Building the Intelligent Store

• Cognizant20-20Insights

Executive Summary

Asfarascustomersareconcerned,onlineretail

is now the state-of-the-art in shopping. Online

customersenjoyasmart,personalizedexperience

withrapidpriceandproductcomparisons,plenty

of informationandoften spot-on recommenda-

tionsbasedontheirpurchasehistoryandprefer-

ences.

Shopping in retail stores can’t compare. Most

merchandisesits orhangs insilence, a sortof

take-it-or-leave-itproposition that does little to

helpcustomersmakeabuyingdecision.

The networked “intelligent store” is about to

change the balance of power. By leveraging

customers’ mobile devices, retailers can now

integrate online and mobile channels with

in-storeshopping.Theobviousadvantageisthat

themerchandise theywant canbe takenhome

immediately.

Rethinking the Model

Thegoalisn’tjust“modernization”butrethinking

theconceptsofsellingand customerservice to

createa true21st-century shoppingexperience.

Inanetworkedstoretheexperienceisenhanced

through customer recognition, information

“pushed” to customers based on preferences,

specialoffersmadeinreal-time,theaggregation

and redemption of digital coupons and greatly

expedited“dynamiccheckout.”

For retailers, the intelligent store lowers costs

through process streamlining, less reliance on

xedPOSandthereductionofcouponhandling

fees.Atthesametime,itmakesthedeploymentof

salespersonnelmoreefcientandimprovestheir

interactionwithcustomerswhile increasing the

effectivenessofin-storepromotions.Theobvious

potential:increasedbasketsize,greatercustomer

satisfactionandloyaltyandhigherprots.

The Growing Challenges

of Bricks-and-Mortar

Makenomistake:storesstillmatter.Theyarethe

most critical partof themanufacturer-to-retail

supplychain.Thebeststoresaredoingmoreto

helpcustomersmakedecisions,nalizeopinions

and exitquickly to serve assatisedambassa-

dors.And thedesire to shop inpersonhasnot

abatedamongcommittedshoppers.

But store retailers face many challenges.

Obtaining genuine value from store business

processeshasneverbeenmoredifcult.Margins

arecompressed.The Internet and socialmedia

are funneling information to an increasingly

sophisticatedcustomer.Competitivedistribution

channelsareemerging.

Asa result,protableretailershave tobalance

storeand infrastructure costswiththeneedto

improve customersatisfactionanddifferentiate

thein-storeexperience.That’sa tallorderwhen

your storetrafc isbleedingattheedges from

onlinecompetition.

cognizant20-20Insights |october2011

 

Five Critical Questions

Retailersneedtoaddressvecriticalquestionsto

deliverthe21st-centurystoreexperience:

1. Howdoes theretailer-to-shopperrelationship

changeintheworldofsocialmedia?

2.Howdoyoubringintothestoreenvironment

theserviceoptionsavailableonline?

3.How can you reduce the cost to servewhile

increasingcustomerloyalty?

4.Howdoyouautomaterepetitivelabortasks?

5.How do you make the shopping experience

memorable?

The Five Things People Want

InaMay 2011columnonhis dailyblog [“What

(people)want”],marketingguruSethGodinlisted

the ve thingshebelievesallofuswant.They

happentocapturepreciselywhattheintelligent

storeisallabout:

•Noticeme.

•Likeme.

•Touchme.

•DowhatIsay.

•MissmeifI’mgone.

Emulating the Online

Experience In-store

ThebestretailWebsitesdoitall.Shoppingonline

offers customer recognition, customer appre-

ciationandcustomerresponsiveness.And they

claimtomissuswhenwearegone.

The intelligent store brings that same level of

service and technology to physical stores. It

offers retailers theopportunity to reinvent the

physicalshoppingexperiencesoitexesrespon-

sively depending onhow consumers choose to

interactwithit.

Theintelligentstorewillcometoshopperswith

servicesandadd-onsthatconsumersarewaiting

for.(Seesidebar,“WhatDoShoppersSay?”)

•Mobile Support:Theintelligentstoresupports

mobile applications like couponing to serve

customers who are increasingly comfortable

withsophisticated smartphones. In fact, it is

nowpossibletocaptureandautomatecoupon

redemption — so customers don’t have to

personallymanagetheirpapercoupons.

•Loyalty Data: Smartphones (and in-store

touch screens) will link to loyalty data and

providepersonalizedcommunications.

•Social Networking: Through social network-

ing,customerswillbuildcommunity,getfeed-

backandshareinformationrightinthestore.

