Retailers Seek New Tech to Manage, Drive SalesBy Alison Diana | Posted 2008-11-26 Email Print
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The $2.5 trillion retail industry is bracing for one of the worst holiday seasons on record. Increasingly, they're turning to solution providers to give them the high-tech tools that optimize management and operations, as well as entice shoppers into their stores.
While retailers woo cash-strapped consumers, solution providers and their vendor partners are courting both brick-and-mortar and online etailers with technologies and solutions designed to reduce back-office costs, and enhance productivity and, therefore, the bottom line.
Generally invisible to consumers, these systems range from back-end access to a plug-and-play global warehouse and on-demand shipping to hosted applications, and from sophisticated retail analytics and business intelligence to online inventory intelligence that unites shoppers with the product.
The $2.5 trillion retail market is experiencing no growth, says Dan O’Connor, founder and CEO of RetailNet Group, a Concord, Mass., analysis and consultancy for retailers. "In a zero environment, your goal is to keep your existing stores productive. Conceptually and practically, what that means is you move from an environment where management focus is on growth strategies to an approach where people are really optimizing."
Frequently, optimization means automation. Solution providers, often the right-hand IT man for both large and small retailers, have the opportunity to recommend, integrate and support solutions that better manage inventory, spot shopper trends, detect shoplifting and shrinkage, and tap the Web for accurate pricing.
"There is tremendous amount of supply-chain rethinking, there’s a tremendous amount of collaboration going on between suppliers and retailers, and they’re really changing the way products flow to the store," says O’Connor. "[Retailers are] using technology to help understand not just how to reduce the number of SKUs in the [loss] category, but also from a store-to-store perspective so they’re not carrying all products in all locations."
Transportation costs also are added into the mix, encouraging some large retailers to move from a centralized distribution to a local distribution model. While this cuts down on greenhouse gas emissions and fuel costs, it puts more stress on local store managers to ensure they are buying and stocking the products their regional customers want.
Theft, too, is costly, accounting for $41.6 billion in 2007, according to a National Retail Security Survey released last year. With the economy tanking even further, theft is expected to only increase without retailers taking additional preventative steps, some of which involve technology.
While they may not be as sexy as look-alike avatars or product information booths, back-office IT solutions—and the solution providers that sell and support these technologies—play an equally critical role in stores’ ability to continue to combat the sagging economy and sinking consumer confidence facing today’s shoppers and stores.
New technology is also playing a bigger role in getting cash-strapped shoppers into the malls and stores. While store managers are optimizing supply chains and inventory, retail marketers are turning to new media to entice and attract consumers.
"We see retailers using new technology and new business models to collect and organize both qualitative and quantitative insights about the shoppers that are in the catchment areas around each store," says O’Connor. "The nature of data that retailers are going to collect around each shopper is going to change more and more, and they’ll rely more on proprietary information surrounding each shopper."
Shopper-facing technologies run the gamut from smart shopping carts to targeted marketing via mobile devices, promotional e-mails that turn a company’s entire employee base into a partial sales force and touch-screen kiosks that provide access to a live customer support specialist.
Whether a solution provider serves small brick-and-mortar stores with limited or no Web presence, an exclusively online retailer, or a multimillion-dollar and multilocation chain with both offline and online sales efforts, there are plenty of available technologies to meet clients’ needs. Many developers of these shopper-facing technologies are seeking partnerships with solution providers, both in an effort to expand their own product sales and to provide retail customers with a completely integrated solution. After all, many of these vendors do not provide hardware, networking or integration services, say company executives.
"There is physical hardware that has to be installed, bought and maintained in retail locations. That is not our business. We are a software and services business. We work with the on-site service providers," says Joel McConaughy, managing partner and co-founder of Displayware, a Seattle-based provider of digital merchandising and media download services for retailers.