Insight-Driven Retailing Blog

Just about all retailers offer gift cards these days. They make shopping so much easier for people struggling to find the perfect gift. You can even get a $100,000 gift card from Four Season's if you're feeling particularly generous. (Let me know if you need my mailing address.) But gift cards have a dark side as well. Consumer Reports (the magazine) estimates that around 25% of gift cards purchased in 2007 have yet to be redeemed. That's a boon for retailers, but a bust for consumers.

With the down economy and over 6,000 announced store closings, you have to be extra vigilant. There's an email floating around that says the following:

I wanted to give everyone a heads up that if you tend to give gift cards around the holidays, you need to be careful that the cards will be honored after the holidays. Stores that are planning to close after Christmas are still selling the cards through the holidays even though the cards will be worthless January 1. There is no law preventing them from doing this. On the contrary, it is referred to as bankruptcy planning.

The email goes on to list retailers that are closing stores. While there is some truth to this email, its not a serious as one might think. Many retailers are closing particular stores, not closing shop. So if your local Gap closes, you might have to travel across town to spend your gift card.

When a retailer files for bankruptcy, things get a little more complicated. According to the California Department of Consumer Affairs, "a gift certificate or gift card sold by a seller that seeks bankruptcy protection may have no value. However, the holder of the certificate or card may have a claim against the bankruptcy estate." Retailers that file Chapter 11 (like Circuit City) are just re-organizing, so they usually continue to issue and redeem gift cards. However, if you're in possession of a gift card from a retailer that filed Chapter 7 (like Sharper Image), then you're a creditor just like any other and must "stand in line" to get paid, in which case you probably won't get full value.

The bigger issue for consumers isn't that a retail chain goes out of business. Its that consumers tend to not redeem the cards, leave residual value on the cards, or blow the cards on items they would not normally have purchased in the first place. Sometimes you just can't beat a check tucked in a sappy hallmark card.

If you caught my article in RIS News entitled Web 2.0 Shapes the Next Generation of Enterprise Retail Software, then you have some idea of Oracle Retail's direction for user interface design. But here's a little more detail for those that are interested.

The concepts popularized by the term "Web 2.0" have already changed the way people interact on the Web, and soon they will change the way retailers use software. Leveraging Web 2.0 concepts for the benefit of business is branded Enterprise 2.0, or E20 for short. Retailers should be thinking about how E20 concepts can improve productivity and thus their bottom line.

Using software has changed over the years starting with green screens, where users interacted with just a keyboard and there was a high learning curve, but power users could accomplish much. Then client-server applications appeared, and users had access to a rich, graphical experience that included a mouse. Then in the interest of universal access and easier maintenance, applications transitioned to browser-based interfaces at the expense of cut & paste, drag & drop, and fluid interactions.

But it’s still not enough. Users want the best features of all three approaches. They want the “power user shortcuts” of green screens, the graphically rich interactions of client-server, and the convenience and ubiquity of browsers.

In 2004, Peter Moreville described user experience in terms of seven traits arranged in a honeycomb. In 2007, Gene Smith used the same graphical treatment to describe the traits of social networks (like Facebook, Linkedin, and our own Oracle Mix).

These ground-breaking diagrams help shape the way software designers think about the user experience.

Applicability to Retail
The most obvious place where these concepts have a big impact is through web stores. By incorporating reviews, pictures, rankings, tags, and affinities to name a few, retailers are able to position their e-commerce site as a product research hub. Amazon has been the leader in this area, but sites like Circuit City and Sears offer similar experiences.

Some collaborative features at Amazon include allowing customers to upload their own photos of products, customer inspired lists (“Listmania”), and the daily blog. The “More Top Picks for You” carousel is a great way to display products, similar to flipping through albums on your iPhone.

And these concepts might also apply to mobile devices and kiosks, allowing customers already in the store to get the information they need. But how could Web 2.0 impact enterprise software for retail?

Data Integration
A “mashup” is the mixing of data from different sources. My favorite example of a mashup is Zillow, the real-estate site. They combine neighborhood maps with tax assessments, real-estate listings, and historical home sales in order to provide homeowners with an estimate for the value of their home. This could all be done in an algorithm behind the scenes, but by graphically depicting all this information together on a map, they provide homeowners the context necessary to understand the estimate and tweak it if necessary.

