6/03/13

Top of the Line

European retailers invest in high-end web technology to accelerate sales in the only part of retail that's growing on the Continent.

Paul Demery , Managing Editor, B2B E-commerce

Galeries Lafayette Group, which opened its doors in 1894, is known for the ornate interior and lavish window displays of its flagship Paris store. But while the company has a long history draped in bricks-and-mortar retailing, Franck Zayan, the retailer's Internet and e-commerce director, is on a mission to lead the Galeries Lafayette retail chain into the omnichannel future, in which consumers shop how, when and where they want.

"Omnichannel retailing brings more sales to e-commerce and our stores," Zayan says. "An omnichannel customer spends more than a single-channel customer."

He reports progress on several fronts. When customers "click and collect," that is, order online for in-store pickup, almost half of them buy additional products when they get to the store, he says. And about half of customers who click and collect say they do it for the convenience of shopping at home and picking up their order for free at a later time. That convenience keeps them coming back to shop again, Zayan adds.

Galeries Lafayette, like many other retailers on the European continent, is relatively new to selling online. It launched its first e-commerce site only five years ago—a site limited in the number of products it could display and its speed of processing transactions—that operated as part of the marketing department. "From 2008 to 2011, Galeries was on an e-commerce learning curve," Zayan says.

That preparatory period ended in 2011 when the retailer built a more robust e-commerce site and a new mobile commerce site, and tied them together, along with its more than 60 physical stores. It established a new business unit to oversee Internet operations, and hired Zayan, a veteran e-commerce executive who started with AOL Inc. in 1995, to run it.

Like other European retailers, Galeries Lafayette is aggressively investing in e-commerce technology in response to consumers' growing demand to shop easily online, in stores and via mobile devices, Zayan says. With e-commerce growing quickly while Europe is mired in a long recession, many European retailers are choosing pricey, high-end e-commerce software to keep from being left behind. "Since we relaunched our e-commerce site in 2011, we've been trying to grow really fast," Zayan says. "Our target is to almost double revenue every year online." Galeries Lafayette is ranked No. 210 in the soon-to-be-released 2013 Internet Retailer Europe 500, with Internet Retailer-estimated 2012 web sales of 60.1 million euros (US$78.8 million), up 8.3% from 55.5 euros (US$72.8 million) in 2011.

Online retail sales across 17 western European countries will reach 128 billion euros (US$166.6 billion) this year, up 14.3% from 112 billion euros (US$145.8 billion) in 2012, according to Forrester Research Inc. By 2017, Forrester projects online retail sales in those countries will reach 191 billion euros (US$249.1 billion), a compound annual growth rate of about 11%. By comparison, online retail sales in the United States will rise from $231 billion last year to about $262 billion this year, a rise of 13.4%, then grow at a compound annual growth rate of nearly 10% to $370 billion in 2017, Forrester says.

That growth stands in stark contrast to the dismal state of European retailing in general. Retail sales declined 2.4% in March 2013 compared to a year earlier in the 17-nation euro zone, and 1.6% in the 27-nation European Union, according to Eurostat, the EU's official statistics agency. Little wonder that there is a frantic race on among retailers throughout Europe to capture as much online sales growth as possible.

E-commerce experts say Europe's most advanced online retailers tend to be merchants in the United Kingdom, an EU country that does not use the euro. Top web retailers include John Lewis Partnership plc, Marks & Spencer plc and Debenhams Retail plc, ranked 13, 19 and 70, respectively, in the Europe 500.

These retailers have progressed far enough online to bring e-commerce sales to 20% or more of their total revenue, which has pushed them into omnichannel retailing to find new ways to ride the engine of e-commerce growth, says Sunil Oberoi, associate vice president, digital commerce and multichannel integration services, at systems integrator HCL Technologies Ltd. "They're looking for the next level of growth by going omnichannel and global," he says.

Like many of their rivals, these leading retailers largely are choosing big-name e-commerce vendors so that they can have top technology quickly, and that includes bringing web features into their bricks-and-mortar stores.

Here's a sampling of developments at several retailers:

Marks & Spencer says it is investing $400 million on e-commerce and multichannel technology projects, including migrating from an e-commerce site hosted by Amazon.com Inc. to one developed on IBM Corp.'s WebSphere Commerce platform by SapientNitro, a Boston-based global technology services firm with offices in London and other European cities. WebSphere Commerce, which experts say can cost close to $1 million in technology and services to deploy, is known for providing many customization options in how a retailer can display products and sell across multiple retail channels. The London-based 700-store chain is also building distribution centers that it says will help the new MarksandSpencer.com offer same-day shipping when it launches next year.

Working with U.S.-based Cisco Systems Ltd. and Amsterdam, Netherlands-based INDG, a software developer specializing in interactive e-commerce applications designed for mobile devices, Marks & Spencer is also testing in two of its stores large touch-screen digital display screens that let shoppers configure a room setting with images of furniture, appliances and other products the retailer sells. The shopper or a store associate can use a tablet to control the same room-planner screen and purchase the items online. Or they can save the room setting to let the shopper access it and potentially complete the purchase later from her home computer.

