Home Featured NRF Conversations – talking retail’s future with SAP

NRF Conversations – talking retail’s future with SAP


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In the fifth in our ongoing series of exclusive vendor interviews from NRF 2013, our Editor talks to a panel of executives from multi-industry software corporation SAP about the trends that are shaping the worldwide retail experience, and how they see it transforming over the coming year.

Interviewed were Klaus Boeckle, VP Consumer & Trade Industries, Colin Haig, Program Principal, and Stephen Henly, Industry Director, EMEA Consumer & Retail Industries.  Boeckle and Henly are pictured.

Ben Hanson: The logical place to start, for many of our readers, is understanding what SAP does for the fashion industry.  Can you give us some insight?

Klaus Boeckle: We started catering to the fashion industry more than fifteen years ago with a solution called SAP Apparel & Footwear. We work with clients such as Levi’s, Nike and Adidas as part of our core innovations team.  Today we’re expanding the role that technology plays within the entire supply chain so we can integrate information from production all the way through to retail.  We have a new SAP offering in production (tentatively called SAP New Fashion), and while I can’t talk specifically about which retailers are helping us with development, as you can imagine we are working with one of the world’s most iconic brands.

Colin Haig: I think it’s helpful to look at the experience that people are having here at NRF, when we talk about fashion and retail.  We have two top fashion brands with us at the show: Chico’s and Crocs, both of whom are using SAP Apparel & Footwear.

BH: Crocs was also the recipient of an award at the NRF luncheon, I noticed.

CH: They were, and I’m glad you noticed that, because it’s emblematic of a wider trend.  Probably around 80 percent of the top fashion companies around the world use SAP Apparel & Footwear, and several thousand retailers use SAP for the retail side of their business as well.

So, when you look at companies like Crocs, they finally decided to retire some of the legacy systems that had no upgrade path and make the move to SAP. Now, their retail systems will stay where they are for a while.

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When you look at Chico’s you’ll see that they’re doing all their merchandising, planning, inventory systems, human resources and so on, but they’ve also added a lot of business intelligence on top. In order to make our solutions as effective as possible, we’ve worked closely with companies like Under Armour and Maidenform to take some of the core processes that the apparel industry deals with every day, like allocation and rescheduling, and maximise their existing production capacities and meet delivery requirements.

[quote]Today we’re looking at predictive information, not history.[/quote]

To do that, we’ve taken our industry-leading Apparel & Footwear solution and applied our new technology, HANA, which essentially is an appliance – with some software – that accelerates everything SAP does.  What we’ve done is to add business intelligence on top of that, providing dashboards so that retailers can play “what if” with allocation and rescheduling.  With that capacity, they can look at inventory that’s currently locked to fulfil the needs of one retailer, and instead free it up for another retailer and avoid penalties.  This kind of intelligence allows our clients to satisfy as many customers as they can, all while minimising their financial impact.  These companies are also using that business intelligence to get an assessment of how well they’re servicing their customers.

BH: Presumably that business intelligence is vital to companies for whom innovation is everything.  In the world of fast fashion, in particular, you have companies like Zara and H&M who have the need to generate a lot of new product but also to centralise and retail all the master data pertaining to those products for the purposes of performance analysis and further product development.

CH: Having that master data, that “one version of the truth” is absolutely key – especially for international retailers like Tommy Hilfiger and Crocs who are, in Crocs’ case, doing business in more than ninety countries.  So these companies have volumes of data originating from seasonality differences, area variations, sizes and labelling.  But these companies also have access to that master data, which they can put in the hands of store associates and say “here’s the new product that’s coming”, or with your brand advocates who are encouraged to share that sneak peek with their friends through social media.  All of this is using the same set of master data, so that the information that created the products themselves is also supporting the selling systems.

BH: For us, that really is the essence of product lifecycle management.  No matter where a product is up to in its lifespan – on the inspiration board or at the point of sale – all the information pertaining to that product should be available to whoever is responsible for that product at that time.

