Interview with German Alekseev

German Alekseev / CIO at Sportmaster

Clients Force Us to Change

Retail Models Drastically

In Autumn 2012, Sportmaster Group of Companies created an e-commerce channel for

OSTIN, one of its brands. What were the reasons? What were the challenges that the
company faced? How important is the transition from multi- to omni-channel distribution for the Russian retail industry? More about this in the CNews interview with German
Alekseev, CIO at Sportmaster Group of Companies.

CNews:

In your opinion, is there any difference between

the state of e-commerce 3-5 years ago and
today? If yes, how significant is it?

German Alekseev:

I think significant changes started about one or

two years ago. During the past 15 years, e-commerce has been developing just as an online
channel, for example, it could be an online channel of a large retail network. Some companies
had simple corporate websites (online business
cards), some companies had usual online stores
providing limited functionality and content delivery
options, and some companies had large well-developed portals. It is only one and a half or two
years ago when the real changes started in what
we call customer experience, or, in other words,
in a clients behavior at a retail store. When big
retail chains appeared, we used to think that the
product price and shopping convenience were the
key factors for the client. Two retail models a
corner store and a shopping mall have practically pushed all others out. If the store model is suitable, and the price is affordable, people will buy.
Now time and relevancy are two factors defining
the purchasing decision.

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German Alekseev

Interview with German Alekseev

CNews:

Previously a retailer could offer some-

Which trends would you point out first?

thing directly to a customer only at a point

German Alekseev:

of sale, but this is too late

Relevancy means that a product or service
meets the clients purchasing expectations.
Through an online channel, the client can get
product details from the manufacturer or the
supplier, be advised by friends on forums and
social networks, read customer reviews, and
so on. All this helps increase relevancy. The
American market stats show that prior to making a purchase, over 50% of clients look up the
product information online, and make their purchasing decision on the Internet as well. As a
result, if previously the client was looking for retail chains and their brands, now the goal is the
product itself. When the client is well informed
about the product, it no longer makes the difference where to buy. To increase client loyalty is
a great challenge for retail chains. It forces us
to find something new, including online channel
development.
The second aspect is time. Today, every store
visit takes much time. E-commerce makes its
less time-consuming. By the way, retail chains
have greater potential there than common online stores. They have good geographical coverage and extensive logistics, which can provide
a high quality of service both in purchasing and,
say, in product return. However, this potential
still needs to be realized. This is how changes
in client behavior force retail chains to upgrade
a common retail model.

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First, multi-channel sales develop. The client

should be able to learn about the product, order
it, pay for it, receive, or return it at any available
time in any available place in any available way.
The task of a retail chain is to provide such an
opportunity.
Second, services get closely interrelated: online
goes offline. Our Western colleagues use the
term omni-channel retailing to describe this
trend. Lets see it in action. A client visits a retail
store, scans the bar code with a mobile device,
and get comprehensive details about the product, including reviews of other customers. Such
options enhance the purchase relevancy at an
offline store. Traditional price tags or advertising
posters still cant provide this relevancy.
Another important trend is a more personal interaction with clients. Earlier retailers addressed
their customers as target groups, which was impersonal. At stores retailers could offer something personally only when the clients showed
their loyal cards at a point of sale. But this is
too late in the process. Now its necessary to
make customer service personal right from the
moment the client enters the store. For example, its good when the client scans a QR-code
at the entrance and automatically gets redirected to our relevant webpage. Now we can see
what particular store the client visits, get more
information about this client, and make a personalized offer based on the previous shopping
history, the variety of goods at this store, and so
on. As a result, the company goes from studying the target groups to studying particular clients. Again, this is a serious challenge, since
the volumes of data and the way we work with it
are changing significantly.

Interview with German Alekseev

CNews:

Back to your company, did you decide to launch

an online store for OSTIN because of this
change in customers needs?

