Roche on Retail  
    
  

 
2012 Outlook On The Retail Industry
 
    
  
Will Roche
 
 WILL ROCHE

 Industry Director
Microsoft Dynamics
Retail & Hospitality		   2011 was a great year for some retailers, but not so much for others. Regardless of where my customers fall on this spectrum, most of them are looking forward to 2012 with a sense of optimism. They know there will be rough spots, but there will be opportunities as well. Their challenge is to be ready to handle whatever comes around the next corner.
 
To help you prepare for a prosperous 2012, I thought I’d share some thoughts on what I’m hearing from others in the retail industry.
 

Question: What are the top three fundamental issues on the minds of retailers today?

The top issue is one that retailers mention year after year. How do I get closer to my customer? Building any relationship requires getting to know more about that person. The same is true for building customer relationships, whether you’re selling to individuals or corporations. The benefits of stronger customer relationships are obvious: increased revenues, stronger margins and a barrier against the competition.

Improving customer communications are an important part of the answer to this challenge. Social networking and mobility solutions are two new technologies that can have a big impact. Retailers are looking for ways to leverage these new technologies, in a smart way, to drive closer relationships in the coming year.

The second issue is one that the challenging economy has forced many retailers to think more about. Retailers need to control, and in many cases minimize, the cost of their infrastructure. They’ve cobbled together business systems and put up with high maintenance costs in the past because there really was no other option. Now, with new technologies and tighter budgets, they are reexamining existing systems and looking for ways to streamline their infrastructure.

As many of these retailers are discovering, streamlining business infrastructure has other benefits as well. Newer systems also allow them to make advancements in their business that weren’t supported by their outdated legacy systems.

Finally, retailers are looking for ways to optimize their business processes around the customer. In a complex world where consumers have a wide choice of products, business processes can become a differentiator. Retailers are looking for ways to streamline and automate business processes by leveraging new and existing technology. This focus on process improvement will help them become more efficient while serving customers even better in 2012.


Question: What do you view as some of the biggest challenges retailers face concerning mobility?

This is such a new category of technology it helps to take a step back and define what we mean when we say “mobility.”

Mobility, as the name implies, means that users of your system are not tied directly to the system. For retailers, mobility solutions are usually separated into two flavors. First, there is the industrial mobility that is important part of your infrastructure. Business system users need to be able to plug into your system even from remote locations; even from locations that are using a different system.

Then there is customer mobility. For example, your retail business might develop a mobile app that allows your customer to access your store from a smart phone. This app would allow them to shop just as they would if they were sitting in front of their computer running your website.

Both types of mobility require the ability to manage large amounts of data and make it accessible from a wide array of mobile devices. Managing the logistics of this and the security behind it is the biggest challenge out there right now.
 
 
Question: How do you see the social network sites influencing the retail business, and what can a retailer do to ensure their success and participation?

I’m of the opinion that we’re just at the starting point of a long journey toward new ways of facilitating interaction between customers and retailers. Right now, there are almost as many different ways of leveraging social networking as there are customers. But the bottom line is that social media is important to retailers because people are more likely to buy products recommended by people they trust.

Right now, many retailers are maintaining multiple sites, each allowing a different type of interaction with the customer. For example, they might have their own website, a Facebook page and a YouTube channel. Each of these gives the retailer different ways to interact with the way the customer chooses to interact.

The second challenge with social networking is monitoring all of the discussions. No retailer can monitor everything that is said about their company and products on every single site, but new applications can help. One example is the latest enhancements to Microsoft Dynamics CRM 2011.
 
 
Question: What does it mean to be a customer centric retailer? Should retailers strive to be "customer centric" and, if so, what are some things they should be doing?

There’s an old saying in retail, “the customer is king.” But although many retailers strive to provide outstanding customer service, the customer has historically had limited power in the relationship.

Technology is turning that situation on its head. For example, marketing is no longer an exercise in mass communications intended to create demand for a product. Instead, retailers are identifying likely buyers for their product and tailoring messages specifically for them, sometimes on a 1:1 basis.

In the past, retailers specialized in a certain type of product. Grocery stores sold groceries. Clothing stores sold clothing. Now we have retailers like Target selling everything from clothing to pharmaceuticals to groceries. Of course, these large retailers don’t necessarily have all the advantages. New specialty retailers selling everything from light bulbs to kitchen gadgets are popping up online all the time.

What do large retailers and small, specialty retailers have in common? The successful ones spend a tremendous amount of time researching what makes a customer buy. For example, why would a customer buy milk from the same retailer that sells their favorite electronic gadgets? Or why would a customer buy from a store that sells only one type of item and wait patiently for it to be delivered when they could go down the street and buy a substitute immediately?

Understanding customers’ purchasing motivations and adapting the business model accordingly will help retailers grow revenues regardless of the economic climate.


Question: What effects will the cloud have on retailers and what should they be doing today to ensure success in the cloud?

Technology has been a competitive advantage for retailers for a long time: Who has the best POS system? The best online storefront? The best merchandising applications? But the latest technology investments have been out of reach for many retailers.

The cloud helps even the playing field by cutting down on upfront technology investment costs in terms of application expense and the infrastructure required to run it. Software as a service also helps reduce the ongoing expense of maintaining your investment.

At this stage, not all retailing applications can or should be delivered in the cloud. As retailers explore new technology investments, they should be having frank discussions with their vendor about what should be deployed in the cloud. Since the answer may change over time, they should also discuss what their options are for moving to the cloud when the technology becomes available.

If you’re not sure what questions to ask, several of our Dynamics partners got together to create a resource which may help: 35 Questions Every CFO Needs to Ask About Cloud ERP Software.


Question: IT has dramatically changed over the years, but many retailers are still using older technology. How can retailers get the data they need to grow and manage their business with this older technology?

To leverage technology in a way that supports the business, retailers really need to understand two things. First, they need to have a clear picture of where they are today. What are their strengths and their weaknesses? For some retailers, an outside opinion can help cut through the inherent biases formed by company insiders.

Second, they need an understanding of where they would like to be. What areas of the company are worth investing in? What areas should be divested or allowed to languish? What would they like the company to look like in the one to five years?

Now the retailer can map out a technology path that supports their business strategy for moving from Point A (today’s reality) to Point B (where they want to be). There may be small improvements they can make in the short term using existing technologies, but this method also helps them prioritize technology investments based on their contribution to the business’s success.


Question: What should retailers do to become more efficient and balanced while increasing their dependence on technology? How can they manage the cost of IT when everyone wants to increase investment in IT?

These questions are really about deciding where to invest limited resources. Making this decision goes back to having the vision and the strategy that we just talked about. When you have a clear picture of where you are today and where you want to be in the future, it’s easier to make smart investment decisions.

At Microsoft, we’re mindful of the fact that many retailers need to make phased investments in technology to achieve their vision. We believe that providing everything, including architecture, platform, business applications and development tools, allows retailers to create a solid foundation that can be built on and adapted as business needs change.


Question: Where should retailers increase usage of technology when IT budgets are shrinking?

All businesses run on information. For most of the retailers I work with, getting actionable information to the right person at the right time has the greatest impact on their ability to make smart business decisions.

There are plenty of data management solutions available, but while many of them are excellent at manipulating large quantities of data, they fail when it comes to disseminating the information in a meaningful way. Microsoft has taken a role-based approach to providing information to users. This helps cut down on data overload by focusing on the information employees need to do their job.
  
 

  
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