Sponsors:

SMRs must tout that they are on par with Tier 1 retailers regarding cost and innovation so they can adapt as the customer evolves.

INNOVATIVE RETAILT E C H N O L O G I E S

The Annual Small To Midsize Retail Research Report

Winning The BaTTle For The omni-Channel Share oF WalleT: How Are Small To Midsize Retailers Doing?

SMRs need to present themselves to the consumer with all of the power of tier-one retailers, but they need to do this in a manner that is sustainable — at

the right cost in terms of budget, right sized in terms of immediate and ongoing resource requirements, and the right platform for inno-vation, so that they can adapt as the customer evolves. This special report from IDC Retail In-sights will help SMR retailers do three things:

1. Understand how to satisfy consum-er needs by employing an omni-channel operations platform that is future-proof

2. Assess how their digital and omni-channel programs compare with the competition

3. Develop a road map for digital and omni-channel transformation

The Customer is always right and always onThe customer journey is no longer bounded by place (the store), and it is dotted with inter-actions, influences, purposeful discovery, and commercial experiences that culminate in the acquisition of goods (through purchase, lease,

are still exploring how to enable seamless omni-channel customer journeys to improve performance amidst these new shopping patterns. This report defines the who, what, why, and how of building omni-channel re-tail execution platforms that will enable retail organizations to move closer to being the retailer who offers customers their last next “best experience.” Because as we all know, the retailer that will be the first stop on a custom-er journey is often the retailer that has been identified as the one that best maximizes their time and enjoyment with great experi-ences, value-aligned products and services, and easily discoverable information — just when they want it!

What Consumers Say about Three Key engagement TacticsThree of the areas that are undergoing an im-

or borrow arrangements). If the adage “The consumer is always right” still holds true — and most retailers think it does — then every retailer, whether operating stores or not, has to consider the impact of the omni-channel shopper on its business. After all, retailers tell us over and over again that the most profit-able shoppers are those who shop across all available channels, with an average spend of at least 30 percent more than single channel shoppers because of the added convenience and engagement the converged physical-dig-ital shopping experience brings.

Since stores continue to enable 90 per-cent of retail business in the U.S., retailers with stores have an advantage — a prebuilt marketing and fulfillment network. When combined with a digital presence and om-ni-channel engagement strategy, retailers can execute and outperform single channel competitors. The challenge, of course, is or-chestrating and instrumenting the efficient movement of goods to the consumer while providing the level of service that consumers expect, with all of the additional overhead of an extended physical footprint.

SMRs no longer question if the customer shops differently now, but many retailers

by Leslie Handvice president,

IDC Retail Insights

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mediate and obvious shift in consumer en-gagement strategies and tactics are related to mobility, payments, and omni-channel fulfill-ment. IDC Retail Insights Consumer Survey data indicates that consumers often don’t ask for capabilities in advance of encountering them at a retailer, but once they have a personal experience of the value of capabilities such as in-aisle mobile checkout, mobile payments, and click and collect, they come to expect and look for capabilities at other retailers. So while responses to consumer surveys and even usage data often make it look like adoption is low for some of these technologies, the winds can shift overnight as the consumer has an opportunity to experience the value of net new retail capa-bilities enabled by technology investments.

MobilityLarge grocery and general merchandise retail-ers have been offering self-checkout capabili-ties for some time, and several leading retailers including Nordstrom, Home Depot, and Sepho-ra now offer mobile checkout options that pro-vide line-busting capacity but, more impor-tantly, provide continuity in the sales process in the store. Successful programs close more sales, increase basket size, and improve transac-tion profitability metrics. Our IDC Retail Insights Consumer Survey revealed that 14 percent of consumers have already experienced checkout in aisle, and all indications are that this number will multiply quickly.

SMRs benefit as much or more than anybody when they can complete a sale while the con-sumer is engaged in a 1:1 interaction with them.

