Retail technology view from the top: IBM's Danny Bagge

As new systems and digital capability continue to evolve the way retailers run their businesses, Essential Retail is gauging the views of the sector's main figureheads, via a series of exclusive interviews. This week, it's the turn of IBM UK & Ireland's head of retail, Danny Bagge.

Retail buying & merchandising is an art form, but those involved in this creative department of retailing need to show adaptability, take on automation and insight, and ensure processes are being shared with the wider organisation.

That is view of IBM UK & Ireland's head of retail, Danny Bagge, who says that "balancing the art with automation" by using new systems to improve productivity is "the crux of the challenge in merchandising at the moment".

"This requires adaptability from every single one of these merchandisers," he told Essential Retail, ahead of IBM's sponsorship of the Buying & Merchandising Summit.

"These people have been doing the same job for 20 years and they need to change – they need to take on automation and insight. One of my favourite phrases is you've got to get marketing out of marketing, but you've got to get merchandising out of merchandising."

The challenges

A recent study published by US-based research firm RSR found the most significant operational challenges for retail merchandisers include getting marketing in line to support their department's plans, managing the complexities of cross-channel merchandising and working out how to work with the supply chain.

"It has become even more critical for merchandising to be cross channel and to work across brand and geography," explains Bagge.

"We are seeing a lot of retailers going back to investment in merchandising systems. Some of the existing systems go back to the 1980s; one of our retail clients has a 1980s-based merchandising system but that was when shops shut at 5pm, there was no mobile, certainly no social and it clearly wasn't 24-7 and international operations."

He added: "Merchandising systems now have to work globally, with multiple currencies, products, price points, catalogues, channels, and languages. All of that means retailers need to have an omnichannel view of their merchandising."

RSR's study draws attention to the fact there are a plethora of new commercially-available solutions that give businesses the opportunity to dramatically improve how companies plan and execute marketing and merchandising plans, and combinations of these strategies.

The research suggested that core merchandising systems have historically been either home-grown or very heavily customised commercial applications, and it is the shift from this way of operating to a new generation of integrated capabilities that retailers are grappling with today. RSR managing partner Brian Kilcourse said almost half of retail respondents to his organisation's survey are getting ready to undertake this journey, but admitted "it is no small task".

Bagge agrees: "For most retailers, merchandising is the hearts and lungs of their business, so they have to do full-scale transplants. It's a huge deal but for the last five-plus years when we've been doing omnichannel we've been treating the front end; now retailers are more widely realising they need to look at the hearts and lungs."

The IBM retail boss, who took over the UK and Ireland role from Martin Butler earlier this year, also suggests that tier two retailers are better positioned than their larger tier one counterparts to see through this change faster – and more effectively.

"The tier ones have the money and marketing budgets to make this change but they also have the legacy; therefore they are hamstrung, but the tier twos are more fleet of foot and can start doing more of a wholesale change," he notes.

"Tier twos are looking at how the implement ERP because they are looking to be more omnichannel, and they are looking at wider strategies where ERP underpins the back-end and single view, augmented with a digital front end. Tier ones could not rip out and replace in three years – but tiers twos can and are."

Flying without wings

As retailers look to adopt a 'fail fast, succeed fast' approach to business, which Bagge describes as businesses wanting to "try it, test it, kill it or roll it out", there is a clear drag in the form of legacy systems. Behind-the-scenes change is needed, but it must be implemented without impacting the customer experience.

Bagge says retailers have got to be pragmatic because the task is "akin to flying a plane and changing the wings".

"A vendor comes along and says you want a single view of stock, etc, and that means major work while they're still trying to run a business," he adds.

"You've got to stop the plane, ground it, change the wings and lift off again. This is what you're saying by saying let's get the right back-end systems in. The question is how do we do that piece by piece change while still using the benefits of front office transformation, so that you can keep running your business?

"For us, front office and back office have to happen together because retailers can't afford to land the plane."

Continuing with the upwards-looking terminology, cloud technology is being touted as one method of aiding businesses looking to implement more flexible, agile systems.

Bagge expects the majority of retailers will be operating cloud-based systems within the next five years but his question is 'what level of cloud will that be?'

"It's not just about having cloud-based systems, it's about having cloud-based business processes – that's the trick.

"The essence of achieving this is making sure you as a company are adaptable enough so that you can construct your business so it can be shared across departments, across channels and across geographies."

As Bagge acknowledges, this is the one thing every single retailer is struggling with today: "How do they adapt their processes to be across channel, across geographies, across brand?"

Click below for more information:

IBM Omni-Channel Merchandising

Buying & Merchandising Summit 2015