Wednesday Jun 19, 2013

Accelerating Innovation for Retailers

In today's competitive marketplace, a big differentiator can be technology, where advancements in social and mobile have opened new possibilities for increasing employee efficiency and enhancing the customer experience.  Therefore, its critical that retailers establish their own labs to track and adopt new ideas.  There are several different approaches, and there's no single right way to establish a lab.  Below I describe the most common three approaches I've seen from retailers.

1. Organic approach.  Some retailers, like Tesco and Wet Seal, fan the flames of innovation within their four walls. Using internal employees, they design and implement novel ideas that improve the business.  Tesco has continued to innovate with their website, loyalty program, and their mobile apps, much of which is developed internally.  Wet Seal, one of the early pioneers of social retailing, learns through trial-and-error, finding out which ideas have legs.  This approach requires strong leadership, vision, and a willingness to fail so its not for every company.

2. Kickstart with acquisitions.  In April of 2011 Walmart acquired Kosmix, a social startup, and formed @WalmartLabs.  This was followed by a string of additional acquisitions in the social and cloud spaces.  HomeDepot followed a similar path by acquiring BlackLocus to form a lab then following with the acquisition of Red Beacon.  This can be an effective approach if there's no existing culture of innovation, so buying the start-up mentality can form a basis for building a lab.


3. Partner collaboration.  The danger retailers face is losing focus on their core competency -- retailing.  Running a start-up within a large company can be costly, reliant on key individuals, and sometimes a distraction to the core business.  An alternative approach is to partner with technology companies so as to share some of the burden.  Lowes, for example, invites technology partners to present innovative ideas then chooses a few projects for collaboration.  This can be an excellent way to stay on the leading edge of innovation without some of the mentioned downsides.

CEOs know that standing still is not an option, so look for more retailers to establish labs where technology innovation can be better cultivated.


Thursday Jan 10, 2013

Innovation Labs

Once of the trends I noticed in 2012 was retailers creating standalone innovation labs.  The ones that seem to get the most notice are Walmart Lab and Nordstrom Lab, most likely because they have great marketing to compliment their inventions.  Two new labs that just started are the Staples Velocity Lab and the Home Depot Lab.  In most cases these labs stem from acquiring a start-up, and not wanting to crush the start-up spirit, the retailer keeps the company separate.

Having a separate lab has a few important advantages.  First, since its not part of the larger IT organization it doesn't get sucked into fire fighting, which can be a huge distraction.  Also, its not bogged down by enterprise-class software development processes that tend to slow things down.  An important part of innovation is constant tweaking that can't be documented up-front.  Having labs focused on retail-specific solutions keeps a retailer's edge.

At Oracle Retail we established the Retail Applied Research (RAR) team a couple years ago under the leadership of John Yopp.  They research emerging technology, collaborate with other labs, and convert ideas into prototypes in a nimble fashion.  Their efforts help us better assess the value of ideas and de-risk some of the technology.  This year we'll be demonstrating two of their projects in our booth at NRF.  We'll be demonstrating an Isis payment using NFC with our Mobile POS running on a Verifone sled. Additionally, we'll be showing how voice-response can speed transactions on our Mobile POS.

To foster the innovative spirit, we also have an annual Science Fair in our R&D organization.  Small teams with innovative ideas are given the week of NRF to build prototypes which are then judged based on originality, execution, and presentation.  Last year we had some pretty cool ideas using iPhones and Twitter that led to patent applications.

Technology doesn't stand still, so I'm hoping that more retailers create separate labs to incubate ideas in 2013.  Nobody can afford to stand still.

Thursday Dec 13, 2012

2013 Predictions for Retail

Its that time of year to roll out the predictions for next year.  I can't say I've really nailed it in the past, but feel free to look back at my 2012, 2011, and 2010 predictions.  I'm not expecting anything earth-shattering this year; just continued maturation of several technologies that are finally taking hold.

1. Next day delivery -- Amazon finally decided it wasn't worth fighting state taxes and instead decided to place distribution centers everywhere so they can potentially offer next-day deliveries.  Not to be outdone, Walmart is looking to leverage its huge physical presence to offer the same.  Clubs like ShopRunner are pushing delivery barriers as well, so the norm is shifting to free shipping in a few days or relatively cheap shipping overnight.  Retailers need be thinking about how to ship from physical stores.

