Meeting The Challenges Of The Empowered Consumer

Retail is experiencing substantial change because consumers are now empowered by the web with information about price, availability, and merchandise features.

The retail industry is still served by solutions that are too fragmented to adequately balance the asymmetry introduced by radical price transparency. There are solutions for transactions, web site, stores, and so on but little to empower the cross-channel retailer to really meet the consumer’s needs.

I’ve recently been looking at IBM’s Smarter Commerce initiative and its portfolio that integrates:

1)    Store applications. IBM has well-established high-volume store apps appropriate to high-volume, low-touch retailing but correctly identifies these as inappropriate for fast-growing specialty retail with low-volume “high touch.” This is why it acquired the “asset” of Open Genius.

2)    Web metrics. IBM acquired Coremetrics in order to bring the discipline of measuring traffic, conversion, and average order to cross-channel retailing. It’s only by monitoring such metrics that retail can understand which marketing strategies are really successful and which market segments are most receptive.

3)    Direct-to-consumer initiatives. IBM acquired Unica as a platform for integrating automated direct-to-consumer marketing with its cross-channel offering.

4)    Fulfillment. IBM recognized that distributed order management is a key element in the new retailing. Traditionally, retailers drive their business through product intelligence where they have a merchandise focus (typically more US) and customer intelligence where they have a marketing focus (typically more European). However, in cross-channel retail you have to have another dimension – the order that has persistence and needs to orchestrate actors such as suppliers, transportation services, and sometimes the consumer too to ensure availability to take delivery.

Planning apps are high value

The major element that could be more emphasized to my mind is around analytic apps. I’m thinking about apps rather than tools for planning – demand management, assortment planning, space management, and (scientific) pricing and promotion. My research shows that retailers strongly believe that these apps have the potential to have the most impact on shareholder return via the impact of improved inventory turn on their balance sheets and reduced markdown on their operating income.

Store traffic is also a hot innovation domain that also might be interesting to a Systems Integrator building a portfolio of apps to drive evolution in retail.

What does it mean for you?

IBM has an intriguing vision for retail. If you are a cross-channel retailer, you might want to check your own road map and think about the completeness and consistency of its elements.

What kind of plans do you have to measure the impact of marketing and promotion investment on traffic conversion and average order value across channels and “audiences”? How will you deploy marketing automation to encourage more engagement and interaction with target consumer audiences? How will you manage customer orders through their life and orchestrate all the actors that participate in the life of an order?

What kind of applications and services do you have in your portfolio to support your retailing strategy? What kind of architecture supports incremental progress from your current to your desired level of capability in cross-channel retailing?

If this has been interesting, I would love to hear your viewpoint. glawrie@forrester.com