The network means many different things to many different businesses. But what are the common issues faced by retailers when upgrading theirs? What steps should be taken to gain a greater share of the physical and virtual wallet? Dive into our dedicated network white paper and all will be revealed.
BUILDING BRITISH RETAIL I 1 DOES YOUR NETWORK MAKETHEGRADE? TalkTalk Business In association with NewsReach #ttb_business "We see our customers as invited guests to a party, and we are the hosts. It's our job every day to make every important aspect of the customer experience a little better." Jeff Bezos, CEO, Amazon.com 2 #ttb_business Ironically, for a segment which is widely lauded for inventing the phrase "customer experience", the retail sector has - thus far - been a particularly slow adopter of consumer-friendly technologies. This, of course, is particularly symptomatic of conventional, high-street, bricks and mortar retailing - but there are signs that online traders are behind in some areas too - not least in network performance, capacity, resilience and reliability. Adobe reports that "most retailers are a bit slower to adopt technology (including web analytics, social media, mobile, video and rich media) than other industries" because: 1. The industry tendency to adopt new methods and technology late ensures that the technology has been tested and proven. This reduces wasted investment by allowing other companies/industries to be the guinea pigs on the bleeding edge. 2. You're not the only one who's late. Your competition from the same industry will likely be late adopters as well. So, while it's true that the major multiples and supermarkets have been quick to implement self- service checkouts, loyalty cards, online ordering / in-store collection and free Wi-Fi, the rest of the high- street is - arguably - still playing catch up. But maybe the reticence, particularly amongst independents, is actually not so surprising when you consider that retail notoriously operates on a high volume / low margin business model. Given this, and the need for speedy return on investment, is it any wonder that innovative, best-of-breed technologies have found other segments more welcoming? But is all that now about to change? Has the retail segment finally woken from its technological slumber? Has the consumerisation and democratisation of technology pulled up the shutters up and exposed a brave new world of IT-powered retailing? Most importantly - and paradoxically to what we've always been led to believe - can technology now enable retailers to fight back in the war with their online counterparts? In the age of 'showrooming' - the phenomenon of consumers touching and feeling merchandise in stores, only to buy it elsewhere (frequently online) - technology now presents itself as both a barrier to and enabler of prosperity on the high-street. That, and other technology driven trends, is bringing home the realisation that connected stores are now needed for connected consumers. The seamless integration of the shopping experience is what the buyer wants and what the retail industry needs to provide if it is to survive and prosper. As professional services consultancy, Deloitte, argues in its 'Changing face of retail' report: "in order to capitalise fully on this opportunity, retailers will need to develop better applications to enhance the in-store experience and invest in their network connectivity." So, with that in mind, please read on as we examine the opportunities, challenges and remedies for the retail market as it seeks to reinvent the very meaning of customer service - both on and offline. 3 #ttb_business "It has never been easier for the consumer to find and switch allegiance to those who best serve their needs, creating risk for traditional providers who do not embrace the revolution. The way consumers pay for their goods - the payments infrastructure - can become a valuable data source/' Richard Johnson, Group Strategy Director, Monitise #ttb_business OPPORTUNITIES In order for retailers to meet the objective of becoming 'the store of tomorrow', consumers will need to enjoy a seamless, cross-channel, digitally-enabled experience at each and every contact point. The competitive online and offline retail environment means that consumers can demand value, flexibility, convenience and satisfaction at every turn. By making use of both basic and advanced technologies - deployed in the right way, with the right infrastructure supporting - merchants can begin to take wilful advantage again of their bricks and mortar assets. The prime and immediate opportunity for the retail sector to fight back is in areas like mobile, wireless, Bluetooth, digital signage and multi-channel marketing - including social media. But, crucially, the right strategy needs to be employed in order that costs can be managed, productivity improved and revenue/margin grown. Part of that strategy could entail looking outside of conventional channels for assistance, particularly financial, so that investments in technology can be feasibly realised. One such route could be the Economic and Social Research Council (ESRC), which is investing up to £500,000 to establish new Knowledge Transfer Partnerships (KTPs). These initiatives are design to stimulate innovation in the UK retail sector and funding applications are already being accepted. Find out more here: https://www.innovateuk.org/-/supporting- innovation-in-the-uk-retail-sector Another vital strand of that strategy will be the need to build a sound foundation for technology adoption. That means putting adequate network connectivity at the heart of the systems architecture - in the design stage and