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AN RIS WHITE PAPER
White Paper | The Intelligent Store
THE INTELLIGENT STORE
Driving customer-valued innovation through deeper insight
IN CONJUNCTION WITH:
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M
eeting customer needs Retailers must constantly use information to
improve themselves, and to understand current
and reacting quickly to patterns and future trends. With this proactive,
flexible business model comes a shift—from
conditions “on the reporting and managing by historical trends to
using data to forecast future behavior, identify
floor” have long been new opportunities, and predict threats. Business
intelligence (BI) solutions come with the
among the primary challenges faced by retailers. promise to enable this business insight thru
information delivery.
Today, these challenges are joined by a new However, retailers are often hesitant to
implement the business intelligence tools that can
generation of customer trends and competitive gather, interpret, and present such information.
Robert Garf and Fenella Scott point out in the AMR
threats. To thrive in this environment, retailers Research Report, Retail Industry IT Spending
Profile, 2005-2006: Retailers Continue Technology
must be able to quickly make the right decisions Spending on Demand Intelligence, Store Execution,
and Improved Usability: “As retailers are accepting
to respond to both the market and their customers, more packaged applications to run critical areas of
their business, they want to mitigate risks
while maintaining the flexibility needed to associated with third-party software providers.”
What’s needed, then, is a powerful, user-
continually enhance the delivery of products friendly solution to the knotty problem of putting
data in the hands of those who are best suited to
and services. act upon it, whether at the store level or the
This dynamic market is driving retailers executive suite. At present, no single such solution
towards innovation that delivers deeper customer exists. However, as a result of developing vendor
and product insight while bridging the gap partnerships, there are solutions available to
between corporate operations and individual store forward-focused retailers who are seeking
performance. Store-level managers and competitive advantage—solutions that offer
associates need real-time access to key almost seamless integration and deploy with a
information, a “bird’s-eye view” of sales minimum of difficulty.
patterns—and even supply chain performance. At Retailers of any size can see significant
the same time, that information needs to be improvement in store and enterprise operations by
readily available to the corporate level to support implementing solutions that allow them to “set the
decision-making and enable the provisioning of dial” in terms of how much decision making data
resources needed to maximize sales and and power is placed at the fingertips of store-level
profitability throughout the enterprise. As a managers and associates. These solutions should
result, in their search for an intelligent store, also provide appropriate—and secure—higher-
retailers have had to balance their desire for top- level views to managers and executives. Although
down control with the challenge of getting the transformation of traditional business models
centrally collected data to the store level in time and information integration may seem daunting, a
to have a real impact on sales and store more agile, responsive, and intelligent store can be
performance. the reward.
2 [Link]
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“OPERATIONALLY FOCUSED BUSINESS INTELLIGENCE
APPLICATIONS LINK REAL-TIME BUSINESS ACTIVITY
MONITORING WITH THE HISTORICAL CONTEXT OF BI
TOOLS. THEY OFFER RAPID DECISION SUPPORT FOR
DAILY BUSINESS OPERATIONS.” — Bill Gassman, Gartner
GOAL: DATA ACQUISITION leveraging the expertise and experience of the
AND AVAILABILITY solution providers.
It seems self-evident that if the goal is to achieve For example, a retail-specific enterprise data
true customer centricity, retailers must often warehouse is the cornerstone of IBM’s Retail
realign the basic building blocks of their business Business Intelligence Solution. This ARTS-
with clearly defined, customer-focused objectives. compliant model covers Customer Analytics,
Yet many retailers find this realignment difficult Product Evaluation, Merchandising Effectiveness,
at best because of internally created limitations Store Operations, and Multi-Channel execution,
and constraints, including organizational providing an information environment that spans
silos, process disconnects, and inflexible all aspects of a retailer’s core business.
