Thursday Apr 09, 2015

Amazon Leading the Charge Again

Free shipping, personalized webpages, Kindle, Prime, Fresh...the list of Amazon innovations is long, and if you watch carefully you can sometimes see what's coming next.  For example, when Amazon suddenly reversed their stance on charging sales tax, it was pretty clear they were doing it to further their 2-day shipping goal.  In exchange for charging sales tax, they would open more local distribution centers so that shipping times could be reduced. 

More recently Amazon released Dash, the wand used to built a grocery list, and Echo, the Siri-like appliance that interprets voice commands including adding items to a shopping list.  And as I predicted last Fall, Amazon has now announced Dash Buttons, a way to easily reorder home products.  These last three innovations are clearly targeting home replenishment through IoT automation.  But wait, there's more.

The Dash Button is a battery-powered, WiFi-enabled button that can be located near where home products, like laundry detergent or paper plates, are used.  When the product-specific button is pressed, that item is added to your Amazon cart for easy reordering.  Its pretty obvious the cost of the buttons is being shared with CPG companies.

We can debate whether Dash Buttons are a good or bad idea, but in the end they are just the first stop on this home replenishment journey enabled by the Internet-of-Things. The underlying trade consumers are making is less choice for more convenience, and the main casualty will be the retailers that aren't Amazon.  The buttons and their future decedents (like reorder buttons built into appliances) are hard-coded to purchase from Amazon -- this should scare retailers.

Perhaps the solution is to create a standard communication protocol for these reorder opportunities that connects to a website where consumers can define their reorder rules.  For example, laundry detergent is always Tide from Kroger, toilet paper is best deal, and light bulbs are GE from Lowes.  At least this way consumers have options, and retailers can compete for business.

Wednesday Apr 01, 2015

Smart Growth Strategies, Part III: Leverage the Cloud to Grow Profitably

This is the final post of a 3-Part Series gearing up to our Thursday April 2, 2 PM EDT, Webinar with RSR Research, IBM and Oracle. Register here to join us!

Smart, sophisticated use of information technology is critical to retailers’ growth.

This is not news to savvy retailers, who have long recognized the linkage between the right technology and success in a highly competitive industry. In fact, the current question is less about the value of technology itself and more about how that technology is deployed and delivered.

For today’s technology to facilitate growth, costs (both initial and ongoing) absolutely need to be factored into the equation. Retailers are already using cloud applications to reduce the total cost of ownership (TOC) for standard business operations like email, HR and finance, but they’ve been slower to adopt cloud-based retail applications.

As the confidence in cloud deployments and data security increases we are seeing that resistance lessen and are pushing ahead full steam with the Oracle Retail Cloud, set to go live April 1, 2015. Key Oracle Retail applications, as well as a number of solutions added via last year’s MICROS acquisition, will be made available through cloud-based deployments. In addition to the attraction of lowering TCO by outsourcing key elements of their IT work to Oracle, retailers partnering with technology providers that have true domain expertise also gain the benefits of retail-specific systems for handling CRM, order management and order broker functions, loss prevention, brand compliance, and BI/analytics.

Moving key applications to the cloud facilitates growth in two important ways. In addition to reducing initial and ongoing costs associated with IT upgrades and expansions, cloud deployments also free up human resources. Retail IT staffs will find they’re spending less time checking backup systems, maintaining basic operating systems and, in general, “keeping the lights on.” They’ll have more time and resources to work on retail growth strategies like improving inventory visibility, tailoring and curating product assortments, and creating stronger omnichannel connections with customers.

To read more on smart growth for retailers, look at my earlier posts on growing by connecting with customers and using actionable data. Register here to join Brian Kilcourse and Paula Rosenblum of RSR Research, Cor Hoekstra, IBM Global Business Services and myself to discuss this topic in depth on a live webinar, Thursday April 2.

Tuesday Mar 31, 2015

The Next Steps for Subscription Commerce

I recall a few years back when flash sales were all the rage, probably peaking when Nordstrom acquired HauteLook. The model readily captures the excitement of discovery, and draws on the competitive nature of deal-hunters.  This cue-routine-reward formula has only one flaw -- as competition enters the market, differentiation dwindles.  Obviously flash sales are very different from traditional online retailing, but there isn't much difference between flash sale sites.  A typical customer is a member of several sites without much loyalty to any particular one.  Then the pressure to watch several sites and pounce on deals becomes exhausting.

