January 28, 2009
Retail TouchPoints: 5 Key Trends From NRF Which May Separate the ‘Has Beens,’ the ‘Survivors’ & ‘Thrivers’
By
Andrew Gaffney
Through
a special arrangement, presented here for discussion is an excerpt of a
current article from the Retail TouchPoints website.
While retailers may have
cut back and sent fewer team members to this year’s NRF event, those retailers
in attendance were active buyers in pursuit of solutions that could help
them emerge as a company that survives and even thrives once the economy
rebounds. In order to stem the current tide, most retailers in attendance
were focusing on the following five key areas:
1. Efficiency/Cost Savings
The ROI that tier 1 retailers
like Home Depot and Sears have realized from task management and workforce
optimization has been well documented, but now more mid-sized chains are
realizing the value in optimizing their workforce. For example, Books-A-Million
at the NRF convention announced plans to implement the entire Reflexis Store
Operations suite of integrated KPI, labor scheduling, task management,
and storewalk/compliance solutions.
2. Analytics/Business Intelligence
Considering the rapid
change in demand cycles, many retailers are leaning more on the dashboards,
real-time alerts and other insights business intelligence and analytics
solutions provide. One of the most telling examples spotlighted at NRF
was Family Dollar’s Project Accelerate. The deep discounter is in the midst
of a three-year transformation designed to improve the shopping experience
and also improve inventory productivity and enhance supply chain efficiency.
3. Customer Centricity
Every retailer claims
to be customer centric, but in the current economic climate many retailers
are actually putting their money and focus behind those claims. As a clear
indication, a Sunday conference session entitled “Are You Truly a Customer-Centric
Retailer?” drew approximately 800 attendees. Presented by DemandTec,
the session introduced new research from IDC on the state of customer-centricity
and insights from Best Buy and Canadian drug chain Rexall PharmaPlus.
4. Connected Channels
Retailers looking to
connect disparate sales channels had several live demos on the show floor
of providing the ability to allow consumers to buy from any channel and
easily have that purchase fulfilled from the distribution channel of their
choice. For example, Manhattan Associates showcased the integration of
its Distributed Order Management (DOM) solution with WebSphere Commerce
from IBM. Building a demo around their joint client David’s Bridal, Manhattan
and IBM demonstrated the ability for buying products online with pickup
in stores, by allowing visitors at the IBM booth to order gifts such as
digital photo frames from an IBM gift registry and then have that order
picked up at the Manhattan Associates booth.
5. The Arrival Of Mobile Commerce
The NRF Show also featured
one of the first live demos of the new Microsoft Tag short code technology.
Built around a prototype retailer called Martin Blue, Escalate Retail promoted
an offering for a free pair of iPod travel speakers.
Retailers were invited to “snap” the tags featured in ads and post cards
with their web-enabled phone and “order” the free speaker as a reward for
taking part in the demo. After snapping the tag to place their order, retailers
were able to stop by the Escalate booth to pick up their order and learn
more about the mechanics of how the behind-the-scenes tools used to deliver
the live “Buy Anywhere, Fulfill Anywhere” example.
Discussion questions:
Of the tech solutions mentioned, which do you think will be most appealing
to retailers in 2009? Are there others that you think will make a bigger
impact?
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These are all important developments and the healthier, more forward-looking retailers are probably working on all five options to some extent. I would point toward the fourth and fifth options as ways to use new technology to drive demand, not just drive down costs. The explosion of social networking as a marketing tool in the past couple of years (perhaps best exemplified by the Obama campaign) is something that most mainstream retailers need to exploit with more energy. If some of these tools make them better multi-channel marketers and help them communicate through “new media,” so much the better.
First, let me say I enjoyed this summary of Andrew’s experience at NRF. Of course all the areas mentioned have potential, but the right decision will vary based on each retailer’s current situation. With that caveat in place, I would proceed as follows:
Analytics/Business Intelligence would be number one. If you can’t measure where you are and don’t know where you want to be, then how will you know when you get there? If the company does not already have them in place, good analytics with clear strategic and tactical measurements are necessary to establish the baselines against which all other efforts will be measured. This may also reveal the best sequence for the rest.
Efficiency/Cost Savings seem like the watchword for the day and I think employees understand from their personal experiences that these are important areas to look for opportunity. Effort put in here will yield profits that can be directed to other areas.
