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Focus On: Business Intelligence

BY Deena M. Amato-McCoy

The retail industry arguably collects more data than other business segments, and this volume doubles every 18 months, making the prospect of “big data” very real. By adopting mobile business intelligence apps, retailers are harnessing this robust data set and putting decision-making in the hands of its front line of defense — store-level associates.

Defining big data simply as large data volumes is an understatement. Big data is the result of information garnered from a variety of diverse sources, including transaction data, loyalty programs, even emerging sources, including consumer mobile transactions and social media interactions.

Indeed, as a recent study points out, retailers are increasing their strategic vision regarding customer insights. Customer retention was the top initiative among 68% of respondents, with 55% of retailers using analytics to delve into customer data mining, new customer acquisition and segmentation, specifically, according to “Retail Horizons, Benchmarks for 2011, Forecasts for 2012,” published by the National Retail Federation, Washington, D.C., and KPMG.

“Retailers without an active BI initiative won’t be around very long,” said Orlando “Butch” Jagoda, VP, IT, Helzberg Diamonds, Kansas City, Mo.

Jagoda said retail is a tough business, one that gives customers endless choices of where and how to buy merchandise — all factors pushing the envelope for retailers trying to manage big data. As a result, these robust data sets need equally robust analytics engines.

“Historically, data was transactional, and retailers used BI to understand trends,” Jagoda added. “As data sets and expectations increase, we need to add infrastructure that models and correlates endless data streams to help chains make decisions.”

While BI operations are often conducted at corporate offices, retailers’ front line staffers and store managers still need access to timely information to ensure they can best service the consumer when they enter the store. By adding mobility to the mix, retailers are giving store associates more selling power than ever before.

As more associates adopt mobile devices (smartphones, tablet computers, etc.) to improve the store-level shopping experience, chains have a new way to deliver reporting tools right to store associates’ fingertips. Armed with mobile BI apps, store managers can receive messages from the corporate-exception reporting tool, alerting them to fast- or slow-moving merchandise, allowing them to fine-tune assortments and displays on the fly.

BI is deeply rooted in Helzberg Diamonds’ DNA, and mobile is playing a stronger role. “Internally, mobile makes it easier for associates who travel, our store managers and all associates who need to be connected with business statistics,” Jagoda said. The goal: “to take the ‘dashboard’ to a form factor that’s easy for those who travel to get the same information,” he added.

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Pinterest: A Powerful Tool to Engage Consumers and Store Associates

BY CSA STAFF

By Elizabeth Cogswell Baskin

Editor’s note: Launched in March 2010, Pinterest now ranks as the third most-visited social-networking site in the United States, according to a recent report by Experian Marketing Services. Pinterest, which lets its users “pin” photos and information onto virtual boards, ranks behind only Facebook and Twitter in terms of total visitors, according to the report. It also skews heavily female — about 60% of users are women.

Retailers are flocking to the visually enticing Pinterest site to engage with consumers. Why is Pinterest suddenly such a big deal? For one thing, it’s exploding with growth. In September 2011, the site had less than 2 million users. Now, it has 20 million users or more.

The visual nature of Pinterest is a natural for retailers with product to show. By creating a collection of images on boards with themes like “Crafts I Can Do,” “Products I Love,” “Dream Wedding” and “Chocolate Desserts,” users promote the things that inspire and intrigue them.

Where do users find these images? Occasionally from their own photos, but more often they find things on another website or “re-pin” images other users have pinned to their own boards. This means some early-adopter retailers, from Michaels Stores to Nordstrom, are reporting more traffic to their websites from Pinterest than any other referral source.

But the site can also be a powerful driver to engage employees. There are numerous ways it can be used to build engagement among employees, not just to connect salespeople from store to store, but also between those at corporate with employees in the field.

One caveat is that the brand must have a high comfort level with transparency between employees and customers. People love to buy from people they know, and Pinterest allows your employees to become real people — ambassadors — to your potential customers. But it’s also a public site, with no way currently to keep any board private or restricted to only certain users.