Subscription commerce, from sites like Birchbox and Stitch Fix, maintain the excitement of discovery plus add the regularity of a subscription with a rewards program that garners loyalty.  You get a box of curated stuff every month and points awarded for purchases.  Over time the company develops a profile of you so that the box can be better curated for your tastes and style.  The model seems to be working well enough for Nordstrom to buy Trunk Club.

Now here are three next steps that retailers should consider:

1. Smarter Subscriptions

Just as the basics are replenished in a store, the same needs to happen in homes. This starts with the dry basics like toilet paper, cereal, and makeup.  Retailers should know a customer's preferences and consumption level, and help replenish products just-in-time. This takes historical data and forecasting, or possibly the use of in-home sensors (i.e. Internet of Things).  Nobody enjoys shopping for toothpaste, so just figure out when I need more and have it delivered before I run out.

2. Better Personalization

Customers are members of many segments, and its the intersection of those segments that makes them unique.  To cull out segment membership requires a mix of soliciting preferences (e.g. what heel height do you prefer?), collecting available psychographic data (what heel heights did you like on Facebook or pin on Pinterest?), and analyzing historical sales (what heel heights have you purchased?).  Even so, a healthy amount of A/B testing is required to stay on top of emerging trends as tastes tend to be dynamic.  Use the data to make the product selections more tailored and relevant.

3. Inclusive Store Experience

To date, subscription commerce has been a solely digital activity, but many customers still require more physical interaction.  For style-sensitive products like fashion, why not provide monthly, personalized suggestions with an opportunity to schedule a try-on appointment in the store?  Or perhaps an in-store tasting for the jelly-of-the-month club?  Driving customers to the store should increase basket size, and also provide customers with the flexibility to tweak their personalized product recommendation.

I'm watching the market to see if these ideas gain traction.  Use the comments to express your own opinions as well.

Friday Mar 27, 2015

Smart Growth Strategies, Part II: Make Big Data Actionable with Big Science

This is the second post in a 3-Part Series gearing up to our Thursday April 2, 2 PM EDT, Webinar with RSR Research, IBM and Oracle. Register here to join us!

Everyone acknowledges that retail growth is a business imperative. What’s less clear-cut are the most intelligent ways to achieve that growth. After all, a retailer could spend many millions to build new stores, with more devoted to advertising to woo new customers, but such growth is purchased at a high price.

A smarter and ultimately more cost-effective path to growth involves applying more rigorous science to everyday decision-making. Better, more customer-focused choices about merchandising and product assortments, allocation decisions, promotions and price markdowns do more than just improve operational efficiencies; they create the conditions necessary for growth.

“Retailers must implement BI and Analytical technologies to populate operational KPIs and management dashboards with usable and timely insights,” write RSR Research Managing Partners Brian Kilcourse and Paula Rosenblum in their Retail Growth Strategies benchmark report. “But modern technologies also enable retailers to move beyond a transactional mindset, and move toward being a ‘sense-and-respond’ business.”

Retailers have a head start in this area because they are well versed in big data, which is characterized by its variety, velocity and volume. Big data is nothing new to retailers, who routinely collect enormous amounts of transactional, product and customer data. However, without retail-specific algorithms to turn that data into actionable insight it’s useless – that’s where big science comes in.

Take a very basic example: category management. A grocer with 30 SKUs of yogurt (including various brands, sizes, and flavors) wants to open up shelf space in the always crowded refrigerated section. But which SKUs should go? Simply dropping the five slowest sellers could easily disappoint customers loyal to those brands. Experienced retailers know that seemingly unprofitable SKUs may be acting as traffic builders, drawing key shoppers to a highly profitable area of the store.

Understanding the science of demand transference can optimize this decision. Applying algorithms to extensive sales transaction history data, Oracle Retail applications can show that if the grocer drops the cherry flavored yogurt, an acceptable percentage of customers will simply transfer their demand to another flavor. However, if the grocer stops carrying six-pack cups of yogurt, an unacceptable number of shoppers will not purchase any yogurt product at all. These customers will not only leave the store disappointed; some will seek the product at a competing store.

