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DEVELOPING THE OMNICHANNEL PLATFORM

OF THE FUTURE

PRESENTED BY

SPONSORED BY

MATURITY LADDERRIS RETAIL

3. ADVANCED

· Retailers adopt more innovative digital customer touch points, which generate high, information-rich volumes of data.

· Organizations deploy web-based customer-facing and back-end solutions, supported by a centralized data warehouse. Efforts allow robust data to be utilized across multiple lines-of-business.

· Retailers upgrade legacy systems and rigid networks with more agile platforms.

· Accessing centralized information enables retailers to engage shoppers at store-level with more targeted messages and processes.

2. INTERMEDIATE

· Retailers begin to adopt omnichannel operations and slowly bring digital touch points down to store-level.

· Retailers transition to cross-channel operations, but processes are supported by siloed channels and disparate operations that do not support a consistent brand experience or image.

· Silos force retailers to store customer-specific and mission-critical business data within disparate data warehouses.

· Legacy-based or mainframe systems cannot access real-time information, making it difficult to get a single view of the customer, and to respond to consumer and business trends.

4. STATE-OF-THE-ART

· Retailers leverage the value of IoT, and apply connected devices to the omnichannel experience for back-end and customer-facing operations.

· Chains convert channel-specific, siloed systems onto unified commerce platforms, or a single framework that combines digital commerce, order management, point-of-sale, store operations and predictive intelligence.

· Retailers transition legacy-based operating systems to more agile platforms, including cloud architectures and application programming interfaces (APIs), to support unified commerce.

Maturity Ladder: Omnichannel Platform of the Future

The RIS News Retail IQ Report Maturity Ladder is a diagnostic measurement tool for a retailer’s state of technology advancement in a specific category. There are four key phases: 1. Basic – minimal capabilities, 2. Intermediate – mostly basic with some advanced capabilities, 3. Advanced – mostly advanced capabilities with some limitations, and 4. State-of-the-Art – comprehensive capabilities are fully integrated and up to date. Note that it is possible to be on more than one step of the ladder simultaneously as specific technology components and processes are upgraded in phases.

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1. BASIC

· Retailers transition from a traditional, single-channel brick-and-mortar business model to a multi-channel model that features physical stores, e-commerce, catalogs and call centers.

· Multichannel retailing models are operated as individual brand divisions, each with their own financial and back-office functions.

· Legacy-based systems manage operations across all channels, and are unable to share data or connect between channels.

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Retailers continue to embrace the omnichannel business model as a means of

enabling consumers to seamlessly move between physical and digital chan-

nels and touch points throughout their path-to-purchase. However, new factors

are complicating the landscape.

The Internet of Things (IoT) adds even more complexity to an already compli-

cated marketplace, and customers’ digital touch point preferences also contin-

ue to evolve — two issues that require new, flexible and scalable omnichannel

architectures. These next-generation frameworks must be capable of connect-

ing existing IT assets; and flexible enough to scale seamlessly in favor of new

capabilities. To address this need, retailers are focusing on new integrated

platforms that promote data sharing, streamline processes and foster seamless

enterprise connectivity.

If there was ever a saying that defines omnichannel retailing it is that the

only constant is change — and it is often driven by consumers. The big-

gest variable contributing to this change is that customers continue to

embrace new digital media to streamline and personalize their shopping

experience.

For example, four in 10 consumers use their smartphones to compare

prices during their path-to-purchase, and one in three use their camera

phone to take photos of merchandise they are contemplating purchasing,

according to “Shoppers Bringing Online Competition Inside Bricks-and-

Mortar Stores,” a report from GFK.

Retailers are so eager to connect with these shoppers that by 2020, two-

thirds of brands plan to identify these customers via their smartphone as

they walk into their store, according to “Real-Time Retail – The New Retail

Imperative,” a report from Boston Retail Partners.

Yet, new innovations are making these efforts mere table stakes. The real

game-changer that is currently impacting omnichannel operations — and

the overall retail landscape — is IoT. Defined as an ever-growing network

of physical objects connected via the Internet, IoT devices are embedded

with Internet Protocol (IP) addresses that support seamless communica-

tion between these web-enabled devices and their supporting systems.

