SAP has a huge, multi-level stand at the event, and this multi-tiered public face reflects its current strategy: to build out and up from its HANA in-memory database technology and embrace different verticals. Against this goal, the company's $6 billion 2010 acquisition of Sybase and its 2013 purchase of on-demand multichannel commerce platform Hybris are beginning to pay dividends.
So what's the headline retail industry story for SAP in terms of what it provides its enterprise customers? Nancy Casey is VP of Retail Industry Solution Management. She says:
Our differentiator when we're working with this sector is how we drive customer insight to build a real-time, personalised experience. SAP traditionally has a name in ERP, in financial order management, and so on, and so it's been a major shift for us, focusing on deep insights and analytics and how you can influence purchasing behaviour.
Planners in retail used to be very siloed in their thinking. What I think is really exciting now is that we're able to take that data and syphon it into the planning process with in-depth information, so that they can learn so much about the consumer.
Everything's tracked: what they say about you on social media, what's in their market basket. That's our concept of localised global services: knowing how people of a particular demographic in a particular zipcode usually shop and why. That's real-time information that you can get in a daily or weekly report.
But what about the retailers themselves: how is their world changing? In the US, at least, omni-channel is last year's news, says Lori Mitchell-Keller, senior VP and SAP's Head of Global Retail:
There are two or three big things that retailers are trying to do. First is becoming much more agile in this new world of omni-channel that they already exist in. Several years ago, we started talking about omni-channel where retailers were looking at using a mix of physical stores, online presences and mobile technologies to better serve their customers.
But the second stage is what I like to call 'omni-commerce', where you see the channels interact with each other: I buy online, I return in store or pick up in store. I'm in the store, but they don't have the product so I order online from my phone, and so on. Those channels have really started interacting, and I think that's where most retailers are, or should be.
But I think that consumers are now at a different place, which I like to call the 'omni-customer'. Consumers certainly want multiple channels from which to buy their favourite brands, and they want to have those various channels to interact, but they also want brands to be very consistent across those channels so that they have a common culture, a common brand experience.
Next, they want that brand to understand them – to know what they like and what they buy, to suggest things, to give them relevant promotions and upsell opportunities that are unique to them.
You know, I love it when I go on one of the world's largest ecommerce sites and I'm told 'Other people who looked at this bought these things'. And I always think, 'I don't care what other people looked at. Help me to understand what I might like to look at, based on what I've looked at in the past.
But such things are an inexact science. Seeing what other people buy (the Amazon model) could equally prompt customer experimentation and new purchases, while seeing items that are similar to previous purchases (the eBay model) could present false assumptions about their preferences, based on isolated purchases. We are not always what we buy. Mitchell-Keller counters:
But there's no reason why, when I walk into one of my favourite stores where I buy a ton of stuff, they have no idea who I am or what I buy There's a huge missed opportunity there. And the technology exists.
SAP has certainly created some innovations in this space to be able to allow retailers to bring in all of their web, mobile and point-of-sale transactions, in real time if they wish, into a responsive shopping experience. What we know is this: customer loyalty increases by 53 per cent if a retailer can offer customers a personalised experience.
But that's where the consumers are, it's not where many retailers are. Retailers recognise that they need to get there, but their ability to take in that information within their old infrastructures is very difficult.
Start her up
This is where CAR comes in, SAP's Customer Activity Repository, a foundation system that collects transactional data from multiple sources into a single container – and which, importantly, doesn't force retailers to change their underlying systems. As long as they have online and inventory systems that can push data into CAR, they can use SAP's technology – even if they're not SAP customers.
But that's just the data piece of the jigsaw, says Mitchell-Keller:
Many retailers get this wrong, she suggests, because they segment and analyse transactional data based on false assumptions, and on a narrow view of who a buyer is. Retail today is about how customers buy, she says, and not about traditional demographics. Mitchell-Keller explains:
The second thing is understanding your customers, and understanding your business in terms of how you fulfil those opportunities for your customer.
The example I always use is myself. 'Lori the 40-something software executive' is in a very different demographic category to 'Lori the stay-at-home mom with three kids', but we're the same person and we buy exactly the same. Retailers need to challenge their traditional ways of thinking about their customers, and start thinking about them as 'buying entities' and then sort and stock their stores based on that.
That's true, but it blows many brands out of the water. Nearly every major brand, from watches and cars to makeup and shampoo, via magazines, clothes, soft drinks and high street stores, are pitched at specific customers, based on assumptions about their age, gender, class, education, and roles in society. We can reel them off one by one: Apple and Virgin for young-thinking creatives who don't march with the crowd, and so on.
But as the mass middle-class patronage of 99p Stores demonstrates in the UK, many of those assumptions are false – as Mitchell-Keller implies – but they remain core to the aspirational worlds that brands build around themselves.
In other words: in a purely data-centric world in which everything is solely transactional, shops become undifferentiated warehouses stocking whatever sells and the US economy would disappear up its own Amazon.
The next step is store fulfilment, how retailers fulfil customer expectations. But while 90% of retailers are talking about it, maybe only 20 or 25 per cent of them are actually doing it. And the reason that they can't do it is that they don't have visibility into their own companies, into where the inventory sits.
Why is that? The answer is that they bring all of their transactions in on a nightly basis and not in real time, she suggests:
I was talking to a department store and it takes them 12 hours to bring in all of their transactions and update their inventory. So they risk missing customer expectations in the first minute, because all of their inventory is out of date. But with something like CAR you can bring in all of the transactions and inventory in real time into the same place. Unless you can do that, customer fulfilment is very difficult.
In SAP's view, all of this covers the 'agility' part of the picture. The missing piece, once again, is branding – which is deeply connected with something that SAP dislikes: demographics, rather than transactional data. What (or perhaps, who) a retailer stands for is what sets one company apart from another in a competitive marketplace.
I think the way that millennials buy from their phones and apps has crept into the way that all generations now buy – with the possible exception of people in their 80s or more. I think companies now need to help customers understand what they [the retailer] stands for, and who they are.
But away from the 'window dressing' of market positioning, who is inside the shop rather than why they are there is becoming rather more important to retailers – as SAP's Casey suggested earlier.
SAP says it can help here too with its Customer Insight 365 offering, which allows users to unlock, analyse and monetise mobile data. But GPS location and other cellphone data presents a world of problems to retailers, who are only able to aggregate anonymised data and draw general conclusions from it. As Mitchell-Keller notes:
Based on privacy laws, we can't provide information down to the individual, but we have connections with all the major mobile providers via our Sybase acqusition. But the insight that gives the retailer in terms of how the social piece [of the jigsaw] is coming into play in stores is critical information that they've never had. (SAP terms this process 'clientelling'.)
I think all of us are tired of talking about the millennial generation. Retailers are the real millennials.
Disclosure: at time of writing, SAP is a premier partner of diginomica.