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Insights From 13 Of The Retail Industry’s Leading Experts

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How do you design a mobile site for the multitude of different phones and tablets? Is your supply chain design meeting the needs of your shoppers? What’s in store for mobile payments?

These and other questions are asked and answered in the Retail TouchPoints 2013 Outlook Guide. A total of 13 retail industry experts — including well-known analysts, consultants and researchers, and one retailer — have shared their expertise and predictions for 2013 and beyond.

Some key topics include: BYOD, showrooming, personalization, collaboration, voice of the customer, omnichannel and new media. Our experts have contributed tips for executives in all types of retail segments, from specialty and big box to grocery and home improvement.

Table of Contents

John Hazen, Fox Racing

Lora Cecere, Supply Chain Insights

Paula Rosenblum, Retail Systems Research

Jerry Sheldon, IHL Services

Al Ferrara, BDO USA

Joy Liuzzo, Wave Collapse

Pam Goodfellow, BIGinsight

Robert Passikoff, Brand Keys

Jim Dion, Dionco

Kevin Sterneckert, Gartner

Chris Cunnane, Aberdeen

Gary Schwartz, Impact Mobile

Laura Davis-Taylor, Shopwork, BBDO

About Retail TouchPoints

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John Hazen VP, Global e-Commerce Fox RacingWith more than 15 years of experience in the retail and technology industries, John Hazen has a specialty in the youth driven, action sports business. Prior to joining Fox Racing, Hazen launched e-Commerce sites and strategies for several well-known surf companies, including Hurley and O’Neill. He also created patented

retail/e-Commerce technology for companies such as Nike.

The answer lies in responsive design. True responsive design is one site that allows style sheets to target and deliver content based on screen size. One code base and many different sets of visual assets, typically three or four. This makes life easier for developers, but a little tougher for the creative folks. And it will only get more difficult.

It is amiss that today we have massive LED screens in our homes that are thousands of pixels wide, yet most sites are still designed with a top size of perhaps 960 pixels across. Think ahead 24 months when these larger screens become more inexpensive to the general public. Would you design a custom web site for screens that are 50 inches and larger? Of course not; the site wouldn’t be scalable. But you would add one more responsive design layout that would allow your site to look stunning on a large-screen television or monitor.

Look forward three years. If most of your company’s traffic won’t be coming from computers, are you going to build or buy your platform around computers? No, e-Commerce leaders need to drive towards the goal of being device agnostic and device specific all at once. And responsive design accomplishes that goal.

Who will lead responsive design? The large, not so nimble enterprise platforms themselves, or will today’s mobile vendors become responsive design vendors and run the whole front end?

Regardless, the reign of a standalone mobile site has come to an end.

R.I.P.

Mobile Sites... R.I.P.

The difference in screen size between an iPad mini tablet and a Galaxy S3 phone is about 60%. Yet the phone has a higher resolution of 720x1280. In fact, the resolution for the Galaxy S3 is higher than what most average desktop visitors are using.

So What Are We Designing Into?

The concept of designing a seamless commerce experience used to revolve around how much real estate your consumers had on their screen. Circa 2009, a company would create a standalone mobile site that catered to those screen sizes. And it worked. A standard mobile site that pretty much fit all phone models. Yes, you had to maintain a secondary mobile site but hey, mobile was the future, and it was only one extra codebase, after all.

Then came the iPad, which gave us a bigger device and excellent touch interface. Due to this more enhanced experience, we pointed it to our full web site. That generally worked well, with conversions approaching desktop levels on many sites, including ours at foxhead.com.

Then things got tricky: We had Kindle Fires, a variety of other Android tablets, iPads with retina displays, and phones with retina displays that grew physically in size. In fact, these larger, higher-resolution devices encouraged the birth of the term “phablets,” defined as touch-screen devices with screens five to seven inches large.

So, do you design based on resolution? If that’s the case, then every smartphone and tablet with a manufacturer suggested retail price of more than $100 would get the full site. How about by device? The iterations and mutations simply are too much to keep up with. Companies buy e-Commerce platforms with a life expectancy of three to seven years. Consumers buy phones for 18 months and new models arrive at retail stores and online monthly, if not weekly. What about designing based on the physical size of the device? This works for phones and tablets, but breaks at the other end of the spectrum: large monitors.

The (current) answer is actually a hybrid strategy, taking into account resolution and screen size. We must design into what the consumer will see when they look at the physical device. And that is what calls mobile’s mortality into question. Just an extra set of code? Not anymore. For optimal experiences, we are talking many different sizes of the site, not just one. And this breaks our traditional paradigm of a mobile site being a one-off.

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Supply Chain Design Must Reflect Brand Promise

and e-Commerce offers retailers a path forward to drive growth, but it also offers suppliers a new opportunity for disintermediation. Now more than ever, retailers can self-manufacture and consumer products manufacturers can directly sell to the shopper. As a result, the definition of the banner to drive services and a unique experience are paramount. Our prediction: more retailers will become manufacturers. The distinction between manufacturer and retailer will blur.

Disintermediation. New Business Models. Redefinition Of Retail?

The convergence of business models, the promise of technology, and the power shift to the shopper is redefining retail. For the bold it will be a revolution: a time to see new leaders, new business models, and redefinition of the value chain. Just as Amazon rode the e-Commerce wave to power a new business model, the shift from digital marketing to digital business offers an opportunity for the extended supply chain — suppliers and retailers — to reshape value. Our prediction: more consumer products companies will become retailers. While disintermediation was frowned upon due to channel conflict in the dawn of e-Commerce in 2001, today it is acceptable to operate in multiple channels. This realization will help consumer products companies better know their shopper and make inroads into Africa and China.

As companies look to redefine their business models to power growth, supply chains matter more than ever. Leaders will define use a broad definition from the customer’s customer to the supplier’s supplier, unleashing the power in new business models while laggards will continue to use existing technologies, to automate traditional supply chains serving traditional banners.

