Information Systems in the Consumer Industry/Retail processes

A case study of reengineering of information systems – industry — A case study of reengineering of information systems – retail — Introduction to methodology — General processes — Industrial processes — Retail processes — Conclusion — Appendix A — Appendix B — Bibliography

We define “retail” as the set of processes which satisfy the availability need in a customer related space-time context. The difference between this set and the previous one is

The subject of the process, the retailer, does not satisfy the need starting from designing and projecting the answer from scratch but he tries to solve the problem choosing the solution, among those on the market, which he thinks will better fit customer requests (sales methodology)
The relation between retailer and final customer is much more “direct” than in the industrial case so many “non product” aspects are more important.

We can see the retail process from three different point of view:

Final customer: form this point of view “retail” is simply the availability in a “local” form; needs and data collection are the same as for the industrial environment
Retailer: problems concern both to satisfy customers (purchasing and selling) and to relate to the context
Context: this relates to how “retail processes” exist in the society both as time phased phenomena (geography = shops, shopping centers; communication etc.) and structure (fiscal and legal compliances)

From the customer point of view “retail” is a service process centered around the actual sale moment but we must remember that it really consists of before sale, actual sale and after sale (preparation, actuation and conclusion).

Process Analysis: the customer point of view

We know that, generally speaking, customer needs are:

Product Aesthetics, reliability, availability

Subjectivity Problem solving, reassurance, empathy

Sociality group belonging, individual recognition

And that, for each need, direct processes imply:

Data collection for all the data levels and views
Analysis and method rationalization to be more efficient and precise
Satisfaction given by the fulfillment of the need of the real product or of feeling
Communication which means the ability to communicate the possibility of satisfaction.

The actual need coverage is through the balancing of these factors.

From the market point of view, the weight of each parameters corresponds to the positioning of the company in the market share.

In the following table we can see how a group of users has quantified their expectations as a function of the sales channel

'Expected satisfaction as a function of the sales channel

		Market stall	no-brand	monobrand	multibrand	shopping center/ corner	Luxury	Internet
Product

	Aesthetics	4,9	5,8	8,0	8,2	7,2	8,3	6,3

	Reliability	3,7	5,5	8,3	7,6	7,1	8,7	4,2

	Availability	5,3	6,5	7,6	7,6	7,9	8,0	6,3

Subjectivity

	Problem solving	5,8	6,4	7,7	7,6	7,6	7,7	4,6

	Reassurance	5,0	6,4	7,9	7,6	7,2	8,3	3,4

	Empathy	5,9	5,7	7,5	7,0	6,1	7,4	4,7

Sociality

	Group belonging	4,5	4,5	7,3	6,6	6,0	7,5	4,8

	Individual recognition	4,3	4,7	6,7	6,0	5,3	8,0	4,7

Process analysis: the retailer point of view

From the point of view of a retailer, the definite question is:

“why does a customer comes to me and how can I satisfy him ‘”

Which means “which are the customer needs and why does he feel that I can satisfy them ?”.

In the world of retail the contact is not with a “customer” but with a “specific customer”, this means that subjective and social needs are very much stressed compared to anonymous relations. It happens that shops may live on “local” emotional realities (mono or multibrand wholesalers), some other times they have a more “diffuse” approach (department stores, large distribution).

The birth of a “sales project”, to satisfy a particular customer need at any level of Maslow scale, then is the result of a sales enterprise which evaluates the market opportunities in terms of the lack of a product in a certain area/time, the availability of structures (shops), a new sales method or the existence of an unexploited sociality.

We start from our daily experience to group elementary processes into categories; this will help us in the functional analysis of the retail system. Processes are sets of actions which satisfy needs whether these needs concern customers, retailers or the context. We assume that, if a process exists, it must have some meaning otherwise it would not exist any longer. Not every possible process exists or, sometime, we are not aware that it exists.

Our methodology starts from listing the processes and then looking for their value on customer needs; we must be very careful to distinguish between “real” value and “customer perceived” value; customer are only interested, and ready to pay for, in the second ones while there could be processes (e.g. finance control) which have no value for the final customer but are very important for the retailer. We shall be using the “perceived value” parameter.

