To further move its position in the retail market space, SAP acquired privately-held Khimetrics last November. Khimetrics is a Scottsdale, Arizona-based (US) provider of enterprise software solutions that allow retailers to analyze how to price and position items to boost margins and optimize demand; to deliver more accurate, profitability forecasts; and to implement long-term sales strategies that promote customer retention.
Part two of the Applications Giants Bolster Their Pricing Management Capabilities series.
As hinted in an earlier note Applications Giants Bolster Their Pricing Management Capabilities in retail, pricing and profit optimization are analytic applications that analyze demand patterns and optimize pricing by each stock-keeping unit (SKU) by selling location in order to optimize revenue and gross margins. The goal is to adjust prices downward where consumers are price sensitive, in order to increase volume, while raising or maintaining prices where consumers are not price-sensitive, in order to maximize margin.
Yet, deciding which SKU in which store location is in which category is not a small exercise, and it is certainly not that intuitive. In the past, such decisions were made by experienced retail buyers, who would scrutinize volumes sales data and rely on their "sixth sense". Furthermore, with the typical large retailer managing thousands of SKUs over several dozens of stores, an expert buyer can only deal with a fraction of the pricing decisions that need to be made in order to maximize revenue. The imperative to respond to constantly-evolving customer requirements more efficiently is driving retailers away from human clairvoyant buyers and/or investment in expensive, in-house development towards standardized software. Flexible, integrated demand intelligence, such as SAP is adding with Khimetrics, will thus be a key element of an broad retail offering that supports an efficient response to customer demand. Khimetrics top-tier customers include Albertsons, PETsMART, Lowe's, 7-Eleven, Sterling Jewelers, ShopKo Stores, Pamida and Big Y Foods.
The acquisition of the customer demand management expert Khimetrics came in the wake of SAP's acquisition of Triversity, the former North American provider of customer-centric, point-of-sale (POS) software solutions, demonstrating continuing evidence of SAP's strategy to acquire narrowly-focused solutions that enhance its offerings and address specific customers' business challenges. The advanced analytical pricing and forecasting technologies from Khimetrics complement SAP's recently added in-store solution and will build on SAP's retail offering, which extends from the enterprise back-office through the retail supply chain and to the store.
Some have questioned SAP's move with KhiMetrics, since DemandTec had been SAP's partner in demand-driven price optimization and its solutions are already integrated into SAP NetWeaver (like LightHammer and Vendavo, but ironically not the KhiDEMAND product). But, in its defense, SAP cites multiple reasons that have led it to acquire Khimetrics instead, starting with the completeness of the solution to provide the crucial forecast optimization capability as to drive the planning, promotion and pricing applications. Also, being an innovative segment leader in bringing scientific advances into the retail market, Khimetrics sales increased more than 1,600 percent since 2001 (with an estimated about $30 million [USD] turnover in 2005), earning the company a spot on Inc. Magazine's list of 500 fastest-growing private companies in the US for the last two years (with about 130 employees prior to the acquisition).
In addition to its revenue management and price optimization solutions, Khimetrics is a leader in the emerging market of demand intelligence, advanced analytics software that taps into vast amounts of internal and external customer data to enable retailers to make faster and more educated decisions about forecasts, promotions, pricing, markdowns, and assortment to achieve optimal business performance. The broader footprint to cover uniformly both the initial pricing, promotional pricing and markup/markdown profit optimization capabilities (as opposed to ProfitLogic and DemandTec's expertise in one or two of the above) has apparently been behind SAP's Khimetrics decision.
As the customer demand expert matter vendor, Khimetrics helps retailers synchronize their merchandising strategies with customer demand to increase sales and profit margins while improving competitive positioning. SAP's contention is that those who manage demand well might not even need to resort to markdowns, which is certainly ProfitLogic's forte. Further, Khimetrics' demand intelligence capabilities can be used across all retail verticals including fast moving consumer goods (hardlines) and general merchandise and apparel (softlines). In addition, the user interface (UI) of these demand intelligence solutions has reportedly been recognized for its intuitive, logical workflow that follows the mindset of how a retailer works on a day-to-day basis.
As for the drawback of the lack of integration in the past, SAP believes that, based on industry standards, Khimetrics' Java-based solutions will be quickly and smoothly integrated into the SAP for Retail solution portfolio. The suite is built on the SAP NetWeaver platform that should allow retailers to leverage existing IT investments inside an integrated solution landscape and help reduce the complexity of IT while not necessarily hampering flexible business strategies. As a result, retailers should be able to run their entire business on a single platform rather than on a costly mix of best-of-breed scenarios (see Multipurpose SAP NetWeaver ).
SAP for Retail includes core capabilities for financial management, human resources (HR), supplier relationship management (SRM), customer relationship management (CRM), as well as support for industry-specific merchandise management and planning, store and channel management, demand forecasting, replenishment, sophisticated allocation, workforce management, POS data management, and radio frequency identification (RFID). For more information, see SAP's Approach to the Retail Market.