Lora Cecere Founder Supply Chain InsightsLora Cecere is the founder of the research firm Supply Chain Insights. She is co-author of the new book Bricks Matter. She also is the author of the enterprise software blog Supply Chain Shaman. With more than 30 years of diverse supply chain experience, Cecere spent nine years as an industry analyst with Gartner Group, AMR Research, and Altimeter Group. Prior to becoming a supply chain analyst she spent 15 years as a

leader in the building of supply chain software at Manugistics and Descartes Systems Group, and several years as a supply chain practitioner at Procter & Gamble, Kraft/General Foods, Clorox, and Dreyers Grand Ice Cream (now a division of Nestle).

For the retailer, supply chain matters now more than ever. However, companies cannot drive growth on the back of their traditional supply chain designs. The business has changed, and the design of the supply chain needs to morph to better deliver on the retail strategy.

Growth Has Stalled

Key metrics — revenue/employee and growth/square foot of the store — are declining. Retailers have been unsuccessful in driving growth through the increase of the size of the store or the expansion into new global regions. For retail, the growth lever is the channel strategy. E-Commerce strategies offer greater growth potential, but success requires more than just a digital marketing strategy. It requires a fundamental rethinking of supply chain strategies for fulfillment and availability. It also requires rethinking the role of the store and redefining store operations.

Our prediction: there will be a greater shift to e-Commerce and disintermediation of the supply chain. Direct shipments and the management of e-Commerce will grow more complex. As a result, B2B will be redefined to have inter-enterprise systems of record for perpetual inventory and Available to Promise (ATP) across a network of trading partners.

The Answer For Growth Is More Than A Front Office Imperative

While many retailers turn to the front-office (digital marketing, mobile commerce initiatives, and merchandising) to formulate growth strategies, the answer now needs to be more holistic. It requires a redesign from the customer’s customer to the supplier’s supplier to answer the new brand promise of the banner. Leaders will use new technologies to redefine the brand promise of the banner while laggards will continue to trudge down the same path of bricks and clicks. Our prediction: new business models will emerge. The use of social and mobile will give rise to new business models. Like the eBay, Amazon and Zappos of the last decade, we will see new players that offer a more personalized, meaningful experience in the next five years.

New Technologies Offer Promise... Few Are Ready

In the supply chain, power has shifted to the shopper. The retailer is moving from digital marketing to digital business strategies. The average retailer has worked on a mobile strategy for less than two years; but today, it needs to be more than mobile for the sake of mobile on driving sales in the channel. It has not become a pervasive redesign to rethink how real-time data coupled with cross-channel operations can redefine the retail response. We are in a transition. The convergence of retail/social

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2013 RTP: What do you see as the primary benefits of mPOS

for retailers?

Rosenblum: Believe it or not, the ability to install POS without new wiring is a big deal. People who haven’t been in the trenches really underestimate what a pain in the neck that can be, and how it can limit a retailer’s POS options. But each sub-vertical will see different benefits.

RTP: With respect to the October 2015 date and shifting fraud liability in the marketplace, do merchants view this shift as an incentive to enable EMV transactions — both contact and contactless — at their POS?

Rosenblum: It’s probably one of the driving forces behind MCX. I think the whole PCI initiative, coupled by high fees are really incenting retailers to go in their own direction. I think retailers are tired of expensive mandates with questionable results.

RTP: Please share any other information or perspectives on the retail payment scenario.

Rosenblum: Retailers are looking for alternatives [for payment] and alternatives are being brought forward. If you take a mobile payment using ISIS, for example, who is the responsible party in the event of fraud? What happens if we go to NFC chips? I think EMV is a short step along the way, and was probably very viable 10 years ago. Now there are other alternatives that make the whole chip-and-pin thing more complicated and slightly less relevant.

Paula Rosenblum Analyst Retail Systems Research (RSR)Paula Rosenblum is widely recognized as one of the top analysts in the retail industry. She formerly served as Vice President of Research & Content at Retail Systems Alert Group (RSAG), and as Vice President of Aberdeen Group’s Retail Research practice. She was also retail research director for AMR Research. Previous to that, Rosenblum spent more than 20 years as a retail technology executive and CIO. She works

with Wall Street analysts and industry trade associations on a regular basis. Paula received her MBA in 1991 from Northeastern University, with a major in management of High Technology firms.

In a recent Q&A with Retail TouchPoints, Rosenblum shared her insights on the where the retail industry stands in terms of mobile payments, mPOS and credit card transaction fees.

Retail TouchPoints (RTP): At what stage is the retail industry today, in terms of saturation, and in being prepared to accept mobile payments?

Rosenblum: The retail industry is ready for anything to reduce the fees it pays to accept credit card transactions. There are about four to five players that are involved in those transactions. Disintermediating them would be welcome. Having said that, we were surprised to discover in our current e-Commerce survey, only 17% of respondents strongly agreed that mobile payments would be a viable option in the next year, and another 19% somewhat agreed. I thought the number would be a lot higher.

RTP: At what point in time do you believe the majority of the consuming public will have smartphones able to complete mobile transactions?

Rosenblum: I think a better question might be “at what point in time do you think smartphone penetration will be high enough to justify the expense of enabling mobile payments?” and the answer to that is “Right now.”

RTP: In discussions with retailers, do you find that many are planning to eliminate traditional POS in favor of mPOS?

Rosenblum: This is a tricky question. There’s hardware/software, and then there are check-out stands. On some level, you can think of mPOS as just another hardware disruptor. If you can accomplish the same thing with a $500 iPad as you could with a $3000 register, wouldn’t you? But the next level is, at what point do you use the same logic/platform for your digital channel as you do for your POS? This is not such a simple trick, as there are devices, cash management and other things required in POS, but I see a convergence there as well.

So sure, lots of them would love to cut down on POS hardware costs and reduce the total number of applications they have, but each vertical will have different decisions to make.

Retail Payment Update

Only 17% of respondents strongly agreed that mobile payments would be a viable option in the next year, and another 19% somewhat agreed.

