As we were putting the finishing touches on STORES’ annual predictions for the coming year there was a flurry of retail news, including holiday forecasts and third-quarter sales figures. There was also a handful of stories that leave one contemplating just how different the future of retail might be.
• Apple rolled out its EasyPay payment system. It’s basically an app that turns an iPhone into an iWallet by using the credit card associated with the user’s iTunes account.
• Walmart launched a massive marketing effort on Facebook aimed at making its stores more relevant on a local level. Then, the world’s largest retailer upped the ante by debuting Black Friday sales on the ubiquitous social networking site.
• Macy’s became one of the first retailers to join the Google+ social network. In just over six hours, the pace-setting department store gained more than 5,300 followers.
• The concept of “augmented humanity” began to crystallize with the introduction of Siri as part of the iPhone 4S rollout. Tapping into the power of voice response changes the way people interact with their smartphones — and looking ahead, it could reshape the way consumers shop.
So just how does one go about making predictions about the next 12 months when potential game changers and disrupters seem to be occurring on a weekly basis? If there was only one prediction to be made about retailing in 2012, it would have to be “Hold on, it’s going to be a heck of a ride!” — quickly followed by the suggestion that if change is not your forte, it may be time to explore new career options.
But what fun it is to stop at just one prediction? With so many new ideas swirling around the retail industry and the promise of new technology beckoning, STORES once again has chosen to make numerous predictions — or educated guesses, as we’re more inclined to think of them — about what the coming year has in store for the retail industry.
Like every other industry, retail must do business against the backdrop of a fragile U.S. economy, political unrest abroad, partisan stalemates in Washington and a consumer population that can at times seem bipolar — distracted and disinterested one day, confident and compulsive the next.
Various figures reveal that personal income slipped slightly in 2011, as did savings as a percentage of disposable income. Statistics show that consumers have recently begun dipping into their savings to spend. That trend might imply they’re feeling better about the economic outlook — or, conversely, that they’re so tired of the vice grip they’ve kept on their wallet for the past few years that they’ve decided to throw caution to the wind.
Measurements of consumer sentiment have been mediocre at best, which could explain why several prominent retail companies have seen the perceived value of their brands decline. The Brand Finance Global 100 update shows that the top 10 global retail brands have lost 2 percent of their combined value — $4.26 billion — with only two, Tesco and McDonald’s, bucking the trend. Still, consumers are shopping: NRF reports 14 consecutive months of retail sales growth through September.
While industry experts are hopeful that retail can continue to post gains, however modest, the pace of U.S. economic growth is forecast to be “frustratingly slow” well into the first half of 2012. Continuing high unemployment and the European debt crisis were among a host of factors impacting GDP growth, which is likely to end 2011 between 1.6 and 1.8 percent. Estimates for 2012 GDP growth range from 2.5 to 2.9 percent, and unemployment is forecast to dip slightly to between 8.5 and 8.7 percent.
Bottom line: 2012 will be challenging for retailers, but no more so than what most companies have faced over the last three years. The most important thing that any retailer can do to stay the course in 2012 is to focus squarely on customers and merchandise. Retailers that acknowledge that their past is not necessarily their future and remain humble in the quest to serve shoppers in innovative ways will emerge on top.
What are some of the overarching themes we see developing in 2012?
• The year ahead will usher in the next big disruptor for the retail industry — digital voice technology. The conversation will be between the customer and the retailer and, increasingly, it will take place between the retailer and company data. The chatter has already begun: It might be a faint whisper now, but you can expect the volume to rise.
• The period will be marked by an impressive amount of innovation — particularly in the mobile and social realms — as the events of the last two months would suggest. Technology and retail are morphing: Companies like Apple, Google, Facebook and Amazon are rethinking IT and rewriting 21st-century retail textbooks.
• The next 12 months will yield more partnerships — between retailers and vendors and between retailers and their competitors. It’s happening at industry conferences and extending back to the home office. The “old guard” of secrecy that once existed between competitors is slowly but surely giving way to problem-solving dialogue. Witness the exchange between CEOs as they work to gain a better grasp of social media.
