rethinking the retail store

7/29/2019 Rethinking The Retail Store

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R E T H I N K I N G T H E R E T A I L S T O R E

T R E N D S A N D T E C H N O L O G I E S F O R 2 0 1 3 A N D B E Y O N D

Introduction

he rapid advancement of technology, and its remarkably fast acceptance by consumers,is likely to cause many retailers to rethink the very nature of the stores they operate.In the past five years, the shopping behavior and expectations of many consumers havechanged more than most brick-and-mortar retailers have been able or willing to

accommodate. This report is for owners, shareholders, and senior executives across businessfunctions in retail companies.

Its hard to change so many stores. And by the time youve adapted, your customers are likelyto expect even more. We at Jesta I.S. have been thinking hard about the fast-evolving natureof stores. Even so, were cautious in our public speculation about the future. We have nocrystal ball; our predictions are no more likely to be right than anyone elses. But, like you, wehave to make business decisions that anticipate futures we think are likely.

Fortunately, our retail customers have taught us a great deal. All told, they operate thousandsof stores in many lines of retail business. Recently weve also reviewed more than 30 currentarticles and documents that address the changing role of stores. This report distills what wethink are the most compelling and relevant of the insights we gained from our research, aswell as from our work with customers. It also recommends sources for further reading.

Executive SummaryThe changes facing retail stores are driven by the convergence of powerful trends in five keyareas:

economics and demographics

competition in the retail industry

the growth and sophistication of e-commerce

technical innovation, and

the shopping behavior and expectations of customers.

We believe that within the next three to five years, most retailers are likely to experience bigchanges in virtually every aspect their stores, including these:

store location and size

store design

business processes

merchandise assortmentsdeployment and use of technology

staffing, compensation and personnel practices, and

local marketing practices.

This report focuses on what we believe is the central question for brick-and-mortar retailers:

How can stores continue offering value to customers whose shopping habits andexpectations appear likely to keep evolving fast?

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Specifically, this document addresses opportunities to deploy and use new technologies to thisend.

We believe the stores of some retailers may be relatively unaffected by the changingbehavior of consumers who shop with mobile devicesat least in the next few years. In thisgroup we include many discounters and off-price retailers. Their main appeal is low price, and

many of their customers are not sophisticated users of technology to improve their shoppingexperience.

No one knows how fast or how far the changes may go. But they are well underway in manyretail segments, and the pace appears to be accelerating. Insightful retail executivesunderstand that they cant wait for certainty before they act.

How technology is driving changeTechnical innovation is a powerful driver of change in retail today:

In the past few years, consumers have adopted several low-cost technologies atunprecedented speed. The technologies include smartphones, tablet computers and

flat-screen video displays. Consumers expect retailers to use these technologies toimprove their shopping experience.

Easy-to-use consumer software applications (or apps) have become the de factostandard for development of enterprise software.

The emergence of cloud computing and software-subscription services enablesretailers to deploy enterprise systems faster and at lower cost than ever before.

The cost of putting wireless infrastructure into stores is relatively low.

Social media is emerging an important factor in consumer buying behavior.

The sophistication and convenience of e-commerce is setting new standards forshopping in stores.

Multichannel retailers have access to powerful tools for gathering, storing and

analyzing massive amounts of data from consumers online interactions. Such data canyield detailed insights into the shopping habits, purchases, tastes and preferences ofindividuals.

In the past 10 years, new technology has given consumers unprecedented access toinformation that helps them make smarter buying decisions. This information has put yourcustomers in the catbird seat.

How consumer expectations are changingMost shoppers look to retail stores to provide social and sensory experiences they cant getonline:

They want to see and feel products before they buy.They want to try on clothes to see how they look and how they fit.

They want to be surprised by appealing merchandise they werent shopping for.

Armed with smartphones and tablet computers, a growing number of shoppers are also tellingretailers they expect their in-store experience to be as convenient, as interesting, asinformative and as personalized as their best online shopping experiences.Considering the sophistication of online retailers like Amazon.com, this is a big expectation.


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If they need help with a decision, they want fast access to a helpful and knowledgeable storeassociate who isnt pushy. They want to be able to look up information online, through amobile-enabled websitemaybe on devices retailers provide in the store.A growing number of consumers are using smartphones to help them shop while they are instores. In a practice known as showrooming, they may use their phones to shop for betterprices from online sources. They may also check social networks, look for product reviews, and

seek detailed product information.

