The retail industry — perhaps more visibly than many other industries — is perceived as being at a significant crossroads that has and will continue to result in changes to all aspects of the retail landscape. Significantly, the most important market influencer impacting the retail industry is technology innovation and the pace at which it is moving.
The impact of the online revolution on retail, such as the enabling of commerce through the web, opened the floodgates for the growth of eCommerce. In fact, industry surveys indicate that 67% of US customers are multichannel shoppers, and this segment of shoppers generate 25% more profit than regular shoppers. As such, a majority of brick and mortar retailers have had little choice but to embrace the online medium. In fact, the introduction of mobile commerce and social commerce into the retail landscape has dramatically increased the number of channels used to increase revenue and, as a result, retailers are obliged to embrace and incorporate these technologies into their businesses.
The retail industry’s challenge and opportunity in the next few years will be the degree to which they can successfully capitalize on the emergence of new markets, channels, products and customer groups. Many industry researchers have encapsulated this phenomenon as the advent of the era of maximum retail agility.
So, what is the relevance (or benefit) of labelling this phenomenon as retail agility? In reality, this term has little relevance on its own. But it does have the ability to encapsulate new and trending ideas and promote their importance within the industry. In fact, retail agility has gained relevance and credibility to the point that most retail businesses no longer question the need to adopt multichannel strategies.
Retail businesses that wish to remain competitive and thrive in this technologically-dominant environment understand that clinging to restricted interpretations of doing business cannot be sustained.
The message that retail agility is attempting to drive home is simple: high performing businesses can recognize and leverage the power of using multiple channels to complete a business transaction, while providing a seamless experience regardless of channel.
It sounds straightforward, but it comes with a steep challenge: how to balance the process of implementing new technology alongside the necessity of upgrading capabilities for a successful integration.
This is where retail agility comes in and begins to make sense. This fast-moving landscape requires an equally fast response time, so businesses can’t afford to struggle with IT architectures that can’t respond to these challenges.
The Role for ERP in the Emerging Retail Landscape
This new reality for the retail world couldn’t provide a better environment for the business case of installing software that addresses and provides solutions to the many challenges that are part of the changing landscape. And the software that most closely aligns itself and responds to these challenges is retail ERP Software.
If you have ever considered investing in a comprehensive software system for your retail business, this is probably a good time to consider this investment.
ERP was originally developed for manufacturing, but has since become an essential tool for many business sectors because of its wide-ranging capability to adapt to individual business needs. The management of a retail business stands to benefit greatly from a well-functioning ERP system. The bringing together of disparate pieces of software facilitates the movement of data quickly, easily, and accurately from one end of the retail process to the other. This enables decision makers to reach the best possible outcome for each individual circumstance.
By examining some of the ways in which retail ERP can optimize the day-to-day running of a business, you begin the process of understanding how ERP can maximize those benefits to suit your specific business needs.
Retail ERP – In General
The role of ERP in retail has evolved from a system for conducting daily operational tasks to engaging with a business in a dynamic and integrated manner. Retail ERP helps executives sustain a strategic view of their retail business and, ultimately, bring that approach into action.
Retail agility, as referenced above, stresses the need for the retail industry to respond directly and quickly to customer demands. In this case, leveraging the power of multiple channels while offering a seamless experience regardless of channel appears to be a winner. Consumers (especially younger shoppers) are comfortable with technology, ready to utilize every device and mechanism to connect and transact with retailers anywhere and anytime. Recent industry analysis continues to reinforce the evidence that customers remain committed to the internet as a primary means of shopping.
How Can a “Typical” Retail ERP System Help Achieve These Goals?
The first and perhaps most important characteristic of a retail ERP system is its ability to centralize data and the functions that manage and control finances, customer management, sourcing, demand forecasting, inventory, sales orders, invoices and other retail functions. The integration of the disparate pieces of software that support all these individual functions is extremely important because it directly addresses many of the serious challenges that retailers have experienced for several years across most enterprise systems — including ERP. Specifically, obsolete technology, lack of integration and high maintenance costs have all contributed to these challenges, rendering their operational systems less than adequate. In other words, all the benefits that would accrue as a result of running a streamlined, multichannel and seamless retail experience would be jeopardized by an outdated and siloed enterprise system.
For example, in order for retailers to manage and optimize their operations both globally and locally, critical functions that move across different brands, channels, supply chains and potentially different countries — such as merchandising, sourcing, and finance — require a robust integration process.
