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You, Me and We Commerce: The Future of Retail IT?

BY CSA STAFF

By Tom Friedman, [email protected]

I was once a high-profile observer of the retail IT industry, when I was CEO of global research and trade show company Retail Systems Alert Group (RSAG). However, since selling RSAG to a private equity firm in 2004, I have kept a low profile in the industry.

Recently, my involvement with angel investing and startup mentoring has offered me a new perspective on the industry. I am now working with nascent startups worldwide entering the retail IT space.

From this vantage point, it appears that new systems and technology are enabling convergence of retailers, customers and brand manufacturers. I believe this will allow great leaps forward in merchandising, assortment, pricing, supply chain and product design.

First, let’s look at some of the IT-fueled retail innovations that are happening right now.

Perfecting old opportunities: ‘You commerce’
Today, a retailer speaks with customers to obtain information about which products the customer desires and then builds sales and assortment strategies around that conversation. I call this “You Commerce.” With developments in social media, these conversations are far more insightful and easier to act upon.

For example, I am mentoring a new Russian ecommerce company that allows women to create a 3-D avatar of their body dimensions and then try on fashion apparel virtually. Social networks add another layer to the process by allowing the shopper’s friends to sneak a look and offer advice. As a result, retailers could soon offer online service that assist customers with selecting better-fitted clothing options that are instantly vetted by the ever-so-important critiques from close friends.

Enabling new opportunities: ‘Me commerce’
In addition to perfecting old opportunities, IT innovation has begun to enable what many are calling “Me Commerce” (or retailing where the customer initiates the conversation and calls the shots). Under this scenario, the customer decides where a product will be available, what it will look like and even what it will cost.

A current example of “Me Commerce” is the Nike iD Studio concept store in New York and other major global cities. Through kiosks and online discussions with in-house shoe designers, customers build new “kicks” to match their color, style and functional preferences. Moreover, a few start-ups are investigating how a twist on the “reverse auction process” could enable customers to negotiate with retailers over markdown pricing.

Despite worries from retailers that this could erode margins, the insights gained from customer-assisted pricing practices could improve sell-through and provide true localized pricing.

The next step: Introducing product designers to customers
With the exception of Nike and a few other major brands with storefronts or websites, the product designer has a low profile or no role in the conversation with customers in the Me Commerce and You Commerce models. Typically, the retailer and the brand have a pre-season buying conversation based on a catalogue of already designed products. The retailer may buy based on sales histories for similar merchandise but it remains a guessing game season-to-season on which products will fly off retail shelves and racks. Brands may occasionally run consumer focus groups to reduce the risk, but designers and most customers have limited visibility or interaction, especially for toys, fashion and other short-cycle merchandise.

I am starting to see entrepreneurs experimenting with crowdfunding concepts (such as Kickstarter and Indiegogo) that enable independent designers to hear from potential customers about products and trends instantly. In addition, companies such as Lego have begun including existing customers in the corporate R&D process through Web-based product design challenges.

Working independently or in R&D at major brands, designers are embracing these new interactions to create relevancy earlier in the development process. I am grouping all these new activities under the broad category of “We Commerce.” This “demand-drive” environment could result in shortened development cycles, heightened sell-through, higher gross margins, fewer markdowns and happier customers, retailers and brands.

What it takes to get there
Despite my optimism expressed in this quick overview, I do not know exactly what the “We Commerce” retail business model will look like or how it will change the landscape. What I do know is that more and more bright, tech-savvy entrepreneurs around the world are acknowledging and tackling difficult retail problems. They are tinkering with new avatar systems, data analytics, cloud-based computing, social media and crowdsourcing. On the horizon, these technologies promise to change how retailers, brands and customers interact and to improve the overall shopping experience.

Tom Friedman was CEO and chairman of Retail Systems Alert Group from 1988 through 2004. He is now a Boston-based angel investor and mentor at MassChallenge Accelerator. He can be reached at [email protected].

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J.Cage says:
Jul-31-2013 10:39 am

Retail and Technology
Good article. Mobile and online shopping can drive retail sales better than any other media. Retailers need to constantly change strategy and evolve to current trends in the market and ensure they stay ahead of the curve. Came across this whitepaper on emerging trends in retail "Thinking about tomorrow: Post recession strategies for retailers" @ http://bit.ly/10XoIQa readers may find it useful.

