Tools to Captivate
the Connected Customer
How Standards Will Enable Retailers to Compete
in a Consumer Controlled World
Jim Nadler
Principal
jimnadler@trevarian.com
IBM Retail User Group Conference
May 15-18
2011
Orlando, FL
IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
Today’s Agenda
 Today’s Retail Challenge
 The New Consumer Dynamic
 What it Means for Retailers
 The Project Prioritization Dilemma
 The Move to “Real Time” Retailing
 The Role of Supplier Collaboration
 How Standards Help
 “A Retailer Example”
 What About the CLOUD?
 Conclusion
34th Annual Conference
IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
Today’s Retail Challenge
 Attract, Build and Retain a PROFITABLE Customer Base

Drive Operational Efficiencies.

Improve Marketing Effectiveness

Differentiate with Customer Service Offerings.

Meet or BEAT Wall Street Expectations
 Change the Paradigm on FINANCIAL Performance Metrics

Drive Increased Performance through Operational Execution across all
Channels

Increase the Level of Supplier Collaboration as part of DRIVE to Execute
Strategy

Eliminate Practices and Processes that do not provide increased focus on
CUSTOMER CENTRIC programs
Define and Implement Replicatible BU$INE$$ PROCE$$ Change
34th Annual Conference
IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
The Retail Challenge
 The emerging “Consumer in Control” requires new strategies to
COMPETE and WIN
 Industry MUST Move to a Consumer Focused Data Reporting Model
 i.e. Integration of Category Management and CRM – “Shopper
Marketing”
 The emergence of the “digital native” and the advance of mobile
commerce will forever change the retail landscape
 What Role will Social Networks Play in the evolution of retail branding
 ANYWHERE, ANYTIME Information Access is changing the GAME
 Google Price by UPC
 Research Digital Camera Cost/Features on AMAZON while standing in a
Best BUY
 Automating the service process will enable retailers to provide added
benefits without increased costs.
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IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
The New Consumer Dynamic
 The FRUGAL Consumer IS HERE TO STAY
 The “New Consumer” has shifted to pragmatic
consumption
 Consumers ARE Educated About Their Preferences
 Social Networks are changing the Branding Game
 Online Shopping Continues to Grow
 Mobile Commerce is Emerging
 New Consumer Technology Tools are available every 6
months
The New Shopper ROI – “Return on Involvement”
34th Annual Conference
IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
The New Consumer – Key Trends
Boomers will not lead
the recovery
Increased Private Label
Brand Purchases*
Gen X will lead and
retailers will have to
better understand this
group
Continue to Seek Best
“Deals”
Digital Natives (Gen Y)
will emerge as a key
force
Limit Purchases to Need
vs. Want
Shopping Less Often
Limits on “Stock-up”
34th Annual Conference
IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
The New Consumer – “Return on Involvement”
 Consumer LIKE the tools Retailers began to offer pre-recession
Shopping Lists, Recipes, e-Coupons, Digital Receipts and other service
oriented applications designed for their convenience
 Expansion of Customer Touch Points brings new complexity and each
must link to the other
Many Current eMail Marketing tools are SPAM
Approach to Integrated Messaging must link to individuals needs and not
generic market
 Building and Maintaining a connection with the “omni channel” consumer
requires new approaches
 Web/Store/Phone/Social Networks
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Tools to Captivate the Connected Customer
Loyalty Programs: Not Effective Enough
Retailers
Consumers
 Pursue loyalty with loyalty
programs
 Generally underwhelmed to
date
 Recognize programs rarely
deliver on their promises
(have not inspired loyalty)
 Good prices drive loyalty
 Don’t believe retailers have
demonstrated that they know
them
Source: RSR Research, April 2011
8
 Acknowledge they are
challenged to derive insights
from the data they collect
 Product selection drives
loyalty
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Tools to Captivate the Connected Customer
Loyalty for Loyalty’s Sake Doesn’t Work
18% of SA
say yes vs.
5% of NA
9
Source: RSR Research, April 2011
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IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
Have We Lost Sight of the Basics?
10
Source: RSR Research, April 2011
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IBM RETAIL
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Tools to Captivate the Connected Customer
What Does It Mean For Retailers?
 New Ways to Connect with and Support The
Consumer are Critical
 Exceptional Customer Service is CRITICAL
