© 2011 Retail TouchPoints2011OUTLOOK

GUIDEPredictions from 10 of the Retail Industry’s Top Analysts

2011

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3 Sahir Anand, Aberdeen Research

5 Lauren Freedman, the e-tailing group

6 Jerry Sheldon, IHL Group

7 Gary Schwartz, Impact Mobile

9 Jim Dion, Dionco, Inc.

10 Laura Davis-Taylor, Creative Realities

11 Chad White, Responsys

12 Dan Avila, Tompkins Associates

13 Greg Girard, IDC Retail Insights

14 Amanda F. Batista, Retail TouchPoints

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Table of Contents

As 2010 concluded, retail industry executives were looking optimistically toward 2011. With the height of the recent recession fading away, retailers are anticipating a positive 2011 as consumers slowly begin to spend. In response, retail organizations are re-tooling their marketing and merchandising efforts. To identify the key retail trends to watch in 2011, Retail TouchPoints called on some of the most prominent retail experts to share insights and predictions. With mobile payment and social media strategies front and center, the 2011 Retail TouchPoints Outlook Guide offers insights for every vertical, and throughout current and emerging channels. The Guide offers solutions that will help improve shoppers’ customer experience while boosting the bottom line.

The 2011 RTP Guide roster of analysts includes experts in mobile technology, in-store solutions, supply chain services, social marketing strategies, merchandising and store operations:

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Retail success in 2011 hinges on customer-centricity, developing increased customer-centric service and sales models in stores and harnessing the power of social and digital channels as part of an integrated marketing strategy. According to Aberdeen Research, 87% of Best-in-Class retailers are innovating the shopping experiences of their customers, enabling the ability to shop in stores, online, and across new channels such as mobile, whenever and wherever the customer wants.

Technologies That Will Drive Process Management Practices

Data and Analytics Fifty-Three percent (53%) of large retailers indicate that customer analysis is difficult due to enormity of data from different channels. Retailers have more data than they are capable of processing. Case studies of retailers indicate that leading companies are successfully surfacing their data about customers, merchandise and operations and leveraging it for actionable intelligence. These retailers are seeing the best margin and repeat customers. These retailers are distinguishing between multiple customer and business data silos that exist within retail, and discovering how to pervasively coordinate customer and brand views.

Merchandising and Inventory Optimization: Two-thirds of retailers are challenged to optimize their inventory as best as possible to plan for the holiday season and beyond. Best-in-Class retailers are also planning their seasonal merchandising and allocation strategies based on localized demand as accurately as possible for the next two-to-three quarters. Seventy-one percent (71%) of Best-in-Class retailers are applying inventory visibility and accuracy strategies from source to shelf to establish a successful consumer-driven replenishment system that balances the demand with the supply chain.

Mobility Will Resonate With Retailers in 2011 Aberdeen surveyed 129 retailers between July and August 2010 to reveal that 38% of respondents are currently at some stage of mobile retail technology or mobile channel adoption compared to 18% at the end of 2008. Another 50% of respondents are looking to adopt this technology (15% within the next one year and the rest considering planned adoption at some point in the future).

Currently, there are three major elements of the mobile retail experience that are top-of-mind for retailers. Mobile web is the top component of a mobile retail technology platform strategy for almost half (49%) of retailers surveyed. The second highest preference for 43% of retailers is mobile coupon targeting and delivery, which can be tied into customer loyalty programs (i.e. Starbucks). In September 2009, JCPenney made a foray into mobile couponing with a pilot program at 16 stores. The third most popular component of a mobile retail technology strategy is smart phone-platform specific mobile retail applications for various smart phones (37%).

Utilizing Customer Data More often than not retailers blame disparate sources and enormity of customer data as the primary reason for lack of adequate consumer insights that inhibits new customer acquisition, customer retention and reactivation. This inability curtails effective retail planning and execution in the areas of customer-centric merchandising, marketing, promotion and pricing, among other critical customer value chain areas. Many large retailers including Wal-Mart and Lowe’s try and grapple with this customer data complexity everyday. In 2009, retailers such as Chico’s FAS realized the importance of customer insights and developed its central business revival strategy by executing in-depth customer data analysis, narrow customer segmentation, and mapping the customer value chain all across the business for augmenting growth prospects in 2009 after a lukewarm 2008. Chico’s undertook a sustained effort to identify key customer characteristics and tied it back to retention and reactivation campaigns that lead to incremental sales.

CRM tools are pivotal in the “before the sale” stage of customer-centric retailing. However, CRM tools are also used in stores and channels in the “during the sale” stage of customer experience to update customer information, customer record look-up, and fulfill loyalty couponing related functions at POS.

CRM tools are used at retail corporate headquarters for maintaining and updating centralized customer database records, buying history and other attributes that are critical for executing effective direct, online and other loyalty marketing campaigns, coupon and offer management, and integration with other value chain areas such as merchandising and channel management.

Best-in-Class are 3.8 times more likely than Laggards to adopt CRM tools at headquarters and channels of sales and service. Overall, 41% of all retailers use CRM tools in their retail organization. These tools not only enable data-driven customer relationship programs but also facilitate in augmenting loyalty marketing and customer outreach campaigns that drive customer acquisition, retention and re-activation.

Social & Mobile Part of Cross-Channel Roadmap Best-in-Class companies are better equipped to track social media activity as part of their cross-channel retail initiatives. Many retailers have come up short in their social media initiatives due to a lack of planning and execution. According to Aberdeen’s August 2010 Social Media ROI report, 85% of retail organizations currently have a social media initiative in place to help manage brand reputation and encourage revenue-building

Key Technologies Will Help Develop Success Through Customer-Centricity

Sahir Anand, VP & Principal Analyst Aberdeen ResearchAnand oversees and enables the overall research and analysis in the vertical industry segments including retail and hospitality, and retail banking related process management and technology value chain areas. Anand specializes in the points of customer interaction and points of integration (technology and business workflow) functions.

