horizon, and consumers will be the big beneficiaries.

Monday Apr 27, 2015

Insights from OIC: Nordstrom’s New Canada Stores Become Testing Grounds for Enterprise IT Initiative

Last month our customer shared some fantastic experiences at Oracle Industry Connect 2015. Here is a glimpse of what you missed from the sessions....

Among its other accomplishments, Nordstrom has been a retailing technology pioneer, beating its competitors to market with customer-focused offerings including save-the-sale and endless aisle capabilities, buy online/pick up in-store, and coordinating returns between multiple stores and channels.

From 2001 until 2013, the Oracle Retail Merchandising System (RMS) served as a technology backbone for Nordstrom’s increasingly complex operations, but this required more and more customization as time progressed. When the retailer realized it was reaching the limits of customization, it initiated the Nordstrom Next Generation (NGEN) initiative, a six-plus-year program to support the company’s growth by replacing its current enterprise foundation solutions with new Oracle Retail systems offering advanced capabilities and scalability.

Nordstrom’s recent expansion into Canada is doubling as the first phase/pilot for NGEN, according to Nordstrom Director of Supply Chain and Fulfillment Brenda Glasgow, who spoke in late March at Oracle Industry Connect in Washington DC. The retailer has already opened two of a planned 10 full-line stores in Canada, with the next opening planned for fall 2015, and also plans to open its off-price Nordstrom Rack stores beginning in 2017.

The Canada expansion “gives us a chance to test, learn, and adjust with our business partners and technologists,” said Glasgow. “It’s allowing us to socialize the ‘vanilla’ implementations of Oracle solutions, and giving us practice managing the scope of these implementations.”

Nordstrom is still relying heavily on Oracle solutions, particularly in merchandising with Oracle Retail Merchandise Operations Management (MOM). This system is supporting international requirements around currencies and import/export issues, and Nordstrom is also taking advantage of new trade management and invoice matching modules that supplant older legacy applications for these functions.

Glasgow and Deby Hansen, Director of Program Management and Architecture for Nordstrom, identified key learnings from the Canada opportunity that include leveraging best practices identified in the Oracle Retail Reference Library, and using a process-led design approach that makes extensive use of personas and job roles. “By painting a full picture of a job’s process flow, it’s been easier to work through what’s been different from one system to the next,” said Glasgow. “We need to balance respecting our people’s business requirements with our motivation to stay ‘vanilla’ with these implementations.”

Nordstrom will apply these learnings as NGEN progresses, supporting long-term corporate goals that include sustaining the company’s growth, supporting its Nordstrom Rack stores becoming more of a separate entity, and “keeping us on an upgrade path that leverages our research and development investments,” said Hansen.

Congratulations to Nordstrom for their hard work and success. Nordstrom continues to impress the industry with their approach to the enterprise transformation. Read the press release or check out the presentation in the RACK to dive a little deeper. 


Tuesday Apr 21, 2015

Aerosoles Taps Responsive Design, Omni-Channel Fulfillment to Boost E-Commerce Performance with DMI

From Amazon to Zappos, shoe retailers vie for consumer orders and Aerosoles is gaining ground by keeping loyal fans happy and winning new ones with a modern e-commerce experience and a tightly-integrated fulfillment strategy. In a press release with partner DMI, Aerosoles executives share insight to creating a “future-proof omnichannel” platform that has grown e-commerce sales using Oracle Commerce, Responsive Web Design and cross-channel fulfillment.

Aerosoles completely overhauled its ecommerce operations in 2014, took steps to improve the customer experience and tapped its stores and warehouses to get orders in the hands of shoppers efficiently.  Retail news magazine Retailing Today covers Aerosoles’ e-commerce initiative here, noting that the retailer promptly delivered a record performance on Cyber Monday. 

Enhancements focused on both the front-end shopper experience and the cross-channel fullfillment operations behind the scenes. First, higher-resolution color and images, state-of-the-art search and cleaner checkout were employed as part of Aerosoles’ new Oracle Commerce platform. Whether consumers sign on with a mobile device or with a personal computer, the Aerosoles ecommerce website responds immediately with a format that performs well and is easy to navigate. This Responsive Web Design feature, Oracle Commerce enhanced dynamic search and guided navigation, and site mapping and SEO capabilities are designed to deliver more overall site volume and sales.