This is the direction retail software is heading as well. Data from different sources is being integrated together and graphically represented on dashboards to help merchants, planners, store management, and executives better understand the state of the business.

Collaboration Makes Life Easier
The typical merchant, planner, or supply chain specialist relies on others to provide raw data, suggestions, approvals, and confirmations. Too much time is spent waiting. Software should bring people together to more efficiently communicate by using the appropriate mode of communication. The phone, email, and instant messaging should all play a part, and each should be at the user’s fingertips. The concept of “presence” allows people to better communicate.

Mediums like blogs, wikis, tagging, twitter, syndication, and widgets should help users exchange information in a timelier manner thus reducing the time it takes to make good decisions.

Processes vs. Applications
Traditionally, retailers have considered functionality in terms of applications. If you’d like to create an item, you use the merchandising application; if you want to create a promotion, you use the pricing application. Applications are a convenient way to package software, but they are not the way people think. People, on the other hand, think about the series of steps they must follow in order to complete a task. This concept was captured in software as the “wizard” and was a popular method for configuring applications.

When retailers work, they think in steps. They want to do the “item induction” workflow or the “create promotion” workflow. These tasks likely involve several applications and include many people. Merchandising by itself doesn’t get work done, but doing the item induction workflow does.

Combining Concepts
The next generation of enterprise retail software is focused less on applications and more on integrated business processes with collaborative features that make it easier to benefit from the group’s expertise. Web 2.0 technologies facilitate the user experience across these workflows, and generally increase user productivity.

Oracle is bringing this approach to bear on the retail industry through products like Oracle Retail Workspace, Oracle Beehive, and its SOA-approach to application integration. The next-generation user experience honeycomb to the right represents the combined traits of the other two honeycombs, with “valuable” in the center. Everything about the user experience must continue to lend value to the overall business. In the end, that’s how the user experience must be measured.

I've had my iPhone for a while now, and my favorite non-Apple applications are Facebook, Evernote, and More Cowbell. But its not all fun and games. In a previous post I discussed some of the research we were doing with Twitter on the iPhone for store managers. I started wondering if retailers were doing anything with iPhone applications, so I did a little research.

The iPhone has applications that track shopping lists, find the best sales, and even calculate final price after discount and tax. But there are very few that come from retailers. I could only find four, which I'll review below. All are free, so try them out.

Amazon
The Mobile Amazon application basically gives you an iPhone view of a subset of the standard website. Once you've logged in, it recognizes you so it can make recommendations, show you your wishlist and shopping cart, and allow product searches. Your shopping cart is constant so you can manage it on your PC and your iPhone. The iPhone application also allows you to complete your purchase just like you would on a PC.

The more interesting feature is called "Remembers." It allows you to take pictures of things that you want to remember, principally future purchases. So if you see a sweater that you like but you don't want to buy it right away, snap a picture so you remember it later. The picture are accessible from your PC later, so you can do further research. Amazon will also try to match the picture to a product, but I just don't think that will be very accurate.

Update: I took a picture of Business Week magazine, and Amazon sent me an email stating they resolved my picture and offered me a subscription. They must be using their mechanical turk.

Target
The Target Snow Globe is very holiday specific. It suggests gifts, let's you keep a shopping list, and helps you find the closest Target store. For gift suggestions, you choose male or female, then use a slider to set the age range. With every shake of the iPhone, the snow globe reveals a new gift suggestion. I let my kids play with this while waiting for a table at a restaurant, and they thought it was great. The animation, sounds, and use of iPhone features are top-notch.

Sam's Club
The Gifter Stress Lifter, as its called, helps you find gifts by having you take a personality quiz for the each recipient on your list. The list can be constructed from your contact list, which is a great feature. You choose the relationship (e.g. wife, son, friend) and the age range, then it asks you 6 questions about the person, allowing you to select 3 pictures (out of 9) that best answer each question. Its very fast and intuitive. After the personality quiz, it recommends gifts.