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Key Themes For 2013: BYOD & Mobile Payment

Jerry Sheldon Analyst IHL ServicesIn addition to having a Bachelor of Mechanical Engineering and a Masters Degree in Mechanical Engineering from Georgia Tech, Jerry Sheldon also has an MBA from the University of Miami with a specialty in Marketing and Marketing Research. He brings 16 years of business experience in engineering and management

through assignments with Pratt Whitney - United Technologies, Georgia Tech School of Mathematics, and Milliken & Company. In his previous employment he was managing a stress testing laboratory on the Space Shuttle engines. In the field of retail technology, Sheldon has researched and authored analyst reports on Mobility, Price Optimization, POS Software and Hardware Systems, Printers, and WFM Solutions. Sheldon also provides the development expertise and analytics that go into IHL’s Sophia Retail Technology Database, Worldwide POS Vendor Database and Retail IT Spend model.

that retailers will not be embracing Square’s technology. The biggest game in town to date is PayPal, but early reviews do not suggest retailers have found the balance sought between fair fees and secure, yet reliable technology.

Enter Merchant Customer Exchange (MCX), led by the following merchants: 7-Eleven, Inc.; Alon Brands; Bed Bath & Beyond Inc.; Best Buy Co., Inc.; CVS/pharmacy; Darden Restaurants; Dillard’s, Inc.; Dunkin’ Brands; Gap Inc.; HMSHost; Hy-Vee, Inc.; Lowe’s; Michaels Stores, Inc.; Publix Super Markets, Inc.; Sears Holdings; Sheetz, Inc.; Shell Oil Products US; Sunoco, Inc.; Target Corp., Wakefern Food Corp. and Wal-Mart Stores, Inc.

MCX was created for the purpose of “offering consumers a customer-focused, versatile and seamlessly integrated mobile-commerce platform.” While swipe fees are notably absent from the mission statement, they are not lost on anyone that follows the payment space. The beauty and drive behind MCX is the opportunity to save money — a lot of it. The real challenge will be if a large number of retailers can get together at the table and come up with a plan they can all benefit from, all with competing interests. I’ll reiterate that I don’t pretend to know how MCX will shake out, but given the participants, if I was a betting man, I would have a hard time betting against them.

BYOD has gotten a lot of attention over the past year and rightly so. BYOD is the next big area for advancement in the rapid proliferation of mobile devices within the retail enterprise. For the IT executive reading this piece there are two key words that will potentially bring angst, those being “next” and “rapid,” as it seems that for the last couple of years, any technology tied to mobility, whether that be consumer- or associate-facing, whether that be handheld or tablet, can be described as both a significant advancement/technical challenge with an emphasis on rapid, which in IT speak can be translated as “challenging to the current budget.”

When you consider the two most significant challenges — wireless network security and employee permissions — the vast majority of retailers have already addressed those in some fashion. Most retailers who are going to have a wireless network are either steadily on their way or have the infrastructure in place. All retailers have experience with defining access based permission, so while associate owned devices may drive a new set of permissions, very few retailers will be required to re-invent the wheel.

I think the real gem in the entire BYOD story is the benefit this can bring to employee satisfaction, with potential money saved by retailers on hardware and maintenance a distant second. In my general travels to retailers, I do not see a great emphasis on employee satisfaction. When one considers the pay, benefits and astronomical turn rates for retail and hospitality employees, it becomes pretty easy to see why. Today’s employees have a pretty high comfort level with their mobile devices and I vehemently believe have the desire to do a good job.

Mobile Payment And The MCX

While none of us were alive to experience how the Wild West was actually won, anyone following the mobile payments arena will quickly recognize the two main components: a giant land grab which is at stake, as well as first mover advantage, which will have tremendous strategic implications as time goes on. With swipe fees averaging about 2% of transactions, the zeros compound rapidly and before you know it, billions of dollars are on the table. With more than a dozen competing technologies, consortiums and ideas being lobbied about, it is realistically far too early to have a good idea which technologies will make the cut. Without a doubt there will be a handful that survives. In the SMB space, it seems that Square has both a great business model, meets a need and charges that customers deem as reasonable. For larger enterprises, our research suggests

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Retailers Eye Omnichannel Growth And Improved Customer Experience In 2013

undaunted by the practice. In fact, when asked if they view showrooming as a threat to their business, a majority of CFOs surveyed (88%) said no.

Still, consumers are trained to hunt for deals, and showrooming may be here to stay. As a result, we’re seeing retailers put increased focus on customer service strategies to bring and keep shoppers in stores. When asked about their primary strategy for countering showrooming, 25% of CFOs said that they are improving their customer service model, and another 25% reported expanded options for in-store pickups and returns for online purchases. We’ve already seen major retailers add more mobile and self-checkout counters and increase employee training to find the right level of associate involvement to satisfy shoppers.

Looking ahead to 2013, shoppers can expect to see these strategies in action as retailers aim to make store visits more enjoyable and worthwhile. In addition to customer service, we expect to see more brands focusing on the look and feel of their stores, as well as promoting events, exclusive deals and products and special services to increase foot traffic.

While retailers certainly are looking to capitalize on digital sales growth, a cohesive brand experience through brick-and-mortar, mobile and online channels is key. Retailers that strike the right balance and differentiate their offering will come out on top in 2013.

Al Ferrara Partner & National Director BDO USAAl Ferrara is a partner and national director of the Retail and Consumer Products practice at BDO USA, LLP. He is based in BDO’s New York office. BDO’s Retail and Consumer Products practice can help organizations navigate complex market challenges and identify opportunities. Client service teams are led by partners who have experience working

with companies ranging from Fortune 500 corporations to entrepreneurial businesses. BDO provides a comprehensive suite of integrated, value-added services to brick-and-mortar and e-Commerce retailers, as well as organizations in the consumer product, food & beverage and restaurant sectors.

Despite a heated political climate and an uncertain economic landscape, retailers headed into the end of 2012 with confidence and optimism for holiday sales. As retailers shift focus from holiday promotions to 2013 initiatives, omnichannel retailing is top of mind. Notwithstanding worries over unemployment and consumer confidence, retailers are finding new value in two important sources of growth: e-Commerce and an improved customer experience.

