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Tuesday 15 October 2019

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Taking stock

Written by Scott Thompson
03/02/2011

Scott Thompson takes a look at the retail technology sector and the mixed bag that was 2010

When we look back in years to come at the retail technology sector in 2010, it’s unlikely that it will be viewed as a momentous period. Eventful, yes, but not groundbreaking. iPhone apps became big business for some retailers. Yet nothing dramatic or startling hit UK retail in 2010 and it was a passive year for retail technology innovation. That’s the view of Huw Thomas, managing director at Paul Mason Consulting (PMC). “Outside of the election, the implications of the new government strategies and continued progress with multi-channel, nothing much changed,” he says.

The rise and rise of multi-channel has been the highlight of 2010. One technology that could make a big splash soon, although right now falls into the ‘damp squib’ bracket is the Apple iPad. “Apple has again done a brilliant marketing job and as a result I know of many retailers where senior store staff are desperate to find a retail problem where the solution involves the iPad,” says Thomas.

Smartphones are also becoming more of a game changer. The past 12 months have seen several early adopters successfully implement m-commerce and that looks set to spark significant uptake of the channel as retailers battle it out for a slice of the action. “Driven by the iPhone with its ever-increasing range of apps, I am sure that smartphones will make their presence further into retailing over the next few years. The current focus seems to be on web enablement but I think the
shorter-term benefits will come through the use of mobiles to improve customer experience through delivery of targeted promotions and enhanced product data,” Thomas comments.

2010 has certainly produced some intriguing developments in this area - e.g. Marks and Spencer, Next, Warehouse, Argos, Halfords, Sainsbury’s and Nectar and Barratts developing mobile tools for their customers. “We’re starting to see the early signs of take-off of mobile applications. Although the industry statistics show that most people who buy using their mobile are buying mobile applications or ringtones, I expect that the situation for smartphones is different,” notes Professor Merlin Stone, principal at Merlin Stone Consulting. “Clearly the user interface has been a barrier until recently. I asked Dominic Keen (managing director at Mobank, which manages the mobile commerce activities for Next, Game and Waterstone’s) what he felt. He said that amongst Mobank’s clients, he had seen a big increase in the number of e-commerce transactions being carried out via smartphones in 2011 and expected this trend to continue next year as consumers get more comfortable shopping in this way. His view was that retailers are working to extend their reach into mobile channels, to grow their volumes, and are now confident that they can do it with the right (high) level of security.”

There is plenty of evidence to support this. Amazon sold over $1 billion via the mobile channel in the year to July 2010, while the iPhone app for Ocado was responsible for 4.4 per cent of its sales in February 2010. Kiddicare.com launched an app recently, noting that mobile traffic accounted for approximately seven per cent (70,000 unique users per month) of all website visits. But whilst 2011 could be a breakthrough year, many retailers need to get the basics right, ensuring that all channels are seamlessly linked together, before venturing into the mobile arena. “Apart from some high-growth retailers, most focused their efforts towards the goals of multi-channel retailing and channel integration; although both have some considerable distance to go to achieve true success. Some retailers took the time to beef up their websites and put in more capability. More placed the emphasis on web usability and focusing the site on the customer, rather than the other way round,” says PMC’s Thomas.

2011: key priorities


If 2010 was the year of ‘remaining the same’ then 2011 has some key priorities that retail IT directors must have on their radar. The likely economic challenges in the next couple of years make the IT director pivotal in enabling competitive business advantage through deploying retail systems technology. Thomas highlights the following priorities which should be ‘front of mind’: aligning IT and retail. It is increasingly important to develop close alignment between IT and the business. IT must be part of enabling, driving and improving business efficiency; operational efficiency - more for less: “With finance under constraint it is imperative to spend every capital and operational pound to deliver a meaningful return. Prioritise spend and cut projects that do not have a short-term return. This will allow IT departments to free up funds to accelerate projects that will deliver the best benefits.”

