Seamless Cross-Channel Retail Execution, Thomas Møller Jensen, IBM

© Copyright IBM Corporation 2011

Thomas Møller Jensen

Seamless Cross-Channel Retail Execution Web, Mobile, & Store

IBM Commerce Solutions

© 2011 IBM Corporation22

AGENDA

A trip to Cross-Channel Nirvana

Why Retail Cross-Channel

The Cross-Channel Participants

IBM’s Smarter Commerce Portfolio

Example Results of Cross-Channel


© 2011 IBM Corporation

Cross-Channel ?

Shopping

3

Marketing

Fulfillment

Social networkDirect Mail

OnlineTV...

MobilePhoneShopFieldAppsWeb

...

DeliveredServicesIn ShopPick-up

DirectMail

...



Cross-Channel Nirvana @ Stables

4



Cross-Channel Nirvana recap

Social media integrationAccurate inventory information Location based promotionRewards program/CRMCross/Up sellSplit payment (Online/Shop)One View of Customer and Order at all times

5

Social media integration MarketingAccurate inventory information Fulfillment Location based promotion ShoppingRewards program/CRM MarketingCross/Up sell ShoppingSplit payment (Online/Shop) FulfillmentOne View of Customer and Order at all times

Marketing Shopping Fulfillment



AGENDA








Consumers Are More “Instrumented” Than Ever Before

Source: “Capitalizing on the smarter consumer”, IBM Global Business Services Executive Report, 2011

7



Consumers Are More Interconnected And Intelligent Than Ever Before

Customer

8



Today’s ‘Smarter Consumer’ Sees One Brand, Not Multiple Channels

9



Consumers’ Interactions With Your Brand Are Varied And Ever Changing

10

Store Create Order Check Status Cancel OrderInitiate/Track

ReturnSchedule DeliveryChange Order PickupResearch

Product

Create Order Check Status Cancel OrderInitiate/Track

ReturnSchedule Delivery

or PickupChange OrderSchedule

Store PickupResearch ProductMobile

Create Order Check Status Cancel OrderSchedule Delivery


Store PickupResearch ProductWeb

Initiate/Track Return

Call Center Create Order Check Status Cancel OrderInitiate/Track

ReturnSchedule Delivery


Store PickupResearch Product



Consumers Have Come To Expect Seamless Cross-Channel Retail Execution

1 Source: “Cross-Channel Brand Interaction: 2010 Consumer Preferences,” Sterling Commerce, DemandWare

85% of respondents “expect a seamless experience across all channels for a retailer”. 1

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Increasingly, Consumers Expect You To Operate Seamlessly Within Your Brand


Importance Of Cross-Channel Capabilities 1

Notify when item is ready for in-store pickup (important to very important) 91%

Maintain cross-channel customer history (important to very important) 53%Notify when frequently-purchased item will be on sale (important to very

important) 59%

Assist with matching the compatibility of a new purchase with a previous purchase (important to very important) 49%

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= Requires cross-channel capabilities



Even Consumers’ Expectations for Mobile Apps Include Cross-Channel

Source: “Cross-Channel Brand Interaction: 2010 Consumer Preferences,” Sterling Commerce, DemandWare

Most Desirable Mobile App CapabilitiesLook up and verify product availability at a particular location 62%

Look up price of an item while in the store 57%

Find nearest store location 49%

Receive pro-active notification about status of outstanding orders 48%

Locate an OOS item at an in-stock location, purchase it, and have it shipped to you or held for pickup 46%

Access product reviews while in the store 46%

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Consumers’ Expectations Keep Increasing

2007-2010 Comparisons1

Cross-Channel Consumer Expectations 2007 2010

Complete an order anywhere 55% 61%

Modify an order anywhere 65% 74%

Track an order anywhere 56% 87%

Shipping Notice (via any combination of channels) 94% 88%

Shipping Delays (via any combination of channels) 91% 91%

Delivery Notice (via any combination of channels) 78% 79%

Cross-channel return to store 90% 84%


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Other Retailers Are Responding To Their Customers’ Cross-Channel Expectations

