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1. 2011 OUTLOOKGUIDE 1Predictions from 10 of the Retail 1 0Industry’s Top Analysts© 2011 Retail TouchPoints
11 OUTLOOKGUIDE20 Table of ContentsAs 2010 concluded, retail industry executives were looking optimistically toward 2011. With the height of the recent recessionfading away, retailers are anticipating a positive 2011 as consumers slowly begin to spend. In response, retail organizationsare re-tooling their marketing and merchandising efforts. To identify the key retail trends to watch in 2011, Retail TouchPointscalled on some of the most prominent retail experts to share insights and predictions. With mobile payment and socialmedia strategies front and center, the 2011 Retail TouchPoints Outlook Guide offers insights for every vertical, andthroughout current and emerging channels. The Guide offers solutions that will help improve shoppers’ customer experiencewhile boosting the bottom line.The 2011 RTP Guide roster of analysts includes experts in mobile technology, in-store solutions, supply chain services,social marketing strategies, merchandising and store operations: Page 3 Sahir Anand, Aberdeen Research 5 Lauren Freedman, the e-tailing group 6 Jerry Sheldon, IHL Group 7 Gary Schwartz, Impact Mobile 9 Jim Dion, Dionco, Inc. 10 Laura Davis-Taylor, Creative Realities 11 Chad White, Responsys 12 Dan Avila, Tompkins Associates 13 Greg Girard, IDC Retail Insights 14 Amanda F. Batista, Retail TouchPoints© 2011 Retail TouchPoints 2
11 OUTLOOK GUIDE20 Key Technologies Will Help Develop Success Through Customer-CentricityRetail success in 2011 hinges on customer-centricity, developing increased customer-centric service andsales models in stores and harnessing the power of social and digital channels as part of an integratedmarketing strategy. According to Aberdeen Research, 87% of Best-in-Class retailers are innovating theshopping experiences of their customers, enabling the ability to shop in stores, online, and across newchannels such as mobile, whenever and wherever the customer wants.Technologies That Will Drive Process Management Practices Sahir Anand, VP & Principal AnalystData and Analytics Aberdeen ResearchFifty-Three percent (53%) of large retailers indicate that customer analysis is difficult due to enormity ofdata from different channels. Retailers have more data than they are capable of processing. Case studies of Anand oversees and enables the overall research and analysis inretailers indicate that leading companies are successfully surfacing their data about customers, merchandise the vertical industry segmentsand operations and leveraging it for actionable intelligence. These retailers are seeing the best margin and including retail and hospitality,repeat customers. These retailers are distinguishing between multiple customer and business data silos that and retail banking related processexist within retail, and discovering how to pervasively coordinate customer and brand views. management and technology value chain areas. AnandMerchandising and Inventory Optimization: Two-thirds of retailers are challenged to optimize their inventory specializes in the points ofas best as possible to plan for the holiday season and beyond. Best-in-Class retailers are also planning their customer interaction and pointsseasonal merchandising and allocation strategies based on localized demand as accurately as possible of integration (technology andfor the next two-to-three quarters. Seventy-one percent (71%) of Best-in-Class retailers are applying business workflow) functions.inventory visibility and accuracy strategies from source to shelf to establish a successful consumer-drivenreplenishment system that balances the demand with the supply chain.Mobility Will Resonate With Retailers in 2011Aberdeen surveyed 129 retailers between July and August 2010 to reveal that 38% of respondents are currently at some stage of mobile retailtechnology or mobile channel adoption compared to 18% at the end of 2008. Another 50% of respondents are looking to adopt this technology(15% within the next one year and the rest considering planned adoption at some point in the future).Currently, there are three major elements of the mobile retail experience that are top-of-mind for retailers. Mobile web is the top component of amobile retail technology platform strategy for almost half (49%) of retailers surveyed. The second highest preference for 43% of retailers is mobilecoupon targeting and delivery, which can be tied into customer loyalty programs (i.e. Starbucks). In September 2009, JCPenney made a forayinto mobile couponing with a pilot program at 16 stores. The third most popular component of a mobile retail technology strategy is smart phone-platform specific mobile retail applications for various smart phones (37%).Utilizing Customer DataMore often than not retailers blame disparate sources and enormity of customer data as the primary reason for lack of adequate consumer insightsthat inhibits new customer acquisition, customer retention and reactivation. This inability curtails effective retail planning and execution in theareas of customer-centric merchandising, marketing, promotion and pricing, among other critical customer value chain areas. Many large retailersincluding Wal-Mart and Lowe’s try and grapple with this customer data complexity everyday. In 2009, retailers such as Chico’s FAS realized theimportance of customer insights and developed its central business revival strategy by executing in-depth customer data analysis, narrow customersegmentation, and mapping the customer value chain all across the business for augmenting growth prospects in 2009 after a lukewarm 2008.Chico’s undertook a sustained effort to identify key customer characteristics and tied it back to retention and reactivation campaigns that lead toincremental sales.CRM tools are pivotal in the “before the sale” stage of customer-centric retailing. However, CRM tools are also used in stores and channels inthe “during the sale” stage of customer experience to update customer information, customer record look-up, and fulfill loyalty couponing relatedfunctions at POS.CRM tools are used at retail corporate headquarters for maintaining and updating centralized customer database records, buying history andother attributes that are critical for executing effective direct, online and other loyalty marketing campaigns, coupon and offer management, andintegration with other value chain areas such as merchandising and channel management.Best-in-Class are 3.8 times more likely than Laggards to adopt CRM tools at headquarters and channels of sales and service. Overall, 41% of allretailers use CRM tools in their retail organization. These tools not only enable data-driven customer relationship programs but also facilitate inaugmenting loyalty marketing and customer outreach campaigns that drive customer acquisition, retention and re-activation.Social & Mobile Part of Cross-Channel RoadmapBest-in-Class companies are better equipped to track social media activity as part of their cross-channel retail initiatives. Many retailers havecome up short in their social media initiatives due to a lack of planning and execution. According to Aberdeen’s August 2010 Social Media ROIreport, 85% of retail organizations currently have a social media initiative in place to help manage brand reputation and encourage revenue-building© 2011 Retail TouchPoints 3
