Back to the future

With more and more retailers circling the mobile and social media arenas and ultimately striving to become truly multi-channel, Scott Thompson asks: what does the future hold for the retail technology sector?

Rumours of the death of the High Street have been greatly exaggerated. Online may well be the future but the Bricks and Mortar store has a vital role to play in the cross channel landscape. Which means that, more than ever, retailers need technology which helps improve, for example, in-store and online experiences and customer loyalty and retention. Although significant progress has been made in recent times, it remains the case that most retailers are multiple channel, not cross channel. Yet retailing will become truly multi-channel in the second decade of the 21st century, with seamless integration of customer experience across all channels, according to Chris Webster, vice president of retail consulting and technology at Capgemini. He adds that technology will play an important role in underpinning this capability by ensuring the effective sharing of customer, product and order data. Mobile commerce and integration with social networks will also flourish in this decade, with an increase in the use of the mobile device for making payments, receiving personalised and location-specific offers and, of course, surfing the web.

Many of the technologies to breakthrough will indeed be around the mobile arena. Mobile web usage will outgrow desktop use and inevitably a large portion of that traffic will be in the retail space, believes Lehane Kellett, technology director at Paul Mason Consulting (PMC), adding that mobile users will look for tailored sites, personalisation, location-based information, in-store interaction, near-field comms with payments to Oyster cards or contactless cards built in to phones and special apps. “Special crossovers into social networking with access to and from retail sites. Not just ‘me too’ m-commerce but a High Street version of could be a possibility, perhaps retailer-specific sites. Information sent direct to the phone while the user is in the High Street - who’s got what and who is the cheapest,” he says.

Andrew McGregor, CEO at eCommera, believes that the future of retail will be dominated by three types of player: global superstores (e.g. Amazon, Walmart, Tesco) competing on range and price, brand owners selling direct to consumers, and niche specialists providing a multi-brand offer in categories where service is valued. All of these players will deliver seamlessly across all channels (online, in-store, mobile, social etc).

“As the multi-channel experience matures, we will see the role of each channel evolve - for example, the emergence of new store formats fulfilling an experiential role (e.g., Apple), or mobile delivering personalised offers and pricing when you are in a store,” says McGregor. “In terms of technologies, we believe that the Software as a Service (SaaS) model as a delivery method will become the technology delivery method of choice. In a multi-channel world retailers will need to manage high availability IT operations 24/7 across the different channels, which on a dedicated basis will be expensive. And as the technology in our view is not the source of competitive advantage, and the historical barriers to SaaS such as lack of control and weak SLA’s disappear, large retailers will embrace the cost, and flexibility benefits of a service without compromising on control.”

“Finally, multi-channel retailers will embrace data to help them drive and optimise their businesses. The technologies that enable retailers to harness the vast amount of data available to make better and faster decisions will be key to achieving success,” he concludes.

The in-store experience

The future of retail will involve a proliferation of technologies designed to improve store systems. “Contactless payments, for example, have already started to go mainstream, with retailers like The Co-operative, Boots and Little Chef all signing up. Contactless is starting to become more embedded in the consumer consciousness too,” says Capgemini’s Webster. “As part of this store system revolution, digital signage will fully integrate online promotions with in-store and to dynamically connect with customers in real-time. Self-service checkouts will also become adopted in the mass market, moving away from just the grocery sector to the wider industry.”

Elsewhere, social CRM will go further to allow customers to improve engagement with retailers or their favourite brands where and when they want. “Social shopping is pushing the boundaries of online retail further, allowing consumers to custom shopping lists and share them with friends, or encouraging groups of people to buy together at wholesale prices, and retailers like Dorothy Perkins, Starbucks and Gap are proving to be forward-thinking experimenters in this space. By creating their own network of shoppers online, retailers can not only increase revenue from advertising and click-throughs, but also learn more about their customers and increase brand loyalty,” says Webster.

Alongside possible breakthrough technologies, one that may implode is PoS, says PMC’s Kellett. He believes that, over the past few years, PoS software has become bloated. Vendors have, at retailers’ requests, put increasing amounts of functionality into packages. As a result, many retailers now have a solution they only use parts of or one that does too much, so when they want to make a change it’s difficult to extract one business area.

