“A customer is really just a little bundle of future cash flow with a memory” – this line in a recent blog⁽¹⁾ caught my eye. We have always known this in retail – customer experience drives loyalty and revenue. But this one line tied it very simply and explicitly to a metric that your CFO can understand – customer experience today is a good predictor of future cash flow - and when discounted to present determines the current value of your business. The imperative for retailers therefore is clear – create memorable experiences to increase shareholder value and to create a long-term sustainable business.

Personalization of interaction is an important ingredient to crafting a memorable customer experience. There are 2 key aspects that help deliver a personalized experience – technology and people.

Technology has come a long way in recent years to make real-time personalization a reality. Solutions like SAP Precision Retailing can combine a customer’s shopping context with their profile and history to provide personalized information and offers at the right time. Recommendation engines can suggest products based upon customer’s history and buying preferences. Web pages can be configured “on the fly” to match customer’s recent online activity. Social media intelligence tools can help understand customers on a more personal level than has ever been possible. Solutions such as the new SAP Audience Discovery and Targeting can help slice and dice customer information into highly relevant and predictive target groups by analyzing both structured and unstructured sources in real-time. Location based targeting is common-place and Apple’s recent acquisition of WifiSLAM provides evidence that it is soon going to get even more precise even inside buildings.

Personalization technology by itself however does not guarantee a good customer experience. Retailers need to watch out that it’s not uncomfortably intrusive and that it’s not so isolating that it takes fun out of shopping. The promise of the internet is to connect us to the whole wide world out there – to help us experience what we could not in our narrow corners of the world. Personalization taken to an extreme, runs the risk of isolating us again within our own bubble – leaving us trapped in a “web of one” – making online activity, including shopping, dull and mundane.

The opportunity then – especially for brick and mortar retailers - is to personalize but with a human touch. Research from multiple sources (e.g. RIS(²⁾ 2012 Shopper Experience Study) has shown that customers prefer in-store personalization and special treatment (still enabled by technology) over technology-delivered personalization.

People - that is the secret weapon that traditional retailers have lots of - and retailers therefore need to do much more to effectively unleash that weapon. There is no reason store associates cannot be armed with the kind of information that customers have about products, pricing, and promotions or a website has about potential customers. Solutions like upcoming SAP CAR (Customer Activity Repository) can provide the foundation to arm store associates with a comprehensive real-time view of products, customer and loyalty information, sales, and inventory across channels. Mobile technologies and applications such as SAP Store Ops Associate can ensure that sales associates have that information where and when they need it on the shop floor.

The power of ‘person’ behind technology is not lost even on internet retailers. Take Gilt⁽³⁾ for example, a pure internet retailer that employs 100’s of people to focus on design, storytelling, and visual merchandising. It recognizes that no amount of ‘algorithmic curation’ can evoke the feeling of surprise, discovery, desire, and excitement that a highly curated merchandise with a narrative created by a human being can.

So are you the kind of retailer that wants to be around and to grow? Then you have to engage your customers at a more personal level using your most important assets – your people, your stores, and your data. You have to stop looking at technology that enables great customer experience as a cost. In the medium to long term it’s a necessary investment – an investment in your customers' memories so that they are compelled to come back again and again and again.

1.    1. http://www.linkedin.com/today/post/article/20121113102636-17102372-do-you-treat-customers-as-assets-or-obstacles

2.    2. http://risnews.edgl.com/retail-research (3rd Annual Shopper Experience Study: Enabling Retail Without Boundaries 5/30/2012)

3.    3. http://www.gilt.com

Here at SAP we continue to invest in new innovations for the retail industry and we are seeing these innovations now being launched in to the market. If you had the chance to visit NRF – The Big Show in New York this year, you may have seen some of these new innovations including applications around On-Shelf Availability, Retail Store Operations, Consumer Mobile Loyalty and Mobile Payment to name just a few.

