OUTLOOK

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2010

Predictions From 10 of the Retail Industry’s Top Analysts

Presented by

OUTLOOK

guideWith the year coming a close, Retail TouchPoints called on some of the most prominent retail experts to compile an expanded resource for retailers that includes rich insight on the most telling retail trends for 2010. From inventory and pricing management to mobile marketing, the 2010 Retail TouchPoints Outlook Guide offers insight for every vertical, exposing some of the biggest challenges and more importantly, solutions to optimize cus-tomer interactions and advisement on where to increase marketing dollars in 2010.

Our roster of analysts includes experts in cross-channel retail, in-store technology, inven-tory & pricing management, consumer spending trends, mobile & social retail strategy and store operations from:

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3 Sucharita Mulpuru, Forrester Research

4 Jim Dion, Dionco, Inc.

5 Sahir Anand, Aberdeen Group

6 Nikki Baird, RSR Research

7 Laura Davis-Taylor, Retail Media Consulting

8 Richard Hastings, GHS Consumer Trends

9 Greb Buzek, IHL Consulting

10 Gary Schwartz, Impact Mobile

11 Leslie Hand, Global Retail Insights

12 Amanda Ferrante, Retail TouchPoints

The Outlook Guide includes forecasts for what retailers can expect in 2010 in the areas of consumer spending, new technology adoption, the latest in mobile development for retail and how what areas retailers should increase investment and marketing dollars. The Out-look Guide includes key tactics for cross channel planning and alignment, as well as a list of technologies that retailers should consider to optimize in store engagement and the shop-per experience.

2 • Retail TouchPoints

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In early November, Sucharita Mulpuru authored the Forrester Report, “U.S. Online Holiday Retail Forecast, 2009.” The report indicated that Forrester expects online retail sales to reach $44.7 billion during the months of Novem-ber and December 2009, an 8% increase over 2008. “Despite the lingering effects of the global financial crisis, the online space remains the retail indus-try’s growth engine,” the report said. “While the majority of online retailers will fare well this holiday season, success will vary based on retailer type, size and product mix. As consumers will continue to be responsive to discounts, online retailers plan to implement pricing, marketing and merchandising strategies that will secure their bottom line.”

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Key Cross Channel Trends• Keeping the store locator function up to date

• Utilize inventory visibility so shoppers online can see if prod-ucts are available in store

• There’s a growing group of retailers looking at in store pickup and store delivery

• Some retailers are looking at mobile applications, aimed at a rich experience. The new trends are focused on providing more product detail, images and information at the point of sale. (Sephora is using mobile reviews)

Mulpuru advises retailers to carefully organize and plan cross chan-nel efforts in order for optimal execution. “Any multi channel effort is a pretty big one that requires a lot of different players to come together and it requires a lot of organizational and technology syner-gies,” she says. “This isn’t about taking baby steps — it’s about committing to multi channel and aligning your incentives and your organizational structure in such a way that you can set yourself up for success.”

Where Retailers Should Increase Investment in 2010“We’re hearing a lot about behavioral targeting as a way to drive increased engagement with the brand,” Mulpuru says. Retail-ers should develop a strategy to capitalize on shoppers that have already visited a retail site and provide relevant messaging to invite them back to ultimately convert.

Mulpuru says there’s a lot more sophistication around email segmentation and paid search. “Some challenges will be pose to some of the incumbent agencies that typically dominate paid search management,” she warns. “I think some of the metrics will be more challenged by some newer players in the space; this is where retail Web marketers will focus their efforts.”

The Super Social SphereMulpuru says she has not seen any real success stories around driving incremental sales from social networks. “Where retailers seem to be getting more traction from the social component is on their own retail sites,” she says. “If retailers enable people to create outfits or send customer reviews, those bits of information seem to be more pertinent for driving sales and providing relevant

information that actually increases transaction volume.”

“Facebook can be a traffic driver back to the site but no one has been able to tie it back to great sales, which I think it’s the root of being able to claim that Facebook is successful,” she says.

Moving Toward MobileMulpuru advises retailers to take things slow in mobile, as it’s very easy to overinvest in things like iPhone applications, which may not prove successful or quickly adopted among consumers. “Make your site simplified and compat-ible across different browsers so it’s convenient for mobile users to access on the go,” she says. It’s important to edit out all unneces-sary information and keep it simple offering information on items with images and price, while making it easy for customers to pay for products in a streamlined fashion (using a service like PayPal.)

“You need to get your organization in place and make sure everyone in your company is aligned with the same strategy,” she says. “You need to have a budget for it and you need to create a roadmap.”

Mulpuru advises retailers to consider what touchpoints are most important to their brands. She offers some cross channel concepts to consider and prioritize:

• Site to store concepts

• Mobile commerce, mobile site design

• Cross channel inventory visibility

“Whatever’s important to you, prioritize that and get a project road-map in place and execute against it,” she says.

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Sucharita MulpuruVP & Principal AnalystForrester ResearchSucharita serves eBusiness & Chan-nel Strategy professionals. She is a leading expert on eCommerce, multi-channel retail, consumer behavior, and trends in the online shopping space. She is also a noted author-ity on technology developments that affect the online commerce industry and vendors that facilitate online marketing and merchandis-ing. In her research, Sucharita covers such consumer-oriented topics as eCommerce forecasting and trends, merchandising best prac-tices, conversion optimization, and Social Computing in the retail world. She has also authored “The State Of Retailing Online,” a joint study conducted annually with Shop.org and a leading industry benchmark publication.