69%In-store pickup of cross-channel orders

Currently support (46%); plan to support in 12 months (23%) 1

Source: Edge Research Retailer Survey; 2010

77%In-store returns of on-line purchases

Currently support (57%); plan to support in 12 months (20%) 1

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Other Retailers Are Responding To Their Customers’ Cross-Channel Expectations


76%Single cross-channel view of customer

purchasesCurrently support (40%); plan to support in 12

months (36%) 1

76%Cross-channel order/shipment status

trackingCurrently support (47%); plan to support in 12

months (29%) 1

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But, Few Retailers With Cross-Channel Capabilities Are Satisfied With Their Current Approach


% of Retailers Satisfied With Current Capabilities 1

Customers can complete an order via any combination of channels 22%

Customers receive order, shipment, and delivery status updates 24%

Overall ability to deliver cross-channel capabilities 21%

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1. Source: Deloitte Research, Forrester Research, Internet Retail Offline Influence Model: 2. Source: CEO Brian Dunn- 9/21/2010-RIS News

Cross-Channel Execution (Enabled By Cross-Channel Order Management) Delivers Results

Macy’s: Every advertising dollar spent online influences $5.77 spent in the store over the next 10 days1

REI: 40% of online orders are picked up in-store, with 35% of pickups resulting in additional sales that average $90 per sale1

Best Buy: Best Buy, recognized as a leader in cross-channel retailing, has achieved a 40% buy online/pick up in store rate2

Nordstrom: Multi-Channel customers spend, on average, four times more than single channel buyers1

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AGENDA








Fulfillment Network.

Distribution Centers 3PL’sDrop Shippers Store NetworkEnterprise

ApplicationsExternal Services

Call Center eCommerce StoreMobileKiosk

Customer Channels

There are Lots of Participants



Performance M

anagement?

Glo

bal V

isib

ility

?


Distribution Centers 3PL’sDrop Shippers Store Network

Enterprise Applications

External Services


Customer ChannelsVarious Expectations

Can We Set Accurate Expectations with the Customer?

What Steps are Required to Fulfill each Specific Order Line?

How do we Coordinate these Steps Across Applications?

What are the Fulfillment Rules for a Specific Order Line?

How do we Best Leverage the Fulfillment Network?

How do we Remain Flexible to Enable New Business Initiatives?






External Services


Customer ChannelsThis Can Get Complex






External Services


Customer ChannelsIBM \ Sterling Approach

Performance M

anagement?

Glo

bal V

isib

ility

?

Promising(ATP)

OrderOrchestration Visibility

Sterling Cross Channel Inventory and Order Hub



A Single Source of the Truth…In-Store

Call Center

On Line (web)

iPhone RF

Sterling Platform

Enable single face to customer with access to information about any order from any channel or division to be available where and when a customer needs it.



AGENDA




IBM’s Smarter Commerce




There are Various Approaches



Store Web POS Call Center Other

Warehouse(s) Store(s) Other(s)

Broad Representation of Interfaces



Customer Integration & Compliance

Platform

SLAs, Customer Mandates

VAN, IaaS

4

There are 4 Distinct Capabilities Needed to Project a Single Face to the Customer

Channel Partners

Repair Depots

Plants / Warehouses

LSPs / Carriers

Contract Manufacturers

Banks / Payment Processors

Synchronized Multi-Tiered Fulfillment

3

Business Unit 1

Business Unit 2

Acquired Company

Order HubERP 2

Legacy System

ERP 1

Single Point of Order Visibility

2 Multi-Channel Order Capture

NamedAccounts

Field Sales Mobile

Web Store

CSR

Field Sales

Store / Service Center

EDI, Email, Fax

DiverseCustomers & Partners

1



IBM’s integrated portfolio for Smarter Commerce

29

Buy Market Sell Service

Core Business ProcessesCORE BUSINESS SOLUTIONS

VALUE CHAIN STRATEGY AND SERVICESMarket and customer mgmt.Aligning sales, marketing and operations

to engage with customers

Innovation and business valueInnovating and aligning business models to

drive value to the customer

• Trading Partner Mgmt..• Supplier Management• Supply Chain Visibility• Logistics Management• Inventory Optimization

• Predictive Analytics/Modeling• Behavioral Segmentation• Cross‐channel Campaign Mgmt.