11 OUTLOOK GUIDE20 Sahir Key Technologies Will Help Develop Success Through Customer-Centricity Anandconsumer interactivity. However, there is a wide gap between the use of social media as an interactive brand extension and adequate monitoring ofsocial media activity. According to Aberdeen’s May 2010 Restocking the Retail Marketer’s Toolbox report, 70% of retailers do not leveragesocial media monitoring as part of their marketing initiatives. Home Depot has successfully integrated customer service and promotion deliverythrough the use of Twitter. With nearly 22,000 followers, Home Depot promotes in-store and web specials, and responds in real-time to customercomplaints or suggestions.Business Intelligence (BI) Application Vital for Customer-Centric RetailThese applications come into use for retailers during and post-sales customer experience stages. Best-in-Class are 1.4 times more likely thanLaggards to use a BI application for customer data collection, assembly, analysis and reporting.These consumer insights are used enterprise-wide by Best-in-Class retailers for both pre-season and in-season retail planning and execution.BI for customer management helps facilitate marketing strategies, merchandising, store layout, signage, sales and service strategies, workforcemanagement, inventory optimization, multi-channel operations and supply chain planning and execution.BI data and reporting provides unit-level consumer buying trends, category, channel, store sales analysis and predictive buying behavior dataanalysis. BI applications that gather, analyze and share consumer insights in retail through basic reporting and customer performance dashboardscan directly or indirectly impact retail profitability, customer sales and service performance. Currently, 40% of retailers use BI for customermanagement purposes. Anand advises retailers to increase investment in the following seven customer-facing technologies for success in 2011: 9 Increase investments in POS and workforce enhancements, mobility, end-to-end cross-channel tools (order, fulfillment, delivery), consumer insights (BI), and demand-supply integration tools; 9 Implement a centralized customer data integration strategy for an effective consumer insights process; 9 Use customer segmentation, affinity and preference mapping for enhancing retention and re-activation; 9 Provide customers with the ability to purchase, exchange and return product through a channel of their choice; 9 Align IT upgrades with current and future cross-channel customer preference and affinity; 9 Introduce or expand customer performance incentives for every job role to sustain a sales and service culture; 9 Measure job role based customer metrics performance and share results with employees regularly.© 2011 Retail TouchPoints 4
11 OUTLOOK GUIDE20 Understanding And Connecting With ShoppersThe biggest challenge for retailers today is that the consumers’ notions about connecting and merchants’ ability toconnect changes so fast. It’s hard for merchants to stay ahead of the curve. But good tactics are being implementedevery day. What it boils down to is understanding your channels and who you target consumers are. It could be aboutmobile and social strategies, but it also can come down to things that are more simple such as product locators or in-store pickup. Lauren FreedmanGrabbing Market ShareI think in terms of growth, at the end of the day, retail growth is going to be small, even if there is a rise during the holiday Presidentseason. So growth will likely come down to merchants finding ways to take market share from their competitors. It’s not the e-tailing grouplike the pie is getting bigger — we are not going to see that for a number of years. Lauren Freedman is a seasonedSix ways to grab market share include: 15-year e-Commerce veteran. She founded the e-tailing group 1. Expanding drop-ship assortment. in 1993 after an extensive career as a department/specialty store 2. Testing a new category. Many retailers are going out of their comfort zone to offer additional products that buyer. The e-tailing group serves will bring in new customers and retain current ones. all sectors of retailing, from brick and mortar to catalog to online. 3. Piggybacking on sister brands. Pottery Barn and PB Kids, for example. – I think you are going to see The e-tailing group’s proprietary more play in this area because it is cost-effective. research includes the annual mystery shopping and merchant 4. Retention. Retailers need to focus on keeping customers. Look at Apple – when you think about their ability benchmarking surveys that to bring people into the store, make appointments and go to the Genius Bar – that is a great retention effort. provide a comprehensive overview of the state of e-Commerce, 5. Driving in-store traffic by continuing to get the customer engaged. setting industry standards while simultaneously highlighting 6. Focusing on the multi-channel effort. Retailers must make sure they have a best-in-class experience best practices. Freedman has in their own category. I am a stickler in this area - it’s about customer service differentiation. Retailers must spoken at many global e-retail conferences including Shop.org, actually know their products and assist shoppers in purchasing them. eTail, and Internet Retailer. She is often quoted in media outletsEmpowered Consumers Challenge Retailers like The New York Times, WWD,Retailers are now dealing with empowered consumers with greater access anywhere anytime and that has to be CNN, Financial Times, USAToday,addressed. I am really struck with fact that we live in such an ADD shopping culture — everyone is impatient, everything Business Week, Forbes, Internetmust be available now. Retailers must respond with broader assortments and greater availability. Retailer and Crain’s. She is author of the book, It’s Just Shopping,To me mobile is the most exciting channel right now. We recently decided to add mobile to our Mystery Shopper studies a comprehensive, behind-the-because we believe that it is leading to a lot of new activity. We are still in the early days but if you see the quick adoption scenes look at the evolution of multi-channel selling.rate, access and anywhere factor is significant and mobile will facilitate that.Piggybacking on the mobile revolution, price checking tools also are an issue. The fact that consumers have the abilityto price check a product in a second is very powerful and very frightening.When we talk about loyalty, we have to talk about the lack thereof, particularly for younger customers. They have no loyalty to anything except themselves and theirsocial connections. That is a factor that has to be reckoned with.Evolving the Ecommerce ExperienceWe are still at a 7% e-Commerce market share, so the store continues to play an important role. The connection between the web and store will be powerful. It isimportant for the web site to be in-stock: we have done research in this area and people say they will leave the site if it’s out of stock.Customer service is another important area retailers must focus on – often shoppers can’t find an answer to a question. In our Mystery Shopper research every yearwe continue to find customer service representatives unable to answers questions about a product.Redemption across channels also is key. It is about efficiency online and in the store simultaneously. In fact, price has been secondary to time savings for shoppingonline. The fact that the web creates efficiencies that shoppers don’t have offline is very powerful. In the end, efficiency and good product will always trump price.Apple is not selling those iPads at a discount. Shoppers will pay for shipping on it if they want it bad enough.Another place retailers are leaving money on the table in the ecommerce world is competing against companies that deliver the next day. If I am a Zappos shopperand my kid needs a new pair of UGGs, I can go online at 11 p.m. and have them the next day. It is hard for many retailers to compete with that.© 2011 Retail TouchPoints 5