Optimizing Cross Channel Alignment in 2010

3 • Retail TouchPoints

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Typically, the back to school shopping season is a telling sign of what to expect for the holiday shopping season. But 2009 has thrown a few

curve balls challenging holiday to hit it out of the park. Jim Dion is a recog-nized expert on retail selling and the service-centric economy. Microsoft, IBM, Williams-Sonoma, Harley-Davidson and Macy’s are some of the clients that have benefited from Jim’s advanced selling methodology.

Dion says October sales have made it easier to be optimistic about holiday spending. “I believe that we will see a +3% increase this Christmas over 2008,” he says. “There is also one more day this year between Thanksgiving and Christmas. The real danger to my forecast is that retailers have always been good at snatching defeat out of the jaws of victory and if they take their already thin inventories and panic by discounting early and deep, or even not too early but deep then all bets are off and we will have a terrible season as stores will run out of inventory that they sold at low prices when they could have waited and made more money.”

“I think that there is more pent up demand out there than lots of economists give the American Consumer credit for,” Dion says. “Also, this year, despite a lot of gloom and doom (which the press is famous for stressing in the 24/7 news cycles) I think that there is more belief that the worst is past. As well, we are not facing pro-jections of rising heating costs and gas prices as we did last year. All in all, a better holiday Season than many expect. Also think about the fact that if you lower prices by 5% and sales are down by 3%, you likely sold more units and business was better despite the “sales decrease.” It is called doing more for less.”

Dion expects mass merchants like Wal-Mart, Amazon and Costco to continue to reign supreme in their market positions. “The con-tinued pandering to price on commodity items will be successful while at the same time strangely self defeating. Having said this, I do see some specialty chains who ‘keep the faith’ such as Crate & Barrel, Gymboree, The Container Store, Apple, Zara, The Chil-dren’s Place and a few others far outpacing their competitors.” What to expect in 2010: Dion says 2010 will be all about making digital analog. “I think we have gotten pretty good at Web selling and now we need to take what we have learned on our Web sites back to our stores. Our customers have told us that they love to shop on line, they love the speed, convenience, presentation, information, product and com-pany reviews and everything that is part of the Web experience and they now expect the same ease of use and information to be available to them in the physical store. Most brick and mortar has become boring and the retailers who can figure out how to bring the excitement of Web shopping to the store are going to win big.”

Where retailers should increase in-vestment in 2010:Dion emphasizes: “Mobile, Mobile, Mobile. We have been predicting for quite a few years that Mobile is going to surpass the Web for commerce, it will not happen in 2010 but it will be the tipping point when we look back. More and more “smart phones” are hit-ting consumers pockets and smart companies are learning how to leverage that device into an impulse buying machine. I would spend my dollars on making digital analog through an investment in mobile apps that work in symbiosis with my store strategy and make it easy to shop and buy.”

Competitive Differentiators in 2010Dion emphasizes: “People, People, People. Hire nice, smart, talented ones (those three traits are NOT mutually exclusive!), treat them exceptionally well, listen to them, celebrate them, educate them, teach them your values and vision and stand back and watch them transform your business. Unless your model is a vending machine business, I still see the single biggest variable for success to be your people.”

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Jim DionFounder & PresidentDionco, Inc. James Dion (Jim), founder and presi-dent of Chicago-based Dionco Inc., is an internationally known Retail Speaker & Trainer, Retail Consultant, and the Author of the best-sellers 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. Jim consults, trains and speaks on consumer trends, retail technology, selling and service, retail merchandising and operations, marketing and leadership. With over 30 years of progressive retail experi-ence working at Sears, Levi Strauss and Gilmore Department Stores, Jim is one of the most sought after Retail Consultants and Retail Speakers in the US and internationally.

Holiday Spending in 2009

“I think we have gotten pretty good at

Web selling and now we need to take

what we have learned on our Web sties

back to our stores.”

4 • Retail TouchPoints

The 2009 fiscal year so far has been a ‘reality check’ for the retail industry that is grappling to deal with critical pain points such as declining topline sales, business value chain impact, and shifts in the information technology roadmap and priorities. Aberdeen Group conducted a recent survey of 200 retailers to ascertain the recessionary response and impact of strategic, systems, opera-tions, and bottom line decisions on retail business within the coming months.

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Aberdeen data shows that 80% of retailers surveyed report that high cost of goods sold, the need to cut payroll costs, and decreased discretionary dollars for areas such as marketing and advertising, are the top pressures faced by retailers during this recessionary year. Additionally, 54% of retailers clearly indicate that one of their top recession-beater strategies is to cut payroll, marketing, and operational expenses. Instead retailers should be concentrating on micro-marketing, merchandise personalization, and consumer management strategy re-alignment with soft market conditions. Ab-erdeen analysis shows that while in the supply chain, merchandis-ing, inventory related areas cost reduction is a necessity to manage gross margin return on inventory investment (GMROII), such knee-jerk cost cutting measures within customer-facing channels and marketing have caused complexities in terms of employee morale, offer management, messaging, service, sales and revenue.

