6 March 2014

1. Digital Commerce MIS 310 Class Lecture 6 March 2014

2. Kyle O’Connor, Manager - Deloitte Digital • Recently married to high school sweetheart Lindsey • Avid hiker, biker and kayaker • Two rescue dogs – June and Tessa Jul ‘06 – Mar ’07 Analyst Apr ’07 – Mar’09 Consultant Apr ‘09 – Aug ’11 Sr. Consultant Today Manager Internships – GE Insurance and Accenture • MSIS, Kelly School of Business (Indiana University), 2005 • BS Informatics, Indiana University, 2004 • Road Warrior • Deloitte Digital out of the LA Office • Specialize in Consumer Retail • Eight years of consulting experience Prior Deloitte

3. Client Experience and Background 2014 3 2 1 2006 BTA and Consultant Consultant Senior Consultant Manager

4. Deloitte Digital • Strategy • Mobile strategy • Visioning workshops and roadmaps • Web and eCommerce strategy • DCM strategy • Concepts and prototypes • Engineering • iOS app engineering • Android app engineering • JEE, Jave, ObjC, Ruby, etc. • Oracle, SQL, MySQL, etc. Our teams are all about creating digital experiences that make sense for our clients’ businesses and keeping their users coming back for more. We bring together the best parts of a small creative agency and a large IT consultancy to offer end-to-end solutions grounded in our core capabilities. Our breadth and depth of capabilities ensure that we deliver beautifully designed and cutting-edge technology solutions paired with real business value. • Quality assurance • Business and risk analysis • Testing strategy development • Automated and manual testing • 3rd party service validation • 3rd party test management • User experience • User research • Content strategy • Information architecture • Interaction design • Usability and analytics • Creative • Visual design • Front-end development • Graphic design • Illustration • Creative and experience strategy • Management • Engagement management • Project management • Large scale transformation • Global • Global presence around tax, enterprise risk, and consulting services

5. Agenda

6. Learning Objectives Purpose • A high-level lecture that introduces MIS 310 students to the trends in digital commerce. The lecture will discuss the components of digital commerce and how they fit together to drive shareholder value and meet customer expectations. Participants will be introduced to digital commerce vendors, trends and an overview of Consulting By the end of the lecture, practitioners will be able to: • Describe what Digital Commerce is and the industry trends impacting Digital Commerce • Explain the challenges organizations are facing in digital Commerce • List the leading solution providers (vendors)

7. Polling Question: Shopping Behavior How do you primarily shop? a) Stores b) Online c) Mobile d) All

8. What is Digital Commerce?

9. Dropping the E in eCommerce - The Retail Commerce Transformation Increasing technical, social, and behavioral connectivity is changing the way consumers interact with enterprises, channels and each other. Tomorrow’s connected consumers will expect functionality at the point of need. The Future Commerce The Present Cross-Channel The Recent Past eCommerce The Past Physical Store

10. What is Digital Commerce? Refers to activities in which businesses or consumers – use digital channels to identify supplies, purchase products, complete financial transactions, and/or obtain services. As commerce evolves, the lines between digital and physical channels are blurring and the ‘connected consumer’ is no longer a futuristic view of the retail shopper. The goal for businesses is to bring a seamless shopping experience to customers regardless of the touch point or channel.

11. Polling Question: Consumer Trends What consumer trends have you observed?

12. Major consumer trends

13. Changing customer expectations are forcing businesses to develop new capabilities Key Capabilities Required* 1 2 3 Ship to Store Buy Online, Pickup in Store Endless Aisle Seamless Customer Service Advanced Delivery Options 1 3 2 4 3 * Sample customer facing capabilities to enable Digital Commerce

14. Ship to Store 1 • What it is • Basic step in enabling Digital Commerce • Allows businesses to ship a customer’s online order to a participating store location • Offers customers the convenience of picking up their online/ digital order in a store without paying for shipping. • Example • Wal-Mart - Site to Store • Site to Store is a free service that lets you ship your online order to any Wal-Mart store in the contiguous United States.

