Building a new customer-centric operating model for retail: Advice from Fujitsu
Customer, shop, merchandise, transaction – that’s all there is to it. Shopping, in simple terms has changed little in 2,000 years. However, on closer inspection, we know that for customers, retailers and their suppliers, the shopping ‘process’ is undergoing a fundamental transformation.
The pace of change, driven largely by rapidly evolving palm-held consumer-based technology is such that traditional business responses just don’t work anymore. How do you use traditional store data capture tools to map a customer transaction across several touch points? What ‘system’, for example, do you buy, install, test and run over a typical 12- month project period to control your brand perception on Facebook and Twitter? To influence shopper opinion in this environment calls for a completely different approach. The customer, not the retailer, is now increasingly in control, and it means retailers are rethinking how they run their businesses.
Fujitsu, with its 35-year heritage supporting some of the world’s major retailers, thinks a lot about the future of retailing. We believe new customer-centric operating models, underpinned by new IT architectures, data models and business processes, will evolve in the next few years in response to the changes society is experiencing today. Bolting on click ‘n’ collect services to a store model, manually sharing stock across physical and virtual stores, and responding to shopper behavior overnight rather than real time are no longer viable. A fundamentally new approach is required. This is the subject of this article.
Analysts are inventing new labels every day --- multi-channel, omni-channel, ‘stop-start’ shopping and clienteling --- to try to describe what is happening in one or two words. Fujitsu sees it from the customer’s point of view – there is only one shopping channel, my channel, and retailers need to operate their businesses in response to how I choose to shop with them. The store no longer has walls, shopping is everywhere, and retailers need to rethink how they set up shop.
Back to the Future
Technology is driving change not because it appeals to the latent ‘geek’ mentality amongst the world’s shoppers. Technology, primarily mobile devices such as smartphones are driving change because they are helping customers rediscover a more intimate, personalized and ‘in control’ shopping experience. Customers want the ‘one-on-one’ personal service - reminiscent of the ‘mom ‘n’ pop’ shops of 1950s America, but they want it represented and delivered for a modern technological age. This may or may not involve human intervention.
The point is that these drivers are not conventional ‘trends’ such as own label or boutique stores have been in the past decade; these are fundamental ‘disconnects’ in the business of retailing.
Therefore, many high performing retailers are rethinking how they ‘set up shop.’ How should retailers organize a business – people, assets, processes and technology to meet these new shopper expectations? How should transactions and customer history be captured across multiple touch points at different time intervals? How should people and processes be reconfigured when they have been based on a store-centric model for decades and decades? This is not about being leading edge, this is about doing the basics in a world when the goalposts have not just moved, they have been removed from the pitch.
The New Model
Typically, retailers don’t go in for complex models, they tend to like a simple plan which works. Any new operating model on this scale is not about academic hypotheses but concrete roadmaps for change. It is our opinion that the new model for retail, the underlying IT and process framework should look like this:
The key point is that it is an interconnected model – strategy, process and technology architected to deliver the new ‘one channel’ retail operating model – whatever the touch point, whatever the data inflow and outflow, whatever the operating procedure. The objective is to scope a business data model which runs on the basis of servicing customers across channels and – ultimately – on a personalized, even one-on-one basis. This is what ‘retailing without walls’ truly means. It is not just about layering on home delivery and online payment services to a foundation store model; it is about a single view of a very different business.
Customer Journey– everything starts with the customer and a detailed understanding of the shopper journey is a critical pre-requirement for shaping the right operating model strategy. Retailers, for example, are comparing the current versus the desired experience for the shopper at the critical ‘stages’ and identifying relevant solutions which can deliver the right business outcome. This can be applied online and offline, in store or via a mobile device. What is important is to identify the solution mix which will support the right customer response.
The IT operating model strategy is a by-product of the mapped customer journey; strong emerging themes such as payment or data integration will start to drive business objectives, and the IT operating model and the associated layers of applications, infrastructure and networks. This will make the business truly customer-centric.
Retail Solutions – the business, and underpinning IT, operating model are built on providing the customer with the products and services they want at the right price and in the right location. The applications that drive merchandising and transaction management, the infrastructure and networks assets that deliver the physical and virtual toolset, and the services that support sustainable outcomes provide the foundation for the new model for retail.