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consumer interactivity. However, there is a wide gap between the use of social media as an interactive brand extension and adequate monitoring of social media activity. According to Aberdeen’s May 2010 Restocking the Retail Marketer’s Toolbox report, 70% of retailers do not leverage social media monitoring as part of their marketing initiatives. Home Depot has successfully integrated customer service and promotion delivery through the use of Twitter. With nearly 22,000 followers, Home Depot promotes in-store and web specials, and responds in real-time to customer complaints or suggestions.

Business Intelligence (BI) Application Vital for Customer-Centric Retail These applications come into use for retailers during and post-sales customer experience stages. Best-in-Class are 1.4 times more likely than Laggards to use a BI application for customer data collection, assembly, analysis and reporting.

These consumer insights are used enterprise-wide by Best-in-Class retailers for both pre-season and in-season retail planning and execution. BI for customer management helps facilitate marketing strategies, merchandising, store layout, signage, sales and service strategies, workforce management, inventory optimization, multi-channel operations and supply chain planning and execution.

BI data and reporting provides unit-level consumer buying trends, category, channel, store sales analysis and predictive buying behavior data analysis. BI applications that gather, analyze and share consumer insights in retail through basic reporting and customer performance dashboards can directly or indirectly impact retail profitability, customer sales and service performance. Currently, 40% of retailers use BI for customer management purposes.

Anand advises retailers to increase investment in the following seven customer-facing technologies for success in 2011:

9 Increase investments in POS and workforce enhancements, mobility, end-to-end cross-channel tools (order, fulfillment, delivery), consumer insights (BI), and demand-supply integration tools;

9 Implement a centralized customer data integration strategy for an effective consumer insights process;

9 Use customer segmentation, affinity and preference mapping for enhancing retention and re-activation;

9 Provide customers with the ability to purchase, exchange and return product through a channel of their choice;

9 Align IT upgrades with current and future cross-channel customer preference and affinity;

9 Introduce or expand customer performance incentives for every job role to sustain a sales and service culture;

9 Measure job role based customer metrics performance and share results with employees regularly.

SahirAnandKey Technologies Will Help Develop Success Through Customer-Centricity

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The biggest challenge for retailers today is that the consumers’ notions about connecting and merchants’ ability to connect changes so fast. It’s hard for merchants to stay ahead of the curve. But good tactics are being implemented every day. What it boils down to is understanding your channels and who you target consumers are. It could be about mobile and social strategies, but it also can come down to things that are more simple such as product locators or in-store pickup.

Grabbing Market ShareI think in terms of growth, at the end of the day, retail growth is going to be small, even if there is a rise during the holiday season. So growth will likely come down to merchants finding ways to take market share from their competitors. It’s not like the pie is getting bigger — we are not going to see that for a number of years. Six ways to grab market share include:

1. Expanding drop-ship assortment.

2. Testing a new category. Many retailers are going out of their comfort zone to offer additional products that will bring in new customers and retain current ones.

3. Piggybacking on sister brands. Pottery Barn and PB Kids, for example. – I think you are going to see more play in this area because it is cost-effective.

4. Retention. Retailers need to focus on keeping customers. Look at Apple – when you think about their ability to bring people into the store, make appointments and go to the Genius Bar – that is a great retention effort.

5. Driving in-store traffic by continuing to get the customer engaged.

6. Focusing on the multi-channel effort. Retailers must make sure they have a best-in-class experience in their own category. I am a stickler in this area - it’s about customer service differentiation. Retailers must actually know their products and assist shoppers in purchasing them.

Empowered Consumers Challenge RetailersRetailers are now dealing with empowered consumers with greater access anywhere anytime and that has to be addressed. I am really struck with fact that we live in such an ADD shopping culture — everyone is impatient, everything must be available now. Retailers must respond with broader assortments and greater availability.

To me mobile is the most exciting channel right now. We recently decided to add mobile to our Mystery Shopper studies because we believe that it is leading to a lot of new activity. We are still in the early days but if you see the quick adoption rate, access and anywhere factor is significant and mobile will facilitate that.

Piggybacking on the mobile revolution, price checking tools also are an issue. The fact that consumers have the ability to price check a product in a second is very powerful and very frightening.

When we talk about loyalty, we have to talk about the lack thereof, particularly for younger customers. They have no loyalty to anything except themselves and their social connections. That is a factor that has to be reckoned with.

Evolving the Ecommerce ExperienceWe are still at a 7% e-Commerce market share, so the store continues to play an important role. The connection between the web and store will be powerful. It is important for the web site to be in-stock: we have done research in this area and people say they will leave the site if it’s out of stock.

Customer service is another important area retailers must focus on – often shoppers can’t find an answer to a question. In our Mystery Shopper research every year we continue to find customer service representatives unable to answers questions about a product.

Redemption across channels also is key. It is about efficiency online and in the store simultaneously. In fact, price has been secondary to time savings for shopping online. The fact that the web creates efficiencies that shoppers don’t have offline is very powerful. In the end, efficiency and good product will always trump price. Apple is not selling those iPads at a discount. Shoppers will pay for shipping on it if they want it bad enough.

Another place retailers are leaving money on the table in the ecommerce world is competing against companies that deliver the next day. If I am a Zappos shopper and my kid needs a new pair of UGGs, I can go online at 11 p.m. and have them the next day. It is hard for many retailers to compete with that.

Understanding And Connecting With Shoppers

Lauren Freedman President the e-tailing groupLauren Freedman is a seasoned 15-year e-Commerce veteran. She founded the e-tailing group in 1993 after an extensive career as a department/specialty store buyer. The e-tailing group serves all sectors of retailing, from brick and mortar to catalog to online. The e-tailing group’s proprietary research includes the annual mystery shopping and merchant benchmarking surveys that provide a comprehensive overview of the state of e-Commerce, setting industry standards while simultaneously highlighting best practices. Freedman has spoken at many global e-retail conferences including Shop.org, eTail, and Internet Retailer. She is often quoted in media outlets like The New York Times, WWD, CNN, Financial Times, USAToday, Business Week, Forbes, Internet Retailer and Crain’s. She is author of the book, It’s Just Shopping, a comprehensive, behind-the-scenes look at the evolution of multi-channel selling.

