THE INTELLIGENT ENTERPRISE IN THE EXPERIENCE ECONOMY FOR THE RETAIL INDUSTRY - Understanding how your customers feel and delivering experiences ...
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SAP Industries White Paper | Retail THE INTELLIGENT ENTERPRISE IN THE EXPERIENCE ECONOMY FOR THE RETAIL INDUSTRY Understanding how your customers feel and delivering experiences they can trust
SAP Industries White Paper | Retail
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
2
WELCOME
Dear Customers: In the experience economy, to create an
even more delightful and distinctive
The recent years have been marked by an experience for the customer, retailers will
unrelenting and disruptive consumer need to consider not only operational data
revolution – a search for convenience, price, but also people’s beliefs, emotions, and
and customer experience that has moved intentions.
consumers online.
The winners will be retailers who are truly
The next five years will require retailers to open to new ways of thinking and radical
“The imperative for a unify the online and offline worlds, a innovation. They will be those who best
single, intelligent, and challenge dependent on both technology adapt in this fast-changing environment by
digital core is essential and that most human of elements: trust. developing new skills and acquiring the right
to future growth. From tools to be even more agile and responsive.
Looking ahead to 2025, consumers will
crafting a personalized
expect retailers to be deeply enmeshed in We have identified five strategic priorities
customer experience their lives as trusted partners, and the that will keep retailers on the path forward:
on the fly to helping consumer and the retailer will have a ▪ Be customer centric across the value chain
business users make relationship based on common values. ▪ Serve the segment of one
informed, real-time ▪ Implement digital supply chains
Retailing will shift from a product-centric
decisions, retailers ▪ Run smart stores
approach to customer-centric, experiential
need to instantly retail blending products, physical and digital ▪ Sell outcomes beyond products
connect historical and services, personalization, and unprecedented This paper takes a deep dive into the trends
transactional data levels of convenience. Experiences will be shaping our industry over the next five years
across the enterprise.” measured and improved. and the path to innovation. In it we propose a
Robotics and artificial intelligence will be set of priorities that will drive transformation
Achim Schneider and the tools that will make it possible.
central to all aspects of the business –
Global Vice President from automated warehouses to robotic Consumers are not looking for a digital
Retail store associates and driverless car delivery. experience or a real-world experience. They
SAP SE Automated and real-time models for service are looking for a seamless shopping
and fulfillment will become the standard experience, one that bridges the online and
consumer expectation. offline worlds. They are also willing to pay
Physical stores will remain an integral part more to companies that share their values
of the retail shopping experience, but they and support sustainability.
will be dramatically transformed to offer To be the retailer of choice, retailers must
an array of experiences, from highly embrace emerging technology, use experience
personalized services to showrooms, management to replace guessing by knowing,
fitting rooms, and even brand extensions think 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
The transition is already well underway, but it their lives.
will not get far without building consumer Welcome to the experience economy!
trust as the ultimate currency – trust in
treating data safely, in delivering the right
quality of product at exactly the right time, Sincerely yours,
and in providing a seamless experience from
shopping to consumption and returns.
Building that trust will require an unprecedented
level of transparency and delicacy as retailers
collect more and more consumer information
Achim Schneider
to help create personalized experiences.
