An Executive's Guide to Best-in-Class Retail Management Software

Retail Management Software

Retail software adoption is beginning to catch up with the business changes occurring in the industry. The retail industry in incurring unprecedented change and many brands are struggling to keep up. The consumer is more connected, informed and empowered which has changed the balance of power. Brand advertising is losing effectiveness in favor of consumer generated content on social media. Customer loyalty is on the decline and consumer showrooming will continue to challenge brick and mortar stores.

These types of consumer driven market shifts require new technologies to support more agile business strategies. The days of relying upon back-office ERP systems, retail merchandising software, supply chain applications and POS systems are behind us. These applications are still necessary, but now only a part of a more expanded software portfolio needed to deliver relevant, personalized and real-time consumer engagement throughout end to end customer journeys across channels and devices.

However, before acquiring new systems to solve hard problems and capitalize on new business opportunities, I recommend adopting an IT portfolio approach. It's a technology strategy that aids manageability and closely aligns to the high impact changes affecting retail business strategies. The below application framework is a deviation of Gartner's Pace strategy that I've adapted to accommodate the retail industry.

Systems of Record

Systems of Engagement
(Systems of Differentiation)

Systems of Innovation

Enterprise Resource Planning
Manufacturing Execution Software
Supply Chain Management
Customer Relationship Mgmt
Human Capital Management
Retail Analytics Tools

Sales, Marketing and Service
Dynamic, Personalized Promotions
Customer Experience (CX)
Customer Loyalty Systems
Social Business
Mobile & Clienteling
iBeacons, NFC and Wi-Fi
Endless Isle

Collaboration (Slack, Chatter)
Social Ideation & Crowdsourcing
Next Best Action/Offer
Customer Analytics
Business Intelligence
Data Warehousing & OLAP
Predictive Analytics
Cognitive Computing
Big Data
Internet of Things

While Systems of Record are often viewed as large, monolithic applications, their primary use cases need to be decoupled in order to design with more specificity and better align with downstream systems. For example, systems of record will cascade to many functions, such as the below.

- Merchandise and Assortment Planning
- Category, Assortment & Space Optimization
- Demand Planning and Forecasting
- Open To Buy Planning
- Procurement and Sourcing
- Allocation and Replenishment
- Pricing, Promotion & Markdown Optimization
- Multichannel Order Management

- Multichannel Inventory Management
- Cross Channel Fulfillment
- Sales & Operations Planning
- Warehouse Management
- Transportation Management
- Vendor Managed Inventory
- Single View of the Customer
- Master Data Management

Retail Management Software Architecture

The IT portfolio framework is designed to build upon core transaction systems with applications capable of realizing differentiation and driving innovative ideas, processes and strategies.

Systems of Record are really the work horse apps that provide little differentiation but manage the everyday business practices every company must accommodate. Because the business processes are routine and the volume of transaction processing is high, their pace of change is low and their ability to increase value is based on their platform extensibility to support more innovative applications.

In fact, attempting to implement disruptive technologies such cloud, mobile, social, analytics, big data or customer experience to name a few, without leveraging systems of record as the originating platform will result in redundant systems, processes and data.

Systems of Engagement lie at the intersection of customers, merchandise and channels. This retail management software connects brands with their customers in order to improve the customer experience. These applications support unique business processes that create differentiation and competitive advantage.

Systems of Engagement are normally lightweight, consumer facing and developed in successive iterations. Above all, it is imperative that these applications cater to what is sometimes called the Consumerization of IT. That means these apps must take a mobile first approach, adhere to consumer design principles and be extraordinarily intuitive (no online help required).

In other words, for most companies they will not look like, act or operate anything like the internal enterprise systems. While Systems of Record are primarily governed by IT, fairly inflexible and generally have operating lives lasting from 5 to 10 years, Systems of Engagement are more often governed by managers in lines of business, very adaptable and have much shorter useful lives.

Systems of Innovation will define the future of competitiveness. Do not confuse learning with innovation. All companies must be able learn and apply that learning in their business execution. However, extraordinarily few brands are capable of building the culture and capabilities needed to create innovation.

While those companies who can innovate will enjoy first to market advantage, market share growth and premium pricing, an alternative 'fast follower' strategy is a viable approach for others as long as they show the ability to act promptly. It's the companies who do not proactively act or act timely that will involuntarily transfer their market share to their more innovative competitors.

This retail management software portfolio approach delivers several benefits.

  • The layered framework offers a building block approach that better facilitates business and technology change. When business processes work across the three layers, each layer delivers increased agility to meet the changing needs of the business. As the pace of change increases, this approach allows more rapid changes to Systems of Engagement while continuing to harness the compute power of Systems of Record.
  • Recognizing that different types of systems offer different value and constraints allows brands to apply varying IT strategies in procuring, managing and retiring business applications. It doesn't make sense to apply the same strategies and rules to Systems of Record that you would to Systems of Engagement.
  • While Systems of Record are generally limited to common ideas shared by all companies, Systems of Engagement and Systems of Innovation deliver differentiation and new ideas to spur business growth. Gartner refers to Systems of Record as "common ideas", Systems of Engagement as "better ideas" and Systems of Innovation as "new ideas."
  • The layered retail management software approach illustrates how Systems of Engagement should leverage Systems of Record as underlying platforms. This minimizes perennial problems such as disparate applications, data siloes and fragmented systems. Master Data Management and cloud architectures provide governance and standards across layers in order to aid enterprise-wide activities such as business process automation and information sharing while at the same time lessening the cost and pain of system integration.
  • This technology strategy allows companies to manage fewer systems, incur much higher data quality, reduce business process cycles and have access to more information.
  • This retail-adapted Pace layered portfolio model offers a more simple governance to IT application strategy. It deconstructs your inventory of IT systems and reorganizes them in a way that creates a more elastic technology plan. That makes it capable of more quickly supporting dynamic shifts in the marketplace.

All merchandise becomes commoditized over time thereby making product-centric retailers vulnerable. However, properly nurtured consumer relationships do not deteriorate over time giving customer-centric companies a more sustainable competitive advantage. Evolving from Systems of Record to Systems of Engagement in order to improve the customer experience and continually foster the consumer relationship is a technology strategy that aligns well to the most sustainable business strategy.