THE INTELLIGENT ENTERPRISE FOR THE RETAIL INDUSTRY - Delivering experiences consumers can trust - EnterpriseTalk
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SAP Industries White Paper | Retail THE INTELLIGENT ENTERPRISE FOR THE RETAIL INDUSTRY Delivering experiences consumers can trust
SAP Industries White Paper | Retail
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
2
WELCOME
Dear Customers: The path forward is clear. It requires a
single-minded focus on understanding the
The past 15 years have been marked by
needs of consumers and creating
an unrelenting and disruptive consumer
distinctive and delightful experiences that
revolution – a search for convenience, price,
exceed customer expectations.
and customer experience that has moved
consumers online. We have identified five strategic priorities
that will keep retailers on the path forward:
The next five years will require retailers to
“The imperative for a ▪ Be customer centric across the value chain
unify the online and offline worlds, a
▪ Serve the segment of one
single, intelligent, and challenge dependent on both technology
▪ Implement digital supply chains
digital core is essential and that most human of elements: trust.
▪ Run smart stores
to future growth. From Looking ahead to 2025, consumers will ▪ Develop new business models
crafting a personalized expect retailers to be deeply enmeshed in
customer experience By 2025, we expect the majority of retail
their lives as trusted partners. The consumer
revenues will be based on insight derived
on the fly to helping and the retailer will have a shared set of
from customer data, predictive analytics,
business users make values. Retailing will shift from a product-
and the ability to monitor customer use
informed, real-time centric approach to customer-centric,
with sensors.
decisions, retailers experiential retail. Experiential retail will blend
need to instantly products, services (both physical and digital), Subscriptions, pay-per-use, and outcome-
connect historical and personalization, and unprecedented levels of based models will move from being “add-
convenience. Experiences will be measured ons” to becoming offerings in their own right,
transactional data
and improved. Stores will become brand with separate revenue streams. They will
across the enterprise.” experience and innovation centers. evolve into multibrand services beyond
current product categories.
Achim Schneider Robotics and artificial intelligence will be
central to all aspects of the business – This paper takes a deep dive into the trends
from automated warehouses to robotic shaping our industry over the next five years
store associates and driverless car delivery. and the path to innovation. In it we propose a
Automated and real-time models for service set of priorities that will drive transformation
and fulfillment will become the standard and the tools that will make it possible.
consumer expectation.
Consumers are not looking for a digital
Physical stores will remain an integral part experience or a real-world experience.
of the retail shopping experience, but they They are looking for a seamless shopping
will be dramatically transformed to offer experience, one that bridges the online and
an array of experiences, from highly offline worlds. To provide it, retailers must
personalized services to show rooms, embrace emerging technology, think
fitting rooms, and even brand extensions creatively about the services they can
that could include classes and uniquely provide, and, most important, earn
entertainment. their consumers’ trust to become a part of
their lives.
The transition is already well under way, but it
will not get far without building consumer Welcome to the experience economy.
trust. Trust will be the ultimate currency –
trust in treating data safely, trust in delivering
the right quality of product at exactly the right
time and the right experiences from shopping
to consumption and returns. Building that Sincerely yours,
trust will require an unprecedented level of
transparency and delicacy as retailers collect
more and more consumer information to help
create personalized experiences.
The winners will be retailers who are truly
Achim Schneider
open to new ways of thinking and radical
Global Vice President
innovation. They will be those who best adapt
Retail
in this fast-changing environment by
SAP SE
developing new skills and acquiring the right
tools to be even more agile and responsive.
SAP Industries White Paper | Retail
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
3
TABLE OF
CONTENTS
3 Welcome
5 Our Place in the New World
6 The Need for Change
8 Five Priorities for Success
10 Be Customer Centric Across the Value Chain
12 Serve the Segment of One
14 Implement Digital Supply Chains
16 Run Smart Stores
18 Develop New Business Models
20 Key Technologies
22 Getting There: A Phased Approach
24 Early Digital Adopters Lead the Way
26 SAP’s Framework for the Intelligent Enterprise
28 How to Plan Your Path to the Intelligent
Enterprise
29 Comprehensive SAP Ecosystem Orchestrating
the World to Deliver Value Faster
30 SAP Is Committed to Innovation
31 Resources
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SAP Industries White Paper | Retail
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
4
OUR PLACE IN
THE NEW WORLD
Our Place in the New World
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
5
THE NEED
FOR CHANGE
The world is undergoing a profound
transformation – one that has upended how
people, companies, and governments interact.
We believe that successful unexpected rivals are forcing a Mini Cases: Data, Artificial Intelligence,
retailers in 2025 will be those strategic reevaluation of the and Experience Action
that understand every aspect of fundamentals of their business.
the customer experience and can Forward-looking retailers are StitchFix makes 100% of sales using
leverage emerging technologies already building new capabilities recommendation, Rather than up-selling
to transform their customer that will enable a new relationship based on past purchases, it makes unique
engagement. with their customers rather than and personal selections by combining data
and machine learning with expert human
cause them to be left behind.
