Smart work

Increasing Sales, Improving Efficiency, Working Smarter in Retail.The new science of selling, from supply chain to point of sale and beyond

2 Increasing Sales, Improving Efficiency, Working Smarter in Retail.

Today’s retail environment is decidedly more complicated. The Internet has changed the way people live and work. As a result, every retailer has been thrown into a global fight for survival. Competitors can come from the other side of the world, steal-ing marketplace share overnight. Products are sourced through supply chains of astounding complexity. Margins are sliced ever thinner. And customers have more options, less loyalty and an endless source of information at their fingertips. No matter how hard some retailers wish for them, the simple, old days of retail are never coming back.

Retailing has always been a competitive game. But the rules of that game are changing faster than ever. It is no longer enough to offer quality goods and services. Today, retailers must also maintain the most efficient supply chain. They must manage their store operations with precision. And they must offer cus-tomers a shopping experience that matches the way people live and work today. Anything less than that and it’s time to close up shop.

Fortunately, the same technology that is reshaping the way we live is also revolutionizing retailing, from store shelves that know when they’re empty to smart mirrors that recommend accessories and update a customer’s social networks. It’s all part of what’s possible when retail environments take advantage of instrumented, interconnected and intelligent systems.

Leading retailers are already implementing merchandising and supply chains that can adapt and respond dynamically. They are maximizing the efficiency of their store operations. And they are doing all of this not because they can, but because they have to stay competitive. Because today’s consumer is less patient and more fickle than ever. Today’s consumer is more connected and aware. Simply put, today’s consumer is smarter. And smarter consumers need smarter retail.

Working smarter in retail: Aligning the way people shop with the way they liveIt used to be so simple. In the old days, a vendor rented a shop, hung a sign and waited for customers to patronize the store. Of course, in these quainter days of retail, local operations and simple supply chains resulted in high prices and little choice. But at least it was simple.

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Today’s retailEvery day, large numbers of retailers shut their doors forever, with barely a ripple in the global economic waters. And most of them are not driven out of business because they lack quality products or lose their passion for the business. They’re driven out of business because they can’t keep up with their customers. Their practices are outdated and inefficient. Their processes are too slow. They are driven out of business because they are focused on today, not tomorrow.

• Today, flawed supply chain integrations can drive inventory levels as much as 40 percent higher within a few months.1

• Today, retailers execute less than 60 percent of their promo-tional initiatives the way they intended, leaving billions of dollars of sales on the table.2

• Today, online shoppers often complain that content provided on retail Web sites is insufficient to complete a purchase.

Numbers like these are unsustainable to any retailer that plans to stay in business. And yet many businesses continue to adver-tise products that are out of stock. Or miss ample opportunities to up-sell and cross-sell. Or fail to engage the customer beyond the store or Web site. These are the reasons that so many of today’s retailers are in danger of becoming yesterday’s news.

Smarter retailImagine this: A new music video shows a popular artist wearing a particular brand of shoes. Rebecca, a 17-year-old high school student, loves the shoes and uses her smart phone to go online to find them. While online, she is able to see that some friends in her vast social network gave the shoes good reviews. The site also suggests accessories that match the shoes. She initiates an instant chat with a customer service representative to make sure she will receive her shipment in time for a big date that weekend.

Meanwhile, Rob in the merchandising group at the shoe com-pany receives an alert on his dashboard because Rebecca—and thousands of other teenage girls like her — are ordering the same pair of shoes. Rob sets up a collaboration session with his team, which informs him that a new music video online has more than two million views, and the shoes are flagged as a viral trend.

Instantly, suppliers are alerted and begin bidding on the contracts for materials and shipping to meet the new demand. Merchan-dising rules are assembled and travel electronically with the new shoes to the stores to help ensure proper placement and up-selling opportunities. And online ad campaigns are queued to run in mar-ketplaces that have shown the most potential.

This is happening today. This is working smarter in retail, where businesses can adapt and respond in real time to customer trends. Where inventories are maximized and supply chain costs are min-imized. And where collaboration goes well beyond the boundaries of the enterprise and seamlessly ties together suppliers, retail stores and customers.

