By Brian Kilcourse, Managing Partner
1/22/2008
Retailers throw off the blues in NYC (or at least that’s what technology vendors hope).
A retail colleague once told me that when attending the January National Retail Federation (NRF) event in New York City, retailers go to either drown their sorrows or toast to a successful year. Based on the good cheer in evidence, it was hard to tell last week that many retailers were coming off of a very difficult December, although many certainly were. Indeed, even if retailers weren’t singing the blues at the Javits Center last week, four miles down the road at the New York Stock Exchange, the market was playing in a minor key. The Dow Jones Industrial Average has fallen about 12% in the last three months, and a stock watch list consisting of fifteen retailers shows that most retail stocks have fallen right along with it. Last week, even as retailers converged on the annual conference, financial analysts were reporting in the press that consumer spending is slowing down sharply in every economic stratum, from the working class to the wealthy. This cannot be good news for either retailers or the technology companies that hope to win their business in 2008.
Nonetheless, the NRF’s Big Show looked like a big success, judging both from the number of exhibiting technology vendors and the expo floor traffic. In our conversations with solutions providers, almost everyone expressed happiness with the quality and quantity of the traffic. Although the “big” players like IBM, Oracle, SAP, and Microsoft, who had their booths set up near the expo hall entries, were jammed with humanity as usual, even small and new players parked around the periphery of the hall seemed to be getting some attention. Judging from the Expo floor demonstrations, the big focus in the coming year will be on the customer shopping experience. Microsoft’s booth was crowded with people vying to try out the Mediacart (the latest and greatest version of a computerized shopping cart), while over at IBM retail decision makers were led through demos of integrated multi-channel shopping. “Suite” vendors like SAP, JDA, and Oracle were touting the merits of their integrated platforms, and how they enable retailers to move from channel-specific operations to integrated business processes – all made possible by investments in new technology solutions. Once past the big booths, Expo-goers could see the latest in digital marketing tools such as in-aisle displays, kiosks, and mobile shopping “assistants.” Mobile commerce applications that utilize consumer cell phones were also on display.
So what were the underlying themes? Several messages came out loud and clear. First of all, “the consumer really is king,” and technology companies want to help retailers respond to a fundamental paradigm shift from “product-centric” to “consumer-centric” merchandise planning and execution. Both in the Expo booths and in private discussions at the after-hours gatherings, there was talk of customer data security – and particularly the issue of PCI compliance - as an issue that had to be addressed in order to execute consumer-centric strategies.
Secondly, it is abundantly clear from many conversations that retailers are truly exhausted from years of overwhelming technology integration costs that yield underwhelming results. Even though they are cynical about “ease of integration” promises that most technology companies make, retailers still want integration risks to be borne by the vendors, not them.
Third, retailers have a renewed interest in technology providers who can help them address issues and opportunities having to do with managing store operations, particularly workforce management, task management, and the “evergreen” problems of loss prevention and shrink.
So, will all the recent press about falling consumer confidence frighten retailers into constraining their 2008 capex spending on technology? It was hard to see any of that thinking in evidence last week, although most of the solutions providers I talked to continued to marvel at how long retailers have been able to make their “legacy” technology stacks work. Many feel that the impetus behind consumer-centric/multi-channel retailing will provide the inflection point to trigger new investments in technology. But, “wouldn’t it be our luck,” said one vendor at an after-hours gathering, “now that retailers finally ‘get it’ when it comes to what 21st Century consumers want, the economy will make ‘em put on the brakes on capex – again.” “Maybe it will be good for us,” another vendor of a software-as-a-service offering chimed in, “retailers might be more willing to listen to pay-for-what-you-eat propositions!” Perhaps.
As I walked around the Big Show on closing day, a Crosby, Stills, and Nash lyric lodged in my head: “Rejoice, rejoice, we have no choice, but to carry on!”. 2008 promises to be a wild ride. But if the past is any indication, winning retailers will see uncertainty in the eyes of their competition as an opportunity to pull even further ahead, and will enable their business strategies with substantial investments in enabling information technologies. We’ll drink to that!
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