After a year of turmoil caused by the migration away from former parent HMV, the technology team at Waterstones is finally finding room to think about strategy and respond to consumer trends such as e-books as well as a challenging retail climate.
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IT and e-commerce director Steve Monaghan was hired in February 2012 with a clear brief - lift and shift as much as possible of the IT estate underpinning the business to new owner, Russian billionaire Alexander Mamut, within a five-month timeframe.
The migration from HMV’s shared services set-up involved every piece of software supporting the business across areas including inventory, human resources, loyalty and customer relationship management, as well as all hardware infrastructure.
“We had to transition from the HMV environment so a lot of the work from last June to October was around making sure everything was working and getting ready for the peak season,” Monaghan told Computer Weekly.
“That meant there was no strategic work in that period - it was all about taking ownership of the systems, making sure we understood them and that they were working during the busiest time of the year,” he adds.
“The decision to take as much as possible [from the previous IT set-up] was made even before I joined because it would have been too risky to change things without knowing what the business plan would be going forward.”
Now that the integration is mostly out of the way, the technology team is focusing on more strategic activities, such as evolving the relationship with Kindle. Since last October, the Amazon-owned bookseller sells and promotes its Kindle tablets and e-readers at Waterstones’ high-street stores and online.
The partnership also prompted the roll-out of Wi-Fi across all stores where customers can access certain books through Kindle and read them in store free of charge for an hour – the idea being to create an experience similar to picking up a book from the shelf and browsing.
“We needed to get into digital reading, which was one thing we didn’t offer to customers. We had an online offer, but not digital books, so we partnered with Kindle – which was not an insignificant decision given that Amazon is our largest competitor and the largest bookseller in the UK. But it absolutely made sense to customers,” says Monaghan.
“So we announced the deal in June, fitted out Wi-Fi, retrained 1,000 staff, built a supply chain, got the systems and technology ready for the launch in October, which was the most challenging thing we did in that period, “ he adds.
“Now we are going to ingest the Kindle titles onto our website, and will be the only place outside the Kindle site where you will be able to buy a Kindle book. It gives us credibility in the digital reading space.”
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According to the IT director, his team is working on revamping the website, which will be “more led around content” and offer a “better customer journey”. The improvements will be seen towards the end of this year and start of 2014.
Another major improvement that is directly linked to Waterstones’ operation online is the use of its store network of over 280 shops as fulfilment centres. This will start in the second half of this year and any store will be able to ship orders to web customers. This will be tested prior to the peak season then refined ahead of a full roll-out next year.
“There is some complex modelling that goes behind it around availability, stock levels and so on, but the idea is that we will end up with more than 280 fulfilment centres rather than a single distribution facility,” says Monaghan.
A different IT reality
Waterstones is also investing millions of pounds on a new electronic point of sale system by PCMS. The implementation started in January and is planned to finish inOctober – which is when the retailer will go into a development freeze ahead of Christmas. The new platform will replace one from IBM, which previously provided the till systems under the HMV set-up.
Monaghan says that one of the main changes for the IT agenda at Waterstones since it moved away from HMV is the size of the business – the chain now has about 280 stores compared to about 700 before, which has an impact on the decisions made in relation to technology.
“We are transitioning away from the HMV contracts, partly because of the scale. Our scale changed, and as a result the type of partner we require changed as well,” Monaghan says.
Waterstones terminated some of its smaller IT contracts that were not delivering or were too expensive at the time of the migration. Monaghan hints there will be further changes in the horizon.
“If you look at our overall spend from a year-and-a-half to six months into the future, it will be down marginally, but not with two to three main suppliers, but spread across a variety of specialist suppliers,” Monaghan says.
In terms of large contracts due to expire, the retailer will be launching a tendering process for its networking needs. The incumbent is Cable & Wireless.
Between IT and e-commerce, Waterstones employs 55 people – again, a lean set-up compared to the hundreds that worked under HMV’s shared services department in the old days. About 90% of the staff were hired from the former parent company, with a small group of people hired externally.
“It is not a particularly huge department. As a company we tend to do things in a pretty lean way,” Monaghan says.
The infrastructure Waterstones operates since moving away from its former parent is also very lean. But the team moving datacentre services to new supplier ACS in the next four weeks have started a virtualisation exercise.
Everything has been under review and change: how the shops and supply chain works, our digital offer, marketing – everything has been under fundamental change
Steve Monaghan, Waterstones
When moving offices from Brentford in London to Piccadilly Circus this year, Waterstones also adopted virtual desktop infrastructure with Citrix software for 200 users and will replicate the model in its other location in Solihull for a similar number of people.
“We are shrinking our infrastructure, but the main goal is not just virtualise everything – only where it makes sense,” says Monaghan.
However, the IT director does not think Waterstones will extend its relationship with Amazon by adopting the supplier’s cloud services – there was an attempt back in the early 2000s, but this ended.
“We are working with Kindle, but would we want [Amazon] to be a service partner for us? At the moment it wouldn’t make sense, but if their offer evolves, it is maybe something we would look into in a few years’ time,” says Monaghan.
Dealing with change
According to Monaghan, previously a telecoms IT executive, working in retail has been an eye opener in terms of customer focus.
“A lot of companies that aren’t in retail talk about customer focus, but when you are in telecoms for example, customers sign up for 36-month contracts and you don’t need to speak to them again until month 33,” he says.
“But when a customer comes to buy a book or a t-shirt, you have to get them to come back soon, as there is no guarantee they will given the pressure on people’s pockets.”
But the real challenge for the Waterstones IT chief is dealing with never-ending change, prompted by the uncertain conditions in which retailers operate.
“The most challenging thing has been the state of flux at the company – from when Alexander bought us a year-and-a-half ago, Waterstones didn’t have that many days left in the high street,” Monaghan says.
“So from that point onwards, everything has been under review and change: how the shops and supply chain works, our digital offer, marketing – everything has been under fundamental change,” he says.
“This means everybody tries to work very hard to make things better and it is hard at times too, because it is difficult to get time with everyone else and complete projects on a timescale, just because there are so many plates spinning at the same time. It is challenging but it really sharpens his focus on what is actually important – our customers.”
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