Whether these are consumer-driven smart solutions, including phones and

tablets, or retailer-supported devices, such as RFID, digital signage and

Consumers that use their smartphones to compare prices during their path-to-purchase.

Source: GFK,“Shoppers Bringing Online Competition Inside Bricks-and-Mortar Stores”

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beacons, IoT is raising the stakes in the omnichannel retailing game.

For example, Levi Strauss & Co. is using RFID to improve its ability to

monitor in-store inventory in real-time, while preserving consumer pri-

vacy. By placing RFID tags on every single item on the shopping floor

in its San Francisco pilot store, Levi’s is able to track inventory status,

item popularity, even shopper movement as they navigate the store with

tagged merchandise.

This connected, detail-rich environment requires an underlying om-

nichannel infrastructure that is robust enough to support real-time man-

agement and data processing. Meaning, there is no room for traditional

platforms or their operational short-comings.

When the traditional, single channel, brick-and-mortar shopping experi-

ence morphed into a multichannel retailing model, one that consisted of

physical stores, online shopping, catalogs and call centers, retailers began

managing operations as separate businesses. The siloed divisions where

supported by individual inventories, profit and loss statements, and most

importantly, individualized platforms and supporting operations. Their only

common denominator — all channels contributed sales to a single brand.

Once traditional operations evolved into the current omnichannel model,

retailers had to learn how to move these siloed, disparate business chan-

nels — and supporting back-end and customer-facing legacy-based solu-

tions — into a more cohesive business model. To achieve this goal, brands

began focusing on more off-the-shelf point solutions. While this solved the

issue of creating a single brand identity, it did little to foster the true mean-

ing of what omnichannel shopping really is — a streamlined path that

enables shoppers to seamless “channel-hop” across a brand, while giving

brands a single view of the customer during each and every customer in-

teraction throughout their path-to-purchase.

A point solution-driven configuration conditioned far too many retailers

to operate their online shopping channels as a separate division, one oper-

ated independently from its brick-and-mortar operation, as summarized

in “Building Omni-Channel Retail From the Back-End Up,” a report from

Retail TouchPoints. This segmented business approach also makes it dif-

ficult to succinctly manage the high-levels of data volume flowing in from

digital touch points. Finally, these cookie-cutter point solutions do little to

Brands that plan to identify customers via their smartphone as they walk into their store by 2020.

Source: Boston Retail Partners, “Real-Time Retail – The New Retail Imperative”

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Q: What are the biggest trends impacting the transition to a more nimble, open supporting platform?OLIVER GUY: We all know that retail is going through unprecedented change — arguably more so than any other industry. Traditional retail has been challenged by digital disruptors with new business models such as Amazon and eBay. They are creating ever increasing consumer expectations on traditional retailers. Retailers are finding that they need to offer new innovative services to differentiate and compete. In other words become more customer centric, but also drive efficiencies. As a result we are seeing new innovation nearly every week — BOPUS (buy online, pick-up in store) may have become the norm but we are also seeing new innovations like mo-bile self scanning, IoT powered real-time inventory, smart signage and smart-store monitoring. The problem is that existing application software does not have in-built capability to support the latest innovations — nor will it ever while the speed of change continues at the current rate. In addition, retailers need to innovate quickly without replacing existing infrastructure. Q: As the omnichannel world evolves, platforms are moving from support-ing an e-commerce site or mobile channel to a “true” digitization. Can you define the difference?GUY: Omnichannel is about giving customers choices — a choice on how they in-teract with you, a choice as to how to acquire their goods, and a choice if they are returning their goods. Omnichannel is an example of a customer-centric initiative, which allows retailers to differentiate from competitors — although in many cases it is about keeping up with them. Digitization is much wider than this. Software AG has done a lot of work in this area and we define digital retail as being the use of technology to drive either differentiation or business efficiency.

