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03/02/2013

Retailers Face Endless Technology Possibilities

Retailers in 2012 relied on new technologies to grab consumers' attention, drive their purchase decisions and improve supply-chain logistics.

As a result, the market is awash in options for grocery and CPG companies that need to reach consumers, manage their social media presence, organize an increasingly disconnected workforce and keep supply and inventory moving quickly around the globe. "There are lots of possibilities at this point, and there is no one right answer," says Tim Hood, vice president and chief solution architect for retail at SAP AG.

Apps

The challenge for app developers and their retail clients is investing in apps that are more sophisticated and useful than the first- and second-generation offerings. As a growing number of companies have rushed to get in the game, more than 1.25 million apps are now available in the Apple Store and Android Marketplace. They include grocery list apps, such as GroceryiQ and Grocery Gadget, and individual retailer apps from Hy-Vee, Supervalu, Safeway, Meijer, Walmart and Walgreen Co.

Many retailer apps have attracted a following. A study by Flurry, a mobile app measurement platform, indicated the amount of time consumers spent with retailer apps jumped 525 percent in 2012, while overall app growth was 132 percent during the same year. Price comparison apps, such as RedLaser, experienced a 247 percent hike in consumer time spent, while purchase assistant apps achieved growth of 228 percent.

Growth in Time Spent per Shopping App Category
Source: Flurry Analytics, n = 1,863 apps, December 2011 - 2012

Retailer apps in 2012 became more sophisticated and useful to shoppers, with many using location-based technology to determine where the shopper is and suggest which store is closest or which aisle will have the desired product. For example, app provider Aisle411 lists store layouts to help shoppers find items, and Walmart's app displays aisle numbers for items.

Apps that let consumers redeem electronic coupons or compare prices became popular, too. As apps based on loyalty data and location proliferate, cutting through the clutter to boost adoption will become a greater challenge for retailers, Hood says.

"People find a new app and download it, but most of those apps end up getting deleted or getting put in a folder that disappears at some point," says Hood, who has between 50 and 100 apps downloaded on his own smartphone.

Those "sticky" apps that home in on a useful function will push competitors out of the market, says Brian Girouard, leader of global consumer products, retail and distribution for Capgemini.

"Success will not be measured by the app itself, but by the amount of revenue it generated for the organization or savings/utility it generated for the consumer," Girouard says. "It's about the ROI."

To serve consumers' need for convenience, a group of merchants including Walmart, Target, Publix Super Markets and CVS Caremark joined forces in 2012 to invest in the Merchant Customer Exchange, or MCX, and its universal app for retailers. The company's mobile digital wallet platform will accommodate merchants' custom offers and facilitate payment by phone through one platform.

Social Media

As with apps, companies have rushed in recent years to establish a presence on social media platforms. Most are still learning how to make the most of their Twitter feeds and Facebook pages. Hood compares the social media landscape to the Wild West, untamed with volumes of potentially valuable information available in raw form, he says.

"Some retailers are making early attempts at managing that," Hood says. "It is still not an exact science."

In the early days, managing social media generally involved hiring young staffers proficient in using Twitter and Facebook. Now developers are designing more sophisticated tools for analyzing the information provided by social media users. Programs using natural language processors can aggregate and analyze posts for retailers.


"Companies are swimming in data and most don't have a good road map of how to re-inject this data into the organization for competitive advantage."

– Brian Girouard,

Capgemini,

"Companies are swimming in data and most don't have a good road map of how to re-inject this data into the organization for competitive advantage," Girouard says. "It's one thing to create a mobile dashboard for senior executives, but the key to unlocking big value is understanding how to repurpose data to drive secondary and add-on sales, especially at the point of purchase, in the aisle."

Instagram became the latest social media platform for retailers to explore with the app's launch in 2012, and a study by Simply Measured, a Seattle-based analytics reporting firm, indicated more than half of Interbrand's Top 100 brands, including Coca-Cola, were using the photo-sharing social network in late 2012. Most brand photos on Instagram also were posted to Facebook, increasing their reach. Pinterest also caught on in 2012 and had attracted 63 percent of top brands by November 2012, Simply Measured reports. That compares with 98 percent usage rates for Facebook and Twitter.

Supply Chain

New technology also provided remote workers with access to everything from inventory control to human resources paperwork. By using cloud-based systems, companies can manage supply more efficiently. For instance, a buyer working on the ground in Asia can use a mobile application to enter data from a prospective supplier, compare terms with competitors, check prices and make an offer on the spot. "He can create a contract on the fly," Hood says.

Social Network Adoption Comparison

Source: Simply Measured
54% Instagram became the latest social media platform for retailers to explore with the app’s launch in 2012.

While managing a supply chain has become more complicated in recent years, advances in transportation management systems are allowing companies to address these challenges. These systems have become more sophisticated than ever at planning, executing and tracking supply transportation, allowing more real-time information for managers to make quick decisions that can save time and money, he says.

At the same time, advances in predictive analytics are helping companies forecast inventory needs for multiple products at a variety of stores. New stock optimization systems allow retailers to improve forecasting, which can help them cut back on out-of-stocks while also reducing excess inventory.

E-commerce

Online shopping in 2012 gained ground in the grocery industry, with players like Peapod, Amazon and Walmart investing in digital commerce. Market research firm IBISWorld forecasted online grocery shopping will increase at an annual rate of 9.5 percent to reach total sales of $9.4 billion by 2017.

As more grocery retailers explore e-commerce, they face the challenge of changing ingrained shopping patterns, Hood says, because 95 percent of retail purchases still are made in person at a store. Brick-and-mortar retailers who branch out into online sales often fulfill orders from store shelves. At Harris Teeter, consumers can shop online, then pick up their orders in express lanes after store clerks select and bag the items they've requested. But as sales increase, the logistics become problematic, Alec Newcomb, chief strategy officer of MyWebGrocer told Retail Leader in 2012. With workers stocking the shelves and consumers selecting items from shelves, most stores don't have room to accommodate staff members picking items to fill a large number of online orders.

As a result, large-scale e-commerce operations often move to a warehouse fulfillment model. While that requires a capital investment upfront, it can result in higher margins down the road because online sales generally require less overhead.

The Internet also is changing the way retailers communicate with consumers, and several major chains launched digital coupon programs in 2012. Publix Super Markets tested digital coupons at stores in Florida and Alabama in 2012 and is expanding the program this year. Using the service, shoppers select coupons from a Publix website and attach them to their account. Then shoppers redeem the coupons by entering their phone number at checkout. Also in 2012, Safeway launched Just for U, a digital savings program that provides customized discounts to shoppers who sign up online.

In the future, consumers are likely to expect more relevant offers. The parents of teenagers don't want offers for diapers, and cat owners don't appreciate dog food coupons. "Interactions and offers have to be relevant or you risk creating junk," Hood says.


"Interactions and offers have to be relevant or you risk creating junk."

–Tim Hood,

SAP AG.,

Consumers expect marketing and supply divisions to be on the same page and for the online store to complement the brick-and-mortar store. "They know the technology to make these things possible is out there, and they expect companies to use it," Hood says.

Wynne Everett is an editor at Zester Daily food and wine news website. Her editing and writing career at daily newspapers has included stints as a courthouse bureau reporter, education writer, city editor, business editor and food section contributor.