For brick-and-mortar retailers, shoppers with smartphones have until recently been about as welcome as barbarians at the gate. Specifically, the practice of “showrooming” – checking prices at a store and then going online to find cheaper alternatives – has posed a serious threat to in-store revenue. Attitudes are changing, however, as retailers increasingly embrace mobility as a potential competitive advantage.
Indeed, over the past two years, retailers around the globe have scrambled to implement WiFi infrastructures to enable free, high-speed Internet access within their stores. This infrastructure is being used to support and manage a wide range of applications. Examples include:
- Discount coupons and advertising promotions sent to smartphones when accessing in-store WiFi;
- Mobile check-outs and payments;
- Loyalty programs;
- Social network campaigns to build communities around a retailer’s stores or products; and
- Using purchasing preferences to enhance CRM database and, conversely, to target customer preferences.
Today, simply giving away free WiFi access in store locations isn’t enough. Rather, retailers seek to identify and deliver the mix of services that aligns with business strategy and customer demographics, optimizes benefits, and addresses major risks. The challenge lies in finding that sweet spot in a relatively immature market where many players are struggling to find their way.
In this environment, CIOs have an opportunity to step up into the role of a true business partner by facilitating a dialogue with marketing executives around how to develop an effective “click-and-mortar” enterprise – one that leverages online technology to enhance rather than replace the in-store experience. Marketing teams have to define what customers want and what the business would, ideally, deliver in terms of online offers, promotions and targeted campaigns that draw people into stores, keep them there to make purchases and then keep them coming back.
Forging this CIO/CMO alliance requires overcoming some obstacles around communication and bridging the gap between respective areas of expertise. While CMOs can describe what they’d like to see in terms of value-adding applications, they often struggle to articulate that wish list into a set of operational requirements for IT. For their part, CIOs need to explain what’s feasible from a technology perspective and what’s cost-effective.
Effective CIO/CMO collaboration can combine a vision of what the promotional sweet spot looks like in terms of how customers are segmented and targeted, along with an understanding of how the in-store operational model supports that customer strategy. If simply giving away free WiFi to all customers isn’t viable or effective, retail CMOs must decide which customers should get special offers, how special those offers should be, how to deliver those special offers and how to create incentives to get new customers and retain (and grow) existing ones. Correspondingly, the retail CIO needs to develop the systems, applications and operational model to deliver on that segmentation strategy as cost-efficiently as possible. When that happens, the CMO and CIO can together develop a business case to measure the impact of WiFi initiatives and effectively gauge ROI.
Retailers have for years deployed hand-held barcode scanners and wireless-based logistics, supply chain and inventory systems to manage backroom and warehouse operations. The question now is how to apply those capabilities to applications that deliver value-added options to customers.
While the technology involved is relatively straightforward and within the realm of basic blocking and tackling, coherently rolling out and deploying a WiFi network in retail stores around the globe presents a variety of challenges. For one thing, security is essential, as the network that supports the in-store customer-facing applications must also support core business functions, such as inventory, price checks and self check-out capabilities. Having one unique WiFi infrastructure is key, as the funding necessary to provision duplicate networks separated by a virtual “Great Wall of China” would be prohibitive. An additional security concern is the fact that the same infrastructure will support “rogue” web surfing from in-store customers, as well as highly secure CRM and ERP workflow connected to the retailer’s back-end data center. Under the circumstances, the chief security officer’s support of the business case is essential.
Global retailers, meanwhile, must strike a balance between a standardized solution that operates uniformly across borders on the one hand, against the need to adapt to local market conditions and customer preferences on the other. Support models will reflect this tension, and will vary from one global vendor to a mixed model of local vendors supplemented by in-sourced technical expertise. Additional choices must be made around technology refresh, and the type of terms and conditions required for in-store customers – along with the implications raised for local regulatory standards around customer data and security. The majority of global retailers have rolled out a unique model within each of their main countries. Some are willing to pay a premium to have the same vendor supporting their infrastructure globally, as this single point of contact provides a unique value to them, especially when supported by strong Service Level Agreements (availability and time-to-restore incidents).
Insight into competitor strategies is essential and has an impact on roll-out strategies. Should retailers commit to massive global implementation? Or focus on selected proof-of-concept initiatives? The former approach can be more cost-effective, and the potential benefits of success are greater, as are the potential risks of failure. A proof-of-concept approach can provide insight into alternative options, but can be misleading, as the results of one regional pilot initiative may not necessarily replicate under different conditions. The initiatives ISG has observed have primarily been launched as proof-of-concept models aimed at finding the right application that will be broadly “liked” by customers and uploaded through the retailer’s application store – and finding the right application that fits customer preference can be a time-consuming process that is difficult to predict.
Despite the relative immaturity of the market, retailers are developing highly innovative applications around in-store WiFi. For example, ISG worked with a major retailer to explore applications that ranged from in-store 3D “sat-nav” capabilities to help customers find the right product in the right aisle and shelf, to applications that facilitate in-store shopping, such as a shopping list app, mobile scanning and mobile wallet technology.
An effective CIO/CMO dialogue can lead to a better understanding of how retailers can take advantage of in-store WiFi to gain a competitive edge. Such a dialogue is also essential to understanding the market, defining options and building a business case to quantify the benefits of new initiatives and to sell the organizational change needed to implement innovative new programs.
ISG is a global consulting, research and advisory services firm specializing in operational excellence. John Lytle is an ISG Director based in Chicago and can be reached at email@example.com. Julien Escribe is an ISG Partner based in Paris and can be reached at firstname.lastname@example.org.