Jan 24, 2011Back in 2000, when I was the managing editor of InformationWeek, one of our columnists wrote that Toys "R" Us had to be careful not to find itself "Amazoned" by an online competitor. A reader wrote in to say that Amazon.com, the online retailer to which our columnist referred, had revenue equalling only a tiny fraction of that of Barnes & Noble, and that all the hubbub about "brick-and-mortar" retailers getting trounced by their newly created online competitors was overblown.
He was right, of course. Journalists were hyping "the new economy" at the time. But the reality, a decade later, is that Amazon has expanded beyond books, and will report revenues of more than $30 billion for 2010, while Barnes & Nobel earned just $6.8 billion. (Barnes & Noble's market capitalization is about $1 billion, and Amazon's is almost $80 billion.) Perhaps more important is the fact that online retailers have changed shoppers' expectations, forcing conventional retailers to adapt or die.
Amazon and other "e-tailers" are growing by 30 percent each year. Most had a great holiday season this past December. Brick-and-mortar retailers had a decent season—sales rose by 3 percent or so. But why are online retailers growing so fast, and conventional stores so slowly? The answer, many retailers are starting to realize, is that the experience is better online than in stores. A Web site can tell you immediately if a product is or is not in stock, and once it becomes available, you can buy that item and have it sent to your home a few days later.
In a store, on the other hand, you often can't find the proper size, color, style or model of whatever you are interested in buying. You have to wait to find someone who can help you, then wait again while the salesclerk checks a computer to see if that item is available. Then you continue waiting while he or she searches for the item in the store's back room, and you inevitably vow not to come back when, after 20 minutes, the employee finally informs you, "The computer says we have two in stock, but I can't find them."
I spoke to a retailer at the National Retail Federation's Big Show conference, held two weeks ago in New York City (see Thoughts From NRF's Big Show). This individual said his company ships the correct item to the correct online customer 99.9 percent of the time, but that inventory accuracy at its stores is just 70 percent. "We're looking at RFID," he stated, "because 30 percent inaccuracy isn't acceptable, and our customers are telling us that [by shopping online more frequently]."
The answer, according to the retailer I mentioned above, is to merge the online shopping experience with a better in-store experience. That means being able to buy online and pick up items or return them to a store. It means providing the kind of information in stores that customers can get online. And it means making the in-store experience as user-friendly, easy and (hopefully) fun as the online experience can be.
It's a great concept, but the foundation on which the concept lies is better execution. That means stores need to know exactly what they have in stock. They need to replenish more effectively. They need to have in-store kiosks that can provide access to information about products and real-time data regarding where those items are located—whether on a shelf next to the kiosk, in the back of the store, at another store 10 blocks away or at a distribution center.
When you have real-time visibility data and can act on it to improve store execution, and when you can bundle that visibility with cool interactive tools, such as those on display at Intel's NRF booth—a vending machine and an experimental end-cap display employing gender-detection software to determine whether a man or woman was approaching, as well as that individual's approximate age, so that it could discern, for instance, if the visitor was a teenage girl, or a middle-aged man—people will enjoy shopping in brick-and-mortar stores once more. When that happens, having stores will again become a competitive advantage.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog or the Editor's Note archive.