Global Vice President
. Retail
SAP SE
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 Consumer Trust Is the Key to
Personalization
7 Five Priorities for Success
9 Be Customer Centric Across the Value Chain
11 Serve the Segment of One
13 Implement Digital Supply Chains
15 Run Smart Stores
17 Sell Outcomes Beyond Products
19 Key Technologies
21 Getting There: A Phased Approach
22 Early Digital Adopters Lead the Way
23 SAP’s Framework for the Intelligent Enterprise
in the Experience Economy
24 How to Plan Your Path to the Intelligent
Enterprise
25 Comprehensive SAP Ecosystem:
Orchestrating the Partner Ecosystem to
Deliver Value Faster
26 SAP Is Committed to Innovation
27 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
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 Experience, and Sustainability in 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 recommendations. 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
cause them to be left behind. and machine learning with expert human
judgment.1
The Internet has reversed the
information gap, and the consumer The retail industry as a major Warby Parker has discovered how
is now in charge. The next generation contributor to global carbon recommendations and options powered by
of shoppers will not only expect the emissions will have to make AI can be geared toward specific locations
best deal and recommendation to sustainability a priority on its and can even connect the customer's online
serve their lifestyle, they will also agenda and discover significant and in-store experiences. The result is a
make their choice of retail brand business opportunities. customer experience that makes each
based on the company’s demon- customer a fan of the brand.2
strated ability to run a sustainable The need for change is
business that is in line with the underscored by macro forces Nike and Levi’s have opened “concept”
customer’s values. in play, including the transition stores, which are flagships for their brands
from a linear economy to a circular and an attempt to dissolve the boundaries
between online and offline shopping. They
The shift has put retailers under economy, the globalization of
represent a shift happening in the way both
intense pressure, yet it is also supply chains, and the explosion
companies sell their products, putting a
providing opportunity for those who of cities as the dense center of
heavy emphasis on one-to-one connections
can reimagine their place in their populations. These, coupled with
with customers and customized products.3
customers’ lives. the need for sustainable energy
and the increased strain on global H&M Group has set a clear goal to use only
For retailers, demographic health systems, are testing recycled or other sustainably sourced
changes, the rise of the consumers’ trust in institutions. materials by 2030. It will achieve this by
smartphone, the ubiquity of the upcycling, recycling, and reusing. Through
Internet, the changing role of its garment collecting program, the
stores, and competition from company lets customers drop off their old
clothes and discarded textiles in return for
shopping vouchers and discount cards.
H&M’s commitment is that all clothes it
collects will either be reused, reworn, or
recycled – with 0% going into landfills.4
Our Place in the New World
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
5
CONSUMER TRUST
IS THE KEY TO
PERSONALIZATION
Experience data, analytics, predictive intelligence, and
demonstrated sustainability will become retail assets like no
other, providing the fuel to power every aspect of the business.
85%
Experience management will be at To achieve this transformation on
the heart of customer engagement. multiple levels, retailers will leverage
This means understanding what is new technologies like never before. of shoppers value strong customer service and
happening by interlocking operational support, but brand performance leaves a lot to be
performance data from business and Converting Big Data into predictive desired5
technology with experience data from insights that drive automated promotion,
>50%
customers and employees, then acting replenishment, and marketing
on insights to improve customer activities will be a competitive
satisfaction, increase organizational differentiator required to exceed of consumers say that the overall enjoyment of
performance, and deliver a better customer expectations. their experience is important in their decision to
brand perception. buy a product or service6
We expect that robotics and artificial
Retailers will be immersed with their intelligence will transform all aspects of Even when people love a company or product,
consumers’ lives. Consumers will the business. Automated warehouses,
expect retailers to connect, “know
and understand me,” and “meet me
robotic store associates, and driverless
car delivery will introduce new levels of
59%
will walk away after several bad experiences, and
where I am,” transforming traditional efficiency into the last mile. Machine
marketing approaches into more
personalized, experience-driven
learning algorithms will help uncover
unspoken needs and create more-
17%
will walk away after just one bad experience7
offerings relevant, personalized offers.
To be successful, however, retailers
will have to build unprecedented levels
While physical stores will remain an
integral part of the shopping experience,
73%
of shoppers say they agree or agree completely
of trust with their customers. This trust their function will be dramatically that it’s important for a retailer to give them
will start with keeping customer data different. New technologies will be flexibility to control how their personal information
private and secure. Without that, integrated into physical stores is used to tailor their experience8
customers will not share the data to provide unparalleled levels of
needed to create personalized engagement and service. Augmented
shopping experiences. and virtual reality will provide the ability
to try on any color, style, or size.
5.6x
Faster growth in sustainable products9
But trust is also earned and kept through Beacons, RFID, and mobile devices will
consistent and on-time delivery, a deliver real-time product information,
seamless shopping experience, the
right quality, and ethical and
availability, and other digital services
that enhance the overall experience.