Q: Industry observers predict that the retail IT landscape will become a het-erogeneous environment over the next 20 years. What does this mean and how will it impact the need for a digitized platform?GUY: Heterogeneous means that the IT landscape is made up of many different so-lutions from different vendors and origins, using different technologies combined with in-house built applications; some in the cloud, others on premise. For this rea-son, I would argue that the landscape is already heterogeneous. The digital innova-tions that we are seeing need to interact with and utilize capability from across the entire landscape and enable innovation quickly and robustly.

Software AG developed its Digital Business Platform to enable seamless con-nectivity between systems, processes, customers and suppliers in order to streamline, maximize efficiency, automate and enable agile innovation. When retailers ask me what they should be looking for to help them digitize I suggest three things, firstly ensure that your decisions do not “lock you in” or restrict you in terms of future decisions — look for technology that gives you independence. Secondly, consider all your digitization projects together — this way you benefit from synergies across the investments but it also means your technology must scale. Thirdly, I advise them to focus on being able to exploit what I call “The Re-tail Moment.” This is the specific point in time where a given opportunity arises — for example where a customer is open to receiving a specific offer or some other incentive to buy at that time.

Keeping Pace With Innovation OLIVER GUY

Retail Industry Director, Software AG

INSIGHTSRETAIL

The problem is that existing applica-tion software does not have in-built capability to support the latest innovations — nor will it ever while the speed of change continues at the current rate.

Software AG helps retailers transition towards a digital re-tail business model faster. The company’s big data real-time analytics, integration and busi-ness process technologies power retail specific solutions and ac-celerate innovation in areas such as omnichannel, context and location-based customer engage-ment and the use of the Internet of Things (IoT). Building on over 40 years of customer-centric in-novation within retail, the com-pany is ranked as a “leader” in 14 market categories, fueled by core product families Adabas-Natural, Alfabet, Apama, ARIS, Terracotta and webMethods. Learn more at www.SoftwareAG.com/Retail

Continued

Q: The priorities of the digitized platform are focused on managing data and processes, connectivity and orchestration. How will this bolster inte-gration efforts?GUY: The digital initiatives that retailers need to undertake in order to drive effi-ciency or competitive differentiation all rely on technology. This always requires a number of key things: the linking together of systems; orchestration and automa-tion of processes across systems; the management of massive quantities of data; real-time analytics, visibility and response to real-time events. While integration is a key foundation, the Digital Business Platform is designed to cater for all of these to enable the extraction of further value from existing IT investments.

Q: How does this new platform streamline disparate vendor’s solutions and support efficiency?GUY: Typical business processes span multiple systems across the enterprise. Take for example buying merchandise. Planning, purchase order management, ware-house and inventory management systems are all involved — and that is before you consider the invoice and payment side of the process. There is a great deal of opportunity to streamline and automate across the different systems. To do this, however, requires process control, automation, and integration that sits above all of these components. It is important that business cases are driven by enabling retail-ers to get more out of what they already have rather than replacement of existing investments.

Q: How does this platform support on premise and cloud-based solutions?GUY: Retailers will continue to have a blend of on premise and cloud applications for the foreseeable future. For this reason the Digital Business Platform incorporates hybrid integration to connect cloud to on premise, cloud to cloud applications or indeed any combination thereof.

Q: What are the challenges that are getting in the way of retailers making this transition?GUY: Retailers have tended to be fairly conservative when it comes to innovation and I believe this in itself can be a significant barrier. However I am seeing some fan-tastic innovation on both sides of the Atlantic. What is needed is to look at the big picture and consider the overall needs to support digitization. It is very easy to look at each project in isolation and not consider the overall strategic technology needs across the business and indeed the synergies across multiple initiatives. I do a lot of work with CIO’s and CEO’s to evaluate and prioritize overall technology needs to support digitization based on all their business initiatives together. The feedback is very positive as it focuses on how technology synergies can be a strategic force for the retailer.

Q: For retailers that do make the transition to a digitized platform, how will this support their Internet of Things initiatives?GUY: The Internet of Things (IoT) is really exciting for retailers. Mckinsey believes it will impact retail by between $400m and £1,200m each year by 2025. IoT initiatives have a number of specific requirements the most important of which are real-time connectivity, real-time analytics and real-time response. Linking IoT devices to exist-ing infrastructure offers the best opportunity to drive value from projects but also attain further value from existing investments. We call this ‘Connected Retail’ and we believe it is key to getting the most from IoT initiatives.

