Outlook guide 2011

2011

OUTLOOK
GUIDE
1
Predictions from 10 of the Retail

1
0
Industry’s Top Analysts

© 2011 Retail TouchPoints

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Table of Contents
As 2010 concluded, retail industry executives were looking optimistically toward 2011. With the height of the recent recession
fading away, retailers are anticipating a positive 2011 as consumers slowly begin to spend. In response, retail organizations
are re-tooling their marketing and merchandising efforts. To identify the key retail trends to watch in 2011, Retail TouchPoints
called on some of the most prominent retail experts to share insights and predictions. With mobile payment and social
media strategies front and center, the 2011 Retail TouchPoints Outlook Guide offers insights for every vertical, and
throughout current and emerging channels. The Guide offers solutions that will help improve shoppers’ customer experience
while boosting the bottom line.

The 2011 RTP Guide roster of analysts includes experts in mobile technology, in-store solutions, supply chain services,
social marketing strategies, merchandising and store operations:

Page

3 Sahir Anand, Aberdeen Research

5 Lauren Freedman, the e-tailing group

6 Jerry Sheldon, IHL Group

7 Gary Schwartz, Impact Mobile

9 Jim Dion, Dionco, Inc.

10 Laura Davis-Taylor, Creative Realities

11 Chad White, Responsys

12 Dan Avila, Tompkins Associates

13 Greg Girard, IDC Retail Insights

14 Amanda F. Batista, Retail TouchPoints

© 2011 Retail TouchPoints 2

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Key Technologies Will Help Develop Success Through Customer-Centricity
Retail success in 2011 hinges on customer-centricity, developing increased customer-centric service and
sales models in stores and harnessing the power of social and digital channels as part of an integrated
marketing strategy. According to Aberdeen Research, 87% of Best-in-Class retailers are innovating the
shopping experiences of their customers, enabling the ability to shop in stores, online, and across new
channels such as mobile, whenever and wherever the customer wants.

Technologies That Will Drive Process Management Practices Sahir Anand,
VP & Principal Analyst
Data and Analytics Aberdeen Research
Fifty-Three percent (53%) of large retailers indicate that customer analysis is difficult due to enormity of
data from different channels. Retailers have more data than they are capable of processing. Case studies of Anand oversees and enables the
overall research and analysis in
retailers indicate that leading companies are successfully surfacing their data about customers, merchandise
the vertical industry segments
and operations and leveraging it for actionable intelligence. These retailers are seeing the best margin and including retail and hospitality,
repeat customers. These retailers are distinguishing between multiple customer and business data silos that and retail banking related process
exist within retail, and discovering how to pervasively coordinate customer and brand views. management and technology
value chain areas. Anand
Merchandising and Inventory Optimization: Two-thirds of retailers are challenged to optimize their inventory specializes in the points of
as best as possible to plan for the holiday season and beyond. Best-in-Class retailers are also planning their customer interaction and points
seasonal merchandising and allocation strategies based on localized demand as accurately as possible of integration (technology and
for the next two-to-three quarters. Seventy-one percent (71%) of Best-in-Class retailers are applying business workflow) functions.
inventory visibility and accuracy strategies from source to shelf to establish a successful consumer-driven
replenishment system that balances the demand with the supply chain.

Mobility Will Resonate With Retailers in 2011
Aberdeen surveyed 129 retailers between July and August 2010 to reveal that 38% of respondents are currently at some stage of mobile retail
technology or mobile channel adoption compared to 18% at the end of 2008. Another 50% of respondents are looking to adopt this technology
(15% within the next one year and the rest considering planned adoption at some point in the future).

Currently, there are three major elements of the mobile retail experience that are top-of-mind for retailers. Mobile web is the top component of a
mobile retail technology platform strategy for almost half (49%) of retailers surveyed. The second highest preference for 43% of retailers is mobile
coupon targeting and delivery, which can be tied into customer loyalty programs (i.e. Starbucks). In September 2009, JCPenney made a foray
into mobile couponing with a pilot program at 16 stores. The third most popular component of a mobile retail technology strategy is smart phone-
platform specific mobile retail applications for various smart phones (37%).

Utilizing Customer Data
More often than not retailers blame disparate sources and enormity of customer data as the primary reason for lack of adequate consumer insights
that inhibits new customer acquisition, customer retention and reactivation. This inability curtails effective retail planning and execution in the
areas of customer-centric merchandising, marketing, promotion and pricing, among other critical customer value chain areas. Many large retailers
including Wal-Mart and Lowe’s try and grapple with this customer data complexity everyday. In 2009, retailers such as Chico’s FAS realized the
importance of customer insights and developed its central business revival strategy by executing in-depth customer data analysis, narrow customer
segmentation, and mapping the customer value chain all across the business for augmenting growth prospects in 2009 after a lukewarm 2008.
Chico’s undertook a sustained effort to identify key customer characteristics and tied it back to retention and reactivation campaigns that lead to
incremental sales.

CRM tools are pivotal in the “before the sale” stage of customer-centric retailing. However, CRM tools are also used in stores and channels in
the “during the sale” stage of customer experience to update customer information, customer record look-up, and fulfill loyalty couponing related
functions at POS.

CRM tools are used at retail corporate headquarters for maintaining and updating centralized customer database records, buying history and
other attributes that are critical for executing effective direct, online and other loyalty marketing campaigns, coupon and offer management, and
integration with other value chain areas such as merchandising and channel management.

Best-in-Class are 3.8 times more likely than Laggards to adopt CRM tools at headquarters and channels of sales and service. Overall, 41% of all
retailers use CRM tools in their retail organization. These tools not only enable data-driven customer relationship programs but also facilitate in
augmenting loyalty marketing and customer outreach campaigns that drive customer acquisition, retention and re-activation.