Where Retailers Should Increase InvestmentAnand says retailers must invest in vast amounts of relevant and actionable consumer research and secondary data for making item-level changes and risk management. “From a customer-facing standpoint, retailers should not stop investments but prioritize on the essentials such as point of service, cross-channel, loyalty, amongst others based on revenue driving improvements and mini-mizing customer attrition areas,” he says.

“Merchandising, marketing, supply chain and customer service teams should be incentivized to meet very specific performance management goals. Companies that started early in terms of con-tract negotiations with suppliers on order cycle time, returns, trade promotions, open to buy requirements, and total landed cost will make substantial gains during this holiday season. The key to suc-cess will lie in how well are retailers connected with their suppliers to adjust the product flow from BtoB integration, network visibility and internal/external collaboration standpoint.”

Aberdeen Research found that planned adoption of technologies among all respondents denotes that there is interest within the next 24 months towards KPI-driven operational and executive perfor-mance dashboards (46%), employee scheduling tools (40%), store productivity and experience tools (43%), cross-channel appli-cations for marketing, order, and fulfillment (42%), demand-driven forecasting application (45%), consumer-driven replenishment (44%), and customer-loyalty applications (43%).

Retail WinnersAnand says a number of retailers will end the year well compared to Q1, Q2, and even Q3 of this year. “While it is difficult to accurately predict, however based on esti-mates through industry associations, it is likely that food retail will lead the way,” he says. “From the other sub segments, some named retailers who are likely to come close or beat analyst expectations include Wal-Mart, Target, Best Buy, CVS, Walgreens, TJ Maxx, Kohl’s, Aeropostale, Amazon, JC Penney, Apple, among others expected to do well.

Factors of Market Share LossAnand says there are three major macro-economic and monetary factors which will cause segments to do well or not do well: the static interest rates, next wave of mortgage defaults/bankruptcies and unemployment.

“I believe BtoC segments that are trying to more with less are likely to continue to be vulnerable with fluctuating results till Q2 of 2010,” Anand says. “The key is to continue consolidation, identify M&A opportunities if you have excessive cash on hand, and invest in research and development to tap into new market opportunities.”

2010 TrendsAberdeen data shows that Best-in-Class companies are showing leadership when it comes to the adoption of technologies that can potentially enable effective retail processes during an extended period of less than desired growth. It is important to note that there is not a single technology platform which can provide a way out of less than desirable growth in retail. The key is not being reactive and follow the roadmap for customer and operational improvements. Currently, the foremost deployment criteria that retailers are using to measure new application deployment and improvements include:

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Sahir AnandResearch Director, Retail Aberdeen GroupSahir Anand focuses on technology and process management practices in retail, hospitality and the interplay between retail and consumer goods. His work is related to use and adop-tion of technologies and processes that aid optimization and efficiencies in the multi-channel retail environ-ment. Sahir specializes in the points of customer interaction and points of integration (technology and busi-ness workflow) functions in retail. Research focus areas include store and headquarter-related functions focusing on retail customer and employee-facing technology and process optimization areas.

Key Performance Indicators, Action Items and Competitive Differentiators

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5 • Retail TouchPoints

One of the overall assessments during the 2008 holiday season was that retailers ended up with a great deal of excess inventory. This was mostly

pinned on the dark cloud that is, the economy, but ultimately, was a result of improper planning on the inventory front. In 2009, it became top priority to as-sess inventory more precisely by aligning analytics with planning. Prior to join-ing Retail Systems Research, Nikki Baird was a principal analyst at Forrester Research, where she covered extended retail industry topics like supply chain, RFID, retail operations, POS and in-store management. Baird’s current focus points are retailer-consumer relationship, including store operations, workforce management, cross-channel, loyalty, pricing and promotions, and supply chain execution.

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“2008 and 2009 have been rough years for retailers on the topics of inventory and price management,” Baird says. “It’s been a real tale of two cities: for most retailers, it’s been the big cliff – the huge cut in consumer spending, which has come back some, but still not to anything like previous spending levels earlier in the decade.”

Baird offers these key trends for 2010 inventory and pricing management:

• More ties between assortment planning and space plan-ning – if there were ever any doubts about the importance of planning against the facings you have available to sell from, 2009 and the “incredible shrinking pack size” put all of those to rest in grocery.

• Closer ties between merchandising and supply chain – merchants can’t keep buying against “infinite distribution capacity” because there’s no such thing. And the retailers that are paying attention to how mismatched metrics are driv-ing some of these non-productive behaviors are starting to set their sights on tackling this age-old problem in a substantial way.

• On the pricing side, the question for 2010 is how to get con-sumers weaned off of heavy promotions and discounts? The retailers that can figure out how to move their customers back closer to full price retail will be in much better shape than the rest of the pack. But that won’t be easy, especially if strug-gling retailers continue to discount heavily.