“What will happen over the next few years is the development of ‘leaner, meaner’ PoS with much better integration, applications, which can orchestrate business processes and data; and, much as I hate to use the term, with ‘best-of-breed’ applications,” says Kellett. “If, for instance, a retailer wants to remove customer ordering from their PoS system they could do that on their e-commerce platform but find that they need further integration with the PoS. Because the PoS is not designed to do that in isolation the business process becomes messy and complicated or fails.”

Part of the problem is that most PoS systems are coming up for their tenth birthdays. Of course, many have evolved over the years and some are a little younger but their basic architecture and design goes back many years. The drive for the future is to put together a ‘leaner, meaner’ transaction engine, make it easy to integrate, easy to customise and to create business process workflow. And there are obviously implications with the continued rise of online retailing.

“The rise of online demands a better way to integrate an online platform with in-store PoS, especially with a customer-centric view. For example, a customer might come into a store and ask to order a specific product. When asked when they want it delivered they may not know or may want to check at home. At the moment that’s where the transaction ends until the customer re-contacts the store or service centre. In future, the retailer could make the sale and offer the customer a ticket or number reference, or even better, tie up with their online presence, and say when you get home enter this number online and we will arrange delivery. Right now everyone has gone the other way - order online and collect in-store, which is of course the most common transaction, and perhaps not considered all the options.”

Don’t believe the hype

Features of this kind sometimes predict big things of technology and solutions that ultimately prove to be damp squibs. Such is the nature of the beast. Cloud computing, for instance, was the next big thing for what seemed like an eternity but then came the somewhat inevitable backlash, headed up by Oracle CEO Larry Ellison’s infamous tirade (“what the hell is cloud computing?”) It’s an area that continues to divide opinion.

“Most hyped is cloud computing. I predict in 10 years time less than 25 per cent of retailers’ systems (excluding web-facing) will be ‘in the cloud’ in the true sense. There’s still a blur in many people’s minds between having a system ‘hosted’ and having an on-demand, dynamic, scalable, resilient application or service for retail,” says PMC’s Kellett.

The past two years have, however, seen the cloud emerge as a credible platform for larger scale digital marketing or e-commerce solutions, according to Capgemini’s Webster. “The speed to develop sites, the flexibility to handle unpredictable volumes and advances in security have been major factors in adoption. We will see an increase in the number of cloud computing solutions to help retailers ‘outsource’ non-core offerings. Capgemini Immediate is one such service offering this,” he notes.

The jury is still out on certain other technologies, such as RFID and in-store kiosks, and it will be interesting to see how widespread these become. “While retailers in certain sectors have made use of kiosks in-store, I am yet to be convinced about how these will translate into wider retail use where they are not integrated into the store process or supporting a digital product, as they are in Argos, Jessops (digital photo printing) and HMV (digital downloading), for instance,” says Webster. “RFID is another trend which I struggle to see moving away from specialist or big ticket goods. We seem to be a long way away from item level tracking, simply because of the impracticalities of economy and scale that this would involve.”

History teaches us that the impact of technology is often overestimated in the short-term and underestimated in the long-term, observes eCommera’s McGregor. “You only need to look at the dotcom boom in 2000 and the revolution that Facebook and Google have had today to see that. Take all of the retailers that are exploiting Facebook or are building their own social networks on their sites, for example. The reality is that for most the impact this has on their business today is marginal. For one large High Street brand that pursued an aggressive social e-commerce strategy, the impact represents less than two per cent of their overall traffic. That said, it is clear that Facebook and others are transforming the way we communicate and interact. So while a social e-commerce strategy should not be top of their agenda (they should focus on getting the basics of multi-channel retail right), it is something that they should experiment with.”

The internet is driving change in the way we shop. But in the rapidly changing space that is multi-channel retail, nobody can lay claim to a clear holistic view of their operations. One thing’s for certain, however: technology will continue to play an important role in retailers’ attempts to innovate in the realms of mobile and social media and tie these in with the in-store experience. With IT budgets likely to open up as confidence returns to the sector in the wake of a brutal recession (see News section, p. 8 for more details), the future looks bright for tech vendors.

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