It began two years ago when the company started talking about its web services in the context of enabling its version-locked installed base to get on an upgrade path without triggering an entire system selection process. Along with that message, JDA started talking about total cost of ownership and how the burden of integration shouldn’t be on the retailer – it should be on the vendor. Very encouraging stuff to hear.

And while a lot of people scratched their heads (myself included, at first) at the i2 acquisition, at last year’s Focus, JDA had a clearly expressed vision for how the acquisition would accelerate and enhance its move to a web services-enabled, on-demand delivery transformation.

This year, that transformation is nearly complete. New capabilities – for example, a lifecycle approach to fulfillment that seamlessly leverages capabilities from both assortment and replenishment – demonstrate that, in many areas, JDA is ready to move from assimilating past acquisitions to leveraging those acquired capabilities in new and innovative ways.

So then how does RedPrairie fit into all of this? Well, first, it’s not nearly as much of an overlap as past acquisitions. And with the foundation of on-demand solutions already in place, JDA’s acquisition offers an opportunity to accelerate the plans that RP already had in place.

But honestly, RedPrairie is not the heart of JDA’s story. I don’t want to minimize the significance of the acquisition, but what’s more important to me is the fact that JDA really does want to change the world – or at a minimum change the way that retailers buy and use software. You may hear JDA talk about cloud computing, and the importance of mobility, and a focus on user experience. But what that really means isn’t a collection of buzzwords. They are well down the road in transforming the purchase of enterprise software into the equivalent of opening an account on salesforce.com. They never want to see a customer face a version-locked implementation ever again, and are determined to get to a point where “upgrades” happen monthly, seamlessly.

There are a couple of significant implications that come from this strategy. One, corporate IT becomes something totally different. Gone are the hardcore tech guys, replaced by essentially super-users that are “application managers”. Gone are point-to-point integrations that make upgrades difficult and expensive. It’s the kind of transformation that is so huge that traditional corporate IT departments will resist it with every fiber of their being. A CIO who would embrace the nature of change that JDA is proposing is also embracing cutting about 75% of his or her staff, leaving only strategy, finance, a handful of architects, and business analysts on staff. The rest aren’t needed – because of “the cloud”. That’s a brave CIO, indeed.

I’m not saying it won’t happen. JDA already has customers like True Religion willing to get up on stage in main-event sessions and talk about how they’ve done exactly that. And I’m not saying it shouldn’t happen – I firmly believe that retailers are getting to a point where their existing IT infrastructure is preventing them from taking advantage of needed new capabilities, and that old ways of thinking – long release cycles and point-to-point integration – keep them locked out of future opportunities. Retail IT needs to embrace the internet age. But saying that and watching it happen are two completely different things, and I worry that JDA’s biggest challenge is not its vision, or its capabilities – but a lack of vision and capabilities on the part of its prospects and installed base.

With all of this as context, I believe that the company sits at a crossroads. Two of them, in fact.

The first crossroads centers on the customer data element. JDA currently bills itself as “The Supply Chain Company” – in part, as CEO Hamish Brewer half-joked at Focus, because they haven’t come up with a pithy catch-phrase that accurately describes what they really are now. Oracle and SAP have already made significant moves around embracing “customer” as a data element that needs to be incorporated into all solution areas. With the RP assets (namely, loyalty and clienteling), JDA now has the beginnings of customer. Will it transform itself to embrace customer as part of its solutions? That remains to be seen.

The second crossroad focuses on commerce. With the i2 acquisition, JDA ended up with, of all things, an eCommerce platform. However, with RedPrairie, JDA’s commerce capabilities received a significant injection of new life. Clienteling and call center capabilities both play roles here, along with a “better” eCommerce platform and a strategy that RP had already begun to pursue that put a lot more emphasis on commerce capabilities. JDA, like SAP and Oracle before it, now has all of the pieces and parts to transform how retailers engage with customers – what our survey takers have pretty passionately embraced as “a single customer interaction platform”. Even though JDA’s competitors theoretically have a head start in enabling this platform, the reality is that JDA could still move fast enough to be the first to deliver a truly converged commerce platform that crosses channels. If they choose to pursue it – which is not currently a certainty.

