Thursday, April 30, 2009

JDA's FOCUS 2009 Conference: An Emphasis On "What's Next" Vs. "What's Now"

There was no ignoring the figurative 800-pound gorilla in the spacious Gaylord National Resort ballroom as JDA Software Group's top executives spoke at FOCUS 2009, JDA's annual global user conference (April 26 to 28, National Harbor, MD). The recessionary economy dealt JDA two blows in the past 10 days.

First, one week prior to the conference, the company announced that its 2009 first quarter net income had dropped 50% from the same quarter in 2008 ($2.64 million vs. $5.35 million). Second, FOCUS 2009 attendance fell by up to one half from 2008 levels, according to several estimates, likely because of retailers' tightened travel budgets.

JDA's leaders, however, chose not to dwell on the grim economic conditions that are afflicting their company and the broader retail market today. Instead, they focused on the opportunities that lie ahead, and how JDA hopes to help retailers take advantage of them — quickly. "For our customers, we need to provide real results real fast," COO Chris Koziol said.

In his State of the Company Address, CEO Hamish Brewer challenged retailers to ask themselves: "What's the next step to unlock value in my company?" JDA's own answer to that question is an enhanced focus on its Managed Services for retailers, "our number one initiative for 2009," according to Brewer. JDA's Managed Services encompasses four specific areas: hardware and software administration, advanced customer support, optimization services, and help desk/transition services. It can help retailers improve supply chain efficiencies, strengthen IT operations, and integrate customer service offerings.

During the numerous breakout sessions I attended later in the conference, JDA software users provided retailers with real-world case studies demonstrating how JDA products can be used unlock the value Brewer referred to in his opening remarks. Brooks Brothers, for example, implemented JDA Allocation software to help its analysts drill down to size-level data within each of the company's 111 U.S. retail stores.

Using the new software application, Brooks Brothers analysts were able to allocate sizes based on each store's size-selling tendencies, as well as leverage assortment plans by style, color, or SKU. Plus, "implementation was on schedule and under budget," said Jon Westergreen, Brooks Brothers director of allocation, replenishment, and store planning.

Retailers are looking for those kinds of good-news stories these days, ones that end with increased operational efficiencies and the words "on schedule and under budget." And JDA certainly hopes that next year's FOCUS conference, to be held at Caesars Palace in Las Vegas, will have more retailers on hand to tell — and hear — such stories.

Tuesday, April 28, 2009

Are You Really Listening To Your Customers?

When I left a Cosi restaurant the other day, I carried more than just a T.B.M. sandwich out the door. The receipt in my hand would save me $2 off my next meal — and give me the chance to win $1,000 or an iPod — if I filled out an online customer survey. In contrast, when I visited a Subway restaurant a few days later, my receipt noted only the company’s Web site address and the words “for more info.” Can you guess which receipt inspired me to go online and which one ended up in the trash?

It’s clear which of these two companies is trying harder to engage its customers. And even though this high-noon showdown took place between two restaurant chains, it nonetheless raises a critical question for retailers: Do you effectively leverage online surveys to learn more about your customers and their needs? If not, don’t be surprised if your competitors do — or if they use that information to better target your customers.

On our website, I write about how retailers are increasingly turning to online surveys powered by enterprise feedback management (EFM) software and services. EFM systems make it easier for retailers to manage the online survey process, and enable them to receive continuous, real-time, location-level feedback from their customers.

The analysis can then be used to measure customer satisfaction levels, gauge interest in new products, and predict buying trends, among other tangible benefits. “Retailers are trying to get faster trend-spotting information and quicker response time to customers,” said Jim Martin, founder and CEO of Inquisite, an EFM software and service provider, recently told me.

Are you asking your customers about their experiences with your company?

Wednesday, April 22, 2009

Coming Soon: Sales Tax On Web Purchases?

If state legislatures get their way, a long-discussed online sales tax may soon come to fruition, much to the dismay of online retailers. A bill is expected to be introduced in Congress as early as Monday that would propose new tax rules for Internet and mail order sales, according to ZDNet.
Internet shoppers who buy from out-of-state companies aren’t always required to pay sales tax at the time of purchase, under current law. They are, however, required to pay their own state’s sales tax rate, known as a “use tax,” on such transactions when they file their state income taxes.

States legislatures are fully aware that consumers aren’t paying those taxes every April 15, according to BusinessWeek, which is why the National Conference of State Legislatures, among others, is pushing for the new law. Adding fuel to the fire, the Nelson A. Rockefeller Institute of Government just issued a report saying the 6.1% decline in 2008 state and local sales taxes was the greatest in the 50 years for which quarterly data is available, and that the opening months of 2009 indicate an overall decline of more than 12%.

Online retailers point to the complexity of state laws as a major hurdle if the new legislation is passed. Leading the counter-charge is the Streamlined Sales Tax Project, which is attempting to bring order to convoluted tax laws.

The National Retail Federation (NRF) supports the idea of an Internet sales tax. eBay, L.L. Bean, and Overstock.com, among others, don’t. I’m with the NRF on this one.

