Store Integration Framework:
This is where IBM steps in with its Retail on Demand through the Store Integration Framework platform. One of the most critical design points of the IBM Store Integration Framework, says Wong, is the flexibility to cater for different types of stores in terms of size and format.
“We are architecting the Store Integration Framework, our next-generation-store platform, with three fundamental objectives.”
The first objective is to provide an open, resilient and secure store platform that is highly flexible and scalable, so retailers can easily interoperate their existing store environment with tomorrow’s technology and solutions.
The second objective is to create an environment that permits IBM’s retail clients to rapidly deploy new integrated solutions in the store and on the Web. “We want to give our retail clients the capability to easily experiment with new consumer solutions and respond more quickly to changing trends. Just like promotion offerings, retailers need to be able to try new solutions in the store, and if these don’t work, throw them out without spending a lot of time and money. If they do work, scale up and roll them out to all stores to quickly maximise their return on investment (ROI),” he elaborates.
The new platform’s third objective is to provide tight integration between the enterprise and the store such that the retailer can effectively and consistently manage its entire enterprise as one entity.
“Some companies are saying the retail-store and consumer-technology solutions are all about devices at ‘the edge’. This is simply not true,” asserts Wong. “A successful retail enterprise runs on a carefully choreographed set of processes, designed to deliver great consumer-shopping experiences and efficiently distribute merchandise. Most store solutions need to be deeply integrated throughout the enterprise to gain the most business value.”
The core technology for the Store Integration Framework comes from IBM’s proven WebSphere family of middleware. This is the same open technology that delivers the secure, high-availability environment for companies like eBay.
“We work closely with our Retail Store Solutions division, which builds the most robust point-of-sale systems in the world [IBM has been named the POS Systems Company of the Year 2004 by Frost & Sullivan], to develop a new set of features specifically for the store,” Wong explains.
These features include new system management, systems and data integration, and retail-business functions. The result is an open, robust and highly scalable store platform.
“By using a combination of open standards, and integration and messaging technology, we can easily pre-integrate the Store Integration Framework with our client’s existing in-store and enterprise systems to offer a new store platform that enables the rapid deployment of new applications,” says Wong.
“This new-found capability is driving some really innovative ideas with our retail clients,” he reveals, adding that he is extremely pleased with the receptiveness of retailers to IBM’s new approach.
Basically, retailers are interested in two things: To increase sales volume and maximise profit margins. A key measure on the effectiveness of its IT investment will be based on the ROI.
Says Wong: “ROI will vary by solution, but I think we are seeing some very interesting matrix in our various pilots. One of the more compelling is the ability to increase same-store sales by increasing market-basket size per shopping trip. This is being done by making relevant cross-sell/up-sell recommendations to consumers during the store trip. We are also seeing increased loyalty through greater return trips to the store and higher conversion rates, as consumers get better information to support their buying decisions.”
The next generation of retail-store solutions will likely need to be localised for each market, says Wong. This is particularly so for solutions that interact directly with consumers. “Just like websites, these solutions need to take into account local cultural preferences. That is why our regional business partners such as application-software developers and other hardware manufacturers play such an important role in the Retail on Demand strategy,” he explains.
“We see retailers are getting innovative about using the Web. In the early days, retailers were trying to figure out how best to leverage the Internet,” he says.
Wong is excited about this new retail synergy. “Retailers are start to realise that the Internet is not just about being another selling channel but rather a channel for building relevancy and intimacy with their customers. For example, imagine how a health-and-beauty retailer can build a trusted relationship with consumers at home and then show them in the store which products will suit them best. It is about creating relevance by integrating around the consumer at different touch points”
Another emerging development is that more retailers are moving towards IT outsourcing. “Outsourcing is certainly trending up, although I have not seen any data in Asia,” says Wong.
“One thing we see is retailers re-examining their business to determine what is core and differentiating it from what is just necessary to function as a business. Once identified, they are looking to outsource the non-core aspects of their business, and refocus their capabilities and investments on those that differentiate themselves. In retail, it is nearly universal that the retailer’s relationship with their customers is core.”
Recently, IBM announced an innovative outsourcing agreement with Boots, the largest pharmacy and health-care retailer in the UK. Under the agreement, Boots will be able to save money through outsourcing and, working with IBM, invest part of the savings in creating innovative new ways to build customer satisfaction and loyalty.
IBM is also one of the technology partners involved in Metro AG’s Future Store in Germany that has created quite a buzz on the international retail scene. What are the possibilities of creating such a store in Asia?
“What are we waiting for?” asks Wong. “I think it is important to remember that the Metro Future Store initiative was more of a pilot and demonstration of different available store technologies. An important takeaway from the project is that retailers do not need to and should not look at implementing all the new store technologies at once.
“We believe prudent prioritisation of solutions is necessary, but it is more important to plan ahead and avoid the trap of trying to using a Point Solution approach to build these new solutions. That would be analogous to building a house one room at a time, and having to integrate the wiring and plumbing each time. Retailers need to think ahead and carefully consider the advantages of using infrastructure for their stores,” he maintains.
Wong says the Asia-Pacific region is one of the fastest adopters of technology in the world, which augurs well for the retail industry. “On behalf of IBM, I have spent many years in the Asia-Pacific region, where the consumers’ speed of adoption of technology solutions never ceases to amaze me. In many cases, I think the challenge is for retailers to have the systems they need to catch up with the rapid pace of the changing tastes and sophistication of Asia-Pacific consumers.”
These are compelling reasons for Asian retailers to recreate their IT road map with reliable and reputable IT providers such as IBM.
“Retail is a great industry and one that is very important to IBM. We have more than 30 years of leadership in creating effective, innovative retail technology, and most of the world’s leading retailers are IBM clients in one form or another,” says Wong.
IBM has led the way for many ground-breaking innovations in retail - everything from the UPC code to inventory-forecasting techniques and supply chain to electronic product code (EPC) and radio-frequency identification (RFID).
“I believe we have earned the right and permission to work together with the industry to develop innovations like Retail on Demand. Together with our retail clients, business partners and industry trade bodies, we are ready to deliver the next generation of retailing.”
Indeed, IBM’s long years of experience in the retail industry allow it to be both a catalyst and an enabler. As Wong says: “We are not just about technology but also the fusion of business and technology that, together, can deliver on that strategy. We are not about technology parts but retail solutions. We provide the technology assets and the business process know-how needed by retailers to exploit the technology for their core business.”
From the beginning, IBM has been at the forefront of delivering open and interoperable solutions so that its clients across the globe can protect their existing investments and guarantee they will have choices in the future. That, basically, is the Retail on Demand road map - to provide retailers of today with choices, he says.
“It starts with vision and quickly moves to execution. We have spent two years formulating the Retail on Demand vision, [which has led us] to continue to learn and evolve. We understand retail - not just technology but also the detailed business processes needed to efficiently and effectively manage a retail operation. We should not be setting the retailer’s strategy and value proposition; that’s its job. But once that strategy is defined, we can bring it to life in new and innovative ways.”