RETAIL BUSINESS WITHIN UNITED KINGDOM AUTHORS: WENJIE LIAO, YU LIU, WAN XU, XIMENG ZHANG, PEIRAN ZHAO.
SUMMARY The UK benefits from a diverse, extremely competitive and innovative retail sector which has proved resilient during recent economic difficulties. Increasingly retailers are moving to "multichannel" operations - their sales channels include in-store, ecommerce, m-(mobile) commerce, and other forms of distance selling. The options a customer has for browsing, purchasing and delivery are widening. This article will focus on two parts: Importance of technology in retailing. Importance of loyalty schemes within retailing.
CHAPTER 1. IMPORTANCE OF TECHNOLOGY IN RETAILING
With the increasing globalisation of retailing, both in terms of their points-of-sale and their points-of-supply; the information technology (IT) spend in the retail sector has increased significantly. IT plays an increasingly important role in the management of complex retail operations. Market knowledge, as well as control of data and information, is the key to obtain a competitive advantage in the retail sector. Markets are continuing to grow and become more complex; the simple process of retailing has started to deploy more advanced retail information systems to cope with all the transactions involved.
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Today, retailers need to transform their IT capabilities for multiple reasons, including: • To improve the company’s ability to respond to the evolving marketplace through enhanced speed and flexibility. • To collect and analyse customer data while enhancing differentiation. • To work effectively; retailers need one system working across stores (or even across national borders) to make sure the most effective use of stock and improve business processes.
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Retailers are beginning to notice that technology’s role is one of an enabler. Essentially, information technology can speed up processes and deliver cost saving benefits to the company.
dition, radio frequency identification tagging positions the company to be able to safeguard its shipments by allowing products to be tracked from manufacturer through the entire supply chain.
The retail industry faces many specific challenges related to IT management, including:
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Customer data
Many retailers struggle with information overload because they’re required to collect and sift through mass amounts of data, then convert it into useful information in a customer-centric industry.
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Transparency and tracking
Retailers must increase transparency between systems, as well as obtain better tracking to integrate systems from manufacturer through to the consumer while obtaining customer and sales information. •
Global data synchronization
PCI Security Compliance
PCI Security Compliance addresses the retailer’s internal security setup and practices, in order to mitigate payment security risks. Every business engaged in credit card payment processing is required to comply with PCI Security Standards. If a retailer collects or stores credit card information that becomes compromised, the retailer may lose the ability to accept credit card payments. Other possible consequences include lawsuits, insurance claims, cancelled accounts, and government fines. The retailers who take advantage of outsourcing IT will obtain optimal advice and benefits from outsourcing. Many retailers have turned towards IT outsourcing as a way to control costs and improve their service delivery.
Due to radio frequency identification/ electronic product coding, the entire sup- • Impact of Information Technology on Retail ply chain has become more intelligent. Retailers must enable the use of realtime data to watch inventory levels. In ad4
This section summarizes the way in which participants perceived the role of IT in retail. Among those interviewed, there was agreement that technology should solve problems, not generate new ones; it should not be implemented just “to be there,” but for a defined reason. It was also understood that technology can appeal to some but not to all customers. In-store technology should be “invisible” to customers and well tested before implementation to ensure that glitches and problems are eliminated, as these can quickly alienate customers. A successful strategy in technology implementation should be aligned with the customer, retailer, and product manufacturer. The issue arises as to who should be responsible for customer experience
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integration: the retailer, producer, or tech- older shoppers, who might still prefer tranology provider. ditional face-to-face interactions with staff members. Thus, the choice of interIn its current state, technology should action is important; customers should be complement but not replace the store able to select the channel and the team. Store employees should be inmethod of interacting with the retailer, as volved as technology users, and soluwell as the time. Any technology in-store tions such as tablets can support them. should extend the customer experience At the same time, store employees are and not be a new barrier for people less perceived as a potential barrier to techfamiliar with it. The answer to such probnology implementation; thus, training lems of diversity might be a combination and technology promotion among staff of the options available in-store: digital are required. This is especially important seamless touchpoint, sales assistant, in organizations in which a large proporand availability of the physical product tion of staff are part-time, temporary, and for inspection and trying out. However, it