Monthly Issue
From Home Furnishing Business
December 4,
2014 by in Business Strategy, Industry 
By: Bob George
The appointment with your certified public accountant is still several months away. Your friendly banker’s annual meeting is also in the future. Therefore, your business resolutions are a matter for you and your personal business goals and objectives.
The month of December is probably budget time. More than likely, working from your financials, the chart of accounts has been transferred to a spreadsheet with your controller applying his or her best judgment for the expense items. The critical decisions regarding salary increases and topline (revenue) increases have been left for your final input. The forecast contained in later pages of this Home Furnishings Business issue may provide some guidance. Most likely the resulting bottom line will be quite similar to what you achieved last year.
Why?
Because you want a realistic budget. That’s why.
Now, finally, we get to those resolutions. Spreadsheets are wonderful tools that allow you to play the “what if” game. Increasing revenue by 15 percent; improving gross margin by two points; reducing sales expense by two points; reducing warehousing/delivery by two points; reducing general and administrative by two points – all of these actions will cause a significant change in your bottom line.
The question becomes, “How do I make these actions more than the manipulation of a spreadsheet?” The answer requires the resolve to change not the numbers, but the people, process, merchandise, and retail experience. What gives you the resolve to make these resolutions and then stick to them? First, you must know that they are achievable when compared to industry standards of good performance. You may then reinforce this by participating in a dialogue with a peer group. This group’s past experiences often can guide you in evaluating your current situation. Next, establish metrics that you monitor weekly, monthly, and quarterly. Understanding the impact of each metric is essential.
What causes the metric to change? It is simple, but you must change the metrics. The starting point is a resolution followed by hours of execution. I hope you find inspiration and input from the pages of Home Furnishings Business.
Contact us if you need encouragement.
September 18,
2014 by in Business Strategy, Industry
You’ve probably been hearing for several years about this thing called “the cloud.” The term gets tossed around a lot, but a lot of folks don’t really know what it means in the context of store technology and operating systems.
Basically, the cloud is a network of servers accessed via the Internet that can provide the same sort of operating functions that are housed in the physical servers running in any business.
Here’s an example from digital innovation news source Mashable.
If you take a picture on your smartphone, that picture resides in that physical device. If you upload it to Instagram, it’s going onto the cloud, where you can access it at any time, anywhere from your laptop, tablet or phone. If you delete the photo from your phone’s internal memory, it still exists on a server located elsewhere—along with information from thousands, even millions of other users.
Some service providers are moving entire operations to the cloud. Take Adobe, which has transitioned its creative services to the cloud. You can’t buy the software for yourself any more, but pay a subscription fee to use “Adobe Creative Cloud” online. Home Furnishings Business recently moved its editorial production to this service.
IMPLICATIONS FOR FURNITURE STORES
Retail automation vendor STORIS has offered its operating system on the cloud for 10 years, said Don Surdoval, president and CEO. He believes the cloud is a big part of furniture retailing's future. Already, at least 125 of STORIS' retail customers have migrated to the cloud, representing north of 1,500 users.
"We feel that, for the bulk of the industry, it's more cost-effective for us to provide the infrastructure" for running the software, he said.
The cloud even is attracting the attention of some of STORIS' largest furniture retailing clients, companies that have the volume and complexity to run their own servers.
"Even the top 100 (retailers) are talking about using it now," Surdoval said.
The best thing about the cloud is that you can access it from anywhere, any time, said Myriad Software Principal Carolyn Crowley. Myriad made its store operations software available on the cloud in 2008.
“For a furniture retailer who doesn’t want to be heavily involved in information technology, it’s perfect,” she said. “You don’t have to worry about an infrastructure.”
The cloud is gaining momentum at Myriad. In 2012, a lot of its larger clients began to move that way.
“Close to 25 percent of our clients are on the cloud,” Crowley said. “In the last couple of years, the majority of new systems we’ve sold have been cloud-based. “We go either way—server or the cloud.”
Profitsystems developed Retailvantage on the Cloud, the cloud application of its point-of-sale and inventory management system, seven years ago, said Guadalupe Pagalday, product marketing manager at the company’s Denver, Colo.-based parent company Highjump Software. Clients began signing on soon after.