judgment.1
The Internet has reversed the
information gap, and the consumer The need for change is Warby Parker has discovered how
is now in charge. The shift has put underscored by macro forces recommendations and options powered by
retailers under intense pressure, in play, including the transition AI can be geared toward specific locations
yet it is also providing opportunity from a linear economy to a circular and can even connect the customer's
for those who can reimagine their economy, the globalization of online and in-store experiences. The result
place in their customers’ lives. supply chains, and the explosion is an extraordinary customer experience
of cities as the dense center of that makes each customer a raving
For retailers, demographic populations. These, coupled with fan of the brand.2
changes, the rise of the the need for sustainable energy
smartphone, the ubiquity of the and the increased strain on global Nike and Levi’s have opened “concept”
health systems, are testing stores, which are flagships for their brands
Internet, the changing role of
and an attempt to dissolve the boundaries
stores, and competition from consumers’ trust in institutions.
between online and offline shopping. They
represent a shift happening in the way
both companies sell their products,
putting a heavy emphasis on one-to-one
connections with customers and
customized products. Being physical
spaces that surround you, these stores
can be immersive in a way that an online
experience can’t.3
Our Place in the New World
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
6
CONSUMER TRUST
IS THE KEY TO
PERSONALIZATION
Data, analytics, and predictive intelligence will become
retail assets like no other, providing the fuel to power
every aspect of the business.
59%
Converting Big Data into predictive We expect that robotics and
insights that drive automated artificial intelligence will transform
promotion, replenishment, and all aspects of the business.
Of shoppers now expect personalized
marketing activities will be a Automated warehouses, robotic
offers delivered in real time4
competitive differentiator required store associates, and driverless
to exceed customer expectations. car delivery will introduce new
The experience will be at the heart
levels of efficiency into the last mile.
Machine learning algorithms will 73%
of customer engagement. In 2025, help uncover unspoken needs Of shoppers say they agree or agree
retailers will be immersed with their and create more-relevant, completely that it’s important for a
consumers’ lives. Consumer retail personalized offers. retailer to give them the flexibility to
interactions will be transformed – control how their personal information
with browsing and buying While physical stores will remain is used to tailor their experience 5
opportunities delivered exactly an integral part of the retail
where the customer is – physically, shopping experience, their function
digitally, and socially. Consumers will be dramatically different. New
will expect retailers to “know me”
and “meet me where I am,”
technologies will be integrated
into physical stores to provide
60%
transforming traditional marketing unparalleled levels of engagement Potential increase in net margin for
approaches into more personalized, and service. Augmented and virtual retail companies that are using Big Data
experience-driven offerings reality will provide the ability to analytics6
try on any color, style, or size.
To be successful, however, retailers Beacons, RFID, and mobile devices
will have to build unprecedented will deliver real-time product
levels of trust with their customers. information, availability, and other
This trust will start with keeping digital services that enhance the
customer data private and secure. overall experience.
Without that, customers will not
share the data needed to create This, of course, requires
personalized shopping experiences. reimagining the role of the store
and the ability to seamlessly unify
But trust is also earned and lost the offline and online worlds,
through consistent and on-time perhaps the biggest challenge
delivery, a seamless shopping facing retailers over the next
experience, the right quality five years.
products, and ethical and
sustainable sourcing.
Our Place in the New World
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
7
FIVE PRIORITIES
FOR SUCCESS
We have identified five strategic priorities
necessary for retail companies to
transform their business.
BE CUSTOMER CENTRIC ACROSS THE VALUE CHAIN
SERVE THE SEGMENT OF ONE
IMPLEMENT DIGITAL SUPPLY CHAINS
RUN SMART STORES
DEVELOP NEW BUSINESS MODELS
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
8
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
9BE CUSTOMER CENTRIC
ACROSS THE VALUE CHAIN
In 2025, retailers will be able to create deep data and
predictive insights from data generated at every customer
touch point – physical, digital, and social.
These insights will drive a forward-looking The result will be tailored, immersive experiences
understanding of consumer trends and allow that anticipate customer needs, supported by
retailers to preempt changes in taste and style, seamless omnichannel interactions.
as well as design the right experience and service
offerings to create hyperloyal customers. (See To get there, retailers must develop a new
Figure 1.) culture, one that is relentlessly focused on the
customer. Successful retail cultures already put
It starts with optimizing existing processes by a premium on providing convenience, whether
creating and using a deep understanding of online or offline, based on insights garnered
customer needs to offer targeted assortments from customer and supply chain data. They
and campaigns. These processes will be obsessively protect customer privacy. The next
extended by responding to real-world data generation of retail culture must start at the very
input (search data and consumption data from top, modeled by the leadership of the company,
sensors and home devices) and changes in and must empower every employee to act on
usage and consumption to make relevant offers behalf of the customer.
for products and services when consumers need
them.
Figure 1: The Vision of Customer Centricity
Focus all elements of the end-to-end experiences designed around the customer
Designed
experience
Understanding Empowered
of your customer front line
Customer- Metrics
focused that
leadership matter
Customer feedback and
continuous improvement
79% of retailers consider it important to quickly and efficiently change assortments and adapt pricing
across channels based on current trends and customer insights, but only 27% are able to do so.7
Carrefour Group is the first mass-merchandising player to open up its Web site to local producers interested in
reaching a new public: people who shop using their computers or the Carrefour app and who are on the lookout
for authentic products – thus responding to changing preferences in the company's customer base. 8
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
10FROM BACKWARD FOCUS
TO BEING FIRST TO SERVE
TOMORROW’S DEMAND
What do my consumers really want? With this end-to-end integrated
scenario, leverage the power of social insights, sentiment analysis,
and search data to improve your assortment planning and have in
store today what your shoppers demand tomorrow.
TRADITIONAL SCENARIO
?
