By Steve Rowen, Partner
6/3/2008
Last week I had the opportunity to attend the Citigroup’s second annual Retail Tech Conference in New York City. Heading up Citi’s retailing/broadlines, food & drug and home improvement investment research, Deborah Weinswig and her team put together an impressive program of speakers. The goal of the day was to provide a forum for investors to learn more from technology vendors about where investments are being made, especially in tough economic times. But Weinswig and company managed to squeeze in no fewer than seven retailer presentations as well, including Macy’s, Saks, JC Penney, Urban Outfitters and Coach.
One of the more candid sessions I saw came from Kohl’s Corporation. Tom Kingsbury, Senior Executive VP of Marketing, Business Development, eCommerce and IT was asked to share what Kohl’s has learned so far pertaining to promotion optimization. “We’ve learned that it’s complicated. To be honest with you, we’ve somewhat put in on the backburner.” Kingsbury explained that the real difficulties surround determining a product’s full lifecycle – not just maximizing the effectiveness of any one given promotion.
EVP of Administration Jon Nordeen went on to discuss the hot technologies the retailer is focusing on, including replenishment and markdown optimization engines (while it was never mentioned during the presentation, according to a transcript from the retailer's recent first quarter earnings call, the retailer is using SAS). “We rolled out markdown through 2007, completed at store level last fall. It has brought huge benefit to our overall profitability, but is also good for the customer. A POS markdown used to confuse the customer, but now she can see exactly what will transpire directly on the price tag.”
At one point, Kingsbury bluntly provided: “We anticipated bad business in this economy.” Nordeen added on, “And buyers historically take markdowns whenever they please. With our new model, we didn’t want to all of a sudden grant our buyers price control (permission they’ve never had), and we were able to maintain this single price for product model right in the design.” Kingsbury concluded, “And this is a huge advantage. If the system says ‘this goes 60% off,’ it goes 60% off – no questions. And obviously it’s working quite well.”
And what did the tech vendors think?
“We aren’t seeing any reduction in technology spending yet,” said Isaac Krakovsky, VP of Retail at SAP. “What we are seeing is that retailers are investing much differently, focusing on more workforce management and customer service-empowering solutions. And we also see a much stronger scrutiny toward ROI, but we really haven’t seen any real investment slowdown.”
In Deborah’s own summary, “We believe that a greater portion of time this year was spent discussing the importance of e-Commerce and channel integration… retailers are focused on improving their online functionality, assortments, and visuals.”
Specifically, many of the day’s presenters, even keynote speaker Scott Friend, placed a heavy emphasis on retailers’ future ability to present their merchandise online in an appealing and advanced manner. Friend, of ProfitLogic fame and now a venture partner at Bain Capital, spent much of his time discussing the history and future of merchandise analytical tools. “I’d like to see many ‘little ProfitLogics’ in the next five years. Boutique firms that are able to actually process the amount of data we’re collecting at the POS, because the raw material is there, but the skills aren’t at the capability level: the technologies aren’t on par with the data asset.” But when it came time for questions, the audience wanted to know exactly which technologies he was currently looking at. “Those that provide rich eCommerce functionality,” he replied, giving attendees a heads-up to a very specific startup based in Cambridge, MA.
Ultimately, the technologies that were “top of mind” takeaways included those that enable better localization opportunities, inventory management solutions, truly advanced eCommerce functionality, as well as clienteling, planning and allocation tools, cycle time reduction, and optimization technologies.
Said Weinswig, “We believe that the next wave of retail technology could include ‘wisdom of the crowd’ forecasting, mobility devices that integrate the online and store-based shopping environments, and technologies that provide a richer shopping experience for the consumer.” We would agree.
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