Social & Mobile Part of Cross-Channel Roadmap
Best-in-Class companies are better equipped to track social media activity as part of their cross-channel retail initiatives. Many retailers have
come up short in their social media initiatives due to a lack of planning and execution. According to Aberdeen’s August 2010 Social Media ROI
report, 85% of retail organizations currently have a social media initiative in place to help manage brand reputation and encourage revenue-building


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Sahir
Key Technologies Will Help Develop Success Through Customer-Centricity Anand

consumer interactivity. However, there is a wide gap between the use of social media as an interactive brand extension and adequate monitoring of
social media activity. According to Aberdeen’s May 2010 Restocking the Retail Marketer’s Toolbox report, 70% of retailers do not leverage
social media monitoring as part of their marketing initiatives. Home Depot has successfully integrated customer service and promotion delivery
through the use of Twitter. With nearly 22,000 followers, Home Depot promotes in-store and web specials, and responds in real-time to customer
complaints or suggestions.

Business Intelligence (BI) Application Vital for Customer-Centric Retail
These applications come into use for retailers during and post-sales customer experience stages. Best-in-Class are 1.4 times more likely than
Laggards to use a BI application for customer data collection, assembly, analysis and reporting.

These consumer insights are used enterprise-wide by Best-in-Class retailers for both pre-season and in-season retail planning and execution.
BI for customer management helps facilitate marketing strategies, merchandising, store layout, signage, sales and service strategies, workforce
management, inventory optimization, multi-channel operations and supply chain planning and execution.

BI data and reporting provides unit-level consumer buying trends, category, channel, store sales analysis and predictive buying behavior data
analysis. BI applications that gather, analyze and share consumer insights in retail through basic reporting and customer performance dashboards
can directly or indirectly impact retail profitability, customer sales and service performance. Currently, 40% of retailers use BI for customer
management purposes.

Anand advises retailers to increase investment in the
following seven customer-facing technologies for
success in 2011:
9 Increase investments in POS and workforce
enhancements, mobility, end-to-end cross-channel tools
(order, fulfillment, delivery), consumer insights (BI), and
demand-supply integration tools;
9 Implement a centralized customer data integration strategy
for an effective consumer insights process;
9 Use customer segmentation, affinity and preference
mapping for enhancing retention and re-activation;
9 Provide customers with the ability to purchase, exchange
and return product through a channel of their choice;
9 Align IT upgrades with current and future cross-channel
customer preference and affinity;
9 Introduce or expand customer performance incentives for
every job role to sustain a sales and service culture;
9 Measure job role based customer metrics performance and
share results with employees regularly.


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Understanding And Connecting With Shoppers

The biggest challenge for retailers today is that the consumers’ notions about connecting and merchants’ ability to
connect changes so fast. It’s hard for merchants to stay ahead of the curve. But good tactics are being implemented
every day. What it boils down to is understanding your channels and who you target consumers are. It could be about
mobile and social strategies, but it also can come down to things that are more simple such as product locators or in-
store pickup.
Lauren Freedman
Grabbing Market Share
I think in terms of growth, at the end of the day, retail growth is going to be small, even if there is a rise during the holiday
President
season. So growth will likely come down to merchants finding ways to take market share from their competitors. It’s not the e-tailing group
like the pie is getting bigger — we are not going to see that for a number of years. Lauren Freedman is a seasoned
Six ways to grab market share include: 15-year e-Commerce veteran.
She founded the e-tailing group
1. Expanding drop-ship assortment. in 1993 after an extensive career
as a department/specialty store
2. Testing a new category. Many retailers are going out of their comfort zone to offer additional products that buyer. The e-tailing group serves
will bring in new customers and retain current ones. all sectors of retailing, from brick
and mortar to catalog to online.
3. Piggybacking on sister brands. Pottery Barn and PB Kids, for example. – I think you are going to see The e-tailing group’s proprietary
more play in this area because it is cost-effective. research includes the annual
mystery shopping and merchant
4. Retention. Retailers need to focus on keeping customers. Look at Apple – when you think about their ability benchmarking surveys that
to bring people into the store, make appointments and go to the Genius Bar – that is a great retention effort. provide a comprehensive overview
of the state of e-Commerce,
5. Driving in-store traffic by continuing to get the customer engaged. setting industry standards while
simultaneously highlighting
6. Focusing on the multi-channel effort. Retailers must make sure they have a best-in-class experience best practices. Freedman has
in their own category. I am a stickler in this area - it’s about customer service differentiation. Retailers must spoken at many global e-retail
conferences including Shop.org,
actually know their products and assist shoppers in purchasing them.
eTail, and Internet Retailer. She
is often quoted in media outlets
Empowered Consumers Challenge Retailers
like The New York Times, WWD,
Retailers are now dealing with empowered consumers with greater access anywhere anytime and that has to be CNN, Financial Times, USAToday,
addressed. I am really struck with fact that we live in such an ADD shopping culture — everyone is impatient, everything Business Week, Forbes, Internet
must be available now. Retailers must respond with broader assortments and greater availability. Retailer and Crain’s. She is author
of the book, It’s Just Shopping,
To me mobile is the most exciting channel right now. We recently decided to add mobile to our Mystery Shopper studies a comprehensive, behind-the-
because we believe that it is leading to a lot of new activity. We are still in the early days but if you see the quick adoption scenes look at the evolution of
multi-channel selling.
rate, access and anywhere factor is significant and mobile will facilitate that.

Piggybacking on the mobile revolution, price checking tools also are an issue. The fact that consumers have the ability
to price check a product in a second is very powerful and very frightening.

When we talk about loyalty, we have to talk about the lack thereof, particularly for younger customers. They have no loyalty to anything except themselves and their
social connections. That is a factor that has to be reckoned with.

Evolving the Ecommerce Experience
We are still at a 7% e-Commerce market share, so the store continues to play an important role. The connection between the web and store will be powerful. It is
important for the web site to be in-stock: we have done research in this area and people say they will leave the site if it’s out of stock.

Customer service is another important area retailers must focus on – often shoppers can’t find an answer to a question. In our Mystery Shopper research every year
we continue to find customer service representatives unable to answers questions about a product.

Redemption across channels also is key. It is about efficiency online and in the store simultaneously. In fact, price has been secondary to time savings for shopping
online. The fact that the web creates efficiencies that shoppers don’t have offline is very powerful. In the end, efficiency and good product will always trump price.
Apple is not selling those iPads at a discount. Shoppers will pay for shipping on it if they want it bad enough.

