Consumer Good Retail Building the Intelligent Store

7/31/2019 Consumer Good Retail Building the Intelligent Store

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1 FUTURE OF WORK September 2011FUTURE OF WORK

Building TheIntelligent StoreTo boost brick-and-mortar productivity and ROI, retailers must

smartly apply lessons learned online and reconnect with shoppers

by tapping social, mobile and other IT advances that deliver a more

intuitive, content-rich and consumer-empowered experience.


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2 FUTURE OF WORK September 2011

Online stores offer consumers a bounty of information. Whether its apparel, food or home goods, mixing and matching hap-

pens at the click of the mouse. Suggestions for complementary items quickly appear, and premium upgrades are always at

hand.

To consumers, these practices feel logical and intuitive. To retailers, they are the essential sales techniques of bundling, cross-

sell and up-sell that the digital world seemingly handles with ease. Now, store retailers are poised to extend the same rich

content to physical stores. Theyre reinvigorating the shopping experience with mobile services, cross-channel integration and

the transformation of point-of-sale to point-of-service. Service is back, and stores are primed to offer it.

The ubiquity of mobile phones has served up the ideal delivery platform for store retailers. With it, brick-and-mortar stores canferry the same abundant details product information, special pricing combinations, related items of interest to give shop-

pers a more informed decision-making environment and do so in a familiar interface: their own smartphone.

How will this new future play out, and how will it impact the future of work within the retail space? To nd out, we conducted

an online survey in mid-2010, asking more than 2,200 consumers about store shopping. Listening to the voice of the shopper

delivered startling results:

Store retailers are pivotal in shopping decisions, even among so-called digital natives.

Gen X (ages 34 to 45) and millennial or Gen Y (ages 18 to 33) respondents are more receptive to mobile services than olderrespondents, but the majority of shoppers in these categories still receive most of their product information from stores.

Whats more, respondents preferred dynamic store displays to online feedback as sources of product information, showingthe persuasive powers of electronic media at work at the point of sale.

This research illuminated ve megatrends that are emerging to reshape the retail sector. By better understanding the dramat-

ic changes underway in todays shopping experience, retailers can capitalize on their buying inuence and gain new ground.

Megatrend #1: Sales and Product Informationvia Mobile PhoneOur research indicates rich potential in the retailer-to-shopper (or brand manufacturer-to-shopper) relationship. To tap it,

retailers and manufacturers need to develop a deeper understanding of shoppers. What do customers want? For starters,

shoppers overwhelmingly favor delivery of in-store marketing information to their mobile devices (see Figure 1). According to

our survey, pricing and product information as well as promotions are welcome details that would prompt them to use their

mobile devices to interact with retailers as they shop.

Coupons are the biggest draw but not the conventional discount offers clipped from print publications or even traditionalmail-in rebates, which 40% of respondents peg as the most disliked aspect of checkout. Instead, mobile coupons are the type

that have an expansive fan base waiting for them.

The successful, headline-grabbing daily deal site Groupon has made coupons sexy by putting a contemporary spin on them.

The site whose name is short for group and coupon posts discounts that require a minimum number of buyers. To

bring the deal to fruition, shoppers turn to social media sites

like Facebook and Twitter to spread the word quickly. (In De-

cember 2010, the two-year-old company rebuffed Googles $6

billion acquisition offer.)

Retailers, too, have a ready audience for mobile coupons, which

our survey underscores. More accustomed than other age

groups to the personalized nature of social media and perhaps

more intuitive about the potential for individualized buyingopportunities, Gen X and Gen Y respondents are enthusiastic

about digital discounts, with 64% and 71%, respectively, afrm-

ing they would take advantage of them. At 57%, the 46-to-64-

year-old baby boomers also strongly favor mobile coupons.

Equally intriguing, our survey found mobile coupons most devoted proponents springing from an unlikely demographic: A

healthy 82% of shoppers earning $200,000 or more annually favor coupons on their mobile devices more than any other

income segment. High-end shoppers, it seems, want value as well as convenience. Theyre armed and comfortable with the

newest technologies and ready to make the most of them.

