Retail margins are slim these days. That means it’s more important than ever to have the right products shelved at the right time. SAP HANA helps achieve this, and more.
We talked to SAP manager Alexander Kurtzahn, responsible for retail and wholesale solutions, about how SAP HANA is disrupting retail.
Q: Through your time at Tengelmann and KarstadtQuelle, and your experience as a service provider, you are very familiar with the retailer’s perspective. What has changed over the last few years?
A: It’s becoming ever more clear that retailers running systems that provide real-time access to all current data have more opportunities to address customers, which gives them a strong competitive edge. This parallels customers’ tendency to first browse in stores and then order online. Imagine that, while on a weekend ski trip, a nice winter coat catches your eye. You later find it in your favorite retailer’s online shop, but can’t quite decide whether you actually want to order it, so the retailer reserves one for you to try on in one of their stores. You then drive to the store to try on the coat. It would now be very annoying, for both you and the retailer, if the coat wasn’t in stock at the store.
The same principle applies to all scenarios in which customers are addressed through various buying channels. We are talking about omnichannel retailing, or omnichannel commerce, which means that all relevant data is available to the retailer in real time, and is always up to date.
Q: So there is transparency across all branches…
A: What you get is ad-hoc transparency of stock, which is far from the current norm. Especially for retail companies dealing in fast-turnover products, such as supermarket chains like EDEKA, which has over 12,000 stores in Germany, achieving this is a real challenge, because up-to-date sales data has traditionally always been stored on-site in the cashier systems. The ultimate aim, however, should be to make stock and sales data for each respective branch accessible in real time.
SAP Customer Activity Repository, an SAP HANA cloud solution, makes this possible.
Q: This solution went to market about one year ago and integrates sales and stock data in a single location, thereby enabling an overview of the entire situation.
A: That’s right, and the market has a real need for this kind of solution. Just recently there were reports about a supermarket chain’s drive-thru concept. It’s a simple idea: Customers pressed for time select and order the ingredients they need for their dinner through an online shop. Later that day, they pick up their pre-packed bag of goods from the drive-thru, only to find that several products are missing. Why is that? Because the centralized online shop site doesn’t make use of real-time stock data. It’s fairly obvious that this kind of mistake can ruin a business.
Q: That makes a lot of sense. Now, clearly not every retailer operates a drive-thru. Can conventional stores also benefit from this type of system?
A: Our system knows how quickly certain products are likely to sell. If, for example, a store doesn’t sell any milk for a specified period of time despite being stocked with it, the system will draw attention to this. Maybe an employee forgot to fill the shelves? This would mean that although the store is adequately stocked, the product is not available to the customer.
Q: It’s especially difficult to predict how long stocks of perishable items like fruit and vegetables are going to last. What’s the best approach here?
A: Swiss supermarket chain COOP, for example, adjusts its prognosis for the latter part of the day based on the morning’s sales, and places an appropriate second order at noon. Another retailer from Germany takes it one step further: Using our system, he estimates his sales for the rest of the day. If a Saturday afternoon prognosis suggests that not enough perishable goods will be sold before closing time, select items are sold at reduced prices, resulting in a kind of Happy Hour. This requires fast and precise analyses.
Q: While customers may be shopping according to their individual tastes, similar shopping behaviors are found across the board. How can these be determined, and how can retailers benefit?
A: Someone who buys asparagus will often also add potatoes or white wine to their shopping cart. Someone buying whisky will frequently buy cola, and those buying beer will often also buy potato chips. These kinds of associations can be determined through what is known as cross-selling analysis, and stock levels can be adjusted accordingly.
But there are also product associations that are less obvious. One of our customers, for instance, identified a customer group that it was very interested in: Women between 35 and 45 who regularly buy premium cosmetic products. The retailer asked itself how it could motivate this group to shop at its stores more frequently. An obvious choice would be to expand the decorative cosmetics offerings. An analysis with our system, however, revealed that this group of impulsive cosmetics buyers also like to buy diet cola, and that offering this product increases cosmetics sales.
Q: These kinds of insights are also of interest in the context of the annual talks held between suppliers and retail companies. How do these insights influence the dialogue?
A: If Samsung is in negotiations with large electronics chain retailers, such as Media Saturn in Germany, being able to simulate certain parameters on-screen is very advantageous. In the case of big brands such as Samsung, Apple, and Eizo, a deal may involve thousands of TVs, PCs, or screens. A wide range of factors such as volume, positioning, and promotion will all affect the offer. The aim is to make up to 500 potentially relevant conditions comparable. For this purpose, using the real-time condition management system gicom Vendor Profitability Planning & Analytics (VPPA) from our partner gicom is very helpful. And, since it’s not just a single article or supplier that needs to be optimized, the interconnected associations within the offered product range also play a role.
Q: Consumer goods manufacturers will turn green with envy once they hear about the technological arsenal that retail is equipped with…
A: Well, to be honest, the margins in the consumer goods industry are already high enough to make retail the envious party, retail is in a better position to quickly adapt to customer needs when it comes to the availability of sales data and how up to date that data is. Companies like adidas or Hugo Boss are unlikely to care about this, because as retailers and wholesalers, they distribute and sell their own brands, and implement the appropriate SAP retail solutions correspondingly.