2015: Promises Kept, Promises Deferred
It seems the past year went by in a flash, and it was an active one. To determine which retail tech promises came to fruition and which ones were deferred, I looked back at our post-NRF debrief. I was surprised how many never came to pass. Let’s take a look at some major themes:
Focus On The Store
Some retailers really did work hard to improve the in-store experience. Unfortunately, efforts were met with mixed results. JC Penney, Target and Best Buy significantly upped the ante and at least on the top-line, all three seem to have been rewarded by shoppers. Macy’s, on the other hand, and even venerable customer service champion Nordstrom experienced sales that were lower than expected.
In our annual store benchmark, retailers reported educated and empowered employees were key to their success, but most provided less than ten hours a year to train and educate those employees. Overall, I’d call this was a promise deferred, with few exceptions.
Even more stunningly, eCommerce sales, which seemed to be flattening out a bit, soared again in 2015, and the biggest beneficiary was Amazon.com. This is, on the surface a real de-motivator for making in-store improvements, but as I’ll discuss a bit later in this report, this does not represent the death knell for stores that some are predicting. There are other factors at work.
Data Security And Mobile Payments
The U.S. mandated move to EMV payment standards was one of the oddest roll-outs I’ve ever seen. Most retailers made investments in EMV-ready terminals, but all but the largest and smallest just kept swiping, and for good reason. The banks, who were part of the change mandate, just didn’t replace enough consumer cards. By most estimates, only 40% or fewer chip-enabled cards were in consumers’ hands by October 1. For those who had and tried to use the cards, the learning curve proved oddly challenging, and card machines were sometimes a bit wonky, requiring “jiggling” of the cards to get the chips to read. By all accounts transaction times using EMV were as many as 5 seconds longer than swiping. That doesn’t sound like much unless you’ve got a line 12-people deep at the checkout stand.
Retailers were faced with a real dilemma. Implement, or wait. If I were in their shoes, I would have taken the gamble and waited until after the all-important holiday season. That turned out to be a pretty safe bet. No major retailers experienced a data breach during the holiday season.
The hospitality industry was not so lucky. The “bad guys” decided this industry was ripe for the pickings, and pick they did. Hoteliers as varied as the Mandarin Oriental Hotel Group, White Lodging, Starwood, Trump Hotels (snark alert: maybe they should build a wall and get the fraudsters to pay for it), and Hilton were all hit by security breaches. At first thought to be confined to retail locations within the hotels, there were persistent stories of card numbers stolen solely through reservation systems.
Mobile payment adoption continued to crawl along slowly, but the sheer time delay associated with Chip-and-signature might well drive shoppers to move to technologies like Apple Pay and Softcard. Do I see “mobile payment only” lines returning to stores? What once seemed silly now seems like a really good idea.
The Mid-Market Really Is Hot Again
The under-served retail mid-market finally got the attention it deserves from players like Aptos (formerly Epicor), Netsuite, Island Pacific and others, who built out their portfolio with acquisitions and new development. We see this trend continuing with other vendors recognizing the opportunity, especially in the cloud.
The Cloud Becomes More Interesting To Retailers
Most of the time retailers lead vendors to create new solutions, but overall this time vendors took the lead. A few vendors like DemandWare were able to persuade retailers that the Cloud was a safe and rapid delivery vehicle, and we’ve seen others come forward with all-cloud solutions. This will escalate in the coming year, especially to the previously mentioned mid-market.
The Fitting Room: A Lot Of Options, Not A Lot of Adoption
Retailer technology priorities just didn’t lead to the explosion of fitting room adoption that we expected. This is unfortunate given the obvious opportunity in the apparel segment, but retailers were too busy racing towards omni-channel consistency and fulfillment to put a lot of attention into their fitting rooms.
The Internet Of Things: Still Early
There’s a lot of noise around the IoT. At the CES show last week, the Chairman of AT&T went so far as to call it the next Industrial Revolution. Forgive me for not quite jumping on that wagon. Smart devices are handy – I’m happy to set up a recording on my home DVR from my phone, and others are delighted with their Nest thermostats. But the pickup in retail is going to be very slow. ROI has to be clearly quantified, and it’s just not there yet. I am reminded that the term IoT was coined to describe RFID back in 2002. RFID never became the panacea expected, especially in the supply chain, where it was a solution looking for a problem. Today’s IoT in retail is a bit different. Chip-enabled displays and devices promise shopper personalization. Unfortunately, it’s not clear that consumers really want to get all that personal with retailers by trading privacy for relevancy. Only time will tell.
Beyond Technology: Black Friday Finally Jumps the Shark
You know there’s trouble when someone starts promoting “Black Friday-like Sales” in July. And that’s exactly what Amazon did with Prime Day. Never mind that the product offerings were weak…it was out there and it started the ball rolling. Some retailers started pushing Black Friday sales as early as October.
In the UK, Asda opted out of the growing Black Friday trend, and we expect to see all European retailers basically do the same. This is a smart move on their part, as we’ll see below. These types of hype events have a limited life span and can cost more to the bottom line than they bring.
In the US, at least 47 major retailers decided to opt out of Thanksgiving Day openings. Their decision was warranted, as overall sales were down over the Black Friday weekend. Shoppers stayed away from stores: there are only so many people willing to deal with the crush of the crowds for a few good deals. Instead they went on-line for Cyber Monday, Green Tuesday and Super Saturday (and pick the day name of your choice, I’m sure I missed a few). Yes, some delivery promises were missed, but that’s another story for another day.
I expect to see difficult bottom line results from stores who DID open on Thanksgiving and if anyone wants to place a friendly 25 cent bet, I’m willing to wager that even more drop out of the “Grey Thursday” madness. Is my personal prejudice showing here? Yes, but so are my retail chops. When sales are down 14% and you’re paying double-time in payroll, and extra in lighting and heating costs for opening the stores (or air conditioning down here in S Florida), you don’t need a rocket scientist to tell you that you’re on the wrong train. I wouldn’t be surprised to see Target and Macy’s close its doors and just leave the day to Walmart.
All in all it was a fast-paced but rich year. As we prepare for yet another NRF Big Show (I think I’m getting close to my 30th year, and that scares me!) we know we’ll see all kinds of technologies on display. I hope next year to do yet another recap, and I hope it’s all focused around what a successful year in retail we had.
See you on the floor!