Friday Aug 31, 2012

Retail CEO Interviews

Businessweek's 2012 Interview Issue has interviews with three retail CEOs that are worth a quick read.  I copied some excerpts below, but please follow the links to the entire interviews.

Ron Johnson, CEO JCPenney

Take me through your merchandising.
One of the things I learned from Steve [Jobs]—Steve said three times in his life he had the chance to be part of the change of an interface. If you change the interface, you can dramatically change the entire experience of the product. For Steve, that was the mouse, the scroll wheel on the iPod, and then the [touch]screen. What we’re trying to do here is change the interface of retail. What we call that is the street, and you’re standing in the middle of it.

When you walk into a store today, you’re overwhelmed by merchandise. There is a narrow aisle. Typically, it’s filled with product on tables and you’re overwhelmed with the noise of signs and promotions. Especially in the age of the Internet, the idea of going to a very large store and having so much abundance is actually not very appealing. The first thing you find here is you’re inspired. I have used the mannequins. The street is actually this new navigation path for a retail store. So if you come in here—you’ll notice that these aisles are 14 feet wide. These are wider than Nordstrom’s (JWN).

Slide show of JCPenney store.

Walter Robb, co-CEO Whole Foods

What did you learn from the recent recession about selling groceries?
It was a lot of humble pie, because our sales experienced a drop that I have never seen in 32 years of retail. Customers left us in droves. We also learned that there were some very loyal customers who loved Whole Foods (WFM), people who said, “I like what you stand for. I like coming here. I like this experience.” That was very affirming. I think the realization was that we’ve got some customers, and we need to make sure we know who they are. So instead of chasing every customer out there, we started doing customer discussion groups. We were growing for growth’s sake, which is not a good strategy. We were chasing the rainbow. We cut the growth in half overnight and said, “All right, slow down. Let’s make sure we’re doing this better and more thoroughly and more thoughtfully.” This company is a mission-based company. This company started to change the world by bringing healthier food to the world. It’s not about the money, it’s about the impact, and this company is back on track as a result of those experiences.

Video of Whole Foods store tour.

Kay Krill, CEO Ann Taylor

You’ve worked in retail all your life. What drew you to it?
I graduated from college, and I did not know what I wanted to do. Macy’s (M) came to campus to interview for their training program, and I thought, “Let me give it a try.” I got the job and fell in love with the industry. The president of Macy’s at the time said, “If you don’t wake up every morning dying to go to work, then retailing is not for you; it has to be in your blood.” It was in my blood. I love the fact that every day is different. You can get to be creative one day, financial the next day, marketing the next. I love going to stores. I love talking to associates. I love talking to clients. There’s not a predictable day.

Thursday Aug 30, 2012

5 Ways to Determine Mobile Location

In my previous post, I mentioned the importance of determining the location of a consumer using their mobile phone.  Retailers can track anonymous mobile phones to determine traffic patterns both inside and outside their stores.  And with consumers' permission, retailers can send location-aware offers to mobile phones; for example, a coupon for cereal as you walk down that aisle.  When paying with Square, your location is matched with the transaction.  So there are lots of reasons for retailers to want to know the location of their customers.  But how is it done?

I thought I'd dive a little deeper on that topic and consider the approaches to determining location.

1. Tower Triangulation

By comparing the relative signal strength from multiple antenna towers, a general location of a phone can be roughly determined to an accuracy of 200-1000 meters.  The more towers involved, the more accurate the location.

2. GPS

Using Global Positioning Satellites is more accurate than using cell towers, but it takes longer to find the satellites, it uses more battery, and it won't well indoors.  For geo-fencing applications, like those provided by Placecast and Digby, cell towers are often used to determine if the consumer is nearing a "fence" then switches to GPS to determine the actual crossing of the fence.

3. WiFi Triangulation

WiFi triangulation is usually more accurate than using towers just because there are so many more WiFi access points (i.e. radios in routers) around. The position of each WiFi AP needs to be recorded in a database and used in the calculations, which is what Skyhook has been doing since 2008.  Another advantage to this method is that works well indoors, although it usually requires additional WiFi beacons to get the accuracy down to 5-10 meters.  Companies like ZuluTime, Aisle411, and PointInside have been perfecting this approach for retailers like Meijer, Walgreens, and HomeDepot.

Keep in mind that a mobile phone doesn't have to connect to the WiFi network in order for it to be located.  The WiFi radio in the phone only needs to be on.  Even when not connected, WiFi radios talk to each other to prepare for a possible connection.