11 OUTLOOK GUIDE20 3 Retail Strategies To Embrace In 2011: Loyalty, Mobility And AnalyticsOver last couple of years, consumer frugality seems to be slowing. The latest numbers show couponredemption slowing or decreasing slightly. Also, higher-end retailers such as Whole Foods, Nordstrom,Saks and Tiffany are starting to post strong numbers. I don’t know that this is necessarily a reaction to theeconomy, but more likely a new demand. People may be tired of not spending; and they are starting toreplace items. Jerry SheldonEconomic Recovery Still An Issue AnalystWhile there is some optimism, unfortunately there is more pessimism where the economic recovery isconcerned. The housing crisis is not going away any time soon – there continues to be a lot more supply IHL Groupthan demand. Banking woes could get better or worse. But in the meantime, Europe, Portugal, Greece In the field of retail technology,and Spain are either in default or almost in default. And we have rising gas prices, which always has a Sheldon has researched andsignificant impact on discretionary spending. Looking at the total picture, the key drivers for economic authored analyst reports on price optimization, POS softwarerecovery don’t seem to be connected yet. systems, printers, and workforce management solutions. SheldonSheldon offers the following advice and insights for retailers: also provides the development expertise and analytics that goDevelop Loyalty Using Smart Phones into the IHL Retailer TechnologyAnyone that has a smart phone is absolutely amazed by what they can do these days – they are Data Service, Sophia, and therevolutionizing communications as we know it. Even though Best Buy by any measure has one of the most Retail and CPG IT Spend models.successful loyalty programs in retail, the merchant has joined shopkick, a service that rewards shoppers He has been quoted by Thejust for entering a store. Target has joined as well. This type of smartphone service has specific potential Atlanta Journal Constitution,for those that don’t have a successful loyalty program. Many loyalty programs become glorified revenue RIS News, Hospitality Upgrade,reduction activities. Smart phone strategies like shopkick offer retailers an effective and inexpensive way to BusinessWeek, Retail Technology Quarterly, and Investor’s Businessimprove loyalty. Daily, among others. In addition to having a Bachelor of MechanicalJoin the Mobility Explosion Engineering and a Masters DegreeJust like during the Internet boom, some companies are not sure how they are going to make money with in Mechanical Engineering frommobility, but they know they need a presence. Retailers are currently asking: What does mobility mean for Georgia Tech, Sheldon also has anretail? Where should I focus my efforts, on POS, loyalty, or peer to peer? What does mobility in the store MBA from the University of Miamimean? How does the mobility in store play into the store experience and what we want our store to be? with a specialty in Marketing andAny mobile activity done without incorporating the overall store experience is a waste of time and money Marketing Research.and will not offer the expected return on investment. The real challenge for retailers is the bar code readersand mobile price check applications shoppers can acquire, then literally walk into the store, scan a productand see if the store has best price or if it would be cheaper at Amazon or another local store. If retailersdon’t maintain the store experience, and if they miss incorporating mobile into the store experience then they risk turning the store into a museum –a place where shoppers touch and explore but don’t buy.Use Analytics to Augment Social & Mobile EffortsOver last couple years, even with the poor economy, business intelligence (BI) and analytics have really held their own, showing close to double-digitgrowth on a year-over-year basis. A lot of tier 1 and 2 retailers have strongly invested in analytics over last few years. These retailers are specificallylooking to discover how online perceptions drive sales. How can retailers better position themselves to understand and influence perception onlineto drive in-store sales? How can product placement in social media drive sales on a particular item? How do tweets and Facebook roll into futuresales? Merchants also must look beyond social and mobile and discover all the drivers that influence sales today – such as weather and otherevents.Store Systems Investments Are On The RiseOne of our strong areas of focus at IHL is store systems. Solution providers over last couple years can attest to what an unfertile ground it’s been.The economy has been unstable and general consumer sentiment hasn’t been positive. Retail organizations have been focused on maintaining thestatus quo, keeping the doors open, maintaining damage control, and doing what they are required to do from a compliance standpoint. But recentresearch is indicating that folks will be back buying again – investing in store systems – which is good news all around. We are expecting to see 3%to 6% IT spend growth in store systems over the next few years – POS systems, checkout systems, workforce management, etc. There is goodnews there for folks that have weathered the storm over the last few years.Again it all plays back into the customer experience and creating efficiencies in the store environment. Retailers need to find new ways to interactwith customers across many different touchpoints – through kiosks, mobile technology, handheld devices, digital displays, etc. Instead of being amuseum the store should be a destination.© 2011 Retail TouchPoints 6
11 OUTLOOK GUIDE20 Mobile Checklist For 2011: Strategies To Build And Manage CommerceIn the spirit of the impulse economy and impulse consumption, the following is a checklist for retailers to reference as a guide tobuild out and manage a comprehensive commerce strategy:9 Leverage existing consumer behavior: How many conference panels have I attended where the line following, “This is the year of mobile,” is: “We just need to educate the consumer”? It is pure hubris to say that you will “educate” the user who is far more advanced intuitively than a pack of marauding mobile experts. Gary Schwartz President & CEO Shoppers are using their phones for mobile web and SMS seamlessly throughout their day in our stores and hotels, and at Impact Mobile our events. Our humble goal is to just try to “keep up” and capture a small piece of their conversation. They are way ahead of any marketing department. Schwartz has played a leadership role in the mobile9 Leverage the largest mobile install base: industry, founding Impact Beware snake-oil salesmen. If education is not the word of the day, then try to forget anything that looks like a “shiny Mobile in 2002 and running object” or “new-fangled solution” (even if there are hundreds of thousands of them on a mobile storefront somewhere). If the first cross-carrier short code campaign in North the consumer is using SMS and the mobile web as their main channels, then use them. When you think you should “walk” America. In 2006, he founded before you run, start at a crawl: the mobile committee for the • Build your SMS opt-in community; Interactive Advertising Bureau (IAB) and has worked to • Buy some mobile advertising inventory; and publish literature such as the • Use both to drive conversion solutions. Mobile Buyer’s Guide, helping