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Over last couple of years, consumer frugality seems to be slowing. The latest numbers show coupon redemption slowing or decreasing slightly. Also, higher-end retailers such as Whole Foods, Nordstrom, Saks and Tiffany are starting to post strong numbers. I don’t know that this is necessarily a reaction to the economy, but more likely a new demand. People may be tired of not spending; and they are starting to replace items.

Economic Recovery Still An Issue While there is some optimism, unfortunately there is more pessimism where the economic recovery is concerned. The housing crisis is not going away any time soon – there continues to be a lot more supply than demand. Banking woes could get better or worse. But in the meantime, Europe, Portugal, Greece and Spain are either in default or almost in default. And we have rising gas prices, which always has a significant impact on discretionary spending. Looking at the total picture, the key drivers for economic recovery don’t seem to be connected yet.

Sheldon offers the following advice and insights for retailers:

Develop Loyalty Using Smart Phones Anyone that has a smart phone is absolutely amazed by what they can do these days – they are revolutionizing communications as we know it. Even though Best Buy by any measure has one of the most successful loyalty programs in retail, the merchant has joined shopkick, a service that rewards shoppers just for entering a store. Target has joined as well. This type of smartphone service has specific potential for those that don’t have a successful loyalty program. Many loyalty programs become glorified revenue reduction activities. Smart phone strategies like shopkick offer retailers an effective and inexpensive way to improve loyalty.

Join the Mobility Explosion Just like during the Internet boom, some companies are not sure how they are going to make money with mobility, but they know they need a presence. Retailers are currently asking: What does mobility mean for retail? Where should I focus my efforts, on POS, loyalty, or peer to peer? What does mobility in the store mean? How does the mobility in store play into the store experience and what we want our store to be? Any mobile activity done without incorporating the overall store experience is a waste of time and money and will not offer the expected return on investment. The real challenge for retailers is the bar code readers and mobile price check applications shoppers can acquire, then literally walk into the store, scan a product and see if the store has best price or if it would be cheaper at Amazon or another local store. If retailers don’t maintain the store experience, and if they miss incorporating mobile into the store experience then they risk turning the store into a museum – a place where shoppers touch and explore but don’t buy.

Use Analytics to Augment Social & Mobile Efforts Over last couple years, even with the poor economy, business intelligence (BI) and analytics have really held their own, showing close to double-digit growth on a year-over-year basis. A lot of tier 1 and 2 retailers have strongly invested in analytics over last few years. These retailers are specifically looking to discover how online perceptions drive sales. How can retailers better position themselves to understand and influence perception online to drive in-store sales? How can product placement in social media drive sales on a particular item? How do tweets and Facebook roll into future sales? Merchants also must look beyond social and mobile and discover all the drivers that influence sales today – such as weather and other events.

Store Systems Investments Are On The Rise One of our strong areas of focus at IHL is store systems. Solution providers over last couple years can attest to what an unfertile ground it’s been. The economy has been unstable and general consumer sentiment hasn’t been positive. Retail organizations have been focused on maintaining the status quo, keeping the doors open, maintaining damage control, and doing what they are required to do from a compliance standpoint. But recent research is indicating that folks will be back buying again – investing in store systems – which is good news all around. We are expecting to see 3% to 6% IT spend growth in store systems over the next few years – POS systems, checkout systems, workforce management, etc. There is good news there for folks that have weathered the storm over the last few years.

Again it all plays back into the customer experience and creating efficiencies in the store environment. Retailers need to find new ways to interact with customers across many different touchpoints – through kiosks, mobile technology, handheld devices, digital displays, etc. Instead of being a museum the store should be a destination.

3 Retail Strategies To Embrace In 2011: Loyalty, Mobility And Analytics

Jerry Sheldon Analyst IHL GroupIn the field of retail technology, Sheldon has researched and authored analyst reports on price optimization, POS software systems, printers, and workforce management solutions. Sheldon also provides the development expertise and analytics that go into the IHL Retailer Technology Data Service, Sophia, and the Retail and CPG IT Spend models. He has been quoted by The Atlanta Journal Constitution, RIS News, Hospitality Upgrade, BusinessWeek, Retail Technology Quarterly, and Investor’s Business Daily, among others. In addition to having a Bachelor of Mechanical Engineering and a Masters Degree in Mechanical Engineering from Georgia Tech, Sheldon also has an MBA from the University of Miami with a specialty in Marketing and Marketing Research.

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In the spirit of the impulse economy and impulse consumption, the following is a checklist for retailers to reference as a guide to build out and manage a comprehensive commerce strategy:

9 Leverage existing consumer behavior: How many conference panels have I attended where the line following, “This is the year of mobile,” is: “We just need to educate the consumer”? It is pure hubris to say that you will “educate” the user who is far more advanced intuitively than a pack of marauding mobile experts.

Shoppers are using their phones for mobile web and SMS seamlessly throughout their day in our stores and hotels, and at our events. Our humble goal is to just try to “keep up” and capture a small piece of their conversation. They are way ahead of any marketing department.

9 Leverage the largest mobile install base: Beware snake-oil salesmen. If education is not the word of the day, then try to forget anything that looks like a “shiny object” or “new-fangled solution” (even if there are hundreds of thousands of them on a mobile storefront somewhere). If the consumer is using SMS and the mobile web as their main channels, then use them. When you think you should “walk” before you run, start at a crawl:

• Build your SMS opt-in community;

• Buy some mobile advertising inventory; and

• Use both to drive conversion solutions.