Not all retailers will feel the same amount of pressure to provide uniform levels of service toall customers. Customers naturally expect more and better services from retailers who sellmore expensive and more complex merchandise. They also expect much more frommultichannel retailers that operate many stores than they do from local retailers who sellthrough only a few brick-and-mortar stores.

Customers are increasingly likely to expect the following services from mid-sized to largemultichannel retailers:

They want consistent treatment across all sales channels with respect to pricing,promotions and loyalty programs.

They want to benefit from the information retailers have collected online about theirpersonal preferences.

They want personalized, relevant offers of merchandise thats likely to appeal to

them.

If a store is out of stock for an item they want, they expect it to be shipped to theirhome or office, with fast delivery at no charge.

They want the flexibility to buy product on an e-commerce site and pick it up at thestore.

They want stores to accept the return of products they buy online.

In addition, they want all of these services fast and without hassles.

Toward the leading edge of expectation, you may find growing numbers of customers whoalso want one or more of these services:

scheduled appointments with individual sales associates

instant matching of online prices

payment by electronic wallet or through services such as PayPal

next-day or same-day delivery for customer orders.

How technology is changing storesRetailers are deploying new technology in their stores for two main reasons:

to improve the customers shopping experienceto better manage store operations.

While both are high priorities, we believe its important for most retailers to focus first onimproving the shopping experience. This, after all, is what keeps customers returning to stores.


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Retailers must provide value in stores that customers are unlikely to find online. This value maycome in any of several forms:

rich sensory experience

merchandise that isnt available elsewhere

in-depth product information

opportunity to evaluate merchandise before buying it

satisfying social interaction

access to knowledgeable and helpful experts

personalized one-on-one attention

entertainment

surprise

emotional engagement.

These and possibly other kinds of unique value are likely to make stores more effective ingenerating revenue and profit.

Store technology in the service of customersStores have a broad and growing range of technologies to help them provide more value totheir customers.

Many of these technologies require in-store access to wireless communications, for bothshoppers and store associates. This requirement alone presents an imperative to the 58% ofNorth American retailers who dont provide wireless technology for store associates orcustomers to use in their stores.1

With wireless communications in place, stores can deploy mobile-enabled softwareapplications for point of sale (POS), customer relationship management (CRM) and clienteling.In combination, these technologies can enable store associates to extend appropriate,

individualized promotional offers that customers are likely to appreciate.

Retailers can also use wireless technology to train store associates through the use of tabletcomputers such as iPads and other devices. Such training can make associates moreknowledgeable about merchandise. It can also make them more effective in selling it.

QR codes or other technologies, used in conjunction with in-store mobile devices or informationkiosks, can give shoppers easy access to additional product information -- including detailedspecifications, product reviews, videos of product in use, social-media feedback, and so on.

Flat-screen digital displays enable stores to deploy electronic signage. They also provideways to present digital imagery that increases customers emotional engagement or that

provides information about merchandise.

Near-field communications (or NFC) technology enables shoppers to pay for their purchasesthrough cashless transactions that dont require them to present credit cards for payment.

Some retailers are also using highly specialized technology to provide in-store services thatare hard to duplicate online. For example, some department stores have deployed technologythat measures womens bodies and makes it easier for them to find jeans that fit.2


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Technology to improve store operationsUnless you enhance the technology in your stores, you probably wont be able to deliver theshopping experience your customers expect.

As you evaluate your needs, you might consider how your stores will use each of the followingkinds of systems:

Merchandising (including cross-channel pricing, plus inventory tracking and lookup)

Customer relationship management

Customer order management

Order fulfillment and shipping management

Point of sale

Business intelligence and analytics

Workforce management and labor scheduling

Human resourcesAny or all of these systems may be deployed on mobile devices as the needs of individualstores may dictate.

RecommendationsYou cant go wrong by focusing first on understanding your customers and finding ways todeliver exceptional value.

Because of the uncertainty and the fast pace of change in the current retail environment,retailers of all sizes should consider managing part of their business as it were a start-upcompany. An entrepreneurial business unit within your company might be made responsible fordeveloping new store concepts.

Agility, speed, flexibility and adaptation are the most valuable traits for startups.Increasingly, they are also becoming essential traits for big companies. Long-term planning

and formal projectionsthe habitual operating methods for bigger companies -- are oflimited value in fast-changing or ambiguous environments.