60%
Potential increase in net margin for retail
sustainable sourcing.
companies that are using Big Data analytics10
This, of course, requires reimagining
Sustainability will not only be key to the role of the store and the ability to
winning the loyalty of the next gener-
ation of shoppers but also a business
seamlessly unify the offline and online
worlds, perhaps the biggest challenge
45%
of retail survey respondents have deployed
necessity and key to further profitable facing retailers over the next five years.
machine learning for customer engagement in
growth.
their organizations11
Consumer Trust Is the Key to Personalization
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
6
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
SELL OUTCOMES BEYOND PRODUCTS
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
7
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
8
BE 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 experience and supply chain data
and campaigns. These processes will be to optimize customer buying experiences. And
extended by responding to real-world data they must obsessively protect customer privacy.
input (search data and consumption data from The next generation of retail culture must start at
sensors and home devices) and changes in usage the very top, modeled by the leadership of the
and consumption to make relevant offers for company, and must empower every employee to
products and services when consumers need act on behalf of the customer.
them.
Figure 1: The Vision of Customer Centricity
Focus all elements of the end-to-end experiences designed around the customer
Designed
experience
Listening and Empowered
understanding front line
your customer
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.12
Saks Fifth Avenue uses Experience Management solutions from SAP (Qualtrics) to gather data from VIP customers and develop a
customer lifecycle program with different levels and special benefits. It researches social media behavior to know how best to
communicate with online customers and sends real-time survey results to customer service for immediate response to customer
concerns. It also prioritizes the development of its online presence based on this rapid customer feedback. With a 75% increase in
the speed of data collection and significantly reduced outsourced research costs, the company can make a wide range of relevant
research data available for easy access and correlation across the company.
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
9
BE CUSTOMER CENTRIC ACROSS THE VALUE CHAIN
FROM 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, homegrown prone work that 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 forward- in regions with no insight
revenue and dissatisfied customers preferences
looking data into regional demand
▪ No use of experience feedback added to ERP ▪ Risk of markdowns and
reduced profitability
NEW-WORLD SCENARIO
Understood market demand Customer-centric planning Plan launch Profitability monitoring Rapid response
▪ Demand signals and ▪ Experience feedback and ▪ Analysis of cluster ▪ Integrated, end-to-end ▪ RFID-enabled store
product search, enabling social media data to performance and trends of planning process from processes, helping store
real-time understanding enhance the future categories, products, merchandise and staff control inventory and
of market demand prediction of market attributes, locations, and assortment planning to provide early-warning
▪ Planning assortments demand customer segments to execution with allocation singles for demand
with products based ▪ Customer segment and inform planning decisions and purchase order changes
on sustainable design to social media sentiment ▪ Intelligent store clustering creation ▪ Automated stock transfer
be reused and recycled analysis based on customer ▪ Real-time monitoring in to rebalance supply
▪ Combination of search demographics and season of plan and forecast across stores and
rankings and marketplace category insights to drive to actuals, enabling a quick eliminate markdowns
view with internal localized assortments response ▪ Capture of consumer
assortment data to ▪ Advanced analytics for ▪ Visibility into real-time emotions and values
intelligently identify decision support around item-level profitability combined with
possible additions to the products to keep or drop ▪ Retailer’s ability to trigger operational data sets to
current assortment mix ▪ Assortment optimization customer feedback to help merchandise
▪ Omnichannel planning to maximize revenue and understand the emotions planners understand what
for store, online, and margins using predictive and sentiments related to drives product uptake for
wholesale channel on a analytics product offerings the target customer
single planning solution segments and help create
▪ Demand predictions to
more-targeted assortments
optimize how much to buy
both preseason and in
season
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.
10SERVE 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 Retailers will need the explicit consent of their
platforms to gather big sets of sales, service, and customers to gather data and put it to work,
marketing data to build a 360-degree customer which requires a new level of transparency and a
profile and understand and predict individual and new level of collaboration between customer and
contextual customer needs. (See Figure 2.) retailer.