infrastructures. To overcome these internal These solutions enable true enterprise
obstacles, retailers need to build a common view reorganization around overarching, customer-
of the customer and the ability to see and respond centric goals. This is not superficial
to customer behavior, making “one view of the reorganization, but deep transformation that can
truth” visible across the enterprise. only be achieved by accomplishing the goal of
Most retailers, of course, are already collecting not just collecting and warehousing data, but
mountains of data. Data is pulled from POS, using tools that make that data available at a
from CRM programs including loyalty cards, moment’s notice.
and from numerous other points. To make use of
this data, it must be warehoused in a manner that GOAL: DATA INTERPRETATION
puts information at the fingertips of those best Obtaining vast amounts of data and making that
positioned to exploit the information in as close data available is only the first step. Raw data is
to real time as possible. overwhelming and filled with unusable
The first step toward this goal is the information. Relying on analysts to make sense
establishment of a fast, scalable data of the mountains of data collected by even small
warehouse. This foundation is critical for retailers is a recipe for failure; even if the
creating a business intelligence infrastructure analysis is spot-on, it takes far too long to
that delivers actionable information quickly separate the wheat from the chaff and put
and efficiently to those who need it. Industry actionable data and analysis in the hands of the
specific warehouse offerings can enable right decision makers.
retailers to not only accelerate deployment but Analysts such as Gartner’s Bill Gassman
also realize tremendous benefits from support this proposition. In the Gartner research,
[Link] 3
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BUSINESS BRIEF
EDEKA
Acquiring data and making it available is a challenge for retailers
worldwide. German food wholesaler and retailer EDEKA
Handelsgesellschaft Hessenring GmbH (EDEKA) is a prime example.
Since the 1980s, EDEKA has expanded dramatically; it now consists
of 60 wholly owned supermarkets and 1,000 retailers in the Hessen
and Thuringian regions of Germany, employing 6,100 people, and
reaching revenues in excess of US $14 billion in 2004
(source: [Link]
The company’s physical growth was accompanied by an increase
in its number of data warehouse users, and the added demand was
slowing the system.
To accommodate the demand and prepare for future growth, EDEKA
migrated its IBM DB2 data warehouse to the IBM e-server iSeries 830
system. “(This) provides us with a highly scalable and cost-effective
platform for our data warehouse,” explains Sven Hohmann, manager
of data warehouse solutions for EDEKA. “We now enjoy more valuable
data, delivered faster and at lower costs.”
The system now processes millions of sales transaction records daily.
And the system has the ability to expand along with EDEKA. The
company plans to leverage the massive data acquisition and delivery
capabilities to identify and track consumer shopping patterns and
trends, putting powerful, actionable data in the right hands. “We’re
deriving incredible value from our updated data warehouse system,”
says Hohmann. “It empowers us to make much more logical business
decisions, which helps us improve our profits significantly.”
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BAM Enhances Operationally Focused Business relating to their particular functions and goals. But
Intelligence, Gassman wrote: “Operationally even when these dashboards and scorecards
focused business intelligence applications link leverage consistent metrics across the enterprise,
real-time business activity monitoring with the this too easily leads to the creation of institutional
historical context of BI tools. They offer rapid silos where information is hidden, even if
decision support for daily business operations.” inadvertently.
Customizable business intelligence (BI) tools use BI tools that integrate the various personalized
features including scorecards and process dashboards, scorecards, and reports help ensure
dashboards to allow retailers to establish metrics and that a single version of the truth is visible at all
key performance indicators (KPIs) unique to their levels and business units, and that all levels are
businesses and needs. Business Objects has taken BI working within a framework that keeps regional
one step beyond by offering pre-built retail analytics and divisional goals in line with and targeting the
for store assortment optimization, vendor overall corporate objectives.
performance, customer profiling, and campaign Just as importantly, the implementation of BI
management. These BI tools can sort through and tools such as those from Business Objects enables
analyze huge amounts of data, and do so quickly retailers to focus their data analysis. Retail
enough to offer virtually real-time reporting and on- managers can easily be swept away by the tide of
demand access to key metrics and exception data that pours in from a powerful data warehouse.