▪ Central assortment planning ▪ No integration to execution, ▪ Demand review after the fact ▪ Delayed visibility to sales,
based on historic data requiring manual, error- profitability, and inventory
▪ Manual stock adjustments
▪ Manual, home-grown prone work leads to late and costly
▪ Slow-moving inventory leading to a decisions
spreadsheets with siloed data ▪ Assortments not localized
high level of clearance markdowns
▪ Little to no use of predictive ▪ Items purchased and listed ▪ Limited ability to preempt
▪ Out-of-stocks resulting in missed customer needs and
science or external or in regions with no insight
revenue and dissatisfied customers preferences
forward-looking data into regional demand
added to ERP ▪ Risk of markdowns and
reduced profitability
NEW-WORLD SCENARIO
Market demand understood Smart store clustering Plan launch Profitability monitoring Rapid response
▪ Demand signals, consumer ▪ Analysis of performance ▪ Ability to predict ▪ Integrated, end-to-end ▪ RFID-enabled store
sentiment, product search, and trends of categories, demand and optimize planning process from processes, helping store
and social media data products, attributes, how much to buy both merchandise and associates control
enabling real-time locations, and customer preseason and in assortment planning to inventory
understanding of market segments to inform season execution with allocation ▪ Automated stock
demand planning decisions and purchase order transfer to rebalance
▪ Customer segment and ▪ Intelligent store clustering creation supply across stores
social media sentiment based on customer ▪ Real-time monitoring in and eliminate
analysis demographics and season of plan and forecast markdowns
▪ Combination of search category insights to drive to actuals and the ability to ▪ Product experience
rankings and marketplace localized assortments quickly respond feedback combined with
view with internal ▪ Advanced analytics for ▪ Visibility into real-time operational data sets to
assortment data to decision support around item-level profitability help merchandise
intelligently identify products to keep or drop ▪ Retailer ability to trigger planners understand
possible additions to the ▪ Assortment optimization customer feedback to what drives product
current assortment mix to maximize revenue and understand the emotions uptake for the target
▪ True omnichannel planning margins using predictive and sentiments related to customer segments and
for retail and digital analytics product offerings help create more
channels as well as the targeted assortments
wholesale channel on a
single planning solution
TOP VALUE
DRIVERS*
30%
Increase in
60%
Reduction of
30%
Reduction of inventory
revenues markdowns write-offs
Source: SAP Performance Benchmarking
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
11SERVE THE
SEGMENT OF ONE
While customer centricity is meant to serve all customers,
the next generation of personalization will serve the
segment of one.
In 2025, retailers will use large data management Critically, retailers will need the explicit consent
platforms to gather big sets of sales, service, and of their customers to gather data and put it to
marketing data to build a 360-degree customer work, which requires a new level of transparency
profile and understand and predict individual and and a new level of collaboration between
contextual customer needs. (See Figure 2.) customer and retailer.
As a result, real-time interactions will create However, to meet this vision of serving the
the context for marketing, assortment, pricing, segment of one, retailers must also be able to
and promotional offers. Algorithms will be individualize their offerings and optimize their
commonplace throughout every retail business existing processes to allow for single-item
process and will power recommendations and sourcing and delivery.
tailored experiences for consumers. Augmented
and virtual reality will offer a personalized Retailers who offer consumers the chance to give
dressing room experience, furniture display, feedback to their products, brand, and shopping
or digital store walkthrough that will take the experience will be able to create winning customer
individual shopping experience to a new level experiences. A new software category, which com-
of personalization. Sensors will monitor use, bines experience management with operational
consumption, wear, and freshness, alerting systems and review brand, as well as product and
consumers to replace, replenish, or repair. customer experience feedback, is already starting
to redefine customer engagement.
Figure 2: The Vision of Serving a Segment of One
Individual and customized 5 1 Individual product design
services ▪ Extend the configured-to-
▪ Deliver personalized order and made-to-order
service and support portfolio
▪ Offer tailor-made services ▪ Manage modular product
▪ Use Internet-of-Things and concepts
sensor data for service ▪ Integrate digital capabilities
optimization and
automated replenishment
2 Contextual omnichannel
marketing
▪ Segment customers
intelligently
▪ Run targeted campaigns
Lot-size-of-one sourcing 4 ▪ Engage in a personalized way
and production
▪ Source or produce
3 Personalized selling
individual products in a ▪ Convert individual needs into
cost-effective way opportunities and orders
▪ Run a smart, integrated, Sales ▪ Configure products and
and flexible factory
solutions flexibly
▪ Manage an adaptive and
▪ Use all sales channels
responsive supply chain consistently
73% of retailers consider it important to deliver a fun, relevant, and personalized experience that is
convenient and unique to customer sentiment, history, and preferences, but only 10% are able to do so.9
SPAR Handels AG (SPAR Switzerland) has created a loyalty program that gives its customers immediate benefit during checkout.
Besides very attractive weekly offers, a SPAR Friend member is eligible to win the whole purchase when it is the 1,000th purchase
in any of the roughly 160 outlets counts. Validating the SPAR Friends 1,000th purchase at checkout is done in real time. Havi ng a
central system to steer and control the loyalty program is key. SPAR Switzerland also wants to have the flexibility to furthe r
develop the program with new offerings and features, which can be introduced swiftly.
