Thinking about the ICT future of the store with my colleague Bharat Popat. Doodling at the mental whiteboard.
Current state in the lower left. It’s client-server architecture. Three to six servers per store, depending upon segment and store size. Fat-client POS and desktops. Fans and hard drives. Ongoing break-fix maintenance contracts. A network pipe just big enough to each night send out batched transactions, inventory, and other performance data, and download the price-item files, promotions, and performance reports.
Now, a line from the lower left current state all the way to the upper right future. From the “as is” to the “will be.” Figuring three to five years. An assumption that a retailer will want to lead the segment and compete worldwide.
Hmmm.
Grab the pen and draw the line, and as you do so, calculate the evolution of technology and of consumer expectations. Calculate the impact of global e-commerce, of multi-channel and omni-channel, of smart phones and tablets, of social networks and social shopping.
Calculate the impact of content clouds and IP video, of augmented reality and “mashops” of virtual into the physical. Calculate the impact of right time data analysis. Calculate dynamic video messaging.
Calculate how to cut time-to-capability down to weeks, not years. Calculate how to do more and spend less.
Now multiply it all by the demographic weight of the tech-savvy Millennial generation.
Do the math. Yes, I’m prejudiced -- I’m a proud Cisco guy. But it’s the math (not the badge) that leads me to this future state: a retail store that’s a living, breathing website.
A retail store that’s built on a lean, network-based architecture and a significant increase in network capacity to and from the store.
Lean store and big pipe.
More about these calculations in weeks ahead.
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One of the areas Cisco contributes to the retail industry is in the participation in industry organizations and standards bodies to help broaden adoption and encourage interopability of technologies.
Cisco retail architects Christian Janoff and Bart McGlothin both contribute to industry organizations. Christian Janoff has just been re-elected to the Payment Card Industry board of advisors. Bart McGlothin current sits on the technical committee of National Retail Federation ARTS Group (Association of Retail Technology Standards ) as vice chair of the mobile integration workteam.
I sat down with Bart and talked about the role of Cisco at ARTS and retail industry standards contribution.
ARTS (Association of Retail Technology Standards ) is the technical arm for industry standards for National Retail Federation. ARTS develop white papers, best practices and standards used in in-house retail solutions as well as vendor products.
Thinking about the hiring of Apple’s Ron Johnson as the next CEO of J.C. Penney Co.
I think it’s a brilliant move. for these reasons:
Because – most of all – it signals that J.C. Penney has determined that its future will be more dependent upon its ability to create value through the delivery of a differentiating, sustainable, and omni-channel brand experience than by the differentiation of its products.
It signals an acknowledgement that apparel and domestic product is largely commoditized.
It signals an acceptance of Wall Street’s insistence that the same-old merchant prince approach to the business is not going to move the dial.
Bravo, Penney’s.
Johnson inherits a business that has declined some 11% in revenues since 2006, that doesn’t have iPhones and iPads to dazzle shoppers and drive traffic, and which has a brand aura more akin to Sears than to Apple.
He has huge challenges in front of him. Like – it should be said – most of US retailing.
But I like the odds.
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E-commerce is going global as retailers from around the world take advantage of faster growth trends to discover riches overseas. For many brick-and-mortar and pure-play retailers, however, expanding e-commerce into a foreign country is unknown territory.
The common questions I get from retailers who want to start new country website operations include: Where should I expand, and in what order? How do I adjust my practices to meet different cultural norms? Which functions should be located at headquarters versus locally? How should the entire operation be governed?
To address these concerns and more, Cisco IBSG conducted in-depth interviews with leading e-commerce executives at many of the top global retailers and suppliers to understand the best practices they use to ensure online success globally. The resulting information described in a recently published paper titled, “The Global E-Commerce Gold Rush: How Retailers Can Find Riches Overseas” is pure gold for retailers wanting to grow global revenues with e-commerce.
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35%, 25%, and $20 an Hour:
Demographics, Destiny, and the Great Evaporating American Middle
Reading this morning about Walmart, and eight quarters in a row of comp-store declines.
Reading last week about Sears Holding, with annual revenues down from $53B to $43B in five years.
Reading recently about Gap Inc., with US sales down 32% since 2004 in its US Gap-branded stores.
And – reading a few weeks ago (The Economist, 30 April) about the decline in employment among US men – blue collar men in particular.
According to the US Bureau of Labor Statistics, the EOM April unemployment rate for US adult men was 8.8%.
