Analysis: SAP targets dynamic retail market with investments and partnerships

SAP is partnering Italian luxury goods firm Salvatore Ferragamo, French supermarket group Casino and other top retailers to fine-tune its retail software.

SAP is partnering Italian luxury goods firm Salvatore Ferragamo, French supermarket group Casino and other top retailers to fine-tune its retail software.

Retail is a strategic industry for SAP as the enterprise software firm aims to capture as much as it can of the potential €2bn annual world market in licence fees.

Retail industry priorities are very much in line with SAP's strategy of enabling enterprise mobility and real-time analytics, says Stefan Gruler, global head of trading industries at SAP.

Global investment banking and securities firm Goldman Sachs has predicted that retail internet and mobile sales will surpass offline brick-and-mortar sales globally in the next five years and, according to research firm IDC, multi-channel shoppers spend 15% to 30% more than those who use only one channel.

SAP wants to tap into that market, and considers itself well positioned because of its current product development strategy, which is aimed at making the most of mobile and analytic technologies acquired after taking over Sybase and BusinessObjects.

"SAP is actively looking for retailers as co-innovation partners to develop its offerings through working on specific use case scenarios," says Gruler.

Under the new leadership of co-chief executives Jim Hagemann Snabe and Bill McDermot, SAP is aiming for a much closer relationship with its customers to ensure it delivers the right technology and functionality at the right time.

The co-innovation project with Casino is focused on a consumer mobile system using targeted one-to-one marketing, including personalised special offers, and suggested shopping lists based on consumer history.

Accurate real-time information

Customers want to feel their needs are understood, but to achieve this, retailers need accurate real-time information to make the right response at the right time, says Gruler.

"We are also looking at ways of helping retailers build user profiles to improve their up-selling and cross-selling capabilities," he adds.

This type of innovation relies heavily on in-memory computing technology to pull all the relevant data together and analytics technology to make sense of it all, Gruler explains.

Salvatore Ferragamo's production is 100% based in Italy, but it distributes to more than 100 countries and is growing rapidly in Asia, with 10 new boutiques opening in China in the past year.

The company, like many other retailers, is facing the challenge of creating standardised management processes for all its new stores as well as harmonising its global business processes and integrating with legacy systems to produce consistent data across the business.

"Ferragamo is a cool and amazing company to work with because there are so many common denominators with SAP, including the drive to innovation, sustainability and globalisation," says Agostino Santoni, managing director of SAP Italy.

Improve operational efficiency

SAP is working with Ferragamo to revamp its IT infrastructure with the aim of gaining insight to better understand its customers and business, improve its operational efficiency to boost profits, and achieve the flexibility required to capitalise on the best growth opportunities.

SAP's key capability in retail, says Gruler, is to provide the consistent data foundation to meet the need to innovate in order to engage customers across all channels including the internet, which already accounts for 20% of sales, to provide mobile functionality with 40% of buyers researching products online, to react to local demand, and to enable rapid change at low cost.

Capabilities developed through such co-innovation projects are routinely included in updates to SAP's retail software to benefit all verticals within the sector, says Gruler, as it continues to expand to include utilities, telcos, financial services firms and wholesalers as they begin to sell directly to consumers.

SAP sees market opportunity in covering as many different business models as possible as the retail industry continues to expand into new areas.

In addition to e-commerce and mobile applications, such as that being piloted with Casino, SAP is also well positioned for future moves into the cloud by enabling data consistency across on-premise, on-device and on-demand cloud services, says Gruler.

Cloud computing is not a model that traditionally conservative retailers are rushing to adopt, says Gruler, but SAP is confident it will be used more widely as other countries catch up with the Asia Pacific region, where there are already concrete moves into the cloud, especially in China and Japan, where some retailers are using cloud-based enterprise resource planning (ERP) applications.

European retailers, like Ferragamo, typically like to have complete control over their data and other IT systems, but worldwide trends are towards achieving the lowest possible total cost of ownership (TCO), says Gruler, so it is only a matter of time before cloud-based computing becomes more widely used in the retail sector.

The retail industry has never been more competitive or more complex, but SAP plans to capture as much of that market as possible by capitalising on its core capabilities to provide the clear data foundation and technologies that will enable retailers to identify and implement new strategies in a relatively short period.

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