CH: We’ve certainly found that some people have, if you like, the “checkbox” of PLM in their minds, when, as you say, it’s much broader: it’s everything from design to production, delivery, distribution and more.  And one of the things that you possibly don’t know is that, now that Ariba is part of SAP, we have the world’s largest business network in place.  So for trading partners like retailers and manufacturers, they’re able to do business interchange through the cloud, lowering the cost of transaction and then passing that saving on to the consumer.

More importantly, this kind of agility can help to improve cycle times, which is absolutely critical for the fast fashion companies you mentioned – like Zara.

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BH: It seems as though, in your work with brands like Crocs, you must gain some early insight into the trends that are going to shape the future of retail.  Are there any in particular – either from NRF or from your work in the industry – that you see as being particularly prominent this coming year?

Stephen Henly: We’re at a point now where trends are consolidating and coming together.  For instance, we’ve touched on omni-channel today, but that’s something that’s been talked about for several years now as a coming revolution- Well now we are right in the middle of that revolution, but, more importantly, it’s about looking at how retailers stay in touch with the consumer through every channel and how retailers, turn that touch into compelling retail stories.  And that means that you have to handle big data in a big way, in real time.  More and more of the discussions we’ve having have been with customers asking how they do that – how do they create those compelling stories – and for SAP it involves everything from in-memory technology to analytics to mobile applications.

KB: That’s the relevance of a brand, after all – whether you’re in the luxury market or in fast fashion that brand experience counts for a lot.  Consumers are increasingly asking themselves whether, as a Zara shopper or an H&M shopper, they are actually influencing the design of the product and the experience.

[quote]We can all have the systems in place – to plan, to automate – but we have to go the last mile and make it usable for the consumer.[/quote]

BH: I agree.  If there’s one thing I’ve been able to distil from the keynotes and demonstrations here at NRF, it’s that consumer behaviour-led product generation and consistency of that experience is going to absolutely define the future.  Now, omni-channel is essentially impossible without that wealth of information and big data…

SH: Exactly.

BH: But the important point of differentiation is that big data should serve the omni-channel experience in almost a counter-intuitive way, by allowing for some experiences to be unique to the store, for example, or to e-commerce, rather than just duplicating the experience of one channel in another.

KB: I actually had a fascinating experience shopping at Abercrombie & Fitch just the other day – something that I don’t think would have been possible in my home country, Germany, given how far ahead some of the U.S. retailers are.  I ordered a product through the A&F website, and I was told that I could pick it up in-store within twenty-four hours, which worked to drive me into the store.  Normally I wouldn’t have gone to the store, but while I was there I picked up some t-shirts and a gift for my daughter, and I think this really is the future of fashion retail, where online business drives store business.

SH: This is a key point, particularly for Europe.  As you know, in the U.K. and further afield we have retail real estate that retailers simply cannot get out of.  However you cut the cake, those retailers can’t switch off their High Street presence overnight.  So, the compelling question for retailers is, “how do I take those different “touches” between the retailer and the customer, through all these different channels, and manage those millions of terabytes of data to create a seamless experience that moves my customers from web to mobile to store?”

[quote]The market is driving the value of brands today, and companies need to accept that things work both ways.[/quote]

After all, as Klaus’s experience shows, retailers want you in their stores.  They can up-sell on the web to an extent, but if they can get you into the store, in front of a sales associate, and empower that sales associate with the information to say, “Mr. Hanson, we notice you were looking at a shirt online earlier today; have you thought about pairing it with this tie and this jacket?”.

BH: That could be very persuasive…

SH: It’s the Holy Grail, really. Retailers are getting to it in different ways today, and I think Klaus is right that, at the moment, the U.S. is a little ahead of Europe in that respect.

CH: As you can see, everybody is doing things a little bit differently, but the one unifying factor is that mobile is impacting consumer behaviour and employee behaviour.  A lot of retailers renovate their stores, but I think it’s equally important that they renovate the employee experience periodically. If you look at young people working in stores, and those who are doing the buying and the creativity, those people are used to carrying their smart devices around – they’re used to having information at their fingertips, and they’re wondering why they can’t use that same technology to deliver a great consumer experience.