• Search Optimization, Ad Targeting

• Marketing Resource Mgmt.

• B2B & B2C Cross‐channel commerce

• Distributed Order Orchestration• Fulfillment and Supply Chain Optimization

• Mobile Commerce• Retail Store

• Delivery & Service Scheduling

• Customer Self Service Enablement

• Reverse Logistics• Case Management

Operating and Organization ModelsDesigning operations, supply chain and the

organization model to deliver customer value

Workload Optimized SystemsSystems, Storage and Software focused on agility, integration and automation to drive relevant business outcomes

Advanced AnalyticsStore analytics | Purchase analytics | Consumer loyalty | Predictive and prescriptive | Social analytics | Web analytics | Master data mgt


© 2011 IBM Corporation30 GBS Smarter Commerce Sales Enablement Training | Introduction to Smarter Commerce Products

CORE BUSINESS SOLUTIONS

• Cross‐Channel Order Capture, Cart and Catalog

• Customer‐centric Shopping Experience• B2C/B2B Storefronts• Mobile

Coremetrics• Digital Analytics• Behavioral Segmentation• Search Optimization, Ad Targeting, and Real‐time Website Recommendations

Sterling Commerce• Distributed Order Management

• Configuration, Pricing, Quoting

• Multi‐vendor catalog

Unica• Cross‐channel Campaign Mgmt

• Real‐time Decision, Event Detection, and Contact Optimization

• Operations Mgmt

Sterling Commerce• Warehouse Management• Transportation Management• Supply Chain Visibility• Sterling Collaboration Network/B2B Services

ILOG Supply Chain• Product Optimization• Inventory Optimization• Network Optimization• Transportation Optimization

Retail Store Solutions • Retail POS Solutions• Self‐Service Portal/Kiosk

• POS Applications

Sterling Commerce• Delivery and service Scheduling• Reverse Logistics

•Customer Self Serve Portals

•Call Center•Collaboration Environments

• Case Design, Run‐time, Analytics

Sourcing and procuring goods and materials required to deliver products and services to meet

customer demand

Selling and fulfillment of products and services across multiple

channels to drive sales

Servicing customer needs across all interaction channels to drive

repeat sales and enhance lifetime value of a customer

Developing, delivering, and measuring relevant and

consistent messages across multiple channels to drive

demand

Buy Market Sell Service

VALUE CHAIN STRATEGY AND SERVICES

Core business processes

Advanced Customer Insight

IBM’s integrated portfolio for Smarter Commerce



Questions/Discussion

[email protected]



AGENDA




IBM’s Smarter Commerce




Key Cross-Channel Retailing Direct Impact Areas

In-Store Pickup– Impact: Additional in-store purchases (cross-sell/up-sell)

In-Store Returns– Impact: In-store purchases (converting the return back into a sale)

Recovering From Out Of Stocks (OOSs)– Impact: Sale of the OOS item – Impact: Sale of companion items – Impact: Salvaged future shopping trips

Cross-Channel Sourcing– Impact: Avoiding duplicate safety stock

Available-To-Promise Sourcing– Impact: Inventory reductions by sourcing from in-transit inventory (before it

arrives at the DC) Sourcing From End-Of-Life (EOL) Inventory

– Impact: Reduced markdowns by sourcing from inventory pools with excess inventory

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In-Store Pickup– Impact: Additional in-store purchases (cross-sell/up-sell)

– Drive additional in-store traffic– 40% of those making online or mobile purchases will choose in-store

pickup as their fulfillment method– Cross-sell/Up-sell

–38% of those opting for in-store pickup of online, catalog, or mobile orders are likely to highly likely to make additional purchases while in the store

–Retailers with high attach rates benefit even more (e.g., general merchandise, apparel, electronics, toys, sporting goods, hardlines/home improvement, etc.)