Applications powered by big science allow retailers to optimize each of these thousands upon thousands of small (but significant) decisions, and to tailor each one to the assortment and customer profile of each store in the chain. When retailers can smarten up their everyday operations and do so at an enterprise-wide scale, they create a highly scientific formula for growth.

To read more on smart growth for retailers, look at my earlier post on growing by connecting with customers. Register here to join RSR Research Managing Partners Paula Rosenblum and Brian Kilcourse, Cor Hoekstra, IBM Global Business Services and myself to discuss retail growth strategies on a live webinar, Thursday April 2.

Wednesday Mar 25, 2015

How Leveraging the Cloud Can Unleash Retailers’ Business Agility

A Viewpoint from Jeff Warren, Vice President Solution Management, Oracle Retail 

Newly launched Oracle Retail Cloud Services combine reliability, security, cost savings and built-in interoperability

The ever-accelerating pace of change in retail puts pressure on everyone within the retail enterprise, but perhaps no one feels it more acutely than the CIO. Technology is rapidly reshaping key elements of the traditional shopping experience, from m-commerce and mobile payments to store-based fulfillment. IT departments are tasked with discovering, and bringing on line, these fast-emerging functionalities, while at the same time maintaining the existing architectures that support both basic corporate and retail-specific systems.

Given these competing demands – “keeping the lights on” while simultaneously serving as the engine for business agility – retail CIOs require cloud-based applications from a trusted technology partner with extensive industry expertise. Oracle is responding with a new offering of Oracle Retail Cloud Services applications for managing e-commerce; customer engagement; order management and order brokering; loss prevention; and brand compliance. (See product list below.)

Cloud-based applications, which in essence outsource many elements of IT management, maintenance, and upgrades, address retailers’ need for business agility. It’s increasingly common that when an IT organization can’t supply the new functionality that the business side seeks, a simple lack of time is cause. Cloud deployments free up IT resources for more strategic projects, and they also allow technology vendors to deliver innovation to retail users more quickly and with more frequent updates.

Keeping Costs in Check

The other benefits of cloud-based applications have been well documented, and are part of the reason so many businesses and individuals have been embracing cloud-based applications, data storage, and processing. They include:

● Lower initial hardware and software costs

● Lower ongoing costs, leading to a lower TCO (Total Cost of Ownership)

● Faster deployments and streamlined routes for patches and system upgrades

Other cloud features are particularly well suited to a retail environment. Scalability and easy access to additional processing power on an as-needed basis fit the needs of a highly seasonal business, one that must often deal with unexpected spikes (such as when a retailer seeks to promote a suddenly “hot” product) and dips.

Oracle’s subscription-based pricing for retail applications maximizes this benefit, bundling software, hardware, and upgrades into a predictable cost structure. In addition, by pricing IT services like a utility, retailers only pay for the processing power they require and actually use.

Mitigating Risk, Maximizing Security

Many retailers have hesitated with cloud deployments based on concerns about data security and overall reliability. This is understandable, given that retail data breaches are highly visible and can tarnish both individual companies and the entire industry. The ability to protect data and maintain the trust of their customers necessarily remains top-of-mind for retailers.

Oracle Retail Cloud Services benefit from the company’s worldclass culture of operational excellence. Oracle Data Centers are classified as Tier 4, the highest level of sophistication, providing 99.995% of uptime. This translates to less than 30 minutes of downtime during an entire calendar year – performance that very few (if any) retailers could match. Oracle Retail also has access to Oracle’s top-notch expertise in the cloud, security, and networking.

Security features inherent to Oracle technology solutions allow for transparent data encryption at the column level, allowing PII (Personally Identifiable Information) to be encrypted using keys that are held in a separate “wallet.” Backups are automatically encrypted, and keys can easily be changed on an as-needed basis. The Oracle Retail solutions leverage Oracle Identity Manager solutions to manage and enforce authentication and authorization for applications, and all elements are PCI-DSS certified.

Built-In Interoperability

Retailers will also benefit from the strategy behind Oracle Retail Cloud Services. These solutions are part of the retail industry group’s comprehensive Commerce Anywhere strategy, which encompasses technology ranging from financial applications to system hardware, so they are designed for maximum interoperability with both on-premise and cloud-based systems.