Where retailers should increase investment in 2010: “Continued investment in customer programs, whether loyalty or more generic CRM-type programs, will be critical, because it’s probably the best way to get the insights you need in order to figure out HOW to wean customers off of heavy price discounts,” Baird says. “And it may well be the vehicle for delivering whatever strategy retailers come up with. The most likely outcome is to start setting up bigger hurdles to get discounts – so instead of mass-mailing everyone $10 to spend in your stores, you might start saying, “spend $50 and we’ll give you $10 for next time” or you might start

being discerning – only mailing those discounts to people who look like they might be defecting soon. But only a good CRM analysis will be able to tell you that.”

Competitive Differentiators in 2010:“Cross-channel, and how retailers organize to serve consumers no matter what the channel, will be the biggest differentiator going forward,” Baird says. “The retailers that build a good solid experi-ence that flexes depending on how consumers choose to engage with them will have a huge advantage over their competition. That means synchronizing inventory, prices, customer programs, mar-keting, everything so that whatever a customer needs to make a buying decision can be brought to bear wherever they are and no matter what the channel.”

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Nikki BairdManaging PartnerRetail Systems ResearchNikki Baird is Managing Partner at Retail Systems Research, an analyst firm that provides market intelli-gence about retailers’ attitudes and adoption of enterprise technology. Nikki’s areas of focus revolve around the retailer-consumer relationship, including store operations, workforce management, cross-channel, loyalty, pricing and promotions and supply chain execution.

Optimizing Inventory Management

cost of deployment (42%), scalability for enterprise-wide adoption (37%), and customization of specific features and functions (36%). Retailers must consider best-in-class standards based integration techniques and opportunities to improve demand predictability, per-formance management and customer experience management.

Competitive Differentiators:• Personalization, localization and responsiveness in the areas

of customer experience management, merchandising and marketing.

• Agility, Collaboration and Network integration in the retail sup-ply chain.

• Within IT, the key differentiators in 2010 will be around risk mitigation, integration, scalability, prioritization and intro-duction of lean techniques (e.g. opportunities to introduce thin-client, SaaS, outsourcing and cloud computing, where possible)

Continued from page 5: Sahir Anand

6 • Retail TouchPoints

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The customer experience is based not only on the retailer’s ability to de-liver a unique, streamlined encounter, but also on the ability to impress

customers with add-ons and special features, ideally those that are unique to each. Laura Davis Taylor is a 15-year agency veteran with a diverse back-ground in traditional advertising, brand planning,interactive marketing, digital signage, merchandising and retail/environmental design.

During her time as a Vice President at Miller Zell, Taylor led accounts with Circuit City, Wal-Mart and H&R Block, working intimately with her clients to help them build strategies around all points of cus-tomer experience and communications. Her book “Lighting Up the Aisle” is aimed at helping retailers understand in-store digital media from a simple perspective.

Taylor emphasizes these technologies for retail organizations moving into 2010:

• Technologies that can measure shopper dwell times, at-tention times and interactions

• Kiosks or touch screens that link to loyalty data and provide personal shopper communications, recommendations and incentives

• Mobile applications that can help shoppers find “on the go” product information

• Touch screens that provide in-depth product or category information and empower shoppers (can also be used for associate training)

• Digital signage software that can link into all of the above (as well as POS systems) to monitor what’s happening in the store and intelligently build content play lists targeted to the shoppers and current activity (we call this Doppler Radar for the store!)

“The tough part for brick and mortar stores is that these digital shopping experiences have set the bar for them,” Taylor says. “Most shoppers find it quite frustrating that the various support offered online is not bridged into the physical store. Most also realize that it’s not the technology that’s holding this back, but the people that make the decisions at the top. They’re not stupid — and I truly think that 2010 is the year for these brands to look hard at what the big shopper challenges are in-store and respond.”

Prominent 2010 changes and trends in retail technology:“More retailers are embracing the opportunity for in-store technol-ogy to provide a better shopping experience, tap into a newfound source of funds (ad revenues) and keep messaging easily fresh and updated. Due to social media’s wild rate of adoption, there also exists a reason to help shoppers easily tap into peer opinions and recommendations.”

Taylor says retailers have a big opportunity to tap into “integrated infrastructures” at the store level. “The easiest way to think about this is to ponder how good online retail Web sites work—they integrate inventory, pricing, loyalty information, logistics and even rec-ommendation engines and create a very well rounded, rewarding online shopping experi-ence,” she says. “Retail-ers have the opportunity to create the same scenario in-store, but they will have to loop together many various data clouds and technology functionality. It will not be easy, but the potential is enormous!” Where Retailers Should Increase Investment in 2010:“There is huge value to add if they increase their investment in store experience, loyalty initiatives and building the proper bridges be-tween online and in-store services, Taylor says. “We often hear that the top two shopper gripes today are rooted in the fact that they still find the shopping experience overwhelming and unhelpful and that they can’t understand why they can access information and services online that aren’t available in the store. If you think about it, it’s really silly that this is often still the case!” Competitive differentiators in 2010:“I truly believe it will be based on the retailer’s ability to understand the needs and desires of their shoppers regarding product choices, store/brand experience, access to product information and their personal relationship with the retail brand and respond,” Taylor says. “There is no magic bullet for most retailers to ‘fix’ right now. In most cases, they are falling down in a variety of areas and today’s shopper simply wants them to take a hard look at what’s not work-ing and do something about it! It sounds simple—and in theory it is—but this is a complex thing to affect with the internal teams. It’s going to take the chiefs at the top mandating positive change and holding the mid-level teams accountable for it to happen.”

