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Unified Commerce: Implications on Traditional Back Office Systems
Posted on January 9, 2017 by
Part 1 Integrating Sales = The challenges of a square peg in a round hole
Most retailers’ back office systems date back to a time when brick and mortar stores dominated and when digital channels were treated as self-contained stores. But now that digital commerce continues to blend with traditional brick and mortar retailing, it’s time to rethink how “Unified Commerce” data is processed in the back-office.
In the next eight blogs, we’ll explore the challenges faced when integrating each of the cornerstone back office apps (from the Intro) with the world of unified commerce. Today we are looking at integration of the back office sales reporting app.
A look back at what we’ve inherited
Most retail sales audit and reporting systems limit themselves to data from brick and mortar POS systems. For decades, the industry has been measuring success and failure through a handful of simple metrics, like rolled up Period to Date totals, annual comparison reports, and broken down by Merchandise Category, Location, Time of Day, etc. On top of this, most retailers correlate these metrics with store traffic and staffing data to measure conversion rates and productivity data.
When digital commerce first appeared in retail, most retailers reported web store sales as a dummy store. But now years later digital commerce has graduated to “Unified Commerce” completely blurring the lines between digital and physical commerce. Unfortunately, the dummy store approach fails to measure success and failure in the digital age.
What’s new for Sales Reporting in the world of Unified Commerce
The role of sales reporting is subtly shifting. In the past, the responsibility of the Sale Report was to report what was sold, where and when the sale took place and by whom. In the Unified Commerce, because there are multiple paths to purchase, sales reporting must answer the question “how” is sold. For example, if one store’s sales are 20% Buy Online Pickup In Store (BOPIS) and another is 2%, store operations managers can use this information to make important decisions about staffing.
A deeper look at the Infographic
Let’s start with the basics, if you look at the left side of the infographic there are many ways retailers are now transacting business through front office apps. Importantly, each app requires access to tables maintained in the back-office system, which must be shared across the enterprise. Unified Commerce means that the same information about customers, products, prices, locations, and associates is visible to every front end app. We learned from Retail Research’s mid-year study that more than 50% of retail “winners” have harmonized their customer facing apps. Retail Research. August POS Study 2016.
But a central repository only begins to solve the data integration problem inherent in Unified Commerce. These tables are anything but static. An infrastructure is required to log updates to key tables, to schedule data transformation and track distributions of new and changed data. Some of the order taking apps, also require very dynamic information such as available inventory, order history, and customer history.
Remember that each customer facing application is likely to have its own unique transformation rules for mapping, timing, and technical interface (API). As we’ve seen and argued in previous blogs, the only way to do this effectively is with a hub and spoke architecture. If you have this infrastructure in place and working well, congratulations. If not, RIBA can help.
Pulling the “sales” out of OMS
Order Management Systems (OMS) are quickly replacing Sales Audit as the vital cog in the sales information flow. But flowing OMS data to Sale Audit is forcing a square peg in a round hole. What is the difference between a sale from the time-honored brick and mortar world and one in the world of Unified Commerce? In conventional retailing, a sale is recorded when the shopper pays for it. In digital retailing, the sale occurs when the shopper, or gift recipient, takes possession of the merchandise. A series of steps usually precedes this to fulfill and deliver the order. (We cover new COST OF SALES in Part 5 of this Blog series.
Also, the OMS to back office transformations deal with some tricky issues. Among them are:
- Charging the sale to multiple parties
- Allocating transaction wide discounts, coupons, and offers to merchandise line items
- Accounting for customer accommodations
- Collecting fees
- Handling returns
- Inter-store transfers invoked when merchandise is fulfilled from another site
The basic dilemma is that because of the limitations of traditional Sales Reporting, the robust treasure-trove of digital data is left on the editing room floor. These data points include important clues to the shopper’s digital and physical path to purchase. And to correlate the sales results to the path to purchase is the most important feedback for today’s retail merchant.
Most retailers have extremely liberal policies for the return of merchandise purchased through digital apps. This leads to many issues which tend to creep into the integrator’s scope. These include making customer accommodations, absorbing additional costs, identifying pricing discrepancies, marking down merchandise, reversing sale at the originating location, transferring merchandise, and identifying potential customer abuse or fraud.
It’s vital to capture processing costs and conditions of every return of online purchased merchandise, no matter where it is processed. This information should be correlated against path to purchase information to gain insight into what the correct policy should ultimately be.
Questions to think about
There are many other ponderable questions about integrating Unified Commerce and the impact on CRM, Planning, Stock Ledger and other down steam apps as well as the cost to sales.
So, what are our recommendations?
1. EMBRACE ENTERPRISE DATA REPOSITORY with a HUB and SPOKE architecture to support the various points of purchase.
2. ENRICH YOUR SALES TRANSACTIONS with data from your digital transactions stream and your customer databases to build a solid foundation for analytics.
3. DRIVE as much of the reporting as possible TO YOUR ANALYTICAL PLATFORM. There you can explore the dimensionality of customer segmentation, path to purchase, promotional response, as well as cost of sales.
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