Focus On: Four key innovative IT solutions

The economic downturn of the past 15 months has impacted retailers in every area of operations, and technology is no exception. Most industry experts agree that the days of platform overhauls and costly technology swap-outs are long gone. With capital already tied up in IT infrastructure, the next decade will teach chains to augment existing solutions with evolving, albeit proven, technology that will keep them flexible and successful going forward.

“It is time for a refresh of purpose, and innovative solutions can help,” said Paula Rosenblum, managing partner, Retail Systems Research, Miami.

Going forward, ease is the name of the game, according to Rosenblum.

“Interfaces need to be easy, access to real-time information is a must, and the ability to get the right information into the hands of decision-makers is crucial,” she said.

As retail IT executives plan for the year ahead, here are some key innovative solutions that have found a niche within the retail industry.

Mobile applications: Cell phones, smartphones and PDAs (personal digital assistants) are fast becoming critical tools that help consumers perform daily tasks, so the timing couldn’t be better for retail chains to integrate the power of consumer mobile applications into their business strategies.

By the end of 2010, 1.2 billion people will carry handsets capable of supporting rich, mobile commerce applications, according to Gartner, the Stamford, Conn.-based technology research firm. This will set the stage for retail chains to successfully merge mobility, the Web and retail.

“Going forward, the mantra for retailers needs to be ‘mobile, mobile, mobile,’” Rosenblum said. “It may be a budding technology, but consumers are demanding it and retailers need to respond.”

Some chains are already ahead of the game. 7-Eleven for example, is using mobile technology to expand its assortments. With a new focus on the gaming category, the Dallas-based convenience store giant is pulling out all the stops to reach a new demographic of shoppers: the 16- to 34-year-old crowd.

“This group is focused on using technology more than any other customer segment, and it is also a sweet spot for the gaming category,” said Michael Jester, 7-Eleven’s category manager for gaming and electronics. “They are never without their phone and always on the lookout for new gaming merchandise.”

The chain began carrying electronics and video games a year ago, and assortments are growing. Yet 7-Eleven knows it can’t sacrifice its core assortment of convenience items to expand the category. By partnering with Redmond, Wash.-based Microsoft, 7-Eleven is helping Gen Y shoppers electronically order merchandise directly through their cell phone.

Shoppers can download the Microsoft Tag application onto their iPhone, Palm, Blackberry or other smartphone device. Using their phones, consumers can snap a digital photo of dedicated “tags” displayed on point-of-purchase signage. Images are uploaded to a dedicated URL where shoppers can use 7-Eleven gift cards or other prepaid cards to order the chosen merchandise. Orders are directed to a third-party distributor that will fulfill the order.

The chain is planning a 25-store test for early this quarter, Jester reported.

“We see this as another service they can use while they come in for their coffee, soft drinks and snacks,” he added.

Other retailers, such as K&L Wine Merchants, are using mobile technology to merge the online and offline experience. The multichannel retailer regularly examines online traffic patterns and the browsers customers use to access its Web site. When K&L noticed that a majority of consumers were accessing the site through browsers supporting mobile devices, it decided to recreate the store experience for mobile users.

“To do this, we needed to optimize the mobile navigation experience,” explained Brian Zucker, coowner, K&L Wine Merchants, Redwood City, Calif. “We wanted to ease the search experience.”

The company turned to Cambridge, Mass.-based Endeca, a provider of search and information access solutions, and Unbound Commerce, Newton, Mass., which serves up the information in a mobile-friendly interface. Endeca’s search engine is linked to K&L’s databases, which store the chain’s online wine catalog, customer reviews and food pairings. The solution then synchronizes common attributes, such as blends and wine origination. As mobile users link to the site’s search application and input their key words, the search engine delivers a compilation of results to Unbound Commerce, which displays the information in a mobile-friendly interface. Users can drill down for more specific results by clicking on terms such as brand, year or rating.

Approximately 10% of K&L’s daily online traffic comes from mobile users. The chain hopes to enhance the mobile experience in the future by adding m-commerce, or a mobile-ordering application.

Advanced Analytics: Staying one step ahead of shoppers is never easy. But that’s what some retailers are doing through advanced analytical solutions, which look into the future, predicting what can or will happen. Such solutions provide simulation, prediction, optimization and other analytics, not simply information, to empower even more decision flexibility at the time and place of every business process action.

Such solutions can serve many purposes. For example, by integrating an advanced analytics solution to existing loss prevention technology residing in a prototype store, Home Depot is collecting data it needs to beat thieves at their own game.

Although the home improvement chain has lowered its retail shrink rate during the past decade, it decided in 2009 to take its efforts one step further and learn how to use cutting-edge technology to protect its assets, with a goal of “becoming a leader of retail loss prevention,” said Mick Pinneke, senior director of asset protection, Home Depot, Atlanta.

Home Depot is tweaking its plan in a prototype location, referred to as the Asset Protection Innovation Store, which launched last July. While the store does serve shoppers, its main role is to help the chain test the effectiveness of solutions in a controlled environment.

The store provided the perfect setting for Home Depot to evaluate the value of advanced analytics in theft prevention. Although the chain’s stores are outfitted with closed circuit television systems and some of its merchandise is protected with electronic article surveillance tags, the retailer still lacked insight into shoplifters’ patterns. By using a variety of analytical tools and models, Home Depot is investigating potential outcomes and scenarios related to loss. Besides analyzing what happens before and during a theft, advanced analytics also provides insight that will allow the chain to predict what thieves will do as they try to leave the store. The results will help the chain maximize the effectiveness of its loss-prevention business processes.

Specifically, Home Depot deployed video cameras in its tool corral and hand tool departments, two high-theft areas due to the coveted merchandise they feature. The cameras are connected to a DVR loaded with analytical software, a combination that detects patterns related to shopper merchandise selection, traffic patterns for the aisle, shopper dwell time at specific aisle locations, as well as which patterns and behavior lead to a sale.

“We have learned to identify specific theft patterns and make it easier for us to pinpoint intentions of the bad guys,” Pinneke said.

The technology has other benefits as well, with Home Depot using it to uncover merchandise affinities, step up marketing signage and even focus on specific pockets of aisle real estate that may