"Serving their customers and growing their business: That should be the focus of retailers," Pagalday said. "Profitsystems developed RETAILvantage on the Cloud to allow home furnishings retailers to focus on what they do best and solve two significant obstacles retailers face when adopting a retail management system: limitations of cash and technical expertise."
WHY THEY SHIFTED Crowley said maintenance issues and expense have pushed more of Myriads retail customers
“cloudward.”
“They had an ‘event’—a server crash or hardware program and they didn’t have a back up,” she noted. “What made it an easy sell with single stores, was the ‘I don’t want to buy another server and worry about maintenance and upgrades.’
“For us, if our client is growing the business and add more memory and additional users, it’s very easy to add new user licenses, and you don’t have to pay labor for installation.”
She added that it’s not just the hardware that a retailer purchases if they want their own in-house server.
“It’s the labor—if there are problems, you pay to fix them,” Crowley said. “The contractor must maintain it. You have to add this to the cost.”
Does your system need an upgrade? That’s a lot easier on the cloud. Cloud providers often offer selections that are upgradeable in the future.
The cloud solution has proven to be stable and reliable, with an up time of 99.9 percent, state-of-the-art anti-virus and firewall protection
"Our retail cloud solution eliminates the burden of maintaining a computer network,” Pagalday said. “There is no file server to purchase, no backup hardware to worry about, and no expensive outside technical help needed."
CHALLENGES Crowley said the biggest block for retailers considering the cloud is that they’re nervous not having their data housed in their store or warehouse.
It’s an issue of security, and hackers have shown plenty of skill when it comes to infiltrating the Internet.
“Any cloud provider is very on top of security,” Crowley said. “That’s improved a lot over the past 10 years.”
In late 2008, a coalition of industry practitioners, corporations, associations and other key stakeholders formed the Cloud Security Alliance. The association’s mission is to promote the use of best practices for providing security assurance within cloud computing, and to provide education on its uses to help secure all other forms of computing.
The organization’s Web site (CloudSecurityAlliance.org) contains a wealth of information on security issues related to cloud computing, and the establishment of standards to help ensure the protection of data and services on the cloud.
The cloud is a strong bet for a number of large, everyday-name technology companies like Microsoft, Apple, Google and Yahoo.
“The Cloud is here to stay, and the Cloud is where business operations have moved or will move,” Crowley said.
For those with security concerns about cloud security, network administration specialists monitor and maintain the cloud network.
Other benefits include remote access that allows retailers to connect to their business from anywhere in the world via the Internet; rapid deployment and scalability.
"Managing the business from the cloud allows retailers to be nimble and react quickly to changing needs,” she said. “During short term events like annual holiday sales where traffic patterns increase and additional sales help is required, it is a straightforward and simple process to simply 'turn on' additional user applications and have them available only for the duration of the event."
The only potential disadvantage to the cloud Highjump sees are local Internet-service interruptions, but there's a fairly easy fix for that. Most companies would opt for cable Internet access for more reliable service with less downtown than satellite, DSL or other broadband options.
Cloud computing is gaining popularity as businesses face the prospect of replacing aging servers and networks, which can be costly and time consuming, Pagalday noted.
"Making the move to the cloud is attractive for three primary reasons: cost savings, flexibility, and security," she said. "We have seen our clients increase efficiencies, improve cash flow, and be able to meet business demands more quickly by moving their computing system to the Cloud."
July 8,
2014 by in Business Strategy, Industry
Standard Furniture Keeps Moving Forward in Its Second Century of Business.
Jacob Shevin took over to represent the fourth generation of his family to serve as president of the company, which now counts 13 stores in Alabama and Tennessee, and employs 100 people. While he’s continued a tradition of customer service and budget-friendly prices passed from down from his great-grandfather, grandfather and father, Jacob is making his own mark.
Recent activities include a new customer feedback process based on Standard’s Web site, and surveys the retailer began e-mailing to customers and conducting in the store in early May; and a formal sales training process that Shevin says should constantly raise performance standards as everyone improves their skills.
FINGER ON THE PULSE
“Everyone says they try to give good customer service, but we are constantly seeking feedback now, and most of it’s very good,” Shevin said. “We have a place on our Web site now for that; and 30 days ago we started sending out surveys asking customers to give us very honest feedback— we do that in the store, too.”
