In the Cloud
Maintaining a wealth of customer data has become a primary directive for retail IT departments. In recent years, retailers have been making substantial investments in solutions that collect and store data relating to their customers’ purchases, behaviors, preferences, demographic characteristics and almost any other traits you can think of. But after all this data has been captured, what do you do with it?
In the case of Chico’s FAS Inc., the Fort Myers, Fla.-based parent company of women’s specialty apparel retail banners Chico’s, White House I Black Market, Soma Intimates and Boston Proper, the answer came from the sky — in a manner of speaking.
"We had a rich customer database but couldn’t get to all the data," said Barb Brandon, director of CRM technology for Chico’s FAS, which operates more than 1,250 stores under its various banners. "We were looking for a way to capitalize on customer data."
Chico’s stored its troves of customer data on disparate servers with different applications. This meant the company had to send data out to external sources in order to be able to work with it. In 2008, Chico’s decided it was time to implement a single solution. However, at the time the retail operator was already in the midst of a very large enterprise-wide technology rollout.
"It caused a drain on the IT and infrastructure teams," recalled Brandon. "We didn’t want to rock the infrastructure more than we already were. That led to us seeking a SaaS-type cloud solution."
Chico’s had some very specific criteria for potential cloud partners. Most importantly, the company sought to partner with a cloud services provider that could also help it bring hosted data tools in house if needed.
"We didn’t want to commit to the cloud forever," said Brandon. "We wanted a partner, not a vendor. Vendors are easy to find. We wanted to find a partner that would bring us into their family and work with us."
With those prerequisites in mind, the retailer evaluated six vendors, dropping some because they did not offer cloud capabilities, and ultimately settled on SAS. According to Brandon, SAS’ strong commitment to R&D was a key factor in its selection of the vendor. Chico’s then partnered with the SAS On-Demand cloud team.
"We were not implementing an out-of-box solution," said Brandon. "So we determined a strategy to create a robust database with a set of tools sitting on top. The six-month implementation went fairly smooth. I was surprised how quickly we got it done with our very small team."
During the initial implementation, Chico’s rolled out SAS solutions, including Marketing Automation, which comprises Campaign Intelligence Studio, Enterprise Miner, Enterprise Guide and Business Intelligence. Since initial rollout, the retailer has also implemented the Size & Pack and Forecast Server solutions from SAS, and the On-Demand cloud team has maintained an active partnership with the retailer.
According to Brandon, the most important benefit Chico’s has received from using cloud-based SAS solutions is that technology has been placed in the hands of business users.
"Business users are operating the pedals and running the tools," said Brandon. "They understand the data better now. Having an integrated single source of customer data extends our capabilities as an organization. It’s pretty powerful. The partnership between the business and technology sides of the organization is rock solid. They couldn’t do without each other’s support."
In addition, Brandon said the ready cloud-based accessibility of data and technology has allowed the company to move from beyond simply being a data-savvy organization to one that approaches information with curiosity.
"We understand that when you’re digging in data, the question you ask is not the one you wind up answering," said Brandon. "You find 10 nuggets of information beyond the one you originally dig for."
Looking ahead, Brandon said that Chico’s will use cloud-based access to in-depth customer data to keep developing better insight into its customers.
"We will continue to understand our customer, how she thinks and behaves," Brandon added. "As we move into a multichannel world, this is where the power is. To know more about the customer and where she is and what she wants. Chico’s is more focused on the customer than anyplace I’ve ever been. We want to use the cloud to optimize customer touchpoints and put tools in place to avoid ‘customer fatigue’ by creating the specific experience that each customer is looking for."
Retail at its core is a pretty straightforward industry. Regardless of a retailer’s vertical, sales channel(s), customer base, or any other distinguishing characteristic, at the end of the day the goal is pretty much the same. Jay Omdahl, VP enterprise resource planning for online sports merchandise retailer Fanatics, sums it up succinctly: "Get the best product at the right time to the right place."
However, as most retailers know, achieving that straightforward goal can be a very complicated process. And when a retailer’s business model includes supporting the e-commerce operations of six major professional sports leagues, major sports media brands such as ESPN and NBC Sports, and more than 200 professional and collegiate teams, as well as its own stores and e-commerce site, giving customers what they want when and where they want it suddenly becomes even more of a potential challenge.
This is the enviable but tricky situation Jacksonville, Fla.-based Fanatics deals with every day. From its humble beginnings in the mid-1990s as a small store in a Jacksonville mall specializing in merchandise relating to the Jacksonville Jaguars NFL team, Fanatics has ballooned into an online giant. Along with its own e-commerce site, it supports the back-end operations of numerous sports entities’ websites.
Since its founding, Fanatics had relied on a RetailPro ERP system. However, in 2008, the company realized that its evolution into an omnichannel retail entity that also managed back-end ERP activities for numerous third parties meant an upgrade in ERP functionality would be needed.
"We needed the ability to look at how to plan, present and control products to a vast array of customers," Omdahl explained.
After a careful review of enterprise retail solutions from various companies, Fanatics decided to implement Microsoft ERP technology. An advantage was that the retailer was already using other Microsoft tools, such as Excel, Word, Windows, SharePoint and Outlook.
"It’s technology people see multiple times a day," Omdahl said. "It all fits together pretty nicely."
Furthermore, Fanatics wanted to "make a change and not a re-change" on its new ERP platform, meaning the company sought scalability, extensibility and the ability to diversify the solutions it would run on the platform as the business grew and changed.