For starters, shoppers

overwhelmingly favor

delivery of in-store

marketing informationto their mobile devices.


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September 2011 FUTURE OF WORK 3

One retailer we are working with is looking to eliminate the hassles associated with manual coupon redemption for its larg-

est customers, who would also need to become part of the retailers loyalty program, if theyre not already. The idea is to

provide and then process all coupons (manufacturers and retailers) at the point of sale via a business process as a service

(BPaaS) solution. Both the customer and retailer benet: The customer gets a streamlined coupon redemption process, and

the retailer creates deeper customer loyalty within this valuable segment.

But mobile services are just one aspect of a smart long-term retailstrategy. To thrive in the digital age, retailers need a thorough un-

derstanding of the end-to-end shopping decision process. Provid-

ing in-store customers with access to marketing information is an

essential step toward that goal.

Megatrend #2: Taking the Store to theCustomerAn even more complex and overarching goal for retailers is creat-

ing a consistent shopping experience across all channels. To to-

days consumers, physical-world boundaries are history. Shopping

no longer begins and ends when stores automatic doors slide

open; instead, its a uid process. Consumers encounter buyinginuences displays, opinions, reviews as they walk store aisles, browse online at home or connect over public networks as

they stroll in the park. At each location, they want the same store experience.

Call it taking the store to the customer. Todays stores must go where the shoppers are a mandate that respondents echoed

loudly (see Figure 2). Sixty-three percent favor the exibility of purchasing a product online, having it delivered to their home

and, if needed, returning it to the store. Indeed, our survey shows shoppers are interested in emerging hybrid models like or-

der online and pick up in-store or purchase in-store for home delivery or order in one store for pickup in another store.

While their appeal to shoppers is promising, the new models also require exible ordering systems that ensure inventory is

allocated correctly.

To todays consumers,

physical-world boundaries

are history. Shopping no

longer begins and ends

when stores automatic

doors slide open.

Coupons Valued as a Mobile ServiceIf a retailer offered the following services for a personal mobile device, please indicate

how likely you would be to use them.

Figure 1

0

1

2

3

4

5

6

7

8

9

10

5.6 5.96.26.0

6.67.0

...

View your status/points in the stores

loyalty program

Ability toplace an

order

Productcomparisons

Product andprice look-up

Store locator Coupons

Measured on a scale of 1 to 10, with 1 least likely and 10 most likely to use.

Base: 2,243 U.S. consumers 18 years of age and olderSource: Cognizant


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Convenience is paramount: Not only do 54% give a thumbs-up to following online purchase with in-store pickup, but 57%

want their store purchases delivered at no extra charge. Such amenities are likely to become key differentiators as boomers

age and clamor for ways to make store outings less physically demanding.

At its core, cross-channel shopping is about the return of service. For retailers, seamless shopping requires offering all their

capabilities, all the time. As a result, cross-channel integration demands signicant changes. In addition to expanded home

delivery, it means customer-service views of catalog, online and in-store purchase history. Organizational implications need

to be addressed, too. Where does revenue suffer when store purchases are returned online? Who owns the inventory? Is a

centralized merchandising organization for inventory required? And if inventory remains in control of the channel, how doesa cross-channel transaction affect KPIs?

The answer is that to succeed in the digital era, retailers need to reshape their businesses around shoppers. For example, our

survey reveals that retailers need to be exible in how they serve customers when it comes to delivery options. Traditional

organizations outmoded processes, service models and technologies make it increasingly difcult to serve todays custom-

ers. To provide the level of service that customers expect and demand, retailers need a single view of inventory, as well as

visibility into orders and how best to fulll them. This requires a new paradigm.

Megatrend #3: Distributed Order ManagementIntegrates the RetailerThe new customer experience paradigm requires distributed order management solutions. Indeed, the need to manage

orders across multiple channels is the critical enabler for the future of retailing. Distributed order management tops many

retail CIOs priority lists, but it requires tight integration with WMS, CRM and supply chain solutions.

