Then on the other hand you have companies such as Amazon, which is scaling up its logistics network, making use of its technology capabilities and competing on customer experience - but has not traditionally operated in the fresh foods and doesn’t yet have the footprint.
Upmarket grocery chain Whole Foods is taking a radical approach to these market changes and CIO Jason Buechel is ripping out and replacing a bunch of legacy systems with ‘single-view’ cloud-based software. The company is also putting a strong emphasis on data and analytics, to better engage with its customers.
My colleague Phil Wainewright has already covered some in-depth Whole Food case studies that touch on some of the topics mentioned in this article, which are also certainly worth a read. You can find them here and here.
Buechel was speaking Oppenheimer 16th Annual Conference this week, where he explained that the company’s underlying technology platforms are facing a dramatic overhaul in an attempt to create large efficiency savings (contributing to $300 million savings by 2017) and to give Whole Foods a quicker route to market. He said:
What we did about three years ago is take an overall look at where we need to go from a company perspective to support growth, efficiencies and ultimately support a lot of the key capabilities we needed to put into place.
And it had us look at our overall technology landscape and we put together a plan that's essentially is replacing 80% to 90% of our systems over a period of time. So we began that work about three years ago. We've a few years left to pull this off but we grouped it into three major platforms, our team member platform, our customer platform and our product platform.
A replacement of up to 90% of all a company’s systems shouldn’t be underestimated, it’s not something I come across regularly. Especially for a more ‘traditional’ player. However, Buechel spoke about how Whole Foods is focusing on its three core platforms: team member, customer and product.
The team member platform comes in the form of Workday and was implemented as a “foundation” in 2015. Buechel said that this is the one that the company had “made the most progress on”. He said:
It really allowed us to automate a lot of our HR processes and create one center common system for all team member information and attributes. That allowed us to do things like labor scheduling which is one of the strategic plug ins that sits on top of it, it also allowed us to do things like digital learning, new solutions for account management and recruiting. So this serves as a key foundation and supporting a lot of our other platforms.
Whole Foods is also focusing on its customer platform, which is the foundation for its point of sales (POS) system and commerce solution. The intention is for the company to move from four legacy systems across seven different instances, to one common solution that isn’t just about point of sales, but also about analytics. He said:
Yeah, so on the POS side of things…the first piece is really around speed to market. Two areas that I think will be most impactful - one is on pricing and promotion itself. So as we want to make price changes, [it allows us] to be more dynamic and responsive so we can do things more closer to realtime, same day. And putting together promotions that allow us to do things more in a personalized level.
So, as you're seeing the digital coupon side of things in our newest point of sale solution, we allow the ability to do personalized offers directly. So we can reward and recognize customers on that side of it and…now will have the ability to have one platform to really bring together all the different offerings that we want to have.
And finally, Whole Foods is focusing on its core product platform, which Buechel describes as the “most transformational project” and is about ‘changing the way that the company does business’. It is deploying Infor in the cloud for this and Whole Foods believes that it is developing the “next generation retail platform”. Buechel said:
For most retailers they have an ERP solution, we currently have a home grown one that is very disparate. There is 12 different instances, one for each of our regions. For us this is going to be about how we host our product information, how we give ordering, receiving, it's going to add a lot of new capabilities for us like replenishment, allocation, forecasting.
It's also going to support our purchasing evolution as we adjust the way that we purchase goods, select our assortment, price our goods and put them on promotion this will be our common system to allow our global team members, our regional team members and store team members to interact together.
We’re leveraging new advancements in machine learning, Big Data and we're doing it in an architecture that allows us to put all this in the cloud. Gets us away from batch jobs, things that are very much 1990s architecture.
And Buechel said that the benefits will be seen both in terms of speed to market for the customer and efficiencies for Whole Foods’ back-end. He said:
We'll be moving from 12 different systems to one common solution. So, today when we setup an item for instance, we set about 12 different times as we make price changes. So there is some basic efficiencies that happen there.
So I think the more exciting piece is the ability to automate stuff that we do today and ultimately actually use data and analytics to better support our business.”
And then on the category management side of things it's part of our purchasing evolution. Most of the things that we do today for assortment planning, space planning, pricing and promotions, we're doing sort of in 12 different ways and in Excel spreadsheets. And we don't have very sophisticated solutions there.
So this is giving us one cohesive system where whether you are a category manager at a global office or looking in purchasing on a region or even a store level, you have full view to the entire supply chain around the attributes to the product. So I think there is going to be lot of efficiency and labor and ultimately I think it allows us to drive our business better.
Finally, Buechel also commented on the threat of Amazon and other online retailers that are continuing tochallenge the grocery business. However, whilst Buechel wasn’t too bold to dismiss the threat, he interestingly commented that he feels more under pressure from the retailers that traditionally operate in the grocery business. He said:
I do think that the more media worthy things like Amazon Fresh and Blue Apron Plated get a lot of media attention and get some analyst coverage but at the end of the day by far the biggest competitors to Whole Foods are the legacy supermarket companies - Krogers, HEB in Texas, Publix in Florida, Wegmans on the East Coast. Those are all very, very good competitors and they’re all copying Whole Foods. I mean Whole Foods does fabulous sales per store, fabulous sales per square foot - far, far higher than our competitors do.
And part of that drive has been we’ve had unique products. And people have driven further to go to our stores than this typical, typical supermarket company. But you’re going to lose some of the business is going to bleed off in that direction. And we’ll compete with it as best we can but just the world is evolving and changing.