extend the digital buy into Reach and frequency are the two words that you need to continually use in the same sentence as mobile advertising and mobile (for which he received an IAB award for industry marketing. Mobility starts with a crawl and it is usually simple list-building and mCRM. excellence in 2009). In 2010, Schwartz was elected Chair9 Leverage existing promotions and CRM strategies: of MEF North America with IT will tell you this but as a reminder: mobile should be an extension of business-as-usual in the store, street or office. Do a remit to develop a mobile not start reinventing the wheel. Curb your enthusiasm. Use mobile APIs (application programming interfaces) and tie them commerce practice to service into your existing communication services and databases. Email, IVR, SMS and MMS should all be fluid two-way opt-in brands, retailers and content channels. owners (for which he received a MEF award for industry9 What’s good for the goose needs to be good for the gander: excellence). Schwartz is the Empower your “blueshirts” with the same mobile tools that the customer uses. Do not let the shopper have a more powerful recipient of the Asia and tool to navigate your products than the sales clerk. Whether this means giving the Mercedes Benz shopper an iPad when Japan Foundation Fellowship as well as the Macromedia they enter the dealership or giving your clerk a smart phone in a scanning chasse, the two worlds need to be on parity. People‘s Choice Award and Dodge Foundation9 Count Clicks to Commerce: Award for Innovation. He Keep it very, very simple. Seems like an also-ran statement but somewhere between concept and launch many mobile authored the upcoming book solution providers get struck by lightning and lose their simplicity gene. The mobile consumer is on the run: you need one Click2K’Ching: The Mobile click2engage, one click2commerce, one click2bricks&mortar. Add one more step and you have lost your shopper. Shopper & The Impulse Economy.9 Mobile commerce makes for strange bedfellows: Given the mobile cut across many verticals, note that mobile commerce connects partners that may never have been able to work together in the traditional world. Airbonus is a good example of how the wireless carrier suddenly becomes the rebate reward clearinghouse for the brand.9 Suspend belief: I recall walking into our wireless carrier partner’s office in 2001 and proposing a joke-of-the-day subscription service. The first joke was that consumers were billed at $1.25 per joke. (The same joke that they could Google for free on the web.) Well the service was a huge success. Lesson: suspend common sense with mobile services — the mobile consumer will opt-in on impulse and pay for convenience.9 Make it an intimate, personal, one-to-one channel: Cliché but if you forget and build your service incorrectly, you will dramatically lose your hard-earned opt-in. While SMS has a nearly 100% open-rate (buzz-to- view time will amaze the most-jaded CMO), SMS also has an equally high opt-out rate (if the viewed message is not what the subscriber expected). The channel is digital gold. The shopper is now including you alongside their personal messages. You need to make a commitment to be as targeted and contextual as possible.© 2011 Retail TouchPoints 7
11 OUTLOOK GUIDE20 Gary Mobile Checklist For 2011: Strategies To Build And Manage Commerce Schwartz9 Make it a “Trojan” channel: Allow your consumer to reach you directly for product and service information. In a world where you know more about your brand than the in-store salesperson, allow the consumer to surreptitiously search, surf and text that product directly and learn why they need to buy it NOW. Just as Steve Madden allows the customer to text about her new shoes and engage at the moment of intent, every product can be the in-aisle expert guiding the potential consumer reviews, insights and tips. Additionally, allow the shopper to use this channel to post reviews, insights and tips to you. Use it for pop- surveys to gauge just-in-time feedback.9 Go SO LO: There is a buzz about the new mobile guys on the block. The so-called location based social media networks, or ``lo-so’’ networks. Be leery of these lo-so third party applications that to drive acquisition and drive-to-aisle via GPS location. They incentivize “check-in” at the store, restaurant, club, hotel, etc.. Facebook and other heavy weights maybe about to sustain reach and frequency but ultimately the brand or retailer should own this relationship long term.9 Make it horizontal: Mobile is a perfect medium to add to your existing media touch points. In a world where most of the media plan is bought as vertical PUSH media, mobile is often PULL. It allows the consumer to SMS and get information, rewards, incentives off TV, radio, print and other non-interactive media. Do not manage your commerce channel in isolation.9 Security? Encryption and payment standards make wireless an unwieldy commerce tool. With private data such as location, profile and banking information floating through the cloud and over Near Field Communication (NFC) tags, there is sure to be multiple security abuses. Proceed with caution and in the company of seasoned industry experts.9 CMO = Chief Mobile Officer: We have established that consumer engagement and “impulse” conversion are the hallmarks of mobile. But to evangelize this across the organization may need more than one department or marketing manager pushing “horizontal integration” initiatives. If the organization is committed to mobile it may want to consider establishing a new position that works agnostically across the organization, across silos to drive mobile efforts. Microsoft and Weather.com have roles that work to make mobile an integrated success across all screens and across all departments.9 Innovation Remember that your brand is not necessarily a mobile brand. Your job is not to become known as a mobile innovator. Remember Gartner’s Hype Cycle? When it comes to the question of what you need to be looking at trialing as mobile evolves I would recommend that you respond with the following sage advice: “Next year run the solutions you probably should have run last year.”9 Invest flexibly Mobile maybe a moving target (but it is an unmistakable target). Bob Parker from IDC Retail Insights says that his clients have moved from “Should we invest in mobile?” to “What do we spend money on in mobile?”. “They end up sinking their spend into option-based investment,” Parker said. They are investing flexibly — basically hedging their mobile bets.”9 Test It No one expects the retailer or brand to attach ClipCams to the glasses of prospective mobile shopper to record and analyze their behavior, but the industry does mandate focus groups that try to understand shopper general MO. Finger-to-the-wind mobile strategies will fail. Apple CEO Steve Jobs was quoted in Fast Company magazine (obviously likening himself to Henry Ford): “If I’d have asked people what they wanted, they would’ve said a faster horse.” Apple’s game-changing products did not come out of focus groups or quantitative research; they came from insights into human behavior. Yes, one shopper has little insight into his/her behavior but the brand/service must run focus groups with shoppers to try to gain insight into their group behavior.9 Homo Mobilis Understand that mobile is a necessary evil. It is a needed shopping tool that in many ways distracts from the optimal shopping experience. The ideal mobile shopping utility would not inhibit mobility. Future mobile device technology and form factor may allow for the shopper to stand upright again.© 2011 Retail TouchPoints 8