Aerosoles supports the customer experience with some astute back-end strategy. E-commerce transactions are fully integrated with stores and warehouse locations for fulfillment to the customer quickly, effectively and with an eye toward balancing inventory availability. Call center integration with DMI OrderSync OMS ensures customer service and sales associates can readily help with orders, add-ons, returns, cancellations, backorders and customer service.

According to DMI, Aerosoles’ mission was to “provide an atmosphere that optimizes its customers’ shopping experience not only online but through all sales channels.” An omnichannel commerce and retail data integration strategy delivers a seamless experience for Aerosoles customers across online, mobile, call center or in-store shopping.

For a closer look at Aerosoles in action, shop the new website and enjoy the spring and summer collection! 

Wednesday Apr 15, 2015

Wicked Fast Delivery

Amazon announced one hour delivery for Austin so I had to give it a try.  My daughter needs a larger camera bag, so I decided that would be a great item to order.  You have to order via the PrimeNow mobile app and its a reduced set of available items, but I had no problem finding what I wanted.  I waited until 8am to start my order, which took six minutes because I used my office address and had to verify my credit card.  Here are some screen shots of the order:

Two hour delivery is free, and one hour is $7.99.  It also recommends a tip of $5.00.  Between the delivery charge and tip, I guess they cover the cost.  It might even be cheaper than two-day shipping according Paula Rosenblum, a retail analyst with RSR.  I chose the one hour delivery and received a text message at 8:11am stating, "Your Amazon Prime Now order will arrive soon."  Then at 8:21am I received a second text message stating, "You Amazon Prime Now order has been delivered."  Yep, it was delivered in 15 minutes.

Now you can see in the map above that the DC is very close to my office, but its still impressive how fast I got my order.  I can definitely say I'll use the service again.

Retailers have the opportunity to offer similar services by partnering with delivery companies.  They key is managing in-store inventory and the picking process.  I expect to see this service from local stores in the next year.

Monday Apr 13, 2015

Glance User Experience

The Apple Watch seems to be getting mixed reviews in the press, but plenty of people ordered one on launch day.  I visited an Apple store on Friday to see them for myself, but I'm not yet swayed to make the investment.  However, prior to launch I purchased a Pebble smartwatch in order to assess the utility of the category.

I've found that the smartwatch doesn't have much in common with the traditional watch beyond its location on the wrist.  Its better characterized as an electronic information hub that goes far beyond displaying just the time.  But its no substitute for a smartphone, and in fact its really just an extension of one.

The same impetus behind the migration of the watch from one's pocket to the wrist is powering the smartwatch -- the Glance UX.  People want to get information in a glance, and at this the smartwatch excels.  No need to pull out your smartphone to see the time, date, weather, texts, tweets, etc., just glance at your wrist and be informed.  The guys at AppsLab even named their first smartwatch app "Glance."

So from a retail industry perspective, I don't see wrist-based commerce being the norm.  Rather, the smartwatch will surface location-based marketing messages, coupons, and help with paymentsTarget, for example, provides a shopping list via the smartwatch.  But that's just the consumer side -- there are plenty of applications for employees.  In fact, our Retail Applied Research (RAR) team created a prototype app for a hotel manager to quickly receive information about the business.  Corey Nash, head of RAR, says it allows the manager to conveniently get "sips of data."


In simple terms, use the watch to receive notifications, the phone to research products, and the tablet/PC to consummate the purchase.  Each device has a unique role in the commerce ecosystem and together they provide and efficient shopping experience.

Thursday Apr 09, 2015

Amazon Leading the Charge Again

Free shipping, personalized webpages, Kindle, Prime, Fresh...the list of Amazon innovations is long, and if you watch carefully you can sometimes see what's coming next.  For example, when Amazon suddenly reversed their stance on charging sales tax, it was pretty clear they were doing it to further their 2-day shipping goal.  In exchange for charging sales tax, they would open more local distribution centers so that shipping times could be reduced. 

More recently Amazon released Dash, the wand used to built a grocery list, and Echo, the Siri-like appliance that interprets voice commands including adding items to a shopping list.  And as I predicted last Fall, Amazon has now announced Dash Buttons, a way to easily reorder home products.  These last three innovations are clearly targeting home replenishment through IoT automation.  But wait, there's more.

