First, there were physical stores, and it was just “commerce.” Then came the Internet and with it “e-commerce.” Next, the Internet moved to the palm of our hands, which brought about “m-commerce.” And now, even before most retailers have fully wrapped their heads around the ‘e’ and ‘m” versions, it’s time to start thinking about “u-commerce.”
Welcome to the pace of change within technology.
As recently as last summer, retail technologists and consultant types introduced the concept of “unified commerce,” and it’s quickly become the latest buzzword among retail CIO types. According to Ken Morris, partner and co-founder of consultants Boston Retail Partners and an early advocate of the strategy, unified commerce seeks to break down the walls between internal channel silos by leveraging a single, unified platform.
Of course, for most specialty retailers, this is not a “right now” technology transition. Currently, no single technology vendor even offers a truly comprehensive unified platform. But unified commerce certainly is not on the “bleeding edge” either. Indeed, the vast majority of retailers envision a single, unified commerce platform on the horizon, and nearly three-quarters of retail business and technology executives surveyed for the National Retail Federation are at least informally planning this business and technical transformation.
For most retail IT departments, however, the current reality is somewhere in the middle. But whether or not a clear roadmap to unified commerce is in place, the transition toward a unified sales platform should be weighed and considered into just about every customer-facing technology purchase decision moving forward.
Source: Boston Retail Partners
The reasons are not hard to understand. Few people in the retail business, if anyone, still need to be convinced that shoppers are increasingly powerful and in control. Customers can quickly navigate multiple touch points and sources of information, compare and contrast, and find precisely what they want, often from multiple sources. They have come to expect concepts such as ship-to-store, endless aisles, real-time inventory feedback and customized pricing and promotions simply because they know it’s possible. (Now Amazon even has them thinking about drones flying around, for goodness sake.) The challenges retailers face behind the scenes to deliver such capabilities, quite simply, are immaterial to consumers. If one retail brand doesn’t have precisely what a shopper is looking for, it’s likely they can find it somewhere else, often in a matter of clicks and sometimes for less money.
Meeting these omni-channel consumer expectations will require a transition from simply selling available inventory to holistically serving connected customers. It means gathering, analyzing and disseminating customer, product, pricing and inventory data in real-time. The problem is legacy retail technology hasn’t been architected to handle these modern-day requirements and the harmonizing of business processes across all customer touch-points, says Boston Retail Partners. Rather, most retailers have deployed technology in separate silos by channel, such as disparate solutions for in-store POS versus e-commerce and, in many cases, mobile. In order to deliver true omni-channel-type experiences, retailers have loosely coupled these legacy systems originally implemented to solve specific problems for specific channels.
Top IT Priorities for Retailers in 2015
Source: Boston Retail Partners
Many retailers, for instance, have relied on e-commerce engines to deliver their omni-channel experiences. Lower percentages have centralized on in-store POS, as well as customer relationship management (CRM) or enterprise resource planning (ERP) solutions. But the limitations of purpose-built and disparate technology environments, say analysts at Boston Retail Partners, strain to keep pace with rapid advancements in consumer technology and behavior.
“In omni-channel, you have multiple channels, but you don’t have one piece of software, one version of the truth,” Morris recently told eMarketer. “You have many versions of the truth. In the unified commerce world, it’s all connected in real time. I don’t just mean the Web side, but the mobile side, the Web side and the store side – all in real time.”
The complexity is even greater considering the other platforms that enable commerce – such as inventory management, order management and merchandising – typically are disparate solutions as well.
Retailers Top Challenges for 2015
Source: Boston Retail Partners
“The inherent weaknesses of this model have become very apparent, as retailers chasing omni-channel capabilities have to overcome the almost impossible hurdle of integrating disparate legacy systems,” says the research and consultancy firm.
Not that retailers always had much of a choice. Decades ago, most retailers decided on decentralized POS, largely due to the immaturity of networking technology, Morris explains. Networks of the past, he reminds us, were slower, typically not redundant and costly. But with the emergence of nearly ubiquitous fat pipes, cloud computing and software-as-as-service (SaaS) delivery systems, solutions such as virtual private networks, back-up and disaster recovery, redundancy, on-demand computing, content delivery and advanced business and analytic applications are available and affordable for even specialty and smaller businesses.
