The Digital Store Platform Will Support The Retail Store Of The Future

The in-store shopping experience is increasingly being transformed into a digitally enhanced experience for both the customer and retailer. Technologies such as beacons, retail store analytics, and store fulfillment programs are rapidly changing the definition of how a retail store operates and engages with customers. While 68% of customers use a mobile device while in a store, retailers are just beginning to take an active role in that in-store digital experience.

Forrester believes that, in the future, retail stores that drive convenience, service, and relevant personalized experiences through the use of digital store technology will succeed. Why? Because today. customers show an affinity for digital store technology. In fact, 66% of luxury apparel customers are more likely to shop with a digitally-enabled associate. Those retailers who wait on the sidelines are at risk of maintaining the status quo and may only grow marginally.

In 2015, Forrester predicts that:

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The Truth About Showrooming

As we enter the 2014 holiday season, retail news outlets are latching on to dramatic headlines highlighting the risk of showrooming - the act of checking prices on a mobile device in a store and then purchasing at another retailer. Yes it’s true; customers use their mobile phones to compare prices in-stores. However the behavior of shopping multiple stores to find the lowest price is nothing new. My grandmother often "showroomed" a bag of peanuts at the farmers market just to save a few cents.  I suspect this behavior has been occurring as long as humans have been bartering goods.

 

While the behavior is not new, mobile phones have enabled customers to compare prices immediately across a vast set of digital retailers.  As mobile phones afford customers greater choice in-aisle, showrooming has instilled fear in legacy retail organizations who quickly realized they no longer completely control the experience in their stores.  At first, retailers responded with force by removing Wi-Fi, which in a world with rich cellular connectivity did little to curb showrooming behavior. Today retailers are reacting to showrooming by providing margin-eroding offers in-aisle. In the future, advanced retailers will begin to embrace showrooming, using the signals from price-checking on mobile phones (either by observing behavior or using retail store analytics) to offer greater convenience and rich experiences at the customer’s moment of need.

 

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Manhattan Associates Acquires GlobalBay: Legacy POS gets another competitor

 

Yesterday Manhattan Associates announced the acquisition of mobile point of service (mPOS) provider GlobalBay Technologies.  A few years ago, it might seem odd that a warehouse and order management company would be interested in playing a significant role in the experience of customers and associates on the sales floor. However as we recently covered in our Omnichannel Order Management Wave, the role of distributed order management has been elevated and is now key to meeting customer’s rising expectations. Along with orchestrating orders across all inventory locations, omnichannel order management systems (OMS) are already taking orders in the call center, handling fraud management, and providing mobile utilities for associates to fulfill orders from stores. Moving into the point of service (POS) space with an mPOS solution is a logical evolution for Manhattan Associates since it combines enterprise inventory visibility, order management, and order capture all under one roof. In addition this acquisition provides a stronger differentiator from their largest competitor IBM, who exited the legacy POS market in 2012.

So what does this mean for POS moving forward?  Three distinct solutions are now possible, including:

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Not Your Parent's Order Management System

Last week Peter Sheldon and I published The Forrester Wave TM: Omnichannel Order Management, Q3 2014 report, assessing order management vendors targeting omnichannel businesses.  Compared to our 2010 Forrester Wave on order management hubs, this new stream of research addresses the heightened requirements that order management systems (OMS)  must now help broker and fulfill orders across all distribution centers as well as physical stores. Based on our research many retailers are seeing a significant lift in online sales by enabling all inventory in the enterprise to be sold.  The omnichannel OMS applications evaluated in this Wave differ from our 2010 evaluation because:

  • Inventory transparency is a priority. In a world where digitally enabled customers expect to find and purchase products from any touchpoint, inventory visibility is now a requirement for OMS applications. The OMS today is responsible for consolidating and maintaining inventory positions from various systems including WMS, eCommerce and even from the supply chain. This consolidated, enterprise view of inventory is made available to customers in near-real time, affording shoppers the best opportunity to have their needs met regardless of the whereabouts of the product.  
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Bits and "Bites" - Technology Enters The Restaurant

My dad came over today for a visit today. He’s an avid reader and consumes The New York Times from front to back. I guess you could say he’s part of my research team as he frequently cuts out articles for me related to digital business. This past weekend he brought over the front page of the business section, profiling the use of tablets in the quick serve restaurant category. Although many digital technologies in physical spaces have yet to transform shopping behavior, the restaurant industry has one of the stronger use-cases to employ digital, including:

  • Improving service by eliminating waiting in line. At Panera, customers go straight to their table and order via their smartphones. No more waiting in line to order, and standing around for your order to be ready.
  • Increasing average order size and margins with contextual meal recommendations. Chili’s employs tablets that drive up order size by providing meal recommendations that may have a higher price point, higher margin, or is highly rated.  In their tests they indicate a 20% lift in dessert sales! Yum.
  • Expediting service and improving accuracy.  Restaurant staff has a lot to gain by employing digital technology. They can reallocate cashiers to kitchen or service roles, and having customers order at the table improves order accuracy.
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Retailers Have Beacon Fever

There is no hotter topic in retail today than beacons. These small objects which transmit location information to smartphones based on Bluetooth Low Energy have transformed our retail imagination, conjuring up visions of continuous offers being showered onto customers as they walk the aisles of their favorite grocery store.  The reality is more subdued.  We are still very early in the development of location strategies that leverage beacons and the iBeacon protocol, and retailers need to solve for a variety of challenges such as customer privacy, beacon maintenance, connectivity, and campaign management.