Omnichannel: More Than Just A Name

Omnichannel was a big buzzword in 2012, and it’s clear that there is still plenty of room for top-line growth online. That is what 100 retail CFOs told us in our sixth annual BDO Retail Compass Survey of CFOs. As they prepared for the final quarter of 2012, CFOs predicted a 5.9% increase in total 2012 online sales — an impressive number when compared with their expectations of 4.1% growth in comparable store sales and 4.5% growth in total sales for the year.

Online shopping now plays an increasingly important role in key retail calendar events — back-to-school shopping, Cyber Monday, the relatively new “Free Shipping Day,” and of course, the entire holiday season. Tablet and smartphone use also has turned traditional shopping on its head. According to IBM, mobile sales as a percentage of total online sales hit 16% this summer. Nearly one in five CFOs told us they are increasing their investment in mobile to capitalize on or catch up to the growth in mobile commerce.

As consumers grow accustomed to free shipping, exclusive online deals, and streamlined mobile apps and web sites, retailers are learning to answer the call and better incorporate each channel into their overall sales strategy. This has become a vital component of retail sales.

Undaunted By Showrooming, Retailers Get Creative

With huge online growth, the relatively new concept of showrooming has been spotlighted as a looming threat to traditional brick-and-mortar retailing. Showrooming is the phenomenon of customers browsing in stores and then buying online, typically at a lower price. While the supposed menace has made headlines in recent months, retailers are

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Make Showrooming Part Of Your Mobile Strategy

Joy Liuzzo President Wave Collapse LLCJoy Liuzzo advises clients on optimizing strategies to drive revenue via mobile by using a foundation of in-depth research and insights. Within the last four years, Liuzzo has spoken over at more than 50 conferences, providing a unique perspective on all things mobile — from behavioral analysis, to emerging trends and advertising effectiveness.

options for the competition to eat your lunch. And no, this doesn’t mean you have to compete on price alone. Some shoppers want the best deal, but they also enjoy the internal satisfaction that comes when they have a valuable retail experience.

Retailers can achieve this more compelling in-store experience by building location-aware components into a mobile app that delivers time-sensitive notifications to shoppers, driving them to specific store aisles. To sweeten the deal even further, merchants can provide geo-targeted coupons that can be used for a discount that day when an item is scanned by a mobile device.

Following this approach allows retailers to take advantage of an established behavior (scanning bar codes) and make shopping a convenient, compelling adventure. The customer is offered an unexpected value (a deal that doesn’t happen every time they are in-store), and they are experiencing the internal satisfaction of getting a good deal (discount/coupon). Using this strategy, retailers aren’t fighting price comparison. Rather, they are leveraging consumers’ deal-seeking behaviors to offer value, and are embracing mobile tools and technologies to make the entire experience fun, interactive and easy.

Taking advantage of mobile’s ability to provide a two-way conversation — either while consumers are in-store or on the go — retailers will be armed with the resources they need to more deeply connect with shoppers, communicate, and in turn, drive purchases and maximize loyalty.

Mobile devices have ignited a seismic shift in consumer behaviors and expectations of retail experiences. It is now natural for shoppers to reach for a device when faced with a buying decision, either to compare prices, access reviews, or discover new items.

A research report from Wave Collapse, titled: Perspectives on Discoverability, uncovered insights from 1,500 mobile subscribers in July 2012. Results indicated that 67% of respondents used their smartphones and tablets on a daily basis to search. Moreover, approximately 33% of consumers reported that they searched for products they have purchased in the past, while about 25% searched for products they haven’t purchased. This tells us that retailers and brands need to have a strong mobile search presence in order to remain top-of-mind for consumers.

While it’s clear that consumers are comparing online and in-store prices via their smartphones now more than ever, it is important to note that these behaviors did not develop out of the blue. The same shoppers who are comparing in-store prices have been doing so for years. Only now, thanks to the progression of smartphones, they can do it more efficiently.

Before smartphones, these shoppers would have gone into the store and left after a round of unsuccessful bargain hunting. This was in the days of analog, and the tools used were written lists, printed store circulars and envelopes packed with paper coupons. Obviously, retailers didn’t see these consumers when they went home to compare prices online, or call five different local stores to inquire about rates. Nowadays, it’s evident that retailers today are only worried about “showrooming” because they can actually see people using their smartphones in stores.

In this age of access, closing your eyes (or doors) to mobile won’t work. Trying to eliminate price comparison and “showrooming” activities by developing unique store-specific barcodes or products only opens up more

Retailers can achieve this more compelling in-store experience by building location-aware components into a mobile app that delivers time-sensitive notifications to shoppers, driving them to specific store aisles.

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Three Media Trends Influencing Consumers’ Apparel Purchases

Pam Goodfellow Consumer Insights Director BIGinsightPam Goodfellow possesses a decade of expertise in consumer behavior related to the economy, retailing and spending plans. Goodfellow is editor of the monthly publication, titled: Consumer Snapshot, produces the monthly Video Briefing, and is a contributor for both the Prosper Now blog on Forbes.com and the BIG Consumer blog. She is frequently quoted on

issues relating to consumer insights and marketplace changes.

The economic crisis that rocked our country nearly five years ago has clearly left its mark on today’s consumers. Gone are the days of excess when shoppers would spend now and worry later. The “new normal” mindset mandates that consumers think twice about purchases, spend when necessary, and scrimp and save at every corner. While the fiscal responsibility we’re seeing now is necessary for the long-term health of our still-fragile economy, retailing as we know it has become increasingly competitive.

The challenge for retailers now is to attract customers, get them into their stores and e-Commerce sites, and keep them there through checkout. In this new economy, it’s imperative that retailers create marketing communications plans that integrate both new and traditional media in a manner that speaks to their core customers effectively and efficiently. With this in mind, BIGinsight identified three media trends influencing consumer purchases within the very competitive apparel category.