Another place retailers are leaving money on the table in the ecommerce world is competing against companies that deliver the next day. If I am a Zappos shopper
and my kid needs a new pair of UGGs, I can go online at 11 p.m. and have them the next day. It is hard for many retailers to compete with that.


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3 Retail Strategies To Embrace In 2011: Loyalty, Mobility And Analytics

Over last couple of years, consumer frugality seems to be slowing. The latest numbers show coupon
redemption slowing or decreasing slightly. Also, higher-end retailers such as Whole Foods, Nordstrom,
Saks and Tiffany are starting to post strong numbers. I don’t know that this is necessarily a reaction to the
economy, but more likely a new demand. People may be tired of not spending; and they are starting to
replace items.
Jerry Sheldon
Economic Recovery Still An Issue Analyst
While there is some optimism, unfortunately there is more pessimism where the economic recovery is
concerned. The housing crisis is not going away any time soon – there continues to be a lot more supply
IHL Group
than demand. Banking woes could get better or worse. But in the meantime, Europe, Portugal, Greece In the field of retail technology,
and Spain are either in default or almost in default. And we have rising gas prices, which always has a Sheldon has researched and
significant impact on discretionary spending. Looking at the total picture, the key drivers for economic authored analyst reports on
price optimization, POS software
recovery don’t seem to be connected yet.
systems, printers, and workforce
management solutions. Sheldon
Sheldon offers the following advice and insights for retailers:
also provides the development
expertise and analytics that go
Develop Loyalty Using Smart Phones
into the IHL Retailer Technology
Anyone that has a smart phone is absolutely amazed by what they can do these days – they are
Data Service, Sophia, and the
revolutionizing communications as we know it. Even though Best Buy by any measure has one of the most Retail and CPG IT Spend models.
successful loyalty programs in retail, the merchant has joined shopkick, a service that rewards shoppers He has been quoted by The
just for entering a store. Target has joined as well. This type of smartphone service has specific potential Atlanta Journal Constitution,
for those that don’t have a successful loyalty program. Many loyalty programs become glorified revenue RIS News, Hospitality Upgrade,
reduction activities. Smart phone strategies like shopkick offer retailers an effective and inexpensive way to BusinessWeek, Retail Technology
Quarterly, and Investor’s Business
improve loyalty.
Daily, among others. In addition to
having a Bachelor of Mechanical
Join the Mobility Explosion
Engineering and a Masters Degree
Just like during the Internet boom, some companies are not sure how they are going to make money with
in Mechanical Engineering from
mobility, but they know they need a presence. Retailers are currently asking: What does mobility mean for Georgia Tech, Sheldon also has an
retail? Where should I focus my efforts, on POS, loyalty, or peer to peer? What does mobility in the store MBA from the University of Miami
mean? How does the mobility in store play into the store experience and what we want our store to be? with a specialty in Marketing and
Any mobile activity done without incorporating the overall store experience is a waste of time and money Marketing Research.
and will not offer the expected return on investment. The real challenge for retailers is the bar code readers
and mobile price check applications shoppers can acquire, then literally walk into the store, scan a product
and see if the store has best price or if it would be cheaper at Amazon or another local store. If retailers
don’t maintain the store experience, and if they miss incorporating mobile into the store experience then they risk turning the store into a museum –
a place where shoppers touch and explore but don’t buy.

Use Analytics to Augment Social & Mobile Efforts
Over last couple years, even with the poor economy, business intelligence (BI) and analytics have really held their own, showing close to double-digit
growth on a year-over-year basis. A lot of tier 1 and 2 retailers have strongly invested in analytics over last few years. These retailers are specifically
looking to discover how online perceptions drive sales. How can retailers better position themselves to understand and influence perception online
to drive in-store sales? How can product placement in social media drive sales on a particular item? How do tweets and Facebook roll into future
sales? Merchants also must look beyond social and mobile and discover all the drivers that influence sales today – such as weather and other
events.

Store Systems Investments Are On The Rise
One of our strong areas of focus at IHL is store systems. Solution providers over last couple years can attest to what an unfertile ground it’s been.
The economy has been unstable and general consumer sentiment hasn’t been positive. Retail organizations have been focused on maintaining the
status quo, keeping the doors open, maintaining damage control, and doing what they are required to do from a compliance standpoint. But recent
research is indicating that folks will be back buying again – investing in store systems – which is good news all around. We are expecting to see 3%
to 6% IT spend growth in store systems over the next few years – POS systems, checkout systems, workforce management, etc. There is good
news there for folks that have weathered the storm over the last few years.

Again it all plays back into the customer experience and creating efficiencies in the store environment. Retailers need to find new ways to interact
with customers across many different touchpoints – through kiosks, mobile technology, handheld devices, digital displays, etc. Instead of being a
museum the store should be a destination.


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Mobile Checklist For 2011: Strategies To Build And Manage Commerce

In the spirit of the impulse economy and impulse consumption, the following is a checklist for retailers to reference as a guide to
build out and manage a comprehensive commerce strategy:

9 Leverage existing consumer behavior:
How many conference panels have I attended where the line following, “This is the year of mobile,” is: “We just need to
educate the consumer”? It is pure hubris to say that you will “educate” the user who is far more advanced intuitively than a
pack of marauding mobile experts. Gary Schwartz
President & CEO
Shoppers are using their phones for mobile web and SMS seamlessly throughout their day in our stores and hotels, and at Impact Mobile
our events. Our humble goal is to just try to “keep up” and capture a small piece of their conversation. They are way ahead
of any marketing department. Schwartz has played a
leadership role in the mobile
9 Leverage the largest mobile install base: industry, founding Impact
Beware snake-oil salesmen. If education is not the word of the day, then try to forget anything that looks like a “shiny Mobile in 2002 and running
object” or “new-fangled solution” (even if there are hundreds of thousands of them on a mobile storefront somewhere). If the first cross-carrier short
code campaign in North
the consumer is using SMS and the mobile web as their main channels, then use them. When you think you should “walk”
America. In 2006, he founded
before you run, start at a crawl: the mobile committee for the
• Build your SMS opt-in community; Interactive Advertising Bureau
(IAB) and has worked to
• Buy some mobile advertising inventory; and publish literature such as the
• Use both to drive conversion solutions. Mobile Buyer’s Guide, helping
extend the digital buy into
Reach and frequency are the two words that you need to continually use in the same sentence as mobile advertising and mobile (for which he received
an IAB award for industry
marketing. Mobility starts with a crawl and it is usually simple list-building and mCRM.
excellence in 2009). In 2010,
Schwartz was elected Chair
9 Leverage existing promotions and CRM strategies:
of MEF North America with
IT will tell you this but as a reminder: mobile should be an extension of business-as-usual in the store, street or office. Do a remit to develop a mobile
not start reinventing the wheel. Curb your enthusiasm. Use mobile APIs (application programming interfaces) and tie them commerce practice to service
into your existing communication services and databases. Email, IVR, SMS and MMS should all be fluid two-way opt-in brands, retailers and content
channels. owners (for which he received
a MEF award for industry
9 What’s good for the goose needs to be good for the gander: excellence). Schwartz is the
Empower your “blueshirts” with the same mobile tools that the customer uses. Do not let the shopper have a more powerful recipient of the Asia and
tool to navigate your products than the sales clerk. Whether this means giving the Mercedes Benz shopper an iPad when Japan Foundation Fellowship
as well as the Macromedia
they enter the dealership or giving your clerk a smart phone in a scanning chasse, the two worlds need to be on parity.
People‘s Choice Award
and Dodge Foundation
9 Count Clicks to Commerce:
Award for Innovation. He
Keep it very, very simple. Seems like an also-ran statement but somewhere between concept and launch many mobile
authored the upcoming book
solution providers get struck by lightning and lose their simplicity gene. The mobile consumer is on the run: you need one Click2K’Ching: The Mobile
click2engage, one click2commerce, one click2bricks&mortar. Add one more step and you have lost your shopper. Shopper & The Impulse
Economy.
9 Mobile commerce makes for strange bedfellows:
Given the mobile cut across many verticals, note that mobile commerce connects partners that may never have been able to
work together in the traditional world. Airbonus is a good example of how the wireless carrier suddenly becomes the rebate
reward clearinghouse for the brand.

9 Suspend belief:
I recall walking into our wireless carrier partner’s office in 2001 and proposing a joke-of-the-day subscription service. The first joke was that consumers were
billed at $1.25 per joke. (The same joke that they could Google for free on the web.) Well the service was a huge success. Lesson: suspend common sense with
mobile services — the mobile consumer will opt-in on impulse and pay for convenience.

9 Make it an intimate, personal, one-to-one channel:
Cliché but if you forget and build your service incorrectly, you will dramatically lose your hard-earned opt-in. While SMS has a nearly 100% open-rate (buzz-to-
view time will amaze the most-jaded CMO), SMS also has an equally high opt-out rate (if the viewed message is not what the subscriber expected).

The channel is digital gold. The shopper is now including you alongside their personal messages. You need to make a commitment to be as targeted and
contextual as possible.


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Gary
Mobile Checklist For 2011: Strategies To Build And Manage Commerce Schwartz

9 Make it a “Trojan” channel:
Allow your consumer to reach you directly for product and service information. In a world where you know more about your brand than the in-store
salesperson, allow the consumer to surreptitiously search, surf and text that product directly and learn why they need to buy it NOW.

Just as Steve Madden allows the customer to text about her new shoes and engage at the moment of intent, every product can be the in-aisle expert guiding
the potential consumer reviews, insights and tips. Additionally, allow the shopper to use this channel to post reviews, insights and tips to you. Use it for pop-
surveys to gauge just-in-time feedback.

9 Go SO LO:
There is a buzz about the new mobile guys on the block. The so-called location based social media networks, or ``lo-so’’ networks. Be leery of these lo-so third
party applications that to drive acquisition and drive-to-aisle via GPS location. They incentivize “check-in” at the store, restaurant, club, hotel, etc.. Facebook
and other heavy weights maybe about to sustain reach and frequency but ultimately the brand or retailer should own this relationship long term.

9 Make it horizontal:
Mobile is a perfect medium to add to your existing media touch points. In a world where most of the media plan is bought as vertical PUSH media, mobile is
often PULL. It allows the consumer to SMS and get information, rewards, incentives off TV, radio, print and other non-interactive media. Do not manage your
commerce channel in isolation.

9 Security?
Encryption and payment standards make wireless an unwieldy commerce tool. With private data such as location, profile and banking information floating
through the cloud and over Near Field Communication (NFC) tags, there is sure to be multiple security abuses. Proceed with caution and in the company of
seasoned industry experts.

9 CMO = Chief Mobile Officer:
We have established that consumer engagement and “impulse” conversion are the hallmarks of mobile. But to evangelize this across the organization may
need more than one department or marketing manager pushing “horizontal integration” initiatives.

If the organization is committed to mobile it may want to consider establishing a new position that works agnostically across the organization, across silos to
drive mobile efforts. Microsoft and Weather.com have roles that work to make mobile an integrated success across all screens and across all departments.

9 Innovation
Remember that your brand is not necessarily a mobile brand. Your job is not to become known as a mobile innovator. Remember Gartner’s Hype Cycle? When
it comes to the question of what you need to be looking at trialing as mobile evolves I would recommend that you respond with the following sage advice:

“Next year run the solutions you probably should have run last year.”

9 Invest flexibly
Mobile maybe a moving target (but it is an unmistakable target). Bob Parker from IDC Retail Insights says that his clients have moved from “Should we invest in
mobile?” to “What do we spend money on in mobile?”. “They end up sinking their spend into option-based investment,” Parker said. They are investing flexibly
— basically hedging their mobile bets.”

9 Test It
No one expects the retailer or brand to attach ClipCams to the glasses of prospective mobile shopper to record and analyze their behavior, but the industry
does mandate focus groups that try to understand shopper general MO. Finger-to-the-wind mobile strategies will fail.

Apple CEO Steve Jobs was quoted in Fast Company magazine (obviously likening himself to Henry Ford): “If I’d have asked people what they wanted, they
would’ve said a faster horse.” Apple’s game-changing products did not come out of focus groups or quantitative research; they came from insights into human
behavior.