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Laura Davis TaylorFounder & Principal Retail Media Consulting Laura is the Founder & Principal of Retail Media Consulting, a specialty firm focused on helping brands strategize, activate, measure and evolve digital media strategies within the retail store. She joined Miller Zell as a Vice President and led accounts with Circuit City, Wal-Mart and H&R Block, working intimately with her clients to help them build strategies around all points of customer experi-ence and communications. A pas-sionate advocate of Digital Signage since 1999, Laura then immersed herself with multiple industry con-stituents to understand the potential of in-store digital signage networks for U.S. retailers.

Retail Technology

7 • Retail TouchPoints

Much of retail sales’ demise has been attributed to the multi-faceted prob-lematic economy. Consumers are not spending because of the housing and employment market conditions. This can no longer be an “excuse” for retailers, as it’s time to adapt and plan accordingly. Richard Hastings is Consumer Strat-egist at investment bank, Global Hunter Securities, LLC, which also provides research on retailers and apparel companies. Richard Hastings brings more than 20 years experience in retailing industry coverage, credit analysis, apparel manufacturing, supply chain trends, and economic analysis.

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“Retailers and consumer companies need to stop waiting for the housing market to come back, as a source of jobs and as a source of capital for spending,” Hastings says. “Industry leaders should look for deeper levels of loyalty within categories to drive cross-channel and cross-category success. It is necessary to have expertise and reputation in at least two or three categories in order to drive the rest of the business. Consolidation is continuing, so leaders need to be aware of two sources of sales: organic sales, and then the sales that come from your business. You don’t want to help anybody with the latter.”

Retail WinnersHastings points to Nordstrom for moving toward encouraging trends, which has managed to grab market share among higher income shoppers and use more extensive technology to understand specific prices and markdowns. “Kohl’s continues to take market share in the moderately priced market for in season softlines,” Hast-ings says. “The Marmaxx division at TJX will continue to intrude deeper into department store demographics, taking shopper dollars who were previously exclusive to department stores; a rebound in specialty apparel for younger shoppers thanks to colder weather in late December and in January; and Walmart for mid-priced con-sumer electronics.”

“Evidence from shopper surveys conducted by BIGresearch indicates that Target is losing market share very slowly in various categories, and has weak loyalty,” Hastings notes. “Macy’s is also vulnerable in women’s apparel, risking some market share to TJX’s Marmaxx division.

Holiday ObservationsRecent GHS Consumer Strategies newsletters cite common retail holiday trends for this season:

• Store traffic trend is disappointing, thus far. We reviewed store traffic data obtained from ShopperTrak for Saturday, November 21, 2009, looking at weekly, monthly, and yearly percentage change. The results from our reviews indicate that store traffic improved significantly and sequentially through September and much of October, then seemed to diminish in quality and intensity again during November. The most recent observations are somewhat disappointing.

• Changing be-haviors is the key theme. We believe it is necessary to look beyond the surface data occurring with the consumer and begin to focus on underlying structural shifts in behaviors. The first theme that we believe is a point of strength is home furnishing and modest home remodel proj-ects, especially in the kitchen.

• It is still very early, and traffic may not tell the entire holiday sales story. Traffic may remain stubbornly disappointing this year, while more consumers stay online and wait for other catalysts for spending. The holiday season, in our model, ends with the last weekend of January 2010, so we have a long way to go before we will know for sure if the entire holiday season achieves or misses our Oct. 2009 forecast for sales to increase by 2.5% year over year.

Amazon’s critical mass remains unchallenged going into Holiday 2009. According to comScore, Inc.’s September 2009 top online properties report, Amazon’s family of properties generated ap-proximately 68.7 million unique visitors, or 120% the visitor rate of Walmart.com for the same period (using comScore’s data). Accord-ing to recent blog entries by Compete.com, there was no evidence of customer loyalty shifts away from Amazon.com to Walmart.com due to the recent buzz about book prices. Compete.com said, “Additionally, Wal-mart bargain book shoppers are twice as likely to shop for these titles at Amazon as Amazon shoppers are to shop at Wal-mart. It seems that when offered comparable prices on books, consumers prefer Amazon.”

Competitive DifferentiatorsHastings says, “Looking to 2010 and beyond, the drivers in the industry will be store aesthetics and pleasing store environments; ease-of-payment systems online, similar to the Amazon and the iTunes Store models; and frequent shopper loyalty point sys-tems across every brand and channel.”

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Richard HastingsConsumer StrategistGlobal Hunter SecuritiesRichard Hastings is Consumer Strategist at investment bank, Global Hunter Securities, LLC, which also provides research on retailers and apparel companies, energy and oil, restaurants, China-based companies, Web-based technologies, healthcare and biotech, and metals and mining companies. Richard brings more than 20-years experience in retailing industry coverage, credit analysis, apparel manufacturing, supply chain trends, and economic analysis.

