A New OrderBy Samuel Greengard | Posted 2012-05-01 Email Print
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Information technology is driving massive changes in retailing. Successful businesses are embracing everything from back-end analytics and social media to mobile POS systems.
A New Order
Social media and online interaction play out in many other ways, too. Capgemini’s Avallon points out that customers increasingly step into stores, try on clothing or eyeglass frames, and snap photos of themselves. They then send the pictures to their friends for an opinion before buying the item.
These same customers also participate in user communities and post online ratings about products and services. Consequently, consumers are rebranding retailers from the outside in. Companies that have always had control of their image and the flow of information must now readjust—and change their business models accordingly.
Nowhere is this more apparent than with the growing use of barcode scanning apps on smartphones. Between 30 and 40 percent of smartphone users have a barcode scanning app on their mobile device. In fact, the use of these apps has increased about 1,600 percent since 2010, according to Capgemini and retail consulting firm GS1.
This has tilted the equation dramatically. “A brick-and-mortar retailer can easily become a showroom for online buying,” says Avallon. “There’s a massive power shift, and retailers must understand how to manage the entire buying experience, including pricing.”
Making sense of this environment—particularly customer behavior—is crucial. At Nextag, a leading shopping Website, insight into customer clicks and trends is a key to making sound business decisions—and a profit. The site offers free product information and compares prices for consumers.
When someone clicks through and buys an item at a merchant site, Nextag receives a fee from the retailer. Every month, Nextag receives somewhere between 30 million and 40 million unique visitors in the United States and another 10 million to 15 million overseas.
To earn a profit, Nextag must gauge demand for a particular product—say a high-definition television—and constantly adjust its pricing and ad links. “We are able to determine how much buyers are willing to pay at any given moment,” says Derek Yung, vice president of finance and strategic planning.
Essentially, Nextag buys an ad on Google and at other search services and then earns a fee when a sale takes place. A $5 ad might net a 50-cent return or a $3 ad might provide a 10-cent return, depending on how aggressive a merchant is about generating traffic and actual sales. Nextag’s advantage is that it boasts higher than average conversion rates.
In addition to developing proprietary software, Nextag uses cloud-based analytics from SAS to provide real-time insights into patterns and trends—and adjust pricing accordingly. It also relies on software from IBM Cognos for business intelligence and reporting, as well as a program, Host Analytics Budget, to tackle underlying financials.
The software-as-a-service approach allows Nextag to operate in a more agile and flexible manner, Yung says. “We’re able to invest in state-of-the-art technology and developers without sinking money into infrastructure.”
RSR Research’s Kilcourse says that retailers must do a better job of connecting data silos and creating “just the right time” information across the enterprise and out to the customer. “Today’s decision-makers are at the edges of the enterprise, he points out. “They’re either store associates serving the customer or the customer themselves.”
He adds that the distributed computing models of the past aren’t necessarily effective in today’s retail environment. “When a customer places an order, it must be filled in the fastest and most cost-effective way possible,” he says.
Leading-edge organizations are also looking for ways to break new ground with emerging tools and technology. This might take the form of streaming a fashion show or a quasi-news show displaying latest products. Or it might include tapping social media and user communities to help decide what products to discontinue.
“We’ve seen some organizations create communities to test new styles and concepts,” Capgemini’s Avallon explains. “There are a lot of powerful tools and capabilities available.”
In the end, “It’s up to an organization to make retailing more interesting and accessible to its customers,” Avallon concludes. “The face of retailing is changing radically, and the organizations that excel will be those that use information technology to build a business model that touches customers in a more compelling way.”