Web Developments Retailers Should Watch

TechCrunch released its agenda last week for the TechCrunch50, which starts today. They have helpfully grouped the companies into categories, which they will run through over the next couple of days. The companies are all fascinating, and I encourage you to check them all out. But what was really interesting to me was the categories themselves:

• Youth and Culture - basically a bunch of social networking sites that are targeted at the younger crowd. If they succeed, they will bring together a juicy group of targets for retailers and marketers. But brands will have to be careful how they approach these sites - if you think there was an uproar over Beacon, think about the privacy implications of advertising or diving in to sites that cater to tweens. That's going to be laden with a lot more landmines.
• Memes and News - the theme here is filtering or aggregating content in some way or another so that it's easier for people to wade through - either by creating a niche of some kind ("news about your friends instead of news by your friends"), or using the crowd to surface the most popular stories from within a world of "TMI". Product reviews kind of do the same thing, but ultimately I can see this kind of functionality melding in with another category - "Vertical Social Networks" - one of which creates a social network around shopping and fashion.
• Finance and Statistics - a bunch of sites that put analytics around either information on the web that relates to people or topics, or information specifically about a person or topic. For retailers, this could be turned inward to employees (especially frontline employees where it's hard to really do a thorough check on the person before you hire them), or turned outward as a service to customers. Safeway's FoodFlex program is a good example based on "closed" data (Safeway's clubcard purchases - Safeway offers to analyze the nutritional value of your past purchases and recommend ways to create a healthier diet), but as more of people's lives end up captured online, someone's going to think of a way to take advantage of it - including purchase or shopping/browsing history.
  

Also interesting to me was that the list of commerce-based topics and companies weren't really that interesting. The session on Advertising & Commerce Monetization had companies that create new ways of targeting (or ways to avoid getting targeted). The most interesting of that lot was Adgregate Markets, which promises to "turn banner ads into shop ads", basically by turning a banner ad into a widget that gets you closer to purchase from the first click.

Retailers have never been keen to be on the cutting edge of technology adoption. It's one of RSR's fundamental "Paradoxes of Retail" that retailers must manage a heavy load of legacy technology infrastructure at the center of their business while consumers are adopting technology at an unprecedented rate - and forcing retailers to speed up or be left behind. The TechCrunch50, to me, shows that the pace of change isn't letting up at all.

How Will Consumers Respond to Suddenly Targeted Ads?

This week, RetailWire posted a story on Infosys' new "ShopperTrip360" for comment, and got back a lot of negative comments (myself included, I guess). You can read the description on RetailWire for what it is and what it does (registration is required). But the topic got me thinking, because a lot of the negative reaction came from people worried about privacy and consumer reaction to an invasion of privacy. Someone commented to me that if people only knew how much data is collected about them already, they would probably freak out about it - let alone the degree of tracking that the ShopperTrip360 proposes.

But the thing is, no one really does anything with the data - so no one REALLY notices how much data is collected. So what would happen if retailers really started earnestly using the masses of information they collect about consumers? For example, I get coupons in the mail from Target. For a long time, I just tossed them. 90% of what was in there didn't appeal to me. Then all of a sudden I got a coupon book that I thought was just great - about 2/3 of the offers were for things I buy. I was pleased - "They're paying attention to me!" I thought. But I also realized that it probably meant that Target was actually mining my purchase history to determine what offers to send me.

That's not too disturbing. Anyone who doesn't realize that this is what that loyalty card is really for is only fooling themselves. But if retailers started acting on data that customers didn't really realize they were collecting. If, for example, Target suddenly started sending me offers based on my online browsing history, the suddenness of that relevance might come off as creepy.

Am I really going anywhere with this? Only to say that despite an overwhelming desire to get more relevant with consumers, it probably doesn't hurt that we seem to be moving at incremental speed. Moving from mass to 1:1 overnight would probably just scare everyone away.

Cart Observations

A Canadian newspaper ran an article on smart shopping carts titled "High Tech Shopping: Smart carts assist in purchases but raise surveillance concerns". I hate these kinds of articles, where they trot out Krazy Katherine Albrecht to spout some paranoia about all the insidious ways that retailers and technology companies are conspiring to tag you and track you. It's almost irresponsible reporting.

