Abstract
Reply’s highly experienced and
effective team, from across its
businesses and regions, turned
Costco’s international ecommerce
expansion plans into reality. Reply
developed, built and managed the
entire ecommerce offering for
Costco, with Mexico becoming the
first market to use and test the
blueprint ecommerce platform
developed in the UK, hosted on
Google Cloud Platform.
Costco strengthens
global ecommerce Offering with Reply
Scenario
Costco is the world’s 3rd largest retailer with a $105.2bn turnover in 2013. It is
an international wholesale membership club with over 600 warehouses around
the world. The warehouses present one of the largest and most exclusive product
category selections to be found under one roof. Costco is known for carrying top
quality national and regional brands, at prices consistently below traditional
wholesale or retail outlets.
Since early 2012, Costco has been looking to expand its ecommerce capability and
launch the first international commerce operation outside of North America. The UK
was chosen due to Costco’s business maturity and size of the ecommerce market.
Portaltech Reply was selected to implement the hybris ecommerce platform and
successfully launched the UK website on time and materially on budget in October
2012, less than 7 months after project approval. The intention of this ecommerce
implementation was to serve as a global template for roll out in further markets.
In October 2013, Reply opened a second website for Costco in Mexico. Costco is now
making plans for additional websites with Reply on the hybris ecommerce platform.
The success of the UK site resulted in a blueprint template that was used as the
basis of the Costco Mexico project.
COSTCO MEXICO ECOMMERCE SITE. Costco is also a highly regarded brand in
Mexico, where the company sells high-end goods to the market via its warehouse
model. Costco’s analysis demonstrated that there was considerable demand for
an ecommerce offering in Mexico and the differences in the buying culture of this
country compared with the UK had to be reflected in the implementation of the site.
In Mexico, big ticket items are commonly bought on hire purchase schemes and the
payment function would need to support this.
To provide the best quality and value to the customer, Costco has a high turnover of
items and a key business requirement was the ability to immediately reflect available
inventory through its ecommerce store. One of Costco’s differentiators is its ability to
move inventory quickly. This helps it keep its costs lower, passing these savings onto
its customers. The Reply solution achieves this, enabling Costco to have real-time
visibility of stock levels, which in turn ensures that items are only ever on sale when
they are ready to be dispatched to the customer.
The solution
Reply is known for its specific knowledge and expertise across a network structure
composed of subsidiary companies, each focusing on specific lines of offer, with
effective solutions and excellent services.
Reply assembled a global team of specialists to cover Costco’s technical leads and
was able to provide teams in each of Costco’s major geographies to meet the entire
needs of the project, including:
Building the ecommerce platform on hybris software, an SAP company, by
Portaltech Reply
Cloud hosting on Google Cloud Platform services, including Google Compute
Engine and Google Cloud SQL, via Storm Reply
Warehouse and fulfillment capabilities and design with SideUp Reply software.
In partnership with Costco, the Reply companies Portaltech Reply and SideUp Reply
have been part of the development of the ecommerce strategy. The result is an
ecommerce “blueprint” that enables Costco to setup ecommerce capabilities in new
countries while retaining the flexibility to tailor each country’s offering to address
local needs.
A TAILOR MADE PLATFORM. The Costco Mexico site was up and running in 7 months.
The site was able to benefit from all the latest developments in functionality that had
been made to the UK platform as well as meet the specific local needs.
Work had been going on to the hybris ecommerce platform in the UK to improve item
setup and workflow. Loading a new product onto the system to sell typically took three
to four hours, but following improvements to the hybris product, entry customisation
was reduced to one and a half hours. Costco Mexico typically wanted to load between
75 to 100 items to per week, therefore with this improved functionality they were
saving between 150-200 hours per week on loading new products onto the system.
In terms of work carried out by SideUp Reply on the warehousing and fulfillment side,
Costco Mexico was keen to expand its product range online and consequently the
number of vendors it provided. It wanted upward of 160 drop ship vendors integrated
onto the Mexico ecommerce platform.
By using the drop-ship fulfillment approach provided by VendorNet, Costco can have
the manufacturers of the products online directly fulfill the order to the customer
via the Costco site. This saves on warehousing costs and also delivery, however it
must be done properly to ensure that the brand promise of buying through Costco
is played out to the customer via the third party manufacturer. SideUp Reply worked
closely with Costco and Portaltech Reply to ensure that the system was set up to
achieve this, as well as to integrate with the CWT jewelry facility in Issaquah, WA,
which fulfills all of Costco’s web site orders for jewelry items. This facility is also
running SideUp Reply.
