a&s International: Multi-channel retailing drives multi-faced retail models

September 15, 2014 | Coverage

More and more, retailers are looking into better and more efficient ways to reach out to their customers and enhance their shopping experience. Traditional shopping rules are being set aside for technological advancements and multi-channel retailing.

By Steve Chin

retail

"Hi, may I help you?" will probably be the first few words a customer hears when they enter a retail store. At first glance, one might think that the way people do their shopping, be it at a high-class luxury establishment or a simple grocery store, has really not changed all that much. In reality though, the retail industry is constantly looking for ways to evolve and improve both the customer's shopping experience and the security of their stores.

As Alex Johnson, Senior Director of Retail Technology at Verint Systems pointed out, "retailers now have an increased focus on improving the in-store customer shopping experience, whether it's through improved merchandising, better informed store associates, or decreased wait times and other initiatives."

Another factor to take into account is the Internet. Nowadays, Internet access is so prevalent and so easily accessible that almost all traditional brick-and-mortar stores offer some form of online shopping. In fact, because it is so widespread and so available, it is incredibly easily to purchase anything from furniture to luxury goods to even groceries, all delivered right to your front door. The downside for retailers is that because their customers are now able to purchase products directly from their living rooms, it is becoming more difficult to have any physical interactions between them.

It goes without saying, the World Wide Web has become a significant part of our lives, with the ability to look up and execute just about anything that comes to mind. In this living, evolving world, tools like social media, online advertisements, and the ability to reach out to customers on a global scale represents a gigantic leap for retailers relative to a decade or two ago. Smartphones have emphasized this point even further. "Shoppers are more and more often using connected mobile devices during their shopping journeys, and both ‘showrooming' and ‘webrooming' are opportunities for retailers," said George Shaw, Head of R&D at RetailNEXT. What this means in essence is that from a retailer's point of view, opt-in guest Wi-Fi and mobile device detection are rapidly growing areas of interest, and are some of the foundation blocks for personalization of the in-store shopping experience. All this can also link up to a concept called omni-channel retailing, which is one of the recurring trends being observed in the current retail industry. With the need to continually connect with their customers, retailers are constantly looking for faster and better ways to offer not just a better customer shopping experience, but more efficient support and cross-platform promoting.

Omni-Channel Retailing

A big thing to take note of is the concept of omni-channel retailing. This is basically a culmination of traditional brick-and-mortar stores combined with online support and shopping through apps on smartphones and tablets. This also expands even further into support across multiple cross-platforms. By utilizing omni-channels, retailers are able to compound on the ease of accessibility that customers gain by making everything from shopping, returning items, price matching, and customer support, all available from a customer's living room sofa. Customers can also see a much simpler and efficient system when they wish to return or exchange items, as purchases made through online methods can also be honored in-store.

Expanding on this idea even further, this is also a very easy way to obtain valuable information through data mining in order to better the retail customers' experiences. For example, by utilizing in-store Wi-Fi and mobile devices, retailers can determine what areas of the store are getting the most traffic and what places are lacking. The retailer can then respond by promoting the most popular products even further through cross platforms, be it on their online stores or through mobile devices, such as a special promotion for their store prior to logging onto in-store Wi-Fi. Data mining also helps retailers determine customer buying habits, and retailers can then respond by advertising store promotions that they currently have. By utilizing omni-channel retailing, retailers are able to cross-promote across all their available systems, not just simply putting up a window poster in their brick-andmortar stores. "The Internet is having a huge impact on how people shop. I see Internet purchases being much more common these days. Offers like Living Social helps drives sales further. Big box stores like Costco are also experiencing significant sales growth, and everywhere there is much more in-store comparisonshopping being done by smartphones," John Sullivan, President of 360iQ explained.

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Delving Further Into Analytics

In line with omni-channel retailing, traditional security analytics are also a factor. No longer just a security tool utilized to prevent crime, its uses are also becoming catered towards business intelligence and retail improvements. Johnson also explained that one of the most significant advancements made recently is leveraging video infrastructure to provide incremental business intelligence to assist retailers in operating their business.

Determents to retailers are things like long queues, ill-informed associates, and mismanaged marketing for products. Brian Lane, Director of Product at 3VR, especially pointed out the queue issue. "It can make for a miserable shopping experience. So much so, that they may shop somewhere else next time." Some ways to combat this that solutions providers are quick to emphasize are analytics like queue management software that can count the number of customers entering stores and the number that are leaving. As Lane explained in greater detail, "Software like this determines the average shopping times of each individual customer, and can properly alert staff to add more associates to the points-of-sales (POS) systems in the store." He also added, "the software can also use people counting, in conjuction with POS systems to determine the conversion rate of customers." Sullivan also explained another method: "surveillance cameras are not only tracking the bad guys but also keeping an eye on the good guys in order to make their shopping experiences better than ever. Video analytics can create ‘heat maps' that show the so-called ‘Golden Path,' the most popular areas of the store — and how that might change during the day, week, or year." This leads to better product and shopping knowledge, and retailers can adapt to the various scenarios.