However (as The Economist points out), the unemployment rate for US 25-54 year olds without a high school diploma is nearly 35% – up from around 10% in the 1960s. Of those with a high school diploma but no college, today’s unemployment rate is almost 25% – up from less than 5% in the 1960s.
The odds are that neither group will find work at pre-recession levels. In each of the past recessions, the percentage of poorly educated men in work has fallen sharply – and not recovered to prior levels economic expansion returns.
Or, if they do find work, the odds are that the job will pay less than before. According to the Bureau of Labor Statistics, the percentage of workers at $20 or more-per-hour jobs in the United States – a wage rate equivalent to at least $41,600 per year – declined more than 20% from 1979 to 2007.
Don’t get me wrong. There are dozens of reasons why Walmart, Sears, and Gap Inc. are in the situation they’re in.
But demographics is destiny.
As a retailer, you can change assortments, beat up vendors, and find new merchants. You can open and close new formats and rapidly expand your presence on the internet. God forbid, you can even hire consultants and change logos.
But if the personality of your brand is irrevocably wedded to the great American middle, and that great American middle is evaporating before your eyes, there’s going to be a problem.
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For retailers, shrink is a significant issue impacting the bottom line, in some cases up to 2% of sales are lost to shrink up and it is a 107 billion dollars issue globally.
Shrink can come from many sources from theft, fraud or procedure errors, and loss prevention techniques is an ongoing subject of strong interest to retailers.
Today I talked to Rick Simon, Cisco retail technology partner manager working with partner Agilence about the National Retail Federation Loss Prevention Conference at the Gaylord Convention center in Dallas, TX June 13-15.
The exhibit hall for the conference is open June 13-14 and Agilence will be at booth #1601, demonstrating their point of sale video auditing solution on reducing shrink at the point of sale checkout.
Cisco will be the technology provider for the Agilence booth including video surveillance technologies, Cisco Cius and UCS Express. Instead of separate digital video recorder, router and servers in each store, Cisco will combine all the functionality in a single hardware platform combined with IP-based video camera technologies. This helps retailers reduce the technology complexity and costs in the stores which allows deployment of new capabilities in the future.
Qualified retailers can download a free expo pass form for NRF Loss Prevention Conference at www.cisco.com/go/retail and schedule meeting with Agilence and Cisco through their account managers.
Cisco partner Agilence develops Hawkeye, an industry leading POS video auditing solution that enables retailers to quickly identify losses caused by operational errors, promotion execution, systemic errors, and associate fraud. Hawkeye efficiently identifies store-wide losses at the point-of-sale before they can erode profit margins and provides retailers with a 6-to-1 ROI in less than 12 months. For more information please visit http://www.agilenceinc.com or Cisco point of sale video auditing solution web site.
In Jon Stine’s blog recently “ In Between the Numbers: Less than a Third, and Less than Half.” He wrote that complexity is an issue with technology and Bob Anderson, former CTO at Best Buy, points us to the “popcorn” button on the microwave as a perfect guide for consumer-facing technology. No questions. Immediate understanding of value. One push and sixty seconds equals hot buttery-salted goodness..
That got me thinking that we can extend the analogy of the microwave oven toretailers. The fact is successful retailers can learn a lot from a microwave oven
There are five areas that successful retailers operates like a microwave oven. Speed, Convenience, Security, Cost Effectiveness and Set/Meeting Expectations.
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E-Com’s Killer Advantage, and What It Means for the Store
Thinking about the store – and asking, in this age of Amazon.com, how the physical environment can create and deliver sustainable, differentiating value. It might be that the answers are found within the digital walls of e-commerce.
First, in all its various forms, e-commerce offers remarkable convenience– in time, in selection, shipment options, even prices. Can’t find it on one site? You’ll find it on another. Don’t want a new one? Would a used one do? Do you want to receive it tomorrow or next week?
E-commerce, in all its various forms, is also steadily improved through detailed analysis of shopper behavior. Total site visits, unique site visits, site navigation, abandon rates by page by product, and on and on.
Finally, e-commerce – and this, I think, is the real killer advantage for net-based retailing – offers a remarkable breadth and depth of content:What-it-is, how-to-use-it, how-good-it-is, what-they’re-saying, and what-else-you-might-like.
According to the Pew Research Center, Internet & American Life Project (2010), available retail content – more than convenience, more than price – is the reason why 83% of all broadband users in the US researched products online in the last year. On a typical day, 21% of US adults search for product information: Scan a top-quality site. Note the peer reviews and ratings. Product comparisons. Recommendations for accessories. Advice from designers. How-to-use-it videos. Quick connections to product experts. References to manufacturer links. On and on and on.