While at NRF, you may have also noticed that SAP has a new point-of-sale solution that we are introducing to the U.S. market. SAP Point-of-Sale by GK is a Java Enterprise Edition (J EE) architected solution that provides comprehensive business logic, centralized deployment options with expanded capabilities to support retailer’s international requirements. Much like SAP POS, the solution is very configurable and can support a wide range of retail environments including Grocery, Big Box, Discounters, Apparel, Soft/Hard Goods, Electronics and more. SAP POS by GK has integrated with a number of back end systems but the solution also includes integration with SAP solutions and has been proven in a number of implementations.

The SAP POS solution is a very robust product that fulfills the requirements of selected retail segments quite well and therefore will continue to be promoted in select markets. SAP POS by GK has a very advance technology foundation that fits well in some of the segments and markets SAP POS has not traditionally addressed. 

If you have any questions or would like to see a demo of the new SAP POS by GK solution or any other retail offerings from SAP, please contact your Account Executive.

How the AAFA sees millennials as consumers, employees, and future leaders of industry

Regardless of the challenges or benefits millennials pose to society, their culture – which is rapidly becoming our culture – is here to stay. As leaders of industry, we need to seek ways to understand and engage them, to teach and to learn from them.

As an organization dedicated to promoting best practices and innovation in the apparel and footwear industry, we invested a lot of time discussing millennials at last week’s American Apparel and Footwear Association (AAFA) Executive Summit in Washington, DC.

Millennials as Consumers

It’s no secret that millennials love to shop, but the experience they’re looking for is what’s grabbing our attention.  According to the Boston Consulting Group:

• 54 percent of millennial shoppers prefer roomier shopping spaces with ambient music
• Almost half of millennial males value trendy sales associates that wear store merchandise
• Millennials are more than twice as likely to use their mobile devices in-store to research products, compare prices, and read user reviews

The study also found that, while millennials are passionate about apparel, they have different needs that retailers have to zero in on.  This is where elements like social responsibility come into play, taking into account where merchandise is manufactured, how the workers are treated, and what kind of footprint is left on the planet.

Rob DeMartini, President and CEO at New Balance Athletic Shoe and my colleague on the AAFA board of directors, pointed out  that millennials are holding us to a much higher standard than we’ve been holding ourselves to. 

“And that's a great thing," he added.  “Other industries have higher standards – we don’t fly airlines that arrive 92 percent of the time.”

Millennials as Employees

Jay Gilbert, in a 2011 submission to the Ivey Business Journal, said millennials now make up the largest portion of active workers.  But they’re not alone: the labor force is composed of more varied generations than ever, and the danger industry faces is treating them all alike and expecting identical results.

According to Gilbert, boomers – accustomed to working in large formal hierarchies – demonstrate aptitude in organizational memory, optimism, and their willingness to work long hours.  Millennials, meanwhile, have far more formal education and skills than other generations would have had at that age, but they lack practical experience.  More interestingly, millennials tend to expect more discussion than direction, a better work-life balance, and faster advancement based on their accomplishments over their tenure.

"Millennials expect mentorship from senior leadership,” said Jeff Gennette, Chief Merchandising Officer at Macy’s during his keynote address yesterday morning. 

“They're not going to change, so we need to.”  It was great to hear Jeff talk about how Macy’s is looking for ways to engage their millennial employees and figure out avenues for “reality checks”.

Millennials as Tomorrow’s Leaders

In his address last week on the state of international affairs, Retired four-star General Stan McChrystal said that millennials are struggling to translate their skills to the business world. 

“They don't know how to talk about leadership skills,” he said, while qualifying that “leadership isn’t born – it’s trained.”  McChrystal, who consults regularly on leadership topics, is a huge advocate of reverse-mentoring as a means of engaging younger generations of leaders while keeping us more seasoned professionals sharp.

“A leader isn’t good because they are right,” he said during a presentation on thought leadership platform TED.com.  “They are good because they are willing to learn and to trust.”

Col. Eric Kail, former course director for military leadership at the United States Military Academy at West Point, believes it’s leaders who need to try harder to bridge the generation gap.

