As Published In November/December 2005

Transforming Retail Economics
By Fred Sandsmark

Oracle Retail enables retailers to improve all aspects of their business.

The retail industry is undergoing a sea change, says Duncan Angove, and Oracle wants to help retailers lead the transformation. Angove, former chief strategy officer at Retek, has spent a career providing retail solutions and now serves as general manager of the recently formed Oracle Global Retail Business Unit. Oracle acquired Retek, a provider of retail operations software, in April 2005, and added inventory optimization software maker ProfitLogic, in July 2005, to create an offering unique in the industry: a standards-based application solution from a single vendor.

Factors such as globalization and multichannel selling contribute to retail's present-day challenges. But two factors affect the industry most: First, the supply chain, formerly an isolated logistics function, is now a core competency for retailers. Second is "asset intensification," an industry term for squeezing more productivity out of existing stores, even as retail square footage per capita balloons. "We're significantly 'overstored' in developed countries now," Angove says. "Adding stores is failing to be a growth lever for retailers."

Despite the fact that retail is changing, not every retailer is at the same point in the transformation, according to Oracle Senior Industries Director Gladys Lau. "Many retail companies are struggling with standard IT issues, such as cleaning up their infrastructure and connecting disparate systems," explains Lau. "These companies look to Oracle not just for innovative retail solutions, but as a stable technology partner."

Transforming Retail

Oracle plans to transform the economics of retailing through the combination of technologies from Oracle, PeopleSoft, Retek, and ProfitLogic. Retek merchandising, supply chain, store management, and point-of-sale solutions form the IT foundation for customers, such as Best Buy, Gap, Gymboree, Sainsbury's, Selfridges, and Tesco. Oracle Merchandising System, Oracle Advanced Inventory Planning, and Oracle Value Chain Collaboration are among the newly renamed solutions covering the entire retail enterprise.

ProfitLogic provides another piece of the retail puzzle. It creates retail profit optimization software that helps retailers profitably manage merchandise through effective markdown, assortment, and allocation. "These areas have typically been governed by art and merchants' gut instincts," says Scott Friend, cofounder and former president of ProfitLogic, now vice president of marketing and science with Oracle Retail. "ProfitLogic brings a science-based approach to merchandising, resulting in a dramatic impact on retailers' financial results." The newly renamed Oracle Retail Price Optimization and Oracle Retail Assortment Execution solutions can assess the billions of potential combinations a retailer needs to consider—every item, every size, every price, every color, every store—and do so in a merchant-friendly way.

Web Locator LEARN more about Oracle Retail LISTEN to the Oracle Retail town hall meeting READ more about Oracle Fusion and Oracle Customer Data Hub

Lau points out that this newly acquired retail functionality leverages the strength of Oracle products. "Oracle already had a stable platform for retail that includes Oracle E-Business Suite," says Lau. "We've built on that core strength with a set of highly innovative offerings."

Model for the Future

Oracle's new retail unit, and Oracle's integration of financial-services software provider i-flex (acquired in August 2005), serve as a model for Oracle's growth. "It's a combination of organic investments coupled with good strategic, selective acquisitions," Angove says.

Oracle Retail announced an aggressive road map for integrating its technologies into the Oracle stack at a town hall meeting on August 4, 2005. "We're intimately involved in Oracle Fusion and the Oracle Customer Data Hub," says Angove.

Organizationally, it means giving vertical divisions freedom. "We've kept [retail] as an autonomous business unit so we can retain focus and consistency for our industry and customers, while leveraging the power of Oracle's global organization," Angove says. "This maintains and nurtures the deep domain expertise, continuity with customers, and industry focus of the acquired companies."