A common thread I heard last week at the NRF Big Show, was the importance of the edges of the network. "Edge" in retail speak refers to pushing relevant and actionable data closer to the customer touch points – to the edges of the retailer’s network. I wrote in my #NRF15 recap about the importance of pushing data, insights and decision making to the edges of the network, click here for post. There is another aspect of the network edge that wasn’t prevalent last week in New York, but probably isn’t ready for prime time yet, and that is an enhanced ability to execute at the network's edge. When it comes to that extended level of execution, think 3-d printing, better usage of hardware and software to better service customers…at the edges of the retail network.
The one advantage brick and mortar retailers have over the likes of Amazon and Alibaba is also what has been seen as their weakness – their physical stores. Stores offer a host of issues that are well documented – inventory carrying cost, limited SKUs due to the physical constraints of a store, overhead associated with labor as well as having real estate. However this disadvantage may have a silver lining – face to face interaction. The challenge for retailers is how to make that face to face more attractive to consumers than their laptops or mobile devices to transact. That is where being able to offer greater personalized and flexible solutions is paramount for retailers. How can retailers address this?
- Greater personalization…kind of like your online experience! We all know that the power of transaction online, other than being able to do so in your pajamas, is how customized the experience is tailored for us. One reason Amazon is so entrenched in our consumer life is that they know what we want…sometimes before we are even aware of it! The power of Google is that they will place those banner ads based on what they know we have been looking at and interested in. Online experiences with the likes of Nordstrom or Banana Republic are littered with suggestions on what else we need. Looking for a a new Peacoat? May we suggest these styles and brands. Oh and if you like that item…you might like this other item that compliments it. Of course this is possible because in the eCommerce world our digital finger prints are everywhere and can be captured with much more ease than in the physical world. This is starting to change. Slowly. As more service providers are focused on helping retailers capture, analyze and provide insights on all the consumer related data sources, physical retail stores will have the potential to be “smarter” in their customer interactions. Companies like Oracle look to offer their retail customers the ability to empower the edges of their network, with the data and consumer persona necessary to transform the in-store experience more on par with the online world. Oracle, like other service providers, realizes for retailers to protect their brand must understand how customers want to research – interact – transact. This can only be achieved with a more complete view of the customer. There is also the need to perform greater levels of analytics at the edge of the network – brick and mortar retailers cannot afford the potential latency associated with having to push data back to a centralized location. For example, Cisco is working on providing the communication hardware, platform and necessary analytics at the edge of the network. Don’t move the data unless you have to. That ensures that the data, and the analytics, are done as close to the customer and execution point as possible. Again, when we transact online there is not much latency when it comes to our profiles and what is being suggested. Retailers are striving to bring some online shopping experience to the store front. But what about getting your product?
- Fulfillment moved out of the traditional channels and pushed to the edges of the network. Having greater understanding of your customer and more insights at the edges of the network is
wonderful, but if you cannot offer the inventory diversity or fulfill at that node, what have you gained? If retailers cannot fulfill better their stores not only become showrooms, but your store associates also become pitchmen. Not what you want in the brick and mortar world! I expect retailers to continue to focus on more flexible and intelligent manners to fulfill their customers’ demand. The first step for better fulfillment is being more savvy about your inventory. I was speaking with a former P&G executive while I was at NRF and the one issue he stated is still a headache is understanding inventory positions within a store – what is on the shelf, what is in the stock room and what item is about to have a stock out? All classic issues CPG and retailers struggle with. But to fulfill better, these need to be solved, and they cannot be solved by just looking at inventory data from your POS or warehouse system. Retailers must have greater and more reliable view of their inventory. That means being more digital with the in store management of the inventory. Service providers like Panasonic are bring such shelf level visibility to the market, something I wrote about in my last post. But it is not just about greater visibility of what is available to your customer – what about greater flexibility on delivering the customized product your customer wants? The story of how Coca Cola has rolled out their Freestyle machines, that puts a tremendous amount of control at the edge of the network, with the consumer. Other CPG companies like Maille mustard and vinegar has stores that allow you to come in and fulfill your mustard and vinegar condiments in the store. These are examples of more flexible inventory and product mix being provided at the edge. There is also the infusion of digital technologies such as 3d printing. Confectionery companies like Hersheys are rolling out 3d printing – need a special chocolate for your kid’s birthday party, have it printed in the store. Luxury retailers, such as jewelry stores, can offer on site 3d printed pieces – for customized jewelery. American Pearl is offering consumers the ability to have customized pieces created via their 3d printers. Granted they are doing this via their online channel, but brick and mortar channels could offer consumers the ability to have a design rapidly prototyped in the store and then produced. That would certainly make events like purchasing a wedding ring less stressful…well maybe not.
Whether it is better visibility and greater analytics or being more savvy in product delivery at the edges, retailers must focus here to maintain relevance for their physical stores. Simple truth – at the edges is where you find the customer. Retailers must make sure that they meet customers needs: eliminate the friction between demand, relationship, fulfillment and after sales.
Tagged: CPG, Digital Disruption, Matrix Commerce, NRF15, Retail, Supply Chain 