“It’s our job to develop the people we expect to carry the torch forward,” he wrote this January in the Harvard Business Review.

Looking to the future and thinking of my own sons (both of whom are millennials), I think we need to adopt the same servant attitude I’ve advocated regarding our customers. My generation has a lot of experience to impart, but much like General McChrystal’s community engagement tactics employed overseas, we have to first earn the right to be heard by being quick to listen and slow to speak.

This year’s Executive Summit was an excellent opportunity for me to reflect on the big issues facing the retail industry.  Yes, the millennial generation keeps transforming our landscape as technology and culture evolve.  I firmly believe that, as my generation continues to listen to, work with, and even shop alongside theirs, we are passing the baton to a generation that will improve people’s lives like never before.

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It was my honor as a relatively new member of the American Apparel and Footwear Association's board to moderate a Q&A session with Jeff Gennette, Chief Merchandising Officer at Macy’s, after his keynote presentation at our annual Executive Summit.

As Senior Vice-President of Retail Sales at SAP, it’s always a pleasure for me to listen to industry leaders like Jeff talk about a growth strategy focused on keeping customers at the center of everything they do.  For Macy’s, like SAP, “customer engagement” isn’t just a marketing catchphrase: it’s at the heart of everything we do, and here’s why:

• The global middle class will more than double in size to almost 5 billion by 2030.  This demographic, with an annual per capita expenditure ranging from US $3,650 and US $36,500, will come from Asia.  European and American populations, meanwhile, are projected to shrink to 22 percent of the global middle class.  Nevertheless, the market potential this surge in potential customers represents is of incredible importance to the global economy.
  
  
• There are now more mobile devices in the world than there are human beings.  Global mobile data traffic is projected to grow 13-fold by 2017, creating a borderless digital world parallel to our own that is always on and always connected to virtually every scrap of information this planet has ever produced.  Our consumers’ appetite for news, entertainment, fashion trends, and deals is insatiable.  Not even ten years ago, it would have been unheard of for a customer to waltz into a department store like Macy’s, photograph a jacket they admire, send it to their friends for feedback, and shop around for a better deal – all from their phone and all within the span of a few minutes.  This is our new reality.
  
  
• One out of every seven inhabitants of this planet is on a social network.  If Facebook were a country, its population would be the third largest in the world.  The implications this has on customer-oriented organizations cannot be understated enough.  Last year, the Harvard Business Review published a blog discussing how to counter a customer insurgency.  It’s an interesting choice of words that draws attention to the speed and size at which a “hyper-connected” and “super-empowered” customer base can grow and threaten an organization’s brand or strategy.  More than ever, we need to plug into what our customers are saying about us and participate in that discussion in a way that validates and channels their feelings into productive action without undermining our long-term strategies.

My Q&A with Jeff Gennette (right), Chief Merchandising Officer at Macy's

To create a real culture of customer engagement, you have to walk the talk.  In 2012, Macy’s did just that by pushing their omnichannel strategy forward, implementing  localization services that connect shoppers to the products they want, and engaging customers directly on the floor. 

At SAP, we continue to execute our mission by sitting down and listening to our customer’s needs, co-innovating with them, and delivering solutions that make them – and their own customers – run better.

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Dear Partners,

Submit your apps for the SAP Retail Industry Mobile Apps Challenge and win big!

Be one of the industry leading innovative partners to build mobile apps on the SAP Mobile Platform and reach millions of business users via the SAP Store. You will receive special enablement benefits including access to SAP trainings and expert coaching.

Three Finalists will gain valuable marketing opportunities, exposure with an award at a key in-person or virtual event in 2013 and best of all be awarded a monetary prize!

Win the SAP Retail Industry Mobile Apps Challenge and be awarded €10,000

Be one of two finalists and be awarded €3,000

Step 1 Choose to be part of the game, register for the SAP Retail Industry Mobile Apps Challenge by submitting your app proposal.