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
12FROM MASS MARKETING TO
PERSONALIZED, IMMERSIVE
EXPERIENCES
By connecting to your customers’ lifestyle, you are able to create an
immersive shopping experience for your consumers – one that earns
lifetime loyalty and also delivers significant efficiencies and new
business opportunities to the retailer.
TRADITIONAL SCENARIO
▪ Consumer recognizes ▪ Consumer looks up ▪ Consumer chooses retail ▪ Consumer decides and ▪ Opportunity to
accelerated wear and information about store pays maintain
tear in product running shoes online ▪ Associate advises ▪ Anonymous sales data is consumer
▪ No sensor data is made ▪ No personalized offers unknown consumer, no imported to ERP system contact and build
available are made connection to online offers consumer loyalty
is lost
▪ Cumbersome execution ▪ Associate has no access
happens between to sales history, sizes, or
channels functional needs
NEW-WORLD SCENARIO
Hyperpersonalization with
Flawless execution of service promises New levels of customer proximity and understanding
Internet of Things technology
Consumer Consumer
• Consumer is part of • Smart automation • Consumer is offered • Consumer is notified that • Foot scan data • Consumer keeps
an avid community of notifies consumer the choice of a order is ready for pickup generates a custom on running for
runners when shoe is nearing personalized one-time and is also offered to printed sole directly life, feels a
• Integrated sensors end of life replacement or book a same-day online from in-store 3D positive
in shoes continually • Marketing intelligence continuity program for foot scan for the custom printer connection, and
stream use and determines each 500 miles run sole • Foot profile helps perceives real
fitness data, personalized product • Consumer opts for • Consumer checks in to create custom shoe value for
augmenting both recommendations continuity program, store for pickup and recommendations continued lifelong
product based on product use, along with a custom fitting for an even better experiences with
manufacturing customer profile, peer sole add-on and fit for future shoe the brand
• Associate recognizes and
intelligence and groups, trends, and completes the greets consumer in store, recommendations
consumer profile social media inputs purchase with Apple provides pickup order, and potential make-
• Based on explicit using machine Pay for nearby store and guides customer to to-order shoes
consent, consumer learning pickup foot scan • Aggregate foot
has valuable real- • Retailer fulfills order • Foot scan information is profiles help R&D
time visibility on and delivers same automatically added to for new product
product use, wear day for store pickup consumer profile, thereby development
and tear, and insights from closest further enhancing
on running patterns microfulfillment center relevance of future
recommendations
POTENTIAL
BENEFITS
17%
Increase in revenue
40%
Increase in subscription
20%
Reduction
for experience leaders revenues in logistics costs
Source: SAP Performance Benchmarking
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
13IMPLEMENT DIGITAL
SUPPLY CHAINS
In 2025, customers won't come to the retailer, the retailer
will come to them. All the factors that drive demand –
promotions, seasonality, events, weather – will be
dynamically taken into account to predict demand.
With drones and driverless cars, real-time To get there, retailers will use predictive analytics
product delivery at a low cost will offer a and machine learning to predict demand and
significant competitive advantage. Robotics supply of the individual household. Subsequently
and artificial intelligence will drive efficiency extending their business processes, retailers will
in retail warehouses. (See Figure 3.) connect to the point of consumption – such as
the fridge – and automate replenishment. Lastly,
Consumers will expect their needs to be met scalable, efficient, and convenient source-to-
automatically. Consequently, retailers will consumer services to the place of need will build
become more vertically integrated, connecting brand loyalty and allow retailers to develop brand
the end-to-end supply chain to automate extensions, such as food preparation services.
replenishment of consumer demand. Consumers
will expect transparency into the supply chain, Ultimately, winning retailers will deploy a highly
with a focus on sustainability. flexible and highly efficient robotics supply chain
that is able to serve dynamic individual needs
anywhere and anytime.
Figure 3: End-to-End Connected Digital Supply Chain
69% of retailers consider it important to have visibility into the global inventory pool and optimize it
for a “source anywhere, fulfill anywhere” model, but only 15% are able to do so.10
How did a leading Swiss retailer improve its supply chain agility through digitalization? Migros offers product freshness
and a better shopping experience for supermarket customers.
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
14FROM MANUAL, ERROR-PRONE
SUPPLY TO HANDS-FREE
SUPPLY CHAINS
With this integrated, end-to-end scenario, you are able to create an
automated, connected, hands-free supply chain that delivers new
levels of speed and efficiency as well as superior value to your
shoppers and consumers.
TRADITIONAL SCENARIO
• Manufacturer sends • Delays in • Often manual and • Issues align the • Goods can arrive • Customer faces
product to a retail traffic are not error-prone goods supply chain too late or empty shelves
distribution center accounted for receipt occurs • No visibility on damaged without • Store associates
• No inventory with paper or status on the road warning have no
visibility on the scanner-based is available information on
road is available lists upcoming arrivals
• There is no chance
• No information on to react
delivery status is
available
NEW-WORLD SCENARIO
Real-time supplier collaboration Real-time alerts and automated response Supply chain automation Consumer safety
• Online order confirmation • Smart rerouting • Goods receipt in • Real-time alerts on • Goods receipt in • Fully stocked
based on collaborative in case of issues distribution issues such as cold store with RFID shelves
demand planning and along the route center with RFID chain violation, theft, • Secure supply • Customer getting
order forecast and delays chains supported detailed
by blockchain information on
transactions pedigree,
ingredients, cold
chain compliance,
and more
POTENTIAL
BENEFITS 30%
Reduction in supply
40%
Reduction in damage
25%
Reduction in total
planning costs and waste logistics cost
Source: SAP Performance Benchmarking
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
15RUN SMART STORES
Consumer-centric retail stores will use experience
management technology to turn their customers into
advocates, their employees into ambassadors, and
their brands and products into obsessions.
