February 1, 2007, 12:00 AM

Crossing the Channel

Nordstrom undertakes a huge, years-long I.T. infrastructure project to help create a seamless shopping experience across three channels.

In the beginning, store retailers launched e-commerce sites as separate operations, run by their own staffs that minded their own sales and inventory records. But as e-commerce has evolved during its first decade, the role of retail web sites has become more central to the business of multi-channel merchants. “We said two years ago that our web site needs to be part of a seamless multi-channel shopping experience,” says Jamie Nordstrom, president of Nordstrom Direct.

An all-encompassing project like Nordstrom’s can require years of infrastructure improvements backed by huge capital outlays. Even more important, it requires effort by executives to alter their traditional focus on product development, merchandising and marketing. They must recognize the value of rebuilding infrastructure to support the flow of inventory and customer data across sales channels.

A single view

“We’re linking our store inventory with our direct business’s inventory system so we have a single view of inventory across all channels,” says Nordstrom, whose company is investing about $150 million a year for three years to upgrade its e-commerce and general I.T. infrastructure. It is in the midst of the second year of its three-year project to integrate the information systems that handle customer and product data across web, store and catalog channels. “It’s useful internally to manage inventory, but it also gives inventory visibility to our customers as well as our salespeople on the floor,” he says.

Nordstrom Inc. has a reputation based on a high level of customer service that complements product lines in higher price ranges; its overall strategy is to emphasize customer service across all selling channels. “Customer service is what makes us different,” contends Nordstrom, who also is executive vice president of Nordstrom Inc. “It’s pervasive throughout everything we do.”

The merchant’s goal for the web channel is sales of $1 billion a year within the next four to six years. To hit this mark, the ability to integrate customer and product data across channels is crucial.

So far, Nordstrom’s integration project is providing its back-office inventory and merchandise managers with a more comprehensive and up-to-date view of inventory levels for its three selling channels. This supports the retailer’s efforts to order new products and properly allocate them across each channel. Additionally, the system now enables store associates at the point-of-sale counter to special order products from online inventory. As the project continues, Nordstrom will extend access to integrated inventory records to front-line employees and customers so that a store associate can view on a computer screen real-time updates of available inventory across all channels and online customers can view real-time updates of inventory available in stores. The latter will support Nordstrom’s plan to offer in-store pick-up of online orders.

Nordstrom is among a growing number of retailers taking the lead in making data integration a key to supporting their overall corporate strategies, says Gene Alvarez, vice president and retail e-commerce analyst at research and consulting firm Gartner Inc.

Maintaining an image

Although talk of multi-channel data integration may not be what traditionally has excited retail executives and managers charged with presenting attractive products and a high degree of customer service, data integration is emerging as an important strategy among all types of retailers, some experts say. Nordstrom has concluded multi-channel integration of data on inventory, sales and customer activity is crucial to maintaining its image as a provider of exceptional, personalized customer service. Other retailers, though, are following the lead of Wal-Mart Stores Inc. in using data integration to improve the movement of inventory to minimize costs of storing and transporting goods and keep retail prices down.

The degree to which merchants have evolved a multi-channel approach, Alvarez says, can be gauged in four levels of achievement:

l Level 1 retailers have developed e-commerce sites to test and prove the concept of online retailing as a standalone channel, usually with its own staff and operating budget and its own infrastructure that keeps sales and inventory records in a separate silo from store records. Such a silo approach prevents merchants from exploring the benefits of serving customers and managing sales across channels, Alvarez says.

l Level 2 retailers have created some integration between the web and stores, enabling them to take a more multi-channel approach, granting customers such options as ordering online for in-store pick-up and permitting in-store returns of products purchased on the web. “Most chain retailers still are at Level 2 and working on Level 3,” Alvarez contends.

l Level 3 merchants provide consistent cross-channel information, including product details, marketing messages and promotions. These retailers are responding to the way many consumers now shop in multiple channels. Indeed, consumers have begun to expect consistency across selling channels, Alvarez says. “You don’t want product specifications on the web site that are different from what’s on the store shelf or in a flyer so that it’s confusing shoppers,” he says. “When they’re confused, they often don’t buy.”

l Level 4 retailers go beyond creating consistent cross-channel information to integrating sales and inventory data in all of their key information systems-from the customer-facing online order management and in-store point-of-sale systems to customer relationship management, supply chain management and enterprise resource planning systems.

Good timing

The rising demand among consumers for a consistent cross-channel shopping experience is coinciding with recent technology developments making it more feasible for retailers to undertake systems integration, using, for instance, XML and other components of web services. Such technology enables data integration among new applications as well as provides cost-saving flexibility retailers need to mix and match new applications with legacy systems.

Nordstrom is building new integration capabilities using database giant Oracle Corp.’s Oracle Retail Merchandising software suite, which includes Oracle’s web technology-enabled Fusion middleware that enables the retailer to share data across key applications in a customer service-focused strategy. Once completed, the integration of sales and inventory data across channels and distribution centers will enable it to check if inventory levels are correct for each store as well as for the web and catalog channels based on demand levels, and that the company is using the best ordering process to allocate the most suitable mix of products to its 156 stores, says Gladys Lau, Oracle’s senior industry director for retail.

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