Here’s how an employee engagement initiative on Pinterest might work:

Start with a focused campaign of internal communications to encourage employees to create their own Pinterest boards, pinning company products. You might “gamify” it by suggesting a different theme each month with the best boards winning a prize or discount.

The themed board for July, for example, might be “Best Ways To Show Off Your Tan,” with employees pinning the brand’s new short shorts, strappy sandals and halter dresses. August might be “Prettiest Pale Neutrals,” with employees creating boards of their favorite clothing in white, cream and camel.

Of course, these boards might also include other images not available at the store, like a long stretch of sandy beach on “Prettiest Pale Neutrals.” This makes the boards more than just a way to hawk your products. Instead, they become more akin to third-party endorsements, which are powerful influencers for potential customers.

This Pinterest program is a great way for c-level associates to build relationships with the rank and file, by humanizing themselves and letting employees get to know them a little. A sales associate in Des Moines, Iowa, for example, might feel a new connection to the CEO when she discovers that they pinned the same pale lemon chiffon scarf. Next, she might re-pin the CEO’s image of a perfect neutral pump. Or the national sales manager might follow the boards of a number of sales associates and give them a thrill when she re-pins the puffy jacket from an associate’s “Prettiest Ways To Stay Warm” board.

At the same time, employees gain celebrity-like status with customers on Pinterest. Some could even gain a significant following of customers who admire their tasteful selections. There’s also a gamification aspect there, in recognition of those employees who attract the most followers.

Using existing internal communications vehicles, from the intranet to the company magazine, the best employee boards can be spotlighted, both to acknowledge the creator and build enthusiasm within the employee population. Further, it’s a cross-promotion that will convert more people to Pinterest, which has the potential to influence more folks — exponentially — than your existing channels.

Eventually, this program creates a great deal of visibility for your products, brings your employees closer — regardless of geography or job title — and builds highly engaged brand ambassadors.

Elizabeth Cogswell Baskin is president and CEO of Tribe, an internal communications agency that works with national and global clients. She is the author of several books, including “How to Run Your Business Like a Girl: Successful Strategies from Entrepreneurial Women Who Made It Happen.”

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Jan-30-2013 11:40 am

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Canada: Open for Business

BY Connie Robbins Gentry

From Target Corp. and Big Lots to J. Crew and Express, the list of U.S. retailers expanding into Canada or scouting locations north of the border seems to grow longer every day. With its growing population, enthusiasm for U.S. brands, relatively underserved market and stable, resilient economy, Canada has become a land of opportunity— and a potentially important profit center — for American retailers. In fact, more U.S. retail powerhouses are eyeing Canada as an untapped market to expand their customer base than ever before, according to a 2011 report from the Ryerson University Centre for the Study of Commercial Activity.

Some recent statistics help explain Canada’s appeal. After the global recession, the Canadian job market is rebounding (unemployment fell to 7.2% in March 2012). The country’s total population is more than 34.6 million, up 5.9% since 2006 (the fastest growth of any country in the G8).

Total Canadian retail spending in 2011 exceeded $450 billion, with the highest volumes in the provinces of Ontario ($160 billion), Quebec ($101 billion), Alberta ($64 billion) and British Columbia ($59 billion).

“U.S. retailers should absolutely look to Canada for expansion,” said James Smerdon, director, retail consulting, Colliers International Consulting, Vancouver, British Columbia.

Just as in the United States, one of the key metrics used to gauge retail success in Canada is average sales per square foot. According to the International Council of Shopping Centers, Canadian shopping malls overall outshine U.S. rivals, with average sales of $589 per square foot in 2011, compared with the American average of $412 per square foot.

“A snapshot from November 2011 showed the average sales per square foot at $610 at centers in Canada, compared with $417 sales per square foot at U.S. shopping centers,” said David Bell, senior associate, planning and retail consulting, Colliers International Consulting.

He noted that at Chinook Centre, the premier mall in Calgary, sales hit an average of $1,000 per square foot for the first time last November.

