How Retailers Can Overcome Gloomy Economic Trends

Michael Hickins , Oracle

Retailers have their work cut out for them—yes, even more than usual. Despite falling gas prices and interest rates as close to zero as we’ll see in our lifetimes, consumers aren’t in a giving—or buying—mood.

That’s the gloomy irony underpinning the National Retail Federation’s annual “Big Show,” which just concluded at the cavernous, gloomy-in-any-weather Jacob Javitz Center in New York. If recent reports are to be believed, consumers still seem to be licking their wounds from the steepest economic downturn since the Great Depression, new credit card technology is likely to shift more fraud liability onto retailers, and legislation is looming that could further hamper their ability to collect data about their customers and help them connect the dots between their virtual and physical stores.

The good news, however, is that the current state of affairs will allow the cream to really rise to the top. Retailers that get their omnichannel strategies right will satisfy more customers and win more hearts than at any time in history.

Real, physical stores are back. Forget millennials—Baby Boomers, Gen X, and Gen Y customers still offer the biggest share of wallet, and by most accounts they still love going into stores. “E-commerce will never be greater than around 10% of total sales,” notes David Dorf, senior director of technology strategy for Oracle Retail. Even for larger retailers with strong online components, “the bulk of their business is in the [physical] stores.”

Consumers also love the convenience of shopping from their mobile devices—and now they want to be treated the same way in both places, to be able to shop in one place and pick their purchases up in another, and return what they bought online at the closest store.

“The key for retailers is connecting the two experiences together,” says Dorf.

One of the newer technologies gaining rapid adoption allows retailers to identify consumers when they walk into their stores. Typically tied to smartphones through new Bluetooth beacons and other geofencing technologies, they allow retailers to make relevant offers to consumers before they actually get to the checkout line—which is too late in the process. “You can touch people in the store and make recommendations before they’re ready to leave,” says Dorf.

These technologies also allow retailers to gather and aggregate data about customer behavior, such as the paths they take through stores and where they tend to spend the most time, which can indicate successful shelf arrangements. “This is very helpful because it can help retailers determine where to put their higher-value items,” says Dorf.

Another new technology is what Dorf calls “data as a service,” essentially a platform that allows retailers to aggregate their own data–data they sometimes trade with other retailers–as well as third-party data from data service providers. “Having all that data in one place and being able to mine that data helps make everyone more efficient,” says Dorf.

Retailers are also benefiting from more pervasive access to real-time information. Data stored in superfast in-memory computer systems allows store managers to generate reports in real time instead of at the end of a day or week, and new data visualization technologies make that data more comprehensible and actionable. “Now this is on everyone’s iPhone or iPad in real time,” says Dorf. “The speed at which technology allows us to get access to information is changing things dramatically.”

Video facial recognition technology is now capable of determining age and gender characteristics of shoppers, making it easier for retailers to generate demographic data within stores.

As retailers strive to know more and more about their customers in order to make more relevant and timely recommendations, they have to straddle a fine line between being informative and intrusive. Or as Dorf says, “the strategy has to be about being a butler, not a stalker… A butler knows you well enough to know what you like. A butler is there for you when you need him. But you don’t want to be a stalker.”

Retailers are also looking for unified transaction systems that allow them to collect transaction data across all their channels in the same place. “They want to get away from stovepipes,” says Dorf.

Of course, technology is not just changing how retailers sell—it’s changing what they sell. An increasing number of goods, from detergent to washing machines, come with intelligence embedded that can order replacements for parts that may be about to fail, connect to the internet to determine whether to water the lawn based on weather forecasts, or restock themselves automatically.

This is something entirely new for store associates, and unless they’re educated about these technologies and how they impact consumers, they won’t be able to sell them successfully. “It’s something retailers are going to have to figure out,” says Dorf. See his post, “How The Internet Of Things Will Shake Up Retail In 2015.”

Retailers will also need to brace themselves for a potential surge in online fraud once new chip-based credit card readers become commonplace in physical stores in the US. As those readers get deployed and credit card fraud becomes harder to pull off in physical stores, thieves will move online, at least in the short term, says Dorf.

“Over the long haul it will be better, but in the short term, all of these retailers that are setting up [chip card readers] have to be aware that that fraud is going to move online, and they need to do something about it. And it’s not easy,” he says.

Oracle industry experts like Dorf will be on hand at Oracle’s Industry Connect 2015 show in Washington, D.C. March 25-26 to help customers adapt to new market challenges and adopt appropriate new revenue-boosting technologies.