BrainTrust Query: Don’t Fall Behind Waiting for the Rebound
By
David Dorf, Director
of Technology Strategy, Oracle Retail
I recently participated
in a RIS News webinar titled “2010 Rebound Strategies: A Retail
Symposium.” As a panelist, I gave some advice that I think merits repeating
here. Retailers need to continue innovating, regardless of the economy.
Those that do will be better positioned when the “retail rebound” occurs.
Shown below
are four forces that are reshaping the retail industry:
Web 2.0/Social: People
tend to trust their network of friends for reviews and advice, and social
media is making it easier for them to communicate. So its paramount that
retailers enter the conversation. I have a friend that had a bad experience
at BestBuy. He complained to BestBuy via Twitter, and when he didn’t
get satisfaction he wrote about it in his blog and tweeted to his 3000
followers. One mistake was amplified and the brand was damaged. Retailers
need to invest in their social media efforts.
Mobile Devices: I
think there are some great opportunities to connect to customers via their
mobile phone. Starbucks has iPhone applications that let users find the
nearest store or manage their prepaid account. Pizza Hut claims to have
driven $1M in incremental sales via their iPhone application. When phones
are equipped with Near-field-communications, things will get really interesting.
Global Economy: In
terms of the Global Economy, much of the growth is occurring outside North
America so our systems need to be internationalized, which is no small
task. But there have been some failures overseas because the cookie-cutter
approach doesn’t always work. Localized assortments and the ability to
capitalize on local trends are crucial to success.
Demographics: Lastly,
today’s consumers shop differently. E-commerce has increased expectations
for having vast product information, endless aisles, and personalized recommendations.
To satisfy these needs cost-effectively, stores will need more self-checkout,
kiosks, and loyalty programs that cater to the consumer.
So how do we
prepare for the rebound?
Retailers should
at least be experimenting in each of these four areas, because when retail
rebounds it will be forever changed. It’s important to iterate often: succeed
or fail quickly, and foster risk-taking by employees. Those that continue
to innovate will pass by those that don’t.
Discussion
Questions: Of the four forces reshaping retail mentioned in the article
(Web 2.0/social, mobile devices, global economy, demographics), which
ones should be most emphasized as stores prepare for the rebound? Are
any major forces missing from the list?
Technological investments are key to any organization but particularly to retailers looking to position themselves for the expected rebound. While social network participation is an immediate requirement, in the long run mobile apps appear to be the best potential investment. Amazon’s m-commerce site is almost ten years old and eBay has experienced 4.6 million mobile app downloads, 450,000 unique visitors per day and almost $500 million in sales. The eBay mobile channel allows customers to bid anytime, anywhere. 1-800-Flowers is another leader in this area.
M-commerce sites and apps appear to be spearheading retailing’s fourth sales channel. This channel appears to have a huge upside potential that retailers looking to rebound need to seriously consider.
The biggest on that list is social media but what’s not on the list and is even bigger is the ability to localize your operation. Smart merchants realize that optimizing your store to cater to the local selling area is the fastest way to build your brand in an immediate geographical area. Cultures are booming in all parts of North America and there is huge opportunity for retailers to localize their mix to cater to the community. Social media is an awesome tool but person to person word of mouth is still the Howitzer when it comes to retail marketing.
Great article! We have to look at which areas the retailer has some control over and which he does not. In the end, the answer is the same as it has always been: great customer service builds loyalty, allows for higher margins and generates positive word of mouth. Retailers that respect consumers (both their time and their money) will generate positive word of mouth. Positive word of mouth cuts across all demographic groups, generates buzz about the retailer and builds loyalty.
The area that should concern retailers the most is mobile. It doesn’t matter how many apps you develop, the technology will always be ahead of your efforts. We are just scratching the surface of mobile interaction with retail. From shopping list to loyalty programs to augmented reality, mobile technology will change the retail landscape.
A great discussion.
In my view, demographics will be the major force shaping the realities of retail for the many years to come. Boomers are aging and spending less and Gen X is not large enough to replace their spending. This will keep the traditional products and channels struggling to find growth, particularly in 4-wall. Gen Y, at a population of 100 million (average age 18) is the new driver of retail success and is already being felt in the growth in two of the other identified forces: Social Media (90% use rate), Mobile devices (48 million iPhones will be sold this year). Retailers that can figure out how to appeal and sell to this emerging group as they age into their acquisitive years will do very nicely.
As an aside, these demographic curves will also have a significant impact on when the “coming rebound” occurs. My guess is we’re talking several years.
The global economy, particularly China and India, is probably the second big driver. It was announced recently that the Chinese will buy more automobiles than Americans, an historic first. It appears that the days of Americans being the biggest global consumer are coming to an end.
This may be the most important topic of 2010.
Retail companies that have decided to save their way out of the recession will have missed a huge opportunity to reinvent themselves. When the economy rebounds, retailers who have addressed the customer experience and embraced new ways of creating value will be way ahead. IT shops are brainstorming new approaches and have some really interesting innovations on the way.
Waiting for the economy to rebound? I think it already has. To me the economy is exploding right now. Cheap labor, low interest rates, low prices on real estate, and big stock market gains. This year has been fabulous for investing and risk taking. This article is about a year or two late. If I had to pick something in those four categories. it would be none of the above. They are so 2007. Time to move on and step up to newer technologies.
I would change demographics to psychographics. Retail is moving away from trying to define the “who” (will we see the end of persona assignment in 2010? Let’s hope so!) and toward figuring out the “why” (need states, missions, occasions). As pointed out in Mr. Dorf’s article, “how” is the next frontier (web 2.0/social).
What rebound? Jobs continue to disappear and when replaced are replaced by service jobs paying 50% of the lost jobs. Some point to improving manufacturing numbers–compared to what? Compared to last month or last year which were miserable? Even a dead fish will bounce when it hits bottom.
Our economy is being held together by two things: 1. It is much worse most other places. 2. Even in our current situation, the USA offers more consumer buying power than anywhere else. Pray that Europe and the Far East don’t come back before we do. If China is forced to build a market in Europe, South America, Australia and Africa, then we will be overrun by inflation and the price of everything will double or triple.
If a retailer wants to stay ahead of the game it will have to rely on some real work. It will have to stress customer service and I don’t mean putting a greeter at the door. A retailer will have to adjust its mix to its customers needs and let them know what it has for them. Managers will stay on the floor talking to customers and should be able to call 60% of the people who come in the store by name. The manager should be able, along with every other employee, to notify customers of at least one special in the produce, meat, bakery and deli departments. Employees should be taught to comment on customers (that’s a great looking scarf, didn’t you buy a new car?). Learn that someone else is always gong to be cheaper on most things, make a point of being cheaper on one or two things.
Technology isn’t going to fix you. What will fix things are employee training and management leadership. If you can do this you will be OK. If not, you are just another storefront and need to be real lucky.