–Avoided shipping overhead–For every in-store pickup of an online, catalog, or mobile order, the

retailer avoids the shipping overhead that would have been incurred

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In-Store Returns– Impact: Additional in-store purchases (cross-sell/up-sell)

– Drive additional in-store traffic– 46% of those making online or mobile purchases will choose to return

their purchase to a store– Cross-sell/Up-sell

–33% of those opting for in-store return of online, catalog, or mobile purchases are likely to highly likely to make additional purchases while in the store

–Retailers with high attach rates benefit even more (e.g., general merchandise, apparel, electronics, toys, sporting goods, hardlines/home improvement, etc.)

–Avoided shipping overhead–For retailers that do not charge customers for shipping returned goods

back to the retailer, for every in-store return of an online, catalog, or mobile order, the retailer avoids the shipping overhead that would have been incurred

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Recovering From Out Of Stocks (OOSs)– Impact: Sale of the OOS item

– 66% of consumers would purchase an OOS item if the retailer could find it at an in-stock location and ship it to the customer

– For those cases where the retailer has the item in stock somewhere, they could save the sale 66% of the time

– Impact: Sale of companion items – 42% of consumers faced with an OOS leave the store without purchasing anything– For every saved sale, the retailer has the likelihood of selling attachment items 42%

of the time– Impact: Salvaged future shopping trips

– For every saved sale, there’s the potential to save the sales associated with one or more future shopping trips

– 29% of consumers who experience an OOS will forfeit at least one future shopping trip to that retailer

– 13% of consumers who experience an OOS will forfeit at least two future shopping trips to that retailer

– 6% of consumers who experience an OOS will forfeit three or more future shopping trips to that retailer

36Source: “Cross-Channel Brand Interaction: 2010 Consumer Preferences,” Sterling Commerce, DemandWare




Cross-Channel Sourcing– Impact: Avoiding duplicate safety stock [liberated capital; avoided working capital

interest]– For those SKUs that are common across channels, the ability to source across

channels enables the retailer to reduce duplicate safety stock Available-To-Promise Sourcing

– Impact: Inventory reductions by sourcing from in-transit inventory (before it arrives at the DC) [liberated capital; avoided working capital interest]

– Internet, catalog, and mobile items can be sourced from inventory that has yet to arrive at the direct-to-consumer shipping site

– For those SKUs, every additional day’s orders that can be sourced from in-transit or on-order inventory is another day’s inventory that can be reduced for those SKUs

Sourcing From End-Of-Life (EOL) Inventory– Impact: Reduced markdowns by sourcing from inventory pools with excess inventory

– For EOL inventory that is at risk of being marked down (in order to sell the merchandise), the ability to source across channels from pools of excess inventory enables the retailer to sell the product at full price and avoid the markdown

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Consumers Will Reward Retailers That Make The Desired Cross-Channel Improvements

58%

19%

23%

0% 10% 20% 30% 40% 50% 60% 70%

Yes

No

Not sure

Percent selected

Likelihood to spend more with retailer if improvements are made

US

Source: IBM Institute for Business Value Analysis, Retail 2010, n=13,960

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According to their quarterly sales report (8K) dated August 12, 2010:• $2.52 billion in revenue, up roughly 13% from the year ago period • Net earnings increase of $41 million compared with the same period in fiscal 2009 • Multi-channel same-store sales increased 9.9% compared with the same period in fiscal 2009• Full-line same-store sales in the second quarter increased 8.2% • Direct sales increased 34.1% compared with the same period in 2009 • Same-store sales during the Anniversary Sale event increased 9.0%

“Nordstrom has implemented several solutions within Sterling Selling and Fulfillment Suite, including Sterling Catalog and Offer Management and Sterling Order Management, to enhance its order capture and fulfillment capabilities. A critical element of the Sterling Commerce implementation is the centralized order hub that synchronizes and orchestrates customer orders, without having to replace warehouse or distribution systems. Instead, the software extends Nordstrom’s existing systems to help improve service, make more efficient use of inventory and reduce costs. For example, Nordstrom is able to open-up website inventory to the stores, operating a single distribution center to fulfill deliveries for every channel. The end result is a better shopping experience for the consumer and better control over the entire fulfillment lifecycle for the retailer. ”

Nordstrom’s efforts are paying off.