Here’s the thing. Cloud, the way that JDA has implemented it, enables some remarkable things. I get the sense that JDA feels like it could be the “supply chain cloud,” and leave Finance and CRM and even commerce to some degree to others. JDA doesn’t need those capabilities – it just needs a clean web services call to reach those capabilities. I get it. But as much as cloud capabilities are transforming the way that JDA delivers software, “customer” is transforming the way that retailers think about supply chain. Customer data isn’t going to be a simple call to a loyalty program. It’s going to be integral to merchandise & assortment planning, to allocation, to fulfillment options and how those options are ultimately presented to the customer.

And retailers aren’t thinking about the future of POS in terms of “transactions”. They’re thinking about how to get more capabilities into store associates’ hands (places where JDA’s mobile and user experience strategies could become key), and the transaction itself is an afterthought. I can see a future where 80-90% of “point of sale” is actually a combination of supply chain and customer-related capabilities. And the remaining 10% is order management, complicated in the store only by the need to take cash. In JDA’s shoes, I would not be willing to let the market evolve to where I have to fight and compete for the 90% because I didn’t want to deal with the other 10% – especially when a 100% offering would overnight transform the market.

But none of this speculation would be possible if it wasn’t for what JDA has already accomplished. The company really is trying to change the world of enterprise software. They’ve seen the future and the entire company is bent towards making it a reality. It’s a future that retail needs.

Retail doesn’t get any more “real” than it is for independent operators, and I’ve enjoyed attending events by the National Retail Hardware Association (NRHA) for the last few years, and getting the opportunity to talk to many of those independents. This year I was asked to present RSR’s view on the changing nature of technology-enabled consumers and what it means for retailers (a subject we’re fond of expounding on). But for me the best part of the event was an awards ceremony that we have nothing to do with: NRHA’s 17^th Annual Young Retailer Of the Year Awards.

Family, Community, and Common Sense

Unlike publicly owned retail companies, for independents the business is equal parts family and community tradition. As pictures of the stores that the recipients represented flashed on the projection screen, there were no big-box-power-mall-mega “destination” stores. What you saw were stores that fit right into their surroundings: a neighborhood hardware store in a neighborhood, a lumber store on a rural highway, a store with a big sporting goods section near a lake, etc.

Several of the recipients were born into their families’ businesses, and those that weren’t were taken under wing by owner-operators who are like-family. Because of these strong personal ties, the Young Retailers exuded a sense of their close connection to the business. That’s a connection that every big retailer should envy. At the awards ceremony, each of the eight recipients had a word of thanks for their parents, the people who bought them into the business, and the communities that have supported their efforts to be as good as they can be. The presentations got downright emotional at times – the featured Young Retailers weren’t just talking about their jobs, they were talking about their lives.

Among the award recipients, those family connections were prominently featured. One video presentation showed off a letter written by award recipient Meagan McCoy Jones of McCoy’s Building Supply of San Marcos, TX when she was 5 years old to her dad, saying that she wanted to work in the store (but didn’t want to have to get up at 5 AM). Try to imagine your 5 year old writing that kind of a letter to BigCo’s CEO! Jeremy Stine of Stine Home + Yard in Lake Charles, LA returned from study abroad and a stint with the U.S. State Department to work with his dad and uncles in the family business. Kim Ytsma of the Alliston Home Hardware Building Centre in Alliston, Ontario Canada, was thrust into the business when her dad suddenly died from a heart attack in 2010.

Being so close to their communities, the Young Retailers used common sense to create more value for their customers. Jesse Loucks of Mount Shasta Do It Best Hardware in Mount Shasta, CA rightly figured that being so close to a big outdoor destination created an opportunity for more fishing and hunting supplies. Willow Yoder of the Seattle, WA Greenwood True Value Hardware store turned the store into the community’s go-to location for eco-friendly supplies. Ceva Courtemanche of Hensel’s Acre Hardware in the small (population 17,500) Northern California coastal town of Arcata expanded the store to create a destination for home improvement projects, offering kitchen fixtures, flooring, appliances, and furniture. Kyle Herbert of the New Milford Hardware store in New Milford, PA expanded the value proposition to offer more construction materials and a drive-though lumber shed.

