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Retail – what’s selling?

01 May 2010

Point of sale, or POS, technologies are the principal gathering funnel upon which retailers and their supply chain partners rely. From this vantage point, here is a look at the new technology that is beginning to appear abroad: General it’s a buyer’s market   Consumers are getting smarter as they incorporate new technologies into their daily lives and information becomes more readily available. They are becoming more instrumented, interconnected and intelligent. They know:

  • Which retailers have the best prices and products;
  • How they want to interact with both retailers and other consumers;
  • What matters most to them as they decide where to shop;
  • What retailers need to improve; and
  • Where they want to spend their money. The balance of power has shifted accordingly. Today, it’s a buyer’s market. Consumers are equipped with technological instruments to help them in their quest. Thanks to the internet, mobile devices, digital TV and in-store kiosks, many consumers now have immediate access to a wealth of information about retailers and their products. They are using this information to decide what to buy and where to buy it.
Cloud computing There is a growing interest amongst retailers in cloud computing, on-demand, SaaS (Software as a Service) or managed services for their IT providers. Many retailers are thinking of moving to retail software packages in the cloud over the next two to three years, so they only need pay for what they need, based either on the number of users or the level of sales. Over 50% of retailers think that SaaS will be one of the biggest growth areas in retail IT during the next decade. Green IT Rising energy costs and pressure from the Copenhagen Climate Change Conference will make sustainability in 2010 essential. Green IT is no longer just good for company morale, but is actually fast becoming a necessity for keeping costs down. Products that incorporate a managed ‘deep sleep mode’ are quickly becoming an essential cost-of-ownership feature. This year, particularly with rising energy costs and governmental pressures to reduce carbon emissions, retailers will look to solutions like these to satisfy green IT strategies. Barcode of the future? There was some recent press around RFID tags that can be printed onto packaging using carbon nanotubes in the ink. This is an interesting development in the world of retail product scanning, given our ongoing obsession with attaining the ‘walk through’ automated checkout. Nevertheless, perhaps we need to take a reality check on using SKU-level RFID tags at the point of sale, and here's why: Barcodes printed on packaging have no cost to the manufacturer as they are part of the label printing process. RFID tags do have a cost. Considering the thousands of items for sale in today’s retail stores, a migration to RFID technology would take considerable time to complete. For example, while marketers may think RFID tags mean the end of barcodes, it will be necessary to have some sort of visual code or number on any item in order to process it at the right price in the event of a failed code or reader.   Technology integration Generations X and Y (the 20-44 age group) are particularly receptive to using new technologies to enhance their shopping experiences, while consumers living in the growth markets are even more enthusiastic than those in mature markets. Consumers want to use different technologies depending on their shopping purpose or objective. For example: Websites are used primarily to compare prices, print coupons and access personal user accounts;   In-store kiosks are used to review product features, pay for goods and get product information; and Mobile phones are used to locate the nearest store, compare prices and check that the items the user wants are in stock before they go to the store. Greater integration of technology across all channels is a high priority as customers increasingly shop online, or via mobile phones. However, a lot more work is needed for a truly integrated multi-channel IT approach. Out-of-the-box retail software systems are still too orientated towards traditional bricks-and-mortar retailing. Multi-channel software tools are out there, but many software vendors are not quite there yet in answering the needs of tomorrow’s consumer.   Business intelligence Retailers need to invest in business intelligence and analytics for their technology and allocate marketing dollars towards getting closer to the customer through social marketing and CRM (customer relationship management). The best source of this is to use the POS transaction data as a way of charting customer behaviour. The problem for many retailers is that they lack any information on specific customers, and hence are trapped analysing data at the product and basket level. The rise of loyalty programmes, mail order and the internet has provided retailers with real access to customers for the first time. This allows retailers to study the purchasing behaviour of customers in detail, tracking changes in purchases as their marketing and CRM programmes take effect. By doing so retailers can understand how they can increase the value of individual customers and predict future trends. Social media Shoppers – especially the younger Generation Y consumers (aged 20-30 years) – are increasingly using social media and alternative channels to communicate with and about their retailers. As a result, a growing number of retailers are introducing online community hubs to tap into the popularity of MySpace, YouTube and Facebook, and are achieving good success.

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