People expect retailers to know them, and, as However, to meet this vision of serving the
a result, real-time interactions will create segment of one, retailers must also be able to
the context for marketing, assortment, pricing, individualize their offerings and optimize their
and promotional offers. Algorithms will be existing processes to allow for single-item
commonplace throughout every retail business sourcing and delivery.
process and will power recommendations and
tailored experiences for consumers. Augmented Retailers who offer consumers the chance to give
and virtual reality will offer a personalized feedback to their products, brand, and shopping
dressing room experience, furniture display, experience will be able to create winning customer
or digital store walk-through that will take the experiences. A new software category, which com-
individual shopping experience to a new level bines experience management with operational
of personalization. Sensors will monitor use, systems and brand reviews, as well as product and
consumption, wear, and freshness, alerting customer experience feedback, is already starting
consumers to replace, replenish, or repair. 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
experiences and support portfolio
▪ Offer tailor-made services ▪ Manage modular product
▪ Use IoT and sensor data for concepts
service optimization and ▪ Integrate digital capabilities
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.13
SPAR Handels AG (SPAR Switzerland) has created a loyalty program that gives its customers immediate benefit during checkout.
Besides receiving a 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.
Having a central system to steer and control the loyalty program is key. SPAR Switzerland also wants to have the flexibility to
further 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.
11SERVE THE SEGMENT OF ONE
FROM 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 ▪ Consumer decides and ▪ Opportunity to
accelerated wear and information about retail store pays maintain consumer
tear in product running shoes online ▪ Associate advises ▪ Anonymous sales data is contact and build
▪ No sensor data is made ▪ No personalized offers unknown consumer; no imported to ERP system consumer loyalty is
available are made connection to online offers lost
▪ No usage or experience ▪ Cumbersome execution ▪ Associate has no access
data available happens between to sales history, sizes, or
channels functional needs
NEW-WORLD SCENARIO
Flawless execution of New levels of customer proximity and understanding Hyperpersonalization and
service promises alignment with customer value
Consumer Consumer
• Retailer follows up • Smart automation • Consumer is offered • Consumer is notified that • Foot scan data • Consumer keeps
with regular product notifies consumer the choice of a order is ready for pickup generates a custom on running for life,
feedback surveys when shoe is nearing personalized one-time and is also offered to printed sole directly feels a positive
• Integrated sensors end of life replacement or book a same-day online from in-store 3D connection, and
in shoes continually • Marketing intelligence continuity program for foot scan for the custom printer perceives real
stream use and determines each 500 miles run sole • Foot profile helps value for lifelong
fitness data, personalized product • Consumer opts for • Consumer checks in to create custom shoe brand connection
augmenting both recommendations continuity program, store for pickup and recommendations • Consumer has
product based on product use, along with a custom fitting for an even better transparency over
manufacturing customer profile, peer sole add-on and • Associate recognizes and fit for future shoe destiny of shoes
intelligence and groups, trends, and completes the greets consumer in store, recommendations (reuse, recycle,
consumer profile social media inputs purchase with Apple provides pickup order, and potential make- refurbish, resell)
• Based on explicit using machine Pay for nearby store and guides customer to to-order shoes • Experience
consent, consumer learning pickup foot scan • Aggregate foot feedback surveys
has valuable real- • Experience data can • Retailer fulfills order • Foot scan information is profiles help R&D help improve the
time visibility on trigger exchange offer and delivers same automatically added to for new product buying journey and
product use, wear to maintain customer day for store pickup consumer profile, thereby development drive loyalty
and tear, and insights loyalty from closest micro- further enhancing
on running patterns fulfillment center relevance of future
recommendations
POTENTIAL
BENEFITS
40% 20% 100%
Forecasted growth in
Increase in subscription Reduction
revenues in logistics costs revenue for categories with
product experience data
Source: SAP Performance Benchmarking
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
12IMPLEMENT DIGITAL
SUPPLY CHAINS
Drive effectiveness across a connected, end-to-end supply
chain by providing real-time consumer insights to internal
and external fulfillment teams, distribution centers,
manufacturers, and suppliers.