11 OUTLOOK GUIDE20 Holy Grail For 2011: Consistent Customer ExperienceAs retailers prepare for 2011, consistency and simplicity are key in delivering a winning customer experience. The‘Holy Grail’ of customer experience is that the customer experiences the same level of service every time andevery way that they interact with a company, whether it is through their online store or their brick-and-mortar store,whether they are buying something or returning something, whether they are asking a question or complainingabout something, whether they are served by John or Dana. These used to be called “moments of truth” wherethe service promise was either realized or proved a false promise.Great stores find a way to make sure that the experience is consistent. This requires a Store Ops checklist that Jim Dionis simple to understand and execute. Complexity is the enemy of customer service yet thousands of companies Founder & Presidentcontinue to try to make the simple complex. If your team did not have input into your checklist and cannotexpress it in less than 30 seconds, odds are you are not going to be very successful in delivering a great customer Dionco, Inc.experience. Dion is a retail speaker and trainer, retail consultant, and theCustomer Service Strategies author of Retail Selling Ain’t BrainCustomers do not demand as much as wish for a seamless experience across all channels. Great stores are Surgery, It’s Twice As Hard, Startnot afraid to give the power to the customer, power to do their own research both on line as well as in the store, and Run a Retail Business and Thepower to comparison shop, power to learn what other customers think about a product and even power to self Complete Idiot’s Guide to Starting and Running a Retail Store. Heselect and check out if they choose to. I believe a great store is always set up for total self service and then layers consults, trains and speaks onpersonal service on top for those customers and times when it is needed. One of the companies that I really consumer trends, retail technology,admire for this ability is Best Buy; they are well down the road to fully empowering the customer and other retailers selling and service, retailwould be well advised to study their approach and see what they can learn from them. merchandising and operations, marketing and leadership. Dion hasLocalized Assortments more than 30 years of progressiveThere is an old saying that ‘all politics is local’ and I think this somewhat applies to retail as well. Companies like retail experience working atWal-Mart have been at the forefront of geographically localized assortments, and even Nordstrom for years has Sears, Levi Strauss and Gilmoregiven its stores the ability to buy and build local assortments. In most categories assortments are still almost 90% Department Stores.applicable across the entire country but the remaining 10% can be crucial for a retailer’s success. This is both atechnology issue (how to do it) as well as a philosophy issue (will we do it).Managing Inventory EffectivelyIt is still amazing to me after all these years how many retailers I visit are out of stock oncore merchandise. If you really want to understand a retailer’s inventory problem, look “In most categories assortmentsto their markdown areas. If you consistently see the same colors, sizes, vendors in the are still almost 90% applicablemarkdown areas you know that they are not learning from their mistakes. Despite thenumber of price optimization programs that have been sold I have not seen many delivering across the entire country but theon the promise of optimizing inventory. You have to begin and end with the reality that “all remaining 10% can be crucialinventory is evil” and treat it accordingly. for a retailer’s success.”Utilizing the Mobile ChannelCustomers are now carrying more power in their phones than they had on their desktop 10 years ago. They want to use that power to make their liveseasier and retailers who figure that out are going to be way ahead of the pack. So smart money is being used to enable phone applications for information,couponing, reviews and even self-checkout in the store. Mobile devices for staff are a double-edged sword as you would love to give your staff the sameability as your customers to access information while at the same time making sure that they are not abusing the communication capabilities of the device(i.e. texting friends all day at work).Providing Value to Maximize Selling TechniquesIf the universal race to the bottom on price and only price is going to stop it will have to be done by adding genuine value to the transaction. This valuecan be delivered by retailers who use technology to give the customer a fantastic experience that includes smart suggestion selling techniques that delivercomplete solutions to customers. Complete solutions are not subject to price comparisons as they are made up of multiple products and often combinedwith services. Technology has to deliver on something beyond just making it easy for consumers to beat us up on price.© 2011 Retail TouchPoints 9
11 OUTLOOK GUIDE20 Retailers Must Focus On Business Challenges In 20112011 is now upon us and, given the dizzying emergence of new technologies, retailers are flat out confused.Which shopper technology should retailers focus on implementing first? Mobile? Tablets? Digital signage? Shelfedge interactive? Social? And how do they divvy up time and budgets?The answer is simple: it’s not about the technology — it’s about the business challenges they can solve and whichwill have the best ability to so. Laura Davis-TaylorAt my firm, we monitor everything that’s hitting the retail tech stratosphere and do our best to clear the fog for Vice President, Globalretailers on how to best utilize them. There are certainly some technologies that we feel are critical for all retail Retail Strategybrands to start embracing, but it’s easier to filter out what we need them to help us do — then pick the tool to Creative Realitiesempower it. I don’t have a crystal ball, but I’ll hang my hat that we all need to focus very strongly on capitalizing onthe following tech-empowered trends for 2011: Davis-Taylor is an 18-year industry expert with a diverse background 1 The convergence of mobile and in-store digital experiences. Now that the smart phone has in integrated marketing, brand planning, in-store digital media penetrated almost 25% of households, apps and handheld solutions are changing the retail shopping and retail/environmental design. experience as we know it. This topic alone could be a book, but the important thing to note is that when Creative Realities is a digital a shopper can quickly compare prices, locate competitors, cash in on coupons, read product reviews, experience company that helps receive ‘hyper relevant” incentives based on their history and more, loyalty changes quickly. No one know clients bridge the physical and exactly how this will shake out and affect retailing financially, but we will only be successful if we watch, virtual worlds of digital marketing. listen, understand and react to how people embrace mobile tools in the store and add to their value rather Davis-Taylor chairs the POPAI than resisting them. Digital Signage Advocacy Committee and is a board member 2 “Socially empowered” shopping experiences. Facebook now has product favorites and wish lists for of the Digital Signage Expo. She also is the co-author of the book anyone’s social network to see and respond to. Levi’s lets you post your personal jeans profile and share it Lighting Up the Aisle. She can be with friends. Dell Swarn and Groupon’s Grouponicus have created volume discounting for rallying up friends reached at LDT@cri.com. and peers to buy products with you. What else should we as retailers be doing to capitalize on social behaviors for retail? Talk to your customers; we promise that some powerful ideas will be uncovered quickly. 