IBM Working Smarter in Retail

1. Smart work
Increasing Sales, Improving Efficiency,
Working Smarter in Retail.
The new science of selling, from supply chain to point of sale and beyond

2. 2 Increasing Sales, Improving Efficiency, Working Smarter in Retail.
Working smarter in retail:
Aligning the way people shop
with the way they live
It used to be so simple. In the old days, a vendor rented a shop, hung a sign and waited for customers to
patronize the store. Of course, in these quainter days of retail, local operations and simple supply chains
resulted in high prices and little choice. But at least it was simple.
Today’s retail environment is decidedly more complicated. The Fortunately, the same technology that is reshaping the way we
Internet has changed the way people live and work. As a result, live is also revolutionizing retailing, from store shelves that
every retailer has been thrown into a global fight for survival. know when they’re empty to smart mirrors that recommend
Competitors can come from the other side of the world, steal- accessories and update a customer’s social networks. It’s all part
ing marketplace share overnight. Products are sourced through of what’s possible when retail environments take advantage of
supply chains of astounding complexity. Margins are sliced ever instrumented, interconnected and intelligent systems.
thinner. And customers have more options, less loyalty and an
endless source of information at their fingertips. No matter Leading retailers are already implementing merchandising and
how hard some retailers wish for them, the simple, old days of supply chains that can adapt and respond dynamically. They
retail are never coming back. are maximizing the efficiency of their store operations. And
they are doing all of this not because they can, but because they
Retailing has always been a competitive game. But the rules of have to stay competitive. Because today’s consumer is less patient
that game are changing faster than ever. It is no longer enough and more fickle than ever. Today’s consumer is more connected
to offer quality goods and services. Today, retailers must also and aware. Simply put, today’s consumer is smarter. And smarter
maintain the most efficient supply chain. They must manage consumers need smarter retail.
their store operations with precision. And they must offer cus-
tomers a shopping experience that matches the way people live
and work today. Anything less than that and it’s time to close
up shop.

3. Smart work 3
Today’s retail Smarter retail
Every day, large numbers of retailers shut their doors forever, Imagine this: A new music video shows a popular artist wearing a
with barely a ripple in the global economic waters. And most of particular brand of shoes. Rebecca, a 17-year-old high school
them are not driven out of business because they lack quality student, loves the shoes and uses her smart phone to go online to
products or lose their passion for the business. They’re driven find them. While online, she is able to see that some friends in her
out of business because they can’t keep up with their customers. vast social network gave the shoes good reviews. The site also
Their practices are outdated and inefficient. Their processes suggests accessories that match the shoes. She initiates an instant
are too slow. They are driven out of business because they are chat with a customer service representative to make sure she will
focused on today, not tomorrow. receive her shipment in time for a big date that weekend.
• Today, flawed supply chain integrations can drive inventory Meanwhile, Rob in the merchandising group at the shoe com-
levels as much as 40 percent higher within a few months.1 pany receives an alert on his dashboard because Rebecca — and
• Today, retailers execute less than 60 percent of their promo- thousands of other teenage girls like her — are ordering the
tional initiatives the way they intended, leaving billions of same pair of shoes. Rob sets up a collaboration session with his
dollars of sales on the table.2 team, which informs him that a new music video online has
• Today, online shoppers often complain that content provided more than two million views, and the shoes are flagged as a
on retail Web sites is insufficient to complete a purchase. viral trend.
Numbers like these are unsustainable to any retailer that plans Instantly, suppliers are alerted and begin bidding on the contracts
to stay in business. And yet many businesses continue to adver- for materials and shipping to meet the new demand. Merchan-
tise products that are out of stock. Or miss ample opportunities dising rules are assembled and travel electronically with the new
to up-sell and cross-sell. Or fail to engage the customer beyond shoes to the stores to help ensure proper placement and up-selling
the store or Web site. These are the reasons that so many of opportunities. And online ad campaigns are queued to run in mar-
today’s retailers are in danger of becoming yesterday’s news. ketplaces that have shown the most potential.
This is happening today. This is working smarter in retail, where
businesses can adapt and respond in real time to customer trends.
Where inventories are maximized and supply chain costs are min-
imized. And where collaboration goes well beyond the boundaries
of the enterprise and seamlessly ties together suppliers, retail
stores and customers.