Without such a system, a retailer could potentially face disparate system interfaces, disconnected data management, disconnected pricing systems between channels and inconsistent key performance indicators (KPI). It’s clear how this set of circumstances would make it very difficult for a retailer to achieve a uniform, well-functioning process that would lead to achieving a profitable business.
How Do You Know When, What and How Much to Buy?
Once a decision to purchase a retail ERP system has been made, some of the most important considerations that a business must make include the following:
- Assess exactly when is the right time to invest in a retail ERP system
- Determine the best vendor for this product
- Determine how expansive a system to purchase
When to Invest
This is a difficult question to discuss in generic terms, as so many of the considerations that go into making this decision are particular to the business. Of course, financial considerations are very important, as this can be a significant investment depending on the size and number of functionalities that are included. However, we will look at some of the variables that can be assessed independently.
A decision to upgrade or replace a software system is, for the most part, a positive event, as it’s usually triggered by increased business activity. Retail business owners that are looking to optimize their capabilities and increase the needs of their growing businesses may be thinking about replacing an outdated system or investing in a totally new one.
Generally speaking, a new retail business that’s just starting out may only require very basic software. Retail ERP isn’t necessarily a wise investment in this case, unless the retail location is particularly large, has several registers and has a high volume of business.
Another consideration would be whether the retail business develops into a chain of retailers, typically between 5 and 10 locations. Under these circumstances, a business might begin looking for a more comprehensive software solution to meet their growing needs. At this point in the business cycle, a retail ERP is a potentially good investment. An ERP platform that’s been carefully selected can service a business for an average of 10 years, and can be upgraded as they require more functionality.
Conversely, if a retail business hesitates too long to invest in retail ERP, it may end up incurring negative consequences once it’s reached a certain size. Trying to manage a business across multiple locations can make running it very difficult and inefficient. A retail ERP software system can be far less costly in the long run, as it provides increased benefits to more complex retail businesses because of the comprehensive approach to managing and integrating business functions.
A common, stable platform with easy customization for your business helps your company integrate the new system quickly. In this case, you can let it evolve as your company grows and changes.
The Best Retail ERP Software Vendor For Your Needs
This is perhaps the only task in software selection which is similar across the board. In other words, whether you’re selecting human resource software, project management software or retail ERP software, the steps are quite similar.
The process begins in-house, with a close examination of your business needs. There may be many similarities across the industry, but no two businesses are exactly alike. You can make those differences work for you by focusing on what is unique in your circumstance, ensuring that those priorities are covered. This approach has a greater opportunity for meeting your needs and producing a successful conclusion than many others.
The next step will include direct engagement with vendors. Your selection team has hopefully come up with a group of vendors that will form part of your final selection pool. But the following points should be individually assessed by your selection team before moving onto the next step of vendor engagement. These steps, taken together, can be looked at as a decision-making process for a retail ERP vendor:
- Research the vendor’s solvency, as you’ll want to ensure that the vendors will be in business if and when you’ll require their assistance.
- Look for a vendor that has significant knowledge and background in the retail industry. Working with a vendor with specific in-depth knowledge will improve the quality of the experience.
- Question the level of service and support post-purchase.
- The principal players in the retail ERP software market are Aptean, Infor, Microsoft, Oracle (including NetSuite), and SAP. When you’ve agreed upon a selection of vendors to choose from, it’s a good strategy to include at least one of these major players in the group. These vendors offer best-of-breed solutions in this market, so their inclusion in the group fulfills an important function for benchmarking purposes.
- Finally, this software is expensive, and the implementation process is both time-consuming and complex. This is an investment that will be in place for a significant length of time, hence the importance of taking your time and choosing wisely. Furthermore, most retail ERP solutions are delivered on the cloud, so the software can be purchased and installed on an as-needed basis.
How Complex a Retail ERP Software System to Purchase
This decision is entirely dependent upon the size of your business (in the short-term and in the longer-term), complexity and category of retail business. There are functions within the software program that are considered basic and are generally found in the majority of ERP packages. These include the following:
- Head Office Operation Software
- Accounting/General Ledger Software
- Human Resources Software
- Point of Sale (POS) and Store Management Software
- Warehouse and Supply Chain Management Software
- Customer Relationship Management (CRM) Software
- Business Intelligence (BI) Software
As mentioned, these functions cover the basics; all additional functions serve more specific, specialized needs. We will cover some of the key functions in the following section that may help to make an initial list of “must have” and “nice to have” functionalities.
A Closer Look at Core Features of a Retail ERP Software System
Today, no retail business intent on succeeding can ignore the impact of digitization. In fact, businesses that ignore this reality for too long do so at their own peril. Change is a constant in all business environments, but the rate at which we’re asked to absorb change today makes it a lot more difficult to understand and deal with.