alerting, providing improved visibility and greater BI solutions can, for example, simplify the process
insight into back-end systems. This, in turn, for category managers looking to analyze
improves retailers’ ability to manage customers, company-wide, store segment, and store
sales, employees, inventory, and finances. assortment composition to help increase product
If executives interact with “on the floor” store sales revenue and profitability. The same tools can
managers, the demand and desire for BI tools enable supply chain managers to monitor stock
should be clear to both groups. An IBM study— availability and vendor service performance, using
involving retailers from both North America and a dashboard with interactive analysis to guide stock
Europe, and spanning multiple retail segments— level improvements.
found that the store management teams BI tools help focus solely on the metrics that
consistently identified “access to information” as truly have an impact on the business. It’s said that
the number one challenge hindering their stores’ in retail, “there may be 50 performance metrics
ability to maximize sales and control expenses. that can be managed at a store, but 10 of them
The finding is all the more poignant in light of the drive 80% of profitability.” BI tools focus on the
fact that the information the store managers want 10 KPIs that matter by putting timely information
and need is there—the retailers have collected the in the hands of those who can act on that
data that will shine the light—but they need a information, as well as providing processes for
solution that both organizes and presents the taking the right action at the right time. And since
information in an actionable format. these tools are able to find and analyze—and more
It’s also critical that the BI tools implemented importantly, report and alert when exceptions are
have the flexibility to incorporate and integrate found—managers are able to spend more time
highly specialized dashboards and scorecards with managing and less time reviewing reams of data,
the enterprise’s overall objectives. Managers across searching for exceptions.
departments and at varying organizational levels For example, what if every store manager was
will, of necessity, have dashboards and scorecards alerted to each problem in his/her store as it started
[Link] 5
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BUSINESS BRIEF
MARK’S WORK
WEARHOUSE
Although Mark’s Work Wearhouse is a large hub in a giant wheel
(the 27-year-old company is a wholly owned subsidiary of Canadian
Tire Corporation), it instituted just the sort of “innovative approach”
described by Gartner’s Bill Gassman.
Mark’s used a network POS system to track its enterprise-wide sales,
but was forced to admit that the enterprise had outgrown the system.
Sales information was batch-transferred nightly from the stores, so
virtually no store information was available to headquarters in a
timely manner. “Without timely information from our stores,” explains
Harry Bekkema, Mark’s application team lead, “we couldn’t react to
market trends as quickly as we should, and risked missing out on
sales opportunities and hurting our profitability as a result.”
Updating to an integrated RBI system that would provide real-time
reporting, Mark’s management realized, would make the retailer more
responsive to the market and its customers, and that, in turn, would
drive sales, reduce costs, and boost profits.
Mark’s replaced its legacy POS system with an integrated, open,
Web-based sales reporting application using IBM DB2 and Business
Objects. The solution is accessible through the corporate intranet,
delivering a consolidated, real-time view of enterprise-wide sales
activity “from CEO to sales floor,” enabling quick responses to
changing patterns or events.
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to occur? What if each merchant and marketing implementation. This helps overcome the
manager was alerted whenever a product wasn’t challenges highlighted by Bill Gassman in
selling well—or as well as it could—and they were Gartner’s Business Intelligence and Data
able to find out why and take care of the problem? Integration Are Top Issues for Midsize Businesses,
What if all managers received such alerts, and if when he writes, “IT executives at midsize and
they didn’t address those performance alerts large businesses have many of the same issues
quickly enough, their supervisors would be about business intelligence, and data and
notified immediately? application integration. However, because MSBs
This is why, in the end, Langdoc, Hagerty and (medium and small businesses) lack the budget or
Suleski write in Implementing a New Retail BI staff to adopt leading-edge solutions, they require
and RPM Platform Strategy: Are You Ready, more innovative approaches.”