Reach and frequency are the two words that you need to continually use in the same sentence as mobile advertising and marketing. Mobility starts with a crawl and it is usually simple list-building and mCRM.

9 Leverage existing promotions and CRM strategies: IT will tell you this but as a reminder: mobile should be an extension of business-as-usual in the store, street or office. Do not start reinventing the wheel. Curb your enthusiasm. Use mobile APIs (application programming interfaces) and tie them into your existing communication services and databases. Email, IVR, SMS and MMS should all be fluid two-way opt-in channels.

9 What’s good for the goose needs to be good for the gander: Empower your “blueshirts” with the same mobile tools that the customer uses. Do not let the shopper have a more powerful tool to navigate your products than the sales clerk. Whether this means giving the Mercedes Benz shopper an iPad when they enter the dealership or giving your clerk a smart phone in a scanning chasse, the two worlds need to be on parity.

9 Count Clicks to Commerce: Keep it very, very simple. Seems like an also-ran statement but somewhere between concept and launch many mobile solution providers get struck by lightning and lose their simplicity gene. The mobile consumer is on the run: you need one click2engage, one click2commerce, one click2bricks&mortar. Add one more step and you have lost your shopper.

9 Mobile commerce makes for strange bedfellows: Given the mobile cut across many verticals, note that mobile commerce connects partners that may never have been able to work together in the traditional world. Airbonus is a good example of how the wireless carrier suddenly becomes the rebate reward clearinghouse for the brand.

9 Suspend belief: I recall walking into our wireless carrier partner’s office in 2001 and proposing a joke-of-the-day subscription service. The first joke was that consumers were billed at $1.25 per joke. (The same joke that they could Google for free on the web.) Well the service was a huge success. Lesson: suspend common sense with mobile services — the mobile consumer will opt-in on impulse and pay for convenience.

9 Make it an intimate, personal, one-to-one channel: Cliché but if you forget and build your service incorrectly, you will dramatically lose your hard-earned opt-in. While SMS has a nearly 100% open-rate (buzz-to-view time will amaze the most-jaded CMO), SMS also has an equally high opt-out rate (if the viewed message is not what the subscriber expected).

The channel is digital gold. The shopper is now including you alongside their personal messages. You need to make a commitment to be as targeted and contextual as possible.

Mobile Checklist For 2011: Strategies To Build And Manage Commerce

Gary Schwartz President & CEO Impact Mobile

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, he 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, Schwartz 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 upcoming book Click2K’Ching: The Mobile Shopper & The Impulse Economy.

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9 Make it a “Trojan” channel: Allow your consumer to reach you directly for product and service information. In a world where you know more about your brand than the in-store salesperson, allow the consumer to surreptitiously search, surf and text that product directly and learn why they need to buy it NOW.

Just as Steve Madden allows the customer to text about her new shoes and engage at the moment of intent, every product can be the in-aisle expert guiding the potential consumer reviews, insights and tips. Additionally, allow the shopper to use this channel to post reviews, insights and tips to you. Use it for pop-surveys to gauge just-in-time feedback.

9 Go SO LO: There is a buzz about the new mobile guys on the block. The so-called location based social media networks, or ``lo-so’’ networks. Be leery of these lo-so third party applications that to drive acquisition and drive-to-aisle via GPS location. They incentivize “check-in” at the store, restaurant, club, hotel, etc.. Facebook and other heavy weights maybe about to sustain reach and frequency but ultimately the brand or retailer should own this relationship long term.

9 Make it horizontal: Mobile is a perfect medium to add to your existing media touch points. In a world where most of the media plan is bought as vertical PUSH media, mobile is often PULL. It allows the consumer to SMS and get information, rewards, incentives off TV, radio, print and other non-interactive media. Do not manage your commerce channel in isolation.

9 Security? Encryption and payment standards make wireless an unwieldy commerce tool. With private data such as location, profile and banking information floating through the cloud and over Near Field Communication (NFC) tags, there is sure to be multiple security abuses. Proceed with caution and in the company of seasoned industry experts.

9 CMO = Chief Mobile Officer: We have established that consumer engagement and “impulse” conversion are the hallmarks of mobile. But to evangelize this across the organization may need more than one department or marketing manager pushing “horizontal integration” initiatives.

If the organization is committed to mobile it may want to consider establishing a new position that works agnostically across the organization, across silos to drive mobile efforts. Microsoft and Weather.com have roles that work to make mobile an integrated success across all screens and across all departments.

9 Innovation Remember that your brand is not necessarily a mobile brand. Your job is not to become known as a mobile innovator. Remember Gartner’s Hype Cycle? When it comes to the question of what you need to be looking at trialing as mobile evolves I would recommend that you respond with the following sage advice:

“Next year run the solutions you probably should have run last year.”

9 Invest flexibly Mobile maybe a moving target (but it is an unmistakable target). Bob Parker from IDC Retail Insights says that his clients have moved from “Should we invest in mobile?” to “What do we spend money on in mobile?”. “They end up sinking their spend into option-based investment,” Parker said. They are investing flexibly — basically hedging their mobile bets.”

9 Test It No one expects the retailer or brand to attach ClipCams to the glasses of prospective mobile shopper to record and analyze their behavior, but the industry does mandate focus groups that try to understand shopper general MO. Finger-to-the-wind mobile strategies will fail.

Apple CEO Steve Jobs was quoted in Fast Company magazine (obviously likening himself to Henry Ford): “If I’d have asked people what they wanted, they would’ve said a faster horse.” Apple’s game-changing products did not come out of focus groups or quantitative research; they came from insights into human behavior.

Yes, one shopper has little insight into his/her behavior but the brand/service must run focus groups with shoppers to try to gain insight into their group behavior.

