A Seamless Future

June 24, 2014  by in Business Strategy, Industry   

More than a third of retail CIOs surveyed in a study from the National Retail Federation are considering a single consumer platform to manage transactions across channels.

The study, released earlier this year and titled “Digitizing the Store—the Next Wave of Online and Offline Convergence,” found that integrating store and online operations is a key focus for retailers as e-commerce capable solutions increasingly supplant traditional point-of-sale and mobile technologies.

NRF teamed with research partner University of Arizona and industry partner Demandware, a leader in digital commerce, to survey more than 200 retail business and technology executives in the United States and Europe to quantify the convergence of POS and e-commerce technology, and its impact on digitizing the store.

Some 35.8 percent of retailers surveyed said they’re thinking of using one platform to manage all consumer interactions and transactions, whether online or in the store.

“The future of retail will envelope business platforms that enhance the endless opportunities that new technologies offer, such as systems that allow retailers to provide seamless, relevant and personalized interactions for all of their customers,” said Tom Litchford, NRF vice president of retail technologies in the report. “In this consumer-led industry, retailers are working overtime to keep up with the expectations and demands of their savvy customers, and are intent on integrating the digital shopping experience like never before.”

Specifically, a single platform would consolidate and manage key data elements and functionalities that historically have lived in multiple disparate systems to provide customers with consistent, on-brand shopping experiences no matter how or where they choose to interact with a retailer.

A WORLD OF DIFFERENCE The study found that customer expectations are driving retailers to carefully examine their technology spend and investments. Over the next three years, 80 percent of retailers surveyed expect to maintain or increase store technology investments, and 70 percent say their organization is currently deploying or planning to refresh its existing software.

Additionally, while traditional point-of-sale software has been a mainstay for physical stores for decades, many retailers recognize e-commerce software as an emerging and logical approach to evolve and establish the sought-after single platform. According to the survey, nearly four in 10 (38 percent) surveyed plan to leverage an e-commerce software platform for their next generation store software—twice the number that plan to use traditional point-of-sale software.

“It’s no surprise that retailers are increasingly looking to leverage e-commerce technology as the single platform for all commerce,” said Rob Garf, Demandware vice president of industry strategy and insights. “This provides retailers a great opportunity to reduce costs, improve operational efficiencies, and enhance the overall customer shopping experience in a dynamic consumer environment.”

The retailers defined four priorities technology vendors should heed: improving efficiency; attracting and retaining new customers; reducing costs; and increasing enterprise growth.

IMPROVEMENT NEEDED Mobile-enabled consumers are dictating and controlling the shopping process, and the study found that existing technological infrastructure, architecture and applications are straining to keep up with shoppers’ expectations for instant gratification; and that legacy systems were implemented originally to solve specific problems for specific channels.

The number of channels through which consumers interact with retailers has therefore resulted in:

·         Redundant data that increases the total cost of ownership from system maintenance and operations inefficiencies.

·         Inaccurate customer information that shows up in order, payment and service miscues.

·         Siloed systems (i.e., insulated management systems that don’t interact with other, related information systems) that stifle retailers’ ability to respond to market dynamics and execute growth initiatives.

Those barriers slow innovation, particularly at brick-and-mortar stores. Just 26 percent of surveyed retailers have capabilities to allow shoppers to interact and transact with their brand within the stores via their mobile devices. They’re farther ahead in Europe with such capabilities (31 percent of respondents there) than in the U.S. (22 percent).

The inefficiency of disparate technological environments within the same store risk customer dissatisfaction and lost revenue. That’s why so many retailers are considering a consolidated approach to their systems architecture to more effectively manage consumer engagement and transactions across all channels.

THE NEXT WAVE OF CONVERGENCE Forrester Research predicts e-commerce transactions will reach $371 billion—10 percent of all retail sales—by 2017 in the United States, an increase of 41.2 percent from 2013 levels. Forrester also estimates that the Internet already influences almost half, 49.5 percent, of total U.S. retail sales through some sort of shopping activity.