3 Personalized in-store communications. For years and years, the top shopper request has been to build better bridges between the online experience and the in- store experience. No surprise given that a highly personal and helpful online shopping “When a shopper can experience sets a precedent that makes a lackluster in-store experience more quickly compare prices, disappointing. When shoppers like retail brands they opt in knowing that the retailer will know their name and offer them products that they know they will like. Mobile and locate competitors, cash in digital screens have built the bridges to do so in-store…it’s time to use them! on coupons, read product reviews, receive ‘hyper relevant” 4 The emergence — and impact — of digital marketplaces such as boutiques.com. If you want to try a shopping experience that will either delight you to pieces or scare you to death, go to Google’s boutiques.com, create a personal profile and check out incentives based on their history your personal boutique. The helpful personalization that it provides bar-none knocks and more, loyalty changes anything we’ve seen out of the water and raises the bar immeasurably for the previous point on personalization. By doing so, Google has made shopping with a retailer quickly.” irrelevant, for they scour the world and bring the products you will like best directly to you — regardless of brand. That means brands will have to play ball with them and become beholden to their revenue shares or get on the same playing field quickly. 5 Digitally-empowered associates. The average associate tenure is still woeful and, as products become more complex to sell, this is an issue. All of the rich information a shopper is accessing online can be accessed and utilized for associates to ensure a better shopper engagement, yet very few retailers have done anything with this yet. This year is the year to change that.© 2011 Retail TouchPoints 10
11 OUTLOOK GUIDE20 Email Marketing Changes With The TimesEmail marketing is constantly evolving, with social media, mobile and ISPs driving most of the change right now.White has been chronicling the changes in email marketing practices and tactics in the retail industry for morethan four years as the author of the Retail Email Blog.White shares five trends that he predicts will have a major impact on email marketing during 2011: 1 The plain text part of your multipart email will become more important thanks to Facebook Messages, which displays the plain text part by default. Chad White Research Director There’s a link to display the HTML part which it does very well — but that link is easily overlooked, which Responsys means that it will likely see little use. Keep an eye on the percentage of your list that’s @facebook.com White is an authority on email addresses. Once it’s more than a couple of percentage points, it’s probably time to give some extra marketing strategies and trends in attention to the design and copywriting of the plain text part of your email. the retail industry. He is the author of the Retail Email Blog and dozens 2 Email design will be more heavily influenced by iPhones, Android-powered smart phones and iPads. of research reports. In addition to working with Responsys clients, he is an Email Insider columnist for The adoption of smart mobile devices that can render HTML emails is skyrocketing and email has become and has been interviewed by the the number-one activity on these devices. Because of those two trends, the distinction between emails New York Times, USA Today and and mobile emails is disappearing. Marketers can no longer assume that their HTML emails will be read on other media outlets. desktops and laptops. That will have several effects on email design: (1) Email widths need to narrow. (Recommended width is about 600 pixels); (2) Font sizes need to increase so they are more legible on small screens; and (3) The space between links and the size of buttons needs to increase to allow fingers to hit links accurately. That also will mean navigation bars with fewer links in them. 3 Share-with-your-network (SWYN) links will be used by a majority of marketers by the end of 2011. SWYN links allow subscribers to share email content with their friends and family members on Facebook, Twitter and other social networks, increasing the reach of email messages. As of August 2010, 26% of top online retailers used SWYN in their promotional emails, up from 12% in July 2009. By the end of 2011, the adoption of SWYN links should break the 50% mark. But some retailers already are moving on to more advanced email-social integration tactics, such as using email to spur Foursquare check-ins and linking conversations on Facebook to products being promoted in an email. 4 Reactivation campaigns will become more important, thanks to ISPs giving weight to engagement metrics when determining whether to deliver an email to the inbox or junk folder, or to block that email. Most marketers still have no plan whatsoever in place to address inactives — the subscribers on their list who haven’t opened or clicked on email in a long time. In some cases, inactives make up 50% or more of a marketer’s list, representing a significant threat to deliverability and a big distraction from focusing on active subscribers. Marketers must start by defining what ‘inactive’ is for them, then progress to segmentation tactics to message inactives differently, and culminate with reactivation campaigns that give inactives a chance to reaffirm their interest or be dropped from the list. 5 The email marketing industry will continue to be divided on permission. The tension between the old-school opt-out email marketing industry aligned with direct mail and the new-school permission email marketing industry aligned with mobile and social will continue to grow. All signs point to New School Marketing winning out. From Gmail’s Priority Inbox and Facebook Messages to ISPs’ ongoing battle against unwanted email from both legitimate marketers and spammers, it’s becoming increasingly critical to be anticipated and wanted in consumers’ inboxes — particularly if you want to be in the part of the inbox that consumers have designated for important, must-read emails. Staying out of the junk folder is yesterday’s battle. The keys to future success in email marketing are having strong segmentation, dynamic content capabilities and triggered email programs to significantly increase the relevancy of emails.© 2011 Retail TouchPoints 11
