Joining the dots in retail

John Norrie, founder and chief executive of Transactor Technologies, answers a Q&A on the challenges facing retailers in a rapidly changing marketplace


What do you view as the biggest challenge facing traditional retailers?

The whole retail landscape has changed dramatically in the last few years, mainly driven by the “coming of age” of communication technologies. The emergence of the internet from being the exclusive domain of computer geeks to today’s easy access for all is opening up a new world of opportunity to communicate with customers in a myriad of ways. Add to this the evolution of online shopping from being a challenging and unwieldy experience into an easy and serious alternative to traditional high street shopping.

The traditional bricks-and-mortar model has never been under more serious threat. We have seen online companies emerging from nowhere, with nothing more than a website, becoming retail giants, not only grabbing significant market share from traditional retailers, but also changing and influencing shopper behaviour.

This astounding pace of change has left many retailers wrestling with the challenge of how to not only be part of, but also take advantage of the “new world”.

How are retailers equipped to deal with these challenges?

Technology changes in retail are traditionally slow. For example, retail point-of-sale (POS) systems may have a “life” of seven years or so, but many retailers stretch that out way beyond the life of other IT infrastructures. In contrast, the speed of computer-processing power has been doubling every 18 months.

It is, of course, very difficult to change the modus operandi of a major retail business due to several hundred outlets and thousands of staff, huge investment in logistics and IT infrastructure. To change any of these elements demands significant investment which is often not supportable based on retail gross margins.

In many situations the consequence is that we find disparate legacy IT systems that are held together by overstretched IT departments unable to contemplate any upgrades and innovations for years to come. Integration with the internet and mobile devices is a definite hurdle for many legacy systems and “going digital” is an unwelcome challenge for some.

In some of your presentations to retailers, you mention “retail silos” – can you expand on what you mean by this?

In a number of retail environments, I have seen situations where new initiatives have been introduced, but due to the inability to integrate with existing POS systems, they have evolved as stand-alone activities, unrelated and unlinked to the whole customer shopping experience. I call these the “retail silos”.

For example, the need to rapidly compete with the online retail explosion has driven many retailers into e-commerce as a stand-alone activity within the organisation, typically operating its own customer database and marketing communication strategies.

Even though most traditional retailers now offer online shopping, many are unable to link customer information effectively with other initiatives

The same can be seen with products such as gift vouchers and cards, typically viewed as a “financial” product and therefore not treated as another way of engaging with customers and prospects, as another integrated part of the marketing communications chain. Often we see gift vouchers or cards and pre-pay cards managed by the finance department, totally independently of the other marketing initiatives of the organisation.

The net result of this situation may be that the organisation ends up with an inefficient, unco-ordinated, and unnecessarily costly customer marketing and promotion expense.

I use the term “joining the dots” to best describe this strategy of breaking down the silos and linking them together in a way that enables all divisions a single view of the customer and their interaction with the business.

What can retailers learn from their online competitors?

The single most important difference between online and bricks and mortar is the fact that in the online retail world, the retailers know 100 per cent of their customers. Bricks and mortar need to look at ways to replicate as much of that online experience in-store to better engage with the customer.

What are the consequences of failing to revise current practice, to streamline and co-ordinate marketing and communications strategies?

Unfortunately, older models that fail to adapt to new market conditions will disappear rapidly. And, arguably, we are on a rollercoaster ride in one of the fastest changing retail environments since the high street began.

One of the overwhelming advantages that an online retailer has over traditional bricks and mortar is that their overheads and staff costs are substantially lower than the traditional retailer cost. But more critically, the online retailer generally has much better information about their customers – what they buy, their preferences and purchase intentions – than most bricks-and-mortar retailers.

Because certain customer information has to be collected in order to process a transaction, this potentially provides the online retailer with a significant advantage in terms of customer knowledge, communications, rewards and incentives.

Even though most traditional retailers now offer online shopping, many are unable to link customer information effectively with other initiatives, such as their loyalty programmes, customer relationship management (CRM) systems, voucher programmes and even through to their gift voucher or card business.

What are the best organisations doing to grow their company and be competitive in the future?

The best organisations are thought leaders in offering technology-based initiatives to understand their customers better, and create more dynamic and interactive customer shopping experiences.

In a nutshell, because progressive organisations know their customers well, their business model depends on offering the right product at the right time in the right way to their customers, rather than simply applying price cuts, untargeted discounts and rapid delivery times to the world at large as a way to attract business.

Progressive companies are connecting all marketing and communications activities through one platform that ideally operates in real time to store and manage all the knowledge about their customers and their interaction with the company. This “gold mine” of information not only contains the essential demographics of customers and their transaction history, but also stock keeping unit (SKU) level data on what has been purchased, what vouchers have been redeemed, what rewards have been issued, and should include the integration of gift card and pre-pay activity, online purchases and, of course, in-store visits.

They have to make a determined commitment to get to know their customers in depth and use every mechanism available to interact, communicate, incentivise and reward customers through a wide variety of touchpoints, making a seamless connection and transition between all activities, whether they are online, on mobile or in-store.

Transactor clients include Subway EU (winner of Loyalty Award Best Food Loyalty Programme in 2012 and 2013), Matahari Department Stores (Indonesia), Paper Plus Group (New Zealand retail books and stationery chain), Westfield Shopping Malls (New Zealand), Carrot Rewards (Thailand Transit System Multi-merchant Loyalty Programme), and Coffee Bean and Tea Leaf (Philippines).

Transactor Technologies provides a unique proprietary platform used by many retail groups around the world to provide the “single source of truth” about their customers – one system that can feed from existing legacy environments and deliver real-time responses back to virtually any customer touchpoint, including POS systems, mobile phones, kiosks, and web environments.

Transactor is a New Zealand company operating since 2003, with offices in the UK, Australia and New Zealand.

View Transactor’s The .dots presentation online at: www.transactortech.com/thetimes