not technology minded. was also acknowledged in the discussions that even though the demand for The main themes and issues that emerged from the focus groups were in- better customer experiences might be growing, it is dependent on the store tegrated and are presented in Figure 1. strategy, product, and brand positioning The following section explores them fur(such as low-cost versus luxury goods); ther. thus, there is always scope for differentia• Diverse Customer Requirements tion among retailers. At the same time, there is the issue of whether customers It is trivial to state that different customare willing to pay more for a premium ers have different requirements; howservice. Some of them do not want to ever, this could easily be forgotten. Not pay more and may be satisfied with a all customers want the same level of inlower level of customer service at a teraction with technology. This is espelower cost. Thus, there is a trade-off becially visible when differences between tween low cost and premium service. It generations are considered. “Digital natives,â€? people who grow up with constant was also noted that the requirements of a single customer might change dependonline access, can be contrasted with 6
ing on the context: time of day, financial situation, plans, feelings, which will all influence the interaction with the retailer and the channel selected. Supply Chain Redesign Supply chain investments are perceived as a key issue in channel integration. When the store is considered a hub for retail activities, the supply chain design should reflect this. Issues such as product availability, returns, delivery options, reverse flows, and inventory management across channels should be addressed. Because online and traditional channels are often managed separately, integration of both physical and information flows is required. However, different options may also be considered, such as “showrooming,” in which products are just viewed and “experienced” in-store and then delivered directly to the customer. The mix of traditional and online options will be the most likely solution: for smaller items the “click and collect” option (buy online, collect in-store), and the “showroom,” supported by interactive screens, for items that need space for storage and exhibition. Such products could be ordered in-store (via assistant, supported by technology or self-service technology—mobile or in-store), then delivered directly to the home in a requested slot. All such options should be supported by redesigned end-to-end distribution and delivery systems; there should also be integration of marketing and supply chain management to ensure product availability across channels and a pull-order system from the product manufacturers.
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REFERENCES Customer-Loyalty Programs.” March 31, 2008. SmartMoney.com. http://www.smartmoney.com/spend/family-money/retailers-expand-customer-loyalty-programs-22801/ 8 “Why most loyalty programs don’t work.” October 27, 2009. imagineeringnow on YouTube.com. http://youtu.be/mHzkOErrCT0. Dowling, GR, and Uncles, M. “Do Customer Loyalty Programs Really Work?” Sloan Management Review 38, no. 4 (1997): pp. 71-82. PDF p. 7. Available online at royalloyalties.com/Case_Study.pdf. Dowling and Uncles, 1997, Op. cit.: PDF p. 13. Grant, K.B. “Retailers Expand Todé, C. “Nordstrom upgrades loyalty program experience.” May 4, 2007. Direct Marketing News. http://www.dmnews.com/nordstrom-upgrades-loyalty-program-experience/article/95464/ “The Lowdown on Customer Loyalty Programs: Which Are the Most Effective and Why.” September 6, 2006. Knowledge@Wharton. http://knowledge.wharton.upenn.edu/article.cfm?articleid=1545. Notte, J. “5 Best, 5 Worst Customer-Loyalty Programs.” June 25, 2010. The Street. p. 1. http://www.thestreet.com/story/10788796/5-best-5-worst-customer-loyalty-programs.html.
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CHAPTER 2. IMPORTANCE OF LOYALTY SCHEMES WITHIN RETAILING. while every business must risk offending customers with imperfect transactions, they can still build meaningful relationships. Loyalty programs attempt to reward customers (and businesses) for sustaining such a relationship by providing clear incentives for patronage. In fact, successful loyalty programs can even accelerate the frequency of customer visits and volume of purchases, strengthening the connection.
Airlines and retail chains were the earliest industries to adopt the practice of rewarding their customer through loyalty incentives. They brought in different card systems such as loyalty cards, reward cards, points and advantage cards. These cards often have barcodes which aid in further identifying the buying behavior of the customers. Some companies even promote membership programs to reward customers with consistent buying patterns. As the average customers are becoming smarter and aware, it’s becoming difficult to cater to all their demands. Customers expect value for money, at all costs. They expect a polite approach from sales and service representatives. Moreover, they want to be appreciated for their patronage! Keeping these smart customers in mind, loyalty programs are designed to test customer retention strategies. These programmes keep the competition at bay and act as motivators for customers to continue using the same service or product. Moreover, customer loyalty programs also provides database for further customer relationship management. Companies look for increased sales and better customer relationships from their loyalty programs. Consumers, on the other hand, are often more interested in the rewards than in the relationships: status, cash, and prizes. we also note that many fashion retailer rewards programs differ from the profiled programs in their structure. While most programs profiled below provide a specific membership number or card, most fashion programs are operated through a store credit card program. That is, reward points are tracked through the customer’s store credit card number rather than a unique membership number. For example, Ann Taylor LOFT Credit Card holders