Oracle also offers flexibility in cloud deployment options. Because different retailers will be at different points in the cloud adoption curve, Managed Cloud services (also known as hosting) allow users to get more comfortable with the concept of outsourcing elements of their IT infrastructure. As the technology provides “wins” and the retailer’s culture adapts, the adoption path can ultimately lead to Oracle Infrastructure-as-a-Service and Platform-as-a-Service offerings. Oracle offers choices that retailers can leverage based on where they are in terms of their own maturity level and business needs.

Most importantly, Oracle Retail Cloud Services give CIOs the tools to keep up with today’s dizzying speed of change. Retailers can no longer wait one to two years to implement the next big thing; IT departments need to deliver meaningful value to the business in time frames that are measured in months. By outsourcing key day-to-day operational duties to cloud providers, IT departments are freed up to offer higher levels of strategic innovation and business agility.

Monday Mar 23, 2015

Smart Growth Strategies, Part I: Growth is Good. Smart Growth is Better

This is the first in a 3-Part Series gearing up to our Thursday April 2, 2 PM EDT, Webinar with RSR Research, IBM and Oracle. Register here to join us!

RSR Research recently published results from a study that included over 120 retailers worldwide focusing on growth strategies and the state of execution on key initiatives. There were a few surprises but in general retailers are compelled to grow and tend to look to a small handful of strategies year after year.

Although the need for growth is undeniable, it also raises a series of difficult questions: What specific avenues should retailers pursue for profitable growth? How, exactly, should they go about achieving it? How do they balance immediate payoffs with the need for sustainable investment that leads to long-term growth?

Success requires not just growth, but smart growth. Technology is at the center of any smart growth strategy in today’s retail environment, and I’ll be exploring three specific approaches in this and subsequent blog posts. They are:

1) Grow by Connecting Customer Interactions

2) Grow by Applying Big Science to Big Data

3) Grow Profitably by Adopting Technology

In their report, authors Brian Kilcourse and Paula Rosenblum express surprise that more retailers aren’t seeking growth in expanding markets around the globe. Despite fiercely competitive markets in the US and UK, retailers believe that there’s still plenty of growth opportunity close to home. One way to turn that belief into reality is via closer connections with customers, including knitting together their on- and offline interactions.

Of course, this isn’t a new concept: achieving a 360-degree view of each shopper, the better to meet his/her needs with the right product in the right place, at the right time and at the right price, has been a long-time goal for retailers. However, this basic growth strategy has gained particular urgency as shopping patterns fragment and customer touchpoints multiply.

Linking multiple touchpoints in a customer-centric manner is a smart approach to growth. For example, say an online shopper finds a piece of jewelry on your site, and likes it enough to place it on a “wish list.” You can bombard her with targeted ads all over the web, and you probably will, but perhaps this particular item is one that has a low online conversion rate. Perhaps it’s something that your customers need to touch or try on. By linking your online data with marketing push notifications, you can seize the opportunity the next time that shopper is within close proximity to your brick-and-mortar store by sending her a text with an image of the item and an invite to view it in person. To really unite the digital and store experiences, the store’s sales associate has the item ready to display to the shopper if she accepts the invitation and has curated additional items for consideration. Thus serving as a personal stylist versus a standard associate.

This level of cross channel coordination essentially enables retailers to get back to basics and build a one-to-one relationship with their customers – ultimately increasing loyalty, basket size, and lifetime value.

I’ll post more on this topic soon. Meanwhile, please register here to join RSR Research Managing Partners Paula Rosenblum and Brian Kilcourse, Cor Hoekstra, IBM Global Business Services and myself to discuss retail growth strategies on a live webinar, Thursday April 2.

Thursday Mar 12, 2015

Pure-play Retail is Doomed

I highly recommend watching NYU professor Scott Galloway discuss the Four Horsemen, but its the first 7 minutes that really interest me.  In that time Scott lays out a case for why pure-play retailers are doomed.  He states that retailers that focus only on e-commerce will either have to open stores or face going out of business.  (And I suppose there's a similar fate for traditional retailers that fail to adopt digital.)  He notes that retailers like Fab, Guilt, and Net-a-Porter are failures while retailers like Warby Parker, Rent-the-Runway, and Bonobos are thriving by opening stores.  "Stores are the new black in the world of e-commerce."