9 Homo Mobilis Understand that mobile is a necessary evil. It is a needed shopping tool that in many ways distracts from the optimal shopping experience. The ideal mobile shopping utility would not inhibit mobility. Future mobile device technology and form factor may allow for the shopper to stand upright again.

Mobile Checklist For 2011: Strategies To Build And Manage Commerce GarySchwartz

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As retailers prepare for 2011, consistency and simplicity are key in delivering a winning customer experience. The ‘Holy Grail’ of customer experience is that the customer experiences the same level of service every time and every way that they interact with a company, whether it is through their online store or their brick-and-mortar store, whether they are buying something or returning something, whether they are asking a question or complaining about something, whether they are served by John or Dana. These used to be called “moments of truth” where the service promise was either realized or proved a false promise.

Great stores find a way to make sure that the experience is consistent. This requires a Store Ops checklist that is simple to understand and execute. Complexity is the enemy of customer service yet thousands of companies continue to try to make the simple complex. If your team did not have input into your checklist and cannot express it in less than 30 seconds, odds are you are not going to be very successful in delivering a great customer experience.

Customer Service Strategies Customers do not demand as much as wish for a seamless experience across all channels. Great stores are not afraid to give the power to the customer, power to do their own research both on line as well as in the store, power to comparison shop, power to learn what other customers think about a product and even power to self select and check out if they choose to. I believe a great store is always set up for total self service and then layers personal service on top for those customers and times when it is needed. One of the companies that I really admire for this ability is Best Buy; they are well down the road to fully empowering the customer and other retailers would be well advised to study their approach and see what they can learn from them.

Localized Assortments There is an old saying that ‘all politics is local’ and I think this somewhat applies to retail as well. Companies like Wal-Mart have been at the forefront of geographically localized assortments, and even Nordstrom for years has given its stores the ability to buy and build local assortments. In most categories assortments are still almost 90% applicable across the entire country but the remaining 10% can be crucial for a retailer’s success. This is both a technology issue (how to do it) as well as a philosophy issue (will we do it).

Managing Inventory Effectively It is still amazing to me after all these years how many retailers I visit are out of stock on core merchandise. If you really want to understand a retailer’s inventory problem, look to their markdown areas. If you consistently see the same colors, sizes, vendors in the markdown areas you know that they are not learning from their mistakes. Despite the number of price optimization programs that have been sold I have not seen many delivering on the promise of optimizing inventory. You have to begin and end with the reality that “all inventory is evil” and treat it accordingly.

Utilizing the Mobile Channel Customers are now carrying more power in their phones than they had on their desktop 10 years ago. They want to use that power to make their lives easier and retailers who figure that out are going to be way ahead of the pack. So smart money is being used to enable phone applications for information, couponing, reviews and even self-checkout in the store. Mobile devices for staff are a double-edged sword as you would love to give your staff the same ability as your customers to access information while at the same time making sure that they are not abusing the communication capabilities of the device (i.e. texting friends all day at work).

Providing Value to Maximize Selling Techniques If the universal race to the bottom on price and only price is going to stop it will have to be done by adding genuine value to the transaction. This value can be delivered by retailers who use technology to give the customer a fantastic experience that includes smart suggestion selling techniques that deliver complete solutions to customers. Complete solutions are not subject to price comparisons as they are made up of multiple products and often combined with services. Technology has to deliver on something beyond just making it easy for consumers to beat us up on price.

Holy Grail For 2011: Consistent Customer Experience

Jim Dion Founder & President Dionco, Inc.Dion is a retail speaker and trainer, retail consultant, and the author of Retail Selling Ain’t Brain Surgery, It’s Twice As Hard, Start and Run a Retail Business and The Complete Idiot’s Guide to Starting and Running a Retail Store. He consults, trains and speaks on consumer trends, retail technology, selling and service, retail merchandising and operations, marketing and leadership. Dion has more than 30 years of progressive retail experience working at Sears, Levi Strauss and Gilmore Department Stores.

“In most categories assortments are still almost 90% applicable

across the entire country but the remaining 10% can be crucial

for a retailer’s success.”

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2011 is now upon us and, given the dizzying emergence of new technologies, retailers are flat out confused. Which shopper technology should retailers focus on implementing first? Mobile? Tablets? Digital signage? Shelf edge interactive? Social? And how do they divvy up time and budgets?

The answer is simple: it’s not about the technology — it’s about the business challenges they can solve and which will have the best ability to so.

At my firm, we monitor everything that’s hitting the retail tech stratosphere and do our best to clear the fog for retailers on how to best utilize them. There are certainly some technologies that we feel are critical for all retail brands to start embracing, but it’s easier to filter out what we need them to help us do — then pick the tool to empower it. I don’t have a crystal ball, but I’ll hang my hat that we all need to focus very strongly on capitalizing on the following tech-empowered trends for 2011:

1 The convergence of mobile and in-store digital experiences. Now that the smart phone has penetrated almost 25% of households, apps and handheld solutions are changing the retail shopping experience as we know it. This topic alone could be a book, but the important thing to note is that when a shopper can quickly compare prices, locate competitors, cash in on coupons, read product reviews, receive ‘hyper relevant” incentives based on their history and more, loyalty changes quickly. No one know exactly how this will shake out and affect retailing financially, but we will only be successful if we watch, listen, understand and react to how people embrace mobile tools in the store and add to their value rather than resisting them.

2 “Socially empowered” shopping experiences. Facebook now has product favorites and wish lists for anyone’s social network to see and respond to. Levi’s lets you post your personal jeans profile and share it with friends. Dell Swarn and Groupon’s Grouponicus have created volume discounting for rallying up friends and peers to buy products with you. What else should we as retailers be doing to capitalize on social behaviors for retail? Talk to your customers; we promise that some powerful ideas will be uncovered quickly.

