As consumers’ love affair with technology grows stronger and the brick-and-mortar shopper experience blends with the digital world to become “one retail experience,” retailers are becoming savvier about using data to keep a sharp competitive edge.
If companies expect to meet and fulfill expanded customer needs and demands, then they too must have better data to act quickly and make decisions going forward. Legacy cycle counting and other inventory data may already be relics of the past. While most companies are focused on big data and looking at ways to leverage it, some are being very creative. One example is leveraging technology traditionally used for other purposes. In-store technology that was once used exclusively for loss prevention and inventory management has evolved into a powerful business intelligence tool that can be used for exclusive competitive advantage and ultimately as a ticket to retail nirvana.
Omni-channel sales may soon dominate retail transactions
The Internet now gives shoppers the power to ask for — and get — exactly what they want during their entire shopping experience. Most major retailers are adapting to what is becoming known as an omni-channel shoppers’ domain. Here, customers “expect” retailers to make it easy for them to order online, pick up the merchandise in-store (or ship), and exchange or return items in a store (or by mail). According to Tyco Director of North America Retail Marketing Steve Sell, “It may sound easier than it actually is, however — the system must be seamless to attract and retain the customer.” He adds that “leveraging technology and using the information it generates to make better decisions can be a key differentiator in the competitive retail market.”In-store technology breaks new ground
Technologies that have been around for years have evolved to help retailers make smarter, more profitable decisions.
Video surveillance originally helped with loss prevention, but today many retailers use it to collect data about their shoppers. When plugged into predictive analytic models, that data helps retailers look for shopping patterns to come up with strategies for using floor space effectively, among other things.
Another example is radio-frequency identification (RFID), an underlying technology that has been used in a variety of industries, and which has now evolved to enable innovative retailers to more clearly track, manage and control inventory. The value of RFID is directly related to the amount and value of information linked to individual products, which then becomes a catalyst for enhancing the omni-channel experience. In the end, retailers are better positioned to meet customer demands for merchandise availability.
“We look at innovation holistically,” notes Tyco Director of North America Retail Marketing Steve Sell. “In the past, video was used to primarily catch thieves; today, video offers insight and data about all shoppers. And when you connect shopper data with your RFID applications for immediate inventory availability, you get an invaluable opportunity to maximize sales. Retail technologies are getting smarter — they are networked and work together to offer retailers better visibility. The result is a superior store performance and customer experience.”
An additional benefit of smarter retail technology is process integration across the business and higher ROI. Traditionally, a retailer’s various operations (loss prevention, merchandising, store operations, etc.) may have been managed separately, with separate budgets. The result was often duplications that increased costs. Smarter technology can help integrate many of these needs and may hold the key to market advantage through the data it generates.
How Macy’s transformed shoe sales through better data and analysis
The 63,000-square-foot shoe salon at Macy’s Herald Square flagship store is home to more than 300,000 pairs of women’s shoes. It boasts 548 customer chairs, employs more than 400 shoe store staff and features styles that range in price from $49 to $1,600 from today’s most in-demand designers. When Macy’s recognized a challenge effectively managing inventory at this scale, the company turned to RFID.
Working with Tyco, Macy’s was able to tag every display shoe with an RFID label, giving them the ability to easily and accurately inventory the shoes on display each day. As a result, Macy’s increased display shoe compliance from 65‒70% to nearly 100%. Additionally, RFID reduced the time required for display counting and restocking, reduced overstock conditions and markdowns, and decreased labor costs associated with inventory compliance.
Through the use of advanced analytics, retailers can provide better product selection to their customers and reduce inventory costs and inventory distortion. And, of course, better selection at an efficient cost is a win-win for consumers and retailers. Merchants who fall behind run the risk of losing the race entirely.
As retailers embrace new use cases for inventory management and loss prevention technology, the possibilities keep evolving. For example, advances in video technology are producing data that can be analyzed in new ways through advanced business intelligence models. Facial- and gender-recognition tools in stores can track who is shopping, what they shop for and how they shop. It begins and ends at the inventory level, however. The inventory must be the right mix, and it must be available in order to meet the customer’s expectations and needs.
Mark Sullivan, Grant Thornton LLP’s Retail practice leader, says, “It’s time to leverage certain technologies way beyond loss prevention and move into a future state where we use technology and business intelligence to determine the shopper’s needs, preferences and traffic patterns to design stores and processes that exceed their expectations.”
Using data analytics to gain competitive advantage
Better data is already working for savvy customers, who now have the ability to walk into a store and compare prices to online stores via their smart phones. This “showrooming” trend is encouraged by smartphone apps that allow customers to scan items in a store and then easily buy online. A Gallup poll in November 2013 indicated stores may be losing nearly one customer in 10 to this trend and that 40% of Americans have showroomed at least once1.
“The retail landscape is evolving and so are the technologies required to ensure success. RFID is emerging as a critical retail enabler, uniquely designed to provide the insight retailers need to optimize inventory and store operations.”
—Nancy Chisholm, Vice President and General Manager, Tyco Retail Solutions
This means that even if retailers are using the advanced capabilities of RFID and other inventory control methods to provide the right mix of items in the right locations, they may still lose sales if the customer pulls out her smartphone and finds a lower price online. In this case, a great customer experience may fall by the wayside and the sale — and possibly the customer — could be lost forever.
Given the rise in online information, retailers must continue to advance the use of the data they are already collecting. Sullivan says that “the result of using data more effectively can be a more efficient, better-run business. Analyzing such parameters as shopper gender, size, age, traffic patterns, dwell patterns and much more can help retailers place merchandise for top profit.”
What’s next for retailers?
There is more data available than ever before, but it is still questionable whether it’s being effectively used and analyzed by retailers. The opportunity is there for new and creative uses of this data. Beyond the obvious outcomes of better inventory control and availability lies the ability to predict customer buying patterns and demand through data analytics, giving smart retailers a potential edge in the market.
Keeping pace with the shoppers’ use of technology — or being one step ahead of them — means winning the technology race. To achieve retail nirvana, the customer must get what they want when they want it. In turn, the retailer must have the tools to deliver what customers need when and where they need it. To get to that level, retailers must ask themselves whether they have the information capabilities to meet expanded customer expectations. It will not be easy. An organizational culture change might be required to move forward, but retailers with the vision to make those changes will prevail.
Grant Thornton LLP
T +1 312 602 8110
Director of North America Retail Marketing
Tyco Integrated Security
T +1 214 233 6787