Radical Shifts To Mobile Payments Coming SoonThe stars are finally aligning around con-sumer mobile device-based payments. Even the smallest businesses are now taking credit,

processed on Square, Clover, PayPal, and other providers’ technology, which enables consum-ers to leave their cash in the bank. PayPal radi-cally changed the payments landscape when it, like Starbucks, started letting consumers leave their cards in their wallets for purchases. But one could argue that the possibilities of secure payments on a personal phone in physical retail should be attributed to ApplePay, even though others including Google had capabilities first. Importantly, Apple helped drive cooperation among the banks, telcos, payments networks, and device manufacturers, and the Visa liability shift has driven retail investments in new pay-ment terminals — establishing the basis for realistic consumer adoption expectations. And now that the banks are shipping cards with EMV chips, retailers will find more reasons to upgrade capabilities to reduce risk and improve the customer payments process.

IDC Retail Insights data certainly reinforces that adoption is happening and will continue to grow dramatically through the next sev-eral years. Only 17.4 percent of consumers reported using their smartphone to pay in the past year, but this number is more than two times what it was the previous year. Similarly, contactless payments have been used by 15.4 percent of consumers in the last 12 months. SMRs need to be able to accommodate the shopper who no longer carries cash and has hesitation regarding the security of transac-tions with a small business. While protecting consumer data, these new capabilities also reduce retailer liability.

Flexible Fulfillment — An Expected CapabilityAccording to IDC Consumer Survey data, an incredible 62 percent of consumers have had goods delivered from store to their home. More than 20 percent have picked up an online order

(click and collect) in store. Some big retailers re-port that more than 40 percent of their online orders are being directed to in store pickup, which is great for business, because getting the customer to the store is half the battle. Small and medium retailers may have smaller physi-cal store footprints than larger competitors, but can exponentially expand their distribution footprint by partnering with other retailers, sup-pliers, and distributors for physical presence.

The perennial challenge is maintaining accurate inventory numbers so that inven-tory promises can be made in real time, and BOPIS (buy online, pick up in store) commit-ments kept when the consumer comes to the store for the pickup. Additionally, lurk-ing below the surface is another challenge — the complexity in managing and orches-trating distributed orders such as these. These require investments in software that use intelligent algorithms and rules-based processing to manage the most satisfactory (for the consumer) and profitable (for the re-tailer) path to order fulfillment.

Out-of-stock rates, which are often reported at greater than 25 percent among large retail-ers, lead to disappointing customer experi-ences, which in turn lead to cart abandonment and lost loyalty. No surprise that Target is get-ting ahead of this problem, having announced Available To Promise, a new program that guar-antees product availability for their BOPIS pro-gram. SMRs that focus on improving in-stocks can significantly improve the likelihood that the customer returns, preserving customer loyalty, and improving purchase frequency by as much as 25 percent (because they become the retail-er that provides “the best experience.”)

Winning At Omni-Channel By Giving Customers What They WantSMRs that piece together net new capabilities by

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implementing mobile, payments, and fulfillment are on the right track. But newly implemented business processes in isolation of a broader plan for giving customers what they want now and in five years from now is short-sighted. Impos-sible to know precisely how, but almost certainly guaranteed is that consumer needs will continu-ally evolve at unprecedented rates.

In order to continue to adapt to evolving consumer needs, SMRs will be best served by implementing an omni-channel retail execu-tion platform that will enable the retailer to plug new capabilities in with adapters and APIs that enable continual service innovation. The figure on page 5, “Omni-Channel Retail Execution: Consumer Journeys and Retail Business Growth Pathways,” illustrates how the consumer moves through the four quadrants of the journey: in-spiration, discovery, selection, and fulfillment and support, while utilizing both consumer-facing and behind-the-scenes capabilities that the retailer has enabled to optimize the ease, convenience, and fluidity of the experience.

To the consumer, the optimal experience is flawless, and they move with considerable agil-ity in and out of the various rings within and across quadrants in no set order as their jour-ney progresses. For the retailer, each consumer touchpoint provides more information that informs deeper engagement through the next cycle of the flexible and agile customer engage-ment cycle (annotated within the gray wedge).