Yes, one shopper has little insight into his/her behavior but the brand/service
must run focus groups with shoppers to try to gain insight into their group
behavior.

9 Homo Mobilis
Understand that mobile is a necessary evil. It is a needed shopping tool that in
many ways distracts from the optimal shopping experience. The ideal mobile
shopping utility would not inhibit mobility. Future mobile device technology and
form factor may allow for the shopper to stand upright again.


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Holy Grail For 2011: Consistent Customer Experience

As retailers prepare for 2011, consistency and simplicity are key in delivering a winning customer experience. The
‘Holy Grail’ of customer experience is that the customer experiences the same level of service every time and
every way that they interact with a company, whether it is through their online store or their brick-and-mortar store,
whether they are buying something or returning something, whether they are asking a question or complaining
about something, whether they are served by John or Dana. These used to be called “moments of truth” where
the service promise was either realized or proved a false promise.

Great stores find a way to make sure that the experience is consistent. This requires a Store Ops checklist that Jim Dion
is simple to understand and execute. Complexity is the enemy of customer service yet thousands of companies Founder & President
continue to try to make the simple complex. If your team did not have input into your checklist and cannot
express it in less than 30 seconds, odds are you are not going to be very successful in delivering a great customer Dionco, Inc.
experience. Dion is a retail speaker and
trainer, retail consultant, and the
Customer Service Strategies author of Retail Selling Ain’t Brain
Customers do not demand as much as wish for a seamless experience across all channels. Great stores are Surgery, It’s Twice As Hard, Start
not afraid to give the power to the customer, power to do their own research both on line as well as in the store, and Run a Retail Business and The
power to comparison shop, power to learn what other customers think about a product and even power to self Complete Idiot’s Guide to Starting
and Running a Retail Store. He
select and check out if they choose to. I believe a great store is always set up for total self service and then layers
consults, trains and speaks on
personal service on top for those customers and times when it is needed. One of the companies that I really consumer trends, retail technology,
admire for this ability is Best Buy; they are well down the road to fully empowering the customer and other retailers selling and service, retail
would be well advised to study their approach and see what they can learn from them. merchandising and operations,
marketing and leadership. Dion has
Localized Assortments more than 30 years of progressive
There is an old saying that ‘all politics is local’ and I think this somewhat applies to retail as well. Companies like retail experience working at
Wal-Mart have been at the forefront of geographically localized assortments, and even Nordstrom for years has Sears, Levi Strauss and Gilmore
given its stores the ability to buy and build local assortments. In most categories assortments are still almost 90% Department Stores.
applicable across the entire country but the remaining 10% can be crucial for a retailer’s success. This is both a
technology issue (how to do it) as well as a philosophy issue (will we do it).

Managing Inventory Effectively
It is still amazing to me after all these years how many retailers I visit are out of stock on
core merchandise. If you really want to understand a retailer’s inventory problem, look
“In most categories assortments
to their markdown areas. If you consistently see the same colors, sizes, vendors in the are still almost 90% applicable
markdown areas you know that they are not learning from their mistakes. Despite the
number of price optimization programs that have been sold I have not seen many delivering
across the entire country but the
on the promise of optimizing inventory. You have to begin and end with the reality that “all remaining 10% can be crucial
inventory is evil” and treat it accordingly.
for a retailer’s success.”
Utilizing the Mobile Channel
Customers are now carrying more power in their phones than they had on their desktop 10 years ago. They want to use that power to make their lives
easier and retailers who figure that out are going to be way ahead of the pack. So smart money is being used to enable phone applications for information,
couponing, reviews and even self-checkout in the store. Mobile devices for staff are a double-edged sword as you would love to give your staff the same
ability as your customers to access information while at the same time making sure that they are not abusing the communication capabilities of the device
(i.e. texting friends all day at work).

Providing Value to Maximize Selling Techniques
If the universal race to the bottom on price and only price is going to stop it will have to be done by adding genuine value to the transaction. This value
can be delivered by retailers who use technology to give the customer a fantastic experience that includes smart suggestion selling techniques that deliver
complete solutions to customers. Complete solutions are not subject to price comparisons as they are made up of multiple products and often combined
with services. Technology has to deliver on something beyond just making it easy for consumers to beat us up on price.


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Retailers Must Focus On Business Challenges In 2011

2011 is now upon us and, given the dizzying emergence of new technologies, retailers are flat out confused.
Which shopper technology should retailers focus on implementing first? Mobile? Tablets? Digital signage? Shelf
edge interactive? Social? And how do they divvy up time and budgets?

The answer is simple: it’s not about the technology — it’s about the business challenges they can solve and which
will have the best ability to so.
Laura Davis-Taylor
At my firm, we monitor everything that’s hitting the retail tech stratosphere and do our best to clear the fog for Vice President, Global
retailers on how to best utilize them. There are certainly some technologies that we feel are critical for all retail Retail Strategy
brands to start embracing, but it’s easier to filter out what we need them to help us do — then pick the tool to Creative Realities
empower it. I don’t have a crystal ball, but I’ll hang my hat that we all need to focus very strongly on capitalizing on
the following tech-empowered trends for 2011: Davis-Taylor is an 18-year industry
expert with a diverse background

1 The convergence of mobile and in-store digital experiences. Now that the smart phone has in integrated marketing, brand
planning, in-store digital media
penetrated almost 25% of households, apps and handheld solutions are changing the retail shopping
and retail/environmental design.
experience as we know it. This topic alone could be a book, but the important thing to note is that when Creative Realities is a digital
a shopper can quickly compare prices, locate competitors, cash in on coupons, read product reviews, experience company that helps
receive ‘hyper relevant” incentives based on their history and more, loyalty changes quickly. No one know clients bridge the physical and
exactly how this will shake out and affect retailing financially, but we will only be successful if we watch, virtual worlds of digital marketing.
listen, understand and react to how people embrace mobile tools in the store and add to their value rather Davis-Taylor chairs the POPAI
than resisting them. Digital Signage Advocacy
Committee and is a board member

2 “Socially empowered” shopping experiences. Facebook now has product favorites and wish lists for of the Digital Signage Expo. She
also is the co-author of the book
anyone’s social network to see and respond to. Levi’s lets you post your personal jeans profile and share it
Lighting Up the Aisle. She can be
with friends. Dell Swarn and Groupon’s Grouponicus have created volume discounting for rallying up friends reached at LDT@cri.com.
and peers to buy products with you. What else should we as retailers be doing to capitalize on social
behaviors for retail? Talk to your customers; we promise that some powerful ideas will be uncovered quickly.