4. 4 Increasing Sales, Improving Efficiency, Working Smarter in Retail.
Increasing sales
Carrefour Group Figure 1: Carrefour’s in-store promotion program offers a consistent
In the intensely competitive hypermarket industry, where mar- and immediate customer experience across its stores.
gins are thin and customer loyalty is fleeting, every promotion
counts. That’s why Carrefour, one of the world’s largest retailers,
decided last year to take back control of its marketing promo-
Customers
tions and loyalty programs from a third party. Carrefour built a
first-of-a-kind, fully integrated in-store promotion program
that offered a consistent customer experience among its hyper-
market, supermarket, discount and convenience stores. The
new system enabled Carrefour to identify extremely targeted Point of sale
customer segments, determine which products these customers
are buying and project which products they are likely to buy,
all instantly, at the point of sale. Then, based on a set of prede-
termined rules, Carrefour could offer the customer an optimal
combination of instant coupons, coupons for later use and
points-based incentives from the loyalty program. The solution
has led to greater revenue; deeper knowledge of customers;
Coupons Points-based
stronger customer loyalty; and faster, more targeted promo- incentives
tional campaigns. “Our new model for managing promotional
campaigns gets us closer to our customers, gives us greater
control and vastly improves our overall effectiveness,” says
Hervé Thoumyre, chief information officer, Carrefour Group.

5. Smart work 5
Improving efficiency
Metro Group Figure 2: Metro Group’s use of item-level RFID transforms how
Since 2002, the benefits of a radio frequency identification customers shop.
(RFID)–enabled supply chain have been apparent to Metro
Group, one of the world’s largest retailers, with more than 2,100
outlets in 32 countries throughout Europe. The company has
been tracking its products from suppliers to the back rooms of
its stores as part of its Metro Group Future Store Initiative,
the largest RFID supply chain solution in all of Europe. But it
wasn’t until the Metro Group extended the RFID solution to
RFID tag
the shelves and dressing rooms of its stores that the solution
revolutionized the customer experience. More than 30,000
articles of men’s clothing are tagged and tracked throughout
one retail shop, allowing shelves to be restocked immediately
if needed. And if a customer brings an article of clothing into
30,000
articles of men’s
one of the store’s smart dressing rooms, the mirror can suggest Back rooms clothing Store shelves
complementary products or direct the customer to the exact
location of the same product in different sizes and colors. The
solution enhances the customer experience and also increases
the efficiency of store operations by reducing out-of-stock situa-
tions, increasing revenues and providing instantaneous inven-
tory counts.
Complementary product

6. 6 Increasing Sales, Improving Efficiency, Working Smarter in Retail.
Smarter retail
Moosejaw Mountaineering Figure 3: Moosejaw Mountaineering surrounds the customer with
As a retailer of outdoor gear, Moosejaw Mountaineering knows community both online and in the store.
a thing or two about the way young people live, work and play
today. That’s why Moosejaw has built an innovative, community-
Online community
based, multichannel shopping experience to cultivate loyalty
among its customers. They call it social commerce, and it con-
sists of thousands of customer reviews; texting of tracking
numbers and promotions to mobile phones; and the Moosejaw
Madness community, where customers post photos from their Blogs
latest adventures, read the irreverent Daily Remark and immerse
themselves in Moosejaw’s unique culture. But Moosejaw is also
adding unique social commerce features, such as product-level
blogging and public-facing customer profiles with photos,
videos, adventure stories and gear lists for upcoming trips.
Customers can interact with Moosejaw staff and with other
customers on the Moosejaw Web site and then connect those
threads on their mobile phones. And when they come into the A.
Moosejaw retail stores, they can even buy, ship and pay using Promotion
the exact same services they are familiar with online as well as
B.
be offered the same targeted promotions and cross-sells while
they read reviews, blogs and recommendations. It’s an example Customer In-store employees
of how smart retailing is designing customer experiences to fit
the way people live today.

7. Smart work 7
Getting started
Every day, retailers are taking steps to increase their efficiency,
improve their customer experiences and develop smarter retail.
Those that don’t are likely to be left behind. To find out if your
organization is working smarter in retail, start by asking some
critical questions:
“Our new model for managing How many of your employees have
access to the information they need
promotional campaigns gets at the time and place they need it?
us closer to our customers,
With which suppliers, stores and
gives us greater control and cus­ omers have you moved beyond
t
vastly improves our overall coop­ ration to true collaboration?
e
effectiveness.” Which of your operational processes
are able to adapt and respond quickly
—Hervé Thoumyre, chief information officer,
Carrefour Group to changing marketplace demands?
How much value are you getting out
of the information stored across your
organization?
How well do you know each of your
customers?
When the answers to these questions show room for improve-
ment, it may be time for you to call IBM. To learn more about
smarter retail and help us build a smarter planet one shopper at
a time, visit:
ibm.com/smartwork

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February 2010
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1 The Boston Consulting Group, Creating the Optimal Supply Chain,
September 2006, http://www.bcg.com/documents/file14863.pdf
2 AMR Research, Bridging the Merchandising and Store Operations Divide,
Robert Garf and Fenella Sirkisoon, December 27, 2007.
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