not just as an afterthought. With internet usage exploding, due to the growth in smart devices (mobile, tablet, phablet) and bandwidth hungry content (HD telepresence, video streaming and instant messaging, real-time data backup), the strain on the network becomes more pronounced. Coupled with that, the trend towards hosting this type of content in the cloud - to maximise security, agility and cost savings - means that the need for speed and resilience in your connectivity solution is imperative. So, while many of the technology solutions to follow are exciting opportunities to transform the very meaning of retailing as we know it, bear in mind that the network acts as the backbone of the business. In short, it can either stall or accelerate your best laid plans. Now, let's look at some of the technologies and strategies that can be deployed, drawing on some notable examples from within the global retail industry. 5 #ttb_business WI-FI Wireless enhances the consumer's ability to stay connected anytime, anywhere. Moreover, as soon as a shopper enters through the door, the point of sale expands from the counter to the customer's smartphone. Once retailers begin to see mobile and wireless in this fashion - and less through a sceptical or paranoid eye - they will begin to increase brand engagement, conversion rates, data collection and customer loyalty. One of the UK's largest retailers, Tesco, has recently said on the issue of showrooming: "You can stand there Canute- like and pretend nothing is happening...oryoucan say it's happening, and I am going to help it happen." Motorolla Solutions, the data and telecommunications firm, forecasts that "56% of retailers will provide guest Wi-Fi by 2017." This is partially as a result of the ubiquitous issues with indoor mobile coverage perse, but particularly in large format retail environments like departments stores, supermarkets and shopping centres. The same firm also claims that 38% of shoppers would "specifically access retailers' networks to search for product information", which sheds a positive light on the cost / benefit analysis of Wi-Fi investment. STOCKLESS STORES In a move that brings the retail environment closer to that of a high-class hotel concierge service, some brands are moving towards a store without stock concept. The new House of Fraser 'Buy and Collect' proposition is a prime example of this undertaking with customers invited to have a luxury shopping experience with their in-store purchases delivered or available for pick up the following day. With large touch screen monitors, personal advisors at every turn and perks like free coffee on tap, these stores are serving up a heightened level of customer experience, arguably not seen elsewhere on the high-street - and certainly online. M-COMMERCE Even renowned conservative institutions like high-street banks are becoming savvy to the benefits of mCommerce. Not least to counteract thethreatfrom technology-led businesses like Google, Amazon and PayPal that are now providing mobile wallet solutions and in-store delivery mechanisms likecontactless, NFC payments. This tussle taking place for the digital wallet means that, for the first time, financial institutions no longer have a monopoly over the handling of money. To illustrate the point PayPal (owned by eBay), has accumulated 128 million registered users and the total value of transactions processed in the first quarter of 2013 alone rose 21% to $41 billion (circa £26 billion). With retailers like Starbucks now leading the way with speedy, convenient and rewarding mobile payment options, concepts like 'Chip and Pin' will soon be perceived as slow, clumsy and dated. One only has to see the number of smartphones pre-installed with NFC apps to appreciate the technology convergence taking place and the reason why mCommerce is such an exciting prospect for consumers. It's exciting for offline retailers too if they accept that the mobile is a friend, not a foe. GIFTING There are two particular aspects to the digital 'gifting' trend that are, or should be, interesting to retailers. The first is the practice of simply adding funds to friends and family members' accounts through mobile, tablet or desktop apps. Simple, low-value giftinggestures are growing in popularity and Starbucks again is driving the trend by making use of its branded app and store card to encourage the process of gifting. Even charities like Oxfam are getting in on the act by permitting online visitors to send electronic greetings cards with the proceeds of the transaction filtering to the organisation's intended target. However, there is another aspect of the gifting trend that is also intriguing. American department store, Target, has discovered that in certain retail segments shoppers need tactical assistance. For example, to tap into the growing console game sector, Target is providing in-store Gaming Kiosks which help parents to select games for their children according to age suitability and user reviews. Similar services are also available at other toy stockists and it's clear to see why this would pull consumers into the shop front environment and instil brand confidence. 