Big Shop Concepts, Applied

There’s a mistaken notion that somehow “big” retail and “small” retail are different: a different mindset, different offerings, and different tools. While that may be true of the mindset and the offering, it doesn’t necessarily hold true for the tools. For example, Justin Ellis of Builders Do IT Center of Roswell, NM used “big shop” concepts like category reviews to reposition departments and remerchandise every category. This was all done in an effort to re-brand and remodel his New Mexico store to create a sense of relevancy and excitement in the community. And it seems to have worked; the Roswell store has experienced a 17% sales increase. Jeremy Stine brought e-commerce to the Stine Home + Yard operation, integrating e-commerce functionality into the store’s website and building a database of over 40,000 customers – and creating a social media presence with 20,000 Facebook followers. And Meagan McCoy Jones, whose McCoy’s Building Supply was by far the largest retailer (84 stores, $600M in revenue) represented in this year’s award recipients, centralized sales and consolidated routes to get the most out of the company’s fleet of delivery trucks.

Small Shop Concepts for Big Shops to Emulate

Several things about the recipients’ acceptance speeches stood out by virtue of their consistency. First is the aforementioned family connection. The bond between these Young Retailers and the businesses they run is up-close and personal. There is much talk today about companies’ lack of loyalty to their employees and employees returning the “favor”. Not so at NRHA. The Young Retailers on the stage understood clearly the connection between the well-being of the store and their own well-being. One has to wonder how if is that so many big companies have lost that connection, and what has to be done to get it back. Based on the comments from virtually every one of the recipients, it must have something to do with the fact that each of the retailers represented, whether it came from parents and family or from that nice old couple who ran the store for 50 years, took a very personal interest in the young up-and-comers’ success. Based on the announced results, they have been paid back handsomely.

The second point is about allegiance to the community. Each and every one of the award recipients thanked their communities for supporting their store. Of course it’s a virtuous cycle: the store listens to the community and tailors the offering to meet the local needs, the community feeds back, the store fine tunes the offering, etc. As long as all are communicating with each other (talking and listening), it should keep getting better – there is no upward limit.

A third thing was that most of the award winners expressed gratitude to the ecosystem that they operate in (no kidding!). Whether it was the Ace Hardware network, Orgill, or the Do It Best membership, the Young Retailers expressed gratitude for all the support and advice that they got from willing local corporate reps.

Finally, of the eight recipients of this year’s NRHA Young Retailer Of The Year award, four were women. Who says that hardware stores are just for the guys?

It can all be summed up this way. As Meagan McCoy Jones said, “retail is a noble business”. She meant it, and coming from her it rang true. Helping the people of the community that you work in is noble.

Figure 1: The Big Picture

Source: RSR Research, May 2013

The contrast couldn’t be any clearer: Winners plan to open new stores – not only in the geographies where they’ve already had success, buy also in new markets around the globe. They view stores as a vital component to their overall brand offering. Yes, consumers may be using any number of physical and digital channels in their paths to purchase, but stores still play a vital role in that equation, and their plans reflect this fact.

By way of comparison, laggards seem to have given up on the store entirely. Perhaps they already have too many stores. Perhaps they need the money; but no matter the reason, one in two struggling retailers is planning to close stores in the near future (compared to 10% of Winners), and another 21% say they just plan to stop opening stores altogether. Whatever plans they do have for expansion are for smaller-format stores than what they currently operate.

While it is important to recall that Winners are looking through an optimistic lens at the future of the store (and laggards a dire one, from Figure 1), Figure 3 sets the stage for the overall retail environment right now: Those who are “in the know” recognize their stores need technological revitalization, and are addressing that need post-haste. Laggards, on the other hand, just don’t “get it”: they have labeled the store as irrelevant, when in fact it is their lack of attention to those stores that has made their locations undesirable to consumers in the first place. Quite simply, why would a consumer want to visit an antiquated, poorly arranged store whose personnel can’t answer even the simplest of product questions? It becomes a self-fulfilling and downward spiral.

From Here to There

When it comes to operational challenges, getting exciting new store-based technologies up and running – and playing well with both new and existing cross-channel tools – takes top honors. But the most interesting data points in Figure 2 are the 48% of retailers who acknowledge that implementing cross-channel process in stores is a top challenge, and that keeping employees focused on selling and service is, as well (Figure 2).

Figure 2: It Ain’t Easy

Source: RSR Research, May 2013

This makes perfect sense; for the best retailers, the store must evolve, and that means it’s going to be a significant challenge to ensure new store-based technologies do not operate in a vacuum. Consumers don’t care about “channels”, and new store systems will only be of value if they interoperate with all the other “channels” retailers operate. For the worst performers, this challenge may prove difficult enough to phase them out completely. Laggards’ problems are only further compounded by how little importance they place on an educated, helpful staff in stores: only 13% (compared to Winners’ 38%) identify hiring good people as a top priority.