All of that mobile technology that SAP has brought to bear is designed to deliver the enterprise in your pocket or purse. If I want to know about this new product – and I’ve been talking about cosmetics here, but you can easily imagine a fashion example – where the retailer has selected organic cotton, manufactured in a sustainable way, so the retailer has to make sure that, whatever platform the consumer is using, he or she can access that product information.

Instead of retail just being a method of distribution – a place to sell stuff – companies are instead closing the loop, using their own information to market products, and also using social media tools to influence the design cycle. The market is driving the value of brands today, and companies need to accept that things work both ways.

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BH: I suppose that’s a large part of any conversation about big data. We have to understand that it’s not just the reams of product information we generate as we create garments or cosmetics or electronics, but also the information that comes from our consumers.

SH:  The paradigm for the last fifty years has been as follows: retailers select products based on what they see in the rear view mirror.  It was all about what sold, and that dictated what the retailer thinks the customer wants.  Today what you have to do is be receptive to the customer telling you what they want; they have access to the global marketplace, so as a retailer I can no longer show my customers  what the look is, I have to tap into what they want and ask myself how much of it should be part of my brand?

That’s a real shift: today we’re looking at predictive information, not history.  Big data, in-memory processing, real-time information – all of those things come together to enable the retailer to be ready for the customer.

[quote]Customers ask how they [can] create those compelling stories – and for SAP it involves everything from in-memory technology to analytics to mobile applications.[/quote]

CH: And there’s no excuse now not to know, up to the minute, how sales figures are shaping up.  Whether you’re a store manager evaluating remaining selling time and prioritising certain items, or a brand manager who needs to see whether he or she is achieving sales projections.  Today they can have all of that information at their fingertips wherever they are in the world, and SAP is behind so much more of the processes of apparel and footwear than perhaps people realise.

BH: If I’m right, what you’re really enabling people to do is make informed decisions at every level – from product development to store planning.

SH: When I look back to the time that I worked in retail, if we needed this kind of real-time information we went out onto the store floors and talked to people – that’s what we had to do.  And I can tell you now that there are still retailers doing that, but they’re able to achieve something in just one store that now, as Colin said, their competitors can do for their entire operations.  And this opens up a range of opportunities, like social media promotions and differential pricing by region, which would not have been possible before.

KB: It’s important to note, too, that while SAP certainly has the right solutions for retailers, we need to look beyond that to see what the adoption rate is like for the consumer.  Those in-store and mobile consumer-grade applications we’re talking about have seen us make a huge shift to focus on the user experience, and UX has become a big thing for SAP.  We can all have the systems in place – to plan, to automate – but we have to go the last mile and make it usable for the consumer.

[quote]I think this really is the future of fashion retail, where online business drives store business.[/quote]

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SH: I do think that if we take a step back, even with all this technology, the need to go shopping still exists.  Despite everything we have, there’s this need to touch and to feel, and that need has to be superannuated and improved by this sense of “stories” and “theatre” when you arrive in-store.  Retailers need a little bit more in that store environment to avoid it becoming a simple cost comparison with online retail.

As SAP we provide the foundation technology that allows retailers to innovate those kinds of experiences within the context of their brand.  And more and more, over the coming years, we’re going to be doing this in real-time and across channels, so that retailers aren’t looking at their “online performance” or their “bricks and mortar performance”, but rather their performance as a whole.  When you’re able to deliver that kind of consistency and enjoy that sort of oversight, you can begin to move the needle and steer certain customers to certain channels, for example, where their experience and their story is going to be best catered for.

Ben Hanson Ben Hanson is one of WhichPLM’s top contributors. Ben has worked for magazines, newspapers, local government agencies, multi-million pound conservation projects, museums and creative publications before his eventual migration to the Retail, Footwear and Apparel industry.Having previously served as WhichPLM’s Editor, Ben knows the WhichPLM style, and has been responsible for many of our on-the-ground reports and interviews over the last few years. With a background in literature, marketing and communications, Ben has more than a decade’s worth of experience, and is now viewed as one of the industry’s best-known writers.