3 Personalized in-store communications. For years and years, the top shopper request has been to build better bridges between the online experience and the in-store experience. No surprise given that a highly personal and helpful online shopping experience sets a precedent that makes a lackluster in-store experience more disappointing. When shoppers like retail brands they opt in knowing that the retailer will know their name and offer them products that they know they will like. Mobile and digital screens have built the bridges to do so in-store…it’s time to use them!

4 The emergence — and impact — of digital marketplaces such as boutiques.com. If you want to try a shopping experience that will either delight you to pieces or scare you to death, go to Google’s boutiques.com, create a personal profile and check out your personal boutique. The helpful personalization that it provides bar-none knocks anything we’ve seen out of the water and raises the bar immeasurably for the previous point on personalization. By doing so, Google has made shopping with a retailer irrelevant, for they scour the world and bring the products you will like best directly to you — regardless of brand. That means brands will have to play ball with them and become beholden to their revenue shares or get on the same playing field quickly.

5 Digitally-empowered associates. The average associate tenure is still woeful and, as products become more complex to sell, this is an issue. All of the rich information a shopper is accessing online can be accessed and utilized for associates to ensure a better shopper engagement, yet very few retailers have done anything with this yet. This year is the year to change that.

Retailers Must Focus On Business Challenges In 2011

Laura Davis-Taylor Vice President, Global Retail Strategy Creative RealitiesDavis-Taylor is an 18-year industry expert with a diverse background in integrated marketing, brand planning, in-store digital media and retail/environmental design. Creative Realities is a digital experience company that helps clients bridge the physical and virtual worlds of digital marketing. Davis-Taylor chairs the POPAI Digital Signage Advocacy Committee and is a board member of the Digital Signage Expo. She also is the co-author of the book Lighting Up the Aisle. She can be reached at LDT@cri.com.

“When a shopper can quickly compare prices,

locate competitors, cash in on coupons, read product

reviews, receive ‘hyper relevant” incentives based on their history

and more, loyalty changes quickly.”

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Email marketing is constantly evolving, with social media, mobile and ISPs driving most of the change right now. White has been chronicling the changes in email marketing practices and tactics in the retail industry for more than four years as the author of the Retail Email Blog.

White shares five trends that he predicts will have a major impact on email marketing during 2011:

1 The plain text part of your multipart email will become more important thanks to Facebook Messages, which displays the plain text part by default.

There’s a link to display the HTML part which it does very well — but that link is easily overlooked, which means that it will likely see little use. Keep an eye on the percentage of your list that’s @facebook.com addresses. Once it’s more than a couple of percentage points, it’s probably time to give some extra attention to the design and copywriting of the plain text part of your email.

2 Email design will be more heavily influenced by iPhones, Android-powered smart phones and iPads.

The adoption of smart mobile devices that can render HTML emails is skyrocketing and email has become the number-one activity on these devices. Because of those two trends, the distinction between emails and mobile emails is disappearing. Marketers can no longer assume that their HTML emails will be read on desktops and laptops.

That will have several effects on email design: (1) Email widths need to narrow. (Recommended width is about 600 pixels); (2) Font sizes need to increase so they are more legible on small screens; and (3) The space between links and the size of buttons needs to increase to allow fingers to hit links accurately. That also will mean navigation bars with fewer links in them.

3 Share-with-your-network (SWYN) links will be used by a majority of marketers by the end of 2011. SWYN links allow subscribers to share email content with their friends and family members on Facebook, Twitter and other social networks, increasing the reach of email messages.

As of August 2010, 26% of top online retailers used SWYN in their promotional emails, up from 12% in July 2009. By the end of 2011, the adoption of SWYN links should break the 50% mark.

But some retailers already are moving on to more advanced email-social integration tactics, such as using email to spur Foursquare check-ins and linking conversations on Facebook to products being promoted in an email.

4 Reactivation campaigns will become more important, thanks to ISPs giving weight to engagement metrics when determining whether to deliver an email to the inbox or junk folder, or to block that email.

Most marketers still have no plan whatsoever in place to address inactives — the subscribers on their list who haven’t opened or clicked on email in a long time. In some cases, inactives make up 50% or more of a marketer’s list, representing a significant threat to deliverability and a big distraction from focusing on active subscribers.

Marketers must start by defining what ‘inactive’ is for them, then progress to segmentation tactics to message inactives differently, and culminate with reactivation campaigns that give inactives a chance to reaffirm their interest or be dropped from the list.

5 The email marketing industry will continue to be divided on permission. The tension between the old-school opt-out email marketing industry aligned with direct mail and the new-school permission email marketing industry aligned with mobile and social will continue to grow.

All signs point to New School Marketing winning out. From Gmail’s Priority Inbox and Facebook Messages to ISPs’ ongoing battle against unwanted email from both legitimate marketers and spammers, it’s becoming increasingly critical to be anticipated and wanted in consumers’ inboxes — particularly if you want to be in the part of the inbox that consumers have designated for important, must-read emails. Staying out of the junk folder is yesterday’s battle.

The keys to future success in email marketing are having strong segmentation, dynamic content capabilities and triggered email programs to significantly increase the relevancy of emails.

Email Marketing Changes With The Times

Chad White Research Director ResponsysWhite is an authority on email marketing strategies and trends in the retail industry. He is the author of the Retail Email Blog and dozens of research reports. In addition to working with Responsys clients, he is an Email Insider columnist for and has been interviewed by the New York Times, USA Today and other media outlets.

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“Uncertainty, agility and visibility are major priorities for all industries in 2011, but they are especially critical for retail,” said Dan Avila, Partner at Tompkins Associates. “In order to overcome the unfamiliar challenges of the new year, retail companies must plan for uncertainty. Agile processes and visibility throughout the supply chain are the fundamental elements needed to help retailers plan for the unknown and achieve profitable growth.”

Avila’s firm, supply chain consultant Tompkins Associates, has released its Top 11 Priorities for Profitable Growth in 2011 report, citing three key strategies retailers should focus on in the coming year: a renewed focus on supply chain best practices, a continued need to keep inventories in check and a push to reach more online customers.