Bol.com b.v., No. 39 in the Europe 500, is a Netherlands-based retailer that started in 1999 as a web-only retailer of books, and expanded over the next several years into such categories as consumer electronics, toys and home appliances. With 7.5 million products for sale and up to 980,000 visitors and 9.2 million page views in a single day, it decided in 2008 to launch a new web site on the ATG platform with site search from Endeca Technologies Inc., both of which are now part of Oracle Corp. Acquired in March 2012 by Netherlands-based supermarket chain Ahold, which had recently migrated its own e-commerce technology to Oracle, bol.com is now integrated with the Ahold e-commerce sites and allows shoppers to pick up orders placed on bol.com at Ahold stores.

Privalia Group, a Barcelona-based flash-sale retailer launched in 2006, has grown to several hundred million euros in international sales, the retailer says. No. 47 in the Europe 500, it's invested in a new IBM Corp. e-commerce platform that will run the five international versions of flash-sale site Privalia.com (in Spain, Italy, Brazil, Mexico and Germany) and Privalia Group's relatively new dress-for-less.com, which is based in Germany and sells off-price designer apparel in a conventional, non-flash format to consumers in 61 countries.

Privalia purchased dress-for-less.com in March 2011 to expand beyond flash sales to enter what it calls "permanent outlet" sales. "In recent years our global sales numbers have been growing annually, and in 2012 that trend has continued, thanks to the growth of e-commerce in the markets in which we operate and a strong multichannel management," says Lucas Carné, co-founder of Privalia.

Debenhams, the London-based department store chain, has developed a mobile commerce presence ranked the highest among 30 retailers serving Europe in a February 2013 study by London-based digital marketing agency EpiServer AB. The study cited Debenhams for having the strongest mobile apps for iPhone, iPad and Android, and singled out the iPad app, which the retailer developed with London-based design firm Do Tank Studios, for being easy to navigate and shop.

T.M.Lewin, a London-based apparel retail chain with more than 100 stores and about 30 million pounds (US$46.1 million) in web sales, has launched three web sites since 2010 using the Internet-hosted DynamicCommerce e-commerce system from eCommera Ltd. in conjunction with the Demandware Inc. software-as-a-service e-commerce platform, to serve markets in the United States, Australia and across Europe. Each site shows the pricing and delivery schedules particular to each market. It costs from $200,000 to $1 million to set up DynamicCommerce, including the Demandware platform, with annual subscription fees of $250,000 to $5 million, according to eCommera chief scientist Michael Ross, who is the former CEO of U.K. apparel retailer Figleaves.com.

The retailer has also deployed eCommera's DynamicAction analytics application, which compiles data from such sources as web and store sales records, marketing campaigns and inventory management systems, to recommend actions for boosting sales and profits. Andrew Mossman, T.M.Lewin's director of home shopping, says the retailer can now, for example, identify web pages with high traffic but low conversion rates, then readjust product assortments and other content to boost conversions. The setup costs for DynamicAction run $20,000 to $50,000, with the annual subscription fee ranging from $50,000 to $100,000, Ross says.

As retailers move ahead with e-commerce and multichannel development projects, little goes unnoticed by their competitors. "We're trying to learn from retailers in the U.K. and the United States," says Galeries Lafayette's Zayan. The retail chain is loosening its purse strings to invest in a new e-commerce platform along with add-on applications that help it better engage shoppers, he says. Although he wouldn't disclose his budget, he says Galeries Lafayette is spending a much larger percent of its online revenue on e-commerce and omnichannel technology today than before 2011, though still far less than 10% of total revenue.

After researching the e-commerce technology market, Galeries Lafayette chose Germany-based hybris AG because of its ability to integrate data and operations across online and offline channels, Zayan says. Built from the ground up with web-based technology, hybris provides stronger integration among software applications than is available through other technology platforms, enabling it, for example, to better share consistent and accurate product data across web and mobile sites and with store systems, he says. The retailer deployed hybris along with Endeca site search and navigation technology (now part of Oracle Corp.) with help from technology consultants and systems integrators Keyrus in Paris and Zurich, Switzerland-based Unic.

Zayan says the hybris technology minimized the time required for Galeries Lafayette to integrate its new web and mobile sites with its store checkout system and its Oracle accounting and inventory management software. The result makes possible programs like click and collect, and allows the retailer to show consumers consistent product data no matter how they're shopping. Galeries Lafayette also uses web analytics technology from France-based Eulerian and Google Analytics; for web performance management, it relies on Nagios Inc.; for order management and fulfillment, Reflex software from Hardis Group.

In addition, the retailer is testing in-store touch-screen kiosks at three locations to let store shoppers and store clerks place orders online, and plans to introduce tablet computers this year for the same purpose. It's also building an English-language version of GaleriesLafayette.com and evaluating new sites for markets in Europe and Asia.

Other plans include building a product recommendations application and improving how the retailer updates cross-channel inventory records for viewing by shoppers as well as employees. A shopper in a store who can't find a particular size or color of a product will be able to see which other Galeries Lafayette stores have it in stock, Zayan says.

Galeries Lafayette is also working with Paris-based Backelite, a mobile web design firm, to replace the retailer's mobile site with a version of its primary e-commerce site that, through the use of responsive design techniques, will adjust to fit smartphone and tablet screens. Another project team is building a mobile/local application using GPS technology that will send registered shoppers offers to their smartphones when they shop the retailer's flagship store in Paris.

This is one 19th-century retail icon that is making the investments necessary to thrive in the 21st century.

paul@verticalwebmedia.com

@pdemery

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