2012 Review & Outlook
By Joe Skorupa
Last year I wrote: “Clear progress is being made and retailers are approaching 2011 with more hope, plans for growth, and optimism for launching new initiatives than they have in three years.” This was essentially correct, but…There’s always a “but.”
In this case there are several “buts” and they add up to a familiar list of woes that act as anchors dragging down the economy. However, if there is a bright side it is that we are fortunate enough to be in the retail industry. Yes, that’s right, retail is in a fortunate position. Why? Because it is in our DNA to deeply engage with the forces of demand, and there is no surer path to success than aligning with demand.
The notion “right product, right place, right time and right price” certainly has relevance, but it doesn’t recognize the essential role played by demand. You can push all you want, but if there is no pull the pipeline will eventually clog.
And that’s why retailing has become central to U.S. and world economies. Retailing is the demand industry. Retail adjusts to the gyrations of the economy faster than any other industry, which is why profits are up and cash balances are at record levels.
Now let’s hear from key industry insiders, a who’s who of top retail leaders who have their fingers on the pulse of the industry, and find out where they think 2012 is heading.
SVP & CIO
There are many macro forces that are significantly impacting retail. These forces include the most severe recession since the Great Depression, the “consumerization” of IT with the introduction of powerful mobile computing devices such as tablets and smartphones, the incredible rise of social networking and “big data” – the tremendous proliferation of data being generated and captured.
Consumer buying habits have changed with the financial crisis. Consumers are less willing to buy capriciously and take on debt just to “have it.” Consumers now look for value and convenience – it is no longer enough to just have great merchandise.
Consumers now have access to powerful mobile technologies that provide instant access to information and provide price transparency. In many cases, consumers entering a store know more about a product than the sales associate. Consumers want to “buy anywhere, get anywhere, return anywhere” and expect a seamless experience while operating in all channels. The retailers who can execute multi-channel, leverage inventory across channels, and provide a consistent rich consumer experience will be the winners.
Retailers are increasingly investing more in social networking given its magnitude, but they are not sure how to monetize the investment. While Facebook is used mainly for customer engagement now, there is a huge opportunity to utilize it as a retailer’s CRM database where a real ROI can be realized. By offering consumers mobile or Facebook applications that provide value in exchange for consent to access their Facebook data, in-depth consumer insight can be gained and can be enhanced when combined with purchase data.
SVP Communities & Exec. Dir.Shop.org
National Retail Federation
As with any economic turmoil, some retailers experience half full and some experience half empty based on their market segment, price point and product. With unemployment still at 9%, we are concentrating on the initiative “Retail Means Jobs.” Retail supports one in four American jobs and drives a large percentage of our nation’s new job growth. It is critical that policy decisions be viewed through the lens of whether it supports or hinders job creation.
Mobile technology in all forms will remain a strong priority, either to get into it in a more meaningful way or continually enhance what you’ve already done. Determine how to use the new and existing tools and features to promote your brand, provide a service, or entice the customer.
There will continue to be increased emphasis on inventory management (where it is and how much there is). Improvements in this area need to continue especially as they relate to availability in the omni-channel world.
And, finally, an area of priority applies to retailers that are already global or are expanding their footprint globally. There are daily challenges to navigate growth internationally with the world going through economic fluctuations.
While digital channels are certainly a critical factor, the store experience and customer interaction should always be enhanced as much as technology improvements. Pay attention to the training of sales associates, not only in customer service, but also in your expectations on how they communicate their own personal feelings about servicing the customer with new tools. Have your store associates embraced the Web and digital channels to complete a seamless experience for the customer? Make sure they love it!
SAP North America
There are many issues that all of us must track – from commodity pricing, market stability, to unemployment and general consumer spending. But, from my perspective, one of the biggest trends impacting the retail industry is the irreversible shift of power to the shopper through the use of mobility and social media networks.
Retailers need to have the ability to look at where they are today, and what is coming down the road – to find a way to understand consumer trends, changes in buying behaviors, and market opportunities well before they take shape. It is all about innovating with your customers.
The reality is that we now live in an “always on” world where consumers can pick it up, put it down and turn it on, when they need to. For example, smart devices have given consumers instant access to information – whether that is in your store checking for coupons, comparing prices online with your competitors, or getting their friends’ alternate recommendations instantly.
