Company: ZygonCustomer: ArgosSubmitted by: The itpr PartnershipDate: January 2001″E-commerce sales in Argos (defined as those over the internet and interactive television) in the first half totalled £20m, an increase of five times over the same period last year.”This sentence, which appears halfway through Great Universal Stores PLC’s November 2000 Interim Results Announcement, summarises the business benefits enabled by Zygon’s Enterprise Catalog Management (ECM) software and the achievement of the joint Argos-Zygon team which installed it. The need for Zygon’s software was triggered by Argos’s earlier strategy review that concluded that the company should become a true multi-channel retailer.
“We saw the home shopping market beginning to fragment through the emergence of new channels. We knew that the strength of our brand and operational expertise in home shopping meant that we could, and indeed should, exploit these new channel opportunities” commented Paula Vennells, Argos’ Director of Channels, Argos Retail Group.
Argos is the UK’s leading home shopping retailer and has been an innovator since the company’s introduction of a new method of catalogue retailing in the 1960s.
Argos’s philosophy is to serve customers via whatever medium they prefer and accordingly the company had made early investments in a web site and interactive digital television. Argos’s initial involvement with the emerging digital channels was small-scale as no one knew how important this method of selling would become and what it would take to succeed. However by the time of the strategy review at the turn of the millennium the answer was clear to Paula Vennells: “we had to have a competitive compelling presence in digital media as both an offensive and defensive measure”. The strategy review formalised this as multi-channel retailing, which was defined publicly as “establishing a growth platform for initiatives in new channels”.
THE NEED FOR ENTERPRISE CATALOG MANAGEMENT “ECM”
The implication of the multi-channel strategy was that every product should be sold through every channel. The effect on the web site and interactive television was that the number of available products had to increase from a few hundred to eight thousand.
Lee Felton, Programme Manager, quickly realised that a key part of the platform should therefore be concerned with product related information.It was obvious that product data must flow smoothly from back office systems into the digital front-ends however Argos had learnt from its early web and interactive television experiences that descriptions and pictures of products need to be different in an electronic format than their counterparts in paper catalogues. More subtley, Argos realised that whereas relationships between product categories are easy to establish in a printed catalogue, they must be made by hyperlinks and other prompts in electronic formats. Therefore the platform not only had to flawlessly import and export product data, but also had to have the flexibility to edit, add and relate product information. Lee Felton puts it this way: “we needed a solution that combined functionality from several different categories of software.
There had to be a middleware element to link the front and back-ends, and elements of database management, editing and augmentation. The solution also had to fit into our existing systems”.
Zygon proposed that all non-dynamic product information such as price, description, attributes, and pictures should be held in a central repository, which would consist of the Zygon [ECM] platform on top of a relational database. Dynamic processes such as stock availability and purchase confirmation would be directly handled via a separate system. The repository would be integrated with the mainframe back-end by a Zygon import manager and with the e-commerce front end by a Zygon export manager.
Zygon proposed deploying a professional service team to work, in conjunction with a smaller Argos team, on installing the system and configuring the ECM platform so that users could easily amend and augment product information. “Zygon had the only solution that came close to what we needed” comments Lee Felton.
MEETING THE GO-LIVE DATE
The strategy review was completed in early 2000 and Argos wanted to launch its multi-channel strategy by the end of the summer so that the electronic channels were familiar to consumers by Christmas. To cope with this concertina-like schedule, Lee Felton decided that first the web site should go-live, with interactive television following on a couple of months later.Zygon split the project into three streams of activity:
- Installing and initially populating the Zygon ECM platform
- Configuring the Zygon ECM platform
- Integrating with the front and back-ends via Zygon Import and Export Managers
Each stream consisted of a substantial amount of process, data and technical analysis followed by the actual installation. To meet the go-live date, Zygon carried out all three streams in parallel.
Sajeeve Bahl, Zygon’s Vice President of Professional Services explains: “To meet the deadline Zygon Consulting, Support, QA and Education were deployed, who followed Zygon Method, our Enterprise-wide Implementation Methodology.There was outstanding teamwork, commitment and alignment to the goal of getting the customer live on time.”The enhanced web site met the deadline and ran flawlessly. A couple of months later so did the interactive television output. “I am absolutely delighted with the operation of our ECM platform” says Lee Felton.
Argos has identified clear benefits resulting from this multi-channel strategy in terms of revenue, cost, and brand. Monthly revenue has increased ten fold through the re-launched web site and interactive television channel. The total project cost has been recouped from just one months extra gross profit from these electronic channels. The cost per product of extracting information from the back-end, managing it and then exporting it to the e-commerce front-ends has declined substantially. This is because formerly complex manual processes have been simplified and automated.
Lee Felton summarises the situation like this: “if we had put all eight thousand products through our pre-Zygon systems we would now be spending several hundred thousand pounds more than we actually are using the Zygon ECM platform”.More intangibly the online brand has been enhanced and the offline brand protected, as Paula Vennells says “we have invested so much over the years in our brand that we cannot afford to compromise it by a ropy website. We now have total confidence in the product information provided to our website”. The value of flawless execution of online channels and offline stores has been demonstrated by a recent Boston Consulting Group study. Over sixty percent of Internet shoppers said that if they are dissatisfied with a retailer’s web site they are less likely to purchase from that company’s stores. The same study found that six percent of consumers who had a failed e-commerce experience not only stopped buying online but refused to go back to the offline stores as well.
Argos has grown to become the UK’s largest catalogue retailer by offering the convenience of home selection with the immediacy of high street shopping. All products for sale are described in the Argos catalogue; consumers select items from the catalogue at home and then visit their nearest Argos branch to make the purchase and collect the goods.The company has over four hundred and sixty stores in the UK and Republic of Ireland. Seventy percent of UK homes have a catalogue which features some seven thousand products. Argos is now the UK’s leading retailer in product areas such as toys and electrical appliances.
Online and Offline Brands are Connected
The Boston Consulting Group (“BCG”) interviewed twelve thousand consumers in the USA and Canada in the fourth quarter of 1999 and reported their experiences and views*. Fifty one percent had purchased goods or service online and the typical internet shopper completed ten transactions and spent $460 online in a twelve month period. Yet twenty eight percent of all attempted online purchases failed and four out of five internet shoppers experienced at least one failed purchase over the same twelve month period.The lessons for retailers is clear; the online and offline brands cannot be separated in the minds of consumers, and the consequence of online failure are severe. Over sixty percent of internet shoppers said that if they are dissatisfied with a retailer’s web site they are less likely to purchase from that company’s stores. Six percent of consumers who had a failed e-commerce experience not only stopped buying online but refused to go back to the offline stores as well.
BCG’s advice: “engineer a flawless end-to-end purchase experience”.