The full report examines much more of the challenges, opportunities, and technologies retailers perceive as being most helpful during this transformative time, and as always, we find stark differences throughout based on retailers’ sales performance. We hope you’ll take the time to read it here.

As stores try to find their way in a brand new digital world, we asked retailers to candidly share their experiences.

Key Findings

• Retail Winners see stores helping to compete with the online experience and are less likely to think future growth will only come from digital channels. They expect they can reverse the erosion of the store — if they can better incorporate technology as part of the store experience.
• Winners plan to open new stores in both new and existing geographies. Laggards are closing existing stores, and the few who do plan new opens will do so with smaller-format stores.
• Retailers continue to see increased value in communicating with consumers within the store walls, all while neglecting the wireless infrastructure to do so effectively.
• All retailers are concerned that stores are spending too much time on the wrong things (including distracting store technologies and administrative tasks for corporate), while Winners worry they are not spending enough on cross-channel selling and fulfillment.

“The Relevant Store in the Digital Age” contains analysis of the business drivers, opportunities, and organizational constraints surrounding retail store strategies. It also offers up baseline recommendations for navigating the future of stores, particularly as retailers struggle with the industry changes brought on by cross-channel shoppers. The report is part of RSR Research’s ongoing efforts to provide market intelligence on retail technology trends.

To find out more, download the full report.

Sponsored by

1. What is the future of the store and how do we make it relevant in an increasingly digital shopping experience?

I’ve been saying since 2010 that the store is in trouble, and that hasn’t changed much in the intervening years. The store simply is not keeping up with the standards for a customer shopping experience that are continually being raised online. Between personalization, rich product content, and access to other shoppers with similar needs and experiences, online delivers a far more effective experience than the store.

The challenge in tackling this question comes from two different directions. One, stores seem to mostly work okay right now. Sure, online and digital channels continue to grow, but it takes massive experimentation on the scale of JCPenney to kill store comps to a degree that threatens the store’s existence. But my theory is that the economic model of traditional stores falls apart somewhere around the time that digital channel sales reach about a third of total sales. The retailers who operate “balanced retail” – business equally distributed between online, store, and direct/catalog – tend to have a different store strategy from retailers who depend heavily on stores for revenue. They operate more of a “flagship” or concept store environment – store as entertainment, store as services, store as brand destination. Think Cabela’s and Bass Pro, or Nike or Under Armor.

The other side of the challenge is the technology side – all of the things that retailers have at their disposal to bring more of the digital experience in stores has already been done in one form or another. Yes it’s true that the cost model has changed significantly, and with smartphones the opportunity to offer bring-your-own-device deployments radically changes the model. But retailers still struggle with the same-old same-old. You want to put a kiosk at the front of the store to offer a more personalized interaction at the beginning of the shopping experience? You’d better be prepared to provision that, either with wifi or hard-wired internet connections, and power – and the training for store staff to maintain it and serve as level 1 help desk for lost consumers. Even if you move that kind of functionality into a smartphone app, store employees better know what it’s all about, and there better be in-store public wifi to ensure the customer has access to the experience you’re trying to deploy.

1. What role should social data play in generating customer insights?

On a completely different note, we’re seeing increased interest in starting to use all of that social customer data that has been collected over the last year or two in order to make better operational decisions. There are some intriguing questions that could be asked and theoretically answered by social data. Questions like, does a high product rating translate into increased demand? Or conversely, does a low-rated product see a drop in demand? Can the comments and reviews about products be mined to make decisions about which channels should carry products (Will it do better online than in stores? Should an online-only product be extended to store inventory?)? And finally, can customer sentiment be used to predict purchasing behavior, the holy grail of social data?

Alongside these questions, retailers are faced with some tough challenges – finding the resources who have the skill sets to ask and answer these questions. For an industry that has struggled with promotion optimization, simply because more of the basics of customer data have been difficult to come by and maintain over time, taking on social insights is fairly ambitious.

1. Who should run all this omni-channel stuff internally?

If I could develop an org chart that lays out what an integrated/converged channel retailer looked like, I think I’d have enough consulting work to last the rest of my life. Everyone, from grocers to luxury retailers and in between, are trying to figure out three main organizational questions: one, who should be the owner of the customer experience? Marketing? A new “customer experience executive”? And what is the true span of control for that executive – does it reach into stores?

