2013 Review & Outlook

Call me an optimist, but, honestly, I don’t see any other way to win. If you think you can win, you can win. Period.

I thought of this while pulling together this story, a collection of views from the best and brightest minds in the retail industry. At the time I was working on it, in mid-November, the retail industry was heading into holiday season madness and the mood was optimistic despite some lingering headwinds. The 2012 calendar year has delivered strong top-line sales and margins for most retailers and the outlook for the fourth quarter promises to meet or exceed expectations.

The stage is set for a strong holiday selling season and end-of-year results, but making predictions is not my purpose. Instead, I will leave it up to the experts in the following pages who are demonstrating the will, vision and intelligence to seize opportunities in all economic climates.  

Charlie Chanaratsopon
CEO & Founder, Charming Charlie

When I am asked about macro-trends that emerged in 2012 having a significant impact on retail I think the obvious answer is the continued traction of visual differentiation and interaction through social media. Specifically in fashion, everyone loves a picture. This is true for everyone and it doesn’t matter whether it’s Instagram, Pinterest or Tumblr. Brands need to have a strong presence visually online in order to be perceived as different and unique.

For 2013 I think the continuation of the breakdown between the online and offline worlds will accelerate. The omnipresence of smartphones and tablets continue to blur the line between the digital and brick-and-mortar channels. Those that are able to deliver converged online and offline experiences that satisfy customers will be the leaders in their segments.

Technology is used to help businesses differentiate and deliver better customer experiences. Many retailers have been moving in the direction of adopting sophisticated loyalty programs, mobile POS, digital signage and so forth. These are important, however, I believe that having the right product that customers want is the most important business tactic and always will be.
That said, we are focusing our efforts right now on CRM and loyalty solutions that help us offer our most loyal customers a differentiated experience through simplicity as well as by delivering real value.

Robert C. Wolcott
Co-Founder & Executive Director
Kellogg Innovation Network
While not yet directly engaged in retail, the crowdfunding phenomenon will increasingly have implications for retailers and their suppliers. The largest crowdfunding sites like Indiegogo and Kickstarter provide an environment where thousands of entrepreneurs, developers, designers and really anyone can share new concepts and receive direct feedback from the marketplace of backers.

All savvy retailers should pay attention to this phenomenon. Consider scanning the crowdfunding sites for relevant products, services, concepts and consumer interests to gain real-time insights.

I consider this to be a significant macro-trend because it is the beginning of a new source of capital and market insights. The Jumpstart Our Business Startups (JOBS) Act, which was signed into law in April 2012, opened the door for eventual raising of capital through crowdfunding mechanisms. This is still early days. There will be many challenges – even disasters – along the way, but the long-term trend is compelling.

A macro-trend that will have significance in 2013 is that the synthesis between online and physical retail will expand considerably. Tesco successfully piloted selling products on billboards in subways in Korea, with consumers using their smartphones to make purchases. Peapod announced a similar program in selected Chicago Transit Authority stations. Sears sold toys in a similar pilot promotion at O’Hare Airport for the Holiday season in 2011. As Dean Carter, Sears Holding’s chief human resources officer, reported, “The promotion far exceeded our expectations...We’re expanding the program for 2012.” 

Another macro-trend with potentially the most impact long-term will be Big Data. We’ll be able to see and sense things we never knew existed. Retailers will be able to ask questions and track metrics at levels of granularity never before possible. The challenge will be to take this avalanche of data and translate it into value. Big Data will be the primary challenge and opportunity of the next decade for retailers of all sorts.

Alan Dabbiere
Chairman, AirWatch

The top three concerns we saw in 2012 were
effectively line-busting and reducing lines for in-store checkout, lack of product knowledge among retail employees, and leveraging store-specific best practices.

Throughout 2012 the retail industry began to evaluate, and in some cases embrace, mobile point-of-sale applications and kiosk-mode features in stores. Retailers that deployed mobile devices in their environments were able to reap the benefits of features such as real-time product inventory and details, mobile POS applications, and customizable user interfaces.

What mobility can do is put something in your customer’s hand that can suggest a next item in a way that an individual associate may not think of. The essential thing to remember is that simply including mobile devices in stores isn’t enough. The technology needs to be managed and controlled to prevent data loss and ensure that customer information is safe and secure. 