Step 2 Send your developers to virtual bootcamps - for experienced web-developers to learn how to develop mobile apps on the SAP Mobile Platform.

Step 3 Build your market-ready, certified mobile app, benefit from coaching by SAP-experts throughout the process.

Step 4 Submit your apps to the SAP Store.

Download more details on the challenge benefits and criteria

Please visit the SAP Mobile Apps Partner Center to learn more about the SAP Mobile Apps Partner Program and our other Mobile Apps Challenges.

Have more questions?

Don’t hesitate to contact me at panagiotis.papadopoulos@sap.com or clemens.suter-crazzolara@sap.com

Pano

SAP Mobile Apps Center:           http://www.sapmobileappspartnercenter.com/

Challenge benefits and criteria:    http://ecohubmkt.sdn.sap.com/rs/sapsandbox/images/SAP_IndustryMobileAppChallenges_2013.pdf 

The NBA, in partnership with SAP, released its entire statistical history online for free last week.  The news is a boon for sports junkies and statheads, who up until now didn’t have access to the breadth and depth of history only available to the league and sports media.

The site showcases every NBA box score dating back to their inaugural 1946-1947 season, incredible shooting charts that graphically represent offensive and defensive success from the basketball court, insight into how successful different combinations of teammates are when playing in the same lineup, and individual player stats. 

   Shot charts illustrate the location, distribution, and success percentage of every shot attempted from the court.

Like so many others, I’ve played around with the tool and am blown away by how beautiful, fast, and easy to use it is.  More importantly, this tool goes a long way in demonstrating the difference between data and insight.  Just to give you an example, here are a few nuggets of insight I appreciated:

• The Miami Heat’s Shane Battier earns a phenomenal 88 percent of his points from three-pointers.
• When playing together, the Los Angeles Clippers’ Chris Paul, Matt Barnes, and Jamal Crawford produce the league’s most efficient fourth-quarter net rating – that’s the difference in how many points a team scores and gives up per 100 possessions – at +33.4.
• The Cleveland Cavaliers’ Kyrie Irving takes advantage of more team possessions (52 percent) than any other player when there are less than 5 minutes of play remaining and only 5 points difference between the winning and losing team.

See what I mean?  Data is just data, bits and bytes of information that accumulate exponentially but have no inherent value.  The examples I cited demonstrate how specific this data can be applied in order to gain valuable insight and empower you to take action.  If you were coaching a team playing against the Heat, Clippers, or Cavaliers, how would you change your strategy based the insight you obtained?

Actionable Insight is the Key

If you haven’t guessed where I’m going with this by now, actionable insight is the key to success in professional sports and in retail.  Not just insight based on historical trends, but also based on how events unfold in real time.  I’ve been talking more and more about the critical importance of knowing your customer in order to deliver the right merchandise to the right place at the right time.  The only way you’re going to be able to do that is by capturing your customers’ statistical history and applying insight obtained in real-time.

Imagine every scrap of data that can be collected from just one of your customer’s shopping runs at your point of sale: the combination of products they bought, the retail price, discount price, coupons used, payment method, store location, the amount of time since they last shopped there, and so on.  Now imagine how much data got collected in one hour from all shoppers at that store.  Or all week at that store.  Or all year in all your stores.  Just like the NBA, retailers haven’t had the processing power to get real insight out of that data. 

That all changes with SAP HANA.  Thinking back to the phenomenally detailed basketball insight I highlighted, imagine the kind of unique and actionable statistics you can derive about your customers.  If you were managing a store equipped with this kind of insight, how would you change your strategy to focus on your customers and increase profits? 

Let this be your season to turn data into insight and win like never before.

