A Roadmap to the Digital Retailing Era

Ken Murphy, SAPinsider: This is Ken Murphy with SAPinsider. The evolution of technology and digital transformation is having a tremendous impact across industry types, but perhaps nowhere are these forces having a greater impact than retail and fashion. Traditional methods of selling goods and products to end consumers are quickly being replaced by omnichannel offerings and personalized products that meet the evolving demands of a savvy online consumer.
To learn more about the pressures facing the retail industry, we spoke with (experts) from Dell, SAP, and Groupsoft who have been involved for years with delivering technology solutions in the retail space and with helping customers make successful digital transformations. The Groupsoft Retail Solution on Intel-based Dell-EMC infrastructure and packaged with SAP HANA software is a recent collaboration between the companies that addresses many of the challenges and trends in retail today, including the use of new technologies such as Internet of Things, machine learning, and artificial intelligence. 

Paul Donovan of SAP is the Global Senior Director of the Retail Business Unit responsible for Global Solution Management in Retail Merchand ise and Marketing solutions. This includes the SAP S/4HANA Retail for Merchandise Management and SAP S/4HANA Fashion Management Solutions as part of the digital core retail platform. 

Paul Donovan, SAP: When I think about the retail industry, there’s obviously a multitude of things that are driving the retailers to change the way they think about how they go to market. At the top of it really is, the consumer behavior is changing rapidly. … Newer generations interact in a lot of digital formats that create a lot of data points outside of the traditional infrastructures that the retailers use to analyze what their customers eventually do. So that’s what’s really changing is creating a different mindset about what defines the consumer, how they analyze them, how you can service that consumer and on the flip side the shopper, the consumer has a different set of expectations about wanting the retailer to be much more mindful of their unique traits as an individual. … This notion of a segment of one really drives a tremendous amount of friction in the retailer because the systems, the buying processes, the way they go to sell, the inventory they buy – all those things are set up traditionally for a mass market rather than a segment of one. So as we’ve got these digital channels growing the segment of one growing, you really have a lot of pressure on the retailer to adjust their mindsets and adjust their systems to deal with this situation. So if I can sort of categorize it you’re moving from a batch situation to an engagement situation or a dialog engagement with your consumers. The digital side of things, whether it be ecommerce, omni-commerce, social media interaction, new forms of digital advertising, marketing, etc., they’re creating whole host of new sources of information that would help the retailer understand these customers. And ergo, situations like the Internet of Things, machine learning or newer technologies they can help the retailer really tackle this segment of one as it relates to the scale of the way you have to analyze the data and interact with the customer, and the way you have to understand the nuances of the customer or the shopper. So that’s really how I’d categorize the overall shifting landscape for retailers.

Ken Murphy, SAPinsider: Rajitha Thalluri of Dell EMC, an Enterprise Technologist for SAP and SAP Big Data Solutions, explains the implications for retailers from collecting customer data and transitioning to a “segment of one” approach: 

Rajitha Thalluri, Dell EMC: One of the biggest issues that’s also impacting our retailers is definitely as they are looking at transforming to the digital era, and as they keep transforming into personalization and bringing all those concepts within their organization, they’re actually collecting significant amounts of personal data on consumers. … Retailers are really forced now to really institute the right protocols to take care of this data. … These are some things that retailers need to think about as they are embarking on this journey. … The other thing we see is with their existing landscapes. Because as they’re looking to go into the digital era, the current landscapes are still very siloed. And it makes it extremely cumbersome for them to be able to reinvent and innovate. … So the old legacy retailers are being challenged and they have to integrate and re-innovate and yet maintaining their existing systems. So those are some of the challenges they need to look at. 

Ken Murphy, SAPinsider: Adding to the challenges for traditional retailers is competition from innovative start-ups, many of which do not even have a physical location. Amitabh Nema, Founder and Principal of Groupsoft, says that for this reason speed to market is critically important. 

Amitabh Nema, Groupsoft: Traditionally, the way the start-ups have operated in the IT industry, retailers have to look at that angle in their mindset. … This is a fundamental point for Groupsoft’s end point of view. … One is the speed which is basically you’re talking about not the implementation of an application, we’re talking about speed of whole deployment of solution. … and traditionally we used to implement the solutions in two years, 2.5 years, and the age has come where basically we (do it) in three months turnaround for the whole solution delivery. … Second thing we’re looking at is a ready solution within the Dell EMC infrastructure, HANA infrastructure as this cloud infrastructure and then most importantly as you know in the retail-fashion (industry) data is key and on top of that with IoT there’s data sizes in terabytes. How do you get the speed, how do you get the performance and assure customer service within fraction of seconds, minutes, otherwise you browse and go out. You don’t want to buy things if you’re not there. That’s how basically this whole relationship with Dell EMC on SAP platform Groupsoft has thought about and developed over the period of the last two years. And that’s the key differentiator. The turnaround time to the whole application not only this one piece of software, but end-to-end solution is what we can do in a shorter time. It’s a key for us to succeed and I believe it’s not key for us, it’s also the key for anybody who wants to sustain and run the business effectively. 