In 2025, customers won't come to the retailer, To get there, retailers will use predictive analytics
the retailer will come to them. All the factors that and machine learning to predict demand and
drive demand – promotions, seasonality, events, supply of the individual household.
weather – will be dynamically taken into account
to predict demand. They will connect to the point of consumption –
such as the fridge – and automate replenishment.
With drones and driverless cars, real-time
product delivery at a low cost will offer a Lastly, retailers will provide scalable, efficient,
significant competitive advantage. Robotics and convenient source-to-consumer services to
and artificial intelligence will drive efficiency the place of need to build brand and process
in retail warehouses. (See Figure 3.) loyalty and develop brand extensions, such as
food preparation services.
Consumers will expect their needs to be met
automatically. Consequently, retailers will To take advantage of these opportunities winning
become more vertically integrated, connecting retailers will deploy a highly flexible and highly
the end-to-end supply chain to automate efficient robotics supply chain that is able to
replenishment of consumer demand. Consumers serve dynamic individual needs anywhere and
will expect transparency into the supply chain anytime.
and expect to see focused sustainability efforts.
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.14
Migros, a leading Swiss retailer, improved its supply chain agility through digitalization. The result was the ability to ensure
product freshness and a better shopping experience for supermarket customers.
The Home Depot Inc. is connecting in-store robotics with an intelligent enterprise approach. It is using drones and robotics
to create an efficient in-store experience that delights customers and provides faster order fulfillment.
Five Priorities for Success
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
13IMPLEMENT DIGITAL SUPPLY CHAINS
FROM MANUAL, ERROR-PRONE
SUPPLY TO SUSTAINABLE,
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 • Optimally stocked
based on collaborative in case of issues distribution issues such as cold store with RFID shelves with little
demand planning and along the route center with RFID chain violation, theft, • Secure supply to zero food
order forecast and delays chains supported waste
• Reduction of waste by blockchain • Customer getting
through cost-optimal transactions detailed
ordering information on
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.
14RUN 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, retailers will need even more With customer identification, smart fitting, endless
flexible supply chain processes. In addition, they 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,
“brand experiences.” Virtual reality, the use as 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.15
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.
15RUN SMART STORES
FROM DISCONNECTED
STORES TO INTEGRATED 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
Shopper recognition Smart Store Fast response Product and experience Compelling shopping New customer
feedback experience loyalty
• Shopper who is • Smart-shelf heat • Real-time response • Real-time inventory • Real-time inventory • Combined insights
recognized and maps to capture to relevant customer and product information and from both
approached according interactions demand signals information endless aisles experience and
to their privacy settings • Sensor technology • Accelerated • Ability to use • Frictionless checkout operational data
• Smart “clienteling” that helps optimize replenishment geospatial data to and convenient service sets, enabling
enabled based on store layouts, identify nearby stock options with grab-and- understanding of
• Triggered product
history and known and assortments, and locations go formats the key drivers of
transfer with RFID
predicted preferences price points, and customer loyalty
enablement to • Elimination of price • Instant shopper
enables better balance stock differences and feedback to optimize • Ability to drive
understanding and between stores control of shelf stock the experience and shopper and
prediction of flexibly using advanced drive new revenue consumer loyalty
shopper scanner technology opportunities and increase
preferences 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.
16SELL OUTCOMES BEYOND
PRODUCTS
In 2025, the majority of retail companies’ revenue will come
from services developed from the insight gleaned from
consumer insights and experience 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.16
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.
17SELL OUTCOMES BEYOND PRODUCTS
FROM 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
and contribute to better waste management.
TRADITIONAL SCENARIO
? ? ? ?
? ?
• Consumer shops for • Store staff lack the • Items for a meal can be • There is no
groceries with a few information to make incomplete added consumer
meals in mind, at best recommendations • Key items can be forgotten value
equipped with a • There is no customer history, or out of stock • There is no way
shopping list or insight on preferences to differentiate
• Leftovers and excess
• There are no recipes, no packaging can result retail services
information on nutritional
values, and no way to match
to the consumer lifestyle
NEW-WORLD SCENARIO
New levels of customer proximity and understanding Selling balanced and healthy nutrition Hyper-personalization
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
Experience feedback and machine
Home Trend analysis from Web searches helps make
learning can be used to improve recommendations that drive demand
recipes, recommendations, and the
overall offering; the next delivery Meal kits are assembled and shipped directly to
cycle is kicked off consumers based on shipping preferences
Home delivery or pickup of selected meal kits is
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.
