Two Retail Technologies to Keep an Eye on in 2014
By Jeff Weidauer, VP of Marketing and Strategy, Vestcom International
Webster defines technology as “the application of scientific knowledge for practical purposes, especially in industry.” Put another way, technology is the use of knowledge that solves problems in a practical manner. It’s important to understand that, because when it comes to the concept of retail technology, history shows that too often the solution becomes a hammer looking for a nail.
Technology is certain to play a major role in retail this year, but the success of any given technology will depend more on whether we start with a problem, rather than start with a solution. It’s not as if there are not plenty of challenges to solve. Solutions for the most critical and obvious challenges are well within reach of current technology. Let’s look at a couple of examples.
The single largest complaint shoppers have with retail stores is the wait to checkout. Online shopping, along with its many other advantages, comes without any concept of lines or waiting. If stores could figure this one out — and at least one or two have — then the overall brick and mortar experience would improve. With the low cost of sensors, e.g. infrared to sense heat, or photocells that can sense movement, in-store traffic can now be monitored in ways that were unthinkable even a decade ago.
Anyone who has worked in a store knows that there is never a steady flow of shoppers through the store. That would be too easy. It sometimes seems like shoppers gather in the back and rush the checkout on purpose; the ebb and flow of traffic at the front can be that extreme. The net result is that the checkout goes from lull periods to times where all available checkstands are needed, and the process can be repeated two or three times in an hour.
Leaving checkstands open in between the rush periods isn’t cost-effective. The standard practice is to close down all but a couple so other tasks can be accomplished, and when the next rush hits, the troops are brought back up front. But by this time the lines have formed, and that 30 seconds of waiting feels like five minutes to the shopper.
The answer is to monitor the flow of shoppers through the store and bring the troops up before they descend on the front end. The tracking devices previously mentioned, combined with some software, can make short work of this problem. This is a perfect example of how technology can solve a real problem and increase shopper satisfaction. The only question is why this isn’t the standard now.
The next challenge has been around for just about as long as lines: out-of-stocks. Out-of-stock levels in U.S. supermarkets have held consistently at about 8 percent for as long as anyone has been tracking them. Many approaches have been tried to reduce out-of-stocks—often using technology — but with no real success in reducing the 8 percent rate. Part of the challenge has been in defining the root cause of the problem. Out-of-stocks have historically been blamed on either a broken store product pipeline or on poor ordering, so technology solutions focused on solving these two problems.
Logistics have gotten very precise in the past 20 years, and major pipeline supply issues are rare with auto-replenishment, item movement tracking and perpetual inventory systems that take out the guesswork at both the warehouse and store level. So why is there still an out-of-stock problem? Recent studies have shown that up to 75% of out-of-stocks are actually caused in the store itself, i.e. the product is in the building but not on the shelf.
Oftentimes this problem is exacerbated by store policies. It’s been a longtime practice to “face over” holes where products were missing, but more often than anyone wants to admit, that has the effect of making a temporary stock-out a permanent one. A classic example of this is when a product is out, it’s faced over with something else, and the shelf tag is covered or even removed (often being stuck under the shelf). Voilà! An instant out-of-stock.
The dirty little secret about that 8% out-of-stock rate, by the way, is that shopper perception of the problem is much higher. Shoppers perceive the out-of-stock problem to be closer to 25%. Higher velocity items are out more often and have a greater impact on shopper perception. No one cares that the pickled okra is out, but if the Honey-Nut Cheerios are gone, that’s a problem.
Item-tracking software tends to be focused on movement, i.e., when shoppers purchase a case of a certain product, it’s reordered automatically. But what happens when that case never makes it to the shelf and the movement stops? Few systems track that, or if they do, it’s to reorder yet another case. Suddenly there are three cases in the backroom, but still none on the shelf because the tag is missing.
Out-of stocks present one of the greatest challenges retailers face today. Rather than looking outside the store, the solution lies in the store itself, at the shelf.
Retail technology is a tool, and properly used, it can be a very effective one. Laser scanners and barcodes, perpetual inventory systems, even automatic misters in produce — these are all examples of effective use of technology. But for every practical use, there is an example of a solution in search of a problem, to wit: electronic shelf labels, kiosks, and ceiling-mounted video screens.
If we can focus on technology second, and spend more time and resources identifying opportunities and their underlying causes before we worry about solving the problem, the customer benefits and retailer ROI will rise together.
Jeff Weidauer is VP of marketing and strategy for Vestcom International Inc., a Little Rock, Ark.-based provider of integrated shopper marketing solutions. He can be reached at [email protected], or visit Vestcom.com.