4 Increasing Sales, Improving Efficiency, Working Smarter in Retail.

Increasing salesCarrefour GroupIn the intensely competitive hypermarket industry, where mar-gins are thin and customer loyalty is fleeting, every promotion counts. That’s why Carrefour, one of the world’s largest retailers, decided last year to take back control of its marketing promo-tions and loyalty programs from a third party. Carrefour built a first-of-a-kind, fully integrated in-store promotion program that offered a consistent customer experience among its hyper-market, supermarket, discount and convenience stores. The new system enabled Carrefour to identify extremely targeted customer segments, determine which products these customers are buying and project which products they are likely to buy, all instantly, at the point of sale. Then, based on a set of prede-termined rules, Carrefour could offer the customer an optimal combination of instant coupons, coupons for later use and points-based incentives from the loyalty program. The solution has led to greater revenue; deeper knowledge of customers; stronger customer loyalty; and faster, more targeted promo-tional campaigns. “Our new model for managing promotional campaigns gets us closer to our customers, gives us greater control and vastly improves our overall effectiveness,” says Hervé Thoumyre, chief information officer, Carrefour Group.

Figure 1: Carrefour’s in-store promotion program offers a consistent

and immediate customer experience across its stores.

Coupons Points-based incentives

Point of sale

Customers

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Improving efficiencyMetro GroupSince 2002, the benefits of a radio frequency identification (RFID)–enabled supply chain have been apparent to Metro Group, one of the world’s largest retailers, with more than 2,100 outlets in 32 countries throughout Europe. The company has been tracking its products from suppliers to the back rooms of its stores as part of its Metro Group Future Store Initiative, the largest RFID supply chain solution in all of Europe. But it wasn’t until the Metro Group extended the RFID solution to the shelves and dressing rooms of its stores that the solution revolutionized the customer experience. More than 30,000 articles of men’s clothing are tagged and tracked throughout one retail shop, allowing shelves to be restocked immediately if needed. And if a customer brings an article of clothing into one of the store’s smart dressing rooms, the mirror can suggest complementary products or direct the customer to the exact location of the same product in different sizes and colors. The solution enhances the customer experience and also increases the efficiency of store operations by reducing out-of-stock situa-tions, increasing revenues and providing instantaneous inven-tory counts.

Figure 2: Metro Group’s use of item-level RFID transforms how

customers shop.

articles of men’s clothing

30,000

RFID tag

Complementary product

Store shelvesBack rooms

6 Increasing Sales, Improving Efficiency, Working Smarter in Retail.

Smarter retailMoosejaw MountaineeringAs a retailer of outdoor gear, Moosejaw Mountaineering knows a thing or two about the way young people live, work and play today. That’s why Moosejaw has built an innovative, community-based, multichannel shopping experience to cultivate loyalty among its customers. They call it social commerce, and it con-sists of thousands of customer reviews; texting of tracking numbers and promotions to mobile phones; and the Moosejaw Madness community, where customers post photos from their latest adventures, read the irreverent Daily Remark and immerse themselves in Moosejaw’s unique culture. But Moosejaw is also adding unique social commerce features, such as product-level blogging and public-facing customer profiles with photos, videos, adventure stories and gear lists for upcoming trips. Customers can interact with Moosejaw staff and with other customers on the Moosejaw Web site and then connect those threads on their mobile phones. And when they come into the Moosejaw retail stores, they can even buy, ship and pay using the exact same services they are familiar with online as well as be offered the same targeted promotions and cross-sells while they read reviews, blogs and recommendations. It’s an example of how smart retailing is designing customer experiences to fit the way people live today.

Figure 3: Moosejaw Mountaineering surrounds the customer with

community both online and in the store.

Promotion

Online community

In-store employees

Blogs

Customer

A.

B.

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“Our new model for managing promotional campaigns gets us closer to our customers, gives us greater control and vastly improves our overall effectiveness.”

—Hervé Thoumyre, chief information officer, Carrefour Group

Getting startedEvery day, retailers are taking steps to increase their efficiency, improve their customer experiences and develop smarter retail. Those that don’t are likely to be left behind. To find out if your organization is working smarter in retail, start by asking some critical questions:

How many of your employees have access to the information they need at the time and place they need it?

With which suppliers, stores and cus tomers have you moved beyond coop eration to true collaboration?

Which of your operational processes are able to adapt and respond quickly to changing marketplace demands?

How much value are you getting out of the information stored across your organization?

How well do you know each of your customers?

When the answers to these questions show room for improve-ment, it may be time for you to call IBM. To learn more about smarter retail and help us build a smarter planet one shopper at a time, visit: ibm.com/smartwork

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1 The Boston Consulting Group, Creating the Optimal Supply Chain, September 2006, http://www.bcg.com/documents/file14863.pdf

2 AMR Research, Bridging the Merchandising and Store Operations Divide, Robert Garf and Fenella Sirkisoon, December 27, 2007.

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