Marc Andreessen (remember Netscape!) has been known for a bold prediction or two. In a Wall Street Journal Op Ed in Aug 2011, he created waves by declaring that “software is eating the world”. What he meant was that vast swaths of the economy will be transformed, disrupted, and even taken over by software companies. Point well taken - especially for companies that deal in digital goods. But recently, he took it a step further by predicting that "software will eat retail" - that traditional retail will be dead in a decade. Yes, dead! For those of us associated with retail - this hits home - this is personal. I am sure we all have various and compelling reasons to believe why this would not happen. Marc nevertheless has a point.

That technology has a bigger and bigger role to play in retail is beyond question. Ecommerce is growing and whether it’s 100% of retail or 20% of retail in a decade - one thing is for certain -  software will transform retail in ways we don’t yet fully comprehend. This fact is not lost on most retailers, witness increased retailer spend on software and cutting-edge technologies. Many leading retailers are taking it a step further - trying to build more software capabilities internally– case in point @WalmartLabs, Home Depot’s acquisition of BlackLocus, Tesco’s investment in Dunnhumby.  

While it does not make sense for all retailers to emulate these moves, there are many things that retailers can learn from software companies nevertheless. A recent McKinsey article (“Competing in a digital world: four lessons from the software industry”) highlighted ways that thinking like a software company can help other industries. Here is what I think it means specifically for retailers.

1. Software companies have long focused on a large and vibrant ecosystem to deliver value. That ecosystem extends from customers to suppliers of complementary products to (if it benefits the customer) even competitors in a co-opetition mode.  Similarly retailer thinking has to evolve from buying and selling of products to establishing a common set of objectives and platforms that can engage customers, suppliers, and even other retailers for greater benefit of everybody. An API (Application Programming Interface) is the common glue that sometimes tie software partners. What is the retail equivalent of that common glue? Is it massive amounts of data that a retailer has - sales data and customer data - that has the potential to provide value and better engage customers on one end and can be used to improve planning and be used as currency when collaborating/negotiating with suppliers on the other end? If you are a retailer you ought to be thinking about your ecosystem – do you have one  – what does it look like – how does it provide value to your customer – how can you expand it – how can it help you differentiate from your competitor ?
2. Software companies increasingly rely on agile methodologies and fast iterative product cycles.  The first iteration of a software product may not be complete or perfect but it's delivered with an acceptable functionality and then improved upon with customer use and feedback over time. Using power of social media, retailers, especially in fashion, are similarly starting to test concepts before they are launched. They are starting to put out ideas with the hope of launching only those that customers like and approve. As social media becomes more pervasive, shopping becomes a more collaborative social experience on the Internet, people become more and more impatient and want things yesterday, planning times shrink, retailers need to do more of this fast proto-typing to better engage customers, become more agile, avoid carrying inventory that customers do not want and increase their profit margins.
3. Finally, retail business model has long relied on buying and selling products for a profit. That is akin to a software company only making money by licensing its application software. But over time, software companies have diversified revenue streams through alternate business models such as delivering software as a service and monetizing their platforms by opening them for other developers, partners, and even competitors.  Airlines recently followed a similar path where they diversified their revenues beyond just selling seats for travel. They priced basic product low to cater to value conscious consumer but found revenue in complementary services that customers value (an apparent contradiction that the same cost conscious consumer would pay 50 dollars for early boarding). While the same tactics may not work for retailers, the point is to think of your revenue model more broadly and see how business model can evolve to capture more value. Is there “Software as a Service” equivalent for retail? How does the store economics and business model need to change so that a physical store is not just a showroom - and if it ends up being that way - who pays for it? Could we make a business by monetizing customer data, monetizing our web properties, monetizing mobile app? Some of this is already happening to some extent. It however needs to become a way of thinking to continuously explore new sources of revenue

Retailers traditionally have not been at the cutting edge of technology. Now is the time to change that - by not only ramping up your investments in software and technology - but to start thinking like a software enterprise yourselves. In my view, Marc Adreessen is way-off in predicting the demise of traditional retail. But there is no denying the fact that more and more Internet-only retailers will emerge and increasingly win race for consumer’s attention and dollars. The key for retailers lie in acknowledging the increased inter-connectedness of software and retail, learn from the software world, and lead the way in shaping the retail-landscape of tomorrow. If software were to eat retail (and to some extent it will), it may very well be your software rather than your competitor’s.

