IBM Buys Retail Forecasting And Merchandising Software Company

IBM has made a major purchase today in the commerce and retail world—DemandTec, a retail marketing and merchandising software company. IBM is acquiring DemandTec (which listed on the Nasdaq) in an all cash transaction at a price of $13.20 per share, or approximately $440 million.

DemandTec provides retailers and e-commerce companies with tools to transact, interact, and collaborate on core merchandising and marketing activities. DemandTec’s cloud-based analytics software allows businesses to examine different customer buying scenarios, both online and in-store, so retailers can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability.

For example, retailers can predict how consumers will respond to a price change before making the change. Or a merchant and supplier can work together to understand how one shopper segment differs from another to create a targeted merchandise plan.

DemandTec’s use of cloud-based price, promotion and other merchandising and marketing analytics helps companies better define the best price points and product mix based on customer buying trends. Essentially, DemandTec uses data analysis and forecasting to make the retail world smarter.

DemandTec customers include Best Buy, ConAgra Foods, Delhaize America, General Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Target, Walmart, and WH Smith. DemandTec also has a portfolio of 31 patents in the areas of pricing, response analysis, and promotion analysis.

For IBM, the acquisition is all about its smarter commerce initiative. IBM estimates the market opportunity for Smarter Commerce at $20 billion in software alone.

IBM’s recent acquisitions include Algorithmics, and Tririga.

Advertisements

E-tailing for Success.

WITH the economy performing below normal, many retailers who preferred having a physical presence are looking to go online at minimal costs and keep the cash registers ringing. Compared to a traditional brick and mortar storefront, an e-commerce store is a relatively small, convenient and lowcost startup. The only costs involved in the e-commerce platform include the monthly hosting and ISP bills. With a website, an e-tailer has the capability to gauge the market condition and make alterations accordingly. Taking into account all its benefits, e-commerce can be considered ideal during a recession as it helps retailers to stay globally competitive.

Serving retailers and consumers
Today leading global e-commerce retailers earn more than 10 billion in revenue on every portal they own, and this shows the shifting trend towards e-tailing. Affirming this, Pawan Gadia, VP, Ferns ‘N’ Petals (FnP), says, “We are achieving 60 percent growth year-on-year, thanks to e-commerce. In fact, 10 percent of the total turnover of the FnP Group comes from online sales.”

Videocon is also aiming big on e-biz. “In 2009, our target is to earn online sales of Rs 10 crore, and our current sales are very much in line with our targets,” adds Arindam Bose, VP–IT, E-biz and Exports, Videocon.

Consumers today are more open to the online medium. This trend is further catalysed by various product and price comparison websites that enable users to perform research on products that they intend to purchase. Moreover, increasing fuel costs, large mall crowds and low disposable incomes are motivating buyers to shop online. Mr Gadia says, “Contrary to a physical store that has issues of timeline, visibility, etc, an online store is more flexible. An FnP store closes at 8 pm every day, but the online store runs 24×7, thereby giving us more customers. We serve more than 2000 clients everyday on our online site.”

The e-commerce option caters to customers in the current economy because it offers products at lower costs. “E-biz reduces the logistics cost as the goods go directly to the end consumer. Any business model that removes layers and brings the consumer nearer to the manufacturer benefits all,” agrees Mr Bose.

Choose intelligently
Despite its potential, many people don’t know how to get started with e-commerce and are often confused about the numerous options available. Several solutions allow retailers to sell items online, but it is always advisable to approach retail-specific vendors who can customise solutions according to customers’ business needs. “Each customer has a different requirement. Some want a pure Web shop, while some want integration with CRM or ERP, and yet others seek telephonic booking. Each requirement should be considered individually before offering a solution,” says Manu Agarwal, CEO, ANMsoft and Naaptol.com.

Though most solutions may differ, some are fundamental for every online business enterprise, and these are listed below:

Design customisation solutions: Setting up a business involves considerable time, energy and money. It is necessary to create a brand that customers find familiar. Many ecommerce solutions force retailers into a particular site layout, template or theme, making them just another cookie-cutter, faceless, online store. An e-commerce service provider must understand the objectives of an e-tailer to equip the latter’s website with aesthetic solutions.

Scalability solutions: Retailers do not want solutions that limit the number of products on display or the amount of traffic that the site can generate. Therefore, e-commerce solutions must equip retailers to add dynamic features to his existing site.