The State of Omni-Channel Services
Source: Boston Retail Partners
In turn, retail IT executives are looking to leverage such capabilities to implement single, centralized commerce platforms that support instantaneous transactions, real-time and contextual marketing efforts, customer-based pricing, single channel shopping carts, product availability, etc. across all channels and customer touch points.
“Retailers understand that to deliver a next-generation customer experience they must have technology that supports the seamless convergence of in-store and digital experiences,” says a Boston Retail Partners study.
While core merchandising, marketing, supply chain and business administration applications will likely continue to be the system of record in many cases, a unified commerce platform extracts value from back office applications and manages all consumer interactions and transactions throughout the consumer shopping journey, explains the consultant firm.
Deployment Plans
In the near-term, 53 percent of U.S. retailers say they plan to implement a single, unified commerce platform to consolidate key data elements, business rules and functionality historically housed in multiple systems, according to a survey performed on behalf of the National Retail Federation, Ecommerce Europe and the Ecommerce Foundation. This represents a nearly 50 percent increase in anticipated adoption year-over-year. During the next 10 years, a full 86 percent of surveyed retail executives plan to leverage a unified commerce platform, suggesting an emerging standard as the technology matures.
Source: Boston Retail Partners, NRF
In the meantime, while a vast majority of survey respondents envision a unified commerce platform on the horizon, retailers are at various stages in their journeys toward realization. Currently, about one in 10 retailers surveyed by NRF are currently in the “realization stage” of operating a single platform and measuring the benefits to gauge future investments. An additional 13 percent say they are in the “execution stage,” or implementing a business and technical strategy to manage the change. As for the rest, nearly three-quarters (72 percent) of retail organizations surveyed are informally planning this business and technical transformation by conducting initial research, engaging strategic vendors and beginning business case development, suggests NRF’s figures. And this all despite the fact that no single vendor offers a mature and robust unified commerce platform to date, says Morris.
Not unexpectedly, intended investment is largely targeted at improving the customer experience. When asked to prioritize the business imperatives addressed by unified commerce, retailers cited as number one the ability to quickly respond to consumer demand, thereby enabling organizational agility to effectively execute merchandising, marketing, promotional and loyalty initiatives. Next on the list was increasing store associate productivity by properly arming associates to enhance customer interaction and increase conversion. Right behind these two was a desire to support omni-channel strategy and execution. This is achieved by providing the backbone to manage data and functionality related to customers, product, price, inventory, orders and content across channels.
A centralized commerce platform not only is more conducive to support the customer experience, Morris points out. It also offers retailers the opportunity to leverage a leaner and more flexible store-level environment through the consolidation of servers, operating systems and applications at the data center or within the cloud, rather than at the store.
“Centralization allows for fewer devices and licenses to deploy and maintain, and helps application updates be deployed centrally to improve efficiency,” he notes.
Source: Boston Retail Partners
The Wares
As suggested above, cloud computing and SaaS, with their inherent speed, agility, anywhere/anytime access and pay-as-you-play models, represent the most logical delivery methods for most next-generation systems designed to keep up with dynamic demands. But the “glue” to a unified strategy is a robust middleware layer, or service oriented architecture (SOA).
As BRP consultants explain, most customer interactions and retail transactions require data from various retail systems to be gathered, analyzed and disseminated in real-time. At the same time, it’s silly to expect retailers to suddenly abandon each individual legacy application before their natural end of lives. A middleware layer solves the dilemma by connecting the dots. Utilizing middleware or SOA, retail IT departments, or their third-party IT contractors, construct Web services that enable these instantaneous transactions by supporting the integration among several different retail systems. In turn, every customer or associate transaction traverses the middleware layer, “which brings the commerce platform to life,” says Morris.
These Web services reduce application development time and costs, as they are reusable and can be leveraged across multiple applications throughout the enterprise.
Source: Boston Retail Partners
For example, a common transaction is a customer contact search by attributes such as name, phone number or loyalty ID, explain Boston Retail Partners analysts. “Developers leveraging middleware or SOA will build a common set of Web services that can be reused in any application that requires a customer search or lookup. Legacy integration approaches, such as point-to-point integration, on the other hand, often were not built to support robust real-time requirements nor do they offer the benefits of reusable Web services.”