18KEY
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
Businesses can leverage these capabilities to Advanced 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.
19Conversational AI
Voice interfaces will be the go-to
product-level RFID is being used to
transform the store, from basics, ~50%
technology for the next generation such as inventory management Of new mobile apps use voice as a primary
interface, and 50% of the consumer-facing
of applications, allowing for greater with the IoT, to more advanced G2000 use biometric sensors to personalize
simplicity, mobility, and efficiency experiences such as smart mirrors. experiences by 201917
while increasing worker productivity The checkout process continues to
and reducing the need for training.
In customer interactions, they will
evolve to meet customer demands
with technologies such as self- 30%
Increased conversion rate and up to 25%
transform customer engagement checkout, self-scanning, and smart
higher revenues from a CX architecture
and allow targeted and fully checkout. Fully automated stores supported by an AI layer18
informed exchanges anytime, are already established in parts of
25%
anywhere. Asia and are being introduced in
other markets. Up to
Blockchain increased inventory turns through 2021 for
retailers that leverage AI, AR, and the IoT for
A relatively recent breakthrough Virtual and Augmented Reality employee and customer engagement to
technology, blockchain is Virtual reality, the use of digital respond to stakeholders’ experience
expectations19
revolutionizing the movement and technology to create immersive
storage of value by creating a chain simulations, was once the stuff of
of unaltered transactional data. The
blockchain model of trust, through
science fiction. So was augmented
reality (AR), which lets users
20%
Improved customer satisfaction for retailers
massively distributed digital interact with digital content that’s that leverage AI, AR, and the IoT for employee
consensus, has the possibility overlaid on the real world. They will and customer engagement to respond to
reshape supply chains and become the standard way to stakeholders’ experience expectations 20
demonstrate a product, whether
commerce across the entire
digital economy. In the near term,
blockchain-based solutions are
that is furniture or paint in the
consumer’s home, beauty products Up to 15%
applied to the consumer’s face, or employee productivity for retailers that
satisfying consumer’s demand for fashion worn virtually by the leverage AI, AR, and the IoT for employee and
customer engagement to respond to
solutions to support global consumer. stakeholders’ experience expectations21
traceability and sustainability in
food and agricultural products. Data Platform to Manage
Solutions to validate authenticity Experience
Retail leaders are connecting
58%
and to fight counterfeiting are also Of human task hours will be automated
perfect use cases for blockchain operational data from companies’ by 202222
business systems (what is
technology.
happening) with the experience
The Internet of Things (IoT) and
data coming from customers and
employees (why it is happening) to
99%
Accuracy in voice and video recognition by
In-Store Technologies get 360-degree views, actionable 202023
Retailers are using IoT capabilities insights, and to deliver better
to bring digital capabilities to the experiences.
physical world. The IoT through 20.4 billion
Connected devices will be in use by 202024
Key Technologies
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
20GETTING 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.)
Figure 6: Strategic Priorities Across the Maturity Framework
Optimize Extend Transform
Create superior
customer experiences
through trusted services
delivered at scale.
