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The retail revolution: Keeping up with today’s shoppers


By Jill Puleri, [email protected]

With shrinking ad budgets, and decreasing foot traffic in retail stores, it is an ever increasing challenge for retailers to get shoppers to shop -- even during traditional times of necessity such as “back to school.”

The prosperous days of 2007, when disposable incomes were high, and shoppers were frequently making impulse purchases are long gone. The new economy has turned loyal shoppers into deal-hungry hunters who carefully consider each decision before opening their wallets.

In the past, a retailer could analyze a customer’s past purchases and then paper them with coupons and mailers. However, the new economy has given rise to a smarter consumer -- one who uses technology to make more informed buying decisions, exchange information, make purchases on-the-go and shop across multiple channels. IBM’s recent survey of 30,000 global consumers found that half were willing to use two or more technologies during a single shopping experience.

As customers spread their purchases across a variety of channels -- including in-store, online, mobile, etc. -- it is becoming more difficult for retailers to track buying habits. Merchandize planners cannot rely on intuition alone to select the right product assortment, and quantities, in their stories. They have to blend the art of merchandising with science of forecasting, engage more directly with customers online, and customize assortment based on preferences, to truly give customers what they want.

These three trends are dynamically changing today’s retail landscape:

Gaining insights through analytics

It seems that just about every retailer has a customer insights initiative underway. And it's not about another BI tool. It's about combining the “art” with the “science” and making sense out of data. These approaches, which combine business consultants with advanced analytical tools creates environment for the retailer to answer the tough questions such as how to assort their stores, promote and price their products and even how to optimize advertising. All with the goal to be more relevant to today’s consumers.

In addition to customer insight, advanced analytics are being used to forecast and predict the future. IBM recently released the results of its analytics-based electronics forecast, which found that the electronics and appliance market is expected to grow to $739 million in September and October -- a healthy 5% uptick from last year. Based on these latest findings, and the upcoming Back-to-School season, IBM’s industry consultants advise electronic retail clients to keep stores stocked in hot items such as smart phones, iPads and flat-screen televisions. This data also informs recommendations on investment in advertising, leading up to the holidays.

Looking at data-driven reports, such as the IBM retail electronics and appliance forecast, retailers can optimize advertising and marketing dollars; manage extended supply chains; make seasonal staffing and hiring decisions and most importantly, compete more effectively for consumer mindshare.

Plugging into social media

As social networking gains increasing prominence in popular culture, consumers are using them more and more to sound off on shopping experiences. From product reviews to comments on customer service, shoppers are sharing all sorts of valuable information on the web. The challenge is for companies to tap into that data, and use it constructively.

From Facebook and Twitter, to location based social media platforms such as FourSquare, consumers are also identifying themselves by the brands that they choose and are openly engaging those brands in conversation.

Customers such as L.L. Bean in Maine are paying attention, and experimenting with mobile and social media to forge new relationships and build a foundation for collecting valuable consumer data. They have started gathering input from online product reviews, to input directly back into product development. This has shortened product lifecycles and created more demand for products. Customers have also benefited, enjoying newfound power in being part of the product creation lifecycle. IBM’s survey also found that 61% of respondents expressed an interest in co-creating products with retailers.

Zeroing in on customers

Retailers face a new mandate around shifting from the industry’s traditional approach of analyzing merchandise to today’s imperative for analyzing customers. Smart retailers know that customer preferences vary, and that regional differences command buying decisions in specific segments.

Just look at Macy’s, who recently revamped their strategies to take a more tailored approach to merchandising. Macy’s introduced the My Macy’s strategy nearly two years ago that shifted the merchandising power out of headquarters in Manhattan and into the hands of smaller, consolidated management teams within 69 districts. This corporate initiative to tailor local merchandise to local tastes is paying off, as “My Macy’s” is credited for boosting the retailer’s second-quarter earnings, announced last week. Additionally, Macy’s will hone in on specific customer segments to grow its business. For example, to tap into the growing spending power of young tweens, Macy’s will be rolling out its Madonna influenced “Material Girl” line to attract stylish female teenage shoppers and their moms this fall.

Similarly, J.C. Penney is also moving to target new products for an increasingly powerful subset: the career-orientated working woman with disposable income to spare for trendy clothing and accessories. To boost a more fashionable image, the company is unveiling a new fast-fashion line to compete more aggressively in the woman’s apparel market. A departure from its traditional approach, the company is partnering with an emerging European retailer Mango MNG in hopes to gain traction with the style-obsessed twenty-something who is also looking for quality products and a good deal.


As the economy, and subsequently the retail environment, changed significantly in the past two years, retailers face new challenges. Companies that want to continue growing need to be both flexible and willing to adopt new technologies.

Today, a small but growing number of retailers are laying the foundation to go beyond their own shopping cart purchase data to find out where else their customers shop, what they think, what promotions they respond to and what products they want to see. The clients described above have fearlessly adopted new technologies to predict the future, harness the power of social media and market more directly to their target customers -- and this is just the beginning. The future is bright -- and by making the right investments in time and technology more retailers can not only keep up, but come out ahead.

Jill Puleri is the Worldwide Retail Industry Leader for IBM Global Business Services. In the retail space, IBM works with retailers to improve the shopping experience in areas of solutions (i.e., supply chain, merchandising), products (kiosks, point-of-sale offerings) and overall service to the shopper (i.e. software that updates stock, interactive websites, predictive analytics that delivers relevant coupons/offers). She can be reached at [email protected].

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