 Price is FLAT
 Traditional Theories Behind Store Layout Need A
New Look
 The deployment of New Technology Platforms play a
Key Role in future success
It is ALL about SPEED to Market
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IBM RETAIL
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Tools to Captivate the Connected Customer
What it Means for Retailers
CONNECT
INFORM
PERSUADE
SERVICE
Store
Product
Details
Pricing
Payment
Web
Value
Statements
Promotion
Return Policy
Call Center
Service
Options
Freshness
Pick up
Options
Mobile
Location
Based
Service
Recall
Notification
An Integrated Infrastructure is Required to Align
Operationally to All Consumer Touch Points
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Tools to Captivate the Connected Customer
What it Means for Retailers
 Merchandising & Merchandise Planning
Store - buy the right product, at the
right cost, maximize selling space and sell the product at the right price
 Marketing - stimulate the brand via various mediums, drive recency,
frequency and spend, leverage loyalty and customer service initiatives
while measuring effectiveness of our
efforts
Connect
 Operations - Provide tools to the front lines to improve our customers
experience , reduce OOS, keep costs The
low
DOTS
Other (Accounting, R/E, Admin) account for business activities, report on
results, provide adequate e-mail and other infrastructure functions to our
business units
Call
Web
Mobile
 eCommerce - maximize virtual transaction opportunitiesCenter
and utilize the
most cost-efficient e-marketing platforms to improve brand performance
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IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
Current Systems Infrastructure
Store
Web
Call Center
A Confused
Consumer
Mobile
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IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
The Project Prioritization Dilemma
 Current Processes are often not the result of an
Integrated S&OP Exercise
 Legacy Systems have “stunted” retailers ability to
react quickly
 Innovation is limited as retailers attempt to keep
up with regulatory and competitive pressures
 Budgets are quickly slashed as a response to
uneven results
 The Business Process you are trying to correct
must lead the way – tie to ROI Model and get the
User Community involved EARLY
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IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
The Need For A Real Time Retailing Architecture
ANYWHERE, ANYTIME ACCESS
Driving Business Process
Mobile Connectivity
Improvements
Web Services
Data
The
CLOUD
Repository
Kiosk, Phone, etc…
2.6%
7.4%
4.4%
0.7%
3.3%
20
06
20
06
17
/
1.0%
6.7%
2.5%
12.4%
17.1%
16.4%
6.1%
15.4%
12.8%
13.3%
13.3%
19.0%
20.0%
12.8%
25.3%
19.5%
28.1%
10.0%
13.3%
12.9%
8.9%
10.0%
12.8%
16.2%
13.3%
13.8%
16.7%
11.7%
16.9%
9.7%
20.7%
9.5%
15.0%
13.3%
8.9%
11.3%
9.7%
14.3%
9.3%
15.2%
17.8%
8.9%
16.9%
11.8%
20.7%
% change
-0.5%
1.7%
0.4%
0.0%
1.3%
-3.1%
-1.9%
-4.0%
1.4%
1.1%
-2.8%
0.0%
2.1%
0.0%
6.1%
28.1%
16.6%
8.9%
20.7%
13.4%
8.9%
20.7%
13.0%
-4.0%
2.1%
-0.3%
9/
0.0%
7.4%
2.4%
10
/
MIN
MAX
AVG
% change
2.9%
2.9%
1.3%
2.2%
0.8%
1.0%
2.9%
1.3%
2.9%
3.3%
1.7%
1.3%
1.0%
0.7%
3/
2
3.8%
5.0%
3.1%
3.3%
3.8%
2.6%
4.8%
2.7%
5.7%
6.1%
3.3%
6.7%
3.6%
7.4%
9/
1.0%
2.1%
1.8%
1.1%
2.9%
1.5%
1.9%
1.3%
2.9%
2.8%
1.7%
5.3%
2.6%
6.7%
9/
1.0%
1.3%
1.8%
0.0%
2.9%
1.0%
1.9%
1.3%
1.0%
3.9%
1.1%
4.9%
4.1%
7.4%
00
6
20
06
17
/
9/
10
/
9/
3/
2
District
1
2
3
4
5
6
7
8
9
10
11
12
13
16
9/
Store, Web,
ZERO MOVERS
20
06
VOIDS
00
6
Figure 1
Point of Service
Sales Reporting
Exception Workbench
Alert Messaging
34th Annual Conference
IBM RETAIL
USER GROUP
Retailers
Tools to Captivate the Connected Customer
Integrated Data Repository
Application Interfaces
Retail
Checkout
Systems
Transaction Data
Digital Electronic Receipts
PCI Compliant
Retailers / Vendors /
Third Parties
Real Time Connection
User Views/Alerts
Summary Data
Sales, OH,OO by Product
Audited POS
Sales, OH,OO by Location
Sales OH, OO
 Purchases by Consumer
SKU/
Channel
Real
Time
Connectors
/ Customer Segment
Product Table/Catalog
 Customers and Users
Transaction DB
POS Transactions
Repository Functions
 Web Transactions
 Access Control and Security
 Mobile Transactions
 Community Management
Customers/Accounts
 Retailer Websites
Real Time Feed to
Operational
Data Store
 Supplier Websites
Social Networks
 Mobile Networks
Supplier
Collaboration
Web Services
 Store Location Table
Application Interfaces
Marketing Views
Operational Views
• Marketing
 Operations
Finance
Customer Services
Consumers
Integrated Purchase History
Hosted Applications
Syndicated Data
Forecasting
 Analytics
Digital Receipts
Shopping Lists
File Transfer
Money Mgmt Integration
Relevant Messaging