Consumer Spending Trends

8 • Retail TouchPoints

The retailers that understand the importance of investing in inventory manage-ment technologies will prevail in 2010. Greg Buzek is the Founder and Presi-dent of IHL Consulting Group and one of the Founders of the Retail Orphan Initiative (www.retailROI.org), a charitable foundation that seeks to help the 400 million orphaned and vulnerable children in the world. Noted by RIS News as one of the 25 Most Influential People in Retail, Buzek has 20 years of experi-ence in market analysis, business planning, product development and consult-ing with Fortune 500 companies.

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Analyzing by retail vertical“For hot electronics or toys, it will be a factor of retailers not being able to get further inventory,” Buzek says. “For this reason I expect to see a banner year for gift cards for electronics and toys. For ap-parel, it is those with near sourcing for manufacturing. Lean inven-tories at store level, but nimble distribution and manufacturing.” Buzek says Abercrombie & Fitch continues to lose market share in the apparel segment, due to the retailer trying to protect the brand by refusing to discount. “At this point, many of their customers have moved on to other retailers and I’m not sure they will be back for the holidays,” Buzek says. “Apparel in general is going to struggle unless it is mass use every day apparel.”

“Most fixed goods retailers made their bets on inventory for the holi-days a long time ago,” Buzek notes. “Add to this the problems with CIT group and access to capital and many retailers are extremely lean on inventory. Many are simply planning for a down holiday and have no ability to take advantage of any upside. That is a dangerous mix because it aggravates the out of stock problem and even with the lean inventories they may have to deeply discount to get the business. Those businesses could be in real trouble come the end of December.

Where Retailers Should Increase InvestmentBuzek says that retailers need to invest in business intelligence and analytics for technology, allocate marketing dollars towards get-ting closer to the customer through social marketing and CRM that really delivers value to the customer.

Competitive Differentiators:Buzek emphasizes the importance of building a unique and sustain-able experience. “I can’t help but think through the excitement that permeates the atmosphere of a college or pro football game,” Buzek says. “The nature of the event around the event. How do

retailers transform this kind of excitement into their stores? How do you create passionate fans of your organiza-tion…and how do you cultivate that in an ongo-ing fashion? In sports, you tap into adrenaline. What is it for your cus-tomers? How do you tap into a passion or an emotion?”

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Greg BuzekFounder & PresidentIHL ConsultingGreg Buzek is the Founder and President of IHL Consulting Group and one of the Founders of the Retail Orphan Initiative, a charitable foundation that seeks to help the 400 million orphaned and vulnerable children in the world. Noted by RIS News as one of the 25 Most Influen-tial People in Retail, he has 20 years of experience in market analysis, business planning, product develop-ment and consulting with Fortune 500 companies. He is frequently quoted in leading industry jour-nals and has been used as a retail technology analyst on NBC Nightly News, CBS News, and CNBC. In ad-dition Greg has been a guest lecturer for the Wharton School of Business’ Global Consulting Practicum and at Belmont University. Before starting IHL, Greg worked with NCR Corpo-ration and Sensormatic Electronics as a marketing and development executive on hardware, software and electronic security products for the Retail Industry.

Store Optimization: Creating Passionate Customers

“Many retailers are extremely lean on

inventory. Many are simply planning for

a down holiday and have no ability to

take advantage of any upside. That is a

dangerous mix because it aggravates the

out of stock problem and even with the

lean inventories they may have to deeply

discount to get the business.”

9 • Retail TouchPoints (www.retailroi.org)

The 2010 consumer is way ahead of any national retailer’s marketing department. The consumer is leveraging their phone as a “mobile mouse” to click, search and explore in the mall, in the aisle. The retail CMO is looking for some new-fan-gled, high-tech way of engaging with this itinerate shopper. The sage truth is that the marketing department is chasing shadows. Gary Schwartz founded Impact Mobile in 2002 having worked in the IT and telecommunications industry for over 20 years. Over the past eight years, Schwartz has played a leadership role in the mobile industry, running the first cross-carrier short code campaign in North America.

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Schwartz advises: “If retailers run mobile as a standalone campaign or service in 2010, it is doomed to the graveyard of ‘yes-I-tried’ mobile case studies.”

There are some amazing and jaw-dropping solutions that are launched every day servicing the mobile shopper. Pick up any mobile periodical and read about geo-location services, mobile couponing innovation, paperless flyers and shopping lists. What is working? What is a game changer?

Where should retailers start with mobile?The key to leveraging mobile successfully is to see it as an inte-grated part of the retail story and not be treated as a standalone solution. Why? Because mobile is difficult for the consumer to discover: Apps (however cool) as lost on the phone and rarely used post-download.

Based on Nielsen research, the consumer will only stay loyal to a limited number of applications. “The consumer will only actively use five applications on their Smartphone at a given time,” said Eric Puterbaugh, director of client services at Nielsen.

“It is easy to come up with great ideas,” said James Crawford, Executive Director of the Global Retail Executive Council at the recent CTIA Wireless conference in San Diego. “But 90% of retailers cannot support them. Retailers have historically missed the trend by decades. Retail is all about mainstream adoption.”

“In many cases we can expect mobile to follow Gartner’s ‘Hype Cycle,’” he said. “People get excited about a new solution. There is hype [and] then when the solution does not immediately deliver results, it crashes, disappears and then grows slowly, reemerging over a longer period of time.”

It is the “dumb” simple solutions that the consumer is leveraging on their phone that the retailers need to focus on. The shopper is way ahead of us simple retail marketing and POS operational folk.

