The Future: Converged Retailing
As consumers become more digitally connected than ever before, with product information and price comparisons at their fingertips, brand loyalty isn’t what it used to be. In response, the industry may be readying itself for a shift that puts consumers in the driver’s seat, dictating what they want, wherever they choose. “Retailers will have to offer a personalized, consistent experience across all channels to stay competitive and be willing to listen to each consumer’s preferences,” said Mike Webster, senior VP and general manager of retail and hospitality for Atlanta-based NCR Corp., a technology company whose assisted- and self-service solutions and support services address the needs of retail, hospitality, financial and other organizations around the world. Chain Store Age spoke with Webster about NCR’s interpretation of “converged retail” and how it has the potential to change the face of the industry forever. How would you describe “converged retailing?”
The intimate relationship between merchant and consumer is currently lost. Retailers are trying to connect with us via so many platforms, and personalization has faded along the way. Merchants try to push Web recommendation-predictions, but these are basically guesses. The future of the retail industry is going to move away from a business-to-consumer world and pick up a consumer-to-business model, where shoppers will be calling the shots and dictating their preferences. To do so, all channels will have to converge into one. This will allow the retailer to begin a transaction in one channel and add value in another.
Why is there a challenge with personalization right now?
It’s hard for merchants to create a consistent, personalized experience across various platforms. There remains a big focus on multichannel strategy, but multichannel is just another way to connect with the consumer, and it is inconsistent. Merchants often send different messages to different platforms. In reality, retailers don’t know that much about individual shoppers. Shoppers may be getting promotions about dog food from a pet retailer when they actually have a cat — the retailer only knows that they have a pet. It’s also a struggle for retailers to harmonize all of the fragmented data out there — from social media to the mobile world — to form a more holistic view of the consumer.
Merchants have to figure out a way to really engage each shopper to better understand their preferences and how they want to be served. In the future, consumers will instead be able to co-create with the retailer, so their presence can be detected in any channel and preferences can be met.
How would a shopper declare their preferences?
Sophisticated software from third-party providers can enable retailers to learn about each shopper on a personalized level. The retailer will ask simple questions via the Web, mobile device or at checkout in a store to hone in on their needs and wants. Shoppers don’t want to be inundated with unrelated promotions, so merchants can make their life easier. Soon, a whole profile can be developed about a shopper so the retailer could know that they prefer certain types of organic products for their six-month-old baby. In a store, a phone number or loyalty card could also be handed over so the cashier would know the shopper doesn’t want a receipt with their purchase (or wants the receipt printed in a certain language).
How will in-store technology reflect this change?
Digital signage can create a conversation with a shopper in a personalized, targeted way. Right now, it’s broadcasting a message, but in the next few years, shoppers will be able to interact with it by swiping a loyalty card, for example, that clues the technology into who they are. The signage, or even a kiosk, can also suggest items in the store that would match what they bought online last month.
How close are we to this reality?
We have already seen it in small pieces, but it’s probably the start to a three- to five-year journey. Personalization will be more prevalent in the next few years, and the results will be very powerful for those that take advantage of the strategy.
Focus on: LEED for Retail
In November 2010 the U.S. Green Building Council announced the long-awaited launch of its newest green building rating system, LEED for Retail. The new system has two distinct certification tracks, LEED for Retail: New Construction and LEED for Retail: Commercial Interiors.
Developed to recognize the unique design and construction needs of the retail market sector, the new Retail rating system will be required for retailers seeking LEED certification if more than 60% of the square footage of the project is devoted to retail uses. It will not be available for projects with less than 40% of the square footage devoted to retail uses. For projects in which 40% to 60% of the square footage is devoted to retail uses, the Retail rating system may be used but is not required.
In addition, the USGBC is expected to launch a related rating system, the LEED Volume Program, designed to streamline the LEED certification process for high-volume developers of uniform projects, sometime this year.
Impact: As retailers cope with today’s difficult retail climate, a commitment to green facilities and green services may improve more than the environment. It just may increase the bottom line by enhancing the customer experience and earning the loyalty of their customers. With consumers focused on all things green, both retailers and retail space developers are taking environmental responsibility seriously. They recognize that a company’s retail space can tell consumers a lot about the company’s commitment to environmental sustainability.
Starbucks is one example. The company has made a commitment to seek LEED certification for its company-owned stores — and to do so within standard store construction budgets. It intends to significantly reduce its environmental footprint by 2015, and using green design elements in its stores is part of its strategy to achieve that goal.