That is why the ability to personalize and deliver real-time offers will separate the winners from the rest. This is where technology must come into the conversation. Investments in technology can no longer be focused just on operational efficiencies, productivity improvements and cost savings. These are important, but should be considered table stakes.
If you are looking for innovation and differentiation to grow your business, you must now look at technology as an enabler of your strategy. Today, technology can, and should, be used to: expand your reach and enter new markets; instantly predict market trends and consumer needs; accelerate customer loyalty by providing exactly the right offer and unique services to every consumer; and to see changes in demand or supply across your entire supply chain to capitalize on your best selling opportunities, in real-time.
Professor of Technology & Innovation
Kellogg School of Management
Retailers should study what is happening in other sectors like financial services, entertainment, media and gaming during this transitional global economic shift to understand the new rules of the “Network Economy.” Leveraging information assets is paramount to retailers surviving if they are to transform from an “Industrial Economy” player.
Although product, price and promotion are still important, the real source of competitive advantage will come from a retailer’s ability to quickly identify growing consumer trends, and execute their strategy more efficiently and effectively than their competitors. Relying on “lagging” indicators (such as sales performance, SKU velocity, inventory turns and so forth) will not enable retailers to anticipate the economic forces of the “Network Economy.” Retailers need both a rear-view mirror (lagging indicators) and a clear windshield (predictive models that produce “leading indicators”).
The retail leaders of tomorrow will learn how to effectively manage transformational change. This requires an effective organizational change platform built on a foundation of an integrated platform of business systems (called IT Systems in the Industrial Economy). Success requires a compelling business model that is built-to-change.
Further, retailers must zoom out of their traditional industry view and deeply study every entity of their entire ecosystem to anticipate where the value pools are forming and therefore what to change. In 2012 organizational cycle time (time from idea to consumer) must be compressed for retailers to share in the economic profits earned by first movers in a market. Tomorrow’s leading retailers will not wait for change and they won’t anticipate change.…They will create change.
Most importantly, tomorrow’s innovative retailer will leverage their business systems to generate leading indicators to stay ahead of their competitors. The rules have changed and retailers must learn how to play by these rules.
Divisional CIO & Divisional VP,
Enterprise shared services
With access to healthcare and fresh foods becoming scarce around the country, Walgreens is at the intersection of retail and healthcare bringing solutions to these critical needs in communities across America. Walgreens is aggressively serving a new base of customers with products and services where we can provide quality care at our more than 7,700 best corners in America.
To support this bold strategy, Walgreens has created a new technology platform called Walgreens 2.0. This new technology strategy defines our multi-year journey that supports our transformation in two ways. First, a major infrastructure upgrade in an enterprise-wide approach offers leading edge technology that allows our team members to be even more accessible to customers and patients. Secondly, a new store format supports agile product and service development including a variety of patient services, fresh food offerings and e-commerce services.
The design is an ecosystem of the latest technologies in the store including unified communications, wireless, blade servers, digital media, multi-function mobile devices, virtualization and cloud computing. Our goal is to provide a robust infrastructure that optimizes delivery of new programs, leaning out our store technology footprint to improve reliability and reduce costs, while providing the platforms for delivering a more consultative experience to our customers.
The Walgreens 2.0 infrastructure upgrade strategy supports using mobile tablets in the stores, digital signage, and a new, centralized communications platform that allows a local call experience while leveraging call center efficiencies.
Recently, we’ve launched a series of new programs which empower our customers to do more digitally: mobile phone and tablet applications featuring refill by scan, web pickup (order online, pickup in the store in as little as an hour), and pharmacist chat. These are new and exciting ways people can access our products and services anytime, anywhere.
President & CTO
Retailers have been honing their online marketing, merchandising and sales skills for the past 15 years, so retailing in a virtual world is nothing new. But what has changed is an increase in the availability of online shopping tools on consumer devices.
Consumers can now access rich sources of information about products and services without leaving the store. When consumers self-serve, especially using third-party mobile shopping tools, retail stores run the risk of becoming nothing more than expensive showrooms. Consumers use mobile shopping applications to get information they aren’t getting in the store — product information, product comparisons, ratings and reviews, and product location. Retailers will have to respond to this new set of consumer expectations to keep shoppers buying in the store.
Retail stores have an edge in a battle of digital options. The store has proximity, inventory and live humans to assist, but no store has a retailer’s complete assortment in stock, many store employees know less about their merchandise than their customers, and most retailers don’t have the tools in-store to assist customers in their purchase decisions and buying options. In short, retailers haven’t positioned themselves to win with their two most important assets — inventory and employees.