6 #ttb_business IN-STORE TECHNOLOGY In both the public shopfront and private backoffice, technology is being used to assist promotion, purchasing, checkout, stock management, replenishment and reporting. With the rise of the super/hypermarket, site footprints have enlarged significantly in order to provide more choice for food, drink and non-food items. Consequently dwell times have risen, but retailers are now looking to overcome issues surrounding shopping fatigue by providing distractions such as digital signage and interactive, touch-screen panels. Coupled with this, technology is being used for convenience purposes. ASDA's US owner, Walmart, is introducing 'Scan and Go' which enables shoppers to skip checkout lines by using their mobile phone to scan items and pay at self-serve kiosks. Waitrose has already imposed a similar practice, but with the use of bespoke scanners, available in store that calculate the costs of shopping and compare prices with other, competing stores. Radio-frequency identification devices (RIFD) - the much- heralded tracking technology - is also being rolled out in stores. Besides being used for things like analysis of buying history, customer feedback and customer loyalty card data, RFID is also used at check-out gates where a whole shopping trolley can be scanned in seconds. Now the technology is being used for 'smart shelves', enabling retailers to change prices in real-time and launch product-related video content when shoppers pick up items from the display. Virtual changing or fitting rooms are also now springing up with retailers like Quiz Clothing enabling customers to virtually try-on clothes, shoes and accessories with their personal virtual model. The concept has resulted in an increased conversion rate of 59% and an increased average order value of over 48%. CHALLENGES This has become increasingly apparentduring the global economic slowdown that often hits sectors like retail first, causing redundancies and closures on the high-street. It is unlikely, in the short to medium term, that the practice of living from one sales peak to another will alter, given that the seasonality of retail demands this. But, outside of these peaks, retailers will need to harness technology and the power of the network to ensure the value-add of the in-store experience pays off. Many are already doing so with hybrid services like'click and collect', to ensure that the cross-platform (web, store, mobile/ tablet) experience offers brand consistency and customer convenience at all times. Sarah Taylor, senior director at Oracle Retail, commenting on some recent global consumer research says: "Ourfindings reveal that consumers are as happy to shop online these days as in store, although less comfortable with shopping over mobile and social networking websites. "Although British consumers are relatively open to sharing information with retailers, there is an expectation for lower prices and exclusive offers that are 'good for me,' in return for engaging in a more collaborative relationship with a retailer. "Service remains crucial and 54% of British respondents identified a simple returns policy that is integrated across channels as a key factor in the provision of good service. Equally important are flexible delivery options and product availability at the point of purchase, while speed around the payment process rated highly at 64%." In another survey, conducted by Deloitte in 2011, more than a third (36%) of consumers wanted to be able to scan product barcodes and access product information when in-store. 14% would then like to be able to pay by mobile, instead of credit card, which highlights that - even two years ago - there was a certain amount of pent up demand for contactless browsing and payment. "Your most unhappy customers are your greatest source of learning/' Bill Gates, Founder, Microsoft For"unhappiness", read "more expensive". So, rather than attempting to compete with price-based online competitors, shop-front retailers will need to find ways to a) add value to the shopper experience and b) make operational savings to become more competitive. The lack of retailer uptake, therefore, seems to be less about technological capability and consumer demand, but more about merchants' ability to adapt and support these advancements. So, with that in mind, let's examine a few of the major blockers that traders will need to overcome from an operational, legislative and commercial perspective. #ttb_business THE PAYMENT CARD INDUSTRY (PCI) The Data Security Standard is a set of requirements designed to ensure that all companies that process, store or transmit credit card information maintain a secure environment. Those using third-party payment software must be either PC DSS-compliant or use PA-DSS validated compliant payment applications, which will limit the opportunities to exploit eCommerceapps. This extends to overcoming the issue of having to de- tag products (clothing etc), which cannot be done from anywhere in the store and is usually restricted to fixed POS areas. And, perhaps, because of this staff will be inclined to man these stations rather than interact with customers all over the shop floor, which causes further headaches for brands looking to break away from the 'traditional' store layout. INTERNET PAGING TERMINAL (IPT) These technologies permit retailers to accept email and other web-based based messages securely and then redistribute them through the organisation's traditional paging system. This is particularly challenging in the retail environment where multiple sales reps need access to calls/alerts from anywhere in the store. Large numbers of connections usually mean that bandwidth usage is high, which can be problematic for stores running on limited DSL connections. Consequently, retailers need to focus on systems designed to ensure accessibility, speed of communication and response. CALL HANDLING This is a significant retail issue due to the frequent need to park (hold) and collect (pick up) calls from anywhere within the store environment. This is exacerbated when there are high volumes of calls simultaneously being handled by reps with insufficient systems in place to manageand