Riachuelo lights up an omnichannel retail future
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Riachuelo lights up an omnichannel retail future

Angelica Mari — March 2018
Brazil’s retail giant is on a digital transformation journey that is enhancing customer experience both in-store and online and improving information security.

Paulo Farroco, CIO at Brazilian department store chain Riachuelo, likes to share an analogy that demonstrates how his IT organization has evolved to become agile and business-aligned as it executes a multi-year business transformation strategy.

“Previously, when business users asked us for ‘a car,’ all we could deliver was a wheel, which, on its own, was of little use. What happens now is we deliver transportation: a skateboard today, a bicycle tomorrow, then a motorbike and finally a car.” His point: that the users are provided with a solution rapidly, one that improves in iterative leaps and progressively adds greater value to the business.

“Paulo
Paulo Farroco, CIO at Riachuelo
Part of the R$7.98 billion ($2.47bn) Grupo Guararapes, Riachuelo — with its 302 stores and 44,000 employees — sits alongside a personal finance arm, Midway Financeira, transportation firm TCV, a shopping mall operation and five factories producing own-brand items.

All operationally intertwined, the business structure presents Farroco and his 250-strong IT team with a broad and challenging canvas for digital transformation. “This is no quick fix but a longer term plan,” he says. “We have a fertile IT portfolio with about 400 initiatives projects currently underway, but that still means prioritizing on technologies that bring returns to the business.”
Channel evolution

High on that list is the push towards omnichannel retail — with some of that integration of customer channels ahead of the curve, some of it behind.

Around 45 new Riachuelo stores are opened each year, and supporting that schedule is a top business priority. For each store, there are about 20 IT initiatives that must be completed to fixed schedules, despite local challenges such as poor network connectivity and complex infrastructure.

In support of that growth in bricks-and-mortar outlets, the IT organization last year completed a move into online commerce. An outsider may have viewed that as a late arrival at the e-commerce party, but the timing, Farroco argues, was right. “Over the past few years we’ve had a very active website, with a lot of dialogue with consumers, fashion tips, blog posts and so on, but no internet sales,” Farroco says. “But the business priorities were elsewhere. We had all our attention turned to supporting organic growth and being present in all 27 Brazilian states,” he adds.

“Riachuelo”

That staged arrival of the ecommerce platform — which cost a relatively modest R$28 million ($8.7 million) —  has enabled IT to implement an integrated omnichannel platform. Features include online product purchasing with in-store collection and access to vast range of about 22,000 products, from apparel and cosmetics to household items.

Other customer-facing innovations on Farroco’s radar are geared towards providing a frictionless in-store experience. These include the potential for smart changing rooms, which could suggest further items that customers might also like and allow them to request staff to bring different sizes.

In addition, Farroco has in mind a series of digital initiatives that would make the shopping experience more customer-friendly.  “There are alarm tags in all of our items that have to be removed at the till, and this is a customer experience issue that we have to solve. We are also thinking of how to reduce the time spent queuing at tills. It could be possible that we eliminate this by notifying the customer via our app when it is their turn to pay, with the app downloadable in each store,” the CIO says.
Securing identity

In parallel to the e-commerce launch, Grupo Guararapes’s financial arm, Midway Financeira, has launched online and mobile account management for its store credit card customers — the app has had 500,000 downloads in three months — as well as a credit management platform. These systems are closely linked to the retail operation and the customer experience at stores. But ensuring their security is robust has required some innovative approaches.

One involves the use of facial biometrics to reduce fraud. “Unfortunately in Brazil we have a lot of identity theft, so we now compare the face of the person applying for credit and establish whether it matches the person’s ID card or appears on a previous application for credit,” says Farroco.  The use of biometrics, introduced in mid-2017, prevents account duplication and any legal action from customers who have been charged for goods bought with their stolen cards.

The launch of a credit management platform has also improved scoring analysis and decision making, with credit applications processed in just 10 seconds. “Just as important as granting credit quickly, is denying credit quickly. There is nothing worse for a client than waiting around for 20-30 minutes only to find that their application has been unsuccessful,” Farroco says.
Guaranteeing the future

When asked about the pressures of driving digital transformation — given that the company is a late adopter of certain innovations —  the CIO says the pace of evolution was “absolutely natural.”

“There are companies from our sector that are far more advanced, bolder and more open to risk, while others are more conservative and old-fashioned than us,” Farroco says. “If you keep looking at those who are ahead it can be frustrating, so it is important to digitally transform but without losing sight of the value it can bring to the business.”

“Riachuelo”

Handling the IT requirements of a conglomerate such as Guararapes is not easy, says Farroco. When it comes to IT transformation, the various business units have different appetites and needs. “We can’t adopt a one-size-fits-all approach. But despite the complexity we have made big strides in our transformation. And importantly our Board is fully behind us,” the CIO says. “We have a clear understanding that what brought us here will not guarantee our future.”
Creating business readiness

The IT transformation at the various business units of 71 year-old Grupo Guararapes has had to be carefully orchestrated, according to Farroco, due to the large number of legacy applications that need to be updated or replaced. “Things are scalable only up to a certain point and eventually you hit a technical barrier — like having to change a certain part in the system four or five times and not being able to do that simultaneously because something will certainly fall apart,” the CIO says.

But that issue is being resolved. “Our old systems were typically monolithic. Now, we break everything down into micro-services and API layers so that platforms can talk to more than one system,” the CIO says.

Farroco is confident his operation will demonstrate its readiness and capability to respond to changes in the sectors in which the group operates during 2018. “Companies that were born digital don’t have legacy systems to deal with and have a much higher degree of readiness. We expect that the transformation we are working on will give us that kind of readiness,” he says.

But he takes nothing for granted. “We are fully aware of that our relationship with the business’s different areas [on transformation] is very strong, and we really look after that bond. Because we know those successes can be very ephemeral.”

First published March 2018
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