15. Ship to Store 1 • Why it is important • Provides “free” shipping options to customers • Easiest capability to implement since businesses can modify existing supply chain processes to include customer orders with store replenishment deliveries • Drives traffic to the store. Customers who go to pick up their shipment can be enticed to make additional purchases in store • Reduces additional shipping and handling costs for businesses • Challenges • Long delivery time for customers since customer orders are packaged along with scheduled replenishments • Does not leverage inventory that may be available in stores

16. Buy Online, Pickup in Store 2 • What it is • Advanced capability in enabling digital commerce • Allows customers to place an online order and find a participating store location where they can pick up their order • Offers customers the instant gratification of picking up their online/ digital order the same day without paying for shipping • Example • Best Buy –BestBuuy.com In-store Pickup • The Container Store – Click & Pickup • Wal-Mart – pick up today

17. Buy Online, Pickup in Store 2 • Why it is important • Provides “free” shipping option to customers • Supports “instant gratification” for customers who do not want to wait for their order to ship • Takes advantage of inventory in a store to fulfil a customer order • Drives traffic to the store. Customers who go to pick up their shipment can be enticed to make additional purchases in store • Businesses achieve a view of inventory across all locations and can start to move product to locations that sell products faster • Challenges • More complex implementation than simply shipping to a store • Requires visibility to and confidence in inventory positions in stores • Requires confidence in ability to reserve and promise inventory in stores to customers

18. Polling Question: Consumer Trends Have you ever picked a product up at a store that you bought online? (What was the process?) Yes No

19. Endless Aisle – The Long Tail 3 • What it is • Most advanced capability in enabling Digital Commerce • Allows businesses to offer the entire assortment of products to a customer regardless of where the customer is shopping (digital or physical) • Leverages kiosks, mobile devices for associates and enhanced POS devices to “bring digital inside the store” • Offers customers the convenience of shopping at any “touch point” or channel • Example • Nordstrom – Endless Aisle • Home Depot– Endless Aisle • Kmart – Store to Home and availability check

20. Endless Aisle 3 • Why it is important • Provide customers ability to purchase anything a company offers regardless of physical location • Businesses can make their entire assortment available and can manage inventory effectively • Businesses have the ability to fulfill from the most cost effective and efficient location based on customer need • Challenges • Significant complexity • Requires visibility to and confidence in inventory positions in stores, warehouses and inventory nodes (vendor managed, etc.) • Requires confidence in ability to reserve and promise inventory to customers regardless of inventory node • Requires enterprise-wide alignment on inventory allocation and management • Requires anyone interacting with customers (store associate, call center, etc.) to be familiar with more products

21. Fulfillment Centers

22. Seamless Customer Service 4 • What it is • Ability to provide real-time access to customer service regardless of channel • Ability to provide consistent and seamless service experience to customers across all “channels” • Ability to provide visibility to customer order history to associates and empowering associates to address a customer’s questions regardless of channel • Example • J.Crew - Click-to-Chat, Self service • Nordstrom – LiveChat, Self service • Burberry – Clienteling iPad app • Chicos – personalized campaigns

23. Seamless Customer Service 4 • Why it is important • Improves customer retention and reduces lost sales due to unsatisfactory customer service • Builds loyalty with customers by supporting a superior and more efficient resolution to issues or questions • Consistent and effective self-service options can lower cost to serve per customer and streamline the customer experience (no more waiting in line or on the phone) • Reduces costs by using more effective customer appeasement e.g. not offering a flat $10 off next purchase to every customer who calls with an issue • Challenges • Lack of consolidated customer and order data • Providing consistent information to associates across all channels • Need appropriate training and incentives for sales associates to gain customer knowledge