redirect the traffic - thereby impacting on customer service. However, in making the transition to IP systems, be mindful of the need for emergency services to be able to recognise / locate a store immediately. This is a familiar technology barrier, but is easily overcome by designing the system with accurate routing as one of its core operating principles. NETWORK OUTAGES Whether network downtime is induced by power failure or other causes, what's clear is that these scenarios will impact upon the ability to make emergency VoIP phone calls, unlike traditional non-SIP lines. Security is also a majorconcern with access to the data network required for verifications on orders and returns, not leastforfraud purposes. Getting 100% network availability against connectivity and routers is vital, so organisations of all types should ensure they have cast-iron SLAs and back-up lines in place to guarantee business continuity. STOCKMANAGEMENT The collection and return of inventory items for retailers is made more difficult in modern retail environments, like shopping centres where the distance between the stock and store rooms can be significant, as well as the available space for kit. Merchants should consider solutions that alleviate the need for overhead pagingsuch as push-to-talk (PTT) over Wi-Fi. CONNECTIVITY In remote locations or where retail concessions exist-such as in motorway service stations - connectivity challenges are, perhaps, at their most pronounced. In addition, stores will also need sufficient connectivity speeds to support in-store streaming of marketing and sales promotion content - not to mention free Wi-Fi hotspots. For example, Nike often streams footage from its major product launches taking place in its flagship Nike Town stores, so that online communities can witness the buzz and engage through channels like social media. Business grade connectivity is a pre-requisite to support such bandwidth-hungry initiatives. FLEXIBILITY In a sector where store openings or closures occur with almost indecent haste, IT contracts need to be flexible to the dynamics of the market. For large retail chains, with multiple sites constantly under performance review, it's essential to build in adequate flexibility so that contracts can easily be switched to new locations without penalty. 8 #ttb_business NETWORK OUTAGES Strategically, the focus for the retail segment has to be in the field of service orientated architecture - whereby flexible, scalable, software based technologies (SaaS) are deployed in a fashion that support both the shop front and back office. With IT departments coming under increasing pressure to do more with less, the hosted model is primed to support this architecture and meet both the short and long term objectives of the business. Connectivity will be vital, whichever strategy or technologies are adopted, so under-investing in this area could compromise future business growth in the same way that a poorly located store undermines business performance. "Do what you do so well, that they will want to bring their friends." Walt Disney, Founder, Disney So, what specific remedies, or IT strategies, should retailers be examining and utilising right now? Here arejust a few of those that could be beneficial out on the shop floor and in the back office: FOR THE BUSINESS... REVIEW YOUR NETWORK Make the design simple and flexible due to the changing nature of the retail environment. There is no such thing as future proof, so you're looking for agility and cost savings and increased security versus legacy systems. Keep it big, robust and simple-the key to scaling a network is ruthlessly removing complexity such as tunnel technology, bandwidth management and kit from stores. Buy the biggest, most robust connection you can afford focusing on features such as resilient connections and automatic failover. Simple store design means you can add and remove sites more quickly with standard template configuration and easy, well-defined engineering tasks. Simple networks are easy to fix as well as being quicker to adapt to new applications or unexpected business workloads. MPLSIPVPN Consolidates voice, video and data needs over multiple sites. It's also a private network, which helps mitigate the risks associated with PCI compliance (data security / in- store CCTV etc). The primary benefit is that by simplifying the network design, costs can be better controlled. And that can only become more important when you consider that broadband costs - industry wide - are forecast to grow by 15% annually. Short term, organisations may benefitfrom broadband provider price wars, but the long term cost trend is invariably upwards, particularly as consumption increases. HOSTED/CLOUD By outsourcing physical assets like your datacentre(s), maintenance costs are stripped away and perhaps, more importantly, also the set up and disposal costs associated with opening and closing stores that host such equipment. However, the cloud model demands more resilient (faster and reliable) connectivity as well as highly-responsive fix times and claim processes. But, once this is in place, retailers can take advantage of flexible working, reduced voice costs, BYOD and collaboration tools. The hosted model also supports outbound marketing techniques through wireless services with public and corporate access and security managed centrally. For example, VoIP, DMS and customer wireless can be supplied from one connection rather than many-thereby reducing cost and complexity. Internet services such as eLearningand CRM for staff to access via the cloud, across all sites, provides numerous advantages too - such as uniform and efficient content generation and management. CONNECTIVITY Exploiting mature technologies is important too - particularly those that assist the communication between store and stock room. Rl FD chip systems are finding new uses or applications that extend beyond the traditional transport and logistics solutions. Even legacy telecoms services, such as3G, are increasingly being leveraged to provide data connectivity backup in the event of power outages. 