Not having to charge tax on their products, online retailers hold a significant advantage over brick-and-mortar retailers who must. Earlier efforts to pass an online sales tax failed because of the aforementioned state tax law complexities, something that can certainly be remedied if the state legislatures and federal government get their act together. Granted, that’s a very big if.

But the concept of Internet sales tax is more than fair. Online retailers shouldn’t be able to blame state legislatures for the free ride they’ve been getting at the expense of other retailers.

Friday, April 17, 2009

Here Today, Gone Tomorrow?

Do you ever wonder which of the technologies you use regularly today will be obsolete in 10 years?

Like phone booths and record albums, the stationary checkout scanner could soon become a thing of the past, thanks to mobile technology developed by Modiv Media. The company’s Modiv Shopper system powers Stop & Shop’s Scan It! handheld scanners, which allow customers to scan and bag their items while shopping and then pay at a self-service station once they’re finished.

The system also allows Stop & Shop to simultaneously deliver coupons and promotions to consumers based on their individual shopping history. Other retailers using Modiv Media include Giant Eagle, Giant Food, Ukrop's Super Markets, and Roche Bros.

The Hartford Courant reports that while the Modiv system isn’t cheap — somewhere in the neighborhood of $100,000 — it can pay big dividends for stores. Shoppers who use the system reportedly spend an average of 10% more during each visit and also increase the frequency of their visits by 10%.

This is yet another example of the growing trend toward retail mobility that I’m hearing about from vendors and retailers. Keith Schroer, VP of sales and marketing for PartnerTech, a POS systems and kiosk manufacturer, told me that he thinks mobility represents “the future of retail” and that his company plans to release three new mobile units for retailers within the next 60 days. “We’re betting on mobility being the next generation,” he said.

Mobile technology still has a few hurdles to clear before it gains mainstream retail acceptance, but that day may not be far off. “As we see more companies become more efficient at writing mobile computer code, we’ll see more retailers embrace mobility,” Schroer said.

Anyone want to buy a corded desktop phone?

Tuesday, April 14, 2009

Loyal To A Fault

I was discussing customer loyalty programs with a retail technology products manager for a large outlet on the West Coast the other day, and he made a surprising comment. I was noting how successful loyalty card programs can be, but he didn’t find that to be the case, at least not in his part of the country.

“Loyalty programs here in the Pacific Northwest, and on the West Coast in general, haven’t been as big as elsewhere in the U.S. A lot of our retailers have decided not to go that route,” he said. “I don’t know why that is. If anything, our retailers have been almost anti-card program. Customers get deals in our stores whether they carry our card or not, and that’s worked well for us.”

Are loyalty programs only popular in certain regions of the country, or are some retailers just failing to realize the full potential of such programs? A survey released today by the Aberdeen Group indicates the latter — that loyalty programs suffer not because of regional variances, but because retailers don’t effectively implement their programs (“Cutting Edge Customer Loyalty: Retail Best Practices for Acquiring, Retaining, and Re-engaging Customers,” April 2009).

The report notes that “customer loyalty programs and similar relationship marketing initiatives are some of the most critical factors that are impacting the retailer’s sales and customer retention performance in current difficult market conditions. However, significant loyalty-related improvements are required in retail as almost half (47%) of Laggard retailers and more than a third (35%) of Industry Average retailers indicate ‘no change in performance’ from their loyalty program.” Reasons cited for retailer failure in loyalty programs include inadequate CRM data capture, a lack of customer analytics-based offers, and poor loyalty process execution, particularly at the POS.

What’s your opinion? Does geography or implementation have a more significant impact on the success of a loyalty card program? Post your comments, and I’ll follow up with more on the topic in the future.

Thursday, April 9, 2009

Q1’s PCI Compliance Lesson

Retailers reeled from a devastating 1-2 punch during the first quarter of 2009: an unprecedented data breach and the worsening of a historic economic recession. I cover these topics extensively in a story on our site, but here are a few highlights worth noting about cardholder data (CHD) and PCI compliance.

The Heartland Payments Systems data breach has put PCI compliance and cardholder data security in a state of flux, leading to a congressional subcommittee hearing and calls for changes to PCI compliance regulations. The fact is, most retailers would prefer not to store cardholder data on their POS systems but must under PCI DSS rules.

An alternative approach that’s gaining momentum — as a result of recent breaches and what’s seen as the overly complex nature of PCI compliance — is tokenization. This process collects and stores sensitive CHD in a centrally secure and PCI-compliant repository, assigns a token to reference each transaction, and replaces the CHD in all points of entry and point of sale payment applications with this token.

“Tokenization is not a magic bullet, but it is helpful as a way to centralize card (and other confidential) data,” PCI Knowledge Base founder Dave Taylor e-mailed me. “The technology has the same type of impact as outsourcing card processing — simply reducing the volume of data with fraud potential and the number of places it’s stored. There is a ‘central point of failure’ risk, but the overall impact is a reduction in risk and compliance costs.” Taylor says there are roughly six companies involved in tokenization now, with that number to double possibly by the end of summer.