Kiosk mode allows customers to use devices and have their information automatically wiped from the device once they’ve completed their session. By including managed, secure devices into daily processes retailers are able to minimize time customers spend in lines, maintain up-to-date inventory and product information, lock down unauthorized browsing on store devices, and create custom user experiences to boost sales.

2012 was just the tip of the iceberg for seeing mobile devices in retail stores. I expect that in 2013 retailers will begin to expose the larger mobility opportunity that’s under the surface and begin to put strategic plans in place to address it.
Mobility is taking the power and the soft skills, such as merchandising knowledge, and the hard skills, such as mathematics and outside information like weather, and creating a flow of institutionalized knowledge that we’ve never seen before in the industry.

Striking a balance between the traditional challenges of retail and the ever-evolving mobile device space means retailers need to adapt quickly in this new age of consumerism. What retailers need to focus on in 2013 and beyond is getting an efficient mobility infrastructure in place.

Not since the introduction of POS systems has a technology so fundamentally changed the way retailers operate as mobile devices. This exciting technology serves a dual purpose for retailers, aiding both the employees and the customers who consider a mobile device a part of their daily lives.

Bernard Luthi
Chief Marketing Officer & COO,
Rakuten Buy.com

E-commerce has grown in leaps and bounds in 2012 but it still has a long way to go. In 2012, retail saw a continued push towards social. The fact that people are continuing to rely on social platforms in a much greater scale every day and in every aspect of their lives, particularly to help them make decisions, had huge implications in the retail space. Additionally, we’ve seen the lines start to blur between the physical and online shopping experience as consumers are seeing a great connection between the two. 

Another area we’ve seen emerge in 2012 is mobile. Mobile is seeping into a great portion of the retail environment. Today, brick-and-mortar retailers are looking at how to defend their space and turning to mobile in particular as a major venue. 

The use of mobile in retail this year is just the beginning. Somewhere between mobile devices and tablets lie the ability to transform the handheld and more importantly the retail experience.

Last but not least was the growth of “curation,” which has come to represent the way consumers communicate, share and interact through and with retailers. Curation is allowing retailers to grow and expand their marketplace by providing a connection for consumers and merchants. 

As 2012 comes to a close, retail will continue down the same path it has started on. Most of the trends that we’ve seen in 2012 are only in their infancy as retailers unlock the right combinations for using various channels and platforms.

For retailers, one of the most critical tactics in 2013 will be social integration and putting the ability to share anything and everything into the hands of the consumer in a seamless manner. This goes beyond just being able to “like” something. Retailers need to allow consumers to effortlessly interact with their friends, family and followers to help them make important decisions when making a purchase. 

Along these lines is the ability to provide and enhance product attributes. Many consumers struggle with visualizing what products look like via pictures or descriptions alone. The experience needs to be completely overhauled and I think we’ll start to see that in 2013, when smart consumers ask, “How will that product look on me?” Content is always king but visualization will reign supreme in retail. 

Putting the keys in the hands of consumers and giving them the full experience online that they would receive in stores will be crucial for retailers. 

Greg Buzek
President & Founder, IHL Group

Clearly the single biggest trend for 2012 has been the addition of mobile devices to the retail environment. This has been the fastest adoption of a technology that we have ever seen. It is even faster than the adoption of Internet to stores. 

There are four different ways that mobile is being used. First, it is simply a way for the store manager to have access to data on the move. Second, it is a way for the sales associate to have a tool in hand to help customers make better and more informed decisions. Third, it is way to actually complete the transaction on a company-owned mobile device. And fourth, it enables the consumer’s device to do inventory lookup and price checking or even completing the sale themselves.

When we began the year, we viewed these as distinct stages. However, specialty retailers in particular moved very quickly to adopt the first three stages at once. And some retailers have gone so far as to say that stage four, the use of the consumer’s device, is the future for their chain.

Overall, mobile may be moving more rapidly than field testing has warranted. This is particularly true for mobile POS as it enters the Christmas season with many retailers using it for the first time. This seems extremely aggressive to me, but we will see. As an industry we will learn a great deal during this time about the effectiveness of mobile POS to truly enhance the consumer experience.

