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In between the numbers – Pay Me Now or Pay Me (More) Later

April 14, 2011 at 8:17 pm PST

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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In between the numbers – A new definition of Premium

April 1, 2011 at 10:24 am PST

 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 to buy 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.

Premium?  You bet.  Scalable to the big guys? 

I don’t think there’s a choice.

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In between the numbers – Big Changes for Stores

March 31, 2011 at 8:35 pm PST

 14.2 Billion Square Feet

 Was doing the Google-dive a few days ago in preparation for a customer presentation.

 Two numbers popped out.  Amazon sales were up 40% in 210, to $34 billion.   And the current vacancy rate in US shopping centers is at 10.9%.

 At first glance, it’s easy to see that online sales are eating into store-based sales.   Morgan Stanley reports that online is now more than 10% of all revenues in a number of product categories, from consumer electronics to jewelry.

 It’s also painfully obvious that the greatest creators of new retail real estate vacancies in North America (Borders,  Hollywood Video, and Blockbuster) have digital tire tracks on their chests.

 Hmmm . . .

 But let’s take a moment, and look beyond the obvious.    And specifically at the future of the 1.22 million stores in the USA  that occupy 14.2 billion square feet of gross leasable area.  Which calculates out at 46.6 square feet of total retail space for every man, woman, and child in the country.

 What retailers are learning – all too slowly, in many cases – is that the opening of more stores is not the end-all, be-all path to revenue growth.   In certain categories, comp-store revenues in status quo stores will decline faster than good stores can be opened.  Revenue is now a question of channel optimization.   Store operation is more a question of net margin.

 Second, the store’s not dead.   But the store must evolve rapidly – probably into smaller footprints, with virtual selections and services.  Probably into living-breathing web sites, where net-based experiences offer the transparency, speed, abundance, and expertise that shoppers find on the web.   Probably into interactive, educational, experiential zones, where shoppers learn and play.   Probably into a tri-furcated structure of large, full services-experience stores, small footprint urban-and-fast stores, and down-sized low-cost stores.

 Status quo just won’t work.  Big changes ahead

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Retail customer experience lessons through windshield repair

This past week I had to take care of a broken windshield of my car, dealing with both the insurance company and the window repair shop over the weekend.  For most people the thought of dealing with insurance and auto repair is probably not a retail experience one looks forward to, but it worked out well for me, and got me to think what what made it a good experience, and it really comes down to a few key points during the shopping journey.

My entire customer journey started with a phone call to the insurance call center to file the claim, I was routed to the glass claim center, where they took my information and verfied my identity, then connected me with the glass company and set up the appointment for the replacment.  I went to the glass shop and had the glass replaced over the weekend, and was on my way.  So what made it a good experience?

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Capturing the Value of Social Media

Facebook, Twitter, Groupon – Social media sites grab the headlines as their valuations continue to skyrocket based on the perception that these sites significantly influence how we work, play, and shop today.  But how influential are they, really?

We know about Facebook and what a HUGE country its participants could now form; its growth continues unabated.  More people spending more time on games, vacation pictures, and stalking former flames. 

Twitter is truly a new media outlet with fast-breaking, world-changing news being tweeted 24x7.  Look at how Twitter helped to bring down an entrenched dictator in power for over 40 years in Egypt to get a sense of what unfettered access to information can do – even if it is only 140 characters at a time.  In its less world-changing form it is also a source of ongoing banality that can numb even the most avid tweeter.

And Groupon – yes Groupon continues to grow quickly as well. With its most recent foray into China the company is in 43 countries and has 51M subscribers (source:  Economist) but with other group coupon sites springing up like weeds in springtime, its competitive advantage has been severely eroded.  The concept has, however, changed shopping in ways that weren’t even anticipated only three years ago.

So what’s a retailer to do?  And perhaps, more importantly, how can retailers make money in social media? 

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