Connected Channels are extremely important to today’s shopper. I think the key feature to allow in-store pick-up and return is important. Better coordination between these channels sets the stage.
Now that the framework is in place, it is time to go after the customer directly. The new flexibility provided by previous efforts will enable Customer Centric efforts.
I agree that greater Mobile Commerce is inevitable, but I also believe it will take quite a while to become a significant portion of the business. Mobile Commerce is where Customer Centric marketing was 3 years ago. Get the other things right first.
Of course, for someone else a completely different sequence might make sense. The one thing I would not underestimate is the time it takes to get your personnel up to speed on new capabilities. The preparation and training are probably more difficult than the technology.
The most appealing choice is going to be for reducing costs. However, if that is the only major initiative, the company will fail anyway to the competitors who are watching costs but becoming consumer-centric and collaborative. The formula for generating profits has two parts: reduce costs and increase sales. If the companies only focus on reducing costs, they lose to competitors that focus on increasing sales as well as reducing costs.
Nikki is 100% correct. No solution will work without clean data. In fact, companies can find themselves wasting a lot of time and money if they don’t have the right architecture in place. Having the data in a clean, integrated and harmonized manner is the key to success. With that, almost any front end tool for business intelligence will add value. I suggest that regardless of what user interface companies use for BI or Customer Centricity or Demand Planning or Supply Chain analysis, they first look at BlueSky Integration Studio (BIS) or POSmart. These are tools that will provide cleansing of POS and internal data sources. They are fairly inexpensive, with solid architectures that are open to any database and any BI tool that the users prefer, they provide companies with a solid foundation that they can build off.
Unfortunately, the architecture is frequently overlooked because companies are going for the “quick solution.” Overlooking the foundation will inevitably lead to a rearchitecture and waste of valuable company funds and time.
Driving demand is going to be job number one for any retailer this year, in an all-out effort to keep or gain a little extra traffic. But, at the end of the day, those retailers who concentrate on shopper experience will be able to communicate the most effectively with shoppers. I think the new stores Family Dollar is opening are a fantastic example of a surprisingly effective experience, and about 15 times more convenient than a visit to a big discounter!
I am also a big fan of mobile delivery of relevant offers. I’m a new user of the Cellfire program to get Kroger offers, and am looking forward to more options like this that give me control and save a few bucks in the process. Retailers can gain loyal shoppers from the Gen Y demo if they listen to their needs and respond accordingly.
Of those not mentioned, a key would seem to me to be computer automated ordering. As a skeptic to start, my experience to date with this area of operations is that it can’t be implemented fast enough. It’s proven to provide the right products, at the right time, at the right inventory level. It reduces inventory overall by 10-15%. It empties back rooms of unneeded inventory. It has been proving to reduce out-of-stocks to near–if not–zero, with the exception of DC out of stocks.
All of its benefits address many of the issues discussed. It’s customer centric in having the right products at the right time with nearly zero out-of-stocks. The cost savings from inventory reduction are substantial. It produces efficiencies in the supply chain by more effectively anticipating demand earlier than manual ordering. All these things add up to a must in challenging inventory times.
Mr. Caras posted the only commentary so far from a “real” retailer..and asked a great question. Why isn’t “restoration of margin” on the top of the list? Well, Mr. Caras, one of those reasons is that many retailers see the control over margin being primarily outside their direct control. There are any number of reasons why this is “true” or “false”…and that’s not the point. Beyond that, the question can be asked, what technology (new) can be adopted by retailers to restore margin?
Customer Centricity offers the opportunity to manage margin. In theory, a truly efficient customer-centric system attempts to offer product to each customer and tailor the entire offer based on the unique characteristics of that customer. In practice, it’s almost impossible to do. However, price optimization technology exists, and to some degree even “works”…it’s just very difficult to integrate into the existing processes and practices of large scale retailers.
Business Intelligence, when applied to product lifecycle management, also offers margin restoration opportunity. Given the right information at the right time, better decisions can be made which impact the overall mix of variables determining final margin.
