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CIO/CMO Collaboration on WiFi: An Opportunity for Retailers

BY CSA STAFF

By John Lytle, [email protected] and Julien Escribe, [email protected]

For brick-and-mortar retailers, shoppers with smartphones have until recently been about as welcome as barbarians at the gate. Specifically, the practice of “showrooming” – checking prices at a store and then going online to find cheaper alternatives – has posed a serious threat to in-store revenue. Attitudes are changing, however, as retailers increasingly embrace mobility as a potential competitive advantage.

Indeed, over the past two years, retailers around the globe have scrambled to implement WiFi infrastructures to enable free, high-speed Internet access within their stores. This infrastructure is being used to support and manage a wide range of applications. Examples include:

  • Discount coupons and advertising promotions sent to smartphones when accessing in-store WiFi;
  • Mobile check-outs and payments;
  • Loyalty programs;
  • Social network campaigns to build communities around a retailer’s stores or products; and
  • Using purchasing preferences to enhance CRM database and, conversely, to target customer preferences.

Today, simply giving away free WiFi access in store locations isn’t enough. Rather, retailers seek to identify and deliver the mix of services that aligns with business strategy and customer demographics, optimizes benefits, and addresses major risks. The challenge lies in finding that sweet spot in a relatively immature market where many players are struggling to find their way.

In this environment, CIOs have an opportunity to step up into the role of a true business partner by facilitating a dialogue with marketing executives around how to develop an effective “click-and-mortar” enterprise – one that leverages online technology to enhance rather than replace the in-store experience. Marketing teams have to define what customers want and what the business would, ideally, deliver in terms of online offers, promotions and targeted campaigns that draw people into stores, keep them there to make purchases and then keep them coming back.

Forging this CIO/CMO alliance requires overcoming some obstacles around communication and bridging the gap between respective areas of expertise. While CMOs can describe what they’d like to see in terms of value-adding applications, they often struggle to articulate that wish list into a set of operational requirements for IT. For their part, CIOs need to explain what’s feasible from a technology perspective and what’s cost-effective.

Effective CIO/CMO collaboration can combine a vision of what the promotional sweet spot looks like in terms of how customers are segmented and targeted, along with an understanding of how the in-store operational model supports that customer strategy. If simply giving away free WiFi to all customers isn’t viable or effective, retail CMOs must decide which customers should get special offers, how special those offers should be, how to deliver those special offers and how to create incentives to get new customers and retain (and grow) existing ones. Correspondingly, the retail CIO needs to develop the systems, applications and operational model to deliver on that segmentation strategy as cost-efficiently as possible. When that happens, the CMO and CIO can together develop a business case to measure the impact of WiFi initiatives and effectively gauge ROI.

Retailers have for years deployed hand-held barcode scanners and wireless-based logistics, supply chain and inventory systems to manage backroom and warehouse operations. The question now is how to apply those capabilities to applications that deliver value-added options to customers.

While the technology involved is relatively straightforward and within the realm of basic blocking and tackling, coherently rolling out and deploying a WiFi network in retail stores around the globe presents a variety of challenges. For one thing, security is essential, as the network that supports the in-store customer-facing applications must also support core business functions, such as inventory, price checks and self check-out capabilities. Having one unique WiFi infrastructure is key, as the funding necessary to provision duplicate networks separated by a virtual “Great Wall of China” would be prohibitive. An additional security concern is the fact that the same infrastructure will support “rogue” web surfing from in-store customers, as well as highly secure CRM and ERP workflow connected to the retailer’s back-end data center. Under the circumstances, the chief security officer’s support of the business case is essential.

Global retailers, meanwhile, must strike a balance between a standardized solution that operates uniformly across borders on the one hand, against the need to adapt to local market conditions and customer preferences on the other. Support models will reflect this tension, and will vary from one global vendor to a mixed model of local vendors supplemented by in-sourced technical expertise. Additional choices must be made around technology refresh, and the type of terms and conditions required for in-store customers – along with the implications raised for local regulatory standards around customer data and security. The majority of global retailers have rolled out a unique model within each of their main countries. Some are willing to pay a premium to have the same vendor supporting their infrastructure globally, as this single point of contact provides a unique value to them, especially when supported by strong Service Level Agreements (availability and time-to-restore incidents).