The store’s overall positive rate from customers is 99 percent, and exceptions get instant attention.
“I track that daily—I have it up on my computer all day, and if we receive negative feedback, I’ll check into it immediately. We like for the manager to handle it, because they’re the one who’s in the community.”
The Web site feedback process has proved particularly useful.
“Customers don’t always want to tell you something (in person), they’d rather say it on line,” Shevin said. One store manager reconciled a customer’s problem after she complained on Standard’s feedback site, and Shevin says she’s a customer for life now.
“She was amazed that a store responded and did something about it,” he said. “She thought she was just telling the world about a problem, but we read it, too.”
RAISING THE BAR FOR SALES
After a strong year in 2007, Standard, like many furniture retailers, ran into tough times: “We hit the same wall the rest of the world did,” Shevin said. After an uptick that began in early 2010, the retailer saw steep increases in sales the next two years. The last couple of years, though, have been fairly flat, with only small sales gains.
Shevin expects that to continue, and is taking steps to offset the trend.
“I’m not seeing any reason for sales having huge increases in our business,” he said, adding that the economic recovery hasn’t reached many in Standard’s budget-conscious demographic.
“When people talk about the recovery, a lot just look at how the stock market’s doing. “People that were rich before (the recession) are rich again, but the increase in the stock market hasn’t really helped the working class shopper.”
A major focus at Standard, therefore, is expense control, but the retailer also instituted programs to earn shoppers’ business and make the most of every sales opportunity that does arise.
“We’ve instituted a formal sales training process, which has been well accepted by the staff,” Shevin said. “We’re doing daily, weekly and monthly performance measurement. We can coach the underperformers so they’re improving, and then you increase the overall averages.
“We track their performance daily—tracking average sale and closing rate its one of the most important things we can do to help the top line.”
PUTTING THE WEB TO WORK
Standard is tweaking its Web site in a number of ways—the feedback function is just one example. Standard is working on offering an online credit application to the site. That plays to a vital part of the store’s business model. “In –house financing is very important to us and something that attracts a lot of customers.”
Shevin said. “We write our own paper, and that gives us a good source of repeat business. People with an open account here are more likely to come back when they need something else.”
Another finance related tool is automatic payments on customer accounts, which Standard currently has in live testing with customers. “Pelham is our test market for that,” Shevin said.
Standard also spends a lot of time, money and effort to maintain an in-stock position for the merchandise on its floors, and fast delivery is another differentiator from much of its competition.
Standard developed its store operating system in conjunction with a local vendor and wants to integrate some of its information power into the Web site.
“We invested a lot of money in our inventory system,” Shevin noted. “We had to build the system ourselves because of the uniqueness of our installment credit system.”
Currently, Standard is working on putting that inventory information to work on the Web site, allowing customers to immediately check on whether a product is in stock. “Our Web site is a tool not only for customers browsing at home, but also a tool we’re using with shoppers in the stores for quick access to things such as materials in the furniture and product dimensions,” Shevin said. “It’s also an opportunity for special orders on something that might not be at a particular store right then.”
SOMETHING NEW
Standard has 13 stores, and no two are exactly alike in terms of setting and merchandising.
Locations range from its downtown Birmingham store, housed in a multi-level historic street front, to strip shopping center spaces. “We do not have a cookie-cutter format for the stores,” Shevin said. “My goal is for customers to see something new, so we change the floors up more often than others might. Even if it’s product you’ve been carrying, people see it differently.” Bedding gets a lot of attention—Standard’s target is to make bedding 20 percent of sales, which it hit last year—and Shevin credits the category with helping the retailer make it through the recession.
“That didn’t seem to get affected as much by the downturn,” he said. “We fight hard for that business. Any print advertising we do includes bedding.”
Bedding is prominent on Standard’s floors. A category display is the first thing that customers see, for example, when they walk into the Center Point, Ala., showroom and clearance center.
The downtown store features a dedicated bedding space within the showroom, the “Mattress Loft.” Right now, Standard has the concept in four other stores. The feel in the downtown store’s bedding department is cool and calm, and in addition to mattresses, displays related accessories for a complete store-within-a-store experience.