In a recent report titled “The Emergence of Beacons In Retail”, my team digs into this emerging location technology and tackles important topics, including:

  • Beacons require the right combination of hardware and software.  BLE is required as beacons leverage the Bluetooth hardware found on most new smartphones. A mobile app is also required to interface with the beacons, transmitting the location information provided by the beacon to a server, and then receiving the appropriate content back from the server to display on the customer’s mobile device.
  • Beacons enable rich experiences beyond offers.  We all enjoy saving money, and pushing offers to us via beacons will be a popular use case. However it is possible to offer a deeper level of engagement. Based on location, retailers can allow the ability to unlock dressing rooms, authenticate a mobile payment, or provide enhanced service such as preparing your favorite latte as you enter your local coffee shop.
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Shoppers Avoid Eye Contact With Digital Storefronts

Looking back at 2013, it’s easy to see all of the great innovation occurring within the digital store. Most retailers focused on omnichannel fulfillment, whether it was click-and-collect or ship-from-store.  Some retailers like B&Q in the U.K. began to experiment with dynamic pricing in-store. If 2013 was about launching new services, 2014 will be about shedding light on the actual performance of these initiatives.

One example of new digital store technology is eBay’s digital storefronts. Last year in June, eBay made a splash by deploying a digital storefront for Kate Spade, allowing customers to browse and buy products from a giant digital screen strategically placed over a vacant physical storefront. This digital storefront replaces the static posters that mall operators use to cover up vacant stores.  This past holiday season, eBay expanded the pilot and deployed a series of digital storefronts in a popular San Francisco mall.  These new digital storefronts are a few blocks from the Forrester offices, and I capitalized on the close proximity to conduct some research on how the technology was being used and received. eBay launched three digital storefronts: a small format Rebecca Minkoff storefront, a small format TOMS storefront, and a large Sony storefront in front of an escalator exit.

In mid December, I spent two hours observing customer interactions with the digital storefronts (some might even call it lurking). After an informal assessment of almost 500 shoppers who passed by these digital storefronts, I came to the following conclusions:

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A New Generation of Clienteling

As we ramp up our coverage of the digital store, we recently researched the role of retail sales associates to understand their impact in the age of the customer. There’s no doubt that technology has dramatically impacted the way in which consumers discover, explore, buy, and engage with brands, products, and services. However, the impact of technology on sales associates is unclear, as is the degree to which the role of the sales associate needs to evolve to leverage these new capabilities.

In the new report A New Generation Of Clienteling, we tackle the role of sales associates and their use of technology in the digital store. In the report, we note a number of trends, including the following:

  • The role of the associate will change from an information provider to a facilitator of engagement. The sales associate is no longer the sole provider of information in stores: Customers can now find product information via their mobile device without the help of an associate. This scenario provides an opportunity for the sales associate to pivot and drive increased engagement with the customer.
  • Digitally connected sales associates are trusted. Less than a quarter of US online adult today state that sales associates are the best source for product information. However, when armed with mobile devices, the associate is seen as a trusted advisor. The breadth of information available to sales associates via mobile devices allows them to consider a broader array of information when making product recommendations to customers in the store. 
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A Bumpy Ride For Retailers At Shop.Org

Last week I was thrilled to attend and present at the annual Shop.org event in the great city of Chicago.  I attended many great presentations, talked at length with the vendor community, and broke bread with some of my old eComm friends.  One observation that was more apparent to me this year is the massive transformation happening in retail.  It feels more dynamic than it did at the peak of the dot com boom of the late 90’s. For me there were clear trends emerging:

  • There is a palpable divide between forward looking retailers and those stuck in second gear.   Going after incremental improvements such as checkout funnel analysis and improving page load speeds are still important functions, but these are now table stakes that most digital businesses employ. Forward looking retailers go beyond site optimization and look at advanced analytics, leverage social graph data to better understand their customers, and employ mobile strategies that add contextual relevance rather than simply emulate the website.
  • Omnichannel is the hottest topic, but it means different things to different people.  The reality is most retailers fail to understand the complexity around creating a seamless experience for customers, and often fall back on defining their omnichannel initiatives as simply creating a singular presentation across all touch points. For organizations to truly support the needs of the customer, they need to focus on aligning supply chain, fulfillment, customer service, and operations around the specific needs of the customer. For instance, enabling the store associate to engage digitally-savvy customers requires new training, new technologies that facilitate assisted selling,  and new compensation paradigms that reward the associate for driving sales in any touch point.
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How To Select The Right Mobile Point Of Service Partner

Last week Forrester published a report highlighting the benefits and challenges of rolling out a mobile point of service (mPOS) solution. Increasingly, retail professionals are turning to mPOS technology to help bolster customer engagement, lower store expenses, and improve the efficiency of sales-related functions. It’s clear that retailers are eager to implement this capability, but realizing a solid return on investment is not guaranteed.

The report, titled Market Overview: Mobile Point of Service Solutions For Retail, gives an overview of the challenges and opportunities as well as an overview of the enterprise-class mPOS vendors. Before jumping headfirst into mPOS initiatives, eBusiness leaders will need to do the following:

  • Ensure your mPOS solution meets core needs. Tailor your mPOS integration to the needs of your customers and associates while leveraging the strengths of your business model. One-size mPOS does not fit all, and strategically creating a solution that exceeds your customers’ needs while bolstering your existing business model will yield the best results.
  • Expose your data in a scalable way. mPOS will improve customer engagement by combining the benefits of a physical interaction with the robust data of the digital experience if data is exposed correctly.
  • Focus on simplifying tasks first. Deploy initiatives that create efficiencies in store operations first, and then focus on developing strategies and solutions that bolster the customer experience. Today, measurable ROI is easier to define through store efficiencies than through improvements in customer experience.
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