24. Advanced Delivery Options 5 • What it is • Ability to support a range of options pertaining to the method, speed, and location of delivering a product • Providing customers with the ability to customize their delivery to fit their current needs from a physical and geographical stand point • Options offered and certain ones incentivized • Example • Amazon– Amazon Locker, Release-Date Delivery, Local Express Shipping • Nordstrom– Same Day Delivery

25. Advanced Delivery Options 5 • Why it is important • Offers customers flexibility to choose a delivery option or location provides an improved customer experience • Convenience and flexibility can be competitive differentiator in attracting new customers who may not traditionally have made the purchase • Note: With Amazon expanding “Same Day Delivery” services, retailers will face tremendous pressure to match the service • Challenges • Expensive • Robust supply chain to ensure products can be delivered to desired location • Likely need partnerships with external service providers to ensure an easy pickup process

26. Polling Question: Consumer Trends Which of the following was NOT a consumer trend discussed? a) Advanced Delivery Options b) Couponing c) Seamless Customer Service d) Shop to Store

27. Learning Objectives Check • Describe what Digital Commerce is and the industry trends impacting Digital Commerce • Explain the challenges organizations are facing in Commerce Enablement • Discuss how businesses can succeed • Describe eCommerce platforms and major vendors • Talk about cool stuff

28. Why is it so difficult?

29. Meeting the demands of today’s consumer is very challenging Mobile Tablet PoS To provide Omnichannel experience, retailers must meet consumers’ demands at the point of need, through the most conveniently accessible channel, in the most cost efficient manner and yet provide consistent brand experience across channels. Web Social Customer Call Center Omnichannel Retail Buy Anywhere, Return Anywhere Efficient Inventory Management Order Visibility Across Channels Needs Fulfill Anywhere Optimized Logistics Today customer’s use all channels simultaneously and want to buy anywhere and return anywhere In order remain competitive in the marketplace, retailers must optimize and rationalize their supply chain commerce processes and platforms

30. Typical Business Challenges To Implement “Digital” Commerce companies have to not only deal with technology challenges but also with people and process challenges People • Are the business processes consistent across channels? • Is there cross channel visibility? Process Technology • Are your people trained well to use new technology? • Does the organization have strong change management? • Has your technology kept pace with changing business needs and the competition? • Is your technology well integrated?

31. Typical Process Challenges Lack of standardized processes across channels • Setting up products separately by channel complicates selling of the full assortment • Buying inventory by channel can lead to overbuying and does not leverage economies of scale Process Lack of visibility into orders across channels • Inability to offer standard self-service features across channels • Inability to offer a seamless and consistent experience to the customer across channels Lack of visibility into inventory across channels • Inability to consistently implement business capabilities to support fulfillment of customer orders • Inability to see incoming inventory and stage it at the appropriate location to meet demand

32. Typical Technology Challenges Technology Strategy not Aligned with Business Needs • Systems and technology implemented without focusing on business value leads to missed requirements • Inability to implement business capabilities consistently across channels prevents a seamless customer experience • Inability to share data across channels and touch points prevents customers and associates do not have visibility to information • Inability to share capabilities leads to duplication of capabilities across channels Lack of Integrated Systems Technology • Old or inflexible framework complicates implementation of new technology and processes • Lack of robust systems hinders the creation of a consistent and seamless customer experience Antiquated Systems and Architecture

33. Typical People Challenges People Lack of Top Level Alignment • Channel-specific, “siloed” incentives and reporting inhibit consistent measurement of business capabilities • Lack of alignment leads to inconsistent implementation of business processes and capabilities • Duplication of activities across channels leads to higher costs • Inadequately trained associates prevents the adoption of standard processes and leads to an inconsistent experience • Unwillingness of older staff to adopt new processes leads to inconsistent implementation of capabilities and an inconsistent brand experience Lack of Change Management Communication Challenges • Lack of timely communication across the organization leads to inconsistent implementation of business capabilities • Lack of consistency across channels leads to inconsistent information to the customer and a poor customer experience