2. Bring your own device -- Earlier this year Intuit bought AisleBuyer, a mobile self-checkout start-up, at least somewhat validating the BYOD approach.  Grocery stores, especially in Europe, have been supporting in-aisle self-scanning for a while and I'm betting it will find a home in certain verticals in the US too.  There's also the BYOD concept for employees.  Some retailers are considering issuing mobile devices at hiring along side the shirt and name-tag.  Employees become responsible for the hardware until they leave.

3. TV shopping -- Will Apple finally release a TV product in 2013?  Who knows?  But the industry isn't standing still. Companies like QVC and HSN are already successfully combining the TV and online experiences for shopping.  Comcast is partnering with Tivo to allow viewers to interact with ads with Paypal handing payment.  This will be a slow maturation, but expect TVs to get smarter and eventually become a new selling channel (pun intended) for retailers.

4. Privacy backlash -- It only takes one big incident to stir the public, and I'm betting we have one in 2013.  Facebook, Google, or Apple will test the boundaries of what the public is willing to accept.  It could involve a retailer using geo-location technology, or possibly video analytics.  And as is always the case, the offender will apologize, temporarily remove the technology, and wait 2-3 years for it to be generally accepted.  Privacy is a moving target.

5. More NFC -- I've come to the conclusion that adoption of any banking technology is going to be slow.  It was slow for credit cards, ATMs, and online billpay so why should it be any different for NFC?  Maybe, just maybe the iPhone 5S will have an NFC chip, but we're not going to see mainstream uptake for years.  Next year we'll continue to see incremental improvements from Isis, Google, and Paypal and a plethora of new startups, but don't toss your magstripe cards just yet.

6. In-store location -- The technologies for tracking people inside stores is really improving.  Retailers can track people using video cameras, infrared, and by the WiFi radios in mobile phones.  We're getting closer to the point where accuracy could be a shelf-facing, which will help retailers understand how people shop, where they spend time, and what displays attract them.  Expect CPG companies to get involved and partner with retailers, since the data benefits both parties.  Consumers will benefit by being directed right to the products they seek.  (In 2013 ARTS is forming a workteam to develop new standards in this area.)

7. M&A -- Looking back at 2012 there were some really big deals involving IBM, Oracle, JDA, and NCR and I expect that trend will likely continue as vendors add assets to bolster their portfolios.  Many retailers are due for an IT transformation to support anywhere, anytime shoppers, and one-stop-vendors can minimize complexity and costs.

Predictions from other sources:

Tuesday Sep 11, 2012

Walmart's Mobile Self-Checkout

Reuters recently reported that Walmart was testing an iPhone-based self-checkout at a store near its headquarters.  Consumers scan items as they're placed in the physical basket, then the virtual basket is transferred to an existing self-checkout station where payment is tendered.  A very solid solution, but not exactly original.

Before we go further, let's look at the possible cost savings for Walmart.  According to the article:

Pushing more shoppers to scan their own items and make payments without the help of a cashier could save Wal-Mart millions of dollars, Chief Financial Officer Charles Holley said on March 7. The company spends about $12 million in cashier wages every second at its Walmart U.S. stores.

Um, yeah. Using back-of-the-napkin math, I calculated Walmart's cashiers are making $157k per hour.  A more accurate statement would be saving $12M per year for each second saved on the average transaction time.  So if this self-checkout approach saves 2 seconds per transaction on average, Walmart would save $24M per year on labor.  Maybe.  Sometimes that savings will be used to do other tasks in the store, so it may not directly translate to less employees.

When I saw this approach demonstrated in Sweden, there were a few differences, which may or may not be in Walmart's plans.  First, the consumers were identified based on their loyalty card.  In order to offset the inevitable shrink, retailers need to save on labor but also increase basket size, typically via in-aisle promotions.  As they scan items, retailers should target promos, and that's easier to do if you know some shopping history.  Last I checked, Walmart had no loyalty program.

Second, at the self-checkout station consumers were randomly selected for an audit in which they must re-scan all the items just like you do at a typical self-checkout.  If you were found to be stealing, your ability to use the system can be revoked.  That's a tough one in the US, especially when the system goes wrong, either by mistake or by lying.  At least in my view, the Swedes are bit more trustworthy than the people of Walmart.

So while I think the idea of mobile self-checkout has merit, perhaps its not right for Walmart.

About


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.


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