This is a stronger stance than I usually take on the topic, but I just completed a new survey on customer data and loyalty programs, and when I compare reality to Albrecht's fantasies, the gap is planetary (as in, she must be living on a different planet). The standout statistic from the CRM report? Barely 20% of retailers who took our survey (out of a total of 90 respondents) strongly agree that they know who their best shoppers are - let alone any of them at all. And retailers are less concerned about collecting more microscopic details about their consumers than they are with getting any kind of insights from the data they already have. (By the way, the study results will be available on RSR's homepage Wednesday morning.)

But I take issue with several other fundamental concepts that came up in the article. First of all, retailers don't have to offer shopping carts. A shopping cart is not one of our "inalienable rights" as consumers. Retailers offer them as a service, and believe me, after looking at what putting a small computer on top of a shopping cart can do to a cart (like knock them over in the wind, bending the frame), or all the ways that companies have come up with to try to corral carts, or all the door dings on my car from carts - they are pretty close to being more trouble than they're worth. If a retailer uses a tracking device of any sort on a shopping cart, they should absolutely disclose it, but if you don't like it, then don't use the cart.

Second of all, retail stores are only semi-public spaces. They're not like the park down the street. They are owned and operated by a company. Again, the retailer should disclose how and where they track consumers in stores (if you're sniffing cell phones and using triangulation to track location and you're not being up front about it, you deserve all the wrath that people like Albrecht can bring on you).

But if consumers don't like what the retailer is doing, they can take their purchases elsewhere. If the market for anonymous shopping gets big enough, then there will be some kind of entreprenuerial retailer who steps up to fill the need. Because for the most part, consumers seem more than willing to trade some personal information if it gets them better deals and relevant offers. I'm sure there's a study out there somewhere that supports it, but even if there isn't, the continued persistance of club cards and loyalty programs is evidence enough. If consumers didn't like them on at least some level, they wouldn't sign up for them.

Shopping by TV - TiVo and Amazon Team Up

The New York Times reported that TiVo and Amazon are teaming up to enable consumers to shop from their TV's. Some of the first shows to try it out will be The Oprah Winfrey Show, and The Late Show with David Letterman. They'll offer the books, CD's, and DVD's that guests will be promoting when on the shows.

On the one hand, this is producer nirvana. I've spoken with a couple of producers for cable channels, and they consider this the holy grail - to be able to quantify their audiences not in terms of reach, but in terms of immediate market potential. In terms of sales.

Books, movies, and music are an easy way to go. I'm curious how this might ever possibly work for fashion or home decor, because it seems like the potential will only ever apply to first-run shows. But maybe that's how to make them TiVo-proof, with a certain degree of irony there - imagine, "Tonight's episode of Gossip Girls will feature limited availability of Serena's and Nate's outfits, provided by [insert brand name here]. Don't miss your chance at getting the look!"

There's one other implication to consider about this kind of matchup. Our whole world of advertising and retail is built on the assumption that there is a gap between when a consumer may decide they want a product, and when they actually purchase it. In the case of something seen on TV, once you decided you wanted, say, Serena's shoes from Gossip Girl, you had to figure out who made them, find out who sells them, make sure they fit at some point (though this could be after you've purchased them), and then actually buy them. This link between a set-top box that enables interactive and internet access, and a retail store that enables commerce short-circuits that whole process. And it's not the only technology doing that: mobile phones, even consumers with wireless laptops sitting in front of the TV change this dynamic.

Do retailers need to become producers? Some CPG brands have already gotten into the mix. But it's a lot harder to enable the commerce than it is to feature the product.

The Dangers of User-Generated Content for Retail

So McDonald's has been holding a contest to update the iconic Big Mac jingle, and they announced the finalists - including one guy who was previously arrested for holding up a McDonald's at gunpoint - and served 12 years for it. While content aggregators like YouTube have been fairly vigilant (some would say overly so) about making sure that the content users post is legal to use, there is also the question about whether the user themselves could be damaging to a brand. Something to think about before you highlight a user product review...

How Much Info is Too Much at the Shelf?