The second question: Who should drive the retailer’s brand strategy, marketing or merchandising? Can the organizational successfully transition from a product-driven company to a customer-driven company? And does this mean that merchandising no longer drives the brand promise, but merely acts on it?

The third question: As marketing reaches more deeply into the customer experience, how do we get marketing and IT to better work together?

None of them are easy questions to answer.

1. How do we better leverage inventory to meet demand that could come from anywhere at any time?

My favorite question. This is the one that promises, actually, to have the most impact on the retail enterprise in the next three years or so, I believe. Yes, even more so than the other three questions. Here’s why. Retailers have spent the last 5-10 years integrating the selling side of their business so that they can at least fake one face to the customer, even if the reality of the behind the scenes is the worst sausage-making factory in the world. But the volume of cross-channel, integrated selling business has grown to the point that retailers can’t hide the baling wire and gumworks in the back. The strain is starting to show, and the cost of maintaining it increases as the volume grows.

Up to this point, retailers have done a good job isolating their supply chains from all the changes happening in their selling channels, but as soon as you start raising questions like “How would ship from store work?” you can no longer maintain that isolation. The supply chain also has to become more sophisticated – and integrated with the cross-channel selling that is already happening today.

Saving the Tough Questions for Last

Questions 1-3 above require long-term change – a sustained change management effort that must fight against the status quo. Like all good procrastinators, retailers will leave these hard questions for later. First, it’s time to bring supply chain along to meet the new demand sources and shifts that cross-channel selling is creating. Along the way, however, retailers might just get a better sense for how to solve the other three.

I’ve got to be clear, just the fact that I don’t have to drive to Aventura to get to a Whole Foods Market is reason enough to celebrate. I’ve written many times what an annoyance it is getting in and out of that town, regardless of the season. It also doesn’t hurt Whole Foods that my local Publix appears to have lost a step – especially in the produce department. In other words, I’ve been eagerly watching construction and waiting for the store to open just 30 blocks from my house. But Whole Foods Market made its store opening a true theater adventure. I was greeted in the parking lot by bands playing, special activities for kids, and policemen directing traffic. Yes, it really was that crowded (although as a local I do know the back way in!). But once I got inside the store it wasn’t about all that. It was about the products. The store contained a moveable feast similar to Costco, where I could sample everything from key lime mustard marinade to Parmesan Reggiano. Everyone likes a free lunch. But I learned some really valuable lessons during my first visit and did more than just chow down on site.

Lesson #1: Branding is about more than Brand Name: Upon entering the store you walk smack dab into the fresh produce department. And the signs you see are “Organic: more than 91 products today” and “Local more than xx products today” (sorry, I don’t remember how many). In other words, the store found a way to hit both my hot buttons. I’ve definitely gotten religion around non-GMO food over the past year, and buying local just makes good sense. But the reason I’m calling “Organic” and “Local” brands follows.

Lesson #2: How Whole-Paycheck Became Half-a-Paycheck: As I said, there are particular foods I’m really fussy about buying USDA-certified organic. Nuts and grains in particular are on my list, because I’ve read so much about how the seed stock has been tainted. Corn, soybeans, peanuts, almonds; it’s (rationally or irrationally) making me very nervous. So I want my almond milk to be organic. As it turns out, Whole Foods had half-gallon jugs of its 365 brand almond milk emblazoned with the USDA certified organic label. Into the cart it went. And so it went with many of the products I bought. The net of this was that the final bill was about 1/3 less than I’d expected it to be. So I saved myself some money, got what I wanted and left very happy. What happens when quality is defined not by the brand, but by the contents? It’s a really interesting phenomenon.

Lesson #3: Store Employees Really Do Matter: People who move to South Florida are generally surprised at the indifference-bordering-on-surliness of the average store or office employee. For whatever reason, they really aren’t very nice. But the Whole Foods employees were genuinely happy. Check-out lines were short, and when I realized I was working with a brand new Whole Foods employee at check-out, who really didn’t know how to ring up “complicated things” like yams, she was so sweet that I just didn’t mind waiting. The person who was training her said “Don’t worry, within a few months you’ll know them all by heart.” She smiled broadly, and that just made me happy. How many of us can even expect our employees to be around for “a few months”? Maybe there is something to this conscious capitalism thing. I have a friend who has worked for Whole Foods as a produce manager forever. He put his daughters through college with his stock options. How many of us can say the same?