The single biggest trend in 2013 will be the adaptation of Big Data into retail operations. Some Wall Street analysts are now saying that investments in Big Data tools and processes are returning about 100 to one the cost of deploying the technologies.

The exponential growth of data and the continual drop in the cost of storage is opening up doors and insights that retailers only dreamed of in the past. This is a trend that is going to explode in 2013 because the early returns are astounding.

One technology that is finally going mainstream is item-level RFID. One could argue that RFID is the key to doing cross-channel merchandising effectively. Without it shipping from stores is simply not reliable enough to trust. For many retailers, inventory accuracy is off by as much as 25%.
RFID brings a promise of 95% to 97% inventory accuracy. Best of all, you can be confident that if you have to ship from a store that you actually have the merchandise to fulfill the transaction.

Alexander Muse
CEO & co-Founder, ShopSavvy

A power shift really came into play in 2012 as retailers across the board came to realize that the shopper holds all the cards. Technology (mobile and social media) has really shifted the power to shoppers and forced retailers and brands to become more engaging and transparent. Most retailers are getting into the game, and a few are really embracing the change. Big retailers like Best Buy and Toys ‘R’ Us are acknowledging that consumers have a great deal of information about the products on their shelves, and they are using that information to mutual benefit.

This power shift will remain in full force in 2013, but the real macro-trend of the year will be a renewed focus on omni-channel retailing. Online retailers will rush to gain a foothold in brick-and-mortar locations, creating beachheads for brand building and customer service and interaction. Local retailers will continue to evolve their facilities to become more than transaction locations. They will be seamless omni-channel experiences where success is no longer measured by revenue per square foot.

Our focus at ShopSavvy will be to enable discreet one-to-one connections between brands/retailers and shoppers. Look for more targeted engagement between brands/retailers and their own mobile experiences and third-party experiences offered by apps like ShopSavvy.

Linda Palanza
COO, OneView Commerce

2012 has seen a convergence of macro-trends affecting buyer behaviors — economic sensitivity and a fundamental shift in the balance of power from the retailer to the consumer through the rapid evolution of technology. While economic trends have impacted when and why people shop, technology has dramatically impacted how they shop. In a less favorable economy one could say consumers are prone to “shop smart” as they shoulder greater job uncertainty, restricted spending capital and moderate wage growth.

Interestingly, this economically sensitive behavior came at a time of explosive technological advances. The rapid adoption of smartphones and tablets over the same five years has meant that now consumers are “armed” to shop smart — any time and everywhere. This intelligent and armed shopper leads to shifts in behavior on the micro-level — gone are the days when a store customer was likely to walk out with product so long as the store had the inventory.  Today’s customer might enter the store to see, feel or experience a product, but may complete the purchase online or on a mobile device. On a micro-level, the customer still has the desire to experience the product before making the buying decision.

In 2013 the question for the retailer will be, “What will you do about the convergence of the macro- and micro-trends?” Dealing with micro-trends such as showrooming in the context of larger behavioral shifts will differentiate winners and losers. The winners will enable associates with a single view of customers, orders and inventory across channels so the store customer enters the retailer’s “fully stocked distribution center.”
This allows the retailer to capitalize on the customer’s need to experience products before purchase while capturing their share of the wallet.  Longer term, this allows winners to embrace the educated and wired customer on both the macro- and micro-level by delivering a seamless experience — across channels, business lines and platforms.

Vincent Quan
Associate Professor Fashion Merchandise
Management, Fashion Institute of Technology

Mobile apps, e-commerce, mobile checkout, omni-channel retailing and social media…These are just a few of the big industry buzzwords in wide use going into 2013.  Retailers have started to integrate one or more of these solutions and concepts into their retail strategies for next year and beyond. The ultimate retail challenge is how to use technology to solicit, engage and satisfy consumers. The goal is to deliver increased traffic, conversion and market share with faster inventory turns, higher sell throughs, and healthier gross margins.

However, is technology the ultimate panacea for consumers and retailers alike? The answer is an affirmative “not yet.”

During a visit to one of the newer stand-alone cosmetics and beauty specialty stores in New York City that has pioneered mobile POS, several customers who were in the process of being checked out with mobile devices were getting frustrated. The reason was that the mobile checkout devices were freezing in the middle of their transactions.  Needless to say, the customers weren’t the only ones getting annoyed.

