Smarter Planet: Retail

George Mattathil

4/20/2011

Let’s Build a Smarter Planet:
Retail

© 2009 IBM Corporation

Building a smarter planet

The reality of living in a globally integrated world is upon us.

 Economic downturn and future uncertainty.
 Frozen credit markets and limited access to capital.
 Increasingly complex supply chains and empowered customers.
 Emerging economies offering new markets for growth.
 Market conditions forcing consumers everywhere to alter spending habits.

The world is connected:
economically, socially and technically.



The need for progress is clear.

91% $1.2 trillion $93 billion
Customers spending Value of excess Total sales missed
less in some merchandise each year because
discretionary areas. stockpiled in supply retailers don’t have
Approximately 59% of chains configured for the right products
customers have less long lead times— in stock to meet
discretionary budget forcing retailers customer demand.
than last year. to make significant
bets on inventory.



The opportunity for progress is clear.

50% increase 15% 92.5%
in conversion reduction in less order
rates time and cost lead time
Integrated experience: Smart tracking: Real-time information:
Moosejaw Metro Yansha

Moosejaw created a truly By implementing RFID Yansha implemented
seamless shopping item-level tracking, Metro a real-time information
experience across the was able to reduce the time platform to provide
Web, stores and mobile and cost of receiving goods transparency into supply
devices, increasing from the warehouse by chain business processes
conversion rates up 15%. and reduce order lead time
to 50%. from 2.5 days to 4.5 hours.



Meanwhile, in the new economy, shoppers are looking to connect
with retailers that they trust.

OPERATIONAL COMPETENCIES

21% to 38%

High
Quality

Store Experience
Customer Advocacy nearly doubled Convenience

ADVOCATE VALUE
from 2007 to 2008.
Product Availability

Assortment

3.1
Consumers will move to a new retailer after
Price/Promotion

Customer Service

Multichannel

Low
3.1 negative experiences.
Advocates indicate that quality,
store experience and convenience
are most important.

Source: IBV NRF 2009; n= 30,000 © 2009 IBM Corporation


For retailers, this means effectively responding to drivers in
four key areas.

GLOBAL ECONOMY COMPETITION AND REGULATION
 Financial crisis  Industry consolidation
 Credit crunch  New business models
 Unpredictable oil and commodity prices  Increasing protectionism
 Growth market slowdown
 Product and food safety
 Environmental concerns

CONSUMER BEHAVIOR TECHNOLOGY
 Decreased spending ability  Historical underinvestment in IT
 Savvy and informed  Pervasive connectivity and mobile devices
 Job insecurity and falling real estate prices  Security and compliance



In the face of a radically transformed
economy, retailers are under pressure
to retain and build customer loyalty
while at the same time cutting costs and
streamlining operations.

Their success will require innovative
business models that rely on real-time
insights to meet customers’ changing
demands and expectations.



To survive in today’s changing retail environment, smart
organizations are working to optimize their…

SHOPPING EXPERIENCE MERCHANDISING
Enable customers to shop however, AND SUPPLY CHAIN
whenever and wherever they want. Gather customer information
Match inventory and brand continuously and at every touch point.
experience on the Web, in stores Manage and deliver assortments
and via mobile devices. RETAIL based on customer input and insights.

OPERATIONS
Update systems to better handle today’s
customer demands. Improve management
across labor, assets and business processes.



+ + =
An opportunity for retailers
to think and act in new ways.

Deliver a smarter Develop smarter Build smarter
shopping experience. merchandising and operations.
. supply chains.



Retail:
Delivering a smarter shopping experience.

SMART IS SMART IS
Enabling customers to shop seamlessly Developing promotions that are
across touch points and brands. personalized—and timely.

SMART IS SMART IS
Putting payment and loyalty cards at An exchange of advice among friends
the tips of customers’ fingers—literally. and strangers.



Retail:
Delivering a smarter shopping experience.

1-800-FLOWERS: Is tearing down the walls Carrefour: Implemented a groundbreaking in-store
between its 14 brands through a flexible Web promotion system across its supermarket and
platform that lets the company respond to hypermarket stores that enables the planning
customer needs faster and more efficiently. and execution of targeted campaigns to achieve
enhanced customer loyalty.