Part two of the Applications Giants Bolster Their Pricing Management Capabilities series.
As hinted in an earlier note Applications Giants Bolster Their Pricing Management Capabilities in retail, pricing and profit optimization are analytic applications that analyze demand patterns and optimize pricing by each stock-keeping unit (SKU) by selling location in order to optimize revenue and gross margins. The goal is to adjust prices downward where consumers are price sensitive, in order to increase volume, while raising or maintaining prices where consumers are not price-sensitive, in order to maximize margin.
Yet, deciding which SKU in which store location is in which category is not a small exercise, and it is certainly not that intuitive. In the past, such decisions were made by experienced retail buyers, who would scrutinize volumes sales data and rely on their "sixth sense". Furthermore, with the typical large retailer managing thousands of SKUs over several dozens of stores, an expert buyer can only deal with a fraction of the pricing decisions that need to be made in order to maximize revenue. The imperative to respond to constantly-evolving customer requirements more efficiently is driving retailers away from human clairvoyant buyers and/or investment in expensive, in-house development towards standardized software. Flexible, integrated demand intelligence, such as SAP is adding with Khimetrics, will thus be a key element of an broad retail offering that supports an efficient response to customer demand. Khimetrics top-tier customers include Albertsons, PETsMART, Lowe's, 7-Eleven, Sterling Jewelers, ShopKo Stores, Pamida and Big Y Foods.
The acquisition of the customer demand management expert Khimetrics came in the wake of SAP's acquisition of Triversity, the former North American provider of customer-centric, point-of-sale (POS) software solutions, demonstrating continuing evidence of SAP's strategy to acquire narrowly-focused solutions that enhance its offerings and address specific customers' business challenges. The advanced analytical pricing and forecasting technologies from Khimetrics complement SAP's recently added in-store solution and will build on SAP's retail offering, which extends from the enterprise back-office through the retail supply chain and to the store.
Some have questioned SAP's move with KhiMetrics, since DemandTec had been SAP's partner in demand-driven price optimization and its solutions are already integrated into SAP NetWeaver (like LightHammer and Vendavo, but ironically not the KhiDEMAND product). But, in its defense, SAP cites multiple reasons that have led it to acquire Khimetrics instead, starting with the completeness of the solution to provide the crucial forecast optimization capability as to drive the planning, promotion and pricing applications. Also, being an innovative segment leader in bringing scientific advances into the retail market, Khimetrics sales increased more than 1,600 percent since 2001 (with an estimated about $30 million [USD] turnover in 2005), earning the company a spot on Inc. Magazine's list of 500 fastest-growing private companies in the US for the last two years (with about 130 employees prior to the acquisition).
In addition to its revenue management and price optimization solutions, Khimetrics is a leader in the emerging market of demand intelligence, advanced analytics software that taps into vast amounts of internal and external customer data to enable retailers to make faster and more educated decisions about forecasts, promotions, pricing, markdowns, and assortment to achieve optimal business performance. The broader footprint to cover uniformly both the initial pricing, promotional pricing and markup/markdown profit optimization capabilities (as opposed to ProfitLogic and DemandTec's expertise in one or two of the above) has apparently been behind SAP's Khimetrics decision.
As the customer demand expert matter vendor, Khimetrics helps retailers synchronize their merchandising strategies with customer demand to increase sales and profit margins while improving competitive positioning. SAP's contention is that those who manage demand well might not even need to resort to markdowns, which is certainly ProfitLogic's forte. Further, Khimetrics' demand intelligence capabilities can be used across all retail verticals including fast moving consumer goods (hardlines) and general merchandise and apparel (softlines). In addition, the user interface (UI) of these demand intelligence solutions has reportedly been recognized for its intuitive, logical workflow that follows the mindset of how a retailer works on a day-to-day basis.
As for the drawback of the lack of integration in the past, SAP believes that, based on industry standards, Khimetrics' Java-based solutions will be quickly and smoothly integrated into the SAP for Retail solution portfolio. The suite is built on the SAP NetWeaver platform that should allow retailers to leverage existing IT investments inside an integrated solution landscape and help reduce the complexity of IT while not necessarily hampering flexible business strategies. As a result, retailers should be able to run their entire business on a single platform rather than on a costly mix of best-of-breed scenarios (see Multipurpose SAP NetWeaver ).
SAP for Retail includes core capabilities for financial management, human resources (HR), supplier relationship management (SRM), customer relationship management (CRM), as well as support for industry-specific merchandise management and planning, store and channel management, demand forecasting, replenishment, sophisticated allocation, workforce management, POS data management, and radio frequency identification (RFID). For more information, see SAP's Approach to the Retail Market.
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