Retailers think inside the box
Within the past month, two Ohio-based traditional retailers announced plans to test-market automated retail vending machines. It’s not so much thinking outside of the box as it is figuring out how to get that box to where the consumers are, wherever they are — the airport, the hospital, convention centers, exercise facilities, on a college campus or in a hotel.
Kroger in February debuted an automated retail kiosk, the Kroger Shop24, carrying both food and household goods for the college students on the Ohio Northern campus. Max-Wellness will this month unveil attention-grabbing orange kiosks at three airports: New York City’s John F. Kennedy International in the JetBlue concourse, Raleigh, N.C., and Houston.
It is brand extension and an inexpensive way to propel a retailer’s reach well beyond the bricks and clicks they have today. “The reality of retailing today is it’s changing,” Max-Wellness CEO Michael Feuer noted. “What we look at is expanding and becoming a national brand by … creating points of presence. We’re looking at a four-legged stool to create this national awareness: brick-and-mortar, which gives you credibility; the Internet, which reaches the masses; the targeted programs like the Mini-Max [small retail shops located in hospital settings]; and then [Wellness Center], which takes you to a different level.”
Improvements in Internet access in heavily populated areas not only give retailers the ability to track inventory and sales in real time, but also can give the customer an easy way to access the retailer’s website and conduct a transaction for a product not currently stocked in the kiosk.
The flexibility built into the kiosk model is advantageous, too. If a particular location isn’t working, the kiosks can easily be placed on rollers and relocated to a potentially better locale.
According to the “Automatic Merchandiser State of the Vending Industry Report,” vending industry sales dropped 3% to $19.3 billion, but this industry figure incorporates everything from cold beverage machines to the coffee vending machines found in many offices. The technology platform is improving across this industry. The report noted that cashless readers have made higher pricing at these vending machines acceptable for consumers, and there have been recent improvements in wireless reporting hardware, bill recyclers and “pick to light” warehouse picking systems that support loading deliveries in the warehouse based on machine needs.
Beyond extending a brand name into nontraditional retail channels, the potential opportunity in automated retailing can be found in higher sales-per-square-foot metrics and lower distribution and inventory costs. According to ZoomSystems, the manufacturer of the automated kiosks for both Max-Wellness and Best Buy, automated kiosks can realize up to 20 times the average per-square-foot than in the same space in traditional retail. That kind of success is realized by making sure high-velocity items are placed in the kiosk, Feuer said, because there is no margin for error in an environment that houses a finite number of offerings versus the thousands of SKUs in a retail setting.
While Kroger has not announced any future plans for its Kroger Shop24 — the grocer stated this concept is still in pilot phase — Max-Wellness has plans in place to roll out between 50 and 100 Wellness Center kiosks, depending upon initial results, all showcasing location-specific merchandise relevant to the venue, such as airports, convention centers or exercise facilities. In this regard, Max-Wellness also has been working on kitting offerings, Feuer said. “In order to increase the average transaction, we will put compatible items in a ‘Max-Well Kit,’” he said. In airports, Max-Wellness will be bundling a number of organic snack items into one pre-packaged bag.
Deloitte study predicts ‘Store 3.0’
While the in-store experience is still important to many shoppers, greater consumer adoption of emerging technologies is undoubtedly reshaping the retail landscape. Today, stores are just one part of a larger, more connected consumer experience. For retailers, this means they must rethink how they can transform stores, strategies and operating models into a store of the future: Store 3.0.
“Retailers need to re-examine and reconfigure their talent, physical space and store operations to meet or exceed customer expectations. A strategy that aligns these dimensions and is enabled by the right technology solutions can help retailers deliver a tailored experience for their customers. It is an experience that begins before customers enter the physical store and continues long after they leave,” according to a report by Deloitte titled “The Next Evolution: Store 3.0.”
As the virtual world increasingly weaves its way into the physical store to create an integrated experience, it is important for retailers to re-evaluate future store counts and footprints to effectively respond to future sales channel trends. In fact, the survey found that the percentage of sales generated by traditional brick-and-mortar stores is expected to significantly decline over the next five years, from 91% to 63% of sales.
The Deloitte study was conducted in September 2011 among 39 retail executives to better understand how they are adapting their brick-and-mortar stores to a next-generation format. Those retail executives surveyed had revenues ranging from less than $50 million to more than $10 billion annually across several industry segments.
The study found that few retailers are leading the way to a Store 3.0 environment, but are instead wrestling with how to create a well-integrated future store strategy and are unsure about the roles and responsibilities of their sales associates in this new retail environment. Deloitte acknowledged that the solution is not a one-size-fits-all approach but did suggest several steps retailers can take to help them differentiate the customer experience.
It all begins with a strong information technology infrastructure. While many retailers believe IT strategy and investment should be a top priority, only 18% said they are ahead of the curve. Many are playing catch-up or are taking a wait-and-see approach. However, that will likely change as respondents said they are looking to create or expand senior leadership committees, executive leadership positions and governance processes three to five years from now to focus on emerging technologies and to incorporate them into stores. As retailers look to shift their budget priority to emerging technologies, it will come at the expense of store infrastructure, the report noted.
Many respondents said that Wi-Fi-enabled solutions, loyalty program signup, SKU availability checks and product information are planned or in pilot; however, researchers recommend that retail stores also be Wi-Fi-enabled. Nearly one-third of retail executives said they have no plans to provide Wi-Fi capability in stores.
“Retail stores should be Wi-Fi-enabled for these applications to work smoothly. Product SKU checks, mobile checkout, customer loyalty information and other applications would be right in the palm of the sales associate’s hand,” the report stated. “Plus, it would allow customers visiting stores to use their mobile devices to connect to the retailer’s brand, access product information and reviews, or share their purchases and experiences through social networking sites.”
According to the report, retailers also must invest in emerging and viable technologies to support future store strategies. Some technologies to consider include:
Customer-facing, in-store applications, such as a virtual look-book on a tablet;
Mobile point of sale; and
Augmented reality applications.
As consumers increasingly demand a more personalized shopping experience, sales associates become even more critical. This means that retailers must invest in employee training, education, compensation and career development options to increase product and technical knowledge. It also means arming them with the right technology.
Researchers suggest that retailers consider investments in sales-generating and profit-increasing tools, such as real-time store-monitoring platforms, to identify unserved customers; employee-facing, in-store applications to help connect customers to the brand and to sales associates; and real-time store monitoring platforms to manage efficiencies in operations.
Colgate announces dividend increase, elects Google exec to board
NEW YORK — Colgate-Palmolive announced on Thursday that its board of directors increased the ongoing quarterly common stock cash dividend by 7%. Separately, the company also announced that Nikesh Arora, SVP and chief business officer of Google, has been elected to its board.
The dividend increase will be effective as of second quarter 2012. The new rate of 62 cents per share is up from 58 cents. The second-quarter dividend is to be paid on May 15 to shareholders of record as of April 24. On an annualized basis, the new dividend rate is $2.48, compared with $2.32 per share previously. The company has paid uninterrupted dividends on its common stock since 1895.
Separately, the company announced that Google executive Arora has been elected to its board, effective March 15.
Colgate also announced that following the recent planned retirement of vice chairman Michael Tangney, effective March 1, Fabian Garcia, COO of global innovation and growth and Europe, has assumed responsibility for the company’s Hill’s Pet Nutrition division; and Franck J. Moison, COO of emerging markets, has assumed responsibility for Colgate’s South Pacific region.