The Waning Influence Of Traditional Media

Consumers indicate that the top 10 types of media influencing their apparel purchases are more traditional. However, half of these media have declined in influence over a two-year period, while others are showing slow or no growth. With circulation rates slipping, it may come as no surprise that the effectiveness of newspapers (Index* to June 2010 = 83) and advertising inserts (Index = 85) are facing the steepest declines. Other forms of print media are suffering as well; magazines and direct mail influence each have diminished 5% over a 24-month period. Today’s budget-minded consumers appear to be keeping the influence of in-store promotions and coupons afloat. TV, email, and online advertising also have remained relatively stable.

Trending Upward: Social Media, Mobile And Blogs

While the various forms of mobile and social media marketing don’t appear on the media influencer list, their pull among clothing shoppers has become much stronger over the past two years. In fact, the influence of mobile devices on apparel purchases has increased 130% over June 2010. Social media (Facebook, Twitter, etc.) has increased nearly 40%, while blogs (Index* to June 2010 = 140), videos on mobile devices (Index = 143), and text messaging on mobile devices (Index = 133) all have experienced double-digit growth.

New Media Growth: Millennials Are In The Driver’s Seat

Millennial consumers born between 1983 and 1993 are the driving forces behind the growing influence of mobile and social media on apparel purchases. Compared to the average consumer (Adults 18+), Millennials are more than twice as likely to indicate that videos on mobile devices (Index* to Adults 18+ = 247) influence their clothing expenditures. Furthermore, blogs (Index = 238) and text messages on mobile devices (Index = 213) are highly influential with this younger group of consumers, as are social media (Index = 188) and mobile devices in general (Index = 195).

While the economic downturn certainly had an impact on consumers, we also must consider how new technology has acted as a changing force for new shopping behaviors. While still relatively small, the growing influence of mobile and social media on purchases cannot be ignored by retailers. Today’s smart shoppers are tapping into a variety of media to access product information, reviews, availability, sales/promotions, and pricing. Knowing your customers and the types of media they adhere to both are key to developing a successful marketing strategy in the increasingly competitive retail environment.

Source: BIGinsight.com, Media Behaviors and Influence™ study - JUN-10, JUN-12 * Index of 100 is flat, while an index of 105 [or 95] indicates that a figure is 5% higher [or lower] than the comparative figure.

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Meeting Retail Expectations

Robert Passikoff, Ph.D. President and Founder Brand Keys, Inc.Robert Passikoff is President and Founder of Brand Keys, Inc. Dr. Passikoff has 35 years of agency and client experience in all phases of strategic brand planning for a wide variety of B2B and B2C product and service categories. He has pioneered work in the area of loyalty and engagement, creating the Brand Keys Customer Loyalty Engagement Index®, the

Brandweek Loyalty Leaders List, the Sports Fan Loyalty Index®, and the Women’s Wear Daily Fashion Brand Engagement Index®.

loyalty than those that don’t. Not sometimes. Always. And because loyalty correlates extremely highly with positive consumer behavior, it also correlates with sales and profits.

Check out the most recent overall Brand Keys rankings in various retail categories. Compare those rankings based upon a retailer’s ability to meet expectations consumers hold for the Ideal (calculated at 100%) and same-store sales. Take, for example, what drives loyalty for Retail Apparel chains. This order of importance tells you how customers will view the category, how they’ll compare offerings, and how they’ll buy:

1. Value & Convenient Location (Am I getting value for my dollar and is it close by?).

2. Brand Buzz (Does the brand act as a surrogate for added-value, so much so that that those in the know are talking about it?).

3. Shopping Experience (Are you wowed beyond product?).

4. Unique and Stylish Range Of Merchandise For Me (Self-explanatory, although the “me” part is unique to this category).

Which of the major Apparel Retail brands answers those questions best? If you said J. Crew you’d be right. J. Crew met expectations by 85%, and most-recently nearly doubled profits and saw same-store sales increase by 16%. If you said Victoria’s Secret, you were close. They were number two, meeting expectations by 83%, with same-store sales up 10%. If you said H&M, take another look at the category drivers and their expectations levels again. H&M same-store sales were only up by 2%.

In some retail categories the drivers are the same, but customers use them to judge retail brands in a different way. Discount Retailers have the same drivers as Department Stores, but consumers use them in a different order: Merchandise Range, Value & Convenient Location, Store Reputation, and Shopping Experience. Highest level of expectation? Value & Convenient Location. The lowest? Shopping Experience. The winner? Wal-Mart at 90%.

Over the 16 years that we’ve been tracking category engagement and loyalty, customer expectations have increased on average by 28%. Brands overall have kept up 8%. Retail brands haven’t even done that. They’ve only managed to keep up by 5%, which anyone at the checkout counter can tell you, is an awfully big gap between what you have and what the customer really desires.

Customers have become impatient with retail brands unable to meet their ever-growing expectations about, well, everything that drives retail success. Most retailers have discovered that discounting is the “price-of-entry” and pretty much table stakes when it comes to consumers. See also: price guarantees, couponing, earlier opening times, and lay-away plans.

Take a look at the current overall consumer expectation levels held for six retail categories, in the chart below. They’ve been indexed to allow for cross-category comparison, with 100 as the benchmark.

Most are pretty high. All are significantly higher than the mean, so what’s the secret to meeting them? The obvious answers like “lower prices” or “holiday lay-away plans” are wrong — or at least not entirely right. The answer is a bit more multi-layered. Retailers succeed by being better able to meet or exceed expectations that consumers hold for the brands participating in the categories where they compete — especially when it comes to the emotional aspects that are in play in the category.

The most critical part of that statement is “the categories where they compete.” Results in our national survey of 49,000+ consumers, about 83 categories, covering 598 brands, proves that measuring real engagement is a category-specific business. Consumers do not engage and buy in one category the same way they do in another. Nobody buys towels the same way they buy toothpaste, or blue jeans the way they buy breakfast cereal.

