If any one industry can be identified as the poster child of digital transformation and the factors that drive it, retail is a leading contender. The dramatic shifts in consumer buying habits and expectations trace to Amazon, whose availability, pricing strategies, and logistical capabilities have defined how successful retailers operate in the digital age. While Amazon has primarily been focused on ecommerce, its counterpart in Asia, Alibaba, has popularised the concept of New Retail: the blending of brick-and-mortar offerings with robust online capabilities. Bridging the gap between physical and digital stores has become all but essential for traditional retailers as consumers flock to the endless aisles and easy payments of websites whilst retaining considerable interest in visiting traditional shops.
Portuguese retail giant Sonae is no exception, and its clothing arm, Sonae Fashion, emblematises both the need for and successful execution of a digital transformation that continually morphs challenges into triumphs. With 400 of its own and franchised stores across Europe, South America and the Caribbean, the Middle East, India, Asia and Southeast Asia, Sonae Fashion has deployed over 5,000 points of sale as well as more than 3,000 members of staff worldwide. Its fashion brand portfolio, currently consisting of Mo, Salsa, Zippy, Deeply and Losan, as well as its global operations, has necessitated the development of digital infrastructure and capabilities that can tackle the challenges of diverse and potentially siloed operations.
Nuno Miller, Chief Digital and Information Officer (CDIO) at Sonae Fashion has had a considerable hand in the company’s digital revolution, joining in 2015 as Head of Digital Channels and rising to the CDIO position in 2018. “My role is to envision, deliver and support a unified digital ecosystem that is able to fulfill business needs as quickly and efficiently as possible,” Miller says. “I work together with all the business teams, sales, operations, warehouse management teams, etcetera, so that we’re able to deliver a better platform and experience than what we used to have. One of the challenges from buying different brands over the past few years has been the need to consolidate teams, platforms, people, to make sense as a whole rather than a series of separate parts that don’t match together as a whole.
“Sonae has traditionally been a brick-and-mortar retailer, starting with groceries and food retail and later expanding into electronics and fashion. Specifically with Sonae Fashion, we recognise a strong change in the market. Online purchases have become more significant and numerous over time, and the digital marketplace is growing stronger and stronger. We wanted to mix our offering with omnichannel capabilities, we wanted to move faster across processes and teams, and we want now to take advantage of our fashion ecosystem, amplify value across teams, offer relevant and seamless experiences to customers and users, and move towards agility and nimbleness across operations.”
This necessity is made clear by the changes in Sonae Fashion’s portfolio over the years, with brands having been acquired, reviewed, closed, and sold in response to performance and value against its other brands. Before the move to a unified system was enacted, each brand had its own digital architecture, or even shared architecture with Sonae’s grocery functions. “My first move was to completely change the digital platform to support the brands’ and markets’ business needs. We changed the Mo site within five months, along with the Zippy sites for Portugal and Spain within five months, and we changed the digital platform to support the sales teams in-store.”
With external support, Sonae Fashion then assessed its global architectures to assess the capabilities required and where developments ought to be made. Miller notes that this strategy was predicated on a fivefold plan that isolated and unified the key requirements of its brands and their digital channels. “Systems of records for ledging and master data; systems of enablement to make service delivery easier for employees in-store; systems of engagement that build communication with customers, users and suppliers; systems of orchestration to unify each of the systems; and systems of insight that can curate and analyse our data and feed it back to the business to improve decision making,” Miller explains. “The key components of the architecture are the ERP, digital sales platform, the ePOS, the omnichannel autofulfiment system, the business intelligence (BI) platform, and the artificial intelligence (AI) platform, along with secondary systems such as product lifecycle management, the loyalty management system, and the warehouse management system.”
After consolidating these factors, Sonae Fashion developed a roadmap for its transformation beginning with a starting point for change: overhauling its ERP systems, and moving from six separate ERP platforms to one. Each factor mentioned here, Miller says, ties into ERP, and building a new, bespoke ERP platform presented both an enormous challenge and enormous opportunity for streamlining and unifying Sonae Fashion’s digital capabilities.
Not only that, but Sonae’s long history of data-driven operations has been supercharged by the growth of more developed BI and AI systems that offer deeper levels of insight at speed; a robust ERP system with these functions integrated stands to maximise the value of Sonae Fashion’s broad and varied and data sets. One example is the firm’s successful customer loyalty ecosystem, fuelled by the Continente card shared across multiple brands and business functions spanning beyond Sonae’s own ventures to petrol stations, supermarkets and more. The loyalty programme alone offers a rich data source that enables a view of customer buying habits, trends, spending spikes, and interests.
This, along with other relevant operational data, requires a significant amount of computational power and space. Cloud technology provides the solution, with Microsoft Azure being selected for its agility, stability, performance, power, enterprise-level capabilities, and its alignment with back-office solutions. The cloud hosts the streamlined SAP ERP system, along with a single-instance BI platform that can unify data from data warehouses, data lakes, customer feedback, loyalty programme data and myriad more sources. The flexibility and agility of the cloud-based architecture ties the ecosystem together, enabling shifts in operational capabilities and behaviours that can be made incrementally and in response to the insights generated by the AI-enabled BI platform.
Being able to manage that data, with the aid of automated and AI-powered processing via the BI platform, enables Sonae Fashion’s stores to be as competitive in the marketplace as possible. “It’s very important for a retailer, in all different areas, to take advantage of all these massive sets of data points and address, with intelligence: pricing and promotions, range and assortment, and location and replenishment,” says Miller. “We have tens of thousands of products per season, with millions of different sales tickets, and it’s impossible for a person to assess all that data and curate insights effectively.”
By unifying systems in this way, Miller and his team have developed a robust digital architecture that reaps huge value from the vast presence and unique factors of its portfolio, brick-and-mortar stores, and its ecommerce capabilities. The COVID-19 pandemic has been a remarkable stress test for these systems, and Miller says the previous architecture and B2C websites would have been unable to cope with its impacts on online spending habits. “During the COVID-19 crisis, we have been receiving a number of orders 10 to 11 times over historic values,” he says. “The new sites haven't had a problem with supporting these volumes of customer visits. If we didn't have this platform and these new sites and capability, we would not have been unable to handle the challenges of the pandemic,” Miller says, and this has been a key success of his work as CDIO.
The result is a business whose flexibility, agility, capability, and resilience are ingrained in and supported by the new digital architecture developed by Miller and his team. While the world is rocked by a pandemic of unprecedented scale, it is a credit to digital transformations such as these that businesses have been able to both handle and thrive under such enormous pressures.