Content creates knowledge. Knowledge creates confidence. Confidence translates in retail to conversion and repeat business.
Envision Amazon.com for a moment without the breadth and depth of content. What if it gave its customers the standard experience of . . . a standard-issue store?
The challenge going forward for brick-and-mortar merchants: how to create convenience, enable behavioral analysis, and integrate content with the store’s inherent advantage of immediate product.
In the days ahead, it may be the difference between retail life and death.
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I was reminiscing with a friend recently about NRF shows past, and the graveyard of consumer-facing retail technology ideas.
Yikes. Lots of ghosts. Even a few zombie ideas that refuse to die (cart tablets, anyone?). The big question is why – with the exception of self-service – have so few new “breakthrough” ideas found acceptance?
Here’s a hypothesis: Caught in an ever-fast cycle of innovation, the sales and engineering departments – understandably – always seek more. More headroom. More functionality. More interoperability.
We dream of the possible. We dream of platforms, of vendor lock-in, of recurring streams of high-margin revenue, of bosses pinning ribbons to our medaled chests. Ignore the cost implications for a moment. (As grave as they may be, given the expense of rolling something out to all stores.)
Here’s what we too often forget: Shoppers dream of ease and simplicity.
A 2009 McKinsey study on consumers’ use of electronics devices sheds some light on the matter. Less than one-third of all consumers use the advanced features of any CE device – and less than one-halfeven know that the features exist.
Allow those factoids to simmer for a moment. Think of the hours of brilliant engineering innovation that most consumers simply ignore -- that for most is too complicated, too complex. Brilliant engineering innovation that brings joy to the engineer, but immediate dismissive frustration from the consumer who simply wants to watch a movie.
Simplicity is the byword of the McKinsey paper. Simplicity in functionality. Simplicity in usability. A quick glance, and you know how to use it and what to do. A quick glance, and you know why it matters. The learning curve: a straight line north.
But it’s not just simplicity. Just as important is the usability – perhaps defined for retail as simplicity in context. Who’ll use it? When? Why? To what benefit? Consider the mother-of-two-in-a-hurry at the modern mega-grocery/mass retailer. Consider, for a moment, the value of a cart tablet to her. See wailing children pounding on the screen. Weep.
The very smart and always wise Bob Anderson, former CTO at Best Buy, points us to the “popcorn” button on the microwave as a perfect guide for consumer-facing technology. No questions. Immediate understanding of value. One push and sixty seconds equals hot buttery-salted goodness.
Food for thought.
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Recently my colleague Jon Stine, wrote on his blog In between the numbers – Big Changes for Stores about amount of retail square footage that is available today and the need for stores to evolve with changing consumer patterns.
This change is also reflected in shopping malls that needs to change to make the destination attractive to shoppers and for retail store operators. In a recent trip to the local shopping mall in San Bruno, California, I noticed how the retail shopping mall has changed in the last few years to adopt to the new shopping trends.
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Maybe it’s because I grew up in the Midwest. But I just don’t like writing checks to lawyers.
I’ve lots of friends in the legal profession, and all are lovely people (well, most of them, anyway).
But as the pragmatic sort, it pains me to spend money to resolve something that might have been settled at a lesser price well before.
Which leads me to the topic of PCI.
Just reviewed a 2010 study from the data security experts at The Ponemon Institute that looked at the post-incident cost of data breaches. Forget, for a moment, the brand humiliation, the CEO news conferences, the critical whiplash in the blogosphere and throughout Facebook. Ignore, for a moment, that research suggests that 30% of consumers who were victimized by retailer data breaches promise never to patronize the offending brand again.
The Ponemon research found that 42% of all data breach incidents led to the involvement of a third party (there to provide additional, independent investigation, resolve disputes, and soak up consulting fees.)
The average cost of that third party involvement in the United States was $1.52 million, with final resolution costs ranging from $750,000 to upwards of $31 million. That’s on top of lost business estimated at $4.47M per incident.
Total: $6M. Perhaps not fatal to a billion-dollar business, but not a check I’d like to request.
Yes, I know that active, careful PCI compliance is no guarantee. And that active, careful PCI compliance doesn’t put revenue on the top line. And that there’s ongoing confusion about PCI for mobile. And everyone thinks it’s all too expensive. And on and on and on.