To adapt successfully to the amount of change we believe is coming, mature retailers mustrenew or instill a culture of entrepreneurship. You can begin doing so on a small scale, with ateam that works outside the constraints of your companys formal processes and procedures.

You can also learn from a growing body of literature about how to manage lean and agilebusinesses amid uncertainty. Here are the key principles:

Place small bets.

Improvise.

Experiment.

Iterate fast to learn quickly.

Accept imperfection as a consequence of speed.

Allow your people to make mistakes, but not the same ones twice.

For more ideas about how your company can prepare your stores for fast-changing customerexpectations, please visit the Jesta I.S. website at:http://www.jestais.com/point-sale
http://www.jestais.com/point-salehttp://www.jestais.com/point-salehttp://www.jestais.com/point-salehttp://www.jestais.com/point-sale


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About Jesta I.S.Jesta I.S. is a leading supplier of enterprise business solutions for retailers, manufacturers and distributors in the apparel,footwear and soft goods industries worldwide. Jesta I.S. is recognized for its expertise, innovative products and servicesas well as its commitment to de livering efficient business solutions in todays consumer-oriented marketplace. Jesta I.S.solutions support essential business management information for global industry leaders including Perry Ellis International(NASDAQ: PERY), PUMA (German: PUM), Genesco Inc. (NYSE: GCO), Town Shoes Limited, Cole Haan, Cavenders BootCity, DSW Inc. (NYSE: DSW), A|wear, Lotus Supercenter, Fanvision as well as many others. Additional information is

available atwww.jestais.com.

Suggested ReadingAaker, David. Will Retailing Ever Be the Same? Harvard Business Review blog. September 6, 2011.http://blogs.hbr.org/cs/2011/09/will_retailing_ever_be_the_sam.html(accessed October 9, 2012),Baird, Nikki; Kilcourse, Brian. Executing on the Promise: Retail Fulfillment 2012. RSR Research report. July 2012.Burk, Christina Cheddar. Why Brick-and-Mortar Stores Will Trump Online. CNBC interview with Jerry Storch, chiefexecutive officer of Toys R Us. September 25, 2012.http://www.cnbc.com/id/49164026(accessed October 9, 2012).Cognizant. Changing Consumers and Technology: Ten Megatrends Transforming the Retail Landscape. Cognizantreport. November 2010.Favaro, Ken; Hodson, Nick. The End of History, or Retail 3.0. Harvard Business Review blog. November 21, 2011.

http://blogs.hbr.org/cs/2011/11/the_end_of_history_or_retail_3.html(accessed October 9, 2012).Forrester Research. U.S. Cross-Channel Retail Forecast. Forrester Research report. 2011.Kilcourse, Brian. How Technology Could Really Threaten Stores. RSR Research blog, June 12, 2012.http://www.rsrresearch.com/2012/06/12/how-technology-could-really-threaten-stores/. (accessed October 9, 2012).

Lal, Rajiv; Alvarez, Jos B. Death Knell for the Category Killers? Harvard Business Review blog. December 19, 2011.http://blogs.hbr.org/cs/2011/12/death_knell_for_the_category_k.html(accessed October 9, 2012).Lasilla, Neal. Re-Imagining the Traditional Store Through Technology. The Mobile Retail Blog. August 21, 2012.http://www.themobileretailblog.com/mobile-commerce-strategies/fresh-ideas-re-imagining-the-traditional-store-through-mobile/(accessed October 9, 2012).Li, Shan. Denim Shopping Gets Easier with Digital Sizing Stations at Malls. Los Angeles Times online. May 3, 2012.http://articles.latimes.com/2012/may/03/business/la-fi-mo-digital-sizing-mall-20120502.Matthews, Christopher. Reports of the Shopping Malls Death Have Been Greatly Exaggerated. Time online. August10, 2012.http://business.time.com/2012/08/10/reports-of-the-shopping-malls-death-have-been-greatly-exaggerated/#ixzz28KZ1QgOu(accessed October 9, 2012).Matthews, Christopher. Will Amazon Take Over the World? Time online. July 16, 2012.http://business.time.com/2012/07/16/will-amazon-take-over-the-world/(accessed October 9, 2012).Merholz, Peter. For the Future of Retail, Look to Its Past. Harvard Business Review blog. December 12, 2012.

http://blogs.hbr.org/merholz/2011/12/the-future-of-retail-look-to-i.html (accessed October 9, 2012).NCR, C-Tailing is Here. The Future is Now. Are You Ready? NCR report. No publication or copyright date.Nielsen Company, The. Retail USA: Whats in Store for 2016. Nielsen report. 2012.