LOCAL HEROES
Standard’s biggest advertising spend is for television.
“It’s about item and price for the most part, or big promotions like a clearance sale,” Shevin said. “That’s what draws our customers in.”
Standard has a social media presence, but Shevin says that doesn’t play a major role at this point.
“We use (Facebook) to do things like post new items, but we haven’t figured out how to place a value on it yet,” he noted.
Advertising’s one thing, but a key part of Standard’s mind share with consumers is involvement in the communities it serves. Birmingham is a large metropolitan area, but the retailer also serves small, close-knit towns.
Shevin has a lot of outside activities (see accompanying story “Free Time”) and he likes store managers to do the same.
“Each store has its own community—I’m active in the Birmingham community, and I encourage store managers to do the same,” he said. “Some have been city council members, and it runs all the way down to buying the logos on T-ball shirts. We contribute to organizations like United Way, Red Cross and Salvation Army that help in those communities.
“We don’t want to be perceived as a furniture chain in a small town, so the managers choose where they’ll help in that town. Someone in Moulton, Ala., doesn’t relate to what we’re doing in Birmingham.”
Free Time
In his spare time Standard Furniture President Jacob Shevin enjoys getting outdoors.
“I love to go to Lake Martin,” he said. “Me and some buddies have a cabin down there, and it’s just a great place to get away and relax. “I also like to get out and play golf when I get the time.”
Shevin also is involved in the community and industry. That includes serving on the Alabama Retail Association board of directors; the Next Generation Now networking group for up-and-coming home furnishings executives; and membership in the 2013 Leadership UAB Class, a group of community advisors made up of young professionals and volunteers supporting the University of Alabama-Birmingham.
June 24,
2014 by in Business Strategy, Industry
Furniture retailing is a people business, and many store owners — especially in smaller operations — tend to rely on their gut to tell them whether business is good, bad or somewhere in between.
While instinct is often a reliable guide, cold, calculating technology can help separate fact from fiction and help grow your business.
This month, we’re talking to retailers about how they are putting technology to use in their stores—not only to help run the numbers, but to assist in training, process improvement and enhance the customer experience.
Josh Hudson is president of Hudson's Furniture, based in Sanford, Fla. As Hudson’s almost doubled in size from nine to 17 stores, technology became even more important in managing the business—and Hudson brought a younger generation’s techno-savvy as he rose to leadership in the family business.
“Technology is such a critical part of increasing your effectiveness and staying on top of things,” he said. “I wasn’t (implementing) it to make things more complicated—it makes it so much simpler to manage the business and clarify goals.”
Simplifying access to the technology itself helped.
“We went to a cloud-based system, and we’re in the process of taking our (point of sale) to the cloud,” Hudson said. “Everyone should be able to access everything through the Web. Making it Web-based makes it so much simpler.”
In addition to serving as company president, Hudson also heads up the stores' information technology: “That’s how important it is.”
IMPROVING CUSTOMER EXPERIENCE San Diego-based Jerome’s Furniture is taking advantage of the proliferation of Web-friendly mobile technology to make shopping more convenient—wherever the customer’s touch point lies.
“We are working on providing access to Jerome’s wherever customers want to interact—their mobile phone, tablet, the Web,” said COO Phil Kenney. “They can now create online shopping lists, so when they come into the store, our associates can recall that information with the customer. We’re rolling out tablets to our sales team so they can pull that shopping list for them.
“The key here is that we’re centralizing all the data, because we look at it as a continuous shopping experience.”
Jerome’s started out by improving the customer’s ability to quickly get to the product she wants on the Web site.
“When we did that, our Web sales increased 10 to 15 percent,” Kenney said. “The next piece was that we wanted the customer to be able to create a shopping list on the Web site. When people come into a store with a list, those turn into orders two to two-and-a-half times the size of our average order.
Jerome's also uses e-mail, geo-targeting and in-store Wi-Fi to reach online customers.
“If they have their tablet or mobile and want to do their own research on the products they see,” Kenney said, “we say go for it.”
TRAFFIC SIGNALS Hudson’s tracks key performance indicators on all aspects of its business — including sales, inventory, profitability marketing, staffing and traffic count data.