The complete list of Tompkins’ Top 11 Priorities is below:

1Retail Best Practices: Best practices can have significant impact on a retailer’s bottom line, as well as their customer service. Leading practices in sourcing, transportation, inventory policies and distribution will provide significant value and increase competitive advantage.

2 Speed to Market: Retailers around the world are striving to reduce the amount of time between product design and placement on a store’s shelf. Competition, consumer taste and trends all increase need for speed to market. To improve speed to market, design effective and efficient supply chains – from planning through transportation to the destination.

3 Reduced Inventory Levels: Over the last two years, reduced inventory levels have become typical for retailers. This has created historic investigation, dedication and execution efforts to reduce inventory at the store and distribution center. Understanding how to improve overall inventory position and what tools are available (such as new software) is essential.

4 E-Commerce: Consumer sophistication, ease of access and retailer incentives have all boosted online sales. From network analysis, DC optimization and improved shipping practices, retailers are evaluating every angle while enhancing their direct-to-consumer service.

5 Uncertainty, Agility and Visibility: As the recession ended, a new norm has emerged: “Uncertainty it certain.” It is best for retailers to accept this new norm and implement agile processes that allow them to move forward. Realizing that they cannot control uncertainty and that they must respond to it can help achieve profitable growth. (Read more about how companies are dealing with uncertainty in this executive briefing from the Tompkins Supply Chain Consortium.)

6 China as a Market: The retail market for fast-moving consumer goods (FMCG) and luxury items is growing. Retailers who previously only sourced in China now want to enter the world’s fastest growing economy and sell in China. It is important for retailers to understand the market of Chinese consumers and plan smart entry strategies.

7 Transportation Spend Optimization: Often in retail, inbound and outbound transportation is managed by multiple organizations and systems. Integrated transportation planning and execution can increase utilization of private or dedicated assets, reduce errors and administration time in freight audit and pay, and reduce the number of cameras.

8 Workforce Management: For retailers, a workforce management solution can improve scheduling, automate transmission of hours to payroll, ensure compliance with labor rules and track information about employee utilization.

9 Regulatory Issues: Retailers need to proactively understand and address legislation changes. For example, the Food & Safety Act change, in which food retailers are required to trace produce from the grower to the store shelf, will dramatically affect the supply chain. Disadvantage: added cost. Advantages: reduced shrink and increased sales.

10Reducing Retail Shrinkage: As companies reduced staff and increased workloads, visibility decreased and best practices were ignored. Technology and better store surveillance equipment can be deployed to reduce internal theft, shoplifting, supplier fraud, accounting errors, warehouse errors and falsified store returns.

11Increased Consumer Intelligence: With the ability to instantly access product information, technology is changing consumers’ buying habits. As retailers adapt to the consumer, they need to address the changes within their own supply chains. Organizational restructuring to eliminate silos, operational process reviews, improved forecasting tools and strategic planning will all be necessities in the coming year.

Read more about the Top 11 Priorities for Profitable Growth in 2011 at the Tompkins Associates web site.

Top 11 Supply Chain Best Practices For Retail Companies In 2011

Dan Avila Partner, Global Supply Chain Services Tompkins AssociatesTompkins Associates is a provider of growth and business strategy, global supply chain services, distribution operations consulting, information technology implementation, material handling integration, and benchmarking and best practices. Avila’s experience includes more than 20 years in supply chain, including 12 years in supply chain consulting. Prior to joining Tompkins, he served 11 years with United Parcel Service as an Industrial Engineer and Hub Operations Manager. Avila received his B.S. in Operations Management from California State Polytechnic University, Pomona.

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The continuing plague of unplanned markdowns and promotions attest to our industry’s continuing plague of high new product introduction failure rates. Unplanned markdowns and promotions can consume 5% to 15% of gross margin dollars. On the flip side, sales and margin dollars are lost whenever a hot non-replenishment item sells out before its planned outdate.

“Newly launched products suffer from notoriously high failure rates, often reaching 50% or greater,” observed Susumu Ogawa and Frank T. Piller in the MIT Sloan Management Review on the risk of new product development in retail. “The main culprit has been a faulty understanding of customer needs.”

Persistent unplanned markdowns draw attention to our industry’s limited success in adopting the customer-centric model we’ve been talking about for years now.

Collective Intelligence Provides AnswersRetailers that have applied collective intelligence to their private label businesses and merchandising processes report great success. David’s Bridal, for instance, found that its use of collective intelligence decreased bad decisions in merchandising by 20%. Wet Seal in teen fashion and Best Buy in consumer electronics are two other retailers that have found success using collective intelligence.

The point where the merchant has to pick a design pack or a vendor line and lay his or her money down is where collective intelligence comes in.

In essence, collective intelligence sources insights from crowds of people. In The Wisdom of Crowds. James Surowiecki demonstrates that any set of people with a modicum of familiarity with a topic can reliably and regularly make better estimates (i.e., the butchered weight of an ox) and better predictions (i.e., the outcome of a political race) on matters related to the topic.

Business thought leaders promote collective intelligence as a key to future success. Several companies — such as the BT Group, one of the world’s leading providers of communications solutions and services, Cisco Systems, and Fuji Xerox — support the MIT Sloan School of Management’s Center for Collective Intelligence through sponsorships. Additionally, McKinsey & Co. advocates collective intelligence as one of six Web 2.0 technologies companies adopt.

But the retail industry needs to play catch-up. By my count, about 100 companies have used collective intelligence with great success. Regrettably few of them are in retail.

Fusing Social Media With Collective IntelligenceSocial media is a made-to-order platform a retailer can adapt for collective intelligence. 2011 will see retailers use their social media assets beyond marketing in product development from ideation onward and in merchandising for assortment planning and localization. Collective intelligence will emerge as critical sources of predictive insights.