In addition, e-commerce functionality, architecture and extendibility designed for online shopping has surpassed in-store POS applications. The result is traditional POS, call center and mobile technologies touching the consumer are being supplanted by e-commerce to establish a single consumer transaction platform.

That’s why almost 40 percent of surveyed retailers are considering a single platform to manage all consumer interactions and transactions across all channels.

Because of its more modern and flexible architecture, the study found that e-commerce software is emerging as the most logical approach to establishing a single platform. They already are the backbone of many call centers and mobile-friendly sites.

The next frontier is traditional store-based POS, which while a longtime reliable and efficient tool in brick-and-mortar stores, is proving difficult to extend its functionality across multiple channels. Often, these systems are closed, require heavy customization and are designed for a single location.

Twice as many retailers surveyed plan to leverage e-commerce (38 percent) than traditional POS (19 percent) for their next-generation store software. Only 23 percent of U.S. retailers surveyed, 13 percent in Europe, are thinking about traditional POS for their next-generation POS software. While that trend varies by retail segment, it’s clear that something’s afoot in terms of direction.

THE GOOD NEWS Retailers already are extending e-commerce functionality into stores to give staff and customers the same product, order and customer data that’s used online for browsing purchasing and service.

Store associates armed with extensive customer intelligence are more effective ambassadors of the brands they represent. Retailers shouldn’t miss out on the opportunity to apply the sophisticated analytics found in the digital shopping experience in their physical locations.

Surveyed retailers also rated inventory search and store fulfillment as important digital functionality in stores—especially since consumers are browsing among channels during their shopping process and want access to the same information they found online once they’re inside the store. With that information ready to hand, a store’s sales associates can keep sales from walking by providing customers with inventory visibility across the enterprise and complete secure transactions on the sales floor.

 

The NRF report “Digitizing the Store” analyzed the next steps for retailers as they begin to take advantage of new technologies that help them understand and meet consumer demand.

·         Understand the market and internal landscape. 

Retailers should examine current technology solutions for both stores and e-commerce teams. 

Two-thirds of retailers surveyed indicated that all of their district/regional managers and store managers will or already use mobile devices in the field over the next three years.

A key here is learning to navigate the vendor landscape. A third of retailers surveyed said they are hedging on a single platform playing a role in their technology strategy because of concerns about a nascent technology and risks related to organizational change. Their main worry about a single platform is that software vendors may not have a comprehensive, proven solution. Retailers should talk to vendors to understand their vision and make sure it aligns with their business model.

·         Establish a technology roadmap. 

This should define success, support business initiatives and identify a path with clear milestones.

This effort should include considering the cloud as a means to centrally manage consumer-facing systems. The survey found that three in 10 retail executives are currently considering cloud options for their point-of-sale software applications.

·         Mobilize and empower store associates.

Even tech-savvy consumers still rely heavily on the physical store experience as part of the purchase process.

Retailers should arm store associates with the same information that consumers have, provide training and incentives, and empower them to leverage information capabilities as the store goes digital.

·        Invest in wireless to leverage initiatives such as guided selling, “clientelling” and endless aisle.

While two-thirds of retailers surveyed indicated that management do use or will use mobile devices in the field over the next three years, only one-third said their sales associates had access to those devices.

Currently only half of retailers use smart phones and one-third use tablets to access POS software in the field. Adoption of such hardware, though, is pivotal in the transformation to a single consumer transaction platform.

·         Drive continual innovation by creating a culture that allows employees to test and learn quickly.

Consumer demands are changing rapidly, so innovation and speed are not one-time events, but should be standard operating procedure.

·         Extend capabilities to channels, devices and geographies so the business can innovate quickly.

Employees should have the chance to experiment quickly and extend capabilities without the traditional costs due to administrative and system complexity.

As part of this evolution, retail executives should drive speed into their business, accelerating the time from inception to delivery into live operation.