4. Hybrid Approaches

Naturally the most accurate approach is to combine the approaches described above.  The more available data points, the greater the accuracy.  Companies like ShopKick like to add in acoustic triangulation using the phone's microphone, and NearBuy can use video analytics to increase accuracy.

5. Magnetic Fields

The latest approach, and this one is really new, takes a page from the animal kingdom.  As you've probably learned from guys like Marlin Perkins, some animals use the Earth's magnetic fields to navigate.  By recording magnetic variations within a store, then matching those readings with ones from a consumer's phone, location can be accurately determined.  At least that's the approach IndoorAtlas is taking, and the science seems to bear out.  It works well indoors, and doesn't require retailers to purchase any additional hardware.  Keep an eye on this one.

Wednesday Aug 29, 2012

History of Mobile Technology

Over the last ten years, mobile phones have gone through several incremental technology leaps that have added capabilities that impact the retail industry.  I've listed the six major ones below, along with their long-lasting impact.

1. Location

In the US, the FCC required mobile phones to implement E911 (emergency calls) by 2006, requiring the caller to be located to within 300 meters.  Back in 2000, GPS was opened up for civilian use, and by 2004 Qualcomm had figured out how to use GPS in mobile phones.  So mobile operators moved from cell tower triangulation to GPS, principally for E911.  But then lots of other uses became apparent, especially navigation.  The earliest mobile apps from retailers made it easy to find nearby stores, and companies are looking at ways to use WiFi triangulation inside stores.

2. Computer Vision

In 1997 Philippe Kahn shared a photo of his newborn using a mobile phone thus launching the popularity of instant visual communications.  Over the years the quality of the cameras got better, reaching the point where barcodes could be read around 2008.  That's when Occipital came on the scene with their Red Laser application, which was eventually acquired by eBay.  This opened up the ability for consumers to easily price compare inside stores.  Other interesting apps included Tesco's Wine Finder and Amazon's Price Checker, both allowing products to be identified by picture.

3. Augmented Reality

Once the mobile phone had GPS, a video camera, and compass functionality it was suddenly possible to overlay digital information on the screen in real-time.  Yelp, which was using GPS to find nearby merchants, created a backdoor called Monocle on the iPhone that showed nearby merchants overlayed on the video camera view.  Today AR apps are mostly used by retailers for marketing, like Moosejaw's app that undresses models in their catalog.

4. Geo-Fencing

So if we're able to track the location of a mobile phone, why not use that context to offer timely information?  My first experience with geo-fencing came courtesy of North Face, the outdoor enthusiast store. When a mobile phone enters a predetermined area, like near a store, a text message is sent to phone with an offer or useful information.  Of course retailers can geo-fence their competitors as well and find out which customers are aren't so loyal.

5. Digital Wallet

Mobile payments leverage different technologies such as NFC, QRCodes, bluetooth, and SMS to facilitate communication between the consumers's phone and the retailer's point-of-sale. The key here is the potential to consolidate loyalty cards, coupons, and bank cards into the mobile phone and enable faster checkout.  Nobody does this better than Starbucks today, but McDonald's and Duncan Donuts aren't far behind.  Google, Isis, Paypal, Square, and MCX are all vying for leadership in this area.  If NFC does finally take off, it will be leveraged by retailers in more places than just the POS.

6. Voice Response

Mobile Phones have had the ability to interpret simple voice commands for a while, but Google and Amazon were the first to use voice to allow searches for products.  Allowing searches by text, barcode, and voice makes it easy to comparison shop in the aisles.  Walmart even uses voice to build shopping lists, and if the Siri API is even opened we could see lots more innovation in this area.

Wednesday Aug 22, 2012

Payments, Payments Everywhere

In order to sell a new product, you have to solve a problem.  Emerging payment methods, by themselves, aren't really solving any problem.  What's the pain point? Credit and debit cards work just fine (although EMV certainly helps reduce fraud, and retailers would love lower rates). Yet over the last couple months there seems to be a new announcement in this area every week, and they get lots of attention.  As Rick Oglesby, a senior analyst with research firm Aite Group LLC., puts it, "This is not about payments -- it's about something bigger."

At stake is the relationship between the consumer and retailers, banks, CPG companies, telcos, and card brands.  Steve Ranger over at CNET put it best when he said, "Right now, the mobile payments market reminds me a lot of the old cartoon show Wacky Races."  I've described some of these solutions in past postings, but for a quick summary refer to Paula Rosemblum's recent posting.

Payments are table stakes.  The jewel is the digital wallet, which typically contains value-added services beyond the payment itself. For a consumer it might be nice to put all her cards "in" her mobile phone, but its when loyalty cards, coupons, and offers are added that things get interesting.  For a retailer, its all about two things: lowering fees and bettering the customer experience.