Hudson’s uses the Flonomics traffic counting system to identify sales opportunities.
“Everything else we track — profit, inventory, marketing — shows how well we’re maximizing those opportunities,” Hudson said.
Using traffic data, instead of sales data, to determine staffing needs, has led Hudson's to a better shopping experience for clients and higher revenue per store.
“We guarantee every sales associate to have 140 customers a month,” Hudson said. “Better staffing allowed us to improve our customer experience.
“We use secret shoppers, and when we have a negative experience, it’s always some variable on, ‘I didn’t have the time to serve the customer and go through the steps you want me to cover with them.’”
Plotting traffic also helps manage store performance, he said.
“We found the No. 1 store we have (showed) double the sales performance of our lowest store—and in a much worse demographic area,” he said. “When you start measuring, it shows where you can improve.”
As a furniture retailer expands from one or two stores to three or more, the owner who might have eyed a lot of information in a single location can’t be in all the stores every day. Accurately counting information about sales, ratio measurements and traffic gets more difficult.
“At that point, gut instinct isn’t enough,” said Flonomics CEO Charles Von Thun.
Are you staffing according to sales peaks or traffic peaks? If you're staffing based on sales, you might be missing opportunities, and that’s why a number of retailers are using traffic-counting technology such as Flonomics.
“The idea is that furniture retailers have an experience they want every person walking through their door to enjoy,” Von Thun said. “There needs to be enough people with the right training and experience on the floor to deliver that brand experience.
“What we see with our furniture clients is that, historically, most don’t have traffic counting in place, or the data they do generate isn’t available quickly enough.”
That leads to staffing by sales instead of actual traffic, which has a couple of effects.
“First, they don’t know what they might be missing” in terms of lost sales due to inadequate service levels, Von Thun said. “Second, we asked for the typical length of the purchase experience, and a significant number said it’s more than an hour.
“If you open at 10 and have (a salesperson) coming in at 11, you might have lost an hour of sales experience with a customer.”
GET TO THE POINT Retailers also can use technology to develop customer relationships at the point of sale.
One key is capturing information. Not everyone makes a purchase on the first visit, so you need the ability to follow up. If they’re in your store, you know an opportunity exists.
“Fifty to 80 percent of people walking into a store walk out without buying,” said Kenney, Jerome’s COO. “Furniture is a big purchase—it’s the third-largest investment people make—and customers want to take their time and do research.
“We make sure our sales associates are, first, equipped with the tools to gather that information and, second, use an e-mail to follow up on the people they talk with and ideally get them to come back to the store” or make a purchase online.
Jerome’s also is investing in point-of-sale technology to enhance its “continuous shopping experience.”
“We have touch screens for credit applications now, and we’re moving to what we call assisted work stations around the store, so the customer doesn’t have to have a cashier to check out,” Kenney said. “Within a year, we’re going to make that tablet-based. We expect that to increase conversion rates.”
Meshing point of sale and point of purchase is another step Jerome’s is taking.
“That way the sales associate doesn’t need to leave the customer,” Kenney said. “We put technology in proximity to that customer’s purchase decision. We don’t … have them sit down and wait for a cashier to check them out, and we’ve seen an increase already in our conversion rates.
“The overriding thing with point of sale is that purchasing furniture—the research, the store visit, delivery—is a complicated process. You need to make technology available, but not intrusive.”
ONLINE POS As more and more retailers are selling furniture online, they can take a cue from some things e-commerce retail specialists are doing at this emerging point of sale.
Beyond Stores, a Davie, Fla.-based online retailer, credits a program called PriceWaiter for its 25.4 percent increase in sales and 22.8 percent increase in conversions over a three-month period—without cannibalizing existing revenue.
Beyond Stores has been using PriceWaiter—which allows a shopper to make an offer on items — since last summer.
“When you’re on an individual product page, you can go through the regular checkout process (which includes a coupon for a discount), or access PriceWaiter on the ‘make an offer’ button and tell us what you’re willing to pay for this item,” said Mark Ginsberg, marketing director at Beyond Stores.
“You can leave specific comments. The shopper puts in an e-mail and password, and that enters the offer and starts a discussion.”
The best thing about the program, he said, is that it engages customers in a dialogue with the retailer.
