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Multichannel retail depends on IT systems integration

Before dressing up brick-and-mortar locations with customer-facing technology, CIOs need to integrate IT systems.

With evidence mounting that the American shopping mall is in decline, if not dead as a doornail, can we finally say that the Internet, mobile phones, eBay, Amazon, Google, Pinterest, Instagram, you name it, have irrevocably changed how we shop? Yes and no, according to the technology experts at a recent gathering of chief digital officers in the mecca of shopping, New York City.

"Consumers are rapidly merging their shopping between online and in-store," said Michael Burgess, president of HBC Digital at Hudson's Bay Company and a presenter at the recent CDO Summit.

In a 2014 Google study, more than half (51%) of respondents reported doing some research online before visiting a brick-and-mortar location and making a purchase. However, 32% of respondents from the same survey reported using brick-and-mortar locations as part of the research process; that is, they start online, then drop by a store to review a product but return online to make the purchase. In China, "this 32% is becoming a prevalent form of shopping," Burgess said. "They can get the best price on their mobile device."

Architecting IT systems has become as convoluted as the multichannel retail shopping experience. CIOs, chief digital officers and other IT leaders not only have to build and support new platforms to manage the growing e-commerce market, but, they also have to integrate those modern platforms with legacy systems if they want to mirror how their customers are shopping. It's a big challenge, further complicated by the growing trend among born-online retail startups moving into the brick-and-mortar business.

Integration key to e-commerce platform's success

For the Aldo Group, a global chain of shoe and accessory stores headquartered in Montreal, it took new technology to build necessary bridges between legacy and more modern systems.

The general growth of e-commerce, mobile and in-store technologies are all powered by this data integration technology.
Lance Martelvice president and CIO, Aldo Group

As the company grew and took on projects, point-to-point data integrations proliferated, according to Lance Martel, vice president and CIO at Aldo. With a corporate business in North America and the U.K., a franchise business in 80 countries, and a wholesale line that sells to the likes of Nordstrom and Kohl's, point-to-point integrations became "difficult to manage and support," Martel said. "Projects were taking too long to deliver and were too costly to IT."

It's one reason why Martel, who, prior to serving as Aldo's CIO was vice president of cross-channel technology, focused on building out a new e-commerce platform that would, effectively, meld in-store and online shopping experiences. On the front end, the platform uses Hybris, an e-commerce software provider acquired by SAP in 2013 that manages customer data from across the enterprise; the back-end system is IBM Sterling Order Management, software that keeps tabs on inventory and order fulfillment. Together, they connect to Aldo's existing systems. "We realized the need for a data integration product between those products and our legacy system, like our core merchandising and warehouse system," he said.

Martel and his team considered IBM WebSphere Enterprise Service Bus, a software architecture model that enables heterogeneous systems and applications to communicate with each other. Aldo was already using the technology for a handful of small applications, but, in the end, "we felt it didn't necessarily bring the flexibility we wanted in terms of the types of integrations we were going to do on a global level," he said.

Instead, Martel and his team decided to experiment with a new integrator on the block: Talend, which launched in 2006 and is headquartered in Redwood City, Calif. Using Talend, Aldo was able to integrate more than 100 applications, services and databases, processing millions of events per day, according to a press release. Plus, the technology provided Aldo enough flexibility to support integration with the RESTful APIs commonly used by websites, mobile applications and social networking sites, as well as with flat file integrations. Both are "very different ways to move information around," Martel said.

A few months after the platform was rolled out last year, Aldo was already reaping the benefits with the largest Black Friday and Cyber Monday in its e-commerce sales history, according to Martel. "The general growth of e-commerce, mobile and in-store technologies are all powered by this data integration technology," he said.

Digitizing the storefront

The back-office is not the only place getting an IT makeover. Retailers are also using technology to turn brick-and-mortar locations into mini-destinations or entertainment hubs -- and that means loaded with digital fun. Referred to as stores of the future, these showrooms do more than provide display space for product, they also provide an interactive, digital customer experience.

