New Realities In Retail


Retail Forward vice president Jim Crawford closed the RIS Retail Executive Summit with an engaging - and often very funny - keynote speech looking ahead at retail realities for 2005 and beyond. One portion of his presentation dealt with the alignment of technology with growth in retail. Here are highlights from that segment.

"This is one of my favorite quotes from Machiavelli: 'There is nothing more difficult to take in hand, more perilous to conduct or more uncertain in its success, than to take the lead in the introduction of a new order of things.'"

"This is something that we as retailers have to do going into the first decade of the 21st century, because it truly is going to require a new order of things to survive and a firm grasp of that new order to thrive. We have dubbed the next ten years in retail as 'the age of uncertainty,' because the climate you face as a retailer today is more challenging than perhaps it has ever been before."

On Digital Signage
Crawford made a compelling case for digital signage, which stands as one of the industry's most promising technologies.

"One of the technology labs that has an awful lot of interesting stuff going on is the Metro Group Future Store. For those of you who aren't familiar with this, it is a grocery store in Rheinberg, Germany, where the three founding sponsors implemented a lot of interesting technology. The first is the idea of digital signage - that more moving images attract customers.

"Here is what I think the real benefit is: what if, instead of saying 79 cents, a sign said 99 cents with a 20-cent discount? Let's say it's a hot day. All the retailer has to do to stop the promotion if the Coke is flying off the shelf is push a button. You now have control over what the customer sees and when. You can turn the promotions on and off. The absolute worst thing in retail is a promoted item with an empty shelf. It means you missed the line of supply and demand. Digital signage is a tool that allows you to align them in real time."

Crawford's Four Truths
Crawford noted four "truths" that he says must be acknowledged before retailers truly realize growth.

"The first truth: retailers miss what is important about technology. There are only two ways you can make money in retail: you can either increase your revenue by attracting more customers or increasing what they spend, or you can decrease the expenses. Your primary expenses are not technology. They are labor, the cost of products and the cost of running your stores. Most technology investments focus on reducing cost, but there is a point where this becomes very difficult to do.

"The second truth: retailers don't know what they don't know. Let's look at a typical store visit. A woman walks into a store and she buys a pair of shoes, an alarm clock and a DVD. What we don't know is what she looked at but didn't buy - like tires, because she couldn't find a salesperson to help her figure out what would fit on her car. We don't know that she looked at a dishwasher but didn't buy it because she couldn't remember the exact dimensions of the opening under her cabinet.

"This leads to the retail paradox: you know what your customers buy for the most part, but you don't know what your customers don't buy and why. Because of that, you don't necessarily know what you should be putting in the store.

"The third truth: no matter what you hear about technology, it all starts and ends with the store. A woman attempted to cash a $1,000,000 bill at Wal-Mart. It didn't work, but it wasn't because of some new loss-prevention system. Wal-Mart owes a big round of thanks to Janice Sanders, the minimum-wage cashier who spotted it.

"The reality is that this is not a unique problem. A cashier at a Food Lion actually accepted a $200 bill for $150 in groceries and gave the person $50 back in change. There is no technology system in the world that can prevent that. Today, the technology sits at the end of the shopping process, but it needs to be expanded to the time the customer enters the store. You must be using technology at every point in the shopping experience to help enhance what the cashier does.

"Expanding technology can start with simply watching what customers do. There is a technology called Brickstream that uses video cameras to develop tracks of where customers shop. It can track that somebody went four different places before they bought one item. Look at enough of those tracks and suddenly you can develop patterns.

"The fourth truth: Welcome to the twenty-first century. Efficiency is the price of entry. That is the Wal-Mart effect. They are not just big - they are smart. They don't just gather all of this data through retailing. They then actually act on it in near real-time.

"You want to know when the demand spikes for American flags the day after September 11 so that you can go out and lock up the U.S. flag manufacturing capacity for the next six months, which is exactly what Wal-Mart did. They saw the demand spike and they acted on it. They created a unified intimate structure between the customer at their store and the factory floor.

"Intelligence can be automated. Use computers for what they are good for. Embed intelligence into your applications. This will allow you to achieve intimate knowledge of your customers and vendors.

"That is what you can do once you start to get through the efficiency issues. It doesn't matter whether you are Wal-Mart or Giorgio Armani; it doesn't matter whether you are selling cans of corn or automobiles. That is the goal."

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