In the 8k report Nordstrom credits the shared inventory platform between full-line stores and the Direct business for improved financial results, because this platform enables better fulfillment of customer demand and greater access to inventory. Nordstrom was also able to reorganize the business as a single, "multi-channel" operating segment, which reduces costs and improves their ability to serve customers well. From Nordstrom's 10Q filed 09/08/2010,"Through our multi-channel initiatives, we have substantially integrated the operations, merchandising and technology of our Nordstrom full-line and online stores, consistent with our customers' expectations of a seamless shopping experience regardless of channel.”

Nordstrom Results

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Press Release Source: Best Buy Co., Inc. 9/23/2010; 1:55 a.m. EDT

MINNEAPOLIS--(BUSINESS WIRE)--Best Buy (NYSE: BBY - News) makes holiday shopping even easier this year by offering one of the most comprehensive shipping programs in the retail landscape, Store Pickup Plus.

The Store Pickup Plus program consists of the following capabilities:

• Store Pickup: Buy online, skip the shipping charge and pick up an order in as little as 45 minutes after placing it.

• Ship-To-Store: Out-of-stock products that are available online can be shipped to any Best Buy store for customer pickup, without any shipping fees.

• Friends & Family Pickup: Place an order online and have someone else pick it up, avoiding an inconvenient trip to the store or giving an out-of-town relative immediate access to a purchase.

• Warehouse Pickup: Avoid delivery charges and scheduling conflicts by picking up products directly from a local Best Buy warehouse. This is an expedient option for appliance purchases and same-day pickup.

With each of the program options, customers will be notified via email when their product is ready for pickup, creating an overall expedient and efficient on-site transaction.

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85% report improved customer satisfaction from ensuring product information and pricing is up to date and consistent across channels

40% report a 2-5% increase in eCommerce profitability

29% report a 5-10% increase in overall return on inventory investment

25% report a 2-5% decrease in warehouse space requirements while another 20% report a 5-10% decrease in space requirements

33% report a 2-5% increase in overall inventory turn while another 25% report a 5-10% improvement in the same metric

31% report a 5-10% improvement in gross margin percent

24% report a 2-5% sales lift on cross-channel promotions while another 20% report a 5-10% lift and a very surprising 22% report a 10-25% improvement.

27% report a 5-10% improvement in fill rates

Retailers Who Enable Cross-Channel Order And Inventory Visibility And Cross-Channel Execution Enjoy Quantifiable Benefits

Source: Cross-Channel Retailing For The Anytime, Anywhere Consumer; Benchmark Study, 2009 – Brian Kilcourse, Paula Rosenblum, RSR [“benefits achieved by retailers who enable cross‐channel order and inventory visibility and enabling cross‐channel processes”]

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Additional Validation

There are two undeniable facts of being a retailer in 2010: Online sales outpace brick-and-mortar sales growth rates by 3-5x. Customers increasingly expect retailers to leverage technology to provide a

consistent, efficient and satisfying buying experience across channels.

Retailers who implement demand-optimized multi-channel inventory, order, and fulfillment

applications will enjoy the following benefits:– Reduced stock-outs– Improved sales: 15%-35% increase in average transaction size – Higher customer retention rates – Fewer lost sales: e.g., increased online conversion rates between 30% and 45% – 5%-10% increase in loyalty customer profitability – 20%-60% reduction of inventory losses as a percentage of sales

– Leslie Hand-IDC Retail Insights

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