The Dash Button is a battery-powered, WiFi-enabled button that can be located near where home products, like laundry detergent or paper plates, are used.  When the product-specific button is pressed, that item is added to your Amazon cart for easy reordering.  Its pretty obvious the cost of the buttons is being shared with CPG companies.

We can debate whether Dash Buttons are a good or bad idea, but in the end they are just the first stop on this home replenishment journey enabled by the Internet-of-Things. The underlying trade consumers are making is less choice for more convenience, and the main casualty will be the retailers that aren't Amazon.  The buttons and their future decedents (like reorder buttons built into appliances) are hard-coded to purchase from Amazon -- this should scare retailers.

Perhaps the solution is to create a standard communication protocol for these reorder opportunities that connects to a website where consumers can define their reorder rules.  For example, laundry detergent is always Tide from Kroger, toilet paper is best deal, and light bulbs are GE from Lowes.  At least this way consumers have options, and retailers can compete for business.

Wednesday Apr 01, 2015

Smart Growth Strategies, Part III: Leverage the Cloud to Grow Profitably

This is the final post of a 3-Part Series gearing up to our Thursday April 2, 2 PM EDT, Webinar with RSR Research, IBM and Oracle. Register here to join us!

Smart, sophisticated use of information technology is critical to retailers’ growth.

This is not news to savvy retailers, who have long recognized the linkage between the right technology and success in a highly competitive industry. In fact, the current question is less about the value of technology itself and more about how that technology is deployed and delivered.

For today’s technology to facilitate growth, costs (both initial and ongoing) absolutely need to be factored into the equation. Retailers are already using cloud applications to reduce the total cost of ownership (TOC) for standard business operations like email, HR and finance, but they’ve been slower to adopt cloud-based retail applications.

As the confidence in cloud deployments and data security increases we are seeing that resistance lessen and are pushing ahead full steam with the Oracle Retail Cloud, set to go live April 1, 2015. Key Oracle Retail applications, as well as a number of solutions added via last year’s MICROS acquisition, will be made available through cloud-based deployments. In addition to the attraction of lowering TCO by outsourcing key elements of their IT work to Oracle, retailers partnering with technology providers that have true domain expertise also gain the benefits of retail-specific systems for handling CRM, order management and order broker functions, loss prevention, brand compliance, and BI/analytics.

Moving key applications to the cloud facilitates growth in two important ways. In addition to reducing initial and ongoing costs associated with IT upgrades and expansions, cloud deployments also free up human resources. Retail IT staffs will find they’re spending less time checking backup systems, maintaining basic operating systems and, in general, “keeping the lights on.” They’ll have more time and resources to work on retail growth strategies like improving inventory visibility, tailoring and curating product assortments, and creating stronger omnichannel connections with customers.

To read more on smart growth for retailers, look at my earlier posts on growing by connecting with customers and using actionable data. Register here to join Brian Kilcourse and Paula Rosenblum of RSR Research, Cor Hoekstra, IBM Global Business Services and myself to discuss this topic in depth on a live webinar, Thursday April 2.

Tuesday Mar 31, 2015

The Next Steps for Subscription Commerce

I recall a few years back when flash sales were all the rage, probably peaking when Nordstrom acquired HauteLook. The model readily captures the excitement of discovery, and draws on the competitive nature of deal-hunters.  This cue-routine-reward formula has only one flaw -- as competition enters the market, differentiation dwindles.  Obviously flash sales are very different from traditional online retailing, but there isn't much difference between flash sale sites.  A typical customer is a member of several sites without much loyalty to any particular one.  Then the pressure to watch several sites and pounce on deals becomes exhausting.

Subscription commerce, from sites like Birchbox and Stitch Fix, maintain the excitement of discovery plus add the regularity of a subscription with a rewards program that garners loyalty.  You get a box of curated stuff every month and points awarded for purchases.  Over time the company develops a profile of you so that the box can be better curated for your tastes and style.  The model seems to be working well enough for Nordstrom to buy Trunk Club.

Now here are three next steps that retailers should consider:

1. Smarter Subscriptions

Just as the basics are replenished in a store, the same needs to happen in homes. This starts with the dry basics like toilet paper, cereal, and makeup.  Retailers should know a customer's preferences and consumption level, and help replenish products just-in-time. This takes historical data and forecasting, or possibly the use of in-home sensors (i.e. Internet of Things).  Nobody enjoys shopping for toothpaste, so just figure out when I need more and have it delivered before I run out.