To stay relevant, even more flexible supply chain With customer identification, smart fitting, endless
processes will be needed. In addition, retailers aisles, and gamification, the opportunities will drive
need to become increasingly self-aware and loyalty as well as new revenue opportunities.
connected, providing a constant feedback
loop to the consumer downstream and to the The journey will start with empowering the front-
manufacturer upstream. (See Figure 4.) line sales staff with real-time customer, product,
and inventory data to serve their customers
In 2025, the online and physical shopping better – regardless of channels, This will be
experiences will merge by leveraging the best extended through sensor-based customer
disruptive technologies, turning stores into identification, store interaction, and checkout as
“brand experiences.” Virtual reality, the use well as automated store processes. The result
of digital technology to create immersive will be more productive, knowledgeable, and
simulations, targeted marketing with AI, and happy store employees that focus on selling
augmented reality that lets users interact with versus stocking or administrative tasks.
digital content overlaid on real-world content
will allow retailers to create differentiating Ultimately, stores will be transformed into
shopping experiences. Customer interaction experience centers with highly personalized
will be captured to optimize assortments, services backed by unified digital experiences.
pricing, and promotions.
Figure 4: Turn Stores into Brand Experience Centers
Instant recognition “Clienteling”
Self-services New trials
Endless aisles Augmented reality
Instant delivery Exclusive offers
Ultraconvenience Restaurants
Gaming Instant personalization
74% of retailers consider it important to equip store associates with real-time product and inventory
information to help them serve shoppers better, but only 30% are able to do so.11
Tommy Bahama is a brand that is constantly innovating – expanding from apparel to furniture to restaurants.
However, the company is committed to letting consumers interact with the brand any way they want to, in
whatever channel they desire. A commerce solution is what enables the company to deliver a personalized
experience to each of its consumers.
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
16FROM DISCONNECTED
STORES TO BRAND-
BUILDING EXPERIENCES
Create a smart store to deliver brand-building store experiences. With this
integrated, end-to-end scenario, you can manifest your brand, create new
store experiences, and capture changing needs by running your stores like
an online business.
TRADITIONAL SCENARIO
• Shopper enters story • The interaction is • Store is run by point-of- • Staff has no access to • No personalized offers • No ability to
anonymously captured only sale transactions real-time inventory • No convenience differentiate the
• No history is available upon checkout • Customer sees only information or options customer
• No interaction is what is sold incoming deliveries experience or offer
• No insight into the • No help when items
sensed service that drives
shopper’s needs, • Valuable interaction data • Staff can’t guide are not available
customers loyalty
preferences, or buying is lost • No ability to provide
behavior is available • Stores exposed to
• Customer preferences feedback
price competition
are not discovered
from online pure
• Decisions are made after plays
the fact
NEW-WORLD SCENARIO
Relevant offers and Empowered staff Product and experience feedback Compelling shopping experience New customer loyalty
promotions
• Shopper is recognized • Interaction is from • Real-time response • Real-time inventory • Real-time inventory • Combined insights
and approached smart shelf heat to relevant customer and product information and from both
according to their maps demand signals information endless aisles experience and
privacy settings • Sensor technology • Accelerated • Ability to use • Frictionless checkout operational data
• Smart “clienteling” is helps optimize replenishment geospatial data to sets, enabling
• Convenient service
enabled based on store layouts, identify nearby stock understanding of
• Triggered product options
history and known and assortments, and locations the key drivers of
transfer with RFID • Instant shopper
predicted preferences price points and customer loyalty
enablement to • Price differences feedback to optimize
enables better balance stock eliminated and shelf • Ability to drive
the experience and
understanding and between stores stock controlled with shopper and
drive new revenue
predicting shopper flexibly advanced scanner consumer loyalty
opportunities
preferences technology and increase
shopper share of
wallet
POTENTIAL
BENEFITS
25%
Increase in revenue
50%
Reduction in
30%
Increase in inventory
markdowns turnover
Source: SAP Performance Benchmarking
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
17DEVELOP NEW
BUSINESS MODELS
In 2025, the majority of retail companies' revenue will come
from services developed from the insight from consumer
data. New business models will include subscription, pay -
per-use, or outcome-based models.
These services will move from being product To make it work, retailers will need a deep
add-ons to offerings in their own right, with understanding of their customers’ consumption
separate revenue streams, and they will not be habits and must occupy a trusted position in their
restricted to the companies’ own products but lives.
will rather evolve into multibrand services beyond
current product categories. The intelligent With this in place, they can use experience and
retailers are the ones willing to chart new operational data to create new offers and services.
territories that are adjacent to their business. By extending current business processes to
(See Figure 5.) connecting with consumers, retailers can offer
use-based services enabled by sensors. The
The next wave of retailers will think of their ultimate transformation will be moving from
brand as a scalable platform, allowing for brand selling products to selling outcomes, facilitated
extensions and creative partnerships into by “no ownership” and subscription services.
telecommunications, travel and entertainment,
and financial services.