Being a technology analyst, I suppose I should comment on the in-store technology, but I honestly didn’t notice much. Yes, the check-out lines were short, but it remains to be seen if this is a “new store opening push” or a permanent staffing reality. I’m sure hoping for the latter.

So while I’m hearing a lot of buzz around Amazon getting into grocery, and Walmart getting into the neighborhood market business, I’ve got a whole other thought process. Give me the assortment that I want, surprise and delight me with your service, and don’t cause me undue pain, and I’ll happily go on a discovery adventure at a local food store. I just have to remember to bring a shopping list next time… because nova lox without cream cheese is just not good enough. My bad!

So it only makes sense to share a sneak peek with RPW readers, too. No one store can be all things to all people, and as a result, confusion about what a store should be has set in. Recent months have seen headlines of old models falling on the sword of show-rooming (Best Buy) and very public failed re-imaginings (JCPenney).

It therefore only makes sense that the first thing we wanted to know from our retail respondents was what they saw for the future of the store. As you can see from Figure 1, at first blush, its perceived future does not look overly bright.

Figure 1: An Incomplete Vision of the Future…

Source: RSR Research, May 2013

However, these opinions are heavily influenced by retailers’ current status in the market. It comes down to one simple question: are you a Winner or a laggard?

Night and Day

One of the prime examples of this difference is in how Winners regard the future of the store. As seen in Figure 2, Winners have an entirely different point of view from their peers: they see stores as helping to compete with the online experience (49% strongly agree to laggards 24%), and they are much less likely to think that future growth will only come from digital channels (6% to laggards’ 18%). They are much more realistic in their goals, and understand that they can reverse the erosion of the store only if they can better incorporate technology as part of the in-store experience. They are also more likely to believe that they are already on the correct path: believing that the current technology investments they are making will be the ones to help them get where they need to be.

Figure 2: …Comes Into Focus

Source: RSR Research, May 2013

In essence, Winners have a completely different view of the future, and keeping in mind this “lens” through which they look while reading the full report (which publishes later this week) will help explain the myriad different tacks they are taking to help return stores to their rightful place of relevance.

Furthermore, this vastly different perspective shows they understand the problems stores currently face: while a happily-ever-after scenario may have previously been possible for retailers offering unique products or superior customer service, today, those functions absolutely require new technologies in the store. Customers demand them. In fact, they are an absolute necessity for anyone operating on anything other than a low-price model. And while we’ll discuss the importance of pricing several places throughout the full report when it releases, history has already proven there are very few retailers who can compete on a low-price basis. This report will be about how technology can help every other store-based retailer compete with rock-bottom-price competition – whether it’s coming from other stores OR the online channel.

We’ll make sure to send you a link to the full report as soon as it is available this coming Thursday afternoon.

• Are time and technology starting to make the bigger dream a reality?
• Which areas stand to gain most: Merchandising? Marketing? Workforce Alllocation?
• Are hardware and software costs standing in the way of adoption less and less?

To answer these questions we need your help. This year’s digital video surveillance benchmark survey, Video Analytics Come of Age, is now available. It will take 5-10 minutes to complete. As always, all individual responses remain completely confidential.

Again, the survey is available here.

Thank you,

Paula Rosenblum and Steve Rowen

In fact, our survey respondents re-affirm this point of view in virtually every benchmark RSR runs.  As frequent readers know, we use a framework called the “BOOT” to analyze most topics we write about.  I’m not going to delve into the details of the methodology here beyond saying that one of the O’s stands for “Organizational Inhibitors” and ways to overcome them.  Seeing “Senior Management Championing Change” identified as top-three way to overcome almost any organizational inhibitor has become completely routine.  Instead of internalizing this, we’ve considered stopping asking the question.  It started getting boring.  Um, my position has evolved.  This is important. It might be the most important thing.