Another example Sullivan pointed out is a demographic analytic, normally used for forensic research on recorded video. What this basically looks to do is to narrow down a search of a subject by their age and gender. Usually, this is utilized to identify possible subjects in crime. But on the business side, this same analytic can be used in the retail environment to help retailers understand the demographics of their customers. "For example, if a store were to run an ad for a sale in the newspaper one weekend, and on social media the next, the information returned would most likely result in a younger demographic the second weekend. This analytic can be used to test this hypothesis," Lane explained. "If the store's merchandise is aimed at a younger audience, the effectiveness of advertising can be tested to target a specific demographic."

High-End Luxury and Big-Box Franchise Retailing Develop with Personalized Approach

The differences are obvious when stepping into a Louis Vuitton store and when stepping into a Costco or when you walk into a Cartier store versus walking into the Wal-Mart electronics section. Right away, as soon as you enter high-end luxury retail stores, you notice a much more personal approach. Traditionally, “high-end retail has always been about differentiation, either with products, customer experiences, or both. Savvy retailers are now looking at technology to empower customizable, personalized shopping experiences, with the aim at creating a sustainable competitive advantage,” said Shaw. In short, there's always the VIP approach when it comes to high-end retail. The "everything is possible" motto comes to mind when referring to these luxury markets.

Things are a little bit different for big-box franchise retailing, as it is centered in such a competitive market. With so many different major brand names, again, one of the solutions for retailers is to make their retail stores really stand out. Provisions such as reward programs, discounts, and promotions offer customers reasons to continually shop at the same retailer. One solution being explored right now is data mining customer shopping histories and looking at the demographical differences: gender, age, and location. A way to execute this would be to have a loyalty or membership program whereas by customers signing up, they would be able to gain access to exclusive coupons or specials. In return, customers would give access to their shopping histories and shopping patterns and enable retailers a way to personalize their shopping promotions i.e. Customer A purchases bananas and apples this week and oranges and celery a week prior; there would be little point in sending promotions for t-shirts and DVDs). The whole goal is to make it a more personalized shopping experience by utilizing the customer's information from multiple channels.

Again, the idea of omni-channel retailing is applied to both high-end luxury market segments as well as the big-box retailing industry. While the target audience might be different, the end goals still remain the same: reaching out to customers and bettering the shopping experience in order to achieve better margin gains.

Roadmap to Better Retailing

One thing to keep in mind when it comes to retailing is continual technological advancements. Some key features to look out for include things like RFID technology becoming more widespread, with its use in real-time inventory management becoming one of the future key features. It will also soon be a huge data source for retailers as they control inventories and better manage its effect on cash flows and working capitals, as Shaw explained. Another important factor is mobile and even wearable tech (including products like: Google Glass, Apple's iWatch, and Samsung's Galaxy Gear), and how to take advantage of it. One achieveable method seems to be the idea of utilizing the NFC and Bluetooth features and directly "beaming" it to customers as they enter the store. It becomes important as time goes on for better and closer customer interactions and feedback, as well as the ability to properly market and promote products to the right demographics. Keep an eye out for such things like Bluetooth connectivity to in-store promotional specials, and better, even faster, and more efficient cross multi-channel retailing. This also ties into the omni-channel retailing factor, as technological advancements will only make cross-channel retailing more and more efficient.

The last thing to point out is that the human factor in shopping will never really go away. That's another reason why not everything is online, said Shaw. People still enjoy social interactions when shopping, and conversing with in-store associates and being attended to is still a big driver. In fact, when it comes to specialty products, retail sales associates are the biggest drivers of shopper loyalty and retention.

Top Retailing Conundrums Facing US Retailers

A quick glance on the Internet still reveals a few worries that retailers have to face. According to publication by Market Watch, the following are the top 10 risk factors, based on the opinions of the 100 largest US retailers.

  1. General economic conditions ― This is far and away the number one reason, and quite understandable;
  2. Federal, state, and local regulations;
  3. Competition and consolidation;
  4. Vendor concerns ― recession has hit the manufacturers just as hard;
  5. Labor costs ― Rising medical costs, staffing costs, minimum wage raises;
  6. Consumer trends;
  7. Maintenance of IT systems ― Things like security systems, POS systems,and registers, are all expensive;
  8. Privacy concerns related to security breach ― This is another big one that has made news headlines recently. Hackers breaking into online databases to steal people's information and blackmailing them for payment.
    • 8a. Consumer confidence and spending;
    • 8b. Legal proceedings


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