9 #ttb_business FOR THE CUSTOMER... FREE WIFI To combat the showrooming phenomenon, retailers need to fight the fight head on. Being supportive rather than obstructive to consumers' surfing habits can bring rewards in terms of higher dwell times, real-time promotional marketing and data acquisition. Wi-Fi is your friend, not your foe as Philip Dorgan, investment analyst at Panmure Gordon, says: "The most successful retailers would be the ones who use data about their customers to best advantage." For many the solution will be the availability of publically-accessible wireless LANs with free hotspots operating in one of two ways: OPEN PUBLIC NETWORK Simple Wi-Fi router based system with user authentication disabled. The disadvantage of this ease-of-set-up method is that access cannot be controlled or limited to those the service is directed at. CLOSED PUBLIC NETWORK Leverages a Hotspot Management System to control network access. The software runs off a router or an external computer and operators can limit access to specific users. The primary benefit of this method, aside from the security advantages, is that pay walls can be imposed, or not, and bandwidth controlled so that the quality of service can be maintained across the user base. INBOUND CALLS With the right IP-based telephony and call handlings systems in place, all inbound enquiries will receive the level of responsiveness and specialist assistance that the customer desires. The ability to direct calls to the best or soonest available agent - anytime and anywhere in the retail chain network - is a concept already proven in the contact centre sector. However, few retailers have applied the same methodologies across their networks. Not only does it alleviate the burden for busy shop front staff, but it also focuses them on serving the needs of the in-store customer who deserves and demands one-to-one, in-person attention. "New expectations have been created in terms of value, service, entertainment and experience against which the average high street has, in many cases, failed to deliver/' Mary Portas, UK government high street tsar 10 #ttb_business 'The phenomenal growth of online retailing, the rise of shopping by mobile, the speed and sophistication of the major national and international retailers, the epic and immersive experiences offered by today's new breed of shopping mall, combined with a crippling recession, have all conspired to change today's retail landscape." Mary Portas, UK government high street tsar SUMMARY Portas may well have delivered her warning, but it's clear that bricks and mortar retailers will remain the central touch point for customers as merchants become more accustomed to exploiting eCommerce and mCommerce solutions. The combination of online, in-store and smart device enabled engagement will help retailers drive sales, profitability and brand loyalty. However, success will largely be dictated by the speed at which retailers can adopt technologies that improve productivity, lower operational risk and enhance the overall customer experience. To do this, businesses will need a unified view of all customers across all channels and a close understanding of their changing consumption habits. News agency, Reuters, reports that: "The modern store is equipped with cameras that look at you, guess your tastes based on yourgender, age and behaviour, and send deals to your smart phone accordingly. It also has the technology to reduce endless check-out lines and speed up the process for picking up somethingordered online." To realise this "modern store", retailers will need a partner, or ecosystem of partners, that can seamlessly integrate legacy systems with new technologies with appropriate speed and minimal disruption. Finding the right consulting and network partner to deal with multiple, mixed-generation systems that are disparate and not networked together effectively is crucial, given the proliferation of new and maturing devices or platforms. The tech-savvy consumer is increasingly demanding a class-leading service, so the retail sector - in turn - needs to demand business grade technologies and support from technology vendors that are able to provide the right blend of product, service and value. More importantly, any investment in new or scaled up solutions should be underpinned by adequate network infrastructure and capacity that not only services your existing needs, but future technological developments and changing consumer shopping habits. The network partner you work with should be able to provide you with added value in terms of identifying potential pain points, supporting you in optimising hosted solutions and establishing the best fit connectivity package for your needs, be that through broadband, EFM, Ethernet or a combination network solution. Demand a business grade service to ensure you get the flexible, resilient, wide-reaching connectivity your business needs - at theoptimum price pointforyour requirements. For more information on modern day retail challenges and how an optimised network will help you maximise opportunities, visit talktalkbusiness.co.uk/ournetwork 11 TalkTalk Business Is a trading name ofTalkTalk Communications Limited. 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