In Touch With Retailing

Creating Consumer Influence, Not Intrusion

By Scott Langdoc, chief technology officer, Fujitsu Transaction Solutions Inc.

While ruthless attention to lowering costs and improving store operations efficiencies is a critical mantra for retail executives, most leading merchants know the keys to long-term success involve a sharper focus on initiatives that affect the top and bottom line – revenue growth and margin improvement.

Retail executives have seen an increasing array of distributed store system solutions emerge that complement traditional point-of-sale (POS) systems and help to establish a differentiated consumer experience. Unfortunately, there is a fine line with most consumers between what technology they view as truly helpful to their shopping experience and what they consider to be intrusive to the way they normally like to shop.

Those retailing leaders that pay close attention to the combination of technology and consumer psychology when implementing new in-store systems tend to have the best success influencing purchase behavior. To positively influence customers’ buying habits rather than just thrusting technology at them, leading retailers should adopt the following tenets:

• Intuitive, Adaptive Usability – Customers can’t be influenced if they are intimidated by the learning curve of self-service applications, for example. If these applications can’t adapt to different usage patterns and be instantly useful to the consumer – either by the information they receive or the offer they are provided – then they won’t successfully influence shopping behavior. No self-service store technology system should be deployed without comprehensive usability testing and customer feedback.
• Creating Demand at the Point of Decision – Merchants are slowly increasing investments in technology that influences purchase behavior at the point when consumers are making their final decision – at the shelf. Shelf labels and electronic signage quickly reflect demand driven promotions right at the product while eliminating the labor cost to execute price and promotion changes. In the next two years, the availability of electronic paper (e-paper) will further broaden the retailers’ ability to target specific products toward specific customers at specific times.
• Truly Personalized Offers – Many customers are less than impressed with typical retailer loyalty programs – either because they generally perceive limited value, or they don’t think the rewards are directly targeted at them. Retail leaders who have invested in next-generation customer relationship management (CRM) systems are blending data collection and customer segmentation into a seamless, closed-loop workflow. This ensures that the offers being made to customers are based on the right combination of promoted product and purchase behavior that will directly influence future buying behaviors.
• Employee Empowerment – New in-store mobile technology and product intelligence give store personnel much better tools to help customers with their research, product comparisons and final purchase decisions. The subtle blending of cross-sell and up-sell suggestions directly affects customers’ average transaction size.
• Channel Transparency – In today’s competitive environment, a retailer’s Web site is no longer an advantage; it’s a fundamental prerequisite to survival. Customers expect to be able to blend their merchandise research and transactions across channels. They want to check online for store inventory levels and complete transactions for on-site pick up. The Web has increasingly become the new medium for enticing consumers into the traditional store, which means that retailers must maintain common inventory, common pricing and common promotions across all channels while allowing for trade area differences. Online-savvy customers not only spend more on the Web, they also spend more in the store when properly influenced.

For those retailers that successfully orient their store operations and technology investment plans toward true consumer influence, the financial benefits are powerful – an average general merchandise retailer can see between eight to 15 percent increases in average transaction size with as much as a 3-5 percent bump in margin. This equates to more than $100 million in incremental sales and more than $30 million in incremental gross margin for every $1 billion in sales. The overarching objective for all store technology investments must start and end with a critical strategic question: with this project, will we materially influence consumer behavior, transaction size and margin growth? Those merchants that do so will thrive in an increasingly hyper-competitive retail marketplace.