Hence our introductory discussion on retail agility.
Retail agility implies a broad acceptance of change, and it rewards the retailer that takes the necessary steps to respond to that change in a timely and positive manner.
Perhaps the single most important element that has transformed the retail business is the consumer. Obviously, the customer has always been king, but today’s consumer behavior and expectations are unparalleled to any previous era. First, over 75% of customers today start out shopping online, using smartphones to research and shop. Product content is dispersed across multiple channels, systems and the cloud, requiring retailers to meet the challenge of providing content that is consistent across every channel and equally engaging. Customer expectation requires that all details needed to make systematic product value comparisons be present from wherever they shop.
These circumstances point clearly to the need for a single, intelligent, digital core that can integrate critical business processes and data, working together to allow instantaneous insight in real-time decision making circumstances. Whether creating a personalized customer experience or helping businesses make informed real-time decisions, the need to connect to historical and transactional data across the company is critical.
Our focus will be on those functions that focus on the consumer experience in order to grow your customer base and profits. Moving to a single, real-time ERP platform can go a long way toward reaching and surpassing your goals. We will assess the following functionalities:
- Marketing and Merchandising
- Supply Chain
- Omnichannel Customer Experience
Marketing and Merchandising Management Tools
This important functionality should be brought together to create a unified view of customer demands and avoid data silos.
- Data and Analytics: the ability to manage retail master data based on consumer activity across channels; analyzes real-time, context-driven customer profiles; analyzes and improves merchandising across channels and KPIs
- Merchandising Planning: collaborative merchandising with the ability to group together various locations to simplify planning, optimize sales and margins; creates financial plans for channels and stores; shifts product between locations for maximum revenue growth
- Omnichannel Marketing Management: marketing strategies that cross all channels and provide individualized experiences
- Omnichannel Promotions: optimize pricing and promotions by using predictive analytics for optimal insight and action
Procurement and Purchasing Management
An integrated platform enhances the process of acquiring goods quickly and efficiently through collaboration with global and local business partners.
- Data and Insight: the ability to improve your bottom line with strong, reliable procurement data; increased collaboration with a global network; improved decision making with real-time inventory reporting
- Contract Management: effective contract management and collaboration with suppliers with an integrated sourcing and supplier management system; enables sourcing the most qualified suppliers on the single system
- Purchasing Merchandise: a solution that can help you benefit from goods that are procured faster and at better pricing by working globally and managing large purchase orders; takes care of compliance issues with informed negotiations; ability to respond flexibly to market conditions to support this process
Supply Chain Management
A network that provides real-time data and insight on supply chain, end-to-end logistics and fulfillment allows you to anticipate demand and stock stores with the right products.
- Data and Insight: unified data across sales channels achieves a real-time view of inventory; full real-time view of supply chain with inventory performance data
- Allocation and Replenishment: an automated process to allocate merchandise, seasonal and otherwise, in an accurate, predictable manner; supports improved retail planning and replenishment calculations, all in the benefit of an improved customer experience
- Omnichannel Inventory: manage and allocate inventory across locations and channels to assess performance, reduce costs and improve customer satisfaction; monitor margins, turnover of inventory and top performing or non-performing inventory
- Order Fulfillment Logistics: an integrated process to optimize all activities across the supply chain with solutions that include warehouse and transportation management. This holistic network improves customer satisfaction, lowers operating costs and maximizes the use of assets
Omnichannel Customer Experience Management
Regardless of channel or location, a customer experience should be uniformly positive and provide exceptional service. Your customer base will expand if you can interact with customers on an anytime/anywhere basis.
- Data and Insight: a predictive tool that allows you to evaluate historical data to predict customer demands both present and future; provides insight into customer interests for a more personalized experience
- Personalization for an Enhanced Customer Experience: a tool that allows you to provide customers with information such as a product recommendation in the moment and across channels, which can increase profits; analyzing browsing behavior can permit advanced marketing strategies; multichannel loyalty programs can be used to promote customer-to-customer promotion
- In-Store and Digital Transactions: an integrated software solution that ensures a seamless customer experience and efficient, secure point-of-sale transactions whether in-store or online; seamlessly blends in-store and digital commerce across all channels and touchpoints
- Omnichannel Order Management: end-to-end software management across channels to ensure efficient management of customer orders from any channel; visibility into current inventory permits you to fulfill orders from anywhere in the supply chain; sales order cycle is completed quickly, with less administration and equally efficient processing of returns; calculates sales prices and promotional offers
ERP By Retail Industry
Enterprise Resource Planning software offers a range of solutions for retail, including point-of-sale or POS software, and other aspects of product handling and sales support software for businesses. Here are some of the specific types of retail sectors where ERP lends a helping hand.