11 OUTLOOK GUIDE20 Top 11 Supply Chain Best Practices For Retail Companies In 2011“Uncertainty, agility and visibility are major priorities for all industries in 2011, but they are especially critical forretail,” said Dan Avila, Partner at Tompkins Associates. “In order to overcome the unfamiliar challenges of the newyear, retail companies must plan for uncertainty. Agile processes and visibility throughout the supply chain are thefundamental elements needed to help retailers plan for the unknown and achieve profitable growth.”Avila’s firm, supply chain consultant Tompkins Associates, has released its Top 11 Priorities for Profitable Growthin 2011 report, citing three key strategies retailers should focus on in the coming year: a renewed focus on Dan Avilasupply chain best practices, a continued need to keep inventories in check and a push to reach more onlinecustomers. Partner, Global Supply Chain ServicesThe complete list of Tompkins’ Top 11 Priorities is below: Tompkins Associates 1 Retail Best Practices: Best practices can have significant impact on a retailer’s bottom line, as well as their customer service. Leading practices in sourcing, transportation, inventory policies and distribution will provide significant value and increase competitive advantage. Tompkins Associates is a provider of growth and business strategy, global supply chain services, distribution operations 2 Speed to Market: Retailers around the world are striving to reduce the amount of time between product consulting, information technology design and placement on a store’s shelf. Competition, consumer taste and trends all increase need implementation, material handling integration, and benchmarking and for speed to market. To improve speed to market, design effective and efficient supply chains – from best practices. Avila’s experience planning through transportation to the destination. includes more than 20 years in supply chain, including 12 years 3 Reduced Inventory Levels: Over the last two years, reduced inventory levels have become typical for retailers. This has created historic investigation, dedication and execution efforts to reduce inventory at the store and distribution center. Understanding how to improve overall inventory position and what tools in supply chain consulting. Prior to joining Tompkins, he served 11 years with United Parcel Service are available (such as new software) is essential. as an Industrial Engineer and Hub Operations Manager. Avila received 4 E-Commerce: Consumer sophistication, ease of access and retailer incentives have all boosted online sales. From network analysis, DC optimization and improved shipping practices, retailers are evaluating every angle while enhancing their direct-to-consumer service. his B.S. in Operations Management from California State Polytechnic University, Pomona. 5 Uncertainty, Agility and Visibility: As the recession ended, a new norm has emerged: “Uncertainty it certain.” It is best for retailers to accept this new norm and implement agile processes that allow them to move forward. Realizing that they cannot control uncertainty and that they must respond to it can help achieve profitable growth. (Read more about how companies are dealing with uncertainty in this executive briefing from the Tompkins Supply Chain Consortium.) 6 China as a Market: The retail market for fast-moving consumer goods (FMCG) and luxury items is growing. Retailers who previously only sourced in China now want to enter the world’s fastest growing economy and sell in China. It is important for retailers to understand the market of Chinese consumers and plan smart entry strategies. 7 Transportation Spend Optimization: Often in retail, inbound and outbound transportation is managed by multiple organizations and systems. Integrated transportation planning and execution can increase utilization of private or dedicated assets, reduce errors and administration time in freight audit and pay, and reduce the number of cameras. 8 Workforce Management: For retailers, a workforce management solution can improve scheduling, automate transmission of hours to payroll, ensure compliance with labor rules and track information about employee utilization. 9 Regulatory Issues: Retailers need to proactively understand and address legislation changes. For example, the Food & Safety Act change, in which food retailers are required to trace produce from the grower to the store shelf, will dramatically affect the supply chain. Disadvantage: added cost. Advantages: reduced shrink and increased sales. 10 Reducing Retail Shrinkage: As companies reduced staff and increased workloads, visibility decreased and best practices were ignored. Technology and better store surveillance equipment can be deployed to reduce internal theft, shoplifting, supplier fraud, accounting errors, warehouse errors and falsified store returns. 11 Increased Consumer Intelligence: With the ability to instantly access product information, technology is changing consumers’ buying habits. As retailers adapt to the consumer, they need to address the changes within their own supply chains. Organizational restructuring to eliminate silos, operational process reviews, improved forecasting tools and strategic planning will all be necessities in the coming year.Read more about the Top 11 Priorities for Profitable Growth in 2011 at the Tompkins Associates web site.© 2011 Retail TouchPoints 12
11 OUTLOOK GUIDE20 Focus For 2011: Collective IntelligenceThe continuing plague of unplanned markdowns and promotions attest to our industry’s continuing plague of high newproduct introduction failure rates. Unplanned markdowns and promotions can consume 5% to 15% of gross margindollars. On the flip side, sales and margin dollars are lost whenever a hot non-replenishment item sells out before itsplanned outdate.“Newly launched products suffer from notoriously high failure rates, often reaching 50% or greater,” observed SusumuOgawa and Frank T. Piller in the MIT Sloan Management Review on the risk of new product development in retail. “The Greg Girardmain culprit has been a faulty understanding of customer needs.” Program Director,Persistent unplanned markdowns draw attention to our industry’s limited success in adopting the customer-centric Merchandise Strategiesmodel we’ve been talking about for years now. IDC Retail InsightsCollective Intelligence Provides Answers Girard is responsible forRetailers that have applied collective intelligence to their private label businesses and merchandising processes report setting and delivering IDC’sgreat success. David’s Bridal, for instance, found that its use of collective intelligence decreased bad decisions in authoritative perspective on howmerchandising by 20%. Wet Seal in teen fashion and Best Buy in consumer electronics are two other retailers that have retailers should use information technologies to achieve keyfound success using collective intelligence. operational, tactical, and strategic objectives in the sourcing, buying,The point where the merchant has to pick a design pack or a vendor line and lay his or her money down is where planning, assortment, allocation,collective intelligence comes in. replenishment and pricing of merchandise. Girard launched theIn essence, collective intelligence sources insights from crowds of people. In The Wisdom of Crowds. James Surowiecki AMR Research Retail Advisorydemonstrates that any set of people with a modicum of familiarity with a topic can reliably and regularly make better Service and led it for several years.estimates (i.e., the butchered weight of an ox) and better predictions (i.e., the outcome of a political race) on matters He was the first analyst to coverrelated to the topic. technologies that have become mainstays of today’s best practicesBusiness thought leaders promote collective intelligence as a key to future success. Several companies — such as the in retail; i.e., price and revenue optimization, store execution andBT Group, one of the world’s leading providers of communications solutions and services, Cisco Systems, and Fuji Xerox task management, as well as— support the MIT Sloan School of Management’s Center for Collective Intelligence through sponsorships. Additionally, advanced assortment planning,McKinsey & Co. advocates collective intelligence as one of six Web 2.0 technologies companies adopt. multi-echelon replenishment and constraint-based supply chainBut the retail industry needs to play catch-up. By my count, about 100 companies have used collective intelligence with planning.great success. Regrettably few of them are in retail.Fusing Social Media With Collective IntelligenceSocial media is a made-to-order platform a retailer can adapt for collective intelligence. 