Figure 5: Extending Existing Business Models and Innovative Customer Engagement
Automated
New offerings Pay per outcome Personalized nutrition
replenishment
Automated
Pay per use Zero-click ordering Management of the
replacement
fridge
Subscriptions New trials Fashion curation No ownership models
61% of organizations consider it important to leverage strengths (customers, assets, core competencies)
and work with partners to drive successful business models, but only 25% are able to do so.12
Tata CLiQ helps connect Indian consumers in 900 cities and 10,000 villages to modern retail. SAP ® Customer
Experience solutions help offer hundreds of brands and thousands of items – all on one platform. Now people
everywhere – from large cities to small villages – can get deliveries to their doorsteps or local stores.
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
18FROM TRADITIONAL RETAIL
TO SELLING OUTCOMES
AND LIFESTYLES
With this integrated, end-to-end scenario, gain a superior understanding of
your customers’ needs and use it to create new revenue-generating offers
and services, such as personalized meals with ingredient and recipe meal-kit
service. Reimagine customer engagement to deliver better health outcomes.
TRADITIONAL SCENARIO
? ? ? ?
? ?
• Consumer shops for • Lack of information • Items for a meal can be • No added
groceries with a few for store staff to make incomplete consumer value
meals in mind, at best recommendations • Key items can be forgotten or • No way to
equipped with a • No customer history, no out of stock differentiate
shopping list insight on preferences retail services
• Leftovers and excess
• No recipes, no information on packaging can result
nutritional values, no way to
match with consumer lifestyle
NEW-WORLD SCENARIO
New levels of customer proximity and understanding Selling balanced and healthy nutrition Hyperpersonalization
Nutrition expert Food and nutrition experts help consumers
Consumer discover matching items based on their
Consumer subscribes to meal-kit service, personal preferences and buying history
which provides cooking and taste
preferences and physical and exercise Through machine learning, the back-end system
information per their individual preferences determines recipe recommendations based on
and goals consumer data, preferences, and history,
including data from social media
Home Trend analysis from Web searches helps make
Feedback and machine learning
recommendations that drive demand
can be used to improve recipes,
recommendations, and the overall Meal kits are assembled and shipped directly to
offering, and the next delivery cycle consumers based on shipping preferences
is kicked off
Home delivery or pickup of selected meal kits are
according to specs, with the right size, amount, and
Consumer profile and preferences are nutritional values, and with reduced, sustainable
enhanced based on structured and packaging
nonstructured feedback
Consumer prepares meals and provides feedback
POTENTIAL
BENEFITS
3x
Increase in shopping
40%
Reduction in logistics
30%
Increase in repeat
basket value cost per item purchase rate
Source: SAP Performance Benchmarking
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
19KEY
TECHNOLOGIES
The current pace of technological advancements has the most
profound impact on enabling how retailers transform themselves
to respond to their customer needs and to the market trends.
Intelligent technologies promise to bring great benefits such as
productivity and efficiency gains, enabling innovative new business
models and new revenue streams. The following intelligent
technologies are instrumental in helping retailers respond to the
market trends. Each of these priorities will be enabled by emerging
intelligent technologies.
Artificial Intelligence and Machine Learning Data As a Strategic Asset and Advanced
Businesses can leverage these capabilities to Analytics
eliminate repetitive manual tasks and drive the next The recognition that data is a strategic asset
level of intelligent business process automation. is a fundamental shift for most businesses.
Today, advances in speech and visual recognition Retailers that curate their data and aggressively
are dramatically changing how consumers interact acquire data from external sources will have
with retailers – for example, shopping by voice with significant advantage over their more traditional
a personal home assistant or using visual search to competitors. Empowered users can get real-time
find a product. Robotic process automation visibility into their changing environment, simulate
streamlines repetitive, rule-based processes and the impact of business decisions, mitigate risk, and
tasks in an enterprise and reduces cost through the achieve better customer outcomes.
use of software robots by replicating specific tasks
or keystrokes.
Key Technologies
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
20The Internet of Things (IoT) and
~50%
Conversational AI
Voice interfaces will be the go-to In-Store Technologies
technology for the next generation Retailers are using IoT capabilities Of new mobile apps use voice as a primary
of applications, allowing for greater to bring digital capabilities to the interface, and 50% of the consumer-facing
G2000 use biometric sensors to personalize
physical world. The IoT through
simplicity, mobility, and efficiency experiences by 202013
product-level RFID is being used to
while increasing worker productivity
transform the store, from basics,
and reducing the need for training.
In customer interactions, they will
such as inventory management
with the IoT, to more advanced
40%
Of retailers will have developed a customer
transform customer engagement experiences such as smart mirrors. experience (CX) architecture supported by
and allow targeted and fully The checkout process continues to an AI layer by 2019 14
informed exchanges anytime, evolve to meet customer demands
with technologies such as self-
30%
anywhere.
checkout, self-scanning and smart
Blockchain checkout. Fully automated stores Increased conversion rate and up to 25%
are already established in parts of higher revenues from a CX architecture
A relatively recent breakthrough supported by an AI layer15
Asia and are being introduced in
technology, blockchain is
other markets.
revolutionizing the movement and Up to
storage of value by creating a chain
of unaltered transactional data. The
Virtual and Augmented Reality
Virtual reality (VR), the use of digital
25 %
increased inventory turns through 2021 for
blockchain model of trust, through technology to create immersive retailers that leverage AI, AR, and the IoT for
massively distributed digital simulations, was once the stuff of employee and customer engagement to
consensus, has the possibility science fiction. So was augmented respond to stakeholders’ experience
reality (AR), which lets users expectations16
reshape supply chains and
commerce across the entire digital interact with digital content that’s
economy.