•Real-Time Targeted Information: Product

informationwillbeavailabledigitallythrough

signsorshoppers’handhelddevices.

•Dynamic Checkout: Payment will be made

almost anywhere in the store, so no more

checkoutlineupsandfarmoresalesassociates

workingtheoor.

High Integration, High Touch

Theintelligentstoretakesmulti-channelintegra-

tiontothenextlevel.Anin-storeshoppermight

runaprice-comparisonapplicationwhiletapping

into one ormore social networks for opinions.

GPS-enabled geo-location services can draw

consumers to in-store promotions at nearby

locations.

Theintelligentstorealsomakessmarteruseof

staff, which is in keeping with a recent major

pushbyretailers.According toaJanuary2010

studybyRISNews, in2009planned upgrades

ofworkforcemanagement applications jumped

61%.1 Suchhuge interest reectsapronounced

desiretohire,trainandschedulemoreefciently

andtobetterdeploystafftopersonalizein-store

service,likeonlineretailersdo.

Point-of-service is where the intelligent store

really shines. The shopping experience can be

enhancedwith a high-touch option that keeps

customers coming back. Staff can spendmore

timewithandimpartmorehelpfulinformationto

shoppers,increasingsatisfactionandbasketsize.

Mobile device links or self-service kiosks ease

store navigation,promote the in-store“endless

aisle” concept and bringWeb delivery alterna-

tivestoin-storeshoppers.

How Do You Build the

Intelligent Store?

Here are seven fundamental prerequisites that

makeastore“intelligent”:

1. Take the store to the customer.Storesneed

tobeeverywherethatshoppersare—ofine,

online and on the road. Retailers need to

leverage the latest technologies to provide

20-20Insights 2

 

shopperswithproductinformation,detailson

promotions, checkout opportunities, delivery

alternativesandotherservices, regardlessof

location.

2.Integrate stores with other supply chain

elements.Agilesupplychainsincludestores.By

integratingwithmerchandising,sourcing,logis-

tics,ordermanagement and orderfulllment,

the intelligent store enables exible demand

responsenomatterwherecustomersare.

3.Support social networking.Intelligentstores

areanextensionofcustomers’socialnetworks.

Smart retailers tap social media to engage

theircustomers.

4.Be customer-centric. Intelligentstorestrack

andexpanduponcustomertrendsandrelation-

ships.Yougrowyour customerbase through

targeted promotions, personalized messages

and in-store loyalty management programs.

Customersoptintothesecapabilitiesbecause

theyrecognizethevalue.

5.Empower store managers. Intelligent stores

should be outcome-oriented. They provide

store managers with the data needed to

reacttoexceptionsin-store,generatingalerts

(whenashelfisoutofstock,forexample)and

decisions(assigningthere-stocktasktoastore

associate).Thisempowersstoremanagersto

bemoreeffectivebybeingontheoor,helping

customersanddrivingrevenue.

6.Manage the store efciently.Moreeffective

use of employees is another major benet.

With dynamic checkout, reliance on POS is

reduced, freeingpersonnel towork thesales

oor. The intelligent store also provides

associatesreal-timeaccesstoenterprisedata

andhelps toplanworkschedules toimprove

customerservice.Analyzingkeytrendssuchas

shrink patterns enables store managers to

target their activities and drive bottom-line

productivity.

7. Shift from point-of-sale to point-of-service.

Point-of-sale is the most important and

often theonlypointofcustomer interaction.

Strategies that reducePOS dependence and

create differentiated at-shelf, mobile “point-

of-service,” or customer handheld “applet”

solutions let shoppers execute checkout

services fromanywhere within oroutside of

thestore.

The Intelligent Store Has Arrived

Allsevenprerequisitesoftheintelligentstoreare

possible today in the networked in-store envi-

ronment.Butrealityisn’tremotelyclose.Infact,

in-store shoppinghasn’tchangedall thatmuch

foracentury.

Yes, store environments are radically different

tolookat,as ismerchandizing.Butanonymous

customers still stroll through stores without

information to evaluate goods, and goods still

 just sitmutelyona shelforhang froma rack.

Eventechnologicaladvancessuchaspromotional

videosarereallyjusttapeloopswithoutatarget

audience.

Untilrecently,shoppingonlineandin-store,have

beencompletelydifferentexperiences,often to

thefrustrationofcustomers.OurintelliSTORE SM

solutionbridgesthegapbetweentheonlineand

physicalstoreexperiencewithleadingedgetech-

nologiestomakecustomershappierandretailers

moreprotable.

In this networked store, customers connect to

thestore’sdatasystemwiththeirmobiledevices.