If you measure a retail brand against those drivers and expectations, the one best able to meet or even exceed those expectations will see higher levels of engagement and

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DiscountSpecialty Apparel

Department Stores

Luxury Goods Home Improvement

Price Clubs

2012 Customer Expectation Levels: Retail

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INDEX POINTS = SIGNIFICANT DIFFERENCE AT 95% CONVIDENCE LEVEL

© 2012 Brand Keya, Inc.

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Retailer-Supplier Collaboration: Last Best Hope

Unfortunately, this hyper-competitive environment of the 800-pound gorillas fighting it out is resulting in tremendous collateral damage to specialty retailers.

If there is not a significant change in this dynamic in 2013 we will see an acceleration of the demise of specialty non-branded retail in the US.

Ultimately, The Only Real Solution Is Collaboration

The only hope to reverse these trends and stop showrooming and price wars is for brands to take a stand on not only their MAP policies (minimum advertised price) which quite frankly have been largely ineffective as most consumers will add the item to the shopping cart to see the discounted price, to a complete unilateral minimum price policy (UMP) that protects the specialty retailer and as well, can prevent “free riding” by companies that offer the low price but not the high service as defined in the Leegin v. PSKS, Inc. case that the U.S. Supreme Court decided in 2007 which reversed almost 100 years of anti-trust law. The courts have given manufactures the green light to protect their brands and their retail partners. Retailers from their end will have the ability to choose whom to partner with and their survival will very much depend on this decision.

Technology has given retailers and manufacturers the ability to collaborate like never before. 2013 will tell if they do either.

Jim Dion Founder and President DioncoJim Dion is an internationally known consultant, keynote speaker, trainer, author and one of North America’s leading experts on consumer trends, retail technology, selling and service, retail merchandising and operations. Dion started his retail career in 1964 in a men’s wear store in Chicago. From 1975 to

1980 he was employed by Sears Canada in Retail Management. He was promoted to Buyer, Jeanswear and was responsible for buying and marketing for 68 retail and 958 catalogue stores. In 1980 he became National Sales Training Manager for Levi Strauss. From 1985 to 1988 he was Executive Vice President of Gilmore’s Department Stores in Kalamazoo, Michigan, where he repositioned a 106-year-old chain in a highly competitive retail environment. He has authored the retail selling manual, titled: Retail Selling Ain’t Brain Surgery, It’s Twice As Hard. In addition, he has co-authored Start and Run a Retail Business for Self-Council Press and is the author of The Complete Guide to Starting and Running a Retail Store.

The year 2013 will be known as the year that many brand name suppliers are forced to “choose sides” and take a stand on which retailers they will actively support and which retailers they will not sell to. As well, 2013 will be the year when retailers will be forced to choose what brands to continue to carry that will help ensure their survival. The race to the bottom, which has created the practice of showrooming, has to end soon. Too many brands and retailers are in a death spiral that will consume them if they don’t stop the current insanity.

And then there’s the web. The simple immutable fact that a web-only based business has far lower operating expenses than a brick-and-mortar store selling the same product, will always give either a margin advantage, price advantage or both to the web-based business. So, with the consumer having the power to search the lowest price on any product wherever and whenever they wish, they will exercise that power for any product that they chose to.

The future for most brick-and-mortar retailers in this brave new world of total transparency demands that they establish very close relationships with key vendors that not only help the vendor by protecting their brand image but also protect the retailer from unfair direct price comparisons. This will also require closer technology links, collaborative planning and retailers giving greater visibility of sales to their vendors.

And then, there is the double edge sword of specialization. For many specialty stores, success is based on the sale of one or two categories of product and if there is significant price or margin pressure on one of these categories, the results can be a disaster. Contrast this with many of the discount channels such as Amazon.com, Wall-Mart, Dick’s Sporting Goods, Target, or Kohl’s, just to name a few, who sell numerous different categories which allows them to be hyper-competitive in some of the categories or products within the categories but then be able to compensate for this loss of margin by having other categories that are not as price sensitive and deliver significantly higher margins.

The future for most brick-and-mortar retailers in this brave new world of total transparency demands that they establish very close relationships with key vendors.

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Often consumers are asked why they bought one item over another or what their decision process was. Their answers are not always aligned with reality. Many causal factors influence consumer purchases. In a physical store, aroma or lighting may have influenced the consumer to choose one item over another. There are other causal influencers for the online shopping experience (recommendations from friends, product ratings or competitive delivery choices) that subconsciously lead to a decision. The good news for retailers: consumers leave behind digital footprints. These footprints come in many forms and feed insight and optimization systems that make up this X-Ray Vision.

I see 2013 as a breakout year for consumer X-Ray Vision in which a significant number of retailers will make progress in applying advanced consumer insights to merchandising and supply chain decisions. I believe retailers who fail to pursue these capabilities will find an increasingly difficult retail competitive environment. They will be bringing a slingshot to a nuclear war.

Kevin Sterneckert Research Vice President GartnerKevin Sterneckert researches and analyzes Pattern-Based Strategy activities within the demand-driven value networks of consumer manufacturers and retailers. He is an expert analyst of merchandise life cycle (assortment, space, price, promotion, markdown and offer) optimization. Prior to joining Gartner, Sterneckert was the senior director of global product strategy for merchandise planning, optimization

and supply chain at Oracle Retail. He also served as the GM and VP of Retail for DemandTec, a provider of merchandise optimization solutions. Kevin also held positions at HEB Grocery Co., Wal-Mart Supercenters and a leading provider of private label services, Daymon Worldwide.

My outlook for 2013 emphasizes the mandatory development and use of consumer X-Ray Vision. Consumers are empowered with real-time information and the ability to act on a plethora of choice. I see leading retailers vigorously developing consumer insights and decision optimization technologies. It is important to note that these leaders are doing far more than just providing more customer information to their business decision-makers. Consumer X-Ray Vision describes not only what consumers are doing, but why, when and where they will do things in the future. While most have a long journey ahead, I believe winning retailers will be those that develop consumer behavior insights with localized intimacy.