Starmount is helping retailers empower their sales associates with mobile selling solutions that put the power of the retailer’s enterprise into the associate’s hands. Instead of being stuck behind the cash wrap, associates can be physically available in the aisle with the consumer, providing information helpful to driving a purchase decision. Associates can even order an item for the consumer and have it shipped to the store or the consumer’s home.
This kind of service is what makes the difference and will keep consumers coming back into the store — and buying before they leave.
My biggest concern for 2012 is the economy, unemployment and their combined impact on consumer confidence. But what’s really interesting is despite continued economic uncertainty we see significant areas of IT spend by retailers.
Many are wrestling with the impact of mobility on their organizations. I believe this is not a “nice to have” but a mission critical strategy as customers are already equipping themselves with multiple mobile devices and expect to use them in their shopping experiences. Both associate-facing and consumer-facing applications will enjoy significant investment. A continued focus on e-commerce will drive IT spending both on infrastructure and new apps. I also think social media will drive new investments toward analytics and consulting.
The RIS News/Gartner 2011 Tech Trends study found that 52% of retailers indicated they had either basic IT infrastructure with some advanced upgrades or basic IT infrastructure with critical limitations. I’d suggest if you fall into that category it is a good place to work on in 2012. The game is evolving dramatically and a mid-20th century infrastructure is not going to be able to keep pace.
The focus on multi-channel is now all-consuming. Not sure I’d describe mobile commerce as mission critical yet, but it will be for most retailers in the very near future. And, of course, the explosion in social media will drive new investments in BI and CRM.
The key point is for retail management to get over the concern of being Amazon’s showroom. Most likely you already are. So engage your customer where they want to be engaged and give them a reason to do business with you.
SVP & General Manager
Oracle Retail Global Business Unit
Oracle’s priorities for 2012 reflect those of our retail customers. We are focused on helping retailers to establish a business platform on which they can deliver a better customer experience. Day to day, we are working alongside partners and retailers to connect customer interactions across channels, optimize operations and enable smarter planning, forecasting, merchandising, supply chain and marketing decisions. The technology is here and getting better all the time.
There have never been more ways to connect with consumers! Emerging channels like social and mobile create a mosaic of interactions surrounding every transaction.
Retailers must empower employees to deliver consistent, high levels of service at every touch point with the customer. So we are making applications mobile, integrating commerce and store platforms and helping retailers place actionable information in the hands of everyone from store associates to the finance team.
This is an extraordinary shift. In the hands of a store or e-commerce manager, today’s mobile BI applications deliver real-time insight and the ability to adjust planning, inventory, pricing and allocation decisions. It makes a difference in customer satisfaction and
IDC Retail Insights
As government studies attest, macroeconomic forces are widening the gulf between the super rich and the economically poor. Persistent unemployment is dampening middle-class spending. In this context, retailers have to create or defend value positions all along this economic spectrum. Lifecycle price optimization is the proven key for a healthy price image and revenue and margin enhancement.
My short list of critical technologies includes: lifecycle price optimization, analytics-based assortment planning, supplier and product lifecycle management, and precision management of make- and landed-costs.
A good recommendation for 2012 is to give consumers reasons to make your digital options their first choice destination for their shopping needs. Get rid of online clutter and stop mixing purposes — informing, marketing, selling and billing. WAP-enable your consumer touch points, except for POS, for simply elegant navigation on mobile devices. Avoid Flash if you can to support Apple iOS devices. Engulf customers in your brand experience at every digital touch point.
Bring “online inside” your stores. Incent customers to use their devices on your store Wi-Fi networks to engage your brand, deploy QR codes throughout your stores, and personalize QR code landing pages in the context of what they’ve done before and they’re doing now. Connect your social network presence to your online domains, so your Facebook fans can go there for product information and commerce. Get ready for commerce-enabled on Facebook.
Begin using your digital channels to change the basis of competition by meeting more of your customers’ needs. Explore omni-channel shopping management apps (SMAs), and use them to change shopping trips into holistic shopping episodes — in grocery, apparel, DIY and consumer electronics. Take SMA farther into lifestyle living apps (LLAs) to enhance how your customers use your merchandise so that what you sell delivers more value in their lives.