I do agree with the clarity of the comment concerning a focus on either operational excellence, customer intimacy or innovative products. I disagree that mediocrity results from focusing on more than one simultaneously. In fact, today’s multi-channel large-scale retailers, I believe, have no choice BUT to focus on all three simultaneously. Operational excellence is a must in an era of contracting volume, having followed a period of retail deflation and cost inflation. Customer intimacy, which I would prefer to refer to as Experiential retailing, is vital to sustain and nurture the brand connection with existing customers, knowing that a strong brand connection is the best form of advertising. Recessions breed fear, which spawns cynicism and caution…all not conducive to winning consumer trust and loyalty. Customer intimacy speaks directly to this challenge, and given the cost of acquisition of new consumers, becomes a core competency of ALL retailers. And last, innovative products (or assortments) create differentiation and drive traffic. Without those, building share in a shrinking market becomes a price proposition, and a losing play.
Customer-centricity may well be the most pervasive theme of the coming year in our industry, but in practice it all depends on reliable, accurate data from the field and systematic methods for measurement, analysis and decision-support. So I’ll put my money on business intelligence as a key enabling trend for 2009.
I’ve read your commentaries and I am ashamed of you, all of you. No one has suggested the single thing that will recover retail: restoration of margin.
The single biggest factor contributing to the collapse was the race to the bottom. Every mass retailer wanted to sound as though they were the LOW PRICE leader.
There will be no economic recovery without restoration of profit. There has to be a commitment to value retailing. Price cannot be the prime component of value.
It’s refreshing to see customer centricity the big winner in this survey. Unfortunately, several of the apparel retailers I talked to at NRF were not clear as to exactly what that meant. It seems soft and fuzzy they complained! And what about determining ROI? In apparel retail, customer centricity equals service. Whether brick and mortar or on the web, fast and easy access to product, information, and service is what the battered consumer wants. There’s still a lot of retail choice out there, and the consumer is in no mood to put up with retailers who don’t care or make them work to buy.
The paradox is that at a time when retail logic is saying “cut payroll” the customer is saying,”you better be there when I want something or I’ll go elsewhere, and I’ll tell everyone about my lousy experience on facebook.” Here’s where access technology can help deliver a consistent service experience across a brand while reducing payroll costs. Properly executed, customers will have a consistent, positive service experience in every store within a brand. I don’t know, it sells itself!
Nice piece!
I kept hearing about customer-centricity all through the show. Retailers are starting to figure out that they have to hire a czar of the customer experience in order to increase their relevance to customers. Retailers are making plans that are inventive and exciting.
Retailers have to be working on all of the areas mentioned, but they will typically specialize in operational excellence (e.g. Walmart), customer intimacy (e.g. Nordstrom), or innovative products/services (e.g. Apple). Each of these three categories will have a different focus on the mentioned initiatives. If you try to focus on all areas, you run the risk of mediocrity.
Two disruptive technologies that will impact the retail industry are mobile phones and social networking. Microsoft’s Tag technology, part of mobile commerce, has the greatest potential of the things demonstrated at NRF. But it’s a long-term play, and won’t impact retailers in the next year.
It is really hard to separate customer centricity from business intelligence (literally and figuratively!) and analytics. These two areas lead to cost efficiency as well, due to the measurability of focusing on customers through the intelligent use of data.
This is, as Arianna Huffington pointed out yesterday, a year of those who get it and those who are “Not Getting It” http://tinyurl.com/bfj46y The retailers at NRF clearly are in the camp of the former. If you’re a retailer or anyone else in a highly competitive business, now is the time to get ahead. Focusing on customers, being smarter about your business and being both efficient and cost effective will result in market leadership as things get better.
It all depends on where the retailer is from a tech perspective. Analytics and BI may be critical–but you won’t be able to get there unless you have clean data and a good data warehouse. Same thing with connected channels–it’s all well and good to prioritize cross-channel, but if your eCommerce platform needs major overhauling, it won’t do you much good to overlay DOM on top of that.
I think what will best separate the winners from the laggards this time around, at least on the technology front, are those that implement a clean architecture, rather than putting an even greater burden on IT by implementing with expediency and no regard for future flexibility.
Good blog. Retail consultancy is touching new horizons.
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These are all important developments and the healthier, more forward-looking retailers are probably working on all five options to some extent. I would point toward the fourth and fifth options as ways to use new technology to drive demand, not just drive down costs. The explosion of social networking as a marketing tool in the past couple of years (perhaps best exemplified by the Obama campaign) is something that most mainstream retailers need to exploit with more energy. If some of these tools make them better multi-channel marketers and help them communicate through “new media,” so much the better.