Shift4, a developer of enterprise payment solutions, offers a tokenization process that goes one step farther. 4Go SecureSuite sits in front of the POS application and produces a token that is passed to the POS system. As a result, the POS system doesn’t handle real card information, only tokens, which cannot be decrypted and are therefore useless to anyone outside of the system.

“The next wave of security discussions will be about new solutions that intercept the data before it enters the POS system,” Shift4 VP of marketing Randy Carr noted in an e-mail to me. “If the data is not there, it can’t be stolen.”

Friday, April 3, 2009

What Your Customers Aren't Telling You

If you can answer the following two questions about your customer, you could drastically change your store dynamic within the next few years. First, do you understand exactly how much they love using their cell phones? Second, do you know how willing many of them are to experiment with new technology, especially if it involves their cell phones?

The answers to those questions — your customers are hooked on their cell phones and love to find new uses for them — are reinforced by several recent news announcements regarding payment by cell phone. On March 30, for instance, Blaze Mobile and MasterCard Worldwide introduced the Blaze Mobile MasterCard PayPass mobile payment sticker. The small sticker can be attached to a cell phone to enable “Tap & Go” purchases at over 141,000 locations.

In the United States, the PayPass sticker represents little more than a transitional step toward a future of more advanced, widely accepted mobile payment opportunities using Near Field Communication (NFC) technology. NFC is a short-range wireless connectivity technology that allows contactless interaction between devices. (For more information about NFC, check out the NFC Forum’s site.) Japan, among other Asian and European countries, is already using NFC to enable cell phones to keep track of purchases, and to load phones with tickets, reward points, or electronic cash.

“Having a payment capability on the phone is a great way for consumers to see the benefit of having a payment capability in the phone,” noted Art Kranzley, chief emerging technology officer, MasterCard Worldwide, in a press release.

Not everyone loves Blaze Mobile’s sticker approach (click here for one dissenting opinion), and there are still substantial barriers to complete acceptance of cell phone payments in general. According to USA TODAY’s Edward Baig ("Buy gas, gadgets with a cellphone"), wireless carriers need to invest in the technology, retailer acceptance needs to grow, and merchants need to upgrade their infrastructure before mobile commerce can proliferate.

Arguing about this early step in the mobile commerce parade, however, misses the bigger picture. The technology may not be perfect yet, but the procession marches on. Within a few years, cell phone payment will likely be as common as cell phones themselves.

For example, Ticketmaster Entertainment Inc. and Tickets.com announced last week that they are launching services to let customers buy tickets directly from their mobile phones. As the Wall Street Journal notes, “The push for mobile ticketing comes as customers shift to smart phones, whose faster networks and larger screens come closer to the feel of ordering via computer.”

“Mobile can greatly aid traditional retailers, helping them better engage, support, and sell to their customers," Jim Levinger, VP of business development for mobile shopping application provider Store Xperience, told me in an e-mail. "But there are also big risks for retailers who don’t have a mobile strategy or offerings, because new information and shopping options are extending into their stores on customers' cell phones that retailers don’t control. They better learn how to engage their customers before someone else does.”

Mobile commerce continues its march toward a more universal retail reality. Now is the time to start analyzing how your retail operation can capitalize on the trend, so when cell phone payments become ubiquitous, you won’t be stuck on the sidewalk watching the parade go by.

Thursday, April 2, 2009

Think Locally

Last fall, Devon Wolfe and his colleagues at Pitney Bowes Business Insight (PBBI) foresaw a bleak holiday season, as others did. They took the next step, though, and tried to anticipate how to help retailers afterwards. “We knew that retailers would be looking for what to do in early 2009, that they’d want to know what’s going to happen next,” Wolfe told me in a recent phone call.

So the company created PBBI MarketPulse, a market analysis software tool that uses current macroeconomic data to predict retail store performance. MarketPulse reports can help retailers improve the operational efficiency of their store network by analyzing key economic indicators for specific markets or trade areas. Those indicators include population change, housing turnover, income growth, household wealth, and unemployment estimates, among others. (For more details, click here.)

“Our mission is to give people actionable answers,” said Wolfe, PBBI managing director of Americas strategy and predictive analytics for retail, restaurant, and real estate. “If retailers can be sharper on right-sizing their inventory with business intelligence, and they can move that gross margin by even a fraction of a percentage point, the potential gain across a retail chain is huge.”

Wolfe recalls trying to help retailers forecast during the 2000-01 economic slump, “but obviously it was nothing like this,” he said. (Click here for a related article on retail strategies during a difficult economy.) Until now, “there wasn’t this type of analysis to do because everybody was gung-ho with expansion. Now there’s a very intense need to study markets at a local level and really understand which markets make sense and which ones don’t.”

With retailers now beginning to place their holiday orders (click here for an article on 2009 holiday shopping orders), what does Wolfe think lies ahead? “It looks like things should continue to get worse throughout the rest of the year,” he told me.

Is it 2010 yet?