SMS is the most use and powerful function on the smartphone. It trumps any other service including that legacy services like “voice.” Retailers need to use these channels creatively to engage and reen-gage with the retail store.

Additionally, remem-ber that successful solutions are solutions that add incremental value propositions to “business-as-usual”. Do not try and change the aisle or the consumer’s shopping behavior. If you want to leverage mobile couponing, do not necessarily try and mirror paper coupon scanning. Look at leveraging mini-kiosks for self-redemption thus avoiding aisle slowdown.

How to Engage and Build RelationshipsRetailers need to engage and own the mobile CRM with the shop-per. Importantly, the retailer needs to realize that the brands are speaking to their shoppers directly circumventing with Trojan-horse programs in the store.

Coca Cola’s PIN-on-Product mobile affinity program uses their bottle caps as an affinity program allowing consumers to add points via their phone as they leave the store. New Balance engages the consumer off the shoe on the shelf, walking them through the NB experience and running post-store surveys. This is all SMS.

The key is to engage with the consumer’s shop number on an opt-in basis and drive cross-channel. Connect the retail media dots. A recent Forrester consumer survey found that more than half of consumers buying in brick and mortar stores begin their research process online. Cross-channel shopping is expected to top $1 tril-lion by 2012.

Hot Topic: Mobile CommerceFinally, m-Commerce is an area to keep your eye on. Things to note: “Going Mobile” is not the challenge. The challenge is under-standing the mobile consumer’s behavior: again “experience” and “physicality.” The m-commerce shopping experience needs to be designed for the mobile consumer and their impulse economy. It cannot be solely designed for the mobile screen.

2010

Gary SchwartzPresident & CEOImpact MobileGary Schwartz founded Impact Mobile in 2002 having worked in the IT and telecommunications industry for over 20 years. Over the past eight years, Gary has been a leader in the mobile industry, running the first cross-carrier short code campaign in North America. He also founded the CWTA Mobile Content Commit-tee to establish policies and increase awareness to promote standards and adoption. Gary is the Founder & Co-Chair of the Mobile Marketing Committee for the US Interactive Advertising Bureau (IAB) and is a Director on the board of the Mobile Entertainment Forum (MEF).

Mobile Madness in 2010: A New Approach

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10 • Retail TouchPoints

The retail industry is undergoing a major shift to customer centric business models. Even in this economy, retail investments should support providing a higher degree of service across channels, building trusted relationships with consumers. How can they continue to satisfy an increasingly savvy consumer? Leslie Hand is a Research Director at Global Retail Insights and oversees re-search and business development for the supply chain and demand planning elements of the Global Retail Insights (GRI) product offerings. In her 20+ years in retail information technology she has guided strategy, development and implementation efforts in supply chain, demand planning, merchandising, point of sale, integration and retail back office applications in a variety of business sectors.

OUTLOOK

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In addition to focusing on core product assortment decisions, Hand says retailers must focus in three key areas:

• Differentiate on customer experience with services that are built on an infrastructure underpinned by modern CRM, loy-alty management platforms and solid demand intelligence

• A consistent, integrated, enterprise-wide strategy to under-standing, anticipating and influencing customer behaviors

• Utilize advanced consumer intelligence, mobile and self-serve capabilities. The target customer is the “omni-channel” shopper, an evolution of the multi-channel consumer, who wants to use all channels -- store, catalog call center, Web and mobile -- simultaneously, not each channel in parallel. An example is the shopper with an Android-based phone who snaps a picture of the bar code of a product in the store and immediately does price comparisons on the Web as well as connecting to her social network for opinions. Perhaps one of those friends bought the product and doesn’t use it and offers to give it to the friend. Can the retailer recognize this activity and at least offer accessories? Are there services attached to the product that can be offered?

Hand says this holiday season’s success hinges largely on consum-er confidence, and more specifically, the financial security of those consumers IDC Retail Insights refers to as the “700s”.

“In our opinion, these consumers, with good credit scores (in the “700s”), have been saving more and spending less on discretionary purchases, and are quite frankly, very anxious to loosen their purse strings,” Hand says. “A major risk to strong holiday performance is that retailers, cautiously placing orders for goods, may in fact, be at risk of under delivering on inventory, causing OOS’s and lower than necessary sales and customer satisfaction. Our hope is that retailers and their suppliers are prepared to ramp up orders and maximize their sales opportunities.”

Competitive Differentiators in 2010: Hand says retailers should focus on providing superior consistent

customer experiences, supported by supe-rior supply chain and marketing execution. “The most successful retailers this holiday season will have the most agile supply chains, pricing and promotional capabilities, respond-ing to shifting market needs, finding the perfect balanced inventory levels across categories and channels.

2010

Leslie HandResearch Director Global Retail InsightsLeslie Hand is a Research Director at IDC Retail Insights and oversees research and business development for the supply chain and demand planning elements of the IDC Retail Insights (GRI) product offerings. Prior to joining IDC, Leslie was the Direc-tor of Global RFID Strategy and the Solutions Center for Ahold, one of the world’s largest grocery retailers.