They are recognized based on loyalty and

shoppinghistory.Real-timeofferscanbemade.

Helpful information can be “pushed”basedon

preferences.Digitalcouponscanbeaggregated

andredeemedautomatically.Checkout is faster

andmoreinformation-rich.

Conclusions

1. Shoppers are empowered. Retailers need to

rethinktheirstorestrategyandadapttonew

technology/trends.

2.Theanswerinallcasesistoavoiddislikesand

amplifywhatcustomerswant.Intelligentstore

technologydoesboth.

Getting Started

The intelligent store is the future of physical

retailing. The technology exists today. It’s up

to retailers to begin innovating so they can

developtheirownstrongplatformaheadofthe

competition.

20-20Insights 3

 

20-20Insights 4

What Do Shoppers Say?

In lateAprilof 2011,we conductedour second

annual Shopper Experience Study, tracking the

preferences of 2,427 shoppers in the U.S. and

Canada.2

Thesearesomeofthehighlightsmostrelevantto

ourIntelliSTORESMservices:

Shoppersmostdislikewhileshopping:

• Outofstock(73%)

• Slowcheckout(67%)

• Storeassociatewithpoorknowledge(47%)

Mobileservicesthatshoppersarewaitingfor:

• Couponswasthetopchoice(5.9of10)for

servicesshopperswilluseifofferedona

mobiledevice

• Loyaltyprogramawards/offers(5.3of10)

• Productcomparisons(5.3of10)

• Product/pricelookup(5.3of10)

Deals,discountsandsocialnetworkingarehere

tostay.Inorderofimportance,shoppersprefer

thesetypesofsitestotakeadvantageofspecials:

• Groupbuying/deals(Groupon,LivingSocial,

DailyDeals)

• Discounts(Ideeli,RueLaLa,Beyond

theRack,Gilt)

• Socialnetworkingplatforms(Facebook,

Twitter,MySpace)

• Geolocation(ShopKick,Foursquare,Gowalla)

Shopperswouldliketoseestorepersonnelmake

theseimprovements:

• Abilitytomatchcompetitiveonlineprices

(68%)

• Improvedcustomerserviceskillsenabledby

technology(64%)

• Morestoreassociatecontactintheaisleswith

checkoutprocessingcapabilities(58%)

• Betterelectronicaccesstoproductinforma-

tion,inventorylocationandordering(53%)

• Betterproductknowledgeenabledby

smartphone,tablettechnologyanddigital

signage(27%)

Customersmostappreciatedordesiredthe

followingservices:

• Homedeliveryofin-storepurchasesatno

extra

charge(29%)

• Automaticredemptionofcouponsfromthe

retailerandmanufacturers(25%)

• Storepickupofonlinepurchases(20%)

• Returnstostoresafteronlinepurchaseand

homedelivery(19%)

Shopperswereveryinterestedinusingcoupons/

giftcardsasanalternatepaymentmethod(8.3

outof10).

Footnotes1 “StoreSystemsStudy2010,”RISNews,January2010,page16.

2WithMarketTools,Inc.weconductedanonlinesurveyof2,427shoppersintheU.S.andCanadainApril2011.

 

About Cognizant

Cognizant(NASDAQ:CTSH)isaleadingproviderofinformationtechnology,consulting,andbusinessprocessout-

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AbouttheAuthors

StevenSkinnerisaVicePresidentwithCognizantBusinessConsultingandleadstheRetail,Consumer

GoodsandHospitalityPractice.Hehasover21yearsexperienceinprofessionalservicesandretail,with

expertiseintheareasofstrategicplanning,innovation,retailoperationsandmulti-channelstrategy.

Steven’sworkexperienceincludesleadershippositionsatHomeDepot,MicrosoftandAccenture.Heis

agraduateoftheU.S.NavalAcademyreachingtherankofCommander,U.S.Navy.Stevenreceivedhis

MBAfromtheUniversityofChicago.HecanbereachedatSteven.Skinner@cognizant.com .

DeepthiTimmasarthy isaConsultantwithCognizantBusinessConsultingandisacoreteammember

of theRetailStoreOperations lineofbusinessconsulting forCognizant.Shehasover sixyearsof

experienceandvariedexperience leadingconsultingengagements, requirementsgathering, vendor

evaluationandfunctionalprojects—apartfromnicheassignmentsinPoint-of-Sale(POS).Deepthihas

anMBAfromIndianInstituteofManagementBangalore,IndiaandaBTechfromtheIndianInstituteof

TechnologyMadras.ShecanbereachedatDeepthi.Timmasarthy@cognizant.com .