I was with Scott until he turned his attention to the big-kahuna of e-commerce, Amazon.  With $6.6B in transportation costs but only $3.1B in shipping fees collected, Scott claims Amazon's model is not sustainable (see his chart below).  Once the cheap capital dries up, Amazon will be forced to open stores in order to stay competitive.

I disagree.  Not because the logic is flawed, but rather because Amazon is not a typical retailer.  I believe they could be profitable if they wanted to but instead choose to continue investing in widening their competitive moat.  Not only is their retail business state-of-the-art, but their investments in AWS, tablets, payments, IoT, etc. are complementary and help to diversify the business (yes, they can do both).  Amazon is not your typical pure-play.

Scott rightly points out that the future of retail is represented by Macy's omni-channel model.  Using stores as showrooms, distribution centers, and customer service portals where the digital and physical are intertwined is the way forward.  Consumers will continue to shop at stores, but stores will also serve as pick-up points and shipping centers.  The graph below from Scott's presentation helps to show the momentum of click & collect, an important.aspect of this new model.

Traditional retailers that leverage their stores alongside digital can absolutely compete with the likes of Amazon.  Stores are not going away -- they are just transforming to serve customers in new ways.

Retail Innovation Labs

It seems to be all the rage for retailers to open an office in one of the tech cites and call it a lab.  In many cases they truly are labs where research is performed, but in others they are simply offices with an IT focus, typically where e-commerce development is done.  Either way, retailers are spending big bucks on office space and talent.  I think this trend was kicked off by Walmart's purchase of Kosmix, and was quickly followed Nordstrom Labs, who recently scaled back on their efforts.  Actually, the whole thing was probably started by Amazon and their Lab126 and A9 labs.

Anyway, I wanted a single spot where I could maintain a list of retail labs.  I've not interacted with all of these labs, so I don't know their true scope or size.  Links are provided where possible.

John Lewis
Marks & Spencer
Neiman Marcus
Shop Direct

If there's a lab I've missed, let me know in the comments.

Monday Mar 02, 2015

Payment Consolidation

What do you get when you add the following pairs?  Samsung+LoopPay, Google+Softcard, PayPal+Paydiant?  Answer: Viable ApplePay competitors.

First everyone and his brother had a mobile payment solution, then a select few rose to the top and got acquired.  The cycle goes like this: innovation, consolidation, standardization.  In this case, there's room for multiple standards, but not too many.  When the music stops, somebody will inevitably be left without a chair.  Today I feel like that's Samsung.

Google wants to play by established rules, but for the longest time telcos weren't letting them in the game.  Their recent agreement with the backers of Softcard now level's the playing field.  I think their ultimate strategy is the obvious one: advertising.  Being part of offline transactions gives them access to the customer's eyes and intentions.  Combine that with their existing online efforts and you have omni-channel marketing.

Approaching from a different angle, Apple is constantly looking for ways to remove the friction in everyday lives.  Their focus is on the user experience of payments, making sure its as smooth and simple as possible.  This either drives sales of existing devices or creates new markets.  With ApplyPay they'll sell more iPhones and create a new market by eventually charging fees (that consumers won't see directly).  They managed to dodge the telcos and get the backing of the banks, but that's no surprise given their track record in other industries. 

On the other hand, PayPal is more aligned with the merchants so their acquisition of the MCX technology-provider makes lots of sense. Their goal is to offer an alternative to swipe fees that satisfies both consumers and merchants.  Their work with Discover, beacons, and their Square-like fob are seeing some success with smaller retailers.  The ability to create orders and do person-to-person payments also sets them apart.

Then there's Samsung, the smartphone manufacturer.  LoopPay has very cool technology that transmits the card data to an existing magstripe reader through the air.  So for terminals that don't support NFC, the consumer can still put the phone within 3 inches of the magstripe terminal and send the card data.  That means that generally every existing merchant can already accept SamsungPay.  But there are two issues.  First, I'm not confident this system works 100% of the time.  And second, its predicated on dying, insecure technology.  Clearly Samsung isn't worried about either of those issues.

