Sep 30, 2005 (02:09 PM EDT)
Retail Industry: Trendy Technology Not In Style
Read the Original Article at InformationWeek
Gerald L. Storch, vice chairman of the nation's second-largest discount chain, Target Corp., isn’t interested in adding any technology to his 1,351 stores beyond the satellite lines that link them to the Internet and the wireless devices his employees already use.
Self-checkout lanes? Too slow.
Electronic radio-frequency ID tags? Too futuristic.
Electronic shelf labels? Too unimpressive.
Storch isn’t even a fan of putting Internet kiosks in stores, which some retailers have been doing for years. Target uses them for customers to access bridal or baby registries, but other than that, he doesn’t see the point in asking people to leave their homes to use a computer. "It’s a ridiculous proposition to our guests to ask them to drive to a store and shop on our Internet site," he says. Storch spoke during Consumer Forum 2005 sponsored by Forrester Research in New York City Sept. 27.
As for self-checkout lanes, a staple of some grocery stores, Storch insists his cashiers are faster than any machine. And overly sensitive scales, which sometimes require an extra employee or two to assist a beleaguered shopper, don’t wind up saving any labor costs.
Instead, Minneapolis-based Target puts a speedometer on every register to measure how quickly cashiers move. "I’m convinced our transactions are the fastest" among the discount chains, Storch says. "We’re absolutely obsessed with getting every last second out of transactions."
He believes it will take five years for self-checkout technology to improve enough to suit him. The same goes for electronic RFID tags. "When my cell phone works to my house, then we’ll put a chip on every bottle of shampoo," he says. "I’m not trashing technology. People are so impressed with what it could do rather than what it can do now. It’s not ready now."
However, there are some retailers who see the supply-chain tool differently. Mike Crowe, director of global IT for Colgate-Palmolive Co., said at the forum that the consumer products company is working on a pilot RFID program with three U.S. retailers and one in Europe. The fate of those programs depends largely on the cost of the tags.
Don’t misinterpret Storch; he is upbeat about something involving his IT department. Target.com now battles Walmart.com in a back-and-forth struggle as the Web’s No. 3 retailer behind eBay and Amazon.com. And though he doesn’t think online sales will ever be more than 10 percent of total sales—which is still a lot; Target posted revenue of $46.8 billion last year—there’s no limit to the amount of merchandise Target can list online. By the holidays the online inventory will include three times that of a typical store, usually between 60,000 and 70,000 items.
The Web site’s role as a testing ground for merchandise is important. Recently, Target.com posted 13 types of rain boots; the top four sellers went into stores.
Recreational Equipment, Inc., the retail cooperative known for its outdoor gear and clothing, takes data from Web sales a step further. It displays items together in stores according to online sales trends, says Brian Unmacht, REI’s senior vice president of sales and store development.
Target's Storch estimates one-third of visitors to Target.com are researching for a store visit. That ability to check out a store’s selection one place and go buy it in another has given shoppers high expectations that many stores, not just Target, often fail to meet, says Forrester senior analyst Nikki Baird.
"Consumers come into stores wanting more information about products and are frustrated when associates don’t have it, because after all, they can get it at home," she says.
REI is contemplating some innovative changes to its stores. The co-op is working on a "contact-less" system to recognize customers as they enter a store and scan a member card. It would work just like some cities around the world that offer a fare pass, good for public buses and subways, that riders hold over an electronic reader rather than swipe or feed through a slot.
An REI shopper with one of the co-op member cards would receive a coupon or discount based on past purchases, printed by the scanner at the front door, Unmacht says.
He has three priorities: to open an East Coast distribution center in the next two years, improve the company’s use of customer relationship management software, and work on what he calls the "store of the future."
A main ingredient of that vision is a new approach to the customer service desk that traditionally handles returns. What if it could also help shoppers plan activities—like a group bike ride, for instance—and meet other people with similar interests? "It gets intimidating when you walk into a store and there’s all this product around," he says. "If I’m a customer, I don’t necessarily want to track [an employee] down."
As for the new distribution center, it’s a sign that the co-op, which had sales of $887 million last year, is on an expansion kick. Just last fall REI said it would add approximately 144,000 square feet of floor space to its existing 375,000 square-foot facility in Sumner, Wash., near its headquarters outside Seattle. It also plans to open eight stores in 2005, for a total of 84. Unmacht shares Storch’s lack of enthusiasm for Internet kiosks in stores, believing them to be one-dimensional. REI invested in them in the 1990s to show off REI.com and offer how-to information, but had mixed results—Microsoft’s Terminal Server took its name literally and caused many kiosks to crash. The company has moved on to free standing wireless devices for scanning items to learn their price; for employees they provide inventory data. The next step is to install digital displays among store aisles to show product and price information for those times when an employee isn’t around.
REI also has a long history with CRM software. In the last eight years, three different initiatives have come and gone. "I tend to be cynical when it comes to CRM," Unmacht says, so much so that the co-op has come up with its own acronym, 5CP, to describe software to understand individual buying patterns in both the online and store channels.