I tried to find a gift for my wife. At the end of the quiz, it classified her as a Caregiver, Avid Reader, and Travel Fiend. The first two are spot-on, and the third would be true if we didn't have young kids. It then listed 20-30 items that matched her personality, most of which were applicable. After selecting an item to purchase, I was taken to the Sam's Club website (which was not optimized for the iPhone).

Gap
The Gap application offers videos of celebrities wearing Gap clothes singing holiday songs called "Merry Mixed Carols." I guess its entertaining, but a little too hip for me. Of course anything with Rain Wilson (aka Dwight Shrute from The Office) has to have some merit. The second option is "Mix Not Match" which allows you to mix different outfits on a picture of a man or woman. It makes good use of the "finger drag" to slide different sweaters, scarves, and hats onto the "manikin."
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I was impressed with this first crop of iPhone applications. I found them entertaining and useful. I think we'll be seeing more iPhone (and probably Blackberry) applications from retailers in the near future, and I'm looking forward to it.

The other day, just as I was leaving for a flight as it were, our washing machine died. Its about 10 years old so its not worth repairing, especially when we can get a more efficient front-loading model. So I did some research, found the best model in our price range, and found it on sale at Best Buy. But when my wife went to purchase it, they were out of stock. With three kids we could not go without a washer for three weeks so I asked my wife to try Home Depot and see if they would price match. It worked!

Price matching has gotten easier with the Web, and with smart phones it will get easier still. I recently read an interesting posting called Keep Your Barcode Scanner off My Merchandise over at AppsLab. The ShopSavvy mobile application discussed allows users to scan or enter the UPC of an item and get product information and price comparisons. Imagine scanning an item, showing the manager his competitors prices, and getting the price match. It couldn't be easier.

So I downloaded Snappr.Net, an iPhone application that does basically the same thing. Although I didn't have much luck with using the camera as barcode scanner, the rest of the application seemed to work well. Finally the in-store consumers may get to enjoy the rich information available on the Web. And of course retailers need to much more aware of their competition.

eMarketer published an interesting chart listing 30 major retailers that maintain a "fan page" on Facebook. My first thought was, why? Basically, Facebook users can sign-up to be a fan of actors/comedians, politicians, bands, movies/TV shows, and now products/businesses. For example, Michael Phelps has 1.7M fans, Homer Simpson has 1.4M fans, Silversun Pickups have 10K fans, and Obama has 3M fans.

Becoming a fan does a few things, most of which are benign. First, it announces to your friends your preferences. A person that's a fan of George Bush, the NRA, and Lynyrd Skynyrd kinda paints a picture. Second, it shows support for up-and-coming artists, politicians, causes, etc. And third, it provides a medium to interact. Its the third area that is of interest for retailers.

I decided to pick four trendy fashion companies and see what they're doing on their Facebook pages. (Incidentally, three of the four use Oracle Retail Point-of-Service!)

Abercrombie & Fitch has a pretty basic page with a few discussions and pictures, but nothing very engaging. The American Eagle Outfitters page looks a little more like an e-commerce site with advertising and discounts. Gap takes it up a notch for their fans by referencing their iPhone application, several videos and polls for voting on fashion trends. They offer a more interesting and engaging page so people are more likely to join discussions or leave a comment. The best of the four was Urban Outfitters (although Gap was really close). Their fans get gift ideas, pictures of new merchandise, a concert video, and occasional fan discount codes. This is, of course, quite subjective and I'll admit I'm probably not in the demographic they are targeting (sadly).

Retailers should be using social sites to enforce branding, solicit customer opinions, and market new products via fan-only discounts. But this takes investment, as content can get stale fast. Pages need to be engaging, leveraging more than what's available on the website. This is, after all, social so conversation needs to be encouraged.

I have two favorite stores, both of which are online, that I visit daily: Amazon and Newegg. Both provide excellent product information that includes customer reviews, photos of products, and related product suggestions. I recently discovered that both have customer forums that facilitate more free-form discussions about their products. This is another case of leveraging the internet community to help people make better buying decisions. Its also cost-effective to let customers help other customers rather than tie up support lines.