German Alekseev:

Absolutely. We understood that customer experience was changing, and it required a timely
reaction. From the perspective of the concepts
and implementation of e-commerce, currently
we see the following: America is ahead, and Europe is lagging behind by about 9-12 months.
In its turn, Russia is behind Europe for about a
year. After a while, this gap will have a strong
impact: in terms of logistics, theres no problem
to deliver an order from abroad. For example,
for Chinese stores the delivery time is 3-5 days.
Were lucky to sell clothes instead of electronics
or auto parts, where competition with Western
online store is incredibly high.
At the end of 2011 when we made the decision, OSTIN had only a business card website.
Sportmaster had an active online store, but we
couldnt use it as a prototype for many reasons.
Weve decided to start with OSTIN to create and promote a solid online channel for this
brand in order to meet customers new expectations and increase sales.

CNews:

Which criteria did you use to choose the platform

for the OSTIN online store and its implementation partner?

German Alekseev:

Our approach to choosing the platform is simple. When we start automating a functional area
that is new to us, first, we thoroughly study the
functional architecture, and define which applications are necessary. Second, roughly saying,
we study Gartner reports, look at the products in
the upper right corner, and then study no more
than three platforms in details. Key selection
criteria are the following: the solution should
correspond to our needs in terms of business
functionality and technologies, as well as provide opportunities for fast development and
scalability in the future. I know pretty well that
the next day after any system is implemented
there will be a business user asking to accomplish as many new tasks as it was at the ear-

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ly stage of the project. Thats why the platform

should be able to develop well. When its possible, we prefer to use large vendors products. In
practice, many independent suppliers are eventually sold or acquired, and no one knows what
will happen to their solutions. We prefer to take
no risks here. Sure, we look at the price. The
total ownership cost of almost every solution is
calculated ahead for five years at least and ten
years at most.

Weve decided to start with OSTIN to

create and promote a solid online channel
for this brand
In this case, we had two market leaders: Oracle ATG Web Commerce and IBM WebSphere
Commerce. They were followed, with a small
lag, by the Microsoft solution. Oracle ATG was
the solution that met all our requirements. It allowed us to start quick and to launch an online
store with necessary functions in a relatively
short time. The platform has a lot of potential,
and the development environment was familiar
to us. Besides, Oracle has clearly explained the
system possibilities with no traditional pre-sale
hype. Finally, alongside with choosing the platform we managed to find a prospective implementation partner, EPAM Systems. This company has already implemented Oracle ATG for
retail clients in the Western and Russian markets, and, after a number of consultations and
reference visits, its implementation capabilities
have left no doubt. The project costs were also
acceptable, so all the factors fell in place.

CNews:

How did the project run? Which phases did it include? And how did you build your relations with
the external partner, EPAM Systems?

German Alekseev:

At the initial stage, EPAM has conducted a functional analysis, I must note, at a very high level
of quality, and this contributed greatly to the final positive results. The rest of the project had
traditional structure: development, implementation, integration, launch, and support. Now we
try to focus more on internal resources during

Interview with German Alekseev

the project, weve gained a good competency in

Oracle ATG. E-commerce is rapidly developing,
and our business clients still poorly specify the
new tasks this area constantly receives, so we
have to address these tasks on the fly. Additional fine-tuning and maintenance are closely interrelated, but in such conditions, we know how
to work only with internal resources.
I would like to note once again that EPAM and
our specialists have carried out acceptance
testing of a very high quality. A typical situation
for many projects is as follows: some minor detail is missed, another one is put aside, the third
one seemed not important, and finally, at the
go live stage, all these minor details grow into
a really big problem that has to be fixed very
quickly and with a lot of effort. In our project,
testing was excellent. As a result, stabilization
phase turned out to be surprisingly short. Since
its launch, the website has never been down,
and there have been no serious problems at all.
Besides, EPAM and Oracle gave us good advice on how to choose the online store infrastructure. Previously we made both under- and
overestimation mistakes with other products.
This time there were no mistakes: the website
copes with the load well, and we managed to
avoid the situation when an expensive super
server is loaded at just 5%.

CNews:

I would like to point out one more thing. The

quality of the project and its internal processes is mostly ensured by the quality of workflow
management and participating staff. When a
project is big, it is crucial to understand the service providers internal organization. For this
purpose we visited EPAM and asked them to
show how the company works. They gave us
a detailed presentation of their organizational
structure, the structure of processes and costs,
and the way they work with resources and clients. It was a good fit for our vision of the right
partner, and actually served as a major reason
for the predictability of the project results. This
is very important. At one point, EPAM had to
change the project architect this is always not
very good, and if it was some other company,
we would deal with it at the highest possible level. But in that case we had no concerns: we understood there would be no critical issues due
to the companys structure and workflow management. It turned out to be true.