34. Polling Question: Challenges Which of the following challenges do you think companies struggle with the most? a) Process b) Technology c) People d) Depends on the Company

35. Learning Objectives Check • Describe what Digital Commerce is and the industry trends impacting Digital Commerce • Explain the challenges organizations are facing in Commerce Enablement • Discuss how businesses can succeed • Describe eCommerce platforms and major vendors • Talk about cool stuff

36. How can businesses succeed?

37. Focus on the future to ensure success • “I skate to where the puck is going to be, not where it has been” • - Wayne Gretzky

38. Focusing on the future requires a fine balance Strategic focus on positioning for future 2. Strategic l Capabilities Tactical focus on business requirements 1. Near-term Requirements Businesses must balance investment in near-term requirements, with investments required to develop strategic capabilities to position for long-term trends and business pressures

39. End-to-end commerce enablement Order Fulfillment & Logistics Order Capture Channels Planning & Allocation Store Fulfillment POS System(s) Enterprise Operations Order Lines Orders • Cross channel view of demand and fulfillment • Enterprise planning and allocation Inventory Inventory US Stores Stores Direct Platform Direct Fulfillment Distributed Order Management (DOM) Order Lines Enterprise Inventory Management Inventory Website Orders • Central view of Inventory and Availability • Flexible inventory availability rules Retail/Wholesale Fulfillment Inventory Order Line Enterprise Order Management Mobile Inventory Wholesale1 • Central order history and status • Pricing and promotions • Product catalog / items • Flexible fulfillment rules and assignments • Payment settlement Order Line 3PL Contact Center Inventory Orders Order Line Partner System(s) Inventory Drop ship Fulfillment1 Inventory Transactional Messages to Customer Wholesale1

40. Digital Platforms Website Mobile Contact Center

41. Learning Objectives Check • Describe what Digital Commerce is and the industry trends impacting Digital Commerce • Explain the challenges organizations are facing in Commerce Enablement • Discuss how businesses can succeed • Describe eCommerce platforms and major vendors • Talk about cool stuff

42. What is an eCommerce Platform and who are the major players/vendors?

43. The eCommerce platform vendor landscape 48% of the Top 50 Internet Retailers use IBM Websphere, Hybris (SAP) or Oracle Commerce as their base eCommercePlatform to build their digital experience Source: 2013 Internet Retailer’s Top 500 Guide

44. eCommerce platform overview – A Car analogy An eCommerce platform is a technology that organizations leverage to build virtual storefronts, both websites and mobile applications that are used to sell products and services. eCommerce Platform Analogy Base Platform consists of core components (e.g. Engine and Frame) that allow you to customize the look and feel of your eCommerce site and build new options into the customer experience. Customized Unique Look and Feel

45. Enterprise grade global eCommerce platform overview An eCommerce platform consists of a set of core capabilities, tools and frameworks that allow a company to create their unique branded look, feel and online customer experience. Enterprise Global eCommerce Platform 3rd Party integrations Custom Code and Integrations API’s Data Models Development Environment Customer Master Business Logic Frameworks Integration Platform Development Toolkit Promotions Engine Email Marketing Point of Sale Core Platform Business Capabilities Product Management Search Order Management Enterprise Back-office Security and Compliance Pricing Service Social Global multi-sites Promotions Shopping cart Products and Reviews Personalization Tax and Order Calculation Payment Processing

46. Polling Question: Vendors Which of the following is NOT a vendor that has a software solution in this space? a) IBM b) Oracle c) SAP d) Apple

47. Learning Objectives Check • Describe what Digital Commerce is and the industry trends impacting Digital Commerce • Explain the challenges organizations are facing in Commerce Enablement • Discuss how businesses can succeed • Describe eCommerce platforms and major vendors • Talk about cool stuff

48. Bonus Round: Stuff I think is Cool

49. In 1984, we thought this is what 2029 would look like

50. The future arrived a few years earlier Smart Glass Capabilities