That’s the 10,000-foot overview; what follows are predictions from a more granular perspective.
Mobile: The Great Unifier
T here was no other topic in retail that garnered more attention in 2011 than mobile. As consumer adoption of smartphones and tablets skyrocketed, so did their desire to interact with retail companies. The conversation quickly morphed from “cool-to-have” to “indispensable device,” and the complexity involved in addressing all things mobile began to grow exponentially.
Expect the pace to increase further in 2012 as the rush to deploy mobile BI takes root and adoption of mobile payments rises appreciably. Already there are more searches coming from mobile devices than from PCs at certain times of the day, and by 2015 there are expected to be more mobile Internet users than PC users.
While there are plenty of reasons to be engaged on the mobile payments front, much of the excitement around mobile isn’t about transacting, it’s about influence — providing the local information shoppers are seeking about a store and being part of the conversation. Shoppers are channel-agnostic; they expect interaction from their mobile devices and the time to deliver is now.
• Mobile will define the movement to unify all channels of retail. It is poised to become a tipping point in the quest for a true
omni-channel business — and will likely be a predictor of tomorrow’s winners.
• Mobile devices have access to deep data resources and enough capability to perform analytics. Greater optimization is within reach for retailers who embrace mobile BI.
• The time for watching and learning is over. The risk of not at least dabbling in mobile is much greater than the risk of not getting it exactly right the first time.
Analytics: Mission Critical
R emember the old TV show “The Beverly Hillbillies?” Jed Clampett struck it rich when he discovered “black gold” bubbling up on his property. Retailers have plenty of “Texas tea” oozing from every corner of their businesses in the form of customer data; the problem is trying to figure out how to retrieve and use it.
A recent Accenture survey of 258 North American business leaders found 72 percent of respondents plan to increase their investment in analytics — presumably in a quest to extract more value from the assets they already have. The challenge is that every mouse click and tap of a mobile device produces streams of data. Along with data coming in faster than ever, business problems are getting bigger and the analytics needed to solve them are becoming more complex. Moreover, the IT systems at most retail companies are not prepared to handle the structural and computational demands of today’s analytics.
The days of managing by guesswork are behind us; retailers want to manage by fact. The good news is that hardware is faster than ever and more affordable; retailers are no longer limited by the speed of the CPU. The less palatable news: there is a dearth of individuals with the right analytical business skills, technical skills — or both — to help retailers mine this data.
• Investments in business intelligence tools, analytics and analytics expertise will account for the biggest chunk of retailers’ IT budget.
• The relentless growth of data has led to the phenomenon of “Big Data.” Monetizing that data with an eye toward increasing operating margins or solving markdown optimization problems, for example, will monopolize retail IT shops in 2012.
• Engineered systems, where software and hardware are optimized to work together, will become more prominent in 2012 as retailers aspire to achieve analytics “at the speed of thought.”
IT: Cloudy With A Chance of Greater Visibility
T echnology and retail, closely intertwined for years, are becoming virtually inseparable. When they’re not knee deep in business intelligence and analytics, retail IT executives have plenty of other projects screaming for their attention.
Cloud computing continues to dominate discussions as retailers who started slowly a year or two ago are now talking about extending the number of applications that can live in the cloud. Some say inventory could “live” in the cloud, but skeptics remain concerned about risk and reward, security and governance.
Will 2012 be the year item-level RFID (finally) gains a firm foothold? Given the adoption by Bloomingdale’s and JCPenney — and the accelerated timeline Macy’s has implemented for managing item-level merchandise — it appears the answer may be “yes.” There’s even talk of hands-free RFID making inroads in the next 12 months. Still, for many retailers, RFID projects don’t rank near the top of the “must-do” list.
More likely to get the nod are tasks that require smaller capital investments, like the development of QR codes, the rollout of mobile devices inside the store and in-store video.
• Near field communication is moving into more and more devices. It’s creating demand from consumers, which should speed up deployment inside the store.
• Intelligent virtual agents for online customer service have become more common. Now, as voice response enters the retail lexicon, merchants will need to apply this knowledge as they address future customer interaction.
