Williams-Sonoma ploughs ahead with two-tier ERP for global expansion

Kitchenware, utensils and furniture retailer Williams-Sonoma has a great presence in the US, with a number of dominant brands including Pottery Barn and West Elm. The company made about $4.4 billion last year in revenue and its physical presence in the States is strong with some 500+ stores. However, when Laura Alber replaced W. Howard Lester as CEO in 2010 there was a shift in strategy from solely wanting to focus on the domestic market to wanting to tap into global opportunities.

Initially this global expansion took the form of franchises in the Middle East, but not wanting to give away too much control, Williams-Sonoma decided to start opening its own stores and launching its own websites abroad – starting with two locations in Australia, then moving on to the UK. However, to do this it needed to expand its back and front end systems outside of the US with websites, Point-of-Sales systems, ERP, procurement, etc.

Domestically the company has invested millions of dollars in creating highly customised on-premise solutions, which mesh together a number of technologies and vendors, including SAP and Oracle. The company literally had no idea what it wanted to use for its international plans and so went to market with an RFP asking for 'retail in a box'. Williams-Sonoma settled on cloud-based vendor NetSuite and VP of international systems Rob Bogan explained at their annual conference last week that the decision to create a two-tier ERP environment enabled the company to expand quickly, at a low cost. He said:

“We wanted company owned stores, company owned websites around the world – the time was right but we needed to move quickly. We looked at using the domestic solution we use in the US for this, but taking those systems global was going to be way too expensive and too slow to market.  

“We also didn't want a situation where the cost and the depreciation was going to cripple the international business where they were not going to see a profit for a decade or more. Needed the cost profile, needed something that was scalable.

“Following the decision to go with NetSuite we launched four websites in under 100 days, for those who have never done anything like that before, it's huge. We were definitely superheroes for a while and the platform enabled us to do that.”

An adjustment to the cloud

Although Williams-Sonoma is still very much 'leveraging' its existing systems in the US, where it has created workflows that extract information into the cloud-based product – including things like expensive high-res images it has already invested in – the switch to cloud had its challenges for the company, where employees were faced with a different way of working. 

One of the first things that Bogan's team struggled with was a conflict between what they wanted to roll-out, given the experience in the US market, and the functionality that the employees wanted from the new product. He said:

“When NetSuite came in the door a lot of our users thought it was amazing and took whatever came their way. I would say that we pushed back a lot because we in a sense had a reference implementation, we have millions of dollars worth of software that we have built in the US and we know what we want. That became a battle. We were successful by using the 80/20 rule, but we had a lot of heated discussions to make sure that people were being realistic about what they were asking for.”

However, having been live for a year now, Bogan has come to realise that there are some additional functions that would be useful to Williams-Sonoma, which he is looking to implement in the coming months:

“I think there are things that we thought we didn't need or things that we consciously made a decision not to do that now we are coming back to. We felt that allocations to the stores, brick in brick out would work, whatever I sell I will replenish – now we have got more stores and more going on we have built something that has an algorithm and can do it in a bit more automative and suggestive way. 

“One of the things that we have been pushing on is the ability from the PoS to be able to see exactly where stock is, we want that ability so that when they are there with the customer they can easily see where stuff is available.”

There was also an adjustment for employees that were used to dealing with an on-premise system that relied on traditional batch reports, where they were now faced with the capability to do things in real-time and monitor progress throughout the day. Bogan explained how this left employees dazed and confused and it got to the point where he actually considered stripping out the functionality. He said:

“Shift from batch to real-time reporting was a challenge for new territories. Funnily that's a bit of a mind-shift, some people don't understand that if you're running a report now and someone else runs it twenty minutes later, they are going to be different.  

“Yeah they're going to be different because sales are still happening, it's 24 hours a day. That's been a bit of a challenge, we were almost at a point where we were going to force an end of day just so that we can draw a line and people can get their head around it.”

Will the cloud ever replace on-premise?

Towards the end of Bogan's discussion about the implementation of NetSuite he said that he and his team have been in the game long enough to know that it would have taken millions of dollars and a significantly longer time to roll out ERP internationally using one of the traditional on-premise players. He didn't want big bang and although he said that if he had done an apples for apples comparison between the likes of Oracle and NetSuite, Oracle probably would have won out on functionality – but Bogan said that NetSuite gave them enough to plough ahead and it was far more scalable, with a smaller price tag. However, since the rollout Williams-Sonoma is incredibly pleased with the tool. Bogan said:

“It gave us enough at the time, it gave us what we needed. But the amazing thing is that once we got into it, the feedback we got was that it was so much better. We have customised the hell out of the domestic market and in Oracle there's twenty screens to create a purchase order, whereas in NetSuite it is two and really it's the same information that we need.”

But will the company ever look to replace its domestic market with NetSuite and ditch the two-tier model in favour of pure cloud? Unlikely. Bogan said:

“We have invested a hell of a lot of money in the domestic business. In e-commerce domestically we have some pretty amazing websites and we use a lot of technologies and a lot of modelling engines, because we are at a point now where we have got all the low hanging fruit and we are going after specific things where we can move the needle in small ways. 

“We have invested a lot of money. If we were doing a re-do NetSuite would definitely be an option, but as far as what we have invested in, we are happy. Also, when I first went in and said we were going to a cloud solution people weren't sure about it. So I think it's crawl, walk, run you know? I don't know what the future holds, but right now this is working for what we are doing.”