2011 will see retailers use their social media assets beyond marketing inproduct development from ideation onward and in merchandising for assortment planning and localization. Collective intelligence will emerge as critical sources ofpredictive insights.These initiatives will leverage social media assets as platforms for gathering consumer perspectives through casual games, social networks, various suggestion-votingschemes, and consumer panels. Some but not all consumer participation will be incentive-based as many customers already engaged with strong retail brands willparticipate “to make a difference” and have their voice heard.Don’t Bank on MiraclesI have created a block diagram (see Figure below) to depict the retail process flow for any class of short-lifecycle merchandise from high-level merchandise financialplanning through assortment and store planning and ending in allocation. I draw the cloud depicting a miracle to bring attention to the fact that information technologyhas informed and supported every step in this process save arguably the most crucial one — where the merchant selects items and lays his or her company’s moneyon the line in an inventory position.The miracle needs to happen there exactly because the buyer has a faulty understanding of customer needs. It’s tough to bank a business, and millions of dollars ininventory, on what all too often comes down to at best an informed judgment call.© 2011 Retail TouchPoints 13
11 OUTLOOK GUIDE20 2011: The Year Of Social Commerce - 3 Key Trends For Socially-Driven SuccessAs retailers increasingly strive to differentiate the customer experience from competitors, they are movingbeyond “engagement” with social media and are using it to accelerate cross-channel retail strategies.The social channel is now firmly entrenched in the retail sphere. In a study soon to be released, RetailTouchPoints has found that close to 75% of retailers surveyed currently have a social media strategy inplace.The next frontier of social shopping demonstrates a golden opportunity for retail organizations to leverage Amanda F. Batistachannels like Facebook and Twitter to optimize branding, customer communication and even revenue. The Associate EditorRTP study confirms that Facebook and Twitter are by far the number one and two choices for retailers who Retail TouchPointswant to reach out to consumers via social media. Batista covers telling retail trendsWhen released, the RTP study also will reveal retailers’ processes for setting up social media strategies, the like in-store technologies, mobile marketing, retail operation solutionsgoals for retailers’ social media strategies, metrics for social media success and more. and cross channel strategies. Focused on providing research and 3 Social Trends To Watch strategies to assist retailers’ socialIndustry-leading retailers already are adopting innovative new social media solutions and strategies. The media efforts, Batista engagesfollowing are three key trends that show strong potential for driving social media marketing success for in conversations on social mediaretailers in 2011: through Retail TouchPoints (RTP) podcasts. Batista has written 1 Facebook Storefronts: While retailers have been capitalizing on the thriving communities within Facebook and Twitter for enhanced customer engagement, leading retailers including JCPenney, Steve Madden and 1800Flowers.com have empowered Facebook users with the ability to browse many articles and custom content exploring how best in class retailers are leveraging social media and and purchase products without having to click through to traditional e-Commerce sites. What was how emerging platforms will impact the retail industry. once relegated as a community for shopper enthusiasts is now a place where commerce can thrive. Usablenet, the provider powering JCPenney’s Facebook storefront, anticipates that 10% of its retailer clientele will be using the application by the end of Q1 2011. Apparel and fashion retailers particularly, have indicated increased interest in the new capability, according to Jason Taylor, VP Product Strategy, Usablenet. “Our clients want to be where their customers are,” Taylor said. “They want to have all different views of products and information optimized for not only on Facebook, but for various other channels.” 2 Social Media Analytics: According to November 2010 data from Forrester Research, in 2009, 78% of customer intelligence (CI) professionals employed customer feedback or listening initiatives. Industry insiders say this trend will grow, and expect that more than 90% of CI professionals will embrace listening initiatives in 2011. Enhancing their current market research efforts, leading retailers are monitoring online and social conversation data to identify important topics and content categories that are relevant to customers in the context of their own online community. Empowering retailers to collect and archive information-rich conversation, social media analytics provide visibility into the trends and volume of social media conversations and their impact on business results. As retailers look to provide competitive differentiators at every possible touch point, social media feedback can help retailers compete by understanding the underlying sentiment of these conversations, by acting on insights categorized by associated rules that assign sentiment to various topics. 3 Location-Based Engagement: In early 2010, Foursquare emerged as a platform for users to “check in” and share their whereabouts. Other applications, like Gowala and Facebook Deals, followed suit to allow users to see available offers from nearby restaurants and retailers. Retailers including American Eagle, Gap, H&M, Macy’s and Starbucks have leveraged these channels to provide discounts and special offers for loyal customers. The most important concept for companies to revisit while developing a location app marketing plan is the importance of incentive. The more tangible and intangible rewards offered to users, the more likely they will check in.Although a study from Forrester Research found that people more actively respond to offers via SMS or mobile search, results also claim thatlocation app users are more likely to do mobile research about businesses through mobile phone with 33% for app users and 10% for non-appusers. A drastic 27% of app users are also more likely to read product and service ratings and reviews, compared to 4% of regular mobile users.Mobile application shopkick has gained traction toward the end of 2010. Retailers like Target, Crate and Barrel, Best Buy and Sports Authority areleveraging the platform to provide an in-store offering at the point of entry. The customer is alerted with a message and points for deals within thelocation. The app can be used to scan items and earn more points and/or deals.“Today, the location-based service (LBS) revolution is building a list of users who are effectively opting in to receive offers, and this is a powerfulopportunity,” said Gabe Zichermann, Author of the book Game-Based Marketing. “…Savvy retailers will think holistically, understanding what reallymotivates their users and delivering the rewards (merchandise, access, experience, fun, cash) that best match their interests.”© 2011 Retail TouchPoints 14
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