PWC. Multi-channel Retailing: Customers Take Control. PWC report. December 2011.PWC. U.S. Multichannel Shopping Survey. PWC report.Rigby, Darrel. The Future of Shopping, Harvard Business Review blog, December 2011.http://hbr.org/2011/12/the-future-of-shopping/ar/1(accessed October 9, 2012).Rosenblum, Paula; Rowen, Steve. The 2012 Retail Store: In Transition. 2012 Benchmark Report. RSR Research, May2012, 12Skinner, Steven. Engaging Shoppers with Intelligent Stores. Harvard Business Review blog. March 4, 2012.http://blogs.hbr.org/cs/2011/03/engaging_shoppers_with_intelli.html(accessed October 9, 2012).Skinner, Steven. Shopper Experience Study. RIS News report. June 2012.

Skorupa, Joe. Embracing Change: Retail Technology Study 2012. RIS News report. April 2012.Strugatz, Rachel. Amazon E-Commerce Reign Pushes Retailers to Step Up. Womens Wear Daily online. August 10,2012.http://www.wwd.com/retail-news/direct-internet-catalogue/amazon-e-commerce-reign-pushes-retailers-to-step-up-6371011?full=true(accessed October 9, 2012).Williams, Lawrence; Ackerman, Joshua. Please Touch the Merchandise. Harvard Business Review blog. December 15,2011.http://blogs.hbr.org/cs/2011/12/please_touch_the_merchandise.html(accessed October 9, 2012).