Since its launch, the website has never

been down, and there have been no serious problems at all.
CNews:

What problems did you encounter, and how did

you tackle them?

How would you define the project results today?

German Alekseev:

Our aim was to build from scratch an e-commerce

channel for OSTIN and to get a platform for its further growth. Weve achieved that. Now we have
experience, competencies, the platform all that
is required for creating another online store, this
time for Sportmaster. Additionally, we have support and prospective resources from EPAM and
Oracle.

I separate problems, tasks, and difficulties. A problem is something you cant solve. From this point
of view, there were no problems in the project.
The only difficult situation was the shift in deadlines. Initially, the project duration was somewhat arbitrary: we planned to finish it in 7-8
months, which we discussed with our business
clients. In the course of the project, weve realized that for objective reasons this estimation was too optimistic. However, we managed
to explain this to the clients and put up a new
deadline 10-11 months. Weve met it with confidence. The project required no heavy top management involvement, and this was a sure sign
that everything was all right.
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German Alekseev:

Interview with German Alekseev

CNews:

What tasks related to e-commerce and retail

channel development do you plan to solve in the
near future, and why?

German Alekseev:

Key problems of e-commerce and retails channel development belong not to the online, but
rather to the rest of infrastructure. First, we
should understand that main data management
in multichannel retail largely differs from data
management separated specifically for onlineand offline-channel. It raises plenty of questions. Information should be modified every
time depending on the clients communication
device (a smartphone, laptop, terminal, etc.).
The information at a retail store should be the
same as at an online store. Just imagine, the
client scans the bar code and sees some product details that the retailer doesnt have? Thats
trouble. It means we should support the staff,
provide them with the resources at least equal
to what clients have, restructure trainings for
salespeople, etc.
Second, it is the product pricing details. Now
theres no problem to set regional prices for
some stores. But when a client makes an online
order at one price, then goes to a retail store to
take it at the pick-up point, and sees another
price, it causes a problem. Youre lucky if the
retail price is higher than the online price, but
what if vice versa?
Third, its logistics. The company processes
hundreds of millions of product entities per year.
The goods are delivered to stores by trucks.
The warehouse spaces are tremendously limited. This is the reason why logistics should work
as smoothly as a Swiss watch. Add online orders to this complex system. Its not a problem
when a particular product is out-of-stock at a
retail store, it does not break its sales process.
But when a client orders two products, say, a fitness exerciser and a cap, but receives only the
cap, this client will be surprised, to say the least.
As you can see, the difficulties are not related
to the online technologies, since we can learn
how to deal with them anyway. However, we
should radically change our approach to basic
data management, pricing, supply chains, logistics, personalization of customer relations, and

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so on. Its critical for companys growth to meet

the clients changing expectations and behavior
patterns.
That is how our OSTIN project was completed
in a timely fashion, and marked the beginning
of our work towards changing the concept of
customer experience at Sportmaster Group of
Companies. At the same time, it pointed out the
challenges that we face now in terms of how
prepared our other systems are for multi- and
omni-channel distribution. In this respect, the
project was very important for the company, and
Im glad that due to our partners help, among
others, this project has been properly organized, executed, and launched live.

About the Company

For 20 years, Sportmaster Group of Companies has been successfully developing a
vertically integrated business in the markets
of casual wear, and sports and leisure products. The companys key business domains
include sport products retail represented by
the SPORTMASTER chain, sport products
distribution that includes wholesales and
supply to the companys own retail chain,
casual wear retailing within the OSTIN
distribution chain, and real estate activities
(acquisition, construction, and lease of real
estate for the companys commercial businesses).
www.sportmaster.ru
The OSTIN chain (part of Sportmaster
Group of Companies) was founded in 2003
in Russia. Now this large retail chain comprises about 600 stores in Russia, Ukraine,
and Kazakhstan. The company offers
casual wear for men, women, and teenagers alongside with middle-priced accessories. The chain turnover reaches about
$800 million per year.
www.ostin.com
Nikolai Smirnov, CNews
Original publication is here