But I also know this: active, careful compliance reduces risk. Significantly.
And that the price of risk is not just a bruised brand.
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Last week Carol Ferrara Zarb, industry solution manager sat down with me and talked about the work being done at Cisco around helping merchants address the Payment Card Industry Data Security (PCI DSS) 2.0 standards released last year.
Cisco will be hosting a webinar april 14th 10:00am PT hosted by Lindsay Parker, global director of retail industry marketing with guests including:
Christopher Novak, Managing Principal, Investigative Response, Verizon Business Security Solutions
Danny Dhillon, Principal, Security Engineer, RSA
Rob McIndoe, Senior Security Consultant, Verizon Business Security Solutions
where Carol Zarb and Cisco retail architect Christian Janoff will discuss Cisco’s solution to help merchants address and maintain PCI compliance.
Some facts about Cisco and Payment Card Industry Data Security Standards (PCI DSS)
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750 Million, and 0.00002%
My mother, bless her soul, would have never thought it was proper.
There’s perhaps no better evidence that we live in a transparent, open-the-kimono digital world than the news that 750 million photos were uploaded to Facebook over this past New Year’s celebration weekend. (That’s an average of 4,330 per second.)
One might guess that a good number of the 750M were not images you’d want to show Mom, let alone include with your latest job application.
Place that in the mind blender with some other food for thought: L. Gordon Crovitz’ column “The 0.00002% Privacy Solution” in the March 28 Wall Street Journal. Mr. Crovitz brings to our attention the results to date of a advertising industry service called TRUSTe, which enables consumers (through a click-through icon to online advertisements) to learn more about how they are being tracked – and to opt out.
According to Mr. Crovitz, a recent study by DoubleVerify found that of five billion recent advertising impressions, only 100,000 clicked to learn more – and only about 1,000 opted out. An opt-out rate of 0.00002%.
Seven-hundred and fifty million. Two out of one hundred thousand.
Don Tapscott called it early in his 2008 book Grown Up Digital. We’re entered an era where transparency – the sharing of previously private information, and the expectation that previously private information will be shared – is the normative rule of the realm. Where personal data privacy concerns (beyond those of credit card theft) are increasingly thrown to the wind.
What does it mean for retailers? First of all, it’s time to recognize that the era of information asymmetry — that we, the retailers, know more than consumers, and thus enjoy an advantage that translates into gross margin — has ended. It’s a tie game now in the information wars, and the tie-breaker goes to the shopper.
Second, transparency is increasingly equated with authenticity. Credibility. Believability. Be transparent in your sourcing, manufacturing, sustainability, pricing, say consumers, and we might friend you. Maintain the old opacity? We’ll go somewhere else. You (and your brand) just don’t get it.
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I was talking with a friend the other morning about the strategy of a struggling retailer.
You could see his head shake, even over the phone. “They’re getting eaten alive by Amazon in e-com, and Wal-mart’s taking away the low-end in chunks” he said. “And they certainly can’t go premium.”
Yikes. Another brand caught in the middle. Two monsters below, and price resistance above.
Hmmm . . .
Maybe they can go premium. Especially if we consider a new definition of the term.
Most of the time, the words “premium” or “upscale” are used to describe an elevated price point and a luxurious customer experience. Premium retailers sell more expensive goods. They also offer such wonders as concierge-level service, discreet-yet- fashionable technology, and soap in the bathrooms.
But maybe – just maybe – the new definition of premium retailing has less to do with luxury, and more to do with creating additional customer value . . . the kind of value that creates lasting stickiness to the brand.
There’s a little independent running shoe store down the street that might be a poster child for this new definition of premium. It’s maybe 2000 square feet. Thin industrial carpet on the floor.
The little running shoe store offers a standard good-better-best assortment of shoes, running apparel, and some new technology-based wizardry: a computer-aided analysis of your stride.
Overall, quite nice, but not fancy. Not “upscale” by any stretch of the imagination.
But the little running shoe store does more. They recognize that what their customers really want tobuy goes well beyond shoes, shorts, and gear. They really want to buy 20 less pounds and a smaller dress size. They really want to buy lower blood sugar levels. They really want to buy new friends. They really want to buy the pride of completing a marathon. Or the high of a great workout.
And so they organize runs. Walks. Events. Meets. Gatherings. Their product is an orchestration of the SKUs and services (stride analysis) and interest-centric activities, all under the brand banner of the little running shoe store.
