Retail 3.0 redefines retail customer intelligence

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By: Wise Marketer Staff |

Posted on October 22, 2009

Retail 3.0 redefines retail customer intelligence

Hawkins Strategic has published a new position paper on 'In-Store Activity', the latest installment in its Retail 3.0 series (which examines the full spectrum of technology-assisted retail operations), addressing an area in retail that has long been a black hole: how shoppers interact with products in the store itself.

According to Sterling Hawkins, vice president for Hawkins Strategic, customers' in-store activity represents something of a gap in most retailers' customer intelligence, but technology is beginning to shine a light on in-store activity, providing tools to actually measure and manage these interactions for the first time.

The paper agrees that all stores already have the option to measure transactions, tracking the products flowing across their checkouts, and most stores have receiving systems, giving the retailer control over what goods end up on the shelves. Some stores have traffic counting systems, allowing them to measure the number of customers coming through the doors.

"But what happens between products flowing into the warehouse and shoppers leaving with them is the retail equivalent of a black hole," argues Hawkins. "In fact, at best, retailers are able to measure only the periphery of what actually happens in-store."

Category management is in place for many retailers, helping them to decide which products are on the shelves and how to price them, and great deal of planning and science can go into developing category plans. But executing such plans at the store level is always challenging, and often prone to breakdown in the dynamic store environment.

Despite attempts to reign in out-of-stocks through new technologies and store-level operations, these frustrations to both the customer and the store management continue to dog the retail industry. The typical estimate is that 8% of sales are lost to them, but Hawkins Strategic argues that the real figure is likely to be much worse: many shoppers simply leave the store - and all of their other would-be purchases - when a key item is not available.

The industry has long wrestled with promotion compliance, with many manufacturer-funded promotions being improperly executed at the retailer's stores (whether it's signs not being posted, special displays not being built, or new products not being cut in). New item launch assortment voids observed include major beverages (41%), major detergents (54%), major food items (46%), and even display programmes are subject to voids of up to 20%.

Many retailers have tried to fix this problem, and several firms now provide promotional compliance services. But, in the end, most of these are manual, labour-intensive processes (such as a person photographing certain categories, shelf sets, or displays). While these services deliver value today, the whole area demands an automated solution.

"Retailers also invest huge sums of money in store design and research to maximize the number of shoppers exposed to high margin products during their shopping trips but, at best, this is simply good guesswork," said Hawkins. "The industry has no mechanism by which to accurately measure traffic flow around the store and conversion rates within aisles and categories on an ongoing basis."

With a few exceptions, retailers do not know who their shoppers are at any given time while they are actually in the store - until the shopper is at the checkout, and even then this can only be retailers that have some type of loyalty programme or customer card.

As a result, new technologies are beginning to improve the level of insight available into in-store activity, and retailers have increasing access to the tools needed to measure and manage it. Brand manufacturers, which have steadily increased promotion budgets for in-store shopper marketing initiatives, have become focused on establishing some type of measurement so their money does not disappear into a black hole, as it has so often done in the past.

But it is not only brand marketers who are trying to obtain this level of information. Sophisticated retailers are now looking for technological solutions that will allow them to better measure and manage in-store activity, right throuh from store deliveries to promotion management, and from shopper tracking to on-shelf availability.

These new solutions, Hawkins argues, will help to open up the in-store environment in real time, connecting previously disparate systems and beginning to share information in the Retail 3.0 ecosystem: "This is the vision of Retail 3.0: aligning interests and optimising supply chain activity up to and including in-store activity, to maximize customer lifetime value (CLV)."

The full position paper, which examines the impact of the Retail 3.0 approach on store operations, transaction data, and business intelligence, has been made available for free download from Hawkins Strategic's web site - click here (free registration required).

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