A New Order
By Samuel Greengard
Eoin Comerford has seen the future of retailing. It’s a place where checkout lines don’t exist and paper receipts have been relegated to the dustbin of history. It’s a space where customers have access to product information from their smartphones, and employees view live inventory information.
“Today’s technology provides a far more efficient way to do business and interact with customers,” says the president and CEO at Moosejaw Mountaineering.
As the fourth largest U.S. retailer in the specialty outdoor niche, Moosejaw operates nine brick-and-mortar stores in Michigan and Illinois, along with an Internet storefront. Last year, the company began eliminating fixed point-of-sale (POS) terminals in stores, arming sales associates with iPod Touches, and completely redesigning the physical layout of its stores to regain space and create a more compelling shopping experience.
“Our goal,” says Comerford, “is to completely redefine the shopping experience.”
These days, Moosejaw isn’t the only company ringing up sales by revamping its retailing strategy. A spate of technologies—encompassing areas as diverse as mobility, social media, analytics and product life-cycle management—are creating new challenges but also new opportunities. Within this disruptive environment it’s critical to apply new thinking.
“Companies must fundamentally remap processes, as well as the way they interact with customers,” points out John Avallon, vice president, North America leader, Consumer Products & Retail Division, Capgemini.
For business and IT leaders, this means stepping out of the retailing box and finding new and creative ways to plug in data, design stores, and manage products and services throughout their life cycle. “The retail industry is at a pivot point,” observes Brian Kilcourse, a managing partner at consulting firm RSR Research. “There is an enormous paradigm shift taking place—the likes of which hasn’t been seen since the introduction of barcode scanning at the store level.”
Cashing in on Mobile
For most of history, retailing has been a fairly straightforward proposition. Companies pushed products out to brick-and-mortar stores or through online storefronts and replenished inventory as needed. In recent years, bar-coding, supply chain management systems, analytics and a spate of other tools have helped speed internal processes and optimize performance. As a result, many retailers are now incredibly efficient at managing ERP and supply chain tasks.
But back-end systems are only part of the picture. Today, social media and mobile commerce are radically redefining the retailing landscape. These tools are empowering consumers by allowing them to step into a store and, quite often, know more about a product or service than a sales associate.
“The reality is that today’s consumer has anywhere, anytime access to product information,” Kilcourse explains. “As a result, the path to purchase has become far more complex.”
Moosejaw is one retailer that understands this concept. The company, which plans on opening five new stores in 2012, is investing heavily in mobile POS technology. “The goal, says Comerford, “is to bring greater interaction into stores and create a seamless multichannel experience for customers.”
In the past, the retailer relied on traditional checkout lanes with fixed terminals. It is now removing some fixed terminals and arming associates with an Apple iPod Touch equipped with a two-dimensional barcode scanner and credit card reader. Customers can receive the receipt by email. “It represents a completely different way to do business,” he says.
The system allows associates to spend time with customers on the floor and access inventory and Web information in real time. A CrossView Mobile POS solution tied into IBM WebSphere integrates call centers, POS and online commerce data on a single platform with a single view of products, pricing, inventory, marketing, promotions and customers.
“The sales associate can handle the transaction at the point of customer interaction,” Comerford notes. “It’s an extremely efficient system that greatly streamlines the sales process.”
No less important: The technology is allowing Moosejaw to reconfigure stores. “The space where checkout lanes previously existed is used to display additional merchandise, including private-label products,” Comerford says. The company has also moved the location of changing rooms and added windows with drapes so that customers can get instant feedback from a friend.
At its Birmingham, Mich., store, the extra space is now used for a hangout area, complete with a Ping-Pong table, flat-screen TV and comfortable chairs. “We have created stores that are much more engaging,” he says. “The associates love the wireless POS system, and customers are providing extremely positive feedback about it.”
The challenge for retailers is not only tying together existing IT systems to provide a live view of inventory, product information and pricing, it’s also connecting to social media feeds. “Social media has become the consumer’s advocate,” Kilcourse says.
In fact, RSR Research found that “overachieving and underachieving retailers view social media very differently,” he adds. “Best-practice companies understand that there’s a need to listen to conversations and monitor activity.”
In some cases, according to Kilcourse, it’s possible to pick up early signals about demand, market trends and performance—especially with the use of analytics. “Retailers must view social media as more than a way to shovel promotions at customers,” he adv ises.
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.”