“Retailers should study shopping patterns across major cities and benchmark properties that are leaders in their respective markets,” Bell advised.

In another plus for U.S. retailers, there is no longer a pronounced difference in the value of the U.S. and Canadian currencies. Indeed, the value of the Canadian dollar has increased to be almost on par with the U.S. dollar.

According to the Bloomberg Correlation-Weighted Indexes, Canada’s currency — nicknamed the loonie — was up 3.9% over the six-month period leading up to April, while the U.S. dollar declined 2.4% during that same period. Essentially the two currencies were at virtual parity in early April, when the loonie was valued at 99.11 cents against a U.S. dollar value of $1.0090.

“When the currencies have comparable value and Canadian retail centers are performing that much higher than U.S. shopping centers, the Canadian retail sector looks a lot more attractive to U.S. retailers,” Smerdon said.

A major factor contributing to the higher performance of centers north of the border is that Canada has fewer shopping malls than the United States on a per-capita basis.

“When retailers begin the process of identifying opportunities in Canadian cities, it is very different than in American cities because we don’t have as much space — retail development has been more constrained here,” Smerdon said.

Challenges: Before they start pitching their tents, however, retailers should do their homework. Despite the many cultural similarities, Canada offers some unique challenges.

“The difference between great success and mediocre success in Canada depends on the retailer’s understanding that Canada is a patchwork of very diverse markets,” Smerdon said.

Canada is a network of regional economies and regional markets, Smerdon explained, and each has to be understood on its own merits.

“Rather than looking at Canadian averages for retail across the entire country, one must study the significant differences in economic characteristics from region to region, province to province, city to city,” he added.

Also, as noted earlier, retail space is somewhat limited. Historically, the development of shopping malls has not been as easy in Canada as in the United States due to a number of factors, including stricter zoning regulations and more limited financing options. Compared with the saturated U.S. market, the Canadian market is relatively underserved and ripe with untapped potential. Even during the recession, Canada’s retail real estate occupancy remained resilient, carrying above 97%.

But less mall space and more productive square footage also had a downside: higher rents versus the United States. And with demand for space in Canada’s existing centers, particularly the premium ones, skyrocketing, the situation is not likely to ease up anytime soon. Labor, material and distribution costs are also higher in Canada.

Real estate realities: According to many industry experts, mergers and acquisition represent the fastest, surest means of accessing retail real estate in Canada, and this is true for developers as well as retailers. Both Target Corp. and Big Lots have chosen this route.

In November, Tanger Factory Outlet Centers (Greensboro, N.C.) and RioCan Real Estate Investment Trust (Toronto, Ontario) announced they had jointly purchased Cookstown Outlet Mall, a 161,000-sq.-ft. center with the potential to be expanded to 320,000 sq. ft., located on the outskirts of Toronto. Tanger’s CEO Steven Tanger described the acquisition as the first step in establishing a larger Canadian outlet center portfolio.

Another U.S.-based REIT with one of the largest Canadian portfolios is Kimco Realty (New Hyde Park, N.Y.), which has 65 shopping centers throughout Canada, totaling 12.2 million sq. ft. Kelly Smith, managing director of Kimco’s Toronto-based Canadian operations, acknowledged the majority of Kimco’s Canadian properties were acquired and all of the centers are jointly owned with partners, although Kimco retains at least 50% interest in each one.

Describing development in Canada, Smith explained, “You don’t build unless you have tenants — that’s just the way it is here. We do very little in the way of development in Canada, but we do have the potential to increase the size of one of our centers that is currently 700,000 sq. ft. by up to 300,000 sq. ft. Apart from that, we might add a pad here or there, but that’s all.”

The supply of retail real estate is held in check by the banking system and lenders that are largely unwilling to finance speculative development. The constrained market is frustrating for retailers that want to expand, but it contributes to low vacancy rates and healthy competition when spaces do come available.

“There is less concern that a new shopping center will open down the road,” Smith said. “Our entitlement process is more difficult, expensive and time-consuming, which makes it harder to develop — but all these factors point to a low-risk environment with good economic fundamentals.”