“Once deployed, new abilities like drill-down
reporting and daily insight (are) considered major CONCLUSION
advancements from the often batch-oriented, Achieving the goal of the intelligent store requires
weekly canned reports most merchants (have) establishing a holistic view of the enterprise, with
been receiving.” a simultaneous corporate perspective and store-
level view across customers, products, campaigns,
GOAL: RETAIL BUSINESS and vendors. Virtually any retailer, whether Tier
INTELLIGENCE One or SMB, can achieve dramatic results through
(RBI) INTEGRATION the deployment of integrated RBI systems. These
There is little argument that while megaretailers systems collect and analyze tremendous volumes
are forcing competitors to close the gap on of both enterprise and customer data to provide
efficiency and price, focusing exclusively on actionable information in a timely, easy to
those two metrics can undermine the business. To understand format without overloading decision
be truly competitive, retailers must optimize core makers with extraneous chaff.
activities—merchandising, pricing, supply chain, These integrated RBI systems, such as the
store operations, etc.—through systematic retail Retail Business Intelligence Solution from IBM
business intelligence (RBI) integration. and Business Objects’ Performance Management
There is at present a great deal of industry Applications for Retail, enable retailers to focus
focus on customer-facing and store-level on critical business issues, while simultaneously
solutions, but a better model is to implement a providing the ability to put decision-making
complete, integrated RBI system that offers the power where it is most effective. At the store level
ability to obtain, analyze, and present actionable this can help retailers optimize in-store staffing,
information and a single view of the truth across marketing, and promotion. At higher levels
the enterprise seamlessly and in real time. within the corporation, the value extends
Patchwork systems can be implemented, but they across merchandising, store assortment, category
require massive investments in time, capital, and management, and financial planning.
IT expertise to create, operate, and maintain. Such RBI systems provide a consistent,
Greater organizational efficiency and dynamic, enterprise-wide view of information, so
operational capabilities, at this time, are offered retailers can focus on enterprise-wide goals,
through partnered systems that allow retailers to working together as a cohesive, informed team
remain focused on their business throughout the instead of individual silos.■
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ABOUT BUSINESS OBJECTS
Business Objects is the world’s leading business intelligence (BI) software company. With more
than 35,000 customers worldwide, including over 80% of the Fortune 500, Business Objects
helps organizations gain better insight into their business, improve decision-making, and
optimize enterprise performance. The company’s business intelligence platform,
BusinessObjects™ XI, offers the BI industry’s most advanced and complete platform for
performance management, planning, reporting, query and analysis, and enterprise information
management.
BusinessObjects XI includes Crystal Reports®, the industry standard for enterprise reporting.
Business Objects has built the industry’s strongest and most diverse partner community, and also
offers consulting and education services to help customers effectively deploy their business
intelligence projects.
Business Objects has dual headquarters in San Jose, Calif., and Paris, France. The company’s
stock is traded on both the NASDAQ (BOBJ) and Euronext Paris (ISIN: FR0004026250 - BOB)
stock exchanges.
For information regarding Business Objects for Retail, please visit us at:
■ Business Objects Retail Solutions:
[Link]/solutions/industry_solutions/retail
■ Business Objects Applications for Retail: [Link]/products/analyticapps
■ Business Objects Performance Management:
[Link]/products/performancemanagement
ABOUT IBM
IBM, the world’s largest information technology company, is the leader in providing the Retail
Industry with a full range of retail solutions, including: point-of-sale systems, Kiosks, automated
self-checkout systems, other hardware and software technology, consulting services and more.
IBM has been providing dependable point-of-sale solutions to the global retail industry for over
30 years, installing more than 2 million POS systems to over 100,000 stores in 100 countries. Our
Business Partners help bring you innovative solutions for specialty retail, food service, general
retail, grocery, gas and convenience, as well as business intelligence, enterprise management and
multi-channel business solutions. For more information on IBM Retail Solutions, please visit our
websites:
■ IBM Global Retail Solutions: [Link]/industries/retail
■ IBM Small and Medium Business Retail Solutions: [Link]/businesscenter/retail
■ IBM Retail Store Solutions: [Link]/industries/retail/store
■ IBM Retail Business Intelligence Solution: [Link]