To be completely correct from a methodological point of view we should define each process to the very detail, in fact we adapt to evaluate the cost/effectiveness of a process, this means that the value of a process is a function of

The relative importance of the customer need (what I satisfy)
The perceived value of the solution: the expectation (how much I satisfy it).

In the following tables:

Processes are grouped by areas

Coding is such that

Effect on the process: H = high, M = medium, L = low, blank = not applicable

Grouping level: C = customer, G = group, T = context

Area: P = product, S = subjectivity, C = sociality, O = organization, F = fiscal

Process group	Process	Product			Subjectivity			Sociality
		Aesthetics	Reliability	Availability	Problem solving	Reassurance	Empathy	Group belonging	Distinction	Group level	Macro area
Group: preliminary analysis	Analysis of product market request (sales)	H	L	H				M		G	P
	Analysis of product knowledge by the operator				H	H				G	S
	Analysis of product availability on the market (purchasing)	H	M	H	H			M		G	P
	Analysis on customer classification				H		H	H	H	G	C
	Analysis on service level to be offered		H	H		M	H			G	C
	Analysis on location availability		H	H			H	H		G	C
	Organization definition			H			H	H		G	C

Process group

Process

S

Product

Subjectivity

Sociality

Aesthetics

Reliability

Availability

Problem solving

Reassurance

Empathy

Group belonging

Distinction

Group level

Macro area

Group: starting process

Financial means research

M

T

O

Fiscal and legal obbligations

M

T

F

Shop works and upgrading

T

Exhibition spaces

M

T

Sociality spaces

M

T

O

Suppliers choice and relation

M

H

T

O

Signs and banners

M

L

G

C

Opening communication

L

M

G

C

Advertising

M

G

C

Community (mail list)

M

G

C

Process group	Process	Product			Subjectivity			Sociality
		Aesthetics	Reliability	Availability	Problem solving	Reassurance	Empathy	Group belonging	Distinction	Group level	Macro area
Group: purchasing order	Budget per supplier/per category (category definition)		M	M						G	P
	Comparison supplier offer vs expectation and product choice	H	M	H						G	P
	Analysis of purchasing order vs spece and finance			L						T	F
	Vendor analysis on punctuality and terms of delivery	M		M						G	P
	Sale context support (POP material)		L	M			M	H	L	T	O
	Reorders										G

Process group	Process	Product			Subjectivity			Sociality
		Aesthetics	Reliability	Availability	Problem solving	Reassurance	Empathy	Group belonging	Distinction	Group level	Macro area
Group: goods receiving	Advance shipping notice			L						T	O
	Receiving authorization			M						T	O
	Receinving operational: physical			L						T	O
	Content control (per box or per delivery)			L						T	O
	Delivery acceptance or refusal			L						T	O
	Garments quality control, relabeling and shop floor ready			L						T	O
	POP material receiving						L	M		T	O
	Supplier invoice control			L						T	F

Process group

Process

S

Product

Subjectivity

Sociality

Aesthetics

Reliability

Availability

Problem solving

Reassurance

Empathy

Group belonging

Distinction

Group level

Macro area

Group: goods arrangement

Arrangement logic decision

Quantity per garment on show

M

G

S

Grouping per theme, supplier, price

M

G

S

Path definition

M

G

S

Emotional spaces/product combination definition

M

H

M

G

S

Emotional customer/product comb definition

M

H

G

C

Shop windows

M

H

G

S

Prices and rebates

M

G

S

Process group	Process	Product			Subjectivity			Sociality
		Aesthetics	Reliability	Availability	Problem solving	Reassurance	Empathy	Group belonging	Distinction	Group level	Macro area
Group: customer relation	Customer welcome					M	H	H	H	C	C
	Customer-garment relation: trial on	H		H	H					C	P
	Customer care: number and quality of sales executive				H	H	H	H		C	S
	Customer brand identification						H	H	H	G	C
	Customer recognition						H	H	H	C	C
	Sales: operational (fiscal, finance)			L	M		L			T	O
	Sales: operational (transports)			L	M					T	O
	Social: brand image					M	M	H	H	G	C
	Social: packaging						M	H	H	G	C