The notion is that as the consumer bounces along through their shopping journey, the re-tailer progressively cycles through what is de-picted as an agile cycle of start, assess, act, en-gage, and iterate (learn & adapt). The retailer’s responsibility and iterative process to improve customer engagement are described as follows:

• Start. The customer enters into a shopping journey to fulfill a specific need or shop for a list of items; and sometimes they are “just browsing” — whether shopping via bricks (physical locations) or clicks (digital locations). The retailer provides inspiration by market-

ing, messaging, and presenting ideas and options in the physical and digital realms.

• Assess. As the customer enters the discovery phase of their journey, the retail-er starts piecing together an understand-ing of the journey the customer is on, and assesses how to influence conversion. The retailer evaluates customer value, real-time activity, and individualized conversion trig-gers as the customer gets closer to a selec-tion. Product availability and the physical location of the customer and proximity to the product are fulfillment questions that are often a key determinant of the pur-chase at this point. Through this period the retailer has an opportunity to present rich media and competitive offers, and engage in additional marketing and 1:1 engage-ment tactics to improve the likelihood that the customer buys from them.

• Act. As soon as an understanding of the customer journey starts to take shape, the retailer will want to start reviewing histori-cal customer patterns and attribute-based patterns of shoppers on similar paths. This is the actionable insights phase, where data about place, context, and response patterns drive personalized interactions that have proven individualized returns.

• Engage. Let us not forget that the cus-tomer — regardless of place — engages with people and digital systems, some-times through multiple cycles of inspira-tion, discovery, selection, and fulfillment exploration; and in this phase retailers are seeking to leverage a contextualized location-specific understanding of the customer to improve the customer rela-tionship with the right offers, service, or in-formation that will close the sale. In-store and virtual engagement strategies may include RFID-enabled fitting rooms, digi-tal displays, mobile applications, robotic sales assistants, call buttons, and useful sales assistants (likely armed with mobile devices and applications that elevate cus-tomer service). Again fulfilment and sup-port options play a role, as the last mile is the last engagement opportunity and can make or break the relationship.

• Iterate: Learn & Adapt. A/B testing and continual listening, learning, and refine-ment of engagement strategies is the new gold standard for optimizing results and growing lasting customer relationships.

The goal, of course, for the retailer is to imple-ment the capabilities that will enable capturing

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No one can shine a light on the future of payment processing without com-ing to the realization that what is new today will be ubiquitous tomorrow, and another new thing will be on the horizon. Mobility, transaction data integra-tion, apps, peer-to-peer payments, and cloud-based software deployment will transform how we pay for goods and services; and technology keeps driving payment processing forward to the next new thing. The one question that is asked regarding each new technology: Is it safe?

EMV — or smart chip technology — is the biggest step forward in transac-tion security since the advent of the magnetic strip. At first look, EMV would seem to have only upside: a card-present, NFC-enabled technology, nearly impossible

to duplicate, practically guaranteed to reduce card theft. Indeed, consumers and merchants will see benefits of the increased security. Developers, however, have expended significant toil and treasure to ensure EMV transactions process.

Prior to the U.S. rollout of EMV, we’ve learned that EMV adds a crucial layer of security but introduces complexities related to payment services. These com-plexities appear at several points along the payment chain and result in a num-ber of questions from software developers, merchants, and their customers.

Technology drives the future of payment processing, making it easier for merchants to securely process payments and allowing them to grow their business.

Sid Singh, president, openedge

EMV’S Fit in thE FuturE oF PayMEntS

and analyzing more customer engagement data at each consumer touch point about place, context, product interests, and interaction re-sponse to inform a refined engagement strat-egy that is responsive to shifting or journey-spe-cific patterns. The prerequisite, consumer-facing engagement strategies span touch points and enable inspiration, discovery, and conversion, building loyal relationships along the way.

how Smrs are Planning For The FutureKnowing the customer, and being able to personalize and contextualize interactions in both the digital and physical realms, will be the business growth enabler as SMRs become more focused on being 1:1 rela-tionship builders and commerce agents. To accomplish this feat, SMRs should evaluate whether they have an omni-channel retail execution platform in place that will sup-port today’s business growth plans and en-able continued alignment with consumer needs. Companies that fail to implement omni-channel congruent architectures and systems will struggle more and more as time goes on, as consumer behaviors be-

come more rigidly aligned with best prac-tice retail capabilities.