A closer look at shoppers preferred remedies for out-of-stock products reveals why retailers need to embrace distributed

order management. Variety is the rule. Women prefer free home delivery for out-of-stock items, while men are willing to

return to the store at a later date in exchange for a 10%-off voucher (see Figure 3). Perhaps owing to their youth and greater

discretionary time, Gen Y shoppers, too, prefer discount vouchers to other remedies. The differences indicate that stores

should be capable of handling a variety of out-of-stock conditions, and the process should be highly integrated with back-end

systems such as order management, sourcing and logistics.

Service Offerings Go Multi-ChannelWhich of the following service offerings do you most value from a store?

Figure 2


0 10 20 30 40 50 60 70 80

Ability to purchase a product online, have it delivered

to your home and return it (if needed) to the store 16%

57%

7%

54%

5%

13%

3%

7%

2%

5%0%

Most

63%

Ability to purchase a product in the store

and have it delivered to your home at no extra charge

Ability to purchase a product online

and pick it up in the store

Ability to purchase a product in the store and return it

(if needed) using online procedures

Ability to purchase a product via personal mobile device,

have it delivered home and return it (if needed) to the store

Ability to purchase a product via a personalmobile device and pick it up in the store

Second Most


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We expect to see vendors tighten their ability to interact with distributed order management solutions and to deliver those

solutions themselves. Order-status information must also integrate with the megatrend of mobile solutions. Customers are

increasingly using mobile platforms for status updates instead

of calling the contact center.

To provide the experiences that shoppers want, retailers need

to upgrade their systems and back-end processes. Having the

right systems support is critical for success. One advantage that

brick-and-mortar retailers retain over their online-only compe-tition is the convenience of their physical locations as points of

service. Retailers should use that infrastructure to their full ad-

vantage by integrating customer information across channels.

As channels of distribution and service grow, there is an increasing need for retailers to adopt a single, cross-channel view

of customer purchases and available inventory. Our survey reafrms why this single, cross-channel view is needed to meet

customer needs.

Megatrend #4: Mobile In-Store Shopping(Finally) Comes of AgeWhile M-commerce provides access to Web sites via portable devices, mobile shopping takes consumers to the next level.

With it, shoppers enter a retail store and use a smartphone or mobile device to scan a barcode and instantly access product

information and pricing. With another wave of the RFID-enabled device, shoppers can purchase their items using a linkedcredit or debit card and exit the store without ever standing in a queue.

With retailers already gearing up to offer mobile shopping apps, the next step is executing the transaction. Growing ac-

ceptance among shoppers and retailers is fueling the trend toward virtual in-store retail operations. Increased network

bandwidth plays a role, as do maturing technologies like Near Field Communications or NFC chips, which allow smartphones

to process payments and transactions. In addition, there is growing awareness of location-based social networks like Four-

Square, Gowalla and Loopt that offer real-time discounts to shoppers based on their physical location.

For retailers, mobile shopping helps reduce capital costs by reducing checkout-related labor expenses. As a result, retailers

can re-allocate labor to customer-facing activities and free up valuable store space for increased merchandising. Mobile in-

store shopping makes too much sense to not happen.

To succeed in the digital

era, retailers need to

reshape their businessesaround shoppers.

Favored Retailer RemediesIf a store is out of a product you seek, which of the following would you most

want the retailer to do to remedy the situation?

Figure 13

Order the out-of-stock item from the register and

have it delivered to your home at no extra charge 21%

40%

20%

34%

19%

32%

16%

23%

14%

21%

11%

51%

Offer you a 10%-off voucher to come back

to the store when the product is back in stock

Order the out-of-stock item from a kiosk or desk within the

store and deliver it to home or store at no extra charge

Find the product at its warehouse/another store

location and have it sent to store so that you can pick it up

Find another product in the store that has

the same attributes as the product you wanted

Find another store that has product

and tell you how to get there



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Converting Point-of-Sale to Point-of-ServiceThe intelligent stores greatest asset is the people who work there. In a display of stores ability to inuence shoppers, 39%

of our survey respondents said they turn to informed store associates as their preferred source of product information.