I've posted plenty of times on RetailWire as a supporter of NYC's initiative to get calorie counts on the menus at chain restaurants. I think it's very misleading to consumers to use terms like "low fat" when hidden behind that sign is something that slugs 1,000 calories or more. So, sure, some restaurants post calorie counts online or in little brochures that sometimes are easy to find or available in the store (and sometimes not), and their argument has been that because they do make the information available, they should not have to put it on menu boards.

The problem with online information is that it's not accessible for when you're making a product selection decision. A lot of online calorie calculators that I've seen restaurant chains put out are not mobile phone friendly at all - they require you to "build a meal" and then tell you, once you've configured multiple options through multiple screens - you get a result. Taco Bell's is a good example.

Here's where it gets interesting. Contrast that with efforts by companies like Staples, who has debated publishing consumer-generated product reviews at the shelf - and the huge number of questions doing something like that generates. Which review do you pick? Is it misleading if you publish a highly favorable review when overall the reviews tended toward the negative? What do you do with a product that received mostly negative reviews? And on and on.

Mobile phones do change the game a bit - providing price and sometimes availability through a mobile phone search is rapidly becoming ante. Reviews (or at least summarizations of reviews) will likely be next, if not additional spec or detailed information - like nutrition info, in the case of restaurants. There are calorie-counting sites out there that will help - like My Calorie Counter - but it's still interface-intensive to compare multiple products against one another.

The ultimate challenge is balancing what you can provide to consumers against what different customers want as part of the experience. MSNBC calls reaction to the calorie information "sticker shock" of a sort, and quotes a NYC health official who is perfectly happy with that result, while meanwhile a restaurant patron wants to switch menus with her friend who received an old one that doesn't have the calorie counts - because she wants to be kept in the dark. It all just makes me think that dynamic displays are an inevitability (granted, once the cost to implement reaches something that retailers can afford to invest in) - so that consumers can taylor what they see, not just online, but even when they're looking at the shelf.

And, for the record, given that California is looking into even stricter standards, and that retailers already have to accomodate New York's specific rules, I believe it will be a short amount of time before we see calorie labeling spread nationwide.

The Re-convergence of Media Brands and Retail

In May, Disney quietly reacquired the Disney stores from Children's Place - the company it had sold them to in the first place. This was after a wild ride in the '90's for media brands - who rushed into the world of retail amidst the emergence of trends like "retailtainment" and "experiential retailing". You couldn't go to a mall without hitting a Warner Brothers store or a Disney Store, and there were several other media companies that tried - Paramount and Nickelodeon come to mind.

The idea was to build a local place where consumers could experience some of their favorite characters, build a closer affinity to the media properties, and in turn spend a lot of money on merchandise. I happened to see this evolution first-hand while I was a consultant at PwC - I was working on an IT Strategy for the Nickelodeon stores when they made their attempt at retailing in the late 1990's. The sad truth, at the time, was that the 20-30% in licensing fees that the studio could get were a heck of a lot more - and with a heck of a lot less capital invested - than the 3-6% the retail stores would return. The stores team argued in vain that there was a lot more at stake than just the return - there was an untold return when you looked at it from a marketing and brand engagement perspective. The problem was that at the time they weren't sophisticated enough to get a lot of customer data or market basket analysis out of their customer purchase history - so they couldn't prove it.

Times have changed, and I think Disney's reacquisition of the retail arm of the brand demonstrates that. With the combination of online and in-store, you can get an enormous wealth of customer information, and the analytics tools are strong enough (they almost always have been, actually) and user-friendly enough (something they haven't always been) that you can get a lot of insights about your customers these days. Disney has shown signs of understanding that it's about more than just sales - I read somewhere about their strategy in the UK, and how they are much more willing to deal on content distribution because they know it helps drive the merchandise, and all the derivative forms of content that go with it - like live shows and special events.

However, I will say that I think the stint that the Disney Stores did with Children's Place was good for the stores. Children's Place ran those stores not as a brand extension of a media property, but as a place to get great clothes and fun toys, which all happen to be coated with the characters that your kids love. And that's the challenge for all of these media companies as they rethink their retail strategies - how to balance the function with the brand, while ensuring that they are measuring the primary strategy behind stores: increase brand engagement.

As a famous media property once said, "We have the technology." The time is ripe for these stores and this strategy to pay off.