INSIGHTSRETAIL

What is needed is to look at the big picture and consider the overall needs to support digitization. It is very easy to look at each project in isolation and not consider the overall strategic technology needs across the business.

Keeping Pace With InnovationContinued from page 5

OLIVER GUYRetail Industry Director

Software AG

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meet brand-specific challenges, or to help a brand differentiate itself from

the competition in a highly-saturated marketplace. And when you weigh in

the very disruptive concept of IoT, point solutions are even less effective.

To work around these challenges, retailers have added processes and

services that may be more flexible, and many even emulate the expected

seamless shopping experience. However, these processes are typically

manual, involve complex integration across multiple systems and opera-

tions, and often don’t work in real-time, as summarized in “Unified Com-

merce is the Goal: “Faux” Omni-Channel is the Reality!,” a report from

Boston Retail Partners.

Each of these factors are prompting companies to reallocate enterprise

spending for the remainder of 2016 toward investments. These invest-

ments will focus on architectures that will transform processes, and con-

vert channel-specific, siloed systems into a unified system that encom-

passes “one version of the truth” for products, customers, transactions

and sourcing locations, as summarized in “The 13th Annual Store Sys-

tems Study 2016: Retail Technology Spend Trends,” a report form RIS

News and IHL Group.

The Omnichannel-Focused EnterpriseIt is time for a new internal mindset — one that can exclusively focus

on the innovations that brands need to support their current and future

omnichannel strategies, as well as the supporting architectures and solu-

tions needed to deliver an exceptional shopping journey. At the core, this

requires an organic change — one that begins with personnel.

Historically, omnichannel operations may have fallen under the chief

information officer’s (CIO) responsibilities, however, omnichannel is more

than a business enabler — it is a means for retail survival. As such, retail-

ers are appointing chief technology officers (CTOs), who are tasked with

evaluating and deploying solutions that differentiate the company in the

evolving omnichannel world. These include technologies and strategies

designed to enable new capabilities and speed to market, as summarized

in “Seamless Technology: Unleashing an Integrated Shopping Experi-

ence,” a report from Accenture.

Working under the CTO is a team focused on how to best deliver these

““We weren’t just looking

for a new e-commerce

platform; we wanted to

fundamentally change

our operational model

to gain better control

and be able to execute

across channels and

geographies faster.

— DAVID DUPLANTIS, PRESIDENT, GLOBAL MARKETING, DIGITAL AND CUSTOMER EXPERIENCE, COACH

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next-gen solutions. Teams are charged with making the best, most efficient

use of information and data, and interconnecting processes to facilitate a

singular view of the business and consumer. Once the team is in place, the

brand is ready to take steps to modernize the processes needed to support

an all-channel strategy, and make smarter business decisions.

The CTO-led teams also need to take into account the two issues that

companies struggle with most: the adoption of IoT, and how to make this

incoming information actionable. While 47% of retailers strongly agree

that identifying and enabling the customer journey is critical to digital

channel success within their omnichannel strategies, the sobering truth is

that this convergence has yet to be achieved, according to “Digital Diver-

gence: The Future of Digital Commerce,” a benchmark report from Retail

Systems Research.

However, to sustain longevity in the digitally-influenced marketplace,

retailers need to begin to walk the walk, if they are going to talk the talk.

Fashioning Convergence and FlexibilityRetailers that are ready to make the move to their next-generation platform

are looking for options that are flexible enough to support current cus-

tomer touch points, while being scalable enough to future-proof the brand

for emerging innovations that drive efficiency, automation, and of course,

customer-centricity. It requires an architecture that can link together solu-

tions and functionality across different areas of the organization, as well

as create new systems that can support current business operations and

customer relationships.

It is such a priority that 58% of companies planned to make invest-

ments in these streamlined technology platforms and infrastructures last

year — a significant jump from the 30% that planned to do so in 2014,

according to RSR’s “Digital Divergence: The Future of Digital Commerce”

benchmark report.