Meanwhile, back at the mall…A visit to the branded denim bar (within a department store) demonstrated some wonderful technology. It had two iPads that allowed consumers to flip through their preferred cut, fit and wash while seated at the “bar.” 

However, why would a time-sensitive consumer exhaust precious minutes to play with an iPad if the product was within sight or displayed at the “bar”? Touching the product beats touching a screen any day. But this is not the end of the story. Two sales associates were observed discussing among themselves that the two mobile checkout devices (iPads equipped with credit card scanners) were not working.

Here is a conversation overheard at an eclectic specialty store between a sales associate and guest. Sales associate: “Hi, would you like to check out via a mobile device?” Guest: “That would be great, but how do I know that you’re not scanning my credit card on your phone?”

In the end, retailers must realize that technology is just an enabler. Technology does not supplant the need for great product, terrific service, a personal connection or security.

Frank Andryauskas
VP Retail Industry Solutions, MicroStrategy

Mobile has proven itself as the catalyst that accelerates and enriches virtually every process in retail, from marketing and customer engagement to supply chain and store operations to workflow management.

We began 2012 demonstrating mobile ROI and ended it aggressively deploying consumer-facing and associate-facing mobile apps as integral components of retailers’ marketing and operating strategies.

Mobile is accelerating the pace of change and presenting our industry with game-changing challenges. Ubiquitous availability of price and product information requires retailers to rethink what distinguishes and defines their brands. Mobile and the consumerization of IT extend processes well beyond traditional organizational boundaries and challenge traditional infrastructures. Retailers are turning to cloud-based solutions to address this issue and get the added benefit of enabling test-and-learn initiatives without the sea anchor and cost of traditional infrastructure.

In 2013 the pace of change will continue to accelerate. Converging mobile and social waves will amplify each other in a virtuous cycle of adoption and innovation, generating a wealth of consumer touchpoint information. Applying analytics to this touchpoint information as well as traditional loyalty and transaction data can deliver extreme value for both consumers and retailers. Consumers experience a richer, more convenient, more relevant shopping experience. Retailers realize more persistent customer loyalty and higher asset and labor productivity.

This confluence of mobile, social and analytics enables consumer-facing apps to deliver the best elements of a digital experience where and when the consumer wants it. This serves as the foundation for a true omni-channel brand experience by bringing the online experience inside the store, if that is where the consumer chooses to be.

Mobile sales enablement apps accelerate informed action, support internal collaboration and empower associates to better serve the customer. Ultimately this is about connecting with the customer in ways that are meaningful to them.

Jon Kubo
Chief Product Officer, 8thBridge

This past year has seen the most significant changes in social commerce since Mark Zuckerberg’s famous quote in August 2010, “If I had to guess, social commerce is the next area to really blow up.”

In just one year, social commerce has pivoted its focus from e-commerce transactions on social networks to a new kind of social network in which users are connected by their interests (Interest Graphs) rather than friendships. User generated curation, or collections, is the basis for connecting everyone in the interest graph.

The meteoric rise of Pinterest has demonstrated the power of social curation and discovery, and curation is central to social commerce growth. The evolution of social commerce from friendship-limited social graphs to more retail specific interest graphs is a major trend that innovative retail companies are capitalizing on.

This year the industry has also witnessed the rise of a new phase of social commerce as many e-commerce startups and innovative retailers have begun deeply integrating social shopping into their websites rather than just relying on social network websites for engagement.

Fab.com is an excellent example of this new social commerce experience. Fab has demonstrated the ability to achieve significant ROI using social commerce driving 25% upstream traffic from social networks, 50% of new customer acquisition from friend-to-friend sharing, and a 15% conversion rate from socially discovered products.

Multi-channel retailers such as Barney’s New York, Deb Shops and even Sears with its ShopYourWay.com shopping portal are also adopting this new model of social commerce.

Social commerce is migrating from social networks to e-commerce sites and traversing from the top of the purchasing funnel to the bottom. Increased traffic, increased average order value, and conversion rate lifts can now be the result of a great website social experience that incorporates social expressions, user curation, social discovery, social rewards, and the use of social data for social CRM. 

The end game for retailers is to capture this interest graph for all of their customers because it holds the key to a much deeper customer engagement.

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