Hi everybody, and a belated Happy New Year!

I know a lot has been written about NRF’s annual Big Show this past January, but I thought I’d add a little more color and flavor.  First of all, did you know that the term “The Big Show” was coined by none other than SAP’s own Tom Redd?  When asked by NRF execs what the heck they should call this event that had grown larger and larger, he simply replied “It’s The Big Show.”  And so it has become, a ‘Really Big Show’.

As Lori Mitchell-Keller reported, over 27,000 attendees went to visit more than 500 booths on three different level of the Javits Convention Center in New York City.  There was some strong content as well, featuring a session on Conscious Capitalism (something I am really interested in, and am equally sorry to have missed), and a speech by Kofi Annan.

First of all, if you get the chance, RetailROI SuperSaturday, right before the Big Show itself, is a must attend event, with analysts and retailers donating their time (and presentations) to support a really great charity.  We may donate our time, but tech vendors like SAP donate the money to support this important work.  For more info, don’t hesitate to check out www.RetailROI.org.

Now, back to the Big Show…and a few über-themes I saw in walking the show floor.

• The Supply Chain is morphing into the “commerce chain”.  There’s a strong recognition that stores are not always ends in themselves…they can also be nodes in the Supply Chain. Important technologies: Distributed Order Management (DOM) and Distributed Fulfillment Management (DFM). These apps have to be really simple to use (store employee turnover remains high and intractable), but pretty sophisticated under the hood.  Using inventory as a shared asset across selling channels requires a fair amount of thought.

• Same day delivery actually makes sense in certain cases.  I had an epiphany around eBay local when the ebay rep mentioned they could have things delivered direct to my hotel.  Business traveler forgets cable, tie or shoes. Orders product(s), goes about workday business, and items awaiting him at his hotel room.  It’s a niche play, but a real one. That means we have to code for it!

• Price remains a hot item.  There’s no chance to rest on any laurels as new vendors are popping up every day, sure they’ve built a better mousetrap for lifecycle pricing. There are new algorithms and approaches, the use of new demand signals (think “social”).  Let it be known here.  Paula (that’s me) hates hyper-promotional pricing.  It’s a really bad habit retailers have, and it’s one we MUST break, science or no science.

• Payments and POS Proliferate.  It seems that everyone’s got some kind of mobile payment technology or a new mobile POS system.  And while there’s lots of talk about NFC, MCX and other types of alphabet soup, I’m thinking “Hasn’t anyone asked the customer what SHE’D like?”  My opinion?  It isn’t going to be NFC (near field communications).  More likely it will be software only, like PayPal in store. I’ve used it at Home Depot and love it.

• Making the complex simple. I know you’ve heard this before, but even if your application is really, really smart you need to make it look really simple.  Otherwise, the intended user might just ignore your stuff. This is a BIG deal.  Go visual or go home.

• The Cloud emerges from the fog. I've commented many times that the Cloud is whatever anyone wants it to be.  That's changing. There are real applications being delivered into the marketplace, and reducing time and cost to value significantly.  It's something to watch very closely.

• Making it real. Finally, it’s important for me to say that these innovations are more than just amusement and amazement.  My partner Nikki Baird points out that along with the innovations we saw, the overarching theme was “operationalize them.”

This is a really quick flyover.  If you want to hear the webinar my company produced after the event, you can find it here: http://www.rsrresearch.com/2013/01/29/nrf-post-show-debrief/

If not, I’m always open to your astute comments.

By the way, the Big Show is not the only show. The Food Marketing Institute (FMI) also holds a mid-winter event.  This year it was in Phoenix, AZ.  I had the opportunity to speak there, and you can read my take on the event here:  http://www.rsrresearch.com/2013/01/29/fmi-more-validation-that-price-doesnt-trump-assortment/

See you soon, I hope!