However, this platform requires planning — both for current needs as

well as future ones. To remain competitive — at minimum — for the next

two years, retailers need platforms that will help them move away from

channels toward relevant retailing experiences on the front-end, and con-

tinuity of business operations, regardless of channel, device or process, on

Consumers that use their camera phone to take photos of merchandise they are contemplating purchasing.

Source: GFK,“Shoppers Bringing Online Competi-tion Inside Bricks-and-Mortar Stores”

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the back end. In the quest to future-proof operations, this platform must

also be flexible enough to support the evolution and agility of new systems.

These were among the top factors that Coach focused on when re-plat-

forming its omnichannel architecture. Eager to gain greater business agil-

ity, to fuel growth across channels and geographies, and most importantly,

to keep pace with its evolving consumer base, Coach added a new, more

flexible and scalable platform aligned with the company’s growth strategy.

“We weren’t just looking for a new e-commerce platform; we wanted to

fundamentally change our operational model to gain better control and

be able to execute across channels and geographies faster,” said David

Duplantis, president, global marketing, digital and customer experience at

Coach. “We now have a model that enables the speed and agility we need

to pursue our strategic initiatives today and into the future.”

Unifying the Next-Generation PlatformThe key to omnichannel success, especially one that can support IoT-

fueled operations, depends on seamless systems integration. While the

industry is still merely scratching the surface in this concept, the fully

integrated future is within reach. The only way to make this goal a reality

is through a unified, real-time technology platform. This requires a unified

commerce infrastructure.

Defined as the framework supporting seamless front and back-end sys-

tems, unified commerce is a pre-requisite in converting channel-specific,

siloed systems into a single framework that combines digital commerce,

order management, point-of-sale, store operations and predictive intel-

ligence. Further, this architecture supports “one version of the truth”

among products, customers, transactions, prices, promotions, and sourc-

ing locations.

“Unified commerce goes beyond omnichannel, putting the customer ex-

perience first, breaking down the walls between internal channel silos and

leveraging a single commerce platform,” Ken Morris, principal, Boston

Retail Partners, said in the “Unified Commerce is the Goal: “Faux” Omni-

Channel is the Reality!” report.

“The idea of a single, centralized, real-time platform for all customer

47%

Source: Retail Systems Research, “Digital Diver-gence: The Future of Digital Commerce”

Retailers that strongly agree that identifying and enabling the customer journey is critical to digital channel success within their omnichan-nel strategies.

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engagement points is a key tenet of unified commerce,” he added. “A uni-

fied commerce platform is not simply the future in-store or web platform,

but combines POS, mobile, web, call center and clienteling into one single

integrated platform. It has become the new retail imperative.”

This transformation is also more cost-effective, as costly investments

required in maintaining siloed systems is eliminated, as summarized in

RIS News’ and IHL Group’s report, “The 13th Annual Store Systems Study

2016: Retail Technology Spend Trends.”

Preparing for the Heterogenous Future There is no question that retailing in 2016 already combines a variety of

moving parts, however as we fast-forward to the next decade and beyond,

retailing is on pace to become even more heterogenous — a fact that will

require companies to stitch together existing software as well as new, more

flexible solutions. It is a process that will combine a variety of solutions

from multiple vendors.

While companies are already underway in this practice of disparate con-

nectivity, many find themselves merely “cobbling” offline and online om-

nichannel solutions together in hopes of achieving connectivity. Too often

however, this process further complicates the IT environment, and rather

than streamlining operations, data integrity and service suffer.

Due to the cost, complexity and time commitment, a “rip-and-replace”

strategy is an unappealing option in the quest for systems integration.

In hopes of modernizing their legacy systems and gaining the flexibility

needed to compete in a digital marketplace, many retailers favor cloud-

based offerings.

Unlike on-premise-based solutions that force enterprises to invest time

and IT budgets in time-consuming, complex technology implementations

and integration efforts, cloud-based solutions are hosted offsite and ac-

cessed on an as-needed basis. They provide a more controlled, cost-effec-

tive environment to manage, utilize, support and transform mission-critical

processes — both currently and in the future. Overall, retailers say that

26% of software spending in 2016 will be on cloud-based solutions, with

51% of companies focusing on e-commerce solutions, according to RIS

News’ and IHL Group’s “The 13th Annual Store Systems Study 2016:

““As we have added

sales channels, each of which has required access to similar data and processes, our library of APIs has enabled us to do this faster and with greater consistency – thus improving speed to market and quality of service.