Some of the design elements used by Starbucks and other companies pursuing LEED for Retail certification include the use of LED and CFL light bulbs to provide more light while reducing energy usage (on external signage and in parking lots, as well as inside the stores). More light is important because research has shown a direct correlation between increased levels of natural light in retail spaces and time and money spent by customers. More and larger windows and skylights can make a big difference.
Other design elements include the use of low-flow faucets and dual-flush toilets to significantly reduce water usage and the use of hand dryers to minimize paper towel usage.
Consumers are more likely than ever before to recognize and appreciate a retailer’s efforts to achieve LEED certification for its retail stores and what that certification says about the company’s commitment to environmental stewardship and sustainable business practices.
Katherine Oberle is an attorney with Morgan Miller Blair, Walnut Creek, Calif., representing national and local companies in commercial real estate transactions. She is a member of the Northern California Chapter of the USGBC.
Monica Sloboda is vice chair of Morgan Miller Blair’s Real Estate Practice Group, and an active member of the International Council of Shopping Centers and the Northern California Chapter of the USGBC.
What do Cabela’s, Whole Foods Market and Walmart all have in common? They are among the retailers using fuel cells to lower their electricity costs while also reducing carbon emissions, according to a study by Fuel Cells 2000, a non-profit educational organization.
The report, “The Business Case for Fuel Cells: Why Top Companies are Purchasing Fuel Cells Today,” details the initiatives of 38 national companies that are deploying or demonstrating fuel cells. The study also makes a case for fuel cell technology, noting that fuel cells generate electricity with low to zero emissions and provide not only environmental savings, but productivity improvements via time, cost and manpower savings.
Also, when the fuel cell is situated near the point of use, waste heat can be captured for cogeneration, where it can be used to provide hot water, space heating or cooling. This type of combined heat and power (CHP) installation can deliver 80% to 90% overall fuel efficiency. Heat can also be used for refrigeration using absorption chillers, as many supermarkets installing fuel cells are opting to do.
Here are some of the retail deployments highlighted in the report:
• High electricity rates in the Northeast led Cabela’s to investigate alternative energy options, and the outdoor apparel and gear chain subsequently installed four fuel cells at its newly constructed, 185,000-sq.-ft. store in East Hartford, Conn.
The cells (UTC Power 200kW) provide 100% of the required building power and reduce carbon emissions by 1,800 tons annually. When there is an excess, Cabela’s is able to sell electricity back to the grid.
• Walmart Canada’s new distribution center in Balzac, Alberta, uses hydrogen fuel cells instead of traditional lead acid batteries in its entire fleet of 71 material handling vehicles. The chain estimates that using the fuel cells as a power source will reduce C02 emissions from the vehicle fleet by 55% annually, and will also improve productivity and result in a cost-avoidance of an estimated $1.3 million over five years.
• In the United States, Walmart is deploying fuel cell-powered pallet trucks and lift trucks at several distribution centers. In addition, fuel cells (400kW, from Bloom Energy) provide primary power at two Walmart locations in Southern California.
• HEB Groceries has deployed 14 fuel cell-powered reach trucks at its distribution center in San Antonio.
• Staples installed a fuel cell (300-kW, from Bloom Energy) in 2008 at its distribution center in Ontario, Calif. In the first year, the project generated more than 2 million kilowatt-hours of power with availability above 99%, and resulted in the reduction of 2.5 million lbs. of carbon dioxide.
• Star Market in Chestnut Hill, Mass., has a fuel cell (400-kW, from UTC Power) that delivers 90% of its energy. The hot water byproduct is used to heat the store and is run through an absorption chiller and used to improve the efficiency of the store’s air-conditioning system. Total energy consumption within the store is expected to decline 211,000 kilowatt-hours annually.
• Whole Foods Market has installed fuel cells (from UTC Power) at two stores: one in Glastonbury, Conn., and another in Dedham, Mass. The chain plans to install a third, in a store to be built in San Jose, Calif., with the cells’ thermal energy byproduct to be used for heating, cooling and refrigeration needs. The grocer has also installed fuel cell-powered forklifts at its warehouse in Landover, Md.
• Wegmans is converting the entire lift truck floor at its warehouse in Pottsville, Pa., to fuel cells. Throughout 2011 and 2012, the supermarket operator plans to expand its use of hydrogen fuel technology at the Pottsville facility, and eventually up to 150 pieces of equipment will be powered by hydrogen fuel cells.