In 2009, Microsoft worked with IT project consulting firm Junction Solutions to build a prototype of a platform based on Microsoft Dynamics AX retail ERP solutions, such as finance, AP, AR, and inventory planning and forecasting. Omdahl said the platform supports "typical ERP tasks," including management of business processes, data and transactions, and Fanatics has steadily expanded the platform’s functionality as the business has continued growing in the past few years.
According to Omdahl, Fanatics is receiving several specific benefits in getting customers the products they want, when and where they want them, as a result of employing Microsoft Dynamics AX solutions.
"It’s easier to make website changes and put them in a container and then build on those changes inside the container with rare ‘ripple effects’ on other parts of the site," he added. "We were also able to implement a product zoom feature, which required high-resolution product photos as pixelated photos don’t sell well."
Omdahl said successfully enacting the product zoom feature required creating a lot of "pictures, data, flags and settings in the right time and right place" on both the front and back ends, which Dynamics AX allowed Fanatics to accomplish with minimum fuss. Other customer-facing omnichannel benefits include the ability to email customers about the brands and products they are interested in (on an opt-in, cookie-based basis) and a "user-friendly, intuitive" online experience.
"Customer satisfaction scores are going up all the time," Omdahl added.
Internally, Fanatics employees also find the ERP system intuitive to use, and Dynamics’ natural interface with a common underlying SQL server database foundation further eases making front- and back-end site changes when necessary. Based on its success with Dynamics AX ERP solutions, the online retailer is considering implementing sales and marketing solutions from the Dynamics CRM product line in the future.
Ultimately, Fanatics is achieving the basic end goal it set out to accomplish when it first investigated Dynamics AX technology five years ago.
"Customer experience management comes up in conversation around here several times a day," Omdahl noted. "We want to give customers the products they want, not the products they’ll return."
A Brave New World
Remember when retail gurus used to say that when it came down to it, retail strategy was all about location, location, location? Location still matters, but not as much as it used to. With the explosion of online retail, brick-and-mortar retail strategies are changing. But it’s not just location that has receded in importance. Price and selection don’t matter as much anymore either.
Strategic changes are rippling through the retail world today, driven by the interplay between brick-and-mortar and online retail.
What changes? Here are three:
- Traditional retail differentiators don’t work anymore.
- Brick-and-mortar retail stores are adopting strategies used by online stores.
- Online strategies and brick-and-mortar strategies are merging into focused, powerful retail strategies.
Retailers that don’t tailor business models and strategies to emerging realities will find themselves in a tailspin, according to a recent report from Deloitte Consulting LLP entitled, "A Race to the Bottom: How to survive in the new retail environment."
The study makes it clear that in today’s marketplace competitive attributes such as price, selection and location are being reconsidered as noted competitive differentiators. Translation: Price, selection and location are less important, today.
"Product and service have become the real differentiators," said Rod Sides, a Deloitte principal and co-author of the study.
Price used to be a key differentiator, but now many other retailers can match low prices.
"You don’t have to be the lowest price," Sides explained. "But you have to be competitively low. A consumer might reason that it’s worth a 5% premium on a $50 item to get it now, instead of waiting a day or so for an online shipment."
Competitive pricing remains important to making a sale, but it won’t differentiate a product or retailer like it used to.
Even vast selection doesn’t differentiate anymore either. The reality is products spanning entire aisles in big-box stores can’t compete with online’s endless aisles.
Then there is location.
"Location is important for brand building, but a customer can buy a product anywhere, anytime without a store," said Thomas F. Quinn, a principal with Deloitte and co-author of the study.
Today, successful retailers differentiate their brands with products and service. Consider Apple.
"Apple is driving the new normal in retail," Sides said. "If there is one concept today that a majority of our retail clients are trying to emulate, it is Apple."
For Apple, retail strategy is all about products and service. The Apple brand stands for innovative, distinctive products, from the iPod to the iPad. It also stands for service. Excellent service in Apple’s physical stores and digital stores drives sales in both venues. Premium products and premium service enable Apple to charge premium prices.
Upscale department stores have always combined high-end products with excellent service. Today, that excellent service includes filling online orders from stores near buyers. Shipping is less expensive and faster, two customer service benefits. Sometimes customers come to the store to pick items up, another customer service benefit that also holds down store costs.
"A number of upscale department stores now pull inventory from stores to fill online orders," Quinn said. "Many of our clients today are trying to duplicate that."
It’s more complicated than it looks. It adds complexity to buying decisions and the way products are allocated among stores and distribution centers. It also requires material handling crews in stores to receive, rack, pick orders and ship merchandise.
"Upscale department stores understand that customers want exclusive products and excellent customer service that includes getting products to online customers fast," Quinn added. "These stores are making that work. As a result, price isn’t as big a pressure point for them."
Most retailers don’t have exclusive products and the financial ability to pay for excellent service. But they can still find a strategic balance — and they should start searching for it now. According to the Deloitte report, brick-and-mortar retailers need to better leverage their operating base if they want to remain competitive.
"In a lower-cost operating model, a retailer must ensure that incremental dollars invested in labor or real estate have value," Sides says. "One strategy might be fewer, smaller stores and more distribution points."
That helps to rebalance real estate investments. Fewer, smaller stores cost less, as does distribution real estate. The stores would build the brand and drive online sales. Service comes from swift delivery of online orders.
"You can’t be in the middle," Sides said. "You can’t have a high-cost structure and an undifferentiated value proposition, because then you will be forced to cut prices to make sales. And that’s the race to the bottom."
Michael Fickes is a contributing editor to Chain Store Age.
The interplay between physical stores and online is driving strategic changes throughout retail.