2. Better Personalization

Customers are members of many segments, and its the intersection of those segments that makes them unique.  To cull out segment membership requires a mix of soliciting preferences (e.g. what heel height do you prefer?), collecting available psychographic data (what heel heights did you like on Facebook or pin on Pinterest?), and analyzing historical sales (what heel heights have you purchased?).  Even so, a healthy amount of A/B testing is required to stay on top of emerging trends as tastes tend to be dynamic.  Use the data to make the product selections more tailored and relevant.

3. Inclusive Store Experience

To date, subscription commerce has been a solely digital activity, but many customers still require more physical interaction.  For style-sensitive products like fashion, why not provide monthly, personalized suggestions with an opportunity to schedule a try-on appointment in the store?  Or perhaps an in-store tasting for the jelly-of-the-month club?  Driving customers to the store should increase basket size, and also provide customers with the flexibility to tweak their personalized product recommendation.

I'm watching the market to see if these ideas gain traction.  Use the comments to express your own opinions as well.

Friday Mar 27, 2015

Smart Growth Strategies, Part II: Make Big Data Actionable with Big Science

This is the second post in a 3-Part Series gearing up to our Thursday April 2, 2 PM EDT, Webinar with RSR Research, IBM and Oracle. Register here to join us!

Everyone acknowledges that retail growth is a business imperative. What’s less clear-cut are the most intelligent ways to achieve that growth. After all, a retailer could spend many millions to build new stores, with more devoted to advertising to woo new customers, but such growth is purchased at a high price.

A smarter and ultimately more cost-effective path to growth involves applying more rigorous science to everyday decision-making. Better, more customer-focused choices about merchandising and product assortments, allocation decisions, promotions and price markdowns do more than just improve operational efficiencies; they create the conditions necessary for growth.

“Retailers must implement BI and Analytical technologies to populate operational KPIs and management dashboards with usable and timely insights,” write RSR Research Managing Partners Brian Kilcourse and Paula Rosenblum in their Retail Growth Strategies benchmark report. “But modern technologies also enable retailers to move beyond a transactional mindset, and move toward being a ‘sense-and-respond’ business.”

Retailers have a head start in this area because they are well versed in big data, which is characterized by its variety, velocity and volume. Big data is nothing new to retailers, who routinely collect enormous amounts of transactional, product and customer data. However, without retail-specific algorithms to turn that data into actionable insight it’s useless – that’s where big science comes in.

Take a very basic example: category management. A grocer with 30 SKUs of yogurt (including various brands, sizes, and flavors) wants to open up shelf space in the always crowded refrigerated section. But which SKUs should go? Simply dropping the five slowest sellers could easily disappoint customers loyal to those brands. Experienced retailers know that seemingly unprofitable SKUs may be acting as traffic builders, drawing key shoppers to a highly profitable area of the store.

Understanding the science of demand transference can optimize this decision. Applying algorithms to extensive sales transaction history data, Oracle Retail applications can show that if the grocer drops the cherry flavored yogurt, an acceptable percentage of customers will simply transfer their demand to another flavor. However, if the grocer stops carrying six-pack cups of yogurt, an unacceptable number of shoppers will not purchase any yogurt product at all. These customers will not only leave the store disappointed; some will seek the product at a competing store.

Applications powered by big science allow retailers to optimize each of these thousands upon thousands of small (but significant) decisions, and to tailor each one to the assortment and customer profile of each store in the chain. When retailers can smarten up their everyday operations and do so at an enterprise-wide scale, they create a highly scientific formula for growth.

To read more on smart growth for retailers, look at my earlier post on growing by connecting with customers. Register here to join RSR Research Managing Partners Paula Rosenblum and Brian Kilcourse, Cor Hoekstra, IBM Global Business Services and myself to discuss retail growth strategies on a live webinar, Thursday April 2.

Wednesday Mar 25, 2015

How Leveraging the Cloud Can Unleash Retailers’ Business Agility

A Viewpoint from Jeff Warren, Vice President Solution Management, Oracle Retail 

Newly launched Oracle Retail Cloud Services combine reliability, security, cost savings and built-in interoperability

The ever-accelerating pace of change in retail puts pressure on everyone within the retail enterprise, but perhaps no one feels it more acutely than the CIO. Technology is rapidly reshaping key elements of the traditional shopping experience, from m-commerce and mobile payments to store-based fulfillment. IT departments are tasked with discovering, and bringing on line, these fast-emerging functionalities, while at the same time maintaining the existing architectures that support both basic corporate and retail-specific systems.