Process group

Process

S

Product

Subjectivity

Sociality

Aesthetic

Reliability

Availability

Problem solving

Reassurance

Empathy

Group belonging

Distinction

Group level

Macro area

Group: customer relation, after sale

Quality

Product quality

H

M

G

P

Follow up: customer care

Company to customer: campaign and group

M

H

M

G

S

Customer to company: returns

H

M

H

G

C

Unfair returns

Process group	Process	Product			Subjectivity			Sociality
		Aesthetics	Reliability	Availability	Problem solving	Reassurance	Empathy	Group belonging	Distinction	Group level	Macro area
Group: general adverstising	General adverstising					M	H	H	L	G	S
	Testimonials					M	H	H	L	G	C
	Shows					L	M	H	L	G	C
	Papers					H	M	M	L	G	C
General purpose
	Stock keeping			L						T	O
	HR				M					T	O
	Real estates			L						T	F
	Patrimony									T	F
	Fiscal regulations									T	F

Customer need – process existence relation

Let us look at the processes we just quoted (remind that needs belong only to the final customer); to fulfill them we need to operate on three different levels (not to be confused with operating entities):

Single customer
Customer group : customers of one specific sale point which means how the local retailer organizes the service
Context: general aspects of service which means how is the general service defined, how to handle general topics ranging from product presentation to fiscal procedures.

The “retail” system does not consists only of processes related to customer relation but it has to cope with many levels of activities; this is the meaning of the “group” attribute in the former table.

Retail support systems: the information processes.

We speak explicitly of “support” and not of software because, as you can saw from the process listed, the content is not a pure “data” parameters but if often connects to physical or psychological aspects.

We also saw that final customer and retailer needs somehow differ both in content and in relative weight.

From an industry point of view the retailer is “the customer” and this is why we need to understand which are the needs he needs to satisfy and he is willing to pay if satisfied.

We can think of retailer needs general schema as:

		Data collection	Analysis	Sotisfaction	Communication
Customer processes
	Product	To be anlyzed	To be anlyzed	To be anlyzed	To be anlyzed
	Subjectivity	To be anlyzed	To be anlyzed	To be anlyzed	To be anlyzed
	Sociality	To be anlyzed	To be anlyzed	To be anlyzed	To be anlyzed
Group processes
	Product			To be anlyzed	To be anlyzed
	Subjectivity			To be anlyzed	To be anlyzed
	Sociality			To be anlyzed	To be anlyzed
Context processes
	Organizzation	To be anlyzed	To be anlyzed	To be anlyzed	To be anlyzed
	Fiscal	To be anlyzed	To be anlyzed	To be anlyzed	To be anlyzed

What we derive from this table is that “single”, “final” customer needs have been largely disappointed in the industrial attitude; companies tend to focalize on “customer groups” as their ability to solve needs is essentially related to product/social and not to subjectivity capabilities.

This aspect of the end customer need is mainly covered by the “retail” structure.

To be methodologically correct we should now take into consideration all the 32 cells; out of these only 6 (“customer group”, data collection and analysis) have already been taken into consideration in the industrial analysis. In the following pages we shall group some cells to avoid being too long even though we realize that we make a methodological approximation.

''''Customer processes

Personal needs are, by definition, very “personal” so they need a very “local” application of general principles stated by the company. The information content is actually very little formalized: we are moving in a very unexplored field.

Product: data collection, analysis and satisfaction

We are talking about the behavior of a specific customer in a specific sale situation: a very elementary context.

What: we are looking at the relation between the customer and the garment he is evaluating;
How: which are the parameters to decide “will the garment fit the customer expectations ?” or even better: “will the garments satisfy the customer need?”
Who: the actors involved in the process = the customer and the retailer
Where does the process take place? typically a real shop but it could be a virtual one
When does the concurrence of product/customer occurs ? presence of both customer and product
How much is the customer need satisfied: this is perhaps the most difficult parameters to measure directly
Why: this the company strategy.

Assuming that we want to satisfy customer need, I think that the only information instrument which can be used is the sales executive capacity to support requests on product (fashion, quality) and customer (decision process). Time length and variability of relation, in my opinion, make impossible for a formal information system to be really useful.

Measuring system can only be indirect through a total evaluation of the sale executive.

Product: communication

The aim of this process is to make the specific customer understand that it is possible to help him in choosing the right product. Assuming that we think that the correct local instruments are sales executive, we want the customer to trust sales executive in their knowledge of product and can help him in determining the product coverage of his needs.