Payment solutions: Many e-commerce solutions force customers to register before making a purchase. Forcing customers to leave a site when they are ready to purchase products is not a smart business practice. If a customer finds the payment options in the website too cumbersome, he/she may switch to another shopping site. Therefore, a retailer must ensure that customers are hooked on to the website until they have completed their transaction.

Order processing solutions: These solutions are specifically designed to save operating costs. In the absence of these automated solutions, a retailer has to maintain the inventory and keep a track of orders and process them.

Search engine optimisation (SEO) and Search engine marketing (SEM) solutions:
To drive traffic to the website, a retailer must employ an SEO or SEM. SEO is more popular because of its low costs and better results. However, a retailer must ensure that the SEO uses the right keywords to improve his website’s page rank. The website must contain the right keywords so that when a user searches for a particular product, the retailer’s website appears at the top.
According to Mr Agarwal, “A majority of the people who go online end up buying nothing or may not even visit a particular website. This is because the retailer and the service provider may have not set up means to direct traffic to the site.”
Coupon solutions: In the face of rising prices, consumers have once again begun clipping coupons. Giving away gift coupons serves to increase sales. People are always looking for discounts and freebies, and a site that offers similar incentives often sees repeated visits. E-tailers can send coupons as an SMS with unique promotional codes that shoppers can use on their e-commerce website, and receive discounts on online purchases.

Shopping Cart and Delivery Solutions: A customer should be given a free hand to add products to his/her shopping list, remove products, change their quantity, recalculate the order before processing and even come back to the same after logging out. On the delivery front, most clients prefer websites that offer free home delivery and, therefore, e-retailers must have a user-friendly delivery solution in place.

Innovations to help you save
In lieu of the ongoing recession, retailers have started exploring innovative ways to cut costs. Many e-tailers are outsourcing their retail operations to specialised retail vendors for reducing labour costs. One of the affected areas during this slowdown is advertising, and very few retailers seek to manage advertising costs. Retailers should ideally adopt online advertising tools like e-mailers, newsletters, etc. “Retailers can send e-mailers, promotions, gift coupons to their existing customers at a very low cost, and still enjoy sales benefits,” admits Mr Gadia.

In order to grow in the existing scenario, a retailer should place his merchandise where his potential customers are most likely to be. Going by this, the retailer should view e-tailing as a cost-effective channel to lure sales.

Which Retail Sectors are growing the most online?

According to US Department of Commerce (DOC) estimates, online sales represent a minuscule percentage of overall retail sales. In 2007, only 3.2% of total retail sales took place on the Internet.

Of course, large categories where e-commerce has hardly made a dent—such as autos, gasoline and groceries—skew the results.

us_doc

 

 

 

 

 

 

The DOC data illuminates a seasonal trend: Online sales penetration is greatest in Q4. A likely reason for this is that the benefits of e-commerce—convenience, broad selection, cost savings, free shipping and avoiding crowded malls—shine brightly during the holiday shopping season.

Forrester Research used its own proprietary formula in May to estimate that e-commerce will represent 7% of retail industry sales in 2008.

Even some of the categories with online sales penetration rates that exceed the industry’s 7% rate still have strong growth potential. Forrester estimated that 20% of consumer electronics sales will take place online this year. Other Forrester data showed that online sales in this large category could grow to 29% of total sales by 2012.

Moreover, some of the least-penetrated categories such as auto/auto parts (2% penetration) and food, beverage and grocery (1% penetration) nevertheless generate respectable online sales.

Take groceries, for example. Many of the early problems that plagued online grocers are being addressed today through innovative business models. In this light, the fact that most groceries are still sold offline could be viewed as an opportunity for online food merchants who can figure out how to lure customers from physical stores.

Online Retailers websites to help shoppers by providing more specific product information

The latest trend in ecommerce is for consumers to shop online but purchase in-store. The WebCollage platform can help brands reach more consumers by linking manufacturer specifications and information on retailer websites, thereby giving the consumer more of what they want – specific product information.

On most retailer websites, the product information is little more than a paragraph. The problem is that most consumers want more information than that; so they leave one etailer site for another, getting the same information website after website. This isn’t good for the brand or the etailer.

WebCollage’s Power Product Pages take manufacturer/brand product information from the manufacturer’s website and seamlessly inserts it into participating etailing websites, giving consumers more information and less aggravation. Continue reading

%d bloggers like this: