Giorgio Armani’s ambitious global technology strategy is all pretty common when you get right down to it. However, it’s anything but typical.
Achieving consistency across business processes and technology is no easy trick for a company with retail operations spanning 37 countries, each with its own cultural and regulatory idiosyncrasies. Still, technology executives and cross-functional teams from all corners of Giorgio Armani SpA’s Milan-based empire holed up in face-to-face meetings over the past year to tackle the job.
Their quest? To find a way to swap certain business activities for a set of processes that can be carried out the same way in Milan as in Tokyo and New York. Common technology promises greater speed and efficiency in the management of data that touches everything from customer service to visibility into the total supply chain.
This is not a rip-and-replace exercise, or a total overhaul. It’s more like a delicate medical procedure where a skilled surgeon repairs trouble spots without disturbing nearby vital organs. In the case of Giorgio Armani, a key pain point is the various flavors of point-of-sale technology in stores around the world. The vital organs that must remain intact are country-specific, back-end systems that support sales and inventory reporting practices unique to, for example, Italy or Japan.
A major wave in this commonality campaign gets under way this summer. Giorgio Armani Corp. plans to test a new POS system in three retail formats in the United States: a Giorgio Armani boutique, an Emporio Armani store and an outlet location. The U.S. rollout will begin in September. Pilot tests of the same POS system are to begin late summer in Europe and the Asia-Pacific regions. The rollout should be complete next year at up to 140 company-owned Giorgio Armani boutiques, Emporio Armani, Armani Casa, Armani Collezioni, Armani Jeans and Armani outlets.
In a series of interviews, Victoria Cantrell, senior vice president and chief information officer of Giorgio Armani Corp., outlined how the global organization arrived at this point through a collaborative internal process that was both arduous and gratifying.
“The first thing we did was sit down as a group and dissect every retail system we had in every country,” said Cantrell, who oversees the group’s technology strategy in the U.S. Cantrell, along with Gianni Piazza, who oversees IT for Europe, and Atsushi Iwaya, who oversees IT for Asia-Pacific, compared pain points of their existing technology.
After 30 days of meetings in Milan, Japan and New York, the group arrived at a conclusion: Though back-end systems, such as merchandising software, varied from country to country, they worked well. However, replacing the front-end technology — the POS — could help bring consistency that was lacking in how data is collected, managed, analyzed and shared across the organization.
“Where we could really take advantage of an impact on the supply chain and getting our product to the floor had to do with some very specific areas of commonality,” Cantrell said. “We realized what was important: not to rip out everybody’s system. What was important was to make sure [those systems] have complete, common codification across all regions.”
Codification is essentially a system for identifying product and the attributes that make up a product such as fabric, style, color, model and size.
“By having the same identifiers for all parts that make up the end result [of a garment], you can do a better job of analyzing your business, because in different regions you will sell garments in different ways,” Cantrell said. For example, a jacket and a skirt may sell as a suit consistently in one country, while in another part of the world, shoppers may prefer to buy them as separates.
The lack of a common language to identify product in granular detail requires time-consuming reconciliation between systems in different parts of the world. Giorgio Armani is not alone in facing this challenge. It’s an industry problem that global apparel companies have grappled with for decades.
With a common language for identifying product throughout the world, and a standard POS system at the front end of every store, data management processes will be greatly streamlined.
The pursuit of a common POS is a lofty goal. Aside from Wal-Mart, no other major international retailer has deployed a standard commercial POS so widely as Giorgio Armani seeks to do. There’s a whole raft of reasons global retailers wind up with a hodgepodge of POS technology. Companies that grow by acquisition often inherit some oddball technology. And local variables such as tax and accounting practices, currency and language, customer privacy laws and available technology support all result in systems that vary from country to country.
Cantrell said the decision to select a single POS platform, from Minneapolis-based Retek, to deploy in all stores was the result of a large collaborative effort within the global Giorgio Armani organization. Cantrell and her technology counterparts overseas worked with cross-functional teams including executives in the marketing and customer relationship management areas to define the needs of such a system.
A chief objective was to build in functionality to accommodate customer-oriented initiatives that may be developed in the future. “We designed it in such a way that we have functionality that allows for growth,” she said.
For example, the new POS system contains numerous data fields to collect information about customers. “The more information we have about the customer, the better we can marry specific marketing initiatives” to suit segments of customers who share certain preferences or shopping behavior.
Cantrell was quick to point out that European laws prohibit collection and storage of customer information, so stores in those countries will not use that function. The capability is there in the event those laws change. U.S. consumer privacy laws may change, also, and become more restrictive. Privacy analysts expect a federal privacy bill will be drafted this summer.
“We designed the database in a way that is common,” she said, “so that if or when we overcome the legal business challenge of being able to understand our customer in a more global way,” the system will be ready.
Europe has more rigid regulations governing customer information, privacy and security than any other part of the world, said Martha Rogers, founding partner of Peppers & Rogers Group, a Norwalk, Conn., marketing company. “In all fairness,” she said, “there are people still alive in Europe who remember that what somebody knew about you could actually get you killed.”
Cantrell said Giorgio Armani is acutely sensitive to customer privacy concerns and that’s why customer relationship management initiatives vary by geography. In Italy, CRM efforts are centered around marketing initiatives rather than individuals, or groups of individuals; in the U.S., widespread credit card use makes it possible to track consumers by spending tiers and that lends insight into how to improve the in-store experience.
“The work we are doing is driving toward understanding the different classifications of customers, what drives them to return to us. [We want] to put programs in place that will allow us to build an appropriate relationship with them.”
Cantrell said the “appropriate” relationship is defined by the customer, not dictated by Giorgio Armani. “The beauty of what we hope to accomplish is to service them and have a relationship with them on their terms, so that the relationship becomes special.”
A very simple, and hypothetical, example of how the new POS could help Giorgio Armani enhance customer relationships could involve something as seemingly insignificant as a casual in-store encounter. For instance, if a shopper were to mention that she prefers to be contacted by e-mail, not telephone, a sales associate could enter that detail at the POS and telephone contacts would be discontinued.
In this case, the customer changes the terms of the relationship by volunteering information that otherwise would not be documented.
In the U.S., Giorgio Armani’s CRM strategy is shaped by Cantrell along with veteran Giorgio Armani executives with knowledge about how the customer has evolved over time. In addition, the Priority Group, based in Westport, Conn., provides consulting services to help put Giorgio Armani’s CRM ideas into action. “They have a direct marketing background, CRM and retail background. They bring to bear research and help with our analysis,” Cantrell said. Acxiom, based in Little Rock, Ark., performs critical database cleansing, which ensures that knowledge drawn from database analysis is accurate.
Giorgio Armani’s drive toward commonality soon will extend into buying practices, Cantrell said. An internally developed solution, called Armani Buying Management, will be pilot tested this year with one of the collections.
“When we looked for the best bang for the buck from a commonality standpoint, we realized that every region in the world comes to Milan to buy, and they all have different methodologies of how they record the buying of merchandise and how they get it back to their own respective systems,” Cantrell said.
The system, which is still being developed, will bring consistency to how buyers analyze, plan and allocate merchandise orders using historical data and “what-if” scenarios. The system will allow buyers to place a purchase order in a consistent fashion with far fewer manual steps and time-consuming data downloads, she explained.
“The advantage is a common budget and buying system across all the Armani entities and it is linked to our main host system,” Cantrell said. “So that means all data goes in the same way from all regions, and all data goes out to suppliers the same way from all regions.” As a result, she said, suppliers will have access to aggregate information sooner. “Suppliers will know — closer to the buy — the total picture of what we will need.
“All these efficiencies will lead us to better visibility of our merchandise at all stages, and the ability to get it into the store faster, with more efficiency. To me, it all gets back to the customer. Everything gets back to the customer.”