What: sale executive product competence
How: must be explicit and customer must recognize it
Who: the information instrument is the sale executive or, at most, the store manager
Where: in the sale area, this means physical availability of the vendor
When: during real and prospect sales
How much: as far as I know there is actually no formal system of measuring this process, maybe through customer interview
Why: because it satisfies the customer.

As far as information supports, we must give the actual instrument (the sale executive) the knowledge he needs both on the product he is selling and on competitors so that he can help the customer to judge correctly the answer to his needs.

Subjectivity: data collection, analysis and satisfaction

We are talking about elementary processes which concern ability to answer, personal assurance and empathy to a particular customer.

What: as we are discussing of very individual, peculiar data. I think that the signals and the collection method are very difficult to categorize, we could try to classify the results. From a practical point of view we should define the results we want and leave to the sale executive the method to collect the data regarding customer individual feeling etc.
How: we could start from classifying (based on our experience) customer approach and check the results of possible general support standards we offer
Who: people involved are sales executive and store managers (control level)
Where: every possible customer relation, mainly in sales area
When: before, during and after the sale
How much: a possible measure of unit could be store manager evaluation
Why: because customer must be at ease from a human relation point of view.

Information support: The sale executive must be empathetic with the specific customer so he must fit his way of acting to the actual situation. Information content must then relate to the sociological world of sales and, eventually, to the social and fashion trends.

Subjectivity: communication

What: we want to communicate that a customer feels at ease in a particular context. It is a very personal phenomena and it is related mainly to the sale executive empathy, to the sale place format and to the brand image.
How: the most important means I know of are word-of-mouth messaging and architecture design
Who: mainly the sale executive, also every other company employee
Where: mainly the shop but also the general social context
When: it is important to note that both actual sales but also prospect and possible sales are extremely important for this topic
How much: I think that only customer interviews can be a measuring instrument
Why: to get returning customers.

This topic is fairly delicate because customer expectations can be very different from company policy and very often we saw a large gap between the two approaches.

Sociality: data collection, analysis and satisfaction

What: the content of this point is about the customer feeling himself recognized and accepted
How: the whole process starts from customer receiving and recognition which must be precise. In the case of recognition this can be done through formal instruments (fidelity cards) or informal ones (the sales executive memory). In any case there must be standard procedures for each case.
Who: this is mainly a sales executive job
Where: Typically the sales area; it is an interesting topic to understand what this means in a distributed location (internet)
When: always, during real or prospect sales
How much: a possible way of measuring this data could be the number of visit a customer does whether they became a real sale or not
Why: to create a nicer environment for our customers.

From an information system point of view the first problem is related to customer recognition. Sometimes we can find some sort of “fake” personal recognition (e.g. intimate friendship) which annoys the customer, the real cases I can think of are either related to the high luxury environment, where quite a few customers are well known from social news, or small local retail with a consolidated personal knowledge of the customers. In other contexts we must rely on some personal interactions supported by CRM systems not to loose company knowledge.

Sociality: communication

What: we are talking about the fact that a customer knows he will be recognized and helped
How: on this topic we can think of formal communication systems like advertising but my opinion is that the best way is word-of-mouth and group diffusion
Who: people involved are mainly sales executives and store managers
Where: the sales place and the logical surroundings
When: during the whole relation with the customer (pre, actual and after sale)
How much: a possible indicator could be the number of contacts; both ways and any possible content
Why: because it helps satisfying the customer.

The information object includes the content (“welcome”), the form (direct or indirect message) and the destination (actual or prospect customers).

Group processes

Customer group needs are those industry relates to. As far as data collection and analysis processes, we can refer to the first part of the book as we are talking about collecting and categorize common customer needs; retail is a different way of solving them.

Product – satisfaction.

What: the topic is about product availability in the whole time cycle including after sales. We should divide the process in purchasing, stocking, shelf availability and after sales. Problems concern offer analysis, purchasing operational, sales space limitation as we assume that bulk storage is not a retail problem; the whole system is the retail industrial chain.
How: operations through subprocesses of purchasing, exhibition, sales and after sales service.
Who: people involved includes merchandiser, buyers, sales executive and customer service.
Where: any site of the company
When: we can estimate a few months period
How much: the whole process is so large that I think the only summary indicators we can use is the economical turnaround of the enterprise unit (shop etc.); subprocesses can be individually measured.
Why: this is seen as the real nature of the retail structure, could not be the only one.