In the near term, blockchain based
overlaid on the real world. They will
become the standard way to 20%
demonstrate a product, whether Improved customer satisfaction for retailers
solutions are satisfying consumer’s that is furniture or paint in the that leverage AI, AR, and the IoT for employee
and customer engagement to respond to
demand for solutions to support consumer’s home, beauty products stakeholders’ experience expectations 17
global traceability and sustainability applied to the consumer’s face, or
in food and agricultural products. fashion worn virtually by the Up to
consumer
Solutions to validate authenticity
and to fight counterfeiting are also . 15 %
perfect use cases for blockchain Data Platform to Manage employee productivity for retailers that
technology. Experience leverage AI, AR, and the IoT for employee and
customer engagement to respond to
Leaders are interlocking the stakeholders’ experience expectations 18
operational performance data from
companies’ business systems
(what is happening) with the
experience data coming from
58%
Of human task hours will be automated
by 202519
99%
Accuracy in voice and video recognition by
202020
20.4 billion
Connected devices will be in use by 2020 21
Key Technologies
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
21GETTING
THERE:
A PHASED
APPROACH
Companies will become
intelligent enterprises on
three distinct tracks as they
evolve their strategic
priorities to match their
company’s vision. They will:
1. Optimize what they already do by
implementing a stable and
scalable digital core to make
processes more transparent and
integrated
2. Extend their current processes by
connecting them to the real world
using IoT technologies
3. Transform their business using a
constant stream of data enabling
new service-driven business
models. (See Figure 6.)
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
22Figure 6: Strategic Priorities Across the Maturity Framework
Optimize Extend Transform Be immersed in consumer lives
through trusted experiences
delivered at scale.
Leverage deep Create tailored, ▪ Tailored assortments
Be customer Respond to real-
understanding of immersive ▪ Seamless omnichannel
world data and
centric across customer need to experiences interactions
changes in use and Preempted changes in
the value chain drive winning predicting ▪
consumption preferences
assortments customer needs
Identify moments of Mass-customize
Serve the Understand and
need and respond product and service ▪ Mass customization
predict individual
segment with timely and bundles to single ▪ Zero-click ordering
and contextual Customer-for-life relationships
of one relevant offers and customer ▪
customer needs
services outcomes
▪ Hands-free robotics supply
Implement Digitalize the supply chain
Extend to point Gain source-to-
chain from the ▪ Connected homes and smart
digital supply of consumption for consumer delivery products
customer to the
chains instant response to the place of need ▪ Flexible delivery anywhere,
manufacturer
anytime
Enable sensor- Create experience
Empower the front
based customer centers with highly ▪ Unified digital experiences
Run smart line with real-time
identification, store personalized ▪ Ultraconvenience
stores insights to serve
interaction, services and ▪ Experiential retail
their customers
and checkout ultraconvenience
Leverage ▪ “No ownership” and continuity
Develop new experience and Enable new use- Move from selling business models
business operational data based services with products to selling ▪ Platform scale created,
models to create new offers sensors outcomes expanding into adjacent and
and services new businesses
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
23EARLY DIGITAL
ADOPTERS
LEAD THE WAY
How do you achieve these
strategic priorities?
Start with reimagining your business together with
your customers. Then build a path for even more
optimization and intelligent automation to simplify
your business and free up resources to invest in even
more digitaltransformation programs and find new
business models and revenue streams.
According to a July 2018 study by Forrester
Consulting that was commissioned by SAP,
innovative retailers focus on digital priorities to help
them achieve digital transformation more than other
retail companies. (See Figure 7.)
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
24Figure 7: Innovators Focus More on Digital Priorities Than Others22
Be customer Innovators 95%
centric across
the value chain Others 78%
Serve the Innovators 86%
segment
of one Others 69%
Innovators 95%
Implement
digital supply
Others 67%
chains
Innovators 93%
Run smart
stores
Others 61%
Develop new Innovators 89%
business
models Others 69%
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
25SAP’S
FRAMEWORK
FOR THE
INTELLIGENT
ENTERPRISE
The Intelligent Enterprise
framework is
a suite of intelligent business
applications that use
intelligent technologies and
can be extended on a digital
platform. (See Figure 8.) This
enables next-generation
business processes to deliver
breakthrough business value
on our customers’ journey to
becoming intelligent
enterprises.
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
26Figure 8: The Intelligent Enterprise Framework
Digital
Manufacturing Core People
& Supply Chain Engagement
Customer Network & Spend
Experience Management
Intelligent
Suite
Intelligent Technologies
AI/ML | IoT | Analytics
Digital
Platform
Data Cloud
Management Platform
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
27HOW TO PLAN
YOUR PATH TO THE
INTELLIGENT ENTERPRISE
In the digital economy, intelligent technologies and integrated
business processes are now driving digital transformation.
To do this effectively requires an end-to-end plan for becoming an intelligent enterprise. This includes
creating an intelligent enterprise road map and implementation plan with proven best practices and
deployment options that optimize for continuous innovation with a focus on intelligent outcomes.