3 Personalized in-store communications. For years and years, the top shopper
request has been to build better bridges between the online experience and the in-
store experience. No surprise given that a highly personal and helpful online shopping
“When a shopper can
experience sets a precedent that makes a lackluster in-store experience more quickly compare prices,
disappointing. When shoppers like retail brands they opt in knowing that the retailer
will know their name and offer them products that they know they will like. Mobile and
locate competitors, cash in
digital screens have built the bridges to do so in-store…it’s time to use them! on coupons, read product
reviews, receive ‘hyper relevant”
4 The emergence — and impact — of digital marketplaces such as boutiques.com.
If you want to try a shopping experience that will either delight you to pieces or scare
you to death, go to Google’s boutiques.com, create a personal profile and check out
incentives based on their history
your personal boutique. The helpful personalization that it provides bar-none knocks and more, loyalty changes
anything we’ve seen out of the water and raises the bar immeasurably for the previous
point on personalization. By doing so, Google has made shopping with a retailer
quickly.”
irrelevant, for they scour the world and bring the products you will like best directly
to you — regardless of brand. That means brands will have to play ball with them and become beholden to their revenue shares or get on the same
playing field quickly.

5 Digitally-empowered associates. The average associate tenure is still woeful and, as products become more complex to sell, this is an issue. All of
the rich information a shopper is accessing online can be accessed and utilized for associates to ensure a better shopper engagement, yet very few
retailers have done anything with this yet. This year is the year to change that.


11 OUTLOOK GUIDE
20

Email Marketing Changes With The Times

Email marketing is constantly evolving, with social media, mobile and ISPs driving most of the change right now.
White has been chronicling the changes in email marketing practices and tactics in the retail industry for more
than four years as the author of the Retail Email Blog.

White shares five trends that he predicts will have a major impact on email marketing during 2011:

1 The plain text part of your multipart email will become more important thanks to Facebook
Messages, which displays the plain text part by default.
Chad White
Research Director
There’s a link to display the HTML part which it does very well — but that link is easily overlooked, which Responsys
means that it will likely see little use. Keep an eye on the percentage of your list that’s @facebook.com
White is an authority on email
addresses. Once it’s more than a couple of percentage points, it’s probably time to give some extra
marketing strategies and trends in
attention to the design and copywriting of the plain text part of your email.
the retail industry. He is the author
of the Retail Email Blog and dozens

2 Email design will be more heavily influenced by iPhones, Android-powered smart phones and
iPads.
of research reports. In addition to
working with Responsys clients,
he is an Email Insider columnist for
The adoption of smart mobile devices that can render HTML emails is skyrocketing and email has become and has been interviewed by the
the number-one activity on these devices. Because of those two trends, the distinction between emails New York Times, USA Today and
and mobile emails is disappearing. Marketers can no longer assume that their HTML emails will be read on other media outlets.
desktops and laptops.

That will have several effects on email design: (1) Email widths need to narrow. (Recommended width is
about 600 pixels); (2) Font sizes need to increase so they are more legible on small screens; and (3) The
space between links and the size of buttons needs to increase to allow fingers to hit links accurately. That also will mean navigation bars with fewer
links in them.

3 Share-with-your-network (SWYN) links will be used by a majority of marketers by the end of 2011. SWYN links allow subscribers to share
email content with their friends and family members on Facebook, Twitter and other social networks, increasing the reach of email messages.

As of August 2010, 26% of top online retailers used SWYN in their promotional emails, up from 12% in July 2009. By the end of 2011, the adoption of
SWYN links should break the 50% mark.

But some retailers already are moving on to more advanced email-social integration tactics, such as using email to spur Foursquare check-ins and
linking conversations on Facebook to products being promoted in an email.

4 Reactivation campaigns will become more important, thanks to ISPs giving weight to engagement metrics when determining whether to deliver
an email to the inbox or junk folder, or to block that email.

Most marketers still have no plan whatsoever in place to address inactives — the subscribers on their list who haven’t opened or clicked on email in
a long time. In some cases, inactives make up 50% or more of a marketer’s list, representing a significant threat to deliverability and a big distraction
from focusing on active subscribers.

Marketers must start by defining what ‘inactive’ is for them, then progress to segmentation tactics to message inactives differently, and culminate with
reactivation campaigns that give inactives a chance to reaffirm their interest or be dropped from the list.

5 The email marketing industry will continue to be divided on permission. The tension between the old-school opt-out email marketing industry
aligned with direct mail and the new-school permission email marketing industry aligned with mobile and social will continue to grow.

All signs point to New School Marketing winning out. From Gmail’s Priority Inbox and Facebook Messages to ISPs’ ongoing battle against unwanted
email from both legitimate marketers and spammers, it’s becoming increasingly critical to be anticipated and wanted in consumers’ inboxes —
particularly if you want to be in the part of the inbox that consumers have designated for important, must-read emails. Staying out of the junk folder is
yesterday’s battle.

The keys to future success in email marketing are having strong segmentation, dynamic content capabilities and triggered email programs to
significantly increase the relevancy of emails.


11 OUTLOOK GUIDE
20

Top 11 Supply Chain Best Practices For Retail Companies In 2011

“Uncertainty, agility and visibility are major priorities for all industries in 2011, but they are especially critical for
retail,” said Dan Avila, Partner at Tompkins Associates. “In order to overcome the unfamiliar challenges of the new
year, retail companies must plan for uncertainty. Agile processes and visibility throughout the supply chain are the
fundamental elements needed to help retailers plan for the unknown and achieve profitable growth.”