can receive LOVE LOFT REWARDS points for instore or online purchases with their credit card, which earn gift cards at intervals and other bonuses or prizes for being a credit card member. The AEREWARD$ card by American Eagle allows cardholders to earn points for purchases made at American Eagle, Aerie, or 77Kids, which earn discount certificates at regular three-month intervals and some additional bonuses or prizes for being a credit card member. Running a rewards program through a store credit card will likely exclude the average consumer because it requires a specific financial commitment – applying and being responsible for a credit card – that most non-loyal shoppers will be unwilling to make. However, we note that the rewards are generally consistent among fashion programs and those profiled below – discounts, special attention or prizes, and certificates toward future purchases. Amazon Prime Real Simple and other prominent publications testify to the ubiquity of Amazon Prime, the customer loyalty program of one of the internet’s largest retailers. This is a fee-based two-tiered program (member, non-member) offering discounts on shipping, access to Amazon Instant Video, and 1-Click shopping: BusinessWeek suggested that “Amazon Prime may be the most ingenious and effective customer loyalty program in all of e-commerce,” citing its ability to convert complete outsiders (“What is Amazon?”) into total enthusiasts (as quoted in the article, “Now if I see or hear about a product somewhere else, I’ll always check first to see if Amazon has it.”). It has become the model for competitor programs, including Best Buy, Target, and J.C. Penney. The program has received particular attention for two 10
additional initiatives: free Amazon Prime for college students for one year (those with a current .edu email address), and hints of a forthcoming free Kindle promotional for Amazon Prime subscribers (well-founded theories based on dropping Kindle prices). Although the program has received some negative press based on the fact Prime membership is automatically renewed – and customers are automatically charged for that renewal – and has also been accused of differential pricing for different types of customer accounts, the loyalty program has been successful overall. The bottom line, as evidenced in Virginia Heffernan’s article in the Times, is that Amazon Prime members want to feel special – and non-Prime members want to feel like they’re superior. In other words, this program has created two “insider” groups – the believers in Prime, and the believers in not-Prime – which establishes an in-
centive for each group to find and share the best deals, attributing the bargains to either their membership or non-membership. This results in a bigger profit for Amazon as a whole.
My Starbucks Rewards T h e S t a r b u c k s c o ff e e s h o p b r a n d h a s generated a complete lifestyle around its products, so much so that to have a “Gold Card” carries with it immense status. This “Gold Card” represents the top elite status in its four-tier (Gold, Green, Welcome, non-member) customer loyalty program. Status and luxury are the focal messages in the company’s program description: Consumers are presented a clear message: “The more you come in to Starbucks, the more we’ll reward you.” The simplicity of this program encourages participation. And the program is seen as a significant improvement over a 11
previous iteration, which charged $25 for membership. The improvement was significant enough that My Starbucks Rewards was named one of the top five best customer loyalty programs by The Street. Particular attention was given to the immediate and entry-level perks, like a free beverage on the member’s birthday.
The whole point of rewarding a customer with better prices or services is to encourage them to repeat their behavior. If rightly executed, a customer loyalty program can dramatically increase profitability. Retaining existing customers is relatively easy on the budget than targeting new ones. In the final analysis, costs incurred on any loyalty program that promises to retain customers is money well spent.
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“Jessie gets a gold card.” December 28, 2010. jessieless3 on YouTube.com. http://youtu.be/IHH8l6hR0GE 71 “Graeginator Got A Starbucks Coffee Gold Card.” February 24, 2011. SeeGraeginatorRun on YouTube.com. http://youtu.be/zm5eKgRTeQc. “Noah gets a starbucks card.” April 15, 2011. bettse0 on YouTube.com. http://youtu.be/OOkk1y3TmSU Co, E. “Does Having a Reward Card Cause You to Spend More?” February 9, 2011. SavvySugar.com. http://www.savvysugar.com/Starbucks-‐Rewards-‐Card-‐13847296. Richardson, V. “Finally, Starbucks creates simpler rewards card.” November 2, 2009. Wallet Pop. http://www.walletpop.com/2009/11/02/starbucks-‐creates-‐simpler-‐rewards-‐card-‐and-‐throws-‐in-‐a-‐free-‐drin/ Notte, 2010, Op. cit.: p. 2. “We meet again, Starbucks.” October 4, 2007. WellHeeledBlog.com. http://www.wellheeledblog.com/2007/10/04/we-‐meet-‐again-‐starbucks/.
“Starbucks Rewards Card: A Good Deal for the Frequent Drinker.” March 11, 2011. WellHeeledBlog.com. http://www.wellheeledblog.com/2011/03/11/starbucks-‐rewards-‐card/.
Dolen, M. “How To Get A $20.65 Drink From Starbucks Without Paying A Dime.” May 12, 2011. Business Insider. http://www.businessinsider.com/the-‐2065-‐drink-‐from-‐starbucks-‐2011-‐5.
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