Given these competing demands – “keeping the lights on” while simultaneously serving as the engine for business agility – retail CIOs require cloud-based applications from a trusted technology partner with extensive industry expertise. Oracle is responding with a new offering of Oracle Retail Cloud Services applications for managing e-commerce; customer engagement; order management and order brokering; loss prevention; and brand compliance. (See product list below.)

Cloud-based applications, which in essence outsource many elements of IT management, maintenance, and upgrades, address retailers’ need for business agility. It’s increasingly common that when an IT organization can’t supply the new functionality that the business side seeks, a simple lack of time is cause. Cloud deployments free up IT resources for more strategic projects, and they also allow technology vendors to deliver innovation to retail users more quickly and with more frequent updates.

Keeping Costs in Check

The other benefits of cloud-based applications have been well documented, and are part of the reason so many businesses and individuals have been embracing cloud-based applications, data storage, and processing. They include:

● Lower initial hardware and software costs

● Lower ongoing costs, leading to a lower TCO (Total Cost of Ownership)

● Faster deployments and streamlined routes for patches and system upgrades

Other cloud features are particularly well suited to a retail environment. Scalability and easy access to additional processing power on an as-needed basis fit the needs of a highly seasonal business, one that must often deal with unexpected spikes (such as when a retailer seeks to promote a suddenly “hot” product) and dips.

Oracle’s subscription-based pricing for retail applications maximizes this benefit, bundling software, hardware, and upgrades into a predictable cost structure. In addition, by pricing IT services like a utility, retailers only pay for the processing power they require and actually use.

Mitigating Risk, Maximizing Security

Many retailers have hesitated with cloud deployments based on concerns about data security and overall reliability. This is understandable, given that retail data breaches are highly visible and can tarnish both individual companies and the entire industry. The ability to protect data and maintain the trust of their customers necessarily remains top-of-mind for retailers.

Oracle Retail Cloud Services benefit from the company’s worldclass culture of operational excellence. Oracle Data Centers are classified as Tier 4, the highest level of sophistication, providing 99.995% of uptime. This translates to less than 30 minutes of downtime during an entire calendar year – performance that very few (if any) retailers could match. Oracle Retail also has access to Oracle’s top-notch expertise in the cloud, security, and networking.

Security features inherent to Oracle technology solutions allow for transparent data encryption at the column level, allowing PII (Personally Identifiable Information) to be encrypted using keys that are held in a separate “wallet.” Backups are automatically encrypted, and keys can easily be changed on an as-needed basis. The Oracle Retail solutions leverage Oracle Identity Manager solutions to manage and enforce authentication and authorization for applications, and all elements are PCI-DSS certified.

Built-In Interoperability

Retailers will also benefit from the strategy behind Oracle Retail Cloud Services. These solutions are part of the retail industry group’s comprehensive Commerce Anywhere strategy, which encompasses technology ranging from financial applications to system hardware, so they are designed for maximum interoperability with both on-premise and cloud-based systems.

Oracle also offers flexibility in cloud deployment options. Because different retailers will be at different points in the cloud adoption curve, Managed Cloud services (also known as hosting) allow users to get more comfortable with the concept of outsourcing elements of their IT infrastructure. As the technology provides “wins” and the retailer’s culture adapts, the adoption path can ultimately lead to Oracle Infrastructure-as-a-Service and Platform-as-a-Service offerings. Oracle offers choices that retailers can leverage based on where they are in terms of their own maturity level and business needs.

Most importantly, Oracle Retail Cloud Services give CIOs the tools to keep up with today’s dizzying speed of change. Retailers can no longer wait one to two years to implement the next big thing; IT departments need to deliver meaningful value to the business in time frames that are measured in months. By outsourcing key day-to-day operational duties to cloud providers, IT departments are freed up to offer higher levels of strategic innovation and business agility.

Monday Mar 23, 2015

Smart Growth Strategies, Part I: Growth is Good. Smart Growth is Better

This is the first in a 3-Part Series gearing up to our Thursday April 2, 2 PM EDT, Webinar with RSR Research, IBM and Oracle. Register here to join us!