Customer Intelligence: Serving Omni-Channel Shoppers

If the goal is to take a legacy media and make it work on a smaller phone browser with limited functionality, then the industry is definite-ly going mobile. However, taking the tethered online storefront and porting it to a mobile browser may not necessarily make it “mobile.”

What has worked historically? Billions of dollars have been spent globally by consumers off the mobile phone on premium rate service (ringtones, sweeps, etc.) one dollar at a time. Now with tethered credit card services, this impulse purchase behavior can be ex-tended to hard goods purchases.

Successful “Deal of the day” or Deal of Week” SMS alert service can be matched with tethered credit-card purchases. You see high conversion rates when the retailer can target interested consumers with unique merchandising opportunities.

The native mobile storefront must place the consumer experience first, with total regard to the consumer’s context and behavior while also leveraging the unique capabilities of the mobile devices, offering timely (time/location) and targeted (access/offers), with immediate methods of search and purchase (or re-purchase!)

Beyond comparison shopping and including elements of social networking for sharing and reassurance, ultimately resulting in more confident purchasing decisions.

“REPLY TO BUY”: now that is mobile.

Continued from page 10: Gary Schwartz

11 • Retail TouchPoints

The social sphere has clearly taken precedence over initial Internet activity, like email and chat. Last year nearly 90% of major online retailers increased their email volume during the holiday season, with retailers boasting their send frequency by 43% on average, compared to the pre-holiday period, accord-ing to the Retail Email Guide to the Holiday Season (Smith-Harmon). With that said, retailers run the risk of getting lost in the clutter. As email falls behind on the priority scale of online activities, retailers should tap social media platforms to engage consumers.

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Social media has emerged providing a platform for community building, feedback, information sharing and, most importantly, a growing part of consumer’s lifestyle. Retailers must be present to monetize feedback and foster loyalty and sharing at every possible touchpoint.

Key Trends:A new Aberdeen Research report, “The ROI on Social Media Moni-toring: Why it Pays to Listen to Online Conversation,” offers four key drivers for social media adoption:

• Risk reduction: The online world unleashes new opportuni-ties to attack a company’s brand reputation and social media monitoring is providing much of the heavy artillery need to identify and respond to these threats in a defensive (and even preemptive) manner. Social media monitoring and analysis can serve as an early warning system, immediately alerting or-ganizations of issues that pose potential threats to their brand reputation.

• Customer advocacy: Using social media monitoring to iden-tify and engage with “top influencers,” and to respond to the key drivers of customer should naturally lead to an increased volume of positive word of mouth referrals. For most companies, no marketing lever is more efficient than customer advocacy. The “network effect” can deliver ever-increasing value at little or no incremental cost.

• Consumer insights generation: Companies can glean invaluable insights by observing a universe of consumers freely discussing their brand experiences, as well as their future wants and need in social media. Ongoing analysis of consumer-generated content can product a vast array of strategic options, including insight into what products should be developed.

• Customer service cost reduction: Because peer-to-peer networks and online communities serve as public knowledge repositories comprised of thousand of question-and-answer pairs, social media can alleviate demand for traditional cus-tomer support services.

Where Retailers Should Increase Investment in 2010:

Social/Collaborative shopping: Teen apparel retailer Charlotte Russe implemented ShopTogether, a social shopping platform designed to enable simultaneous shopping sessions on the Charlotte Russe site. Shoppers from remote loca-

tions can view the same products and communi-cate via chat. Sesh and Fluid are other similar platforms designed to provide a group Web browsing experience.

FacebookConnect: Although analysts are skeptical about the success of Facebook-Connect for retail, this platform demonstrates potential to increase brand awareness and positive word-of-mouth. Facebook Connect launched in December 2008 and has proved successful for driving awareness around events, like Lollapalooza, which reported a 99% increase since implementing Facebook Connect. While retailers are not early adopters of this technology, it’s a bold opportunity to reach the 350 million (and growing) loyal members of the Facebook community.

Competitive Differentiators:The retailers that figure out how to leverage Facebook Connect successfully will clearly outshine and add value to their brand and products. Any chance to create a positive buzz about your product offerings is golden, and this platform provides the opportunity to do just that.

Although it’s a common practice for retailers to have a presence on social networks, very few have Facebook storefronts or of-fer the ability to pay for products without clicking through to the e-commerce site. 1800Flowers offers Facebook users the ability to purchase without leaving the retailer’s Facebook page. The idea is to accentuate your offerings on social networks and tap into the loyal and growing customer, or “fan,” base.

2010

Amanda FerranteAssistant EditorRetail TouchPoints Amanda Ferrante is Assistant Editor at G3 Communications, publisher of Retail TouchPoints, a weekly e-newsletter focused on provid-ing retailers with insight to optimize the customer experience across all channels. Amanda covers telling re-tail trends like in-store technologies, mobile marketing, retail operation solutions and cross channel strate-gies. Focused on providing research and strategies to assist retail-ers’ social media efforts, Amanda engages in conversations on social media through Retail TouchPoints podcasts. Amanda is currently work-ing on a social media whitepaper exploring how best in class retailers are leveraging social media and how emerging platforms will impact the retail industry.

Tapping into Social Media Strategies

“Retailers must be present to monetize feedback and foster loyalty and sharing at

every possible touchpoint”

12 • Retail TouchPoints