Making the Connection

The economic downturn clearly has chains scrambling to re-evaluate IT budgets, and establish new strategies that will help them efficiently operate and compete going forward.

However, “If retailers want to spend their budgets well, they need to refocus efforts and solutions toward customer service, and provide services that consumers truly desire,” according to John Hardin, senior partner, Navigator Consulting.

This was the main message during the inaugural RetailConnections Business and IT Executive Summit in Boca Raton, Fla., Feb. 6-8.

Approximately 110 attendees, comprised of retail executives, analysts and vendors, joined the conference with one common goal: to learn how to compete—and prosper—during this volatile economic landscape.

“We may not be in an official recession yet, but there is clearly a slowdown in consumer spending,” Deborah Weinswig, managing director, Citi Investment Research, said during the session, “Retail Technology and Wall Street: What Matters and Why.” “That’s why retailers need to improve their business decisions by striking a balance between the art of retailing and the utilization of technology.”

As economic pressures heat up, most companies’ first response is to take heed and cut back spending—especially in technology. “But that is a mistake,” Larry Selden, professor emeritus, finance and economics of Columbia University and the Wharton School of Business, warned during the session, “Reaping Double-Digit Increases From True Customer-Centric Retailing.”

“In fact, there is no better time to spend than now,” Bennett Nussbaum, Winn-Dixie Stores’ senior VP, CFO, reiterated during the “CFO Panel: Finance Decision-Making in Today’s Market.” “Budgets are not changing, but prices for capital expenditures are coming down.”

This factor is prompting chains to reevaluate their IT priorities—even plans that were established 12 months ago. Kohl’s, for example, used to plan IT projects and upgrades on an annual basis.

“Different elements continue to affect our business, so we are reassessing our plans more frequently,” said panelist Jeff Marshall, Kohl’s senior VP, CIO. “Annual plans are now reviewed on a quarterly, even monthly basis.”

As retailers look to reallocate their budgets to new solutions that can improve business processes, customer-service practices are being moved to the top of to-do lists. “In general, customers are increasingly dissatisfied with retailers’ customer service,” Selden said. “If you can’t thrill customers, you will be unsuccessful at making them profitable. It is time to make these shoppers profitable.”

New York City-based luxury department store Barneys New York has created its reputation on its superior customer service. “The chain is known for selling $4,000 suits, $700 shoes and $1,700 handbags,” Alan Barnett, Barneys former senior VP of merchandise planning and information systems, and former VP, merchandise planning, allocation and replenishment, Levitz Furniture, said during the panel, “Top Strategic Issues and Priorities.”

“While the product is important, shoppers come to the store to feel good,” he said. “And Barneys associates go out of their way to help them.”

Putting the customer first: Many chains hope to revitalize their own customer service in this lagging economy by focusing on consumer-centric strategies.

Simply stated, consumer-centric strategies revolve around the analysis of shopper demand. Once retailers determine shoppers’ needs and demands, they can deliver relevant merchandise and services to shoppers on localized, and in some cases, individual levels.

By gaining a clearer view of consumers—and their desires—retailers are also in a better position to deliver customer service that can build loyalty, pique shoppers’ profitability, and increase sales.

The first step toward this profitability is for chains to embark on segmentation. While many companies would argue they already do this, their current efforts may not be enough.

Some companies may be focusing on tactical segmentation, which groups clients into buckets. “Then chains market appropriate messages to each group,” Selden said.

To stand out from competitors, however, segmentation needs to reach a higher, strategic level. This includes analyzing customer demographics, behavior and psychographics, or personal characteristics, including their values and aspirations.

“Consumer-centricity is about more than delivering product,” he explained. “Retailers need to be prepared to satisfy consumers’ personal and business needs.”

Nussbaum admitted that the struggling Winn-Dixie supermarket chain has been guilty of conducting “basic segmentation.” “We offered the same assortments for the last two years, but we are over that now,” he said. “Realizing we needed to conduct better customer service, we began learning which customers shop where, and what they buy. Then we used this information to tailor merchandise by neighborhood.”

The chain is currently re-evaluating how to step up these strategies with customer-facing solutions that capture and deliver data. “This is an area that we have historically under-invested in,” he said.

Retailers are also looking to step up consumer-centric strategies by investing in business-intelligence and customer-relationship-management (CRM) solutions to improve marketing initiatives.

The right IT infrastructure is only a foundation of any consumer-centric program. The next step is to determine what services shoppers actually want and need. Some chains will focus on tailored store-level assortments. Others will step up distribution of loyalty rewards. Regardless of the flavor they choose, successful retailers will learn it’s all about getting personal.

This could be something as simple as reserving front-row parking spots for moms-to-be and new moms shopping at Babies “R” Us or at supermarkets. Or retailers may want to initiate personal communication between a good shopper and a live agent.

For example, Navigator Consulting’s Hardin mentioned that every time he uses his Best Buy credit card, he earns rewards toward a future purchase. “But my biggest pet peeve with the program is that the rewards expire,” he said during the conference.

“I checked my voice mail today and got a message from a live customer-service agent reminding me that my current rewards would expire on March 18,” he said. “That call reminded me to use my rewards. That personal service is a valuable version of consumer-centricity.”