There are a number of great examples where the use of consumer X-Ray Vision is returning high dividends. David’s Bridal, Kroger and Macy’s each are applying a version of consumer X-Ray Vision. David’s Bridal is leveraging social media gamification to understand the success of wedding gowns in the marketplace before they are manufactured, shipped and available in stores. These insights lead to proper order quantities as well as improved opening price points. Macy’s has transformed its financial performance with its “My Macy’s” approach to sales and merchandising. Assortments are tailored to the consumer preferences of individual stores. Kroger’s journey of consumer insights permeates business decisions across the entire enterprise. The application of insight-driven decisions provides distinct market advantage as a result of the retailer’s intimate understanding of the consumer.

The insights derived from consumer X-Ray vision can be applied to assortment, space, price, promotion, inventory, forecasting, and campaign decisions. As with the invention and use of X-Ray technology, users were able to see what is not obvious and extract value from seeing through layers. Winning retailers will be those that are able to understand the customer and leverage those insights to improve what is offered.

Tapping Consumer X-Ray Vision

The insights derived from consumer X-Ray vision can be applied to assortment, space, price, promotion, inventory, forecasting, and campaign decisions.

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2013 Best-in-Class retailers are also incorporating customer

insights into their supply chain plans. Supply chain planning, and the associated inventory and merchandising strategies, are impacted by how the customer views the source to consumer process. Today’s consumer is more concerned with the source of products — from the food they eat to the toys their children play with. This means retailers need to understand whether how their products are sourced or fulfilled make an impact on sales. Consumer insights help to bridge this knowledge gap, and allow retailers to ensure their supply chain plans are aligned to their customer’s desires.

The final piece of the puzzle is to use customer insights for store operations plans. These insights affect all aspects of the store experience, from product availability and store layout, to associate behavior. By incorporating customer insights into store operations plans, retailers are able to ensure that the brand is aligned to how the customer wants the store experience to be. Ignoring these insights alienates customers, and can make the difference between a loyal customer and a lost customer.

The use of these customer insights helps to align the brand more favorably to consumers, and can be a driving factor for better performance. Retailers that are incorporating customer feedback tools into their strategic initiatives have seen nearly double the year-over-year growth in both customer conversion rates and average transaction value. Understanding your customer is a key ingredient for personalizing the experience and continuing to drive innovation in 2013 and beyond.

Chris Cunnane Research Analyst AberdeenChris Cunnane is a Research Analyst for the Retail, Hospitality and Banking Practice. Cunnane’s research focuses on customer-facing technologies within retail and hospitality to identify the practices, technologies, and

behaviors that separate Best-in-Class retailers from their peers. Cunnane’s retail coverage focuses on the customer experience, and topics include cross-channel retail, customer loyalty, enterprise marketing, and campaign management. His hospitality coverage includes property management, customer experience management, and revenue management and forecasting.

Cunnane brings years of retail experience to Aberdeen, including roles in inventory management, marketing and customer service.

The Voice Of The Customer Is Changing The Face Of Retail

When people think about the voice of the customer, and its impact on retailers, the first thing that comes to mind is social media. Approximately 86% of Best-in-Class retailers from Aberdeen’s recent omnichannel retailing research are using social media as an interaction channel and are monitoring the customer experience, compared to about 50% of Average and Laggard organizations. The interesting part of this is that from a retail standpoint, the brand is king. These companies are more than two times more likely to track social commentary on the brand than on the individual location. This highlights the importance of maintaining a seamless customer experience across all channels.

However, while monitoring, measuring and analyzing social media commentary, on both the brand and individual locations, are important, there are other aspects of the voice of the customer that must be considered. Specifically, retailers need to apply customer insights to their strategic business planning. Customer intelligence and feedback loops, from mystery shopping and store intercepts to web, social, and call center feedback, help to drive innovation and address inconsistencies or shortcomings within the brand. Incorporating these insights into strategic plans demonstrates to the customer that their opinions matter, and the organization cares about its customers. Retailers are applying the customer insights they gather to their pricing, promotions, supply chain, and store operations plans.

From a pricing and promotions standpoint, retailers are using customer intelligence to understand which promotions are working and which are not. Using these insights, the CMO’s office can make more informed decisions regarding their marketing mix and promotional calendar. Retailers are also able to understand how their prices are seen in a very competitive landscape. The use of customer insights allow for a focused effort on revamping pricing structures, which begins with the source of the product.

Customer intelligence and feedback loops, from mystery shopping and store intercepts to web, social, and call center feedback, help to drive innovation and address inconsistencies or shortcomings within the brand.

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The Future Of Retail As Reflected In The Malls

Gary Schwartz President Impact MobileGary Schwartz has played a leadership role in the mobile industry, founding Impact Mobile in 2002 and running the first cross-carrier short code campaign in North America. In 2006, Schwartz founded the mobile committee for the Interactive Advertising Bureau (IAB) and has worked to publish literature such as the Mobile Buyer’s Guide, helping extend the digital buy into mobile (for which he received an IAB award for industry

excellence in 2009). In 2010, he was elected Chair of MEF North America with a remit to develop a mobile commerce practice to service brands, retailers and content owners (for which he received a MEF award for industry excellence). Schwartz is the recipient of the Asia and Japan Foundation Fellowship as well as the Macromedia People’s Choice Award and Dodge Foundation Award for innovation. He authored the books Click2K’Ching: The Mobile Shopper and The Impulse Economy.

So where does this leave the future mall? Let’s take a look at some categories:

1. Without a subsidised model for commerce, Best Buy and Barnes & Noble are not going to be around in their present form. The stores are important showroom entertainment but these stores cannot reinvent themselves (while supporting their incumbent legacy footprint).

2. Amazon, Zappos or some other new entrant will develop a pure showrooming business model that seamlessly allows for a mall-to-cloud commerce relationship with the mall goer.

3. Starbucks and movie theatres will continue to grow their entertainment footing.

4. Grocery will continue to be destination to touch, feel and buy your vegetables and fruit. Oh, and of course the rest of your food basket.

5. Pharmacy will still be the trusted destination for medical information. Oh, and of course the rest of your drug basket.