All these moves coupled with the occasional security breach makes this space very exciting.  Sit back and enjoy the ride.

Friday Feb 27, 2015

Is Mobile Over-hyped?

Don't get me wrong; I think mobile has and will continue to have a huge impact to the retail industry.  It's just that sometimes we get swept up by the shinny new object and neglect the basics.  Less than two years ago Marc Andreessen declared that stores were dead, yet they still typically represents more than 90% of a retailer's revenue.  Investments may not track contributions exactly, and that's understandable.  We just can't let the ratio get too out-of-sync.  Put another way, a meal consists of main dishes and side dishes.  If the chef neglects the side dishes the meal won't be ruined, but the converse is not true.

After the holidays I kept seeing stories about mobile traffic doubling or tripling, so retailers were upping their investments.  But we need to put that in perspective.  Even with huge growth, mobile is still not as big as PC traffic. MarketLive estimates PCs account for 56% of website traffic, and more importantly, 75% of the revenue.  See the chart at the left from e-Marketer, which also shows average order value from PCs is higher too.

I trust actual metrics much more than the surveys that ask questions like, "have you purchased something from your smartphone in the last six months?"  Few haven't, but often they're small, infrequent purchases so it tends to overweight the results.

And there's a big difference between browsing and buying.  As you can see below, shoppers often are doing research on their mobile devices then completing the purchase on their PC.  The PC has a definite advantage when it comes to conversion.  From my own experience, I rarely buy on my mobile phone but split purchases between my tablet and PC.  After all, today's tablet is basically as powerful as our PCs.

Infographic: Smartphone Shoppers Rarely Close the Deal | Statista
You will find more statistics at Statista

So back to the original question, is mobile over-hyped?  No, its hugely important to the retail business, and customers have come to expect top-notch experiences on their mobile devices.  But don't get distracted to the extent that the basics get underfunded.  The "main dishes" of retail are what continue to bring in the majority of sales.

Wednesday Feb 25, 2015

Eight Things Retailers Need to Know About EMV in the US

If you’ve received a new card from your bank in the last six months, it’s likely an EMV card with a chip.  Banks are issuing EMV cards, and retailers are installing EMV-capable terminals to accept those EMV cards.  Both are working toward the October 2015 deadline whereby the liability shift occurs.  Today, when a counterfeit card is used in a store, the bank takes the loss.  But after the liability shift, if the bank has issued an EMV card, but the retailer has not upgraded to an EMV terminal, then the retailer takes the loss resulting from counterfeit cards.

In that scenario the bank has done its part but the retailer hasn’t – so the retailer is the weakest link and takes on the risk.  If the retailer has an EMV terminal, but the card is not an EMV card, then the risk goes back to the bank since it’s the weakest link.

Most retailers understand the situation and have carefully weighed the risk versus the cost of upgrading terminals.  But there are many other nuances with the EMV migration.  Below are eight things every retailer should know:

1. If you’re not already testing EMV-capable terminals, you’re behind.  But you’re not alone as many retailers are questioning the cost of upgrading terminals.  The rollout in the UK and Canada took several years, so don’t expect anything special to happen on October 1 when the liability shift occurs.  It will be just like any other day.

2. The EMV specifications allow several methods for cardholder validation: online PIN, offline PIN, signature, and none (for low value transactions like vending machines).  The issuing bank decides which method to use when the card is programmed.  Then when the card is inserted into the terminal, the terminal will request a PIN or signature to verify the cardholder’s identity.

The card brands are recommending online PIN (where the PIN is sent to the issuer for verification, similar to debit transactions) instead of offline PIN (where the chip validates the PIN), but this decision will be transparent to both the cardholder and merchant.

In the US, a PIN is not mandated so many banks will configure their cards to request signatures.  Obviously this is not as secure and also places a burden on the retailers to retain signatures.  For this reason the NRF has been advocating “Chip and PIN” vs “Chip and Signature.”  Only Mexico and Brazil continue to use signatures.

3. The chip in the EMV cards is really aimed at preventing counterfeit cards, but it does nothing to help with other types of fraud.  Creating a counterfeit card, which is relatively easy with mag-stripe cards, is nearly impossible with chip cards.  The liability shift only impacts counterfeit cards; retailers are still not responsible for stolen card usage.