First, let me say I enjoyed this summary of Andrew’s experience at NRF. Of course all the areas mentioned have potential, but the right decision will vary based on each retailer’s current situation. With that caveat in place, I would proceed as follows:
Analytics/Business Intelligence would be number one. If you can’t measure where you are and don’t know where you want to be, then how will you know when you get there? If the company does not already have them in place, good analytics with clear strategic and tactical measurements are necessary to establish the baselines against which all other efforts will be measured. This may also reveal the best sequence for the rest.
Efficiency/Cost Savings seem like the watchword for the day and I think employees understand from their personal experiences that these are important areas to look for opportunity. Effort put in here will yield profits that can be directed to other areas.
Connected Channels are extremely important to today’s shopper. I think the key feature to allow in-store pick-up and return is important. Better coordination between these channels sets the stage.
Now that the framework is in place, it is time to go after the customer directly. The new flexibility provided by previous efforts will enable Customer Centric efforts.
I agree that greater Mobile Commerce is inevitable, but I also believe it will take quite a while to become a significant portion of the business. Mobile Commerce is where Customer Centric marketing was 3 years ago. Get the other things right first.
Of course, for someone else a completely different sequence might make sense. The one thing I would not underestimate is the time it takes to get your personnel up to speed on new capabilities. The preparation and training are probably more difficult than the technology.
The most appealing choice is going to be for reducing costs. However, if that is the only major initiative, the company will fail anyway to the competitors who are watching costs but becoming consumer-centric and collaborative. The formula for generating profits has two parts: reduce costs and increase sales. If the companies only focus on reducing costs, they lose to competitors that focus on increasing sales as well as reducing costs.
Nikki is 100% correct. No solution will work without clean data. In fact, companies can find themselves wasting a lot of time and money if they don’t have the right architecture in place. Having the data in a clean, integrated and harmonized manner is the key to success. With that, almost any front end tool for business intelligence will add value. I suggest that regardless of what user interface companies use for BI or Customer Centricity or Demand Planning or Supply Chain analysis, they first look at BlueSky Integration Studio (BIS) or POSmart. These are tools that will provide cleansing of POS and internal data sources. They are fairly inexpensive, with solid architectures that are open to any database and any BI tool that the users prefer, they provide companies with a solid foundation that they can build off.
Unfortunately, the architecture is frequently overlooked because companies are going for the “quick solution.” Overlooking the foundation will inevitably lead to a rearchitecture and waste of valuable company funds and time.
Driving demand is going to be job number one for any retailer this year, in an all-out effort to keep or gain a little extra traffic. But, at the end of the day, those retailers who concentrate on shopper experience will be able to communicate the most effectively with shoppers. I think the new stores Family Dollar is opening are a fantastic example of a surprisingly effective experience, and about 15 times more convenient than a visit to a big discounter!
I am also a big fan of mobile delivery of relevant offers. I’m a new user of the Cellfire program to get Kroger offers, and am looking forward to more options like this that give me control and save a few bucks in the process. Retailers can gain loyal shoppers from the Gen Y demo if they listen to their needs and respond accordingly.
Of those not mentioned, a key would seem to me to be computer automated ordering. As a skeptic to start, my experience to date with this area of operations is that it can’t be implemented fast enough. It’s proven to provide the right products, at the right time, at the right inventory level. It reduces inventory overall by 10-15%. It empties back rooms of unneeded inventory. It has been proving to reduce out-of-stocks to near–if not–zero, with the exception of DC out of stocks.
All of its benefits address many of the issues discussed. It’s customer centric in having the right products at the right time with nearly zero out-of-stocks. The cost savings from inventory reduction are substantial. It produces efficiencies in the supply chain by more effectively anticipating demand earlier than manual ordering. All these things add up to a must in challenging inventory times.
Mr. Caras posted the only commentary so far from a “real” retailer..and asked a great question. Why isn’t “restoration of margin” on the top of the list? Well, Mr. Caras, one of those reasons is that many retailers see the control over margin being primarily outside their direct control. There are any number of reasons why this is “true” or “false”…and that’s not the point. Beyond that, the question can be asked, what technology (new) can be adopted by retailers to restore margin?
Customer Centricity offers the opportunity to manage margin. In theory, a truly efficient customer-centric system attempts to offer product to each customer and tailor the entire offer based on the unique characteristics of that customer. In practice, it’s almost impossible to do. However, price optimization technology exists, and to some degree even “works”…it’s just very difficult to integrate into the existing processes and practices of large scale retailers.