Insight into competitor strategies is essential and has an impact on roll-out strategies. Should retailers commit to massive global implementation? Or focus on selected proof-of-concept initiatives? The former approach can be more cost-effective, and the potential benefits of success are greater, as are the potential risks of failure. A proof-of-concept approach can provide insight into alternative options, but can be misleading, as the results of one regional pilot initiative may not necessarily replicate under different conditions. The initiatives ISG has observed have primarily been launched as proof-of-concept models aimed at finding the right application that will be broadly “liked” by customers and uploaded through the retailer’s application store – and finding the right application that fits customer preference can be a time-consuming process that is difficult to predict.

Despite the relative immaturity of the market, retailers are developing highly innovative applications around in-store WiFi. For example, ISG worked with a major retailer to explore applications that ranged from in-store 3D “sat-nav” capabilities to help customers find the right product in the right aisle and shelf, to applications that facilitate in-store shopping, such as a shopping list app, mobile scanning and mobile wallet technology.

An effective CIO/CMO dialogue can lead to a better understanding of how retailers can take advantage of in-store WiFi to gain a competitive edge. Such a dialogue is also essential to understanding the market, defining options and building a business case to quantify the benefits of new initiatives and to sell the organizational change needed to implement innovative new programs.

ISG is a global consulting, research and advisory services firm specializing in operational excellence. John Lytle is an ISG Director based in Chicago and can be reached at [email protected]. Julien Escribe is an ISG Partner based in Paris and can be reached at [email protected].


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Walmart decks aisles with holiday shoppers

BY CSA STAFF

ORLANDO — Walmart is kicking off its official start to the holiday season Friday, Sept. 13, with a no-fee layaway program.

"Times are tough and it’s not easy for many Americans — they are watching every penny," said chief merchandising and marketing officer Duncan Mac Naughton. "All year long, but especially during the holidays, our customers need a low price leader. This year, we are committed to doing everything we did last year to help Americans save money — plus more. More savings, more layaway items and our commitment that they can give their families a great Christmas on a budget."

Walmart’s free layaway means there are no opening fees and no gift-card reimbursements. Eligible layaway items include electronics, toys, toys for infants, jewelry, small appliances, select sporting goods and automotive electronics such as speakers and stereos. The retailer is also offering its Facebook following access to layaway on Sept. 11 and 12.

Customers can start a layaway account in any Walmart Supercenter or Walmart store — not including Neighborhood Markets — by visiting the Walmart.com Services Desk. Once a layaway account is opened, customers can make payments at any register in that store between Sept. 13 and Dec. 13. Walmart will also send payment reminders and status updates to customers via email.

Layaway customers can also take advantage of Walmart’s ad match guarantee. The retailer will match the price of any local competitor’s printed ad for an identical item at the Walmart.com Services Desk.

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Changing of the guard at Orchard Supply Hardware

BY CSA STAFF

Lowe’s expects to complete its West Coast acquisition of 72 Orchard Supply Hardware stores by the end of August. When that happens, current CEO Mark Baker will be replaced at the helm of Orchard Supply by Lowe’s executive Richard D. Maltsbarger.

Baker, a former Home Depot executive, took over the Orchard Supply job back in March of 2011. According to the press release announcing the move, Baker "informed Lowe’s of his decision to accept a position as president and CEO of the Aircraft Owners and Pilots association following the closing."

Before joining Orchard, Baker served as president and CEO for Scotts Miracle-Gro. Previously, Baker served in a variety of senior roles at The Home Depot during his seven years there, including executive VP merchandising. In addition, he was CEO of the Gander Mountain Co., an outdoor retailer, and has held senior leadership roles at Scotty’s Inc. and Homebase, Inc.

Maltsbarger led the Lowe’s team that worked on the acquisition of Orchard.

"We are confident that Orchard’s talented management team, led by Richard Maltsbarger, will continue to execute their successful repositioning strategy and deliver long-term profitable growth," said Lowe’s CEO Robert Niblock.

Orchard will also lean on executive leadership from Steven Mahurin, chief retail officer and Chris Newman, CFO and head of development.

Lowe’s says that it intends to run Orchard as a separate, standalone business and keep its headquarters in San Jose, Calif.

To acquire the California-based hardware-store chain’s 72 stores, Lowe’s will pay about $205 million, and also assume the payables owed to nearly all of Orchard’s supplier partners. The deal was approved by the U.S. Bankruptcy Court for the District of Delaware yesterday.

Lowe’s currently operates 110 stores in California, compared to Home Depot’s California store count of 223. According to Lowe’s, Orchard brings locations in "high-density, prime locations" and smaller, neighborhood stores that are expected to complement its big-box presence in the state.

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