One significant category of ERP is made for more general or generic retail sales processes. The relevant tools can run the gamut, from product handling features to customer relationship management software, and customer loyalty and satisfaction tools
These kinds of functionality help measure and evaluate relationships between businesses and their customers.
Various business intelligence features help the retail business to look at inventories, sales numbers, and business processes the right way, to know more about what’s going on in any kind of shop on an ongoing basis.
Other tools will help with specific business processes around retail, such as brick and mortar store administration, price margin evaluation, and stocking.
Farm and Home Retail
Many of the best ERP tools for farm and home retail take into account the types of products and equipment on sale in these kinds of businesses.
Order entry and tracking systems can help managers supervise e-commerce operations, while mobile POS equipment can help with wrangling different sizes and volumes of items on the floor. Think of this as a “Home Depot” model — where versatile mobile POS tools can help businesses sell small items like cans of paint, and large items like bagged concrete or mulch, or contractor materials like lumber.
Other aspects of farm and home retail ERP will help with inventory and the supply chain process. These businesses may need to evaluate where inventory is being kept, to keep an eye on real estate costs and other aspects of business.
Finally, the ERP software can include the specific kinds of CRM that this segment of the industry needs, for instance, help with handling seasonal promotions, coupons, and more.
Pharmacy business has become a complex operation.
ERP tools targeted to this unique industry will help handle inventory and address customer-facing interactions, while also providing backup support for fax and e-prescription processes and other methods of legitimizing pharmacy sales.
Mobile POS will help provide the ability to ring up pharmacy transactions at various checkout locations, while record-keeping features will help manage the regulatory requirements around the drug purchases. Pharmacies can also integrate point-of-sale touchscreens, discount or coupon offers, customer loyalty programs and versatile pricing, as well as certain kinds of credit card processing tools. Inventory management features will help handle demand and supply for a multitude of different drug products.
In general, pharmacy ERP will take into account both sides of this retail business: first, the “regular” customer-facing side, with CRM, pricing tools and more, and second, the healthcare side, with a wealth of features built to help the pharmacy business interface with doctors, facilities administrators or other stakeholders in the prescription process.
In the automotive retail sector, different pricing tools will assist in building current and up-to-date prices for OEM and aftermarket products, while parts identification features will help control inventory. Other ERP tools may offer distributor information in order to track the availability of parts for various models.
An ERP parts I.D. functionality will help businesses with large catalogs, and other documentation resources can handle data on warranties and specialized order information. The automotive retail ERP system has to have complexity, in order to handle a complex and diverse inventory of parts, for a customer base driving many different types of vehicles.
In addition, automotive retail can include a need for archived information. For example, staffers may need to know about environmental requirements for vehicle operations. Some ERP tools for the automotive space can also accommodate these types of archiving, and present this information to a workforce through an intranet, through the cloud or by other means.
B2B or Contractor Centers
For businesses that sell wholesale, or sell to a specific B2B community of contractors or business customers, ERP tools can be built to accommodate these specialized types of transactions.
Customer relationship management tools on this site may be somewhat different, with company identification fields (instead of personal customer profiles) and other resources.
Automated purchase tools can be helpful for B2B transactions. Items like role-based task lists, identity access management features, and special order tools can help to micromanage all of those aspects of a B2B deal that go on in the marketplace. Again, business intelligence tools will show business leaders how their customers are accessing their products, and how they can innovate to help serve these customers better.
Building on the idea of large-scale or high-volume purchases, B2B systems can also provide for the shipment and handling of large volumes of inventory, for example, for large items such as brick, gypsum, wood or concrete orders, as well as items like doors, panels and other building products.
Paint and Decorative Supply Businesses
ERP tools can also support specialized businesses, such as a store selling paint and decorating items.
Some of the tools in this type of customized ERP could be similar to other retail sectors — for example, resources will not only offer e-commerce and point-of-sale functionality, but also cover elements like business reporting, customer relationship management, integration of network devices, and different types of information-handling features. However, they will also help with the specific demands of this type of industry, where materials may need to be tracked by pigment, viscosity or other precise physical metrics.
Retail ERP for a paint and decorative business can help with every aspect of the sales transaction, from special order processing to high-speed credit card authorization.