Ken Murphy, SAPinsider: A ready-made solution that allows traditional retailers to adopt the mindset of a start-up and re-imagine the future of retail has profound implications for the organization as a whole. Donovan sheds light on what some of those implications are: 

Paul Donovan, SAP: The organizational change is not that easy because you have to redefine all the KPIs of the line of business executives across supply chain, merchandising, store operations to bring together all the digital operations with the physical operations because they traditionally don’t align on a joint KPI basis. We’ve seen some companies … reorganize their departments across their category managers, marketing and merchandising, IT, finance function, supply chain function all in the pod on a particular category of buying, merchandising, selling and marketing rather than looking at it from the perspective of individual siloed departments. So that’s something that has to change and it’s not an easy change for retailers organizationally. 

Ken Murphy, SAPinsider: According to Morten Loderup, Dell EMC Alliance Manager, the way forward is via collaboration between a number of different stakeholders, which must include the business. 

Morten Loderup, Dell EMC: I like to look back to (SAP CEO) Bill McDermott and (Dell founder) Michael Dell on-stage at Sapphire where they talked about –how this has to be an alignment between the company’s strategy and the IT strategy. It can’t be an IT project it has to be a CEO project and involve everyone in the company. . .. Collaboration is critical to run a responsive business in today’s dynamic economy. So from Sapphire to our most recent SAP Retail Forum we also heard similar messages – it has to be a collaborative effort and especially when we face competition like the Amazons …retail has to be a close cooperation between these two groups. 

Ken Murphy, SAPinsider: According to Nema, “segment of one” doesn’t just refer to how products are sold and delivered to the end consumer, but how retailers must think about reorganizing themselves around the same principles: 

Amitabh Nema, Groupsoft: What I see is the wholesale and retail paradigm is basically becoming an omnichannel and the whole structure internal organization structure also has to be looked at one team considering all the channels is not basically the wholesale channel, retail channel. That’s becoming very obvious nowadays. ….. This is not a benefit, this is a necessity. So the way the whole retail paradigm has shifted from brick and mortar to omnichannel and then the IoT technology in the store becomes – is a must because you can first have so much information collection and then basically you are processing that information in a form to the customers where you can analyze what is the liking for an individual customer? … Using IoT technology makes a smarter way to service the customer is a way forward. I feel that it is not a question of benefit it’s a question of differentiator and how do you survive that? 

Ken Murphy, SAPinsider: This point underlines the importance of adopting IoT and other new technology as being a company decision, according to Donovan: 

Paul Donovan, SAP: If you think about it, retailers have been opening up new stores and spending capital in quite significant amounts even in zero-sum gain markets. So in this context we’re talking about a capital investment in the store to basically make you a better, more efficient operator which is an absolute necessity for long-term survivability and thriving and growing your market share. It’s not just about this decision about is it an IT investment, is it a capital expenditure investment? It’s really is it a company investment and is it going to be effective over the long haul? … And obviously the business benefits will flow because as you move to an omnicommerce model, you have a lot more pressures on your margins, on your capital expenditures so you’re going to need to be more effective in the long haul otherwise you won’t survive because you’ll be offering an omnicommerce offering, but your margins will go to zero. So that’s why it’s really important. 

Ken Murphy, SAPinsider: One of the reasons the Groupsoft Retail Solution on Intel-based Dell EMC infrastructure is becoming a preferred solution for SAP customers in the retail and fashion industry is that it offers a ready-made gateway to SAP Leonardo and its host of retail use cases. Here is Rajitha Thalluri: 

Rajitha Thalluri, Dell EMC: When we are looking at an IoT solution, one of the biggest challenges is how do you provide the real-time analytics and at what levels? So the way Dell-EMC looks at IoT solutions is providing smarter intelligence at the edge, and that’s where you can leverage analytics to provide the real-time decision making. Then you bring the smart end computing at the core level to provide more in-depth analysis and then finally taking the solution back to cloud to be able to provide additional data for exploration and predictive maintenance capabilities and machine learning analysis as well. So being able to provide this holistic solution along with Leonardo provides a great way for our customers to leverage IoT solutions. 

Morten Loderup, Dell EMC: If I could just quickly add to that. Our IoT Leonardo Gateway comes with Intel processors, Intel atom SoC the Intel radios and Intel Xeon processor. So you’re talking about super-fast processing at the edge as Rajitha explained. 

Ken Murphy, SAPinsider: This combination, Nema says, allows a traditional retailer to innovate along with their more agile competitors. 

Amitabh Nema, Groupsoft: The whole idea of this offering is can you compete as a retail start-up? If that’s what you’re looking for, having Groupsoft-Dell combination is very attractive and very important for you to consider. 

Ken Murphy, SAPinsider: And, as Donovan says, adopting the mindset of a start-up to compete in today’s retail environment is important because if there’s one thing the pace of technology has taught us is that today’s retail environment might look completely different just a few short years, underlining the importance for retailers to always being at the leading edge of change. 

Paul Donovan, SAP: The Dell-Groupsoft-Intel packaging and methodologies are very valuable because the retailers are asking how can I get started quickly and get a well-defined benefit early? The second part of that is clearly with SAP we’ve got a long history of design thinking and applying design thinking principals and this journey through the digitization process for retailers acquires a significant amount of collaboration across function but also innovation, and bringing new entities to the table because there’s a lot of unknowns out there and SAP can help bring some of those design thinking approaches to our whole SAP Leonardo infrastructure with our partners as we guide the retailers through this journey of there’s knowns but there’s also a lot of unknowns, and that helps if you’re bringing new innovation approaches or methodologies to the table as well. 

For more information, please reach out to your Groupsoft or Dell-EMC account team. And for further information on how to transform retail operations, the “Retail 2020: A Roadmap to the Digital Retailing Era” white paper can be accessed via the link on this page.