6. Specialty will continue to differentiate itself from the cloud as a come-look-and-see shopping destination.

A viable mall business model depends on: cost of goods (price), proximity of purchase (convenience) and experience (trust). We all know that the modern mall cannot win on price alone. Convenience, trust and, of course, the mall’s silver bullet, entertainment, will be needed in spades to win the day.

Many mall owners would like to jump into a time capsule. If they could fly through the disrupted business models of 2012 into a less turbulent 2015, what would they find? Landing from a bumpy (but enlightening ride) would they be surprised at the new mall tenants? Would the shoppers be engaged and buying? Would the mall realtors of the future be in business or retired in Tampa on a golf course with other disrupted media executives?

The future may not be this bleak, but change is coming and it may be prudent for mall owners and their tenants to take a peek into their not-too-distant future. Let’s take a look at the shape of the new mall and a few things to take stock of as we court a mobile shopper.

Let’s start with a conversation I had with Brett Bonner, the head of innovation at Kroger. Brett explained that the store and the mall have always been primarily about entertainment. The Leave-It-To-Beaver ‘50s family’s trip to the mall was not only about utility it was about the outing. The family dressed up to fill the basket. No one got into the Chevy without dressing in their finest.

The modern mall has evolved to service shoppers’ entertainment needs. Malls continue to be entertainment destinations, and movie theatres and Starbucks have become standard hookup locations. Mall developers and management have increased their emphasis on entertainment, trying to provide a consumer value exchange. However, the 2010s may bring this ROI calculation into question.

The Mall Is Fun. But Is This Fun Financially Viable?

With so much entertainment, we know that the mall is in need of a “showrooming” business model. Somehow all this foot traffic needs to end in a purchase and if the mall cannot put this purchase on their balance sheet, it may be in trouble.

For brands and retailers the whole concept of “path to purchase” has changed. It has always been a perilous path, but with an always-on mobile shopper, in many cases purchase can happen without the path.

For this digital generation, the shopper, in many cases, has researched online and is ready to make a purchase decision pre-store, pre-mall. Google calls this the Zero Moment Of Truth (Z-MOT) — if the shopper is in the market for a dishwasher or dress, they have already scoured the web for information on the best product at the best price.

If the brand can make a purchase of a dish washer simple at point of decision at a bus shelter or billboard, then the shopper is highly likely to act on this advertisement. Path to purchase becomes simply “purchase.” Where does this leave the store and its realtor, the mall?

The mobile phone becomes the dispenser and the media becomes the store. A one-click wallet in the cloud now is all you need.

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In a nutshell, what they all had in common was not one specific thing that all shoppers were experiencing. What they all had in common were unique, service-oriented tactics that make the shopping experience easier, more rewarding or just plain special. We heard consistent statements like “goes above and beyond,” “makes me feel special,” “makes me feel confident,” “knows me and cares about me,” “make my visit fun,” among others. They all are statements about retailers adding value, making consumers feel recognized and making them happy to be shopping. These consumers simply felt good doing business with the winning retailers.

Think about it: What retail brands do you simply love shopping and buying from? Why? How does your experience with each of them make you happy in some way, regardless of path or place? And how does this alter how you feel about shopping their competitor, particularly for price alone?

Self-reference a bit and this really resonates. Bets are that you’re more allegiant to the retailers that make you feel warm and fuzzy. You don’t mind traveling an extra few miles to get to a store, or spending a bit more money. You like them more — and why wouldn’t you?

So how do we as retail strategists respond to this? Embrace that it’s not our job to strategize how to push our agendas on shoppers — it’s our job to listen to their current experiences and respond with things that will make them better. Lucky for us, the tools at our disposal to do so have never been more exciting.

Last year’s Outlook Guide from Retail TouchPoints featured many strong topics regarding how technology has disrupted retail, and the opportunities now available to help merchants evolve shopping experiences across all points of engagement. This year, as talk about being “Amazon-ed” has reached a crescendo, almost everyone is looking for more specific suggestions on how to use digital engagement to stay protected. It’s easy to gloss over, however, that digital is just a platform — it’s the experiences that it unlocks for people that matter.

From a basic commonsense perspective, it just makes sense that better retail experiences lead to sales and loyalty. All agree that technology is the ticket to creating these exceptional experiences. Unfortunately, most C-level retailers don’t do well with theory — so we at BBDO decided to find some proof.

We love the term “Shopability” — it means the capacity to transform consumer needs and desires into purchases. But do we as an industry truly understand what drives “Shopability,” or how specific cross-channel shopping experiences either support or detract from it? Not really.

We spent six months looking into this question, both qualitatively and quantitatively, across 13 retail verticals and 45 brands. Our questions dove into five key areas: in-store experience, online experience, offerings, emotional attachment to the retail brand and rewards. The data is still being fleshed out in detail, but what has emerged as a clear takeaway is this: emotional attachment is the most important driver to sales health. And what is emotional attachment driven by? You got it — experience.

The retailers that came out on top for both experience and sales health are probably no surprise. In order, the leaders were: Apple, Zappos.com, REI, Amazon.com, Trader Joe’s and Nordstrom. What we found fascinating was the dialogue and specific detail around the rating data for the winners.

Customer Experience 2013: The Experience/Success Connection

Laura Davis-Taylor SVP, Managing Director ShopWork, BBDOFocused on helping clients turn shoppers into buyers amidst today’s ever-changing retail landscape, Laura Davis-Taylor has been creating shopper strategies that bridge home, life and store for more than 20 years. Her experience is multi-faceted, ranging across account planning, Internet marketing, store design and, more recently, next generation retail experience design.

Derived importance is based on Pearson correlation between performance and Net sales

Stated importance is the average score of “Please rate the importance of the following features when you shop at ___”

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EMOTIONAL ATTACHMENT OFFERINGS

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Average derived importance 47%

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Retail TouchPoints is an online publishing network for retail

executives, with content focused on optimizing the customer

experience across all channels. The Retail TouchPoints network

is comprised of a weekly newsletter, category-specific blogs,

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