The End-to-End Journey to Becoming an Intelligent Enterprise
Plan Build and launch Run Optimize
well to manage with proven best all deployment for continuous
expectations practices models innovation
Simplify and innovate Standardize and innovate Run with one global Optimize to realize value
▪ Reimagined business ▪ Model-company support Continuously captured and
models, business approach to accelerate ▪ One global, consistent realized benefits of digital
processes, and work adoption with model experience transformation
industry solutions
▪ SAP Digital ▪ End-to-end support –
Transformation ▪ Design thinking and on premise, in the
Framework rapid, tangible prototypes cloud, or with a hybrid
methodology as approach
▪ Coengineered industry
a guide for digital
innovations delivered
transformation
with agility
▪ Value-based innovation
road maps
To move forward with speed and agility, it helps They are built on preconfigured SAP solutions
to focus on live digital data and combine solution based on best practices supported by SAP, along
know-how and industry-specific process with the business content that encompasses our
expertise with data analytics so that the right experience and expertise relevant for the
digital reference architecture is defined and industry. They provide a comprehensive baseline
delivered. In that context, a model-company and come with the accelerators to jump-start
approach is aimed at simplifying and increasing digital transformation projects.
the speed of the digital transformation journey.
Model companies represent the ideal form of
standardization for a specific line of business or
industry.
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
28COMPREHENSIVE SAP
ECOSYSTEM
ORCHESTRATING
THE WORLD TO
DELIVER VALUE FASTER
SAP partners play a key role in helping organizations like yours succeed.
These experts can help you identify, buy, build, implement, service, support,
and run the SAP for Retail solutions that best fit your unique needs.
Our comprehensive retail ecosystem offers integration into:
▪ A wide range of business services ▪ Complementary and innovative third-party
(merchandising, point of sale, supply chain, solutions – accessible via SAP App Center
analytics, omnichannel, and more)
▪ Broad reach through partners to serve your
▪ Open architecture with a choice of hardware business of any size anywhere in the world
and software
▪ Forum for influence and knowledge
▪ Large skill sets
Our partner ecosystem includes, among others:
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
29SAP IS COMMITTED
TO INNOVATION
10-Year Innovation Vision Comprehensive Industry Proven Services Offering
SAP delivers fully intelligent Coverage By bringing together world-
business solutions and networks SAP enables comprehensive class innovators, industry
that span across company coverage of the complete and emerging technology
boundaries and promote purpose- retail value chain across the expertise, proven use cases,
driven businesses. These solutions enterprise. With its clear and design thinking
will be the most empathic symbiosis industry road map, SAP is methods, we help retail
between machine intelligence and the partner of choice for the companies develop
human ingenuity. Retail industry. innovations that deliver
impact at scale.
▪ Self-running enterprise ▪ More than 13,400 retail ▪ Proven methodologies
systems manufacturers in 121 to drive innovation, from
▪ Self-organizing business countries innovating with reimagining customer
ecosystems SAP solutions experiences to enhancing
▪ New markets and business ▪ 99% of retail companies in operations
models the Forbes Global 2000 are ▪ Innovation that is fueled
SAP customers through a managed
▪ All lines of business are innovation ecosystem
supported on a single from SAP
platform ▪ Ability to build your own
innovation capability and
culture
SAP supports retail companies in becoming intelligent enterprises – providing
integrated business applications that use intelligent technologies and can be
extended on SAP Cloud Platform to deliver breakthrough business value.
Learn more
▪ SAP.com for Retail ▪ SAP Digital Business Services
▪ SAP Leonardo ▪ SAP Design Thinking
Getting There: A Phased Approach
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
30RESOURCES
Outlined below is external research that was used as supporting material for this paper.
1. “Stitch Fix’s CEO on Selling Personal Style 13. “IDC FutureScape: Worldwide IT Industry 2018
to the Mass Market,” Harvard Business Review, Predictions,” IDC, October 2017.
November 2018.
14.–18. “Executing Digital at Scale: IDC’s Digital
2. “The Fascinating Ways Warby Parker Uses Use Case Map for Retail – A Three-Horizons
Artificial Intelligence and AR to Change Retail,” Approach,” IDC sponsored by SAP, 2018.
Forbes, April 18, 2019.
19. “The Future of Jobs Report 2018,” World
3. “In the Era of Online Shopping, the Retail Store Economic Forum, 2018.
Is Immersive Theater,” Quartzy, November 18,
20. Michael Brenner, “Disruption and Opportunity:
2018.
Advanced Analytics, Automation, and AI in Digital
4. John Maxwell, “Total Retail 2017: 10 Retailer Media,” Digitalist Magazine, March 26, 2019.
Investments for an Uncertain Future,” PwC, 2017.
21. “Gartner Says 8.4 Billion Connected ‘Things’
5. “2019 Shopper Vision Study: Exploring Will Be in Use in 2017, Up 31 Percent from 2016,”
Shoppers’ and Retailers’ Divergent Views of the Gartner, February 7, 2017.
In-Store Experience,” Zebra, 2019.
22. “Emerging Opportunities for Retailers to
6. Lucas Roh, “The Retail Apocalypse Is Not Deploy Industry Processes in the Cloud,”
Happening: Why Retailers That Innovate Will Forrester Consulting commissioned by SAP, 2018.
Never Go Extinct,” Forbes, September 28, 2018.
7. SAP Performance Benchmarking, 2017.
Note: All sources cited as “SAP performance
8. “Carrefour Starts Selling Local Products benchmarking” are based on our research with
Online,” Carrefour, August 1, 2018. customers through our benchmarking program
and other direct interactions with customers.
9.–12. SAP Performance Benchmarking, 2017.
Resources
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
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