These initiatives will leverage social media assets as platforms for gathering consumer perspectives through casual games, social networks, various suggestion-voting schemes, and consumer panels. Some but not all consumer participation will be incentive-based as many customers already engaged with strong retail brands will participate “to make a difference” and have their voice heard.

Don’t Bank on MiraclesI have created a block diagram (see Figure below) to depict the retail process flow for any class of short-lifecycle merchandise from high-level merchandise financial planning through assortment and store planning and ending in allocation. I draw the cloud depicting a miracle to bring attention to the fact that information technology has informed and supported every step in this process save arguably the most crucial one — where the merchant selects items and lays his or her company’s money on the line in an inventory position.

The miracle needs to happen there exactly because the buyer has a faulty understanding of customer needs. It’s tough to bank a business, and millions of dollars in inventory, on what all too often comes down to at best an informed judgment call.

Focus For 2011: Collective Intelligence

Greg Girard Program Director, Merchandise Strategies IDC Retail InsightsGirard is responsible for setting and delivering IDC’s authoritative perspective on how retailers should use information technologies to achieve key operational, tactical, and strategic objectives in the sourcing, buying, planning, assortment, allocation, replenishment and pricing of merchandise. Girard launched the AMR Research Retail Advisory Service and led it for several years. He was the first analyst to cover technologies that have become mainstays of today’s best practices in retail; i.e., price and revenue optimization, store execution and task management, as well as advanced assortment planning, multi-echelon replenishment and constraint-based supply chain planning.

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As retailers increasingly strive to differentiate the customer experience from competitors, they are moving beyond “engagement” with social media and are using it to accelerate cross-channel retail strategies.

The social channel is now firmly entrenched in the retail sphere. In a study soon to be released, Retail TouchPoints has found that close to 75% of retailers surveyed currently have a social media strategy in place.

The next frontier of social shopping demonstrates a golden opportunity for retail organizations to leverage channels like Facebook and Twitter to optimize branding, customer communication and even revenue. The RTP study confirms that Facebook and Twitter are by far the number one and two choices for retailers who want to reach out to consumers via social media.

When released, the RTP study also will reveal retailers’ processes for setting up social media strategies, the goals for retailers’ social media strategies, metrics for social media success and more.

3 Social Trends To Watch Industry-leading retailers already are adopting innovative new social media solutions and strategies. The following are three key trends that show strong potential for driving social media marketing success for retailers in 2011:

1 Facebook Storefronts: While retailers have been capitalizing on the thriving communities within Facebook and Twitter for enhanced customer engagement, leading retailers including JCPenney, Steve Madden and 1800Flowers.com have empowered Facebook users with the ability to browse and purchase products without having to click through to traditional e-Commerce sites. What was once relegated as a community for shopper enthusiasts is now a place where commerce can thrive. Usablenet, the provider powering JCPenney’s Facebook storefront, anticipates that 10% of its retailer clientele will be using the application by the end of Q1 2011. Apparel and fashion retailers particularly, have indicated increased interest in the new capability, according to Jason Taylor, VP Product Strategy, Usablenet. “Our clients want to be where their customers are,” Taylor said. “They want to have all different views of products and information optimized for not only on Facebook, but for various other channels.”

2 Social Media Analytics: According to November 2010 data from Forrester Research, in 2009, 78% of customer intelligence (CI) professionals employed customer feedback or listening initiatives. Industry insiders say this trend will grow, and expect that more than 90% of CI professionals will embrace listening initiatives in 2011. Enhancing their current market research efforts, leading retailers are monitoring online and social conversation data to identify important topics and content categories that are relevant to customers in the context of their own online community.

Empowering retailers to collect and archive information-rich conversation, social media analytics provide visibility into the trends and volume of social media conversations and their impact on business results. As retailers look to provide competitive differentiators at every possible touch point, social media feedback can help retailers compete by understanding the underlying sentiment of these conversations, by acting on insights categorized by associated rules that assign sentiment to various topics.

3 Location-Based Engagement: In early 2010, Foursquare emerged as a platform for users to “check in” and share their whereabouts. Other applications, like Gowala and Facebook Deals, followed suit to allow users to see available offers from nearby restaurants and retailers. Retailers including American Eagle, Gap, H&M, Macy’s and Starbucks have leveraged these channels to provide discounts and special offers for loyal customers. The most important concept for companies to revisit while developing a location app marketing plan is the importance of incentive. The more tangible and intangible rewards offered to users, the more likely they will check in.

Although a study from Forrester Research found that people more actively respond to offers via SMS or mobile search, results also claim that location app users are more likely to do mobile research about businesses through mobile phone with 33% for app users and 10% for non-app users. A drastic 27% of app users are also more likely to read product and service ratings and reviews, compared to 4% of regular mobile users.

Mobile application shopkick has gained traction toward the end of 2010. Retailers like Target, Crate and Barrel, Best Buy and Sports Authority are leveraging the platform to provide an in-store offering at the point of entry. The customer is alerted with a message and points for deals within the location. The app can be used to scan items and earn more points and/or deals.

“Today, the location-based service (LBS) revolution is building a list of users who are effectively opting in to receive offers, and this is a powerful opportunity,” said Gabe Zichermann, Author of the book Game-Based Marketing. “…Savvy retailers will think holistically, understanding what really motivates their users and delivering the rewards (merchandise, access, experience, fun, cash) that best match their interests.”

2011: The Year Of Social Commerce - 3 Key Trends For Socially-Driven Success

Amanda F. Batista Associate Editor Retail TouchPointsBatista covers telling retail trends like in-store technologies, mobile marketing, retail operation solutions and cross channel strategies. Focused on providing research and strategies to assist retailers’ social media efforts, Batista engages in conversations on social media through Retail TouchPoints (RTP) podcasts. Batista has written many articles and custom content exploring how best in class retailers are leveraging social media and how emerging platforms will impact the retail industry.