4. The EMV specification supports both contact and contactless (NFC) cards with some cards supporting both.  As mobile payments mature, it’s likely that contactless gains popularity so it’s probably worth the investment in terminals that support NFC.

5. New EMV cards will continue to have a mag-stripe for several years as terminals are upgraded.  If a consumer tries to swipe an EMV card in an EMV-capable terminal, the terminal will ask them to insert instead.  If the card’s chip or the chip reader malfunction, the consumer will be told to fall-back to mag-stripe.  And if the mag-stripe doesn’t work, merchants will call for a manual authorization.

6. When a card is inserted, it must be left until the transaction completes.  The chip is a tiny microprocessor that must communicate with the terminal, verifying each other’s authenticity.  Often consumers remove the card prematurely and the transaction must be restarted.  Or worse they forget to take the card with them when the transaction completes.  Cashiers will need to be diligent as consumers are educated.

7. Initially fraud won’t decrease.  Instead, card-present fraud in stores will migrate to card-not-present fraud online.  Thieves can still steal account numbers off the front of the cards or the cards’ mag-stripe, but they won’t be able to create counterfeit EMV cards.  That will drive them online where EMV doesn’t help (yet).

8.  Account numbers are not encrypted.  Each transaction gets a unique cryptogram that ensures the card is not counterfeit, but otherwise the account number and associated data travel the same path we’re used to.  Put another way, EMV cards and terminals would not have prevented recent thefts at large retailers.  But it does make it harder to use the stolen account numbers, because EMV cards can’t be counterfeited and used in stores.

Retailers still need to follow PCI recommendations to encrypt card numbers in transit and at rest, as well as protect point-of-sale systems from malware.

Infographic from

The worst mistake retailers can make is not knowing the facts about EMV.  Stay informed, and be prepared for the coming changes.

Tuesday Feb 10, 2015

Your Product, Your Problem

Today's posting comes from Paul Woodward, formerly with MICROS and now part of the Oracle Retail family. Paul has 20 years experience dealing with the supply chain with recent focus on brand compliance.

This month the New York attorney general accused GNC, Target, Walgreens, and Walmart of selling fraudulent herbal supplements whose contents did not match the labels.  Four out of five products did not contain ingredients matching the label and often instead contained cheap fillers, which could potentially harm those with allergies.

With the many scares over the past 12 months including the use of horse meat in Europe, the need for retailers to demonstrate due diligence in their collection, capture, and validation of supplier and product data is now fundamental to the protection of their brand and consumer trust.

As consumers, we continue to drive complexity into the supply chain -- we want greater ranges, experimental flavours, convenient ready to go products, choice of price points and an appreciation of our dietary needs. This creates a significant risk for the retailer as they balance bringing products to market quickly to meet the demand whilst ensuring thorough assessment of these ranges.

Just ten years ago consumers didn’t really care.  They didn’t ask for the information and they probably didn’t know they needed it. Now a third of consumers are allergic to something and 1 in 6 has a form of food related illness each year. This, along with our thirst for better living, healthier options, and the media's encouragement to know more, is firmly establishing that if it’s your label, it’s your product, and it’s your problem.

The average retailer is now handling over 10,000 active products from 2,000 production sites worldwide, and as the FDA and regulative requirements continually evolve and demand more transparency.  Retailers are faced with an ever increasing risk of failing to meet their brand promises.

Oracle Retail MICROS mycreations has been specifically developed to support this requirement. With over 20 years of proven capability in enabling the growth and protection of private label brands worldwide, the brand compliance cloud platform empowers retailers to collaborate with their supply chain in efficiently providing accurate and reliable data the consumer can trust.

Wednesday Feb 04, 2015

RetailROI Hall of Fame Class of 2015

I've posted several stories about the important work that the Retail Orphan Initiative does throughout the world.  I hope that perhaps you'll be inspired to offer your time, expertise, or even make a donation.  At the recent Super Saturday event, a few people were recognized for their contributions to ROI, and were awarded fantastic bobbleheads!  Below find the ROI Hall of Fame Class of 2015:

Scott Hagizadegan

Scott has traveled to 3 different ROI countries (Honduras, Dominican Republic, and Zambia) as well as led 2 different Trips to Zambia.  His company Ignisis has also donated numerous firewalls and monitors these for health and keeping the kids safe.