Avila’s firm, supply chain consultant Tompkins Associates, has released its Top 11 Priorities for Profitable Growth
in 2011 report, citing three key strategies retailers should focus on in the coming year: a renewed focus on
Dan Avila
supply chain best practices, a continued need to keep inventories in check and a push to reach more online
customers. Partner, Global Supply
Chain Services
The complete list of Tompkins’ Top 11 Priorities is below: Tompkins Associates

1 Retail Best Practices: Best practices can have significant impact on a retailer’s bottom line, as well as
their customer service. Leading practices in sourcing, transportation, inventory policies and distribution
will provide significant value and increase competitive advantage.
Tompkins Associates is a
provider of growth and business
strategy, global supply chain
services, distribution operations

2 Speed to Market: Retailers around the world are striving to reduce the amount of time between product consulting, information technology
design and placement on a store’s shelf. Competition, consumer taste and trends all increase need implementation, material handling
integration, and benchmarking and
for speed to market. To improve speed to market, design effective and efficient supply chains – from
best practices. Avila’s experience
planning through transportation to the destination. includes more than 20 years in
supply chain, including 12 years

3 Reduced Inventory Levels: Over the last two years, reduced inventory levels have become typical for
retailers. This has created historic investigation, dedication and execution efforts to reduce inventory at
the store and distribution center. Understanding how to improve overall inventory position and what tools
in supply chain consulting. Prior
to joining Tompkins, he served 11
years with United Parcel Service
are available (such as new software) is essential. as an Industrial Engineer and Hub
Operations Manager. Avila received

4 E-Commerce: Consumer sophistication, ease of access and retailer incentives have all boosted online
sales. From network analysis, DC optimization and improved shipping practices, retailers are evaluating
every angle while enhancing their direct-to-consumer service.
his B.S. in Operations Management
from California State Polytechnic
University, Pomona.

5 Uncertainty, Agility and Visibility: As the recession ended, a new norm has emerged: “Uncertainty it
certain.” It is best for retailers to accept this new norm and implement agile processes that allow them to
move forward. Realizing that they cannot control uncertainty and that they must respond to it can help achieve profitable growth. (Read more about
how companies are dealing with uncertainty in this executive briefing from the Tompkins Supply Chain Consortium.)

6 China as a Market: The retail market for fast-moving consumer goods (FMCG) and luxury items is growing. Retailers who previously only sourced
in China now want to enter the world’s fastest growing economy and sell in China. It is important for retailers to understand the market of Chinese
consumers and plan smart entry strategies.

7 Transportation Spend Optimization: Often in retail, inbound and outbound transportation is managed by multiple organizations and systems.
Integrated transportation planning and execution can increase utilization of private or dedicated assets, reduce errors and administration time in
freight audit and pay, and reduce the number of cameras.

8 Workforce Management: For retailers, a workforce management solution can improve scheduling, automate transmission of hours to payroll,
ensure compliance with labor rules and track information about employee utilization.

9 Regulatory Issues: Retailers need to proactively understand and address legislation changes. For example, the Food & Safety Act change, in
which food retailers are required to trace produce from the grower to the store shelf, will dramatically affect the supply chain. Disadvantage: added
cost. Advantages: reduced shrink and increased sales.

10 Reducing Retail Shrinkage: As companies reduced staff and increased workloads, visibility decreased and best practices were ignored.
Technology and better store surveillance equipment can be deployed to reduce internal theft, shoplifting, supplier fraud, accounting errors,
warehouse errors and falsified store returns.

11 Increased Consumer Intelligence: With the ability to instantly access product information, technology is changing consumers’ buying habits. As
retailers adapt to the consumer, they need to address the changes within their own supply chains. Organizational restructuring to eliminate silos,
operational process reviews, improved forecasting tools and strategic planning will all be necessities in the coming year.

Read more about the Top 11 Priorities for Profitable Growth in 2011 at the Tompkins Associates web site.


11 OUTLOOK GUIDE
20

Focus For 2011: Collective Intelligence

The continuing plague of unplanned markdowns and promotions attest to our industry’s continuing plague of high new
product introduction failure rates. Unplanned markdowns and promotions can consume 5% to 15% of gross margin
dollars. On the flip side, sales and margin dollars are lost whenever a hot non-replenishment item sells out before its
planned outdate.

“Newly launched products suffer from notoriously high failure rates, often reaching 50% or greater,” observed Susumu
Ogawa and Frank T. Piller in the MIT Sloan Management Review on the risk of new product development in retail. “The
Greg Girard
main culprit has been a faulty understanding of customer needs.”
Program Director,
Persistent unplanned markdowns draw attention to our industry’s limited success in adopting the customer-centric Merchandise Strategies
model we’ve been talking about for years now.
IDC Retail Insights
Collective Intelligence Provides Answers Girard is responsible for
Retailers that have applied collective intelligence to their private label businesses and merchandising processes report setting and delivering IDC’s
great success. David’s Bridal, for instance, found that its use of collective intelligence decreased bad decisions in authoritative perspective on how
merchandising by 20%. Wet Seal in teen fashion and Best Buy in consumer electronics are two other retailers that have retailers should use information
technologies to achieve key
found success using collective intelligence.
operational, tactical, and strategic
objectives in the sourcing, buying,
The point where the merchant has to pick a design pack or a vendor line and lay his or her money down is where planning, assortment, allocation,
collective intelligence comes in. replenishment and pricing of
merchandise. Girard launched the
In essence, collective intelligence sources insights from crowds of people. In The Wisdom of Crowds. James Surowiecki AMR Research Retail Advisory
demonstrates that any set of people with a modicum of familiarity with a topic can reliably and regularly make better Service and led it for several years.
estimates (i.e., the butchered weight of an ox) and better predictions (i.e., the outcome of a political race) on matters He was the first analyst to cover
related to the topic. technologies that have become
mainstays of today’s best practices
Business thought leaders promote collective intelligence as a key to future success. Several companies — such as the in retail; i.e., price and revenue
optimization, store execution and
BT Group, one of the world’s leading providers of communications solutions and services, Cisco Systems, and Fuji Xerox
task management, as well as
— support the MIT Sloan School of Management’s Center for Collective Intelligence through sponsorships. Additionally, advanced assortment planning,
McKinsey & Co. advocates collective intelligence as one of six Web 2.0 technologies companies adopt. multi-echelon replenishment and
constraint-based supply chain
But the retail industry needs to play catch-up. By my count, about 100 companies have used collective intelligence with planning.
great success. Regrettably few of them are in retail.