Point of Sale
Point of Sale (PoS) software is arguably the engine room of any retail business, capturing the vital transaction sales and customer information, which addresses replenishment, buying, merchandising and CRM processes and decision-making. As retailing goes ‘omni-channel’ PoS becomes a critical enabler that delivers the cross-journey transaction management and data history that is vital for customer expectations. However, to date, PoS has been architected on the basis of ‘the one server, one register, per store, mobile, call center or web shop model.’ Retailers are grappling with complex and duplicating data models which prevent any single view of the customer or cross-channel mapping.
Fujitsu is working to build a point of service solution which will work on the basis of the ‘Any3’ customer transactions, not the cash register per store, per web shop model.
The single transaction repository, combined with new flexible deployment models including the cloud, will revolutionize transaction, process and data management for the retailer, reducing cost and speeding value for the customer. Data will be synthesized and cross-referenced according to the customer journey, not the retail operating procedure. We believe this will become the standard model for transaction management.
Infrastructure solutions – enterprise, store, mobile --- are also being re-engineered to meet the demands of the new model for retail. For example, the traditional store infrastructure is being integrated to deliver a connected experience for the shopper. This can be via digital media screens that respond to peak transaction activity, bluetooth-enabled location based services that trigger mobile promotion coupons for eligible customers and personal scan and pay services that are downloaded to the shopper’s smartphone.
The customer will expect a seamless bridge between the different stages in their journey – single sign on, retrieved transactions, loyalty history and permission-linked, personalized marketing based on their shopping history and stated preferences.
Retail as a Service
The new model for retail is not ‘one size fits all’ although the underlying principles – single transaction repository, flexible IT deployment and solution cross-channel integration--- remain constant, deployment will vary according to the business needs and retailer operating preferences.
Retailers want to adopt the ‘as a service’ model in areas beyond software, the most popular model to date. Fujitsu is pioneering the ‘retail as a service’ model via a recent deployment with Hallmark, which has 3,000 stores in North America. We are delivering to Hallmark a bundled, subscription-based suite of hardware, software and support services. Founded on an operating expenditures (not capital expenditures) commercial model and targeted at retailers that seek a simple outcome-based contract from their IT service provider, retail as a service is expected to be a key component of the future operating model.
Business Integration – Store and ERP - the omni-channel environment is by definition all about integration – strategy, process and data. Network integration, wireless enabled within the store and between the store and headquarters, is a critical connectivity enabler for success. However, system integration between the store and the headquarters’ ERP is even more important in terms of enhancing the overall shopper experience and reducing the cost for the retailer.
As an example, Fujitsu and SAP have recently announced the joint development of a new packaged integration component, integrating Fujitsu’s new and innovative retail point of service application with SAP® for retail portfolio. The new capabilities of this portfolio will deliver significant multi-channel benefits in terms of customer service, front-office business process improvements and point-of-sale improvements to retailers.
Performance Management – It is expected that the new model for retail will deliver significant business benefits. However, traditional IT-based performance management is insufficient to monitor and track the benefits of the new model, and reshape or reinvest to deliver against the original return on investment targets.
We believe that any new business and IT operating model should be measured by lead and lag indicators, against explicit business targets and outcomes. These should include multi-channel customer transaction performance, IT (and hence, trading) availability and resource productivity including people, stock and property.
IT will become a profit center as it increasingly underpins the core business operating model for the modern multi-channel retailer.
Running a retail business is more like leading an army than conducting an orchestra – leadership needs to be clear, focused and offer direction. As outlined in this article, the new model for retail sets this direction and reflects what retailers are planning in response to today’s connected, cross-channel, and mobile retail environment.
The Fujitsu view is that being a retailer, including buying and merchandising, supply chain, retail operations, and transaction management is no longer defined by a store, merchandise or a cash register. It is defined by managing a customer through a shopping ‘journey’ on individual terms and often with their own personal assets (smartphone) and capabilities (product knowledge, social media connectedness). This means that over time, retailers need to recast their business data models (the information engine for supply and demand and customer management) to fit a customer, not a store, format. It will still be shopping, but not as we currently know it.
Article by Richard Clarke
Vice President, Global Retail, Fujitsu
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