When I broached the idea of writing on this topic to my partners at RSR, we had our own stimulating exchange on the subject.  Part of my ‘evolution’ is that the “Rock Star CEO” is entitled to obscene compensation, but only if it is tied to results.  That is what I broached to the team. Let’s see what some of the partners had to say:

Nikki Baird: “I don’t have a problem with that line of thinking. The only thing I’d throw out there is, what about the measure of risk for taking on the job? A lot of companies, when they take on a rock star CEO, are doing so because they need big changes. There’s always the risk that the organization (or the board) doesn’t listen. Sometimes it takes an eye-watering paycheck to get someone to sign up for a company headed downhill already, and sometimes it takes that size paycheck to get the board to take them seriously – and sometimes even with all that, the rock star still doesn’t pan out, and/or the company refuses to change. Sometimes it’s not all about company performance; it’s about getting anyone who stands a chance of success to agree to take the job.”  (My note:  is that what happened at Sears?  How did being the CEO of the 27^th largest retailer in the world and 12^th largest in the US become a part-time hobby [compensation set at $1 a year]? It remains beyond my understanding. As an unnamed analyst friend has said “This might be the most expensive $1 Sears has ever spent.”)

Brian Kilcourse:  “I think the issue is ‘CEO as manager’ vs. ‘CEO as leader’.  CEO’s should be leaders, in my opion, and that implies that they must be good at two things.  First, they have to have a vision that people can get behind. Then, they have to put a team in place that includes great managers. I always think about Dwight Eisenhower – the ‘CEO of the European theatre’.  There’s a picture of him talking to some troopers who are loading onto ships for the D-Day invasion, and you just know that several of those guys are going to die.  But they all are hanging on the general’s every word.  They so believed in his vision that they were willing to hurl themselves at the enemy.  That’s what a CEO can do.  But it turns out that crafting the vision ain’t easy, and most people aren’t very good at it at all.  As for the team, you can always tell when a CEO hasn’t done that – a few signs include, the CEO as a ‘shirt sleeves’ kinda guy, taking credit instead of giving it to the team, and poor results.”

We tossed around various names that are just too gossipy to discuss here (I’ve written and deleted entire paragraphs three times already!).  As usual, we came to no real consensus – that’s why we call ourselves “The candid voice in retail research.”  We just don’t have any corporate line to tow.  Still we do all agree that the CEO can make an enormous difference and should be rewarded handsomely when that difference goes to the good.

My goodness, I have a lot of friends who aren’t going to like this piece.  I’ve moved far to the right of “Occupy Retail”.  But you just can’t deny what’s right in front of your eyes.  There are individuals with the rare vision and talent to infuse a company with greatness.  If you’re lucky enough to work for one, don’t try to BE one.  Just enjoy him or her. And reap the rewards from success.

Go ahead, drop me a line.  You know where to find me: prosenblum@rsrresearch.com.  Send me your point of view.  I promise to respond.

Yes, it’s true that retailers have started taking a greater interest in the future of payments – the MCX group and ISIS are both examples of associations that are trying to bring retailers into the mix. But even with those two groups’ activities, I find retailers woefully under-engaged in understanding how the evolution of payment technologies may directly change their lives – and their consumer-focused investment plans. I’ve heard from some retailers who dismiss MCX because of Walmart, dismiss ISIS because of the payment networks (at whom they still seethe over PCI), and dismiss PayPal because of eBay. That’s a lot of dismissing and not a lot of engaging. I find it supremely ironic that these retailers seem content to let those very same networks they despise, alongside the major banks/card issuers, define how it is retailers should interact with shoppers.

Because that is exactly what they’re doing.

The United States is in a particularly unique place when it comes to the future of payments. EMV – otherwise known as chip & pin for the chip on the card and the PIN the cardholder enters at a transaction (from the end-user perspective, much like a debit transaction) – has been implemented practically around the world, except for in the US. If you’ve traveled abroad at all, as an American you can rapidly feel like some backwater country when you offer your low-tech mag-stripe-only card for payment. They have to fetch the special terminal for swipe and signature, and you feel the pressure of the line behind you as the store associate searches for the archaic pen to sign the archaic receipt.

And, in fact, mag-stripe related fraud has gotten so bad that there are some issuers – and some merchants – in Europe who no longer take swipe cards, and soon enough the majority of cards issued in Europe will come without a mag stripe at all.

The US has been behind the times in part because we were ahead of them with PCI. After retailers were forced to upgrade their payment terminals and submit to security audits that often required additional significant investments, the last thing they wanted to hear was “Okay! Let’s do it all again!” But after receiving their bye on EMV, the time has come to invest. Retailers essentially have until October 1, 2015 to install chip & pin terminals, or face a “liability shift” – where they will be held liable for any fraud that results because they haven’t implemented chip & pin.