Customer satisfaction is “the process” of a retail system as it has to conjugate market availability and specific customer request. From an information point of view it asks for a huge amount of informations (see appendix B).

Product – communication

What: we are talking about the process which makes the customer understand that, in that place and at the right moment, he will find the answer to his product needs (group level). We thus deal with an information content.

How: we can use formal systems (commercials, press, window presentation) or informal (word-of-mouth) in large social contexts and personal systems (human relations) in limited environments.

Who: usually we cope with professionals in large scales and sales executive in small environment.

Where: Social contexts mean the whole society, up to world scale, and especially in aggregation area while small environment means essentially shops.

When: product satisfaction is not a one shot process, it needs to be created before and fed also after sale, this means that communication has to be time calibrated.

How much: without any communication product access is essentially stochastic so we can have a first guess relating amount of communication to sales increase.

Why: because it might be that the customer doesn’t know that we can solve his need.

This whole topic should be analyzed by itself.

Subjectivity - satisfaction

What: in this group we can identify a few topics. We can identify the role of the sales executive (technical expertise, personal attitude, follow up), customer-context relations (shop image, goods location and availability), customer-company relation (commercial, shop windows). They are all the result of how the company has imagined its relation with the customer.
How: customer satisfaction can thus be a result of how we support
- Sale executive competence both on product and relation
- Context design and product merchandising
- Space positioning, visual merchandising and commercial.
Who: persons involved include sales executive and sales structure managers to project the sale process
Where: both in the shop and in the company studios
When: a real sale experience does not last a moment, we must create a long lasting customer relation
How much: I think one of the parameters we should consider is customer retention and find a way to measure it (e.g. fidelity cards)
Why: we want to satisfy every aspect of our customers.

Informations related to this process are various and need a separate study.

Subjectivity – communication

What: this topic is about how we can communicate our ability in satisfying customer subjectivity

How:
- sales executive: after the specific training, we must communicate our employees ability in a formal way to the market (group of customers)
- customer – context: after the design of a comfortable shop environment we must be very strict in assuring that the standard is kept
- customer-company: like before we must underline our ability in individual attention.
Who: people involved include sales executive and communicators.
Where: we must act any place a prospect can be but especially near shops, as to use take advantage of existing structures.
When: we are not talking of a specific product so there is no definite time zone, it is a continuous job with peaks when no specific product is to be advertised
How much: I think we could use the number of visiting people in our shops as an indicator
Why: to cover any aspect of subjectivity need.

The information request set is too large to be analyzed here, further studies are needed.

Sociality – satisfaction

This process is concerned with smaller groups of customers than those addressed by industry, retail is more “locally” concerned either from a geographical (customer in a certain area) or from a social (customer of a certain type) point of view.

What: the aim is to create a sense of belonging so that the customer refers to the shop, also maybe not for purchasing
How: the attachment may be induced either directly (direct marketing) or indirectly (social signs)
Who: it is usually a PR person working on these topics
Where: the place is related to the sale method (place or market type)
When: the time base is fairly long as it implies personal involvement
How much: a possible parameter to measure such a process could be the number of visit, whether for purchase or not, to the company locations
Why: it is not so easy to create the “social” concept of the retailer, especially for multi-brand retailers who do not share a company support.

Let get into more details for this area. Our analysis could take into consideration:

Customer reasoning:

What qualifies myself from the context?

How much does belonging to that group cost ?

Which are the group identities and testimonials?

How can I avoid being considered “standard” and yet belong to the group?

Retailer reasoning

How much does it cost to create the “group”?

How much does it cost to maintain the “group identity”?

How much do I get in terms of new customers or upsales form the “group”?

Generally which is the “group” trade off?

I think we can look at two possible ways of approaching the problem:

Internal: a “group” needs to have times and places it can exists (like happy hours in bars etc.) and archetypes it can recognize, testimonials defining the “group characters”

External: a “group” needs symbols like shopping bags or reserved events.

From an information point of view we can measure

Customer retention both in number and quantity

New customers entries

PR costs.