3rd Platform Investment TrendsInterestingly, when IDC Retail Insights com-pared SMR retail responses regarding 3rd platform technology investments (social, mobile, Big Data and analytics, cloud, and IoT), interesting trends come to light (See “3rd Platform Initiatives: Small/Midsize vs. Large Retailers” on page 6). SMRs lead in mobile and social technology investments, but lag significantly on Big Data and analytics invest-ments. While this can easily be rationalized considering the sheer size and complexity of larger competitors and the challenge they have maintaining 1:1 relationships, we would argue that SMRs have just as big a challenge interacting and building relationships.

Big Data And Analytics Investment TrendsSMRs should look at alternatives to acceler-ate adoption in the area of analytics. Cloud and SaaS-deployed solutions, and creatively structured financial relationships that re-ward analytics vendors for improving retail

performance, are a few methods that enable turning these capabilities on sooner rather than later. Contrary to IDC expectations, cur-rent data indicates SMRs lag large retailers in cloud adoption, which may indicate that they have been more focused on customer engagement at the edge versus replatform-ing for the future.

There are several areas of Big Data and analytics investment where SMRs are ahead of large counterparts (see “Top 3 Ways Big Data and Analytics Are Being Applied: Small and Midsize vs. Large Retailers” on page 7, includ-ing “for surveillance” and “to understand prod-uct performance, rationalize product lines, and/or develop new products.” This investment strategy hones in on stopping the bleeding, so to speak — preventing loss through theft). But impressively, this also indicates that SMRs have identified that differentiating on products and product assortments above all else will attract and retain their best customers. Frankly, with so much to do to create better engagement with customers, this is a great approach until the customer is drawn to the competitors via 1:1 interactions and forgets to stop by to see what a retailer has to offer.

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Mobility TrendsIDC’s mobility data (See “Top 3 Mobile Applica-tion Priorities: Small/Midsize vs. Large Retailers” on page 7) proves that SMRs are leveraging mobile devices and applications to improve customer interaction and engagement and fa-cilitating employee productivity. Just over 28 percent of SMRs reported using mobile com-merce/payments while only 20.2 percent of the large retailers reported similarly. Customer alerts, updates, reminders, and notifications are used by greater than 10 percent more SMRs than large retailers (26.9 vs. 16 percent), but one has to be concerned that mobile interactions with-out the analytics to personalize 1:1 engagement may result in repetitive and frequent outbound messaging with low response and conversion. When offers are not personalized, they are just discounts that the consumer knows they’ll have in their in-box when they want it, versus driving immediate high-value purchase behavior.

Mobility is an efficiency and productivity en-abler for the workforce, and SMRs are investing in improving communications with the work-force and reducing the effort to perform time-consuming tasks like completing timesheets,

password resets, and employee surveys — all to a greater extent than their larger competitors.

Developing a road map For implementing an omni-Channel retail execution PlatformRetailers that entered into an omni-channel journey early, in 2010-2013, defined omni-channel processes and business needs that were not yet served very well with off-the-shelf vendor solutions. But just as these retailers worked steadily at defining these new retail reality business processes, technology vendors were ramping up R&D investment and acquisi-tion strategies to meet the new customer-cen-tered, 3rd platform-enabled business require-ments. Others emerged as key innovators and enablers of doing business in a mobile, social, and cloud-based way. Meanwhile, well-known integrators and service providers filled a gap to facilitate becoming omni-channel (and in some cases have developed IP to support omni-chan-nel business for the long term).