Jeff Roster

Jeff has made several trips to Honduras and is leading the trip to Congo.  He also has been instrumental in helping the microbusiness in Honduras, scheduling Life Skills webinars with business leaders for the kids at Plan Escalon.  

Randy Cucerzan

Randy is in charge of the RetailROI projects in Honduras. Starting with the original computer lab, Randy has now traveled to Honduras 9 times, leading 7 or 8 of those trips.  

John Geyerman

John has made several trips to Honduras, but most importantly he spearheaded the donations and installation of a cafeteria kitchen for a school of 600 children by getting suppliers and vendors involved.  A US quality cafeteria for total cost of about $65,000.  Not satisfied with just that, John had the Schlotzky's food safety course translated to Spanish and taught classes at Plan Escalon so kids would have certification.

Congratulations to all of the inductees! 

Tuesday Feb 03, 2015

Happy Birthday Amazon Prime

Has it been 10 years?  During that time Amazon's revenue has increased from $6.9B to $89.0B, and I'm guessing the unique program was a big part of that growth.  It's estimated there are $40M members, which would represent about 45% of Amazon's US customers.  I'm a member (although I only receive the free 2-day shipping because I share my brother's membership).  The student discount trains young shoppers to expect 2-day delivery, and I imagine the program is pretty sticky.  Unfortunately, Amazon is pretty secretive about its successful program.  Clearly they lose money on the actual shipping, but they seem to make it up on the increased number of purchases.

Now there's Prime Fresh for $299/year to deliver fresh groceries in limited cities.  Back in 2005 I could never have imagined how successful this program appears to be, and what's more impressive is the breadth of its offerings. Now Amazon is starting to open stores on college campuses, considering the purchase of existing Radio Shack stores, and there's always PrimeAir hanging out there waiting for regulators to set it free.  I wonder what's next?

Monday Feb 02, 2015

Payments in the Retail Industry

Last week I delivered a webinar for some of our Oracle Retail User Group (ORUG) members on payments in retail.  With NFC, EMV, and the many emerging payment solutions on the market, its important to keep current.  The deck is below, and a brief overview is after that.

Slide 2- The basics of credit card fees.  With a $100 purchase, the merchant actually gets $98 after fees taken by the issuing back, card network, and acquiring bank. Card fees are one of the most expensive costs for retailers.

Slide 3- The big emerging payment solutions are Google Wallet, PayPal, SoftCard, ApplePay, and MCX/CurrentC.  Google and Softcard is straightforward NFC with coupons and loyalty.  ApplePay is focused simply on payment.  PayPal is trying to extend online payments to the offline world, and MCX is trying minimize costs for retailers.

Slide 4- There are tons of smaller, emerging payment schemes including solutions from Final, Plastc, SimplyTapp, and Dwolla among others.

Slide 5- Krebs has a nice list of the types of fraud in the industry.  There are lots of opportunities for thieves.

Slide 6- Data breaches occur in many industries, not just retail.  Its a widespread problem.

Slide 7- Every retailer needs a Response Plan so they are prepared when a breach is discovered.

Slide 8- EMV is a step in the right direction, but it doesn't solve all the issues.  With base EMV, card numbers are still in the clear so memory scraper malware, the cause of several recent breaches, would still capture account numbers.  Also, retailers should be aware the when EMV is rolled out, fraud tends to migrate online.

Slide 9- There are three advanced solutions that help combat online fraud, but none of them is in widespread use due to additional friction and costs.

Slide 10- The liability shift is coming soon, so retailers need to understand what it entails.

Slide 11- The card issuer configures the card to determine the cardholder validation method, which can be online PIN, offline PIN, signature, and none.  Unfortunately, some banks are choosing signature, which isn't the most secure.

Slide 12- The process of using an EMV card is slightly different than magstripe, so lots of training will need required.

Slide 13- Some advice for retailers when they implement EMV.

Keep your eye on this space as it continues to change.


David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.

Industry Connect

Stay Connected


« August 2015