In Mexico, SideUp Reply is integrated with Costco’s central systems as well as the
shipping systems of Costco’s local parcel carrier partners. A Cubiscan device, adds
precise weight and dimensions information to the Item Master Data held within
SideUp Reply. This helps not only with location of items as they arrive in the depot,
but also with precise information for shipping, size of box recommendations and
invoicing purposes.
THE ULTIMATE TEST – EL BUEN FIN. El Buen Fin is Mexico’s annual nationwide
shopping weekend in Mexico. Started in 2011, it takes place on the third weekend in
November to mark the beginning of the Christmas shopping season. Retailers are
encouraged to offer discounts and promotions.
Reply needed to ensure that the site was live in Mexico to capitalise on the potential
sales from El Buen Fin. The number of visits to the site and transactions expected
for El Buen Fin 2013 was high and Costco wanted to make sure that Google Cloud
Platform and site would stand up to demand levels. Over El Buen Fin 2013, Costco
exceeded its sales targets by 200%.
HOSTING THE ECOMMERCE PLATFORM IN THE CLOUD. Costco selected Google
Compute Engine and Google Cloud SQL, part of Google Cloud Platform, in May 2013.
Reply and Costco were so convinced of the business and technical merits of Google
Cloud Platform that the Mexico site was moved into production on the Platform
before it was made generally available. Throughout the project, Storm Reply worked
closely with Google engineering in the development of Google Compute Engine and
Google Cloud SQL. Storm Reply was able to build its own procedures and technical
functions into the cloud environment, which created a bespoke infrastructure with
effective features in a very short timeframe.
Google Cloud Platform has exceeded Costco’s stringent requirements that were
defined at the project’s outset by the Reply team. The fully scalable properties of
the cloud infrastructure mean that it can be adapted automatically according to
requirements. The benefits of high performance through good networking capabilities
and the computing power of the Google Computer Engine mean that Costco can be
confident of supporting peak periods of transactions and page impressions made
at once whilst at the same time reducing the overall number of services required
throughout the year. Greater redundancy and failover has also been built into the
infrastructure to improve reliability.
THE GLOBAL REPLY TEAM. Reply created a global team to most effectively address
Costco’s business and technical leads. The core ecommerce team was based in
Mexico, close to the Costco Mexico team. Project and delivery management were
coordinated in Seattle and close to Costco’s global headquarters. Reply’s Europeanbased infrastructure and developer teams worked in time-shifts to be more available
during Mexico working hours. The four locations and time zones made it logistically
challenging but Reply was able to take on the international management of the
delivery of the project leveraging the skillset in the UK and in the satellite teams set
up in Seattle and Costco Mexico’s key main location of Mexico City. The development
team in the UK had daily calls with delivery management and the customer to provide
effective communication across time zones.
The project was delivered using agile development methodology and worked on a
two-week development cycle. Portaltech Reply also provided training from the UK to
Mexico and support to the team in London from Seattle.
Reply value
Reply’s deep experience across a number of functions and regions, meant that
the team could fully manage this all-encompassing project in terms of technical
capability, market insight and global presence. The team comprised a network of
specialist technology Reply companies, covering the entire needs of the project,
cherry picking particular skills as the project moved into different stages. This agile
approach meant that the Reply team was able to respond exactly to the specific
requirements of the project at any one time. For example the UK website was
migrated onto the Google Cloud Platform with minimal impact to the Costco team
and with no unplanned outages.
Reply worked with Costco to develop an ecommerce solution that is not only futureproof, but that can be adapted to new markets. This proven success in two markets
means that Costco has a high degree of confidence that the template will be valuable
in its subsequent deployments, ultimately supporting the retailer’s global growth
plans.
The ecommerce operation for Costco needed to support the core of its business
framework – countless suppliers, millions of customers and a high turnover of
products. This could have been a complex and unwieldy IT implementation, but Reply’s
experience and skill has meant that the new ecommerce function is streamlined and
responsive.
The future
Costco will continue its successful formula to date of keeping sites as uniform as
possible with local differences. The key to this is the continual dedicated development
of new code in the UK as well as all the cost efficiencies that have been built in
to every stage of the ecommerce process, from drop ship vendors to delivery and
customer returns. The use of Google Cloud Platform to host ensures that Costco only
pay for what they use, they can scale up to the most demanding workloads of El Buen
Fin and then scale back in other periods.
Reply [MTA, STAR: REY] specialises in the design and implementation of solutions based
on new communication channels and digital media. Through its network of specialist
companies, Reply supports some of Europe’s leading industrial groups in Telco & Media,
Industry & Services, Banks & Insurance, and Public Administration to define and develop
business models, suited to the new paradigms of Big Data, Cloud Computing,
Digital Media and the Internet of Things. Reply services include: Consulting,
System Integration and Digital Services.
For further information: www.reply.eu