Leverage deep ▪ Tailored assortments
Be customer Respond to real-world data and Create tailored, immersive ▪ Seamless omnichannel
centric across understanding of customer
changes in use and experiences predicting interactions
the value chain need to drive winning consumption customer needs ▪ Preempted changes in
assortments
preferences
▪ Mass customization
Serve the Understand and predict Identify moments of need and Mass-customize product
▪ Zero-click ordering
segment individual and contextual respond with timely and and service bundles to
relevant offers and services single customer outcomes ▪ Customer-for-life
of one customer needs
relationships
▪ Hands-free robotics supply
Digitalize the supply chain chain
Implement Extend to point
Gain source-to-consumer ▪ Connected homes and
digital supply from the customer to the of consumption for instant
delivery to the place of need smart products
manufacturer response
chains ▪ Flexible delivery anywhere,
anytime
Empower the front line Create experience centers ▪ Unified digital experiences
Run smart Enable sensor-based customer
with highly personalized
stores with real-time insights to identification, store interaction, ▪ Ultraconvenience
services and
serve their customers and checkout ▪ Experiential retail
ultraconvenience
▪ “No ownership” and
Leverage experience
Sell outcomes continuity business models
and operational data Enable new use-based services Move from selling products
beyond ▪ Platform scale created,
to create new offers with sensors to selling outcomes
expanding into adjacent and
products and services new businesses
Getting There
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
21EARLY DIGITAL ADOPTERS
LEAD THE WAY
How to 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
digital transformation 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.)
Figure 7: Innovators Focus More on Digital Priorities Than Others25
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
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
22SAP’S FRAMEWORK
FOR THE INTELLIGENT
ENTERPRISE IN THE
EXPERIENCE ECONOMY
Most organizations understand what is happening in their business but may not always know why.
They know what’s happening because they have systems that capture operational data (O-data) – about
their customer transactions, supply chain, manufacturing, spending, and the activities of their workforce.
They can see that data through reports and dashboards. They can see trends and predict what will
happen next.
But to influence what happens next, companies need data about the interactions that people have with
their products and their business. Experience data (X-data) captures beliefs, emotions, opinions, and
perceptions – the “why” something is happening. And when companies know why something is
happening, they can make an informed decision about the best way to respond.
Y connect experiences with operations. They use
To win in this experience economy, intelligent enterprises
both X-data and O-data to guide their business decisions. Intelligent enterprises collect insights from
customers, employees, products, and brands at every touch point. They use powerful technologies to
automate and integrate their data, processes, and applications, enabling them to sense risks, trends,
and opportunities. And they act on this intelligence across every part of their business. (See Figure 8.)
Only SAP has the strategy, expertise, and solutions to deliver on this vision, enabling intelligent
enterprises to turn insight into action.
Figure 8: SAP® Intelligent Enterprise Framework
X HR
Data Customer Finance
Customer Analytics Intelligent
Technologies
Manufacturing
Experience Intelligence Operations
Employee
Supply Chain
Database & Application Development
Data Management & Integration
Product Procurement
Brand O
Data
Getting There
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
23HOW 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 to focus on live digital data and combine solution
know-how and industry-specific process expertise with data analytics so that the right digital reference
architecture is defined and delivered. In that context, a model-company approach is aimed at simplifying
and increasing the speed of the digital transformation journey. Model companies represent the ideal
form of standardization for a specific line of business or industry. They are built on preconfigured SAP
solutions based on best practices supported by SAP, along with the business content that encompasses
our experience and expertise relevant for the industry. They provide a comprehensive baseline and
come with the accelerators to jump-start digital transformation projects.
Getting There
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
24COMPREHENSIVE
SAP ECOSYSTEM:
ORCHESTRATING
THE PARTNER ECOSYSTEM
TO DELIVER VALUE FASTER
Our comprehensive ecosystem for the retail industry offers:
▪ The Intelligent Enterprise as the overarching ▪ Integration into a wide range of business services
strategy to meet future requirements, (OEMs, suppliers, key vendors, and more)
providing:
▪ Open architecture, with a choice of hardware and
– SAP S/4HANA co-development software specifically designed to meet
programs for customers and partners requirements
– Industry co-innovation programs for ▪ Complementary and innovative third-party
industry-specific use cases solutions to provide leading-edge and state-of-
the-art technology
– Delivery of “enterprise-to-enterprise
industry clouds”
– Thought leadership, evangelism, and
enablement by industry through events,
councils, and regular customer exchange
Our partner ecosystem includes, among others:
Getting There
© 2019 SAP SE or an SAP affiliate company. All rights reserved.
25SAP 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 Services and Support
Getting There
© 2020 SAP SE or an SAP affiliate company. All rights reserved.
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