Exploiting new technologies - exert time and effort to identify suitable new technologies that can be implemented timely and cost-effectively to increase sales, improve store staff efficiency, increase customer footfall and improve the customer experience; PCI: “Unfortunately this is a necessary evil
that retailers must address. Develop a longer-term strategy - it will be a
major cost and distraction over the coming year. Does continuing to manage this issue in-house make sense or would it be better to move to an end-to-end encrypted service from a bureau and let a specialist focus on it?”; Mobile/multi-channel. “Mobile as an extension of multi-channel strategies will become the driving force in sales growth. It is envisaged that by 2013 over half of all online activity will be delivered through a mobile device rather than desktop devices. Implementing best in class web solutions and specific mobile-enabled technologies is probably the IT director’s main priority.”

Tony Bryant, business development manager at K3 Retail & Business Solutions, also highlights the continuing multi-channel journey as well as customer interaction and personalisation. “Managing the talent pool and improving staff knowledge will be key. Technology driving product information, business intelligence, and loyalty schemes, localised and personal pricing and promotion campaigns. So visibility of stock across the retail estate and customer spend across the channels will be a must have,” he says. “This alone creates a large amount of data share needed to ensure multi-channel service levels are maintained. By its nature the customer proposition will require IT systems to integrate data and present a consolidated view of customer activity. Not easy when in many cases the first generation of e-commerce platforms still exists across all tiers and subsectors and will require significant upgrading or replacement. K3 predicts this area will be an investment focus in 2011.”

Ultimately, e-commerce has moved into the mainstream and onto the
CEO’s agenda. One of the highlights of the last 12 months has been the growing number of successful retailers who understand the interaction of the
physical and the online worlds. Another is that there is now recognition that technology is a critical enabler - but never a reason - for success, according
to Michael Ross, director at eCommera.

Yet there remain areas where retailers, both bricks and mortar and pureplays, need to up their games. “The damp squib to me is social media. It remains a distraction for most retailers,” says Ross. “Also mobile, for the vast majority, is about rendering a website on a new device. The priorities for 2011 should be rigorous measurement of profitability. Online retailers must understand customer, marketing and product profitability in order to allocate spend to maximise returns. Also retailers should understand the need for a different trading model online. Thinking of online as ‘just another store’ is a shortcut to missed opportunities.”

Retailers face a challenging 2011, as the public spending cuts and VAT rise
begin to kick in. But they are also looking at significant rewards if they manage to deliver a truly consistent customer experience across all touchpoints. The next 12 months could well be groundbreaking, rather than just eventful.

More thoughts from the frontline

“Consumer Intelligence’s recent study on online retail shopping shows that this is one of the big success stories of 2010, but also a failure for those companies who have come late or badly to the party, and in particular for those who have not got their systems integrated - this is a problem. You select online, but the store inventory does not match what you have selected, so you get a substitute, but the in-store technology does not advise the picker what is the best substitute or whether it is best not to substitute (which should be analysed based on the acceptance of past substitutions, at least in general and ideally for the specific customer), so you get the wrong substitute. There is apparently also an issue in relation to picking products near the sell-by date.” - Professor Merlin Stone, Merlin Stone Consulting

“We expect to see demand from within the retail space for cloud-based (Software as a Service) solutions and fully managed outsourced IT services, which in turn allow companies to focus on their core strengths. Specifically within the supply chain arena, we continue to see focus on returns management and order management processes as a way of improving margins whilst directly adding value to the customer experience.” - Evan Puzey, chief marketing officer, Kewill

“As technology has made so many more things possible it also increases the complexity, dependency, and inter-connectedness of what we do. So even the relatively simple shopping event is now a multi-channel minefield and relies on a plethora of underlying processes and technology to support a seamless customer experience. I predict that 2011 will see us return to issues of productivity. As we emerge from the financial crisis faster productivity growth will offset the tug from increasing costs, VAT, and reduced spending power. The experience from America in the 1930’s has shown that post-depression behaviour forces rapid efficiency and restructuring activity.” - Dr Brad Poulson, principal consultant, Wipro Retail


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