Retailers embarking on an omni-channel journey today have little tolerance for “science projects,” companies that can’t tell them what

best practices are, and toolsets that will require years to adapt to their business. The current wave of retail omni-channel execution platform implementations should be inherently mobile, social, and cloud-based, with Big Data and ana-lytics applied to drive better decision processes. Retailers expect that they will be able to accel-erate implementation timelines, minimize the cost of implementation, and achieve ROI faster, and it is this expectation that is driving revolu-tionary innovation in omni-channel retail ex-ecution platform design and deployment. Man-aged services are also getting more attention as retailers seek to offload noncore business-build-ing responsibility.

recommendations For Small To midsize retailersAny retail organization — those that are already well down the path towards becoming omni-channel and those just entering this journey — can benefit from reflection and comparison to competitive best practices for the omni-channel retail execution platform of the future, particu-larly since customers are continually evaluat-ing retailers against each other, seeking newly shaped “best experiences” at every turn. Retail-ers need to rethink their role in the commerce ecosystem, accepting and defining a new role as 1:1 relationship builder and commerce agent. The retailer needs to accept responsibility for orchestrating omni-experiences, as chief selling agent and relationship master.

As such, retailers become inherently digital businesses, engaging consumers in ever-evolv-ing ways to earn the first glance, the first stop, or go-to position among the many competitors that vie to attract and grow loyal customers. This report touches on various aspects of the omni-channel journey, with a focus on identi-fying omni-channel retail operations platforms architected to stand the test of time:

• Create an omni-experience engage-ment team whose primary goal is identi-fying and shepherding customer-centric

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For small and midsize distributors and e-tailers, increased sales can quickly lead to growing pains in the warehouse or DC when manual pick operations are no longer able to keep up with demand. Once these businesses reach a certain volume of orders, accuracy and turnaround time begin to erode under the strain of the increased workload. It is not uncommon for these businesses to become quickly overwhelmed by large volumes of small-quantity, mixed-SKU orders and find themselves outgrowing their existing fulfillment capabilities.

One way to take these businesses to the next level is by implementing material handling automation. However, implementing traditional automated

fulfillment technology is time-, labor-, and cost-intensive — and often beyond the reach of smaller companies struggling to meet growing demand. These complex automated systems typically take up a large amount of space, require a lengthy planning process, and are very expensive. What’s more, once these systems are in place, additional changes in future demand could require another lengthy and costly redesign.

What these companies need is a more dynamic, stand-alone, entry-level material handling solution that not only meets current distribution center needs but is also flexible enough to grow along with the business.

David Stevens, president and CEO,

oPeX Corporation

a uniquE aPProach to autoMatEd ordEr FulFillMEnt For SMall to MidSizE rEtailErS

best practices in with internal and exter-nal teams, guiding the business toward enabling outcome-based digital business.

• Define omni-channel retail execution platform near-term and long-term re-quirements. Becoming an omni-channel retailer whose technology architecture will stand the test of time requires well-thought-out analysis of current and fu-ture needs, but even more importantly re-quires a systemic change in how systems are selected, deployed, and supported.

• Seek to learn from and engage con-

sumers as they step through shop-ping journeys that have no physical or digital boundaries. Enable participation, interaction, and flexible adaptation to consumer needs. Engage in an iterative process of continually refining an un-derstanding of contextualized customer needs and personalizing engagement strategies.

• Implement an omni-channel retail ex-ecution platform that enables capturing and analyzing more customer engage-ment data at each consumer touch point

about place, context, product interests, and interaction response to inform a re-fined engagement strategy that is respon-sive to shifting or journey-specific patterns.

• Persistently apply new consumer-fac-ing engagement strategies that span touch points and enable inspiration, dis-covery, and conversion, building loyal re-lationships along the way.

• Address each of the steps along the customer journey to fully operational-ize and optimize consumer conversion, frequency, AOV (average order value),

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LTV (lifetime value), and relationship building opportunities. Examine your customer’s journey and frame how you are enabling progressively more personal-ized engagement strategies. Importantly, how do these build on each other?

• Continually refine strategies and apply technologies that bring the customer closer and drives stron-ger relationships. Engage more deeply and persistently.

• Refine and review against the checklist frequently:• Do I know how to engage today’s

shopper?• Can I increase engagement (trans-

lated in performance terms to con-version, frequency, AOV, and lifetime value) through the shopper journey?