"Digital in-store technology is key to the evolution of our customer experience in store and our customer decision journey," Martel said. "We're looking at putting technology in to support our sales associates in terms of better serving customers, and for customers to utilize in order to improve their overall experience with us."

There is, perhaps, no better example of this than Burberry Group plc, a 159-year-old company many consider to be a retail model for digital transformation. At the recent CDO Summit, presenters invoked the name of the London-based luxury brand in three separate sessions. One example trotted out by HBC Digital's Burgess is the radio frequency identification (RFID) tags and labels Burberry attaches to or embeds into products. When a customer picks up an item, radio signals interact with the display screen closest to the customer and trigger videos on how an item was made or what it looked like on the runway.

RFID is a fresh example of how retailers (Burberry is not alone) are digitizing the storefront, but Johanna Murphy, CMO and digital director at fashion retailer Ivanka Trump and a CDO Summit panelist, said that the in-store razzle dazzle wouldn't amount to much if the company's enterprise systems were not seamlessly integrated.

"We talk about operations as front and back of house," Murphy said. The front of the house might look more appealing, but the back end is "far more important," she said. If customers don't receive packages in a timely manner, or service is cumbersome, customer satisfaction plummets -- and that can affect any retailer's bottom line.

In a story that's been well reported over the years, Angela Ahrendts, the then-Burberry CEO who now works for Apple Inc., led an innovation charge that included integrating a global SAP ERP platform with CRM tools from Salesforce, while bringing call center in-house and trying to optimize the supply chain. "That's where Burberry really wins," Murphy said. "They don't divide their organization into front of the house and back of house."

Startups get in on the brick-and-mortar action

Retailers like Burberry and Aldo don't have the luxury of time to create a better multichannel retail experience. Established retailers that began as brick-and-mortar locations are now seeing increased competition from startups, and integrating systems to modernize the IT stack has never been more critical.

Take Rent the Runway, for example. Born online in 2009, Rent the Runway introduces the Netflix model to the fashion industry by renting rather than selling designer apparel and accessories to consumers. (Average age of a Rent the Runway customer: 29.) Last year, the startup continued to disrupt the industry when it began investing in brick-and-mortar locations in New York City, Washington, D.C., Chicago and Las Vegas. (And it's not alone. Other retail startups taking this back-to-the-future approach include Bonobos and Warby Parker.)

Jennifer HymanJennifer Hyman

"Building a brand is multifaceted, and you need to think about all of the channels that you're going to acquire customers," Jennifer Hyman, CEO and co-founder of Rent the Runway, said at the recent TechCrunch Disrupt in New York City. Brick-and-mortar locations do two things, Hyman said. "They're the most effective way for us to spend marketing dollars, because they have the strongest brand impact," Hyman said. And the stores double as mini-distribution centers, which "provide a better level of customer service." Unlike a traditional brick-and-mortar retailer that has shops in hundreds of locations, Hyman's long-term strategy is 15 to 20 stores in major metropolitan areas.

Then there's that greenfield advantage. Hyman has no doubt she can build out a retail store and provide a better multichannel retail experience in Runway's new stores than a traditional retailer ever could. She not only doesn't have to contend with legacy systems, but the company's workforce is also primed to provide the new shopping experience. "We're a technology-first company. Most of the people who work at Rent the Runway work in engineering or logistics," she said. Technology in the store is a given. And in the future?

"Imagine a world where you could come into our retail store, take a necklace, a handbag, say, 'I'm tired of this [piece I rented], here it is. I want to steal these two things from the store.' All without paying because we're going to beacon you so that you can just grab whatever you want," Hyman said. "I can do that because I can build out that functionality and disrupt the industry way before an established player could."

Let us know what you think of the story; email Nicole Laskowski, senior news writer, or find her on Twitter @TT_Nicole.

Next Steps

Capgemini's Didier Bonnet explains how businesses can become digital masters.

This was last published in May 2015

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