All of these services support businesses that need to serve a customer base with particular needs. For example, most paint orders require a specialized process where the customer will either use available color samples, or order colors according to hexadecimal values on a computer, or otherwise specify a particular shade or hue through some technical process. The paint then has to be physically mixed to a particular standard, and the materials have to be marked for a particular customer order.
To support this type of retail, specialized ERP tools will put in place specific safeguards for customer identification. They’ll make sure that the exact color matches what the customer has ordered, and that the right customer gets the right shipment or order. This is part of customization for this particular sector of retail. In some cases, items such as paints, candles or refrigerated items like flowers need particular types of “best-practice” cold chain storage: the ERP tools can cover this type of issue accordingly.
To understand how ERP software supports a specialty shop, think about the most unusual types of assets or products offered to a customer base.
For example, think about a high-end painting by a famous artist — or a classic car, or a guitar signed by a star musician.
What all of these items have in common is that the goods in question are not mass-manufactured goods — they are unique artifacts and assets that need to be sold in a very particular way.
As any pawn shop manager can tell you, selling these types of specialized goods is much different from working in other kinds of retail. So the ERP tools have to support those differences.
One of the most fundamental ways that specialized ERP software will support specialty goods processes is by including more fields and functions related to identifying the properties of individually unique pieces.
Instead of having bar-coded product numbers or SKUs, these items will have in-depth background attached to them, in many cases, with supportive documentation about valuation, professional appraisal, customized warranty and more. Every aspect of these individual assets or artifacts has to be as transparent as possible, to support clear valuation and fair market values.
Many of these items also require a chain of custody that can also be put into digital ERP software for this retail sector. In addition, ERP for specialty retail will have all the usual features revolving around transaction support, bookkeeping utilities and more.
Yet another category of retail supported by ERP is that category that exists in a specialized section of a department store – retail for sporting goods and entertainment products.
Since this is a less isolated segment of retail, many of the ERP tools will be more generalized. Some of them may put a premium on quick checkout and transactions — making it more convenient, for example, to purchase something like a DVD or a media smart card or flash drive.
Other ERP products for this segment will focus on supporting information, for instance, archiving details about what a particular product does, and how it supports a recreational activity.
Third Party E-Commerce
Some firms may make a business out of drop shipping items from third party manufacturers directly to customers over the Internet. Many of these businesses do not have brick and mortar stores – they are Internet-exclusive. As such, they have different kinds of overhead, and much less overhead in specific physical categories.
One part of what these third-party e-commerce stores do is network with suppliers to make sure that individual and customers have the right information about products, that demand and supply are accounted for, and that the drop shipping process generally goes well.
These companies will often have quite a high customer service burden — they will have to have someone on hand to deal with customer questions and concerns. Because they do not have brick and mortar offices or stores, they will need some way for the customer to interface with them to troubleshoot problems or talk about orders.
ERP for these types of operations will generally have features facing the customer service individuals who need to maintain the drop shipper’s reputation through problem-handling. They may have sophisticated order capture or customer service ticket systems to make sure that no incoming customer query falls through the cracks. They will also maintain in-depth archives with product information because again, the customer can’t go directly to the manufacturer or observe the product in a physical store. That makes digital product specification and demonstrations very important for these types of businesses. ERP tools may offer agile change or addition for these digital, online catalogs.
In all of the above ways, ERP supports many different types of retail. Sophisticated and state-of-the-art ERP tools really allow the business to specialize in its own unique area, and innovate when it comes to selling a specific type and variety of products.
One of Forrester’s retail predictions for 2018 — one that’s particularly resonant for this report — is the following: “The key to successful retailing in 2018 is obsessing about the customer experience.” Further expanding this thought, they argue that retailers’ greatest hindrance to executing on this vision is the siloed organization structure that makes it next to impossible to get a holistic customer view or to craft the right products and services.
This is the prediction that supports the premise of this buyer’s guide: the digitization of the retail industry has turned traditional measurements of success upside down. In this digital retail arena, customers engage with multiple devices in their lives, use various channels to make purchases and connect with as many competitors as they choose. A different set of skills and strengths are required to meet these challenges, and the urgency to meet them is apparent.
Rarely has a set of circumstances been more ripe for the adoption of a unified, intelligent software system to assist in this significant challenge. Luckily, retail ERP systems are advanced enough to take on the challenge. The customer experience in retail has evolved from a poorly-defined understanding of customer service to a significant strategic priority, and businesses are spending millions of dollars addressing the question of how to improve the customer experience in stores and in digital channels. So you have to ask yourself, “How will I use retail ERP to answer that question?”