Amazon's Amapedia is really a community-based wiki with detailed product reviews. From their website:

Amapedia introduces a new way of organizing product information that we call “collaborative structured tagging”. Articles about products are tagged with terms that describe what the product is (“This Is A”) as well as their most important features (“Facts”). We believe that this way of organizing information will make it easy for you to write about the products that you like most. This structured information will also allow other community members to easily discover, filter, and compare related products and product features. Check out Real-time Strategy Games to get a sense of what collaborative structured tagging is about.

So far I haven't been too impressed with the site, but they are on the right track if they can generate more content. A better site is Newegg's Eggxpert, which has forums, chats, blogs, and newsletters. They are also on Twitter, though I don't find that very useful. When building a PC, its often good to get people's opinions on compatibility, so this resource hits the mark. From their website:

EggXpert.com is an extensive and easy-to-use online tech community designed specifically for PC & consumer electronics enthusiasts. Via our online forums, blogs and regular interactive events, community members can take part in tech discussion, political debate and network with other EggXpert members. Join our growing community today, and make EggXpert.com your place to meet with tech fans from around the world!

Another good site I found is BestBuy's Community. They have message boards, polls, podcasts, blogs, and twitters from executives. Reading some of the posts, it really feels like they are taking care of their customers. I noticed there were several comments bashing Best Buy, but they were untouched. That's they way it has to be -- keep the posting even if they cast the retailer in a bad light.

While researching computer cases on Newegg's site, I saw a customer comment that complained some parts were missing from the product he purchased. Immediately following was a response from the manufacturer (not Newegg) apologizing for the issue and asking them to call the help desk to arrange for a free shipment of parts. That's the right way to respond to customer complaint.

Any other community sites from retailers out there?

Last week both Fry's Electronics and Best Buy found leaks in their respective ships in the form of embezzlement. A VP at Fry's convinced the company they'd save money letting him handle vendors directly. He then proceeded to take $65M in kick-backs over the course of three years, spending much of it in Las Vegas casinos where he already had a reputation with police.

The Best Buy saga isn't much different. A couple owning a company called Chip Factory managed to underbid and overcharge Best Buy for computer parts by having the manager of vendor-relations in their pocket. Between 2003 and 2007 they allegedly netted at least $31M from their lucrative scheme.

I suppose its pretty easy for a buyer to overpay or overbuy and take a little something for his troubles. Audits are part of the answer, and job rotation is probably a good thing as well. Occasional background checks would have unearthed lavish lifestyles not in sync with pay-grades, but apparently none of these precautions were followed. I guess SOX doesn't plug all the holes.

Now's a good time to return that pink bunny suit (aka the Pink Nightmare) your aunt bought you so that you can instead buy the Red Ryder you've always wanted. Now is the time when the gifts gone wrong are made right.

I have a friend that bought iPod drumsticks in late November for Christmas. When his daughter finally opened the gift, they found that one of the sticks did not work. Unfortunately Buy.com's return policy is for 14 days, so he had to exchange many emails and phone calls to get them to relax the policy. In November the NRF said that 52% of surveyed retailers planned to relax their return policies for the holiday season. For example, Amazon.com modified their return policy:

Items sold by Amazon.com and shipped between November 1 and December 31, 2008, may be returned until January 31, 2009 for a full refund, subject to our other returns restrictions.

That's good customer service. (Speaking of good customer service, shortly after Christmas I received an email from Amazon.com thanking me for my holiday purchases and giving me a $3 credit to download music. I used the $3 and found an album I also wanted -- a win-win promotion.)

Creating a return policy that promotes good customer service but also prevents fraud is a tough proposition. I think the only good policy is one that's flexible. Retailers need policies that are dynamic, taking the customer, the product, and the situation into account. This used to be the domain of the store manager, but emotions and prejudice can get management into hot water quickly. A better approach is a scientific scoring mechanism based on policies and rules assessed in real-time.

Return authorization software that's directly connected to the checkout can reward the best customers by accepting returns out of policy and penalize those customers that habitually return products. Its all about mining the data to determine the right decision free of bias.