RSR Research recently published results from a study that included over 120 retailers worldwide focusing on growth strategies and the state of execution on key initiatives. There were a few surprises but in general retailers are compelled to grow and tend to look to a small handful of strategies year after year.

Although the need for growth is undeniable, it also raises a series of difficult questions: What specific avenues should retailers pursue for profitable growth? How, exactly, should they go about achieving it? How do they balance immediate payoffs with the need for sustainable investment that leads to long-term growth?

Success requires not just growth, but smart growth. Technology is at the center of any smart growth strategy in today’s retail environment, and I’ll be exploring three specific approaches in this and subsequent blog posts. They are:

1) Grow by Connecting Customer Interactions

2) Grow by Applying Big Science to Big Data

3) Grow Profitably by Adopting Technology

In their report, authors Brian Kilcourse and Paula Rosenblum express surprise that more retailers aren’t seeking growth in expanding markets around the globe. Despite fiercely competitive markets in the US and UK, retailers believe that there’s still plenty of growth opportunity close to home. One way to turn that belief into reality is via closer connections with customers, including knitting together their on- and offline interactions.

Of course, this isn’t a new concept: achieving a 360-degree view of each shopper, the better to meet his/her needs with the right product in the right place, at the right time and at the right price, has been a long-time goal for retailers. However, this basic growth strategy has gained particular urgency as shopping patterns fragment and customer touchpoints multiply.

Linking multiple touchpoints in a customer-centric manner is a smart approach to growth. For example, say an online shopper finds a piece of jewelry on your site, and likes it enough to place it on a “wish list.” You can bombard her with targeted ads all over the web, and you probably will, but perhaps this particular item is one that has a low online conversion rate. Perhaps it’s something that your customers need to touch or try on. By linking your online data with marketing push notifications, you can seize the opportunity the next time that shopper is within close proximity to your brick-and-mortar store by sending her a text with an image of the item and an invite to view it in person. To really unite the digital and store experiences, the store’s sales associate has the item ready to display to the shopper if she accepts the invitation and has curated additional items for consideration. Thus serving as a personal stylist versus a standard associate.

This level of cross channel coordination essentially enables retailers to get back to basics and build a one-to-one relationship with their customers – ultimately increasing loyalty, basket size, and lifetime value.

I’ll post more on this topic soon. Meanwhile, please register here to join RSR Research Managing Partners Paula Rosenblum and Brian Kilcourse, Cor Hoekstra, IBM Global Business Services and myself to discuss retail growth strategies on a live webinar, Thursday April 2.

Thursday Mar 12, 2015

Pure-play Retail is Doomed

I highly recommend watching NYU professor Scott Galloway discuss the Four Horsemen, but its the first 7 minutes that really interest me.  In that time Scott lays out a case for why pure-play retailers are doomed.  He states that retailers that focus only on e-commerce will either have to open stores or face going out of business.  (And I suppose there's a similar fate for traditional retailers that fail to adopt digital.)  He notes that retailers like Fab, Guilt, and Net-a-Porter are failures while retailers like Warby Parker, Rent-the-Runway, and Bonobos are thriving by opening stores.  "Stores are the new black in the world of e-commerce."

I was with Scott until he turned his attention to the big-kahuna of e-commerce, Amazon.  With $6.6B in transportation costs but only $3.1B in shipping fees collected, Scott claims Amazon's model is not sustainable (see his chart below).  Once the cheap capital dries up, Amazon will be forced to open stores in order to stay competitive.

I disagree.  Not because the logic is flawed, but rather because Amazon is not a typical retailer.  I believe they could be profitable if they wanted to but instead choose to continue investing in widening their competitive moat.  Not only is their retail business state-of-the-art, but their investments in AWS, tablets, payments, IoT, etc. are complementary and help to diversify the business (yes, they can do both).  Amazon is not your typical pure-play.

Scott rightly points out that the future of retail is represented by Macy's omni-channel model.  Using stores as showrooms, distribution centers, and customer service portals where the digital and physical are intertwined is the way forward.  Consumers will continue to shop at stores, but stores will also serve as pick-up points and shipping centers.  The graph below from Scott's presentation helps to show the momentum of click & collect, an important.aspect of this new model.

Traditional retailers that leverage their stores alongside digital can absolutely compete with the likes of Amazon.  Stores are not going away -- they are just transforming to serve customers in new ways.

About


David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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