This situation puts US retailers at something of an advantage. The rollout of EMV in Europe wasn’t without its snags. And there has been another major rollout recently, closer to home in Canada, that has also provided some valuable lessons that promise to reduce the cost, the time, and the risk involved in implementing EMV. There are worse places to be.

But it’s also a very disrupted time in payments, particularly around mobile payments. There are a lot of experiments out there, some of which have expanded into pilots, and in the developing world, some activities promise to leapfrog traditional banking completely. Mobile is almost the only way to do business in some areas of the world.

US retailers aren’t stupid. They’re looking at everything that’s happening in this space and wondering if there isn’t an opportunity to leapfrog. European retailers in particular now find that the shoe is on the other foot. Having just gone through a long and painful EMV rollout not that long ago, they’re very unexcited about “doing it all again” to incorporate NFC and/or mobile. Retailers like Tesco have even taken public stances in direct opposition to NFC, and I’ve heard some retailers say either that NFC is dead on arrival, or it will never be a real thing unless it’s on an iPhone (Tim, are you listening?).

Here’s the thing though. When you’re thinking about payments and NFC and mobile, I would love for you to keep this in mind. NFC and EMV have a lot of affinities. If you’re going to replicate the EMV experience on the phone, there must be some kind of (as the industry puts it) Secure Element. Some groups are looking at EMV on SIM, where the EMV functionality is embedded on the SIM card in a mobile phone. Some groups are looking to embed an NFC chip directly in the phone, regardless of SIM. Either way, the interaction between phone and reader would need to be NFC-based, and by definition, contactless. And an embedded NFC chip can still also serve the chip requirement of EMV, together with a PIN (and that’s about as far as I’ve gotten in understanding the bones of the technology, so bear with me).

Here’s where things get interesting. In both Europe and Canada, when you take away the opportunity for mag-stripe-related fraud, the fraudsters immediately turn to online fraud. It’s like squeezing a balloon. You squeeze down on one half, and the other half gets bigger. The reaction is almost immediate. So as part of EMV rollout, US retailers need to be aware that whatever they are doing to prevent online fraud, they’re going to need to double that effort once EMV is out. Fraud pursues the easiest target, and in 2015, online will become that target.

But what if there was a way to make an online transaction look exactly like a card present transaction? What if there was a way, over the cellular network, for a card acquirer to contact the shopper’s mobile phone, prompt for a PIN, and validate against a Secure Element on the phone all in the course of an online transaction? Or to securely send a 6-digit PIN to the shopper to enter into an online field to confirm the transaction? Either way, we’re talking primarily about using some combination of mobile and NFC, transacted over EMV. Complicated or not, if the industry could solve the card not present problem of online transactions, there would be a real and immediate benefit to everyone from issuer to acquirer to retailer to consumer.

What about Starbucks and PayPal? you might ask. Starbucks utilizes a barcode generated on the phone, which bypasses the need for any kind of Secure Element. And also regularly comes under fire for not being nearly as secure as it should be. Or perhaps a better way to say it is, when $50 is at stake, and your gold card status at Starbucks, maybe that’s secure enough. Is it secure enough for direct access to your checking account?

Paypal is different – in store, it’s enter a phone number and a PIN. But isn’t that basically a card not present transaction? I confess I don’t know how EMV requirements will impact PayPal’s store strategy.

What I do know is that retailers should not dismiss NFC out of hand. In fact, given the avalanche of online fraud that is coming, they should be pushing the rest of the industry even harder to quit squabbling over the pieces of the pie, and worry about how to make a good pie that everyone wants to eat. One message that was delivered loud and clear at CARTES was this: no one is going to dominate mobile payments. No one is going to corner the market – it’s too important and there are too many players needed to make mobile payments a reality. Each group might be the big gorilla in their own respective space, but that does not make them the leader overall. Right alongside that message, another important one to remember: ultimately, it’s about what the consumer will adopt. Retailers can have a lot of influence over that – if they choose to engage.

US Retailers do have a chance to leapfrog Europe and Canada with their EMV implementation. But a lot of things need to happen in the industry to make that a reality. If you want more info on how retailers are thinking about the future of payments, I encourage you to read our benchmark report on the topic.