While middleware enables a centralized platform and other retail systems to effectively supply data across the enterprise, a master data management (MDM) solution ensures the data is consistent, accurate and up-to-date. By utilizing business rules and data governance to harmonize and merge the information from various retail systems, MDM provides a central repository for master files. Acting as a central repository, MDM maintains a single version of the truth for product, customer, vendor, location and asset information.
“Inaccurate or inconsistent data works against the goals of unified commerce and a holistic customer experience,” BRP analysts warn. “MDM significantly decreases data errors within an organization, driving operational efficiencies and enhanced reporting and analysis.”
Business process management (BPM) software, meanwhile, enables the definition, execution, monitoring and optimization of business processes across the retail enterprise. At the same time, a modern BPM system is able to identify structured and unstructured processes that involve system interactions and human interactions, including both internal (within the four walls of the retailer) and external (suppliers of goods and services), an especially valuable assent for retail processes that involve multiple systems, channels and touch-points.
Once processes are identified, BPM enables process automation to reduce errors, maximize profits and ensure processes are unified, explains Boston Retail Partners. Additionally, a BPM solution can be leveraged for active business activity monitoring, such as real-time store operations monitoring, which could provide employees with real-time visibility to store conditions. A retailer starts the process by setting business rules and deviation thresholds in a closed-loop structure. If a threshold is met or an anomaly occurs, a manager can be alerted immediately, enabling real-time corrective action.
Source: Boston Retail Partners
Ultimately, BPM improves processes by identifying inefficiencies and bottlenecks within processes so retailers can quickly make adjustments. And if evolving customer demands require a new process to be created, BPM enables business users to rapidly construct the new process.
“With BPM, retailers are able to make more informed decisions, improve performance and ultimately deliver a unified, continuous customer experience,” claim Boston Retail Partners executives.
Needless to say, the transition will not be easy. New technology tends to require detailed training, and individual roles, responsibilities and accountabilities will alter within and across functions.
“Given the way processes and technologies have been hardwired to serve consumers by channel, organizational change requires a methodical approach that includes clarity, communication and training,” advises BRP.
And as with most any technology deployment, ROI models will be requested, as will justification for the retirement of some legacy systems.
Even so, retail IT departments clearly are struggling with rapid change and the need to create omni-channel experiences for customers.
“Our survey responses show increased urgency around integrating selling channels,” notes George Lawrie, vice president and principal analysts at Forrester Research.
Indeed, when Forrester asked retail CIOs to list their top three business priorities for IT for 2015, integrating the selling channels to enable an omni-channel face was second only to security concerns, listed by 76 percent of respondents. That was up from the 64 percent with omni-channel concerns in 2013. Meanwhile, within the same survey, respondent were ask to name their top internal considerations around deploying and managing IT, and 44 percent said “consumers are demanding access to proprietary corporate data such as product and inventory information.” As recently as 2014, only 6 percent expressed this concern, and just 3 percent in 2013.
Retail CIOs Prioritize the Growing Urgency of Assorted Onmi-Channel Challenges
Source: Forrester Research
At the same time, 82 percent of U.S. consumers recently surveyed by Accenture said they expect a retailer’s prices to be the same in store and online, a significant increase over the 69 percent who said this the previous year, according to the consulting firm. But in a benchmark analysis, Accenture also found that only one-third of U.S. retailers had consistent pricing for more than 80 percent of the items assessed. And while three-quarters of retailers told NRF they can fulfill inventory across multiple channels, 46 percent still use spreadsheets to manage their supply chain planning.
In other words, the transition to unified commerce is inevitable, but it’s certainly going to take some time.
“Retailers should expect their plan to be executed over the course of several years as they decommission legacy systems, establish new integrations and consolidate disparate technologies into a unified commerce platform – all while the business continues to serve and delight consumers,” concludes the Boston Retail Partners’ study.
Along the way, IT departments can reduce the complexity of migrating to a single channel platform by ensuring that, moving forward, any infrastructure and technology investments that are related to commerce or customers are not hardwired to existing systems and applications.
Written by Martin Vilaboy, editor-in-chief of Inside Outdoor magazine, this article originally appeared in the Sping 2015 print issue of Inside Outdoor.