• Video analytics to map in-store activity will begin to reshape business objectives as retailers gain insight to workforce management, customer engagement, out of stocks, shopping patterns and more.
Social: Going Beyond Like
There’s a lot of noise on the wire. Some of it is coming from consumers having conversations about brands; the rest is coming from retail CEOs overwhelmed by social media and asking anyone who will listen how best to handle the conversations — and learn from them.
It’s a great place to start. As social media experts explain, retailers can’t control the conversation about their brand, but listening to what shoppers are saying, gleaning insight and reacting to their feedback is yielding dividends.
Some have described social media as the focus group of the future. Truth is, it’s better in many respects because those participating in the conversation are less influenced by the setting and people surrounding them. Can businesses learn from social media? Ask Gap and JetBlue. It probably won’t be long before we see brands receiving social media scorecards.
The story to watch in 2012: the rise of social commerce. Research firm EMarketer expects Facebook to become the top seller of display advertising in the United States this year. And, according to Booz Allen Hamilton, $30 billion will be spent via social commerce by 2015.
• Retail brands are part of the conversation. If businesses are cavalier about their most important asset they may lose it.
• Companies will embrace analytics that help retailers understand the sentiments being expressed in the social realm and turn unstructured data into valuable assets.
• Facebook and Walmart struck a deal that will allow users of social networking services to “connect with their local stores.” When the world’s biggest retailer says this is important, expect others to quickly follow its lead.
Customers: Ruling Retail
T o say that the customer is in control seems like the understatement of the decade. They hold the purse strings, of course, but they also know how to yank a retailer’s leash – demanding that merchants know them personally, serve up relevant offers and keep up with new technologies the second they acquire them.
Determining how to serve shoppers — many of whom now have more computing power in the palm of their hand than entire businesses had just a few decades ago — is a formidable mountain to scale. Shoppers in the 25-to-40 age group are making their mark on the industry and retailers need to find ways to understand them better and cater to them with greater veracity. The real challenge is doing so without alienating shoppers who are device challenged and technology averse.
Retailers need to keep a wary eye on demographics as they map out the coming year. The latest census data shows our nation has an increasing number of Americans living in poverty, and the Hispanic and Asian populations continue to grow. Understanding the diversity of household incomes and celebrating ethnic preferences will become more important in the year ahead.
• Retailers need to rewire their operations to be more customer-centered, more relationship-oriented and more transparent.
• Practice co-creativity with your consumers and do more than just listen to the conversation — react.
• It’s time to figure out how to reward loyalty without being promotional.
Store: Set the Stage
Traditional retail stores remain the engine that drives this industry. Still, there is a growing body of shoppers that has different ideas as to what constitutes a store; not all distinguish between physical and virtual channels the way their parents do. The need to create a seamless shopping experience for today’s omni-channel shopper is ongoing.
For years industry pundits have been saying that the store should be treated like a stage; this year that statement needs to be followed by an exclamation point. Shoppers can roam the aisles of your store while checking prices at your competitors. Retailers can’t control that, but they can make the experience so appealing that the shopper is willing to buy the item while standing in front of it rather than push a few buttons and wait, usually for the promise of just a few dollars in savings.
How can retailers make stores more appealing? Through great design, better customer service and value-added services. There is a watershed of in-store technologies with which retailers are experimenting to make the in-store experience more appealing; retailers need to test and deploy the ones that make the most sense, keeping in mind the value of enabling employees to engage with customers the way they engage with their friends.
Debates about store size persist: Is bigger better, or do shoppers prefer a smaller footprint and an edited assortment? The answer is really less about size and more about ease of navigation and more inviting environments. There’s no magic bullet.
• Among the questions retailers will wrestle with in 2012: What’s more important, the brands in the store or the brand on the door?
• Retailers need to control the shopping experience, using all channels to make it seamless. You can’t operate 20th-century stores if you want to appeal to 21st-century shoppers.
• Labor issues continue to vex some retailers. In the next 12 months task management will become more important as retailers attempt to move staff through critical activities in an orchestrated way.
RT @IR_Magazine: Another cross-border e-commerce provider is acquired - Pitney Bowes announced today that it has agreed to acquire ... http…6 hours ago