— JEAN-FRANCOIS ROMPAIS, IT & ARCHITECTURE LEADER, KIABI

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Retail Technology Spend Trends” report.

As businesses become increasingly heterogenous, application program-

ming interfaces (APIs) are also garnering retailer attention. A robust ap-

proach to managing solutions across both cloud and on premise solutions,

APIs are a set of routines, tools and protocols needed to build software

and applications across a web-based database or operating system, and

facilitate integration of new features into existing applications. They are

becoming increasingly important as retailers need to share more consis-

tent information and reusable capabilities across the organization, as well

as with consumers and business partners.

One retailer benefiting from APIs is French fashion retailer Kiabi. An om-

nichannel operation serving 20 million customers across 32 countries and

more than 500 stores, Kiabi tapped APIs to extend its digital ecosystem as

a way to expose core business functions in real-time to business partners,

and across all departments in their company. Including on-premise, cloud

and hybrid functionality, the APIs enable Kaibi to rapidly scale its systems

and online presence up, or down, depending on customer demand.

“Our API management program has been a core enabler of our cross-

channel strategy,” said Jean-Francois Rompais, IT & architecture leader

at Kiabi. “As we have added sales channels, each of which has required

access to similar data and processes, our library of APIs has enabled us

to do this faster and with greater consistency — thus improving speed to

market and quality of service.”

ConclusionAs consumers embrace new, sophisticated touch points, and these robust

connected devices create an even more complex marketplace, retailers’

omnichannel strategies — and supporting architectures — must keep

pace. Eager to salvage existing IT investments however, retailers are now

in search of flexible platforms that can support current consumer demand,

as well as prepare organizations for future opportunities.

With a renewed focus on cloud- and API-based processes, retailers are

deploying more agile, scalable platforms that thrive on data sharing, pro-

cesses and connectivity.

Retailers that will focus 2016 software spending on cloud-based solutions.

Source: RIS News and IHL Group, “The 13th Annual Store Systems Study 2016: Retail Technology Spend Trends”

26%

51%Companies that will focus cloud software on e-commerce solutions.

&

RIS INFOGRAPHICOMNICHANNEL PLATFORM OF THE FUTURE

Brands that plan to identify customers via their smartphone as they walk into their store by 2020.

Source: Boston Retail Partners, “Real-Time Retail – The New Retail Imperative”

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““We weren’t just looking

for a new e-commerce

platform; we wanted to

fundamentally change

our operational model

to gain better control

and be able to execute

across channels and

geographies faster.

— DAVID DUPLANTIS, PRESIDENT, GLOBAL MARKETING, DIGITAL AND CUSTOMER EXPERIENCE, COACH

““As we have added sales channels, each of which

has required access to similar data and processes,

our library of APIs has enabled us to do this faster

and with greater consistency – thus improving

speed to market and quality of service.

— JEAN-FRANCOIS ROMPAIS, IT & ARCHITECTURE LEADER, KIABI

Retailers that will focus 2016 software spending on cloud-based solutions.

Source: RIS News and IHL Group, “The 13th Annual Store Systems Study 2016: Retail Technology Spend Trends”

26%

51%Companies that will focus cloud software on e-commerce solutions.

&

““Unified commerce goes

beyond omnichannel,

putting the customer

experience first,

breaking down the

walls between internal

channel silos and

leveraging a single

commerce platform.

— KEN MORRIS, PRINCIPAL, BOSTON RETAIL PARTNERS

Consumers that use their smartphones to compare prices during their path-to-purchase.

Source: GFK,“Shoppers Bringing Online Competition Inside Bricks-and-Mortar Stores”

4 10IN

Consumers that use their camera phone to take photos of merchandise they are contemplating purchasing.

Source: GFK,“Shoppers Bringing Online Competi-tion Inside Bricks-and-Mortar Stores”

1 3IN