Business Intelligence, when applied to product lifecycle management, also offers margin restoration opportunity. Given the right information at the right time, better decisions can be made which impact the overall mix of variables determining final margin.
I do agree with the clarity of the comment concerning a focus on either operational excellence, customer intimacy or innovative products. I disagree that mediocrity results from focusing on more than one simultaneously. In fact, today’s multi-channel large-scale retailers, I believe, have no choice BUT to focus on all three simultaneously. Operational excellence is a must in an era of contracting volume, having followed a period of retail deflation and cost inflation. Customer intimacy, which I would prefer to refer to as Experiential retailing, is vital to sustain and nurture the brand connection with existing customers, knowing that a strong brand connection is the best form of advertising. Recessions breed fear, which spawns cynicism and caution…all not conducive to winning consumer trust and loyalty. Customer intimacy speaks directly to this challenge, and given the cost of acquisition of new consumers, becomes a core competency of ALL retailers. And last, innovative products (or assortments) create differentiation and drive traffic. Without those, building share in a shrinking market becomes a price proposition, and a losing play.
Customer-centricity may well be the most pervasive theme of the coming year in our industry, but in practice it all depends on reliable, accurate data from the field and systematic methods for measurement, analysis and decision-support. So I’ll put my money on business intelligence as a key enabling trend for 2009.
I’ve read your commentaries and I am ashamed of you, all of you. No one has suggested the single thing that will recover retail: restoration of margin.
The single biggest factor contributing to the collapse was the race to the bottom. Every mass retailer wanted to sound as though they were the LOW PRICE leader.
There will be no economic recovery without restoration of profit. There has to be a commitment to value retailing. Price cannot be the prime component of value.
It’s refreshing to see customer centricity the big winner in this survey. Unfortunately, several of the apparel retailers I talked to at NRF were not clear as to exactly what that meant. It seems soft and fuzzy they complained! And what about determining ROI? In apparel retail, customer centricity equals service. Whether brick and mortar or on the web, fast and easy access to product, information, and service is what the battered consumer wants. There’s still a lot of retail choice out there, and the consumer is in no mood to put up with retailers who don’t care or make them work to buy.
The paradox is that at a time when retail logic is saying “cut payroll” the customer is saying,”you better be there when I want something or I’ll go elsewhere, and I’ll tell everyone about my lousy experience on facebook.” Here’s where access technology can help deliver a consistent service experience across a brand while reducing payroll costs. Properly executed, customers will have a consistent, positive service experience in every store within a brand. I don’t know, it sells itself!
Nice piece!
I kept hearing about customer-centricity all through the show. Retailers are starting to figure out that they have to hire a czar of the customer experience in order to increase their relevance to customers. Retailers are making plans that are inventive and exciting.
Retailers have to be working on all of the areas mentioned, but they will typically specialize in operational excellence (e.g. Walmart), customer intimacy (e.g. Nordstrom), or innovative products/services (e.g. Apple). Each of these three categories will have a different focus on the mentioned initiatives. If you try to focus on all areas, you run the risk of mediocrity.
Two disruptive technologies that will impact the retail industry are mobile phones and social networking. Microsoft’s Tag technology, part of mobile commerce, has the greatest potential of the things demonstrated at NRF. But it’s a long-term play, and won’t impact retailers in the next year.
It is really hard to separate customer centricity from business intelligence (literally and figuratively!) and analytics. These two areas lead to cost efficiency as well, due to the measurability of focusing on customers through the intelligent use of data.
This is, as Arianna Huffington pointed out yesterday, a year of those who get it and those who are “Not Getting It” http://tinyurl.com/bfj46y The retailers at NRF clearly are in the camp of the former. If you’re a retailer or anyone else in a highly competitive business, now is the time to get ahead. Focusing on customers, being smarter about your business and being both efficient and cost effective will result in market leadership as things get better.
It all depends on where the retailer is from a tech perspective. Analytics and BI may be critical–but you won’t be able to get there unless you have clean data and a good data warehouse. Same thing with connected channels–it’s all well and good to prioritize cross-channel, but if your eCommerce platform needs major overhauling, it won’t do you much good to overlay DOM on top of that.
I think what will best separate the winners from the laggards this time around, at least on the technology front, are those that implement a clean architecture, rather than putting an even greater burden on IT by implementing with expediency and no regard for future flexibility.
Good blog. Retail consultancy is touching new horizons.