J.Cage says:
Jul-31-2013 10:39 am

Good article. Mobile and online shopping can drive retail sales better than any other media. Retailers need to constantly change strategy and evolve to current trends in the market and ensure they stay ahead of the curve. Came across this whitepaper on emerging trends in retail "Thinking about tomorrow: Post recession strategies for retailers" @ http://bit.ly/10XoIQa readers may find it useful.

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FINANCE

Coach Q4 profit drops 12%; announces exec shake-up

BY Dan Berthiaume

New York — Coach Inc. on Tuesday reported a 12% drop in net income in its fourth quarter amid weaker same-store sales in North America, and also said it would sell its Reed Krakoff business to a group led by Reed Krakoff, who will depart the company as executive creative director when the deal is completed.

In other news, Coach announced a series of executive changes and said North American Group president Mike Tucci and president and COO Jerry Stritzke have decided to leave the company at the end of August. Francine Della Badia, currently executive VP, responsible for all North America Retail merchandising, planning and allocation as well as Coach’s global men’s and factory merchandising, will succeed Tucci as president North America Retail.

Coach’s net income for the quarter ended June 29 fell to $221.3 million from $251.4 million a year earlier

Overall revenue increased 5.8% to $1.22 billion in the fourth quarter, helped by gains in men’s merchandise and in China. Same-store sales were down 1.7% in North America. It was the second drop in North American same-store sales in the last three quarters.

Coach said that it anticipates the Reed Krakoff deal to close in the first quarter of its new fiscal year. (In June, the company hired former Loewe SA creative chief Stuart Vevers as its new executive creative director to succeed Krakoff, who has served as Coach’s president and executive creative director for 16 years.)

The company also announced the following executive appointments:

David Duplantis, executive VP digital marketing, is taking on the new role as president of global digital and customer experience.

Javan Bunch, senior VP of licensing will assume the expanded role of senior VP and president, North America wholesale and licensed categories, reporting into Todd Kahn, general counsel in his expanded role as executive VP corporate affairs.

Ian Bickley, president, Coach International, is expanding his role to take on responsibility to include all international direct retail businesses as president, international group.

Stephanie Stahl, currently senior VP strategy and consumer insights, is taking on an expanded role as executive VP marketing and strategy.

“Our management team is among the best in global retail, and we’re very fortunate to have a deep bench of truly exceptional talent,” said Victor Luis, president and chief commercial officer of Coach, who is set to take the reins from longtime Coach CEO Lew Frankfort in January. “We’re confident that this new organizational structure – with an intensified focus on our North American business – comprised of proven Coach leaders, will successfully drive Coach’s transformation strategy.”

For the full year, Coach’s net sales rose 7% to $5.08 billion from $4.76 billion the prior fiscal year while net income excluding unusual items increased 3% to $1.07 billion from $1.04 billion. Same-store sales rose 5.7%.

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REAL ESTATE

Nordstrom Rack to open in landmark Brooklyn site

BY Marianne Wilson

Seattle — Nordstrom said it plans to open a Nordstrom Rack at 505 Fulton Street in Brooklyn, N.Y. The approximately 41,000-sq.-ft. store is scheduled to open in spring 2014. The developer for the project is United American Land LLC.

The store will feature a unique design that will blend the architecture of the site — the landmark Offerman building — with the contemporary style of an adjacent, newly built structure. The single-level store will occupy the second floor retail space.

"We want to be in the top locations across the country, so this spot at the heart of downtown Brooklyn is big for us," said Geevy Thomas, president of Nordstrom Rack. "We are thrilled to become a part of this exciting community at a historic location, and we intend to make the most of the opportunity to serve customers and give them a reason to shop the Rack."

In related news, Nordstrom said it will open a Nordstrom at Shops at Orchard Place in Skokie, Ill. The approximately 36,000-sq.-ft. store is scheduled to open in spring 2014. Shops at Orchard Place is owned and managed by Inland Real Estate Corp.

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