Innovation and Improvement

Retailers have fared better in delivering this sort of experience online, yet in-person shopping currently accounts for well over 90 percent of retail spending in the U.S., according to Jupiter Research, and may never dip below 85 percent of total retail spending.

What’s needed, says LRA Worldwide Inc. Vice President Zach Conen, are ways to apply the mass customization concepts championed by Amazon.com and eBay, for example, on the actual shopping floor.

“How can an actual brick-and-mortar storefront operation personalize the experience for customers who walk through the door?” Conen asks. “Part of it has to do with technology—CRM on steroids—but part of it is providing tools and training to the front line to be able to quickly assess and recognize the needs, moods and predispositions of the customer.”

Those areas—particularly technology and customer service—represent focal points in the innovations consulting firms are helping their retail clients develop.

Cracks in Brick-and-Mortar Satisfaction The 2007 “Shoppers at Risk: Retail Dissatisfaction” study, conducted jointly by University of Pennsylvania’s Wharton School of Business and The Verde Group via interviews with 1,000 brick-and-mortar North American shoppers, delivers numerous insights on retail shopper dissatisfaction, including the following: Lonely Shoppers Flee: Loyalty risk is greatest when shoppers cannot find a sales associate. That’s troubling because 33 percent of survey respondents who experienced a problem could not find a sales associate when they needed help. What’s more, the study indicates that 6 percent of all brick-and-mortar shoppers are lost as a result of ineffective sales associate availability. Category Killers Get Creamed: Of the five types of physical retail stores covered in the study—“category killers” (e.g., The Home Depot, Best Buy, Barnes & Noble), department stores, mass merchandisers, specialty stores and specialty apparel—survey respondents reported more problems at category killers than any other store type. Bad News Travels Far: One-third of shoppers who experience a problem will tell four other people about those problems. Additionally, half of survey respondents indicate that they chose not to visit a particular store in the past 12 months because they heard about someone else’s negative experience at the store. Shoppers Take it Personally: News about a negative retail-store experience tends to travel further when it involves a negative encounter with a sales associate. The survey finds that customers are 50 percent more likely to broadcast shopping problems when those issues involve sales associates rather than a store-related glitch, such as a disorganized layout. —E.K.

Accenture currently helps clients “integrate a holistic view of the customer across multiple channels into business processes in an automatic, seamless manner,” explains Janet Hoffman, managing director of the firm’s North American retail practice. Accenture’s technology labs created a promotion planning software prototype that leverages two years of loyalty data to plan and deliver personalized promotional offers to individual customers during their shopping visit online or in a store.

Accenture also helps retail clients leverage social networking sites to market and sell retail offerings. And the firm is working with retail clients to provide customers access to personalized information “closer to the moment of need that is not cost prohibitive and is scalable,” Hoffman adds. The firm recently showcased an in-store video intelligence device that automatically changes the content on digital screens to tailor messages in real-time to the audience. The screen’s content can change based on the age, ethnic and gender makeup of who’s shopping the store at a particular moment, Hoffman reports.

Other firms are integrating similarly gee-whiz technology into their retail client’s brick-and-mortar environments. IBM’s “AnyPlace Kiosks” feature large screens and wireless capabilities that allow shoppers to connect to the Internet via kiosks inside stores, airports, hotels and other locations. IBM’s vice president for retail Systems, Jill Puleri, says the tool increases consumers’ options by blending online experiences with the in-person experience.

Another component of Big Blue’s global consumer services initiative “is a new self checkout system that can be easily customized and quickly implemented by retailers,” says Puleri. “Retailers have found that their experts in their stores make a difference” in terms of higher sales. And, she says, the kiosks are a way that retailers can share their experts across numerous locations. For example, a shopper preparing for a Colorado adventure might walk into the rock-climbing department of a national outdoors sports retailer in Austin, Texas, and tap the kiosk to connect with the rock climbing expert in the chain’s Boulder, Colo., store for advice on harnesses and the scoop on multi-pitch climbing routes in Boulder Canyon.

“A lot of people say [kiosks and similar technology] eliminates human interaction,” Puleri says. “[But] it actually can be used to increase human interaction while greatly enhancing the shopping experience.”

Not all retail innovation comes in the bells-and-whistles variety, however. Amin Shahidi, director of EDS’ global retail industry practice, says that many trends in the marketplace “are less about the introduction of ground-breaking technologies and more about targeting and addressing the right business issues with the appropriate solution and driving an effective implementation.”

Recent EDS research, for example, suggests that barcodes—which were until recently presumed past their sell-by date due to the advent of radio frequency identification (RFID) technology, which has not advanced as smoothly as predicted (Wal-Mart dropped its mandate to suppliers)—may yet play a key role in supermarket innovation: 30 percent of U.K. supermarket shoppers want to access nutritional, product sourcing and environmental information about their food from their shopping carts.

“Overall,” Shahidi adds, “retailers are re-inventing and re-energizing their time-tested and proven strategies. Simply put, they’re improving on what already works.”

Consulting Service Implications

The implications of increasingly powerful customers, and retailers’ desire to harness that power through experiences, places new demands on the consulting firms that serve the industry. These firms can expect to address the following challenges in light of current conditions on the retail industry:

Developing increasingly holistic solutions. As the disappointing state of shopper satisfaction illustrates, effective customer experiences require far more than new technology. It also requires smooth integration to back-end systems and better approaches to training and managing front-line employees. Highly engaged customers depend on a genuine connection between the customer and the company, Conen says, “not the ‘fake nice’ phenomenon that grips too many customer service or customer experience initiatives. If you can envision the story behind your offering and how that should make the consumer feel… and then hire and train folks who are able to execute and create the connection through genuine interaction, you probably will have wired an ‘experience’ that the competition will be unable to match.”

Extending expertise beyond retail. Serving retail clients increasingly requires expertise earned outside the industry. Puleri says IBM, whose self-service kiosks will be familiar to anyone who flies JetBlue Airways, takes what it has learned in the travel and transportation, hospitality and healthcare sectors and applies those insights to retail—and vice versa. “It’s not just about retail anymore,” she asserts. Her competitors agree. “The focus on accessing the consumer through new technologies creates opportunities for consultants to bring forward insights from other industries that may prove very valuable to clients,” Hoffman says.

Forging alliances. Consulting firms emphasize the importance of alliances in their retail offerings. IBM’s self-service alliance program helps clients access, investigate and assemble self-service solutions from dozens of self-service integrators, original equipment manufacturers, hardware enclosure firms and independent software vendors around the world. “The ability to bring together alliances through the reach of the consulting organization will get increasingly important and become a differentiator in driving value to clients,” Hoffman says. She believes that collaboration between different retailers will also increase, and she cites examples such as Office Depot using Best Buy’s Geek Squad service to provide its office supply customers with technical services and Staples’ store-within-a-store concept at Stop-&-Shop stores.

While major facets of the Wal-Mart era appear to be on the wane, it remains to be seen which retailers will lead the industry in the future. But, there are some signs that a familiar face may not be throwing in the towel just yet: another innovative example of the industry’s growing affinity for alliances involves Wal-Mart and social networking site Facebook. The two companies joined forces earlier in the school year on a program in which college-bound Facebook users who joined a Wal-Mart group received recommendations on furnishing their dorm rooms—with Wal-Mart items—in a way that clicks with their new roommates’ personal style.

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