These data are very difficult to obtain as they are much perturbed by product data, at the moment I do not know of reliable analysis on this topic.

Sociality – communication

While industry communication is essentially based on product, retail communication underline the idea of service, of problem solving. This idea implies that it is more of an institutional then technical communication.

What: I want to tell people that my “group” is a “happy community” and you can join it.
How: the mean is related to the market I am heading, no general rule.
Who: the person who acts is mainly a PR, the customer receives.
Where: the main targets are customers and prospects so it has to be evaluated where to spend the money; internet is a world situation
When: if you act just once it is dangerous: the customer asks himself why of these expenses; the “group” communication has be lasting in time as it connect people and it has to create trustworthiness
How much: let us divide customers and prospects. Customer are to be steadily reminded, the parameter we could measure is customer retention. Prospects are to be invited, we could measure new entries as a function of expenses.

The informations we need to control are various and often not explicit : imagine we talk of teenagers buying clothes. Clothes are not just a way of dressing, it is also a request for meeting similar. This means that a shop is a meeting point and it has to fulfill this need so that the teenager likes to stay in the shopping area. Places where you can only buy, in my opinion, have little chance against the web-offer, on the other hand satisfaction places are more expensive than normal shops.

From an information point of view the problem is thus to quantify the ratio between the capacity of satisfying customer social need and economical balance.

Context processes

Context processes group all those operations which have no direct relation with the customer so these processes create no customer perceived value but are necessary for enterprise functioning.

A rough classification could divide them into “fiscal” processes (related to external existing rules and laws) and “organizational” (related to process “best practices” in the business area).

Context process are the one which are best known from an informational point of view as they derive either from formal rules (fiscal) or from repetitive experience (organizational); they are also the best information system supported processes. It is not the aim of this paper to describe more deeply this set of processes; I only would like to point out that, as they create no customer value, they must be considered a pure cost driver and the information system goal should be to satisfy the enterprise need reducing these costs. Typically this goal is achieved using methodologies as standard as possible introduced in the company via education and/or consultancy.

Retail: the solution architecture

As we discussed in the industry part of this paper, in retail also we can create a schema for the set of processes related to the company information strategy. The matrix needs-functions is the retail phase space where each cell has its own cost and value; the complete figure is the company positioning strategy.

		Data collection	Analysis	Satisfaction	Communication
Customer needs
	Product
	Subjectivity
	Sociality
Group needs
	Product
	Subjectivity
	Sociality
Context needs
	Organizzation
	Fiscal

Some of these cells need to analyzed at a more specific level (e.g. group-product satisfaction) ì; we should then sum the subprocesses cost to derive the total cell cost while the value is available only at an upper level.

We can think at the “true value” of the need as the product of the need importance multiplied by the channel expectation for the market we are operating, we find a result like the following table:

Valore di canale

Weighted expectations
		Market stall	no-brand	monobrand	Multi-brand	shopping center/ corner	Luxury	Internet
Product
	Aesthetics	31,2	37,0	51,0	52,3	45,9	52,9	40,1
	Reliability	33,3	49,5	74,7	68,4	63,9	78,3	37,8
	Availability	37,1	45,5	53,2	53,2	55,3	56,0	44,3
Subjectivity
	Problem solving	42,4	46,7	56,2	55,5	55,2	56,2	33,6
	Reassurance	36,9	47,2	58,3	55,7	53,3	61,5	24,9
	Empathy	39,4	38,1	50,1	46,8	40,8	49,5	31,4
Sociality
	Group belonging	26,7	26,7	43,0	39,3	35,6	44,5	28,2
	Individual recognition	27,0	29,7	42,3	37,8	33,3	50,4	29,7
Total		274,2	320,6	429,1	409,2	383,4	449,	270,2

Based on this schema, a retailer, as long has he decided which one is his operating channel, can find the relative value of customer need, his problem is now to decide “how much do I want to invest in satisfying this request”.

As we saw, each of these cell is made of many elementary processes with its own contribution to the final cost; this allows us to derive total cost as the sum of the whole solution.

The information technology goal is both to detail the information content and the analysis of a single subprocesses and to reduce the cost of each of the processes itself using technology in the right way (where possible).

It is obvious that we start from processes which have the highest customer value so that they have a quicker return.