Gewandhaus Gruber: Launched the first Moosejaw:Is giving customers a seamless shopping
fingerprint-identification-based loyalty and experience across the Web, stores
payment method in Germany, allowing club and mobile devices while infusing customer
members to conveniently pay for items and feedback and reviews back into a system
receive loyalty incentives. designed to continuously improve products
and customer experiences.


Retail:
Developing smarter merchandising and supply chains.

SMART IS SMART IS
Reducing order lead times from days Manufacturing the right number
to hours. of a trendy item to fulfill real-time
customer demand.

SMART IS SMART IS
Knowing exactly where your Dynamically allocating inventory
merchandise is as it moves from the based on real-time customer demand
manufacturer to the customer. and inventory constraints.



Retail:
Developing smarter merchandising and supply chains.

Yansha: is leveraging a first-of-a-kind, real-time Max Bahr: Built a dynamic system that helps
performance information system that provides to determine optimal inventory levels based on
transparency into supply chain processes to reduce inventory constraints, demand patterns and
order lead times, improve order accuracy and boost customer service levels.
order acknowledgement rates.

Metro: Uses RFID technology throughout its supply
chain to help get the merchandise customers want
onto the shelves right when they want it.



Retail:
Building smarter operations.

SMART IS SMART IS
Understanding sales trends in real time Quickly consolidating new acquisitions
and adjusting inventory and promotions into an existing brand as well as
accordingly. existing processes and systems.

SMART IS SMART IS
Reducing overall operating costs Never allowing customer data to be
while deploying new customer breached or compromised.
services more quickly.



Retail:
Building smarter operations.

Co-op Group UK: Deployed energy efficient point- Elie Tahari: Built a business intelligence and
of-sale that automatically powers down after end of performance management platform that helps
day processing, resulting in savings of 1.68 million match products to real customer demand.
kilowatt hours of electricity per year and 120K GPB
in annual savings.

Rocky Mountain Chocolate Factory: Enhanced
insight into financial and inventory performance by
integrating point-of-sale and core systems,
resulting in improved staffing schedules, sales and
profitability.



Forward-thinking retailers will fundamentally reshape their business
models to cut costs and boost efficiencies while focusing on the
high-value areas of merchandising and customer experience.

Product
Availability
Price/
Assortment Promotions
Human
Resources MERCHANDISING
Call
Centers
Quality
BACK
OFFICE KEY
IT COMPETENCIES
FUNCTIONS

Customer
Service
Indirect
Procurement
CUSTOMER
Finance and EXPERIENCE
Accounting
Convenience Multichannel

Store
Experience

Source: IBM, "Shopper advocacy: Building consumer trust in the new economy" © 2009 IBM Corporation


These retailers will use multiple channels to gather real-time
customer insights, which they will share with partners, suppliers and
manufacturers to drive product development.
SUPPLY CHAIN

Product
Availability
Price/
Human
Call
Centers
Quality
BACK
OFFICE KEY
IT COMPETENCIES
FUNCTIONS SHOPPING CHANNELS

Customer
Service
Indirect
Procurement
CUSTOMER
Accounting

Store
Experience

Information Flow



This will enable them to deliver the optimal products and customer
experience—at the right prices and in weeks instead of months.

SUPPLY CHAIN

Product
Availability
Price/
Human
Call
Centers
Quality
BACK
OFFICE KEY
IT COMPETENCIES
FUNCTIONS SHOPPING CHANNELS

Customer
Service
Indirect
Procurement
CUSTOMER
Accounting

Store
Experience

Information Flow
Product Flow



To deliver on this vision of the retail future, smart organizations are
focusing on three imperatives…

SHOPPING EXPERIENCE MERCHANDISING
Enable customers to shop however, AND SUPPLY CHAIN
whenever and wherever they want. Gather customer information
Match inventory and brand continuously and at every touch point.
experience on the Web, in stores Manage and deliver assortments
and via mobile devices. RETAIL based on customer input and insights.

OPERATIONS
Update systems to better handle today’s
customer demands. Improve management
across labor, assets and business processes.

…supported by a dynamic infrastructure.


Retailers require an infrastructure that can propel the business
forward while improving service, reducing cost and managing risk.

Mobility Facilities Supply Chain Technology Communications
Infrastructure Infrastructure Infrastructure Infrastructure Infrastructure

+ + + +

We need a dynamic infrastructure.



Dynamic Infrastructure…
 Enables visibility, control, and automation
across the retail value chain.