• Am I prepared to spend my technol-ogy dollars differently than I did in the past?

• Do I have the right objectives in mind

and a road map to get there?• Do I know that I am engaging in efforts

that will result in immediate and lasting results?

Conclusions — Winning The Battle For omni-Channel Wallet ShareAdopt The Retailer’s New Role: Omni-Experience Black Belt, Ubiquitous Selling Agent, And Relationship MasterIt isn’t good enough anymore to create and ex-ecute on a retail strategy devoid of an individu-alized customer-centric view of the customer journey and associated patterns that need to be understood, nurtured, and responsively en-gaged to be successful, and this is as true for SMRs as larger competitors. Serving an omni-channel customer requires systemic change and technology investments reflecting a sig-nificant shift in satisfying and engaging custom-ers in customer-centric journeys and the role the retailer plays in the commercial ecosystem changes as follows:

• The retailer becomes responsible for or-chestrating omni-experiences and is seen as a ubiquitous selling agent and relation-ship master.

• Consumer loyalty and profitability is no longer primarily a result of profitability-draining discounts but of individualized relationship-shaping engagement.

• Enterprise inventory boundaries or con-straints give way to unbounded commer-cial inventory availability information.

• Workforce budget minimization pro-cesses give way to workforce productiv-ity-enabling practices.

• “Same” product can be found anywhere and competitively price matched, but product differentiation, product fresh-ness, and product marketing increase purchase frequency and basket size.

• Adapt from a business perspective and ramp up investments in technol-ogies that will enable continual align-ment with customer needs.

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Reflexis is the pioneer in real-time execution and workforce management solutions that enable retailers to execute their customer engagement strategy flawlessly and uncover profit. The Reflexis platform of real-time store execution, task management, compliance, time and attendance, and labor scheduling (including budgeting, forecasting, and employee self-service) enables retailers to align store labor & activities to corporate goals and institutionalize best-practice response to real-time metrics and alerts.

  For the past 14 years, more than 200 of the world’s best

companies in multiple verticals have reported dramatic improvements in store-level compliance with corporate strategies; higher productivity of corporate, field, and store employees; and increased revenue and profitability after implementing Reflexis solutions. 

 reflexisPlus™ for small & midsize retailers provides a cloud-based, pre-configured family of task management, retail auditing, and mobility solutions that can be implemented in 3-5 weeks.

www.reflexisinc.com

OPEX Corporation is a recognized global technology leader in high-speed mailroom automation, document imaging, and material handling.  Since 1973, OPEX systems have provided performance enhancing workflow solutions and cost-effective results to thousands of organizations around the world.

OPEX technologies deliver a wide array of process improvements designed to streamline envelope opening and extracting, document imaging and sorting, and material handling and order fulfillment.  OPEX’s extensive portfolio of worldwide patents attests to its unique ability to efficiently handle

individual, single-piece items ranging in size from envelopes, documents and checks all the way through 60 pound payloads using our Perfect Pick warehouse and distribution center system.

Perfect Pick is a unique robotic goods-to-person picking technology for order fulfillment. It’s “one touch” design is based on a single automated component — the iBOT. From the mailroom to the warehouse, OPEX makes it possible for virtually any enterprise to benefit from its innovative solutions.

www.opex.com

OpenEdge helps software developers and retail businesses succeed by delivering secure and personalized payment solutions.

As the integrated payments division of Global Payments, OpenEdge is driving innovation —adapting, scaling, and simplifying how payments are processed, across platforms and points-of-interaction, in an increasingly complex retail landscape.

OpenEdge builds payment-processing options that work for your business. OpenEdge serves more than 2,000 technology partners across 60 industry verticals throughout the United States and Canada.

Our EdgeShield security bundle and EMV® solutions are designed to reduce the developer’s burden when deploying EMV, and help merchants accept EMV payments swiftly with minimal disruptions to their businesses.

OpenEdge technology ensures every transaction occurs swiftly and securely, bundled with services that make payments seamless.

We want you focused on building your business, not the minutiae be-hind every credit card payment.

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