Support & Service
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IBM RETAIL
USER GROUP
Tools to Captivate the Connected Customer
Benefits of Retailer/Supplier Collaboration
The Role of Enhanced Retailer/Supplier Collaboration
Inventory Management
 Reduces purchasing and order management time; less administrative time
needed to create and receive product orders, expedite shipments, and
respond to problems
 Improves demand management thus reducing overtime production labor
costs.
 Reduces out-of-stocks for both manufacturer and retailer, thereby increasing
sales and add to gross margin. An added benefit: improved customer
service.
 Reduces buffer stocks; possible reduction in warehouse facilities.
 Improves transportation efficiencies (truckload capacity)
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IBM RETAIL
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Tools to Captivate the Connected Customer
The Role of Enhanced Retailer/Supplier Collaboration
Marketing and Sales
Sales and Marketing
 Equips marketing managers with marketing management tools
 Reduces the complexity of marketing by providing new insights
 Allows you to develop programs that truly serve the needs and wants
of your customers
 Improves ROI on Trade and Consumer promotions
 Facilitates a shift from “function control” to “enterprise management” of
your marketing strategy (focus on MROI”)
 Aids in coordination of advertising, consumer promotion, and
trade promotion activities
 Creates a more unified message that can touch both the head
and heart (appeal to both logic and emotion)
 Promotion compliance tracking (FASB and EITF acctg guidelines)
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IBM RETAIL
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Tools to Captivate the Connected Customer
How Standards Help?
Standards allow for a framework to move forward
quickly while driving down costs
Standards insure that initial development is reusable
Standards based solutions enable faster adaption /
alignment with your business vision
Standards enable fast efficient integration of BEST in
BREED Solutions
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Tools to Captivate the Connected Customer
Key Standards
 POS Log
 e-Commerce
 Payments & PCI
 Digital Receipt
 Data Warehouse
 Product Database
 Mobile Commerce
 Cloud Computing
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Tools to Captivate the Connected Customer
A Retailer Example – BevMo!
March 2010 Creates IT’sMo! – a plan based on desire to explore new
ways of delivery – step outside traditional thinking – take huge
strides to enable rapid deployment of new concepts
 Use of STANDARDS introduce architectures that conform to
NRF/ART’s standards proposed benefits lower initial investment
Demonstrate “proof of concept‟ “plug & play‟ thanks to NRF/ART‟s
standards rapid delivery lower CapEx somewhat higher OpEx
Systems “on demand” as a utility IT Team growth is minimized maximum leverage of current resources systems - scalable on
demand – tied to company performance with the right partners
 SOX-compliance concerns diminish (SAS 70)
 SOFTWARE-AS-A-SERVICE (SaaS) effective software license
model
 CLOUD COMPUTING – fast deployment - eliminate hardware
acquisition costs
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Tools to Captivate the Connected Customer
What About The Cloud?
 Lower cost to engage - minimal infrastructure
 Utilization is metered on an “as needed” basis “Pay by The Drink
Model”
 IT as a Strategic Tool
 Initial investment = a foundation – Can be leveraged as you move
forward
 Access – Anywhere / Anytime
 Best of All: Cloud = low cost Pilots – minimal risk – parallel
approach – current world intact
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Tools to Captivate the Connected Customer
Why The Cloud?
“ cloud
computing is a model for enabling convenient, ondemand network access to a shared pool of configurable
computing resources (e.g., networks, servers, storage,
applications, and services) that can be rapidly provisioned and
released with minimal management effort or service provider
interaction. “
2009 National Institute of Standards and Technology
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Conclusion
 Does your Systems Infrastructure provide ANYWHERE ANYTIME
Access to Customer Demand Signals
 How do you quantify the consumer experience and the investments
needed to understand customer vs. product metrics?
 What service initiatives you offer will provide a meaningful
connection to the consumer
 Data Analysis Tools for Channel Demand Signals – Touch points
are Digital
 Retail 3.0 Will Require a CHANGE IN THINKING and the Consumer
will DEMAND that change
 A Flexible ARCHITECTURE will be a REQUIREMENT
34th Annual Conference