 Enables retailers to make better decisions on how
to service customers … and enables the
consumer to make better decisions on purchases.

 Helps address the growing information challenge
in retail.

 Is highly optimized to drive operational efficiency.

 Leverages flexible sourcing like clouds.

 Manages and mitigates risks by ensuring
availability, security and regulatory compliance.

…delivers superior business and
IT serviceswith agility and speed.



Dynamic Infrastructure: The foundation to accelerate the
transformation toward making smarter systems for retail.

 Monitor business and IT asset performance to meet service
objectives withservice managementsolutions.
 Manage all types of assets – IT, stores, warehouses, fleet - on a
common platform withasset managementsolutions.
Deliver a smarter
shopping  Create aninformation infrastructureto manage, backup, store
experience. and protect significant volumes of customer and transactional
data.
Develop smarter
 Provide a secure andresilient environment that monitors for
merchandising and
physical attacks and prevents cyber attacks to minimize system
supply chains.
interruptions.
Build smarter  Implementsecuritysolutions to meet payment card industry data
operations. security standard (PCI DSS) regulations.
 Improve and manage theenergy efficiencyof the stores and
data centers, their assets and HVAC, and align energy usage
with business goals.
 Use virtualizationand cloud computing to improve workload
management for faster business service delivery.


The imperative for retailers is threefold.

1 2 3
Focus on Value: Exploit Opportunities: Act with Speed:
Deliver a smarter  Customer security  Increase loyalty  Clearly communicate
shopping and confidence  Invest in growth plays  Get the information to act
experience.  Improve efficiency  Protect and acquire talent  Business performance
management and analytics

Develop smarter  Optimize Supply Chain  Explore New Operating  Get the information to act
merchandising and  Rationalize Assortments Models  Manage business
supply chains.  Renegotiate terms  Consider Global Expansion performance

Build smarter  Reduce SG&A costs  Focus on winners  Clearly communicate
operations.  Improve efficiency  Invest in growth plays  Leverage experience
 Renegotiate terms  Explore new operating  Set the agenda
models  Manage risk
 Look at acquisitions and
alliances



IBM’s offering portfolio is aligned with the needs of retailers.

RETAILERS ARE FOCUSED ON… IBM IS DELIVERING…

Delivering a smarter  Next-generation  Marketing and
shopping experience e-commerce campaign management
 Single view of customer  Checkout and
 Cross-channel order self-service
management  Customer analytics

Developing smarter  Integrated planning  Integrated supply chain
merchandising and  Product information  Business process
supply chains management management
 Core merchandising  Merchant and SC
dashboards

Building smarter operations  IT outsourcing  BPO: call center, F&A,
 Application management indirect procurement
services  Energy performance
 Store management management
services  Retail security



We’ve only just begun to uncover what
is possible on a smarter planet.

The world will continue to become smaller, flatter and
smarter. We are moving into the age of the globally
integrated and intelligent economy, society and
planet.

By building intelligence into our entire retail system,
retailers, manufacturers and suppliers can eliminate
inefficiency and waste at every step of the chain—
crucial in the current economic downturn.

More importantly, retailers can better serve the new
breed of empowered consumer, whose needs for
high value, individual service and low prices will only
grow.

Let's work together to drive
real progress in our world.


Trademarks and notes

IBM Corporation 2011

 IBM, the IBM logo and ibm.com are registered trademarks, and other company, product
or service names may be trademarks or service marks of International Business
Machines Corporation in the United States, other countries, or both. A current list of IBM
trademarks is available on the Web at ―Copyright and trademark information‖ at
www.ibm.com/legal/copytrade.shtml
 Adobe, the Adobe logo, PostScript, the PostScript logo, Cell Broadband Engine, Intel,
the Intel logo, Intel Inside, the Intel Inside logo, Intel Centrino, the Intel Centrino logo,
Celeron, Intel Xeon, Intel SpeedStep, Itanium, IT Infrastructure Library, ITIL, Java and
all Java-based trademarks, Linux, Microsoft, Windows, Windows NT, the Windows logo,
and UNIX are trademarks or service marks of others as described under ―Special
attributions‖ at: http://www.ibm.com/legal/copytrade.shtml#section-special
 Other company, product and service names may be trademarks or service marks of
others.
 References in this publication to IBM products or services do not imply that IBM intends
to make them available in all countries in which IBM operates.


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