“It brings back some of the personal relationship and conversation to online shopping,” Ginsberg said. “It can also be used as a price-matching system.”
Say a customer comments that she found the same item at a lower price on another Web site. Beyond Stores makes sure to verify the price on its own before responding.
“If we accept the offer right away, the customer purchases the item immediately,” Ginsberg said. “We want to provide high quality home furnishings at discount prices where we can, and this allows us to work with the customer and engage in dialogue.”
Beyond Stores also asks for a customer's ZIP code, which enables it to factor in delivery costs.
“If they’re close by,” Ginsberg said, “it’s easier to push that discount over to the customers, and it helps the negotiating process.”
Another online retailer, Chattanooga, Tenn.-based Smart Furniture, uses PriceWaiter to sell high-ticket items — average retail price of around $700 — to price-sensitive consumers. The result of adding the PriceWaiter “Name Your Price” tool to its site was a 3 to 5 percent boost in conversions, and the average value of a PriceWaiter transaction increased to $1,100.
At 25 percent, PriceWaiter is Smart Furniture’s highest converting lead source — over catalog requests, newsletter sign-ups and e-mail campaigns.
Partnering up, Getting it Done:
Teaming up with a technology partner not as simple as flipping a switch.
The first step is to analyze what you need your system to do, and whether that system fits your business model.
“Every system says they’re easy to work with, but really they aren’t,” said Phil Kenney, COO of San Diego-based Jerome’s Furniture. “There’s a lot to learn. Jerome’s has 500 people, and if we make a change, that’s a very big job.”
Jerome’s uses a retail operating system from JDA Software Group.
“We’re trying to do some of our own things to tie around the operating system,” Kenney said. “One of the things we’re working on right now is to give the associates information about the customer, and about their performance, through business intelligence systems.
“You have to match your business model to that system, and make sure your model can run in that system. The system can’t dictate your business model—that’s what makes you unique. I think a lot of people forgot that for a while.”
The second step, Kenney said, is to assess the capabilities of both your technology and your operations team.
“Are you going to build on top of a system,” he said, “or rely solely on your vendor?”
Finally, you’ll have a lot of options to sift through. Be patient.
“There’s a lot of technology available,” Kenney said. “Work through your options, check who’s using it. This is very important.
“There’s a community of users around whatever you go with where you can get support.”
Cloud-based services such as Google Apps offer a lot of tools geared toward helping small businesses grow, said Josh Hudson, president of Sanford, Fla.-based Hudson’s Furniture. They also don’t cost as much as a lot of other options.
“You can get everyone on a common platform and move away from so many PC-based functions that drive up (the cost of) technology,” Hudson said. “A lot of the furniture-specific systems are going Web-based.”
IMPLEMENTATION ISSUES When implementing new technology, you can't just flip a switch and expect results.
Hudson's Furniture started using the Flonomics traffic-counting system three years ago.
“It’s been a push, with lots of one-on-one conversations,” Hudson said. “You have to explain why you’re doing it, and get buy-in from the team.”
Also, look before you leap.
“I don’t jump into anything without full research and testing,” Hudson said. “We started out with Flonomics at one store to see how it would work” before rolling it out to more locations.
Implementation of any technology requires a willingness to change, Flonomics CEO Charles Von Thun said.
If you’re used to having two or three people on the floor during the week and four or five on Saturday, real traffic numbers might indicate you need just one on Monday, but seven on Saturday.
“Once you get the right people on the floor at the right time … you can get a meaningful bump in conversions,” Von Thun said. “If your (conversion rate is) in the low 20s raising it a couple of points can mean a lot.”
Implementation has to come from the top. A manager or owner has to show buy-in to the new technology and follow through to make it stick with the sales team.
With Flonomics, Von Thun said, there’s a sequence to implementation.
“First, get the right people and number of staff on the floor at the right time,” he said. “Second, make sure they’re all delivering the experience you want. At that point you can start refining and fine-tuning — find where you can shave a couple of minutes off the process, use technology to improve the process.
“The last piece: We think this system works best when the numbers are out in the open. The sales manager should coach (the sales team) through it, say ‘Here’s an opportunity we missed.’”
It can take two to three months to get everyone up to speed.
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.