Zimmerman, Ann; Banjo, Shelly. New Web Victim: Office-Supply Stores. Wall Street Journal online. September 25,2012.http://online.wsj.com/article/SB10000872396390444358804578018082713484050.html?mod=dist_smartbrief(accessed October 9, 2012)Notes1Paula Rosenblum and Steve Rowen. The 2012 Retail Store: In Transition. 2012 Benchmark Report (RSR Research, May2012), 122Shan Li. Denim Shopping Gets Easier with Digital Sizing Stations at Malls (Los Angeles Times online, May 3, 2012)http://articles.latimes.com/2012/may/03/business/la-fi-mo-digital-sizing-mall-20120502(accessed September 14,2012).
http://www.jestais.com/http://www.jestais.com/http://blogs.hbr.org/cs/2011/09/will_retailing_ever_be_the_sam.htmlhttp://blogs.hbr.org/cs/2011/09/will_retailing_ever_be_the_sam.htmlhttp://www.cnbc.com/id/49164026http://www.cnbc.com/id/49164026http://www.cnbc.com/id/49164026http://blogs.hbr.org/cs/2011/11/the_end_of_history_or_retail_3.htmlhttp://blogs.hbr.org/cs/2011/11/the_end_of_history_or_retail_3.htmlhttp://www.rsrresearch.com/2012/06/12/how-technology-could-really-threaten-stores/http://www.rsrresearch.com/2012/06/12/how-technology-could-really-threaten-stores/http://blogs.hbr.org/cs/2011/12/death_knell_for_the_category_k.htmlhttp://blogs.hbr.org/cs/2011/12/death_knell_for_the_category_k.htmlhttp://www.themobileretailblog.com/mobile-commerce-strategies/fresh-ideas-re-imagining-the-traditional-store-through-mobile/http://www.themobileretailblog.com/mobile-commerce-strategies/fresh-ideas-re-imagining-the-traditional-store-through-mobile/http://www.themobileretailblog.com/mobile-commerce-strategies/fresh-ideas-re-imagining-the-traditional-store-through-mobile/http://articles.latimes.com/2012/may/03/business/la-fi-mo-digital-sizing-mall-20120502http://articles.latimes.com/2012/may/03/business/la-fi-mo-digital-sizing-mall-20120502http://business.time.com/2012/08/10/reports-of-the-shopping-malls-death-have-been-greatly-exaggerated/#ixzz28KZ1QgOuhttp://business.time.com/2012/08/10/reports-of-the-shopping-malls-death-have-been-greatly-exaggerated/#ixzz28KZ1QgOuhttp://business.time.com/2012/08/10/reports-of-the-shopping-malls-death-have-been-greatly-exaggerated/#ixzz28KZ1QgOuhttp://business.time.com/2012/08/10/reports-of-the-shopping-malls-death-have-been-greatly-exaggerated/#ixzz28KZ1QgOuhttp://business.time.com/2012/07/16/will-amazon-take-over-the-world/http://business.time.com/2012/07/16/will-amazon-take-over-the-world/http://blogs.hbr.org/merholz/2011/12/the-future-of-retail-look-to-i.htmlhttp://blogs.hbr.org/merholz/2011/12/the-future-of-retail-look-to-i.htmlhttp://hbr.org/2011/12/the-future-of-shopping/ar/1http://hbr.org/2011/12/the-future-of-shopping/ar/1http://hbr.org/2011/12/the-future-of-shopping/ar/1http://hbr.org/2011/12/the-future-of-shopping/ar/1http://blogs.hbr.org/cs/2011/03/engaging_shoppers_with_intelli.htmlhttp://blogs.hbr.org/cs/2011/03/engaging_shoppers_with_intelli.htmlhttp://www.wwd.com/retail-news/direct-internet-catalogue/amazon-e-commerce-reign-pushes-retailers-to-step-up-6371011?full=truehttp://www.wwd.com/retail-news/direct-internet-catalogue/amazon-e-commerce-reign-pushes-retailers-to-step-up-6371011?full=truehttp://www.wwd.com/retail-news/direct-internet-catalogue/amazon-e-commerce-reign-pushes-retailers-to-step-up-6371011?full=truehttp://www.wwd.com/retail-news/direct-internet-catalogue/amazon-e-commerce-reign-pushes-retailers-to-step-up-6371011?full=truehttp://blogs.hbr.org/cs/2011/12/please_touch_the_merchandise.htmlhttp://blogs.hbr.org/cs/2011/12/please_touch_the_merchandise.htmlhttp://blogs.hbr.org/cs/2011/12/please_touch_the_merchandise.htmlhttp://online.wsj.com/article/SB10000872396390444358804578018082713484050.html?mod=dist_smartbriefhttp://online.wsj.com/article/SB10000872396390444358804578018082713484050.html?mod=dist_smartbriefhttp://articles.latimes.com/2012/may/03/business/la-fi-mo-digital-sizing-mall-20120502http://articles.latimes.com/2012/may/03/business/la-fi-mo-digital-sizing-mall-20120502http://online.wsj.com/article/SB10000872396390444358804578018082713484050.html?mod=dist_smartbriefhttp://blogs.hbr.org/cs/2011/12/please_touch_the_merchandise.htmlhttp://www.wwd.com/retail-news/direct-internet-catalogue/amazon-e-commerce-reign-pushes-retailers-to-step-up-6371011?full=truehttp://www.wwd.com/retail-news/direct-internet-catalogue/amazon-e-commerce-reign-pushes-retailers-to-step-up-6371011?full=truehttp://blogs.hbr.org/cs/2011/03/engaging_shoppers_with_intelli.htmlhttp://hbr.org/2011/12/the-future-of-shopping/ar/1http://hbr.org/2011/12/the-future-of-shopping/ar/1http://blogs.hbr.org/merholz/2011/12/the-future-of-retail-look-to-i.htmlhttp://business.time.com/2012/07/16/will-amazon-take-over-the-world/http://business.time.com/2012/08/10/reports-of-the-shopping-malls-death-have-been-greatly-exaggerated/#ixzz28KZ1QgOuhttp://business.time.com/2012/08/10/reports-of-the-shopping-malls-death-have-been-greatly-exaggerated/#ixzz28KZ1QgOuhttp://articles.latimes.com/2012/may/03/business/la-fi-mo-digital-sizing-mall-20120502http://www.themobileretailblog.com/mobile-commerce-strategies/fresh-ideas-re-imagining-the-traditional-store-through-mobile/http://www.themobileretailblog.com/mobile-commerce-strategies/fresh-ideas-re-imagining-the-traditional-store-through-mobile/http://blogs.hbr.org/cs/2011/12/death_knell_for_the_category_k.htmlhttp://www.rsrresearch.com/2012/06/12/how-technology-could-really-threaten-stores/http://blogs.hbr.org/cs/2011/11/the_end_of_history_or_retail_3.htmlhttp://www.cnbc.com/id/49164026http://blogs.hbr.org/cs/2011/09/will_retailing_ever_be_the_sam.htmlhttp://www.jestais.com/

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