Fusing Social Media With Collective Intelligence
Social media is a made-to-order platform a retailer can adapt for collective intelligence. 2011 will see retailers use their social media assets beyond marketing in
product development from ideation onward and in merchandising for assortment planning and localization. Collective intelligence will emerge as critical sources of
predictive insights.

These initiatives will leverage social media assets as platforms for gathering consumer perspectives through casual games, social networks, various suggestion-voting
schemes, and consumer panels. Some but not all consumer participation will be incentive-based as many customers already engaged with strong retail brands will
participate “to make a difference” and have their voice heard.

Don’t Bank on Miracles
I have created a block diagram (see Figure below) to depict the retail process flow for any class of short-lifecycle merchandise from high-level merchandise financial
planning through assortment and store planning and ending in allocation. I draw the cloud depicting a miracle to bring attention to the fact that information technology
has informed and supported every step in this process save arguably the most crucial one — where the merchant selects items and lays his or her company’s money
on the line in an inventory position.

The miracle needs to happen there exactly because the buyer has a faulty understanding of customer needs. It’s tough to bank a business, and millions of dollars in
inventory, on what all too often comes down to at best an informed judgment call.


11 OUTLOOK GUIDE
20

2011: The Year Of Social Commerce - 3 Key Trends For Socially-Driven Success

As retailers increasingly strive to differentiate the customer experience from competitors, they are moving
beyond “engagement” with social media and are using it to accelerate cross-channel retail strategies.

The social channel is now firmly entrenched in the retail sphere. In a study soon to be released, Retail
TouchPoints has found that close to 75% of retailers surveyed currently have a social media strategy in
place.

The next frontier of social shopping demonstrates a golden opportunity for retail organizations to leverage
Amanda F. Batista
channels like Facebook and Twitter to optimize branding, customer communication and even revenue. The Associate Editor
RTP study confirms that Facebook and Twitter are by far the number one and two choices for retailers who Retail TouchPoints
want to reach out to consumers via social media.
Batista covers telling retail trends
When released, the RTP study also will reveal retailers’ processes for setting up social media strategies, the like in-store technologies, mobile
marketing, retail operation solutions
goals for retailers’ social media strategies, metrics for social media success and more.
and cross channel strategies.
Focused on providing research and
3 Social Trends To Watch
strategies to assist retailers’ social
Industry-leading retailers already are adopting innovative new social media solutions and strategies. The media efforts, Batista engages
following are three key trends that show strong potential for driving social media marketing success for in conversations on social media
retailers in 2011: through Retail TouchPoints (RTP)
podcasts. Batista has written

1 Facebook Storefronts: While retailers have been capitalizing on the thriving communities within
Facebook and Twitter for enhanced customer engagement, leading retailers including JCPenney,
Steve Madden and 1800Flowers.com have empowered Facebook users with the ability to browse
many articles and custom content
exploring how best in class retailers
are leveraging social media and
and purchase products without having to click through to traditional e-Commerce sites. What was how emerging platforms will impact
the retail industry.
once relegated as a community for shopper enthusiasts is now a place where commerce can thrive.
Usablenet, the provider powering JCPenney’s Facebook storefront, anticipates that 10% of its retailer
clientele will be using the application by the end of Q1 2011. Apparel and fashion retailers particularly,
have indicated increased interest in the new capability, according to Jason Taylor, VP Product Strategy, Usablenet. “Our clients want to be
where their customers are,” Taylor said. “They want to have all different views of products and information optimized for not only on Facebook,
but for various other channels.”

2 Social Media Analytics: According to November 2010 data from Forrester Research, in 2009, 78% of customer intelligence (CI) professionals
employed customer feedback or listening initiatives. Industry insiders say this trend will grow, and expect that more than 90% of CI
professionals will embrace listening initiatives in 2011. Enhancing their current market research efforts, leading retailers are monitoring online
and social conversation data to identify important topics and content categories that are relevant to customers in the context of their own online
community.

Empowering retailers to collect and archive information-rich conversation, social media analytics provide visibility into the trends and volume
of social media conversations and their impact on business results. As retailers look to provide competitive differentiators at every possible
touch point, social media feedback can help retailers compete by understanding the underlying sentiment of these conversations, by acting on
insights categorized by associated rules that assign sentiment to various topics.

3 Location-Based Engagement: In early 2010, Foursquare emerged as a platform for users to “check in” and share their whereabouts.
Other applications, like Gowala and Facebook Deals, followed suit to allow users to see available offers from nearby restaurants and retailers.
Retailers including American Eagle, Gap, H&M, Macy’s and Starbucks have leveraged these channels to provide discounts and special offers
for loyal customers. The most important concept for companies to revisit while developing a location app marketing plan is the importance of
incentive. The more tangible and intangible rewards offered to users, the more likely they will check in.

Although a study from Forrester Research found that people more actively respond to offers via SMS or mobile search, results also claim that
location app users are more likely to do mobile research about businesses through mobile phone with 33% for app users and 10% for non-app
users. A drastic 27% of app users are also more likely to read product and service ratings and reviews, compared to 4% of regular mobile users.

Mobile application shopkick has gained traction toward the end of 2010. Retailers like Target, Crate and Barrel, Best Buy and Sports Authority are
leveraging the platform to provide an in-store offering at the point of entry. The customer is alerted with a message and points for deals within the
location. The app can be used to scan items and earn more points and/or deals.

“Today, the location-based service (LBS) revolution is building a list of users who are effectively opting in to receive offers, and this is a powerful
opportunity,” said Gabe Zichermann, Author of the book Game-Based Marketing. “…Savvy retailers will think holistically, understanding what really
motivates their users and delivering the rewards (merchandise, access, experience, fun, cash) that best match their interests.”


Outlook guide 2011

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