PayPal and Square are injecting much needed competition into the payment space, which in turn may lead to lower fees for retailers.  Retailers aren't looking for zero because they know that card-based transactions lower their cash handling cost and decrease checkout time.  There's value that's justifies reasonable fees, but I stress the word reasonable.

But its customer experience and that relationship I mentioned earlier that is the driving force here.  Mobile phones suddenly make it possible to reach consumers as they shop, much like retailers do online.  And thus they can be enticed with offers, coupons, and product information across channels. Payments are along for the ride.

So each time you read another announcement touting NFC or cloud-payments, look past the payment and consider the impact to customer experience.  That's what will separate the winners and losers.

Thursday Aug 09, 2012

Integrated Mobile Initiative Launch

Back in 2009, ARTS (a division of the NRF) began to collect information on the use of mobile devices in the retail industry.  A committee was assembled consisting of retailers, vendors, analysts, and standards organizations for the purpose of authoring the first retail-specific whitepaper addressing mobile marketing, mobile commerce, mobile payments, and mobile operations.  The tremendous reception of document led to a second version that followed in 2011.

As mobile continues to gain momentum in retail, the NRF has now established the Integrated Mobile Initiative (iMi), an effort aimed at providing crucial resources to retailers for all things mobile.  Today a portal (  was launched where all the NRF's information on mobile can be easily found.  This includes research, articles, whitepapers, and webinars.

Expanding upon the previous Mobile Blueprints, ARTS has published the Mobile Integration whitepaper on the new portal.  This document is available for download and explains how existing standards can be leveraged to integrate mobile applications into a retailer's existing business processes.

The upcoming ARTS User Conference, September 30 to October 2, is a gathering for experts to exchange ideas about mobile retailing and more.

Wednesday Aug 01, 2012

Amazon is Amazing

Regular readers know I'm a big fan of Bezos at Amazon.  In fact, I commented on Amazon over at RetailWire just today.  Well now Amazon has taken the next step, and launched Amazon Yesterday Shipping.  Take a look at the video below:

EMV on its way to the US

At a past job I recall slaving away in Mastercard's facility in Purchase, NY testing my implementation of a stored value system called Mondex when the project manager walked in and told me to stop working so hard.  I was completely confused as there were deadlines to meet, but a few days later Mastercard announced is was dumping Mondex in favor of something called EMV.  That was over 15 years ago and EMV has yet to take hold in the US -- but its coming soon.

EMV is simply a standard for payments made using smartcards, which look like standard credit cards but have integrated circuits embedded.  You can think of that chip as a tiny computer that can talk with the POS to perform encryption and authentication tasks to help prevent fraud.  Chip-and-PIN is the UK's implementation of EMV.

Last year Visa announced its intention to transition the US from mag-stripe to EMV cards with a target of October 2015.  Mastercard, Amercian Express, and Discover have also aligned to that target.  This means that retailers need to upgrade their POS hardware to be able to accept contact (insert the chip card into a read) and contactless (wave the card near a reader) cards.  Acquirers must have their software updated by April 2013.

To encourage retailers, the card brands are providing both a carrot and a stick.  When 75% of a retailer's transactions are chip based, it no longer has to annually perform the PCI certification (yeah!).  However, after the deadline acquirers and retailers will take on the liability of non-chip card transactions (boo!).

Contactless chip cards use a technology called NFC to communicate with the reader.  In this case the chip can be embedded in a card or it can also be inside a smartphone.  Therefore, by adopting EMV hardware retailers will also be ready to accept mobile payments like Google Wallet and Isis.  Those payment systems include the added benefit of combining loyalty cards and digital coupons alongside payment data.  We're still waiting to see if Apple includes NFC in its next generation iPhone, but their Passbook concept is a good sign.

Here's some free advice:

  • Discuss EMV with your acquirer (and payment switch vendor) right away so you understand their roadmap.
  • Plan to upgrade your existing payment terminals to meet EMV requirements ASAP.  All the major payment terminal vendors have solutions.  Consider if you need network-addressable terminals (ones connected to your LAN).
  • Consider also participating with Google and Isis in their NFC programs.  They have pilots running in several cities with aggressive expansion plans.
  • Work with your POS vendor to understand any changes required to integrate the new payment terminals, but also to support value-added features like loyalty and digital coupons.
  • Discuss lessons-learned with peers that have already gone through the EMV migration in Europe.

This transition away from mag-stripe cards will not only reduce fraud, but there's an opportunity to use the technology to improve shopping experiences.  There will be pain along the way, but we'll all benefit from this move in the long-run.


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