Yet store staff are frequently a negative: Customers are unani-

mous and show few differences along the lines of gender,

income, and age in their dissatisfaction with inattentive ca-

shiers, which at 54% tips the scale as the most disliked aspect

of checkout (see Figure 4).

Self-checkout may be the trend, but our survey underscores

that well-trained, engaged cashiers can be an important dif-

ferentiator for retailers, helping to drive customer loyalty and

promote the use of rewards cards. Training needs to continu-

ally focus on cashiers, as they often serve as the front line of

customer service. Educating cashiers on how to prepare for

and resolve customer discontent over inconsistent pricing

respondents second most disliked store characteristic after

refusal to provide cash refunds is an opportunity for retailers

to convert a common annoyance into goodwill and drive ad-

ditional sales through improved conversion and higher basket size.

Savvy retailers are already spotting the opportunity. In a recent job posting for cashiers, UK bookselling chain Indigo speci-

ed that members of its in-store sales team add a little joy to our customers lives by providing sales and service and en-

gage customers by consistently delivering an exceptional customer experience to maximize store sales.

Intelligent stores are similarly connecting with customers and creating a consistent cross-channel shopping experience to

maximize sales. By going where the marketplace is, theyre increasing revenue and prots by automating back-ofce

responsibilities and freeing associates to spend more time selling to and educating customers.

As channels of distribution

and service grow, there is

an increasing need forretailers to adopt a single,

cross-channel view of

customer purchases and

available inventory.

Check-Out Turn-OffsWhich aspect of the check-out process at a store do you dislike the most?

Figure 4


0 10 20 30 40 50 60 70 80

Products with no stock number

having to call for a price check

Inattentive cashiers (e.g., talking on the phone

or to another associate while ringing up your order)

Getting the manufacturer discount by having to mailin the rebate coupon after purchasing the product

The wait in line

Slow cashiers

25%16%

10%

7%

7%

5%

6%

3%

3%

2%

1%

0%

26%

29%

40%

54%20%

15%

16%

17%

A barcode that does not work at check-out

Stores that do not take all forms of credit

(i.e., Visa, MasterCard and AMEX)

Self check-out

Not being able to purchase a product

in the aisle instead of check-out

Not being able to use a personal

mobile device to check-out


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Megatrend #5: When Social Media and ProductDevelopment Collide

Incorporating social media feedback into product lifecycle management offers important new opportunities for manufactur-

ers and retailers, alike. For starters, inviting consumers into the development process improves product relevance. Moreover,

bringing the power of crowd-sourcing to products can increase speed to market and also help new offerings fail faster, thereby

reducing the cost of products and services that dont resonate with target customer segments.

How does it work? Through social media networks like Facebook and Twitter, manufacturers and retailers invite consumers to

comment on proposed and existing products, as well as to pitch their own ideas for new products.

Think of it as participatory product design. A CG company invents a new product and asks for opinions on variables such as

look, size and purpose. Armed with the crowds feedback, product developers further rene the product prior to its market

launch. The result? Fewer market ops and faster time to market. By systemically integrating with social media environments,

existing product lifecycle management solutions can track, analyze and act on the consumer input. Social media gives them the

tools to monetize word-of-mouths powerful inuence.

About the Author

Steven Skinner is Vice President of Cognizants Retail and Consumer Goods Consulting Practice. Steven has 21 years of industry

experience in professional services and retail operations. Prior to joining Cognizant, Steven was a Strategy Partner in Accen-

tures Consumer Industries practice, Vice President of Home Depot, with responsibility for merchandising operations, and

served as General Manager for Microsofts Global Industry Strategy and Solutions Practice. His areas of expertise include

strategic planning, innovation, retail operations and multi-channel strategy. Steven is a graduate of the U.S. Naval Academy,

reaching the rank of Commander, U.S. Navy. He received his MBA from the University of Chicago. Steven can be reached at

[email protected].


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Consumer Good Retail Building the Intelligent Store

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