When retailers do find a space, the leasing process is similar to that in the United States — but with a few notable exceptions.

“Negotiating power is tilted to the landlord in Canada, so co-tenancy clauses are rare and tenants have [less influence] over restrictions on other uses in a center or what other tenants can do,” Smith explained.

Retailers signing leases in Canada may be moderately surprised by how little leverage they have with institutional owners in Canada compared with the negotiating power they typically enjoy with U.S. landlords. But U.S. retailers are even more surprised by one of the subtle legal differences in Canada.

Mario Paura, senior partner at business law firm Stikeman Elliott in Toronto, explained: “Retailers can expect to operate under two binding agreements on the leasing side. In the United States, you typically have a non-binding agreement (letter of intent) followed by the binding lease. But in Canada, the offer to lease is binding and then [the parties] move into the binding lease.”

When retailers choose to purchase a property, rather than lease, they may encounter more delays and transaction fees than anticipated. Paura noted: “On the purchasing side, transactions may attract a land-transfer tax which, depending on the municipality, ranges from 1.5% to 3% of the transaction value.”

“With regards to permitting and entitlement,” Paura continued, “while there are many similarities between the U.S. and Canada, if questions are raised about the retail use — either by a city or residents or surrounding tenants — then the entitlement process may take longer.”

Additionally, there are unique property laws in the province of Quebec, largely because Quebec’s property laws are civil-code-based as opposed to common-law-based. Paura likened the fact that Quebec is uniquely different from Canada’s other provinces to the way Louisiana is different from other states, but he stressed that retailers should not feel intimidated by the differences.

“From a legal perspective, there are no material differences in regions that would make expanding into one region more difficult or easier than another,” stated Rocco Delfino, another senior partner at Stikeman Elliott. “In some cases, U.S. clients have the initial impression that Quebec, with its Civil Code and French language laws, may be more complex than common-law provinces. However, in conjunction with our Montreal office, we can readily explain the rules and requirements and provide related practical advice [so] clients are better able to focus on what makes sense from a business perspective.”

Geographical challenge: The most inflexible challenge facing retailers interested in expanding in Canada is the country’s geography and the inherent logistics required to effectively distribute goods for coast-to-coast operations.

Eighty percent of Canada’s more than 34 million residents live within 100 miles of the U.S. border. Across this relatively thin continental stretch of populated land, travel distances between major metropolitan areas are much greater than in the United States.

“Toronto, Canada’s largest city, is a five-hour drive from Montreal, the second-largest city,” Kimco’s Smith said. “And the third-largest city, Vancouver, is over a five-hour flight from Toronto — so distribution is quite a challenge if retailers want to open just a few locations in the largest cities.”

Smith has a list of U.S. retail concepts that Canadian consumers are clamoring for, and it includes Trader Joe’s (which has moved to the top of the wish list now that Target has made its commitment), DSW, Ross Stores and any of a number of higher-end restaurants. Perhaps the first step toward luring these brands is to build it, so they can come.

Not only is development in Canada considerably more constrained than in the United States, there is also little variety in the properties that exist.

“While the quality of our shopping centers is high, the range of shopping center formats is more limited in Canada, which to a degree limits consumer choice,” concluded Collier’s Bell. “Since consumer shopping preferences are very similar in both the U.S. and Canada, there are opportunities to bring a broad array of retail formats that are popular throughout the U.S., such as premium outlets, lifestyle centers and integrated mixed-use developments with entertainment, food and employment uses.”

In fact, that is already starting to happen. Indianapolis-based Simon Property Group and Calloway Real Estate Investment Trust, Toronto, have started construction on what is billed as Canada’s first upscale outlet center. The first phase of the planned 500,000-sq.-ft. Toronto Premium Outlets, a joint venture between Calloway and Simon, will open in the summer of 2013.

“We see tremendous opportunity to introduce our top merchants to the Canadian market,” said John R. Klein, president of Simon’s Premium Outlets division.

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