Disruptive technologies in retail

The term disruptive technology is being bandied about a lot recently. Like most people I haven’t given the term much thought until recently. In working with clients POS projects have grown in scope to include and myriad of associated technologies including but not limited to digital signage, integration to social media, loss prevention and enhanced customer analytics. I think the term disruptive technology is being used negatively to describe a technology or program that causes some amount of chaos in a business. To me it means just the opposite, a technology that challenges the norm for the benefit of the business. The disruptive part comes in when businesses are resistant to change and want to stay the course and continue with the same old stuff. Most retail businesses have three generations working in their stores. These three generations can provide an interesting cross generational partnership. Actively engage the younger people in your business so they can provide insights on how their age group wants to be communicated with. Use this information to initiate a “Disruptive Technology” in your business. Create some chaos shake up the norm.

Retail is location, location, location or is it?

We all agree that one of the main criteria for retail is retail. Chains spend a lot of money and time analyzing data on where to locate store new stores. The independent retailer has fewer resources  and has to base the decision on where to locate a new store on gut instinct and intuition many times. The emergence of the mobile customer has level the playing field a bit.  Understanding how a millennial interacts with retailers is one of the new paradigms of retail.

-          They are heavily influenced by social engagement with a store

-          Most millennials own a least five mobile devices

-          Your website needs to be mobile enabled

-          They want to make informed purchasing decision and have access  current pricing

-          Instagram is growing rapidly in user acceptance by millennials

-          They still use Facebook despite recent reports

-          They want to interact with stores and communicate their experience

Learn how to play in their sandbox if you want reach them.

One last thought, good customer service is still the number one customer influencer.

Four big lies about data security

This article was written by David French and posted on The Retail Big Blog from the NRF.

In the wake of some major data thefts in the past few months, the House Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit held a hearing last week on “Data Security: Examining Efforts to Protect Americans’ Financial Information” to find some answers.

To get to the bottom of these data thefts perpetrated against some of the largest retailers in the country and affecting millions of consumers, the committee invited precisely — you guessed it — zero retailers to learn about the problem and get their side of the story. As you would expect, the hearing was rife with falsehoods, inaccuracies and half-truths.

We thought we’d highlight four of the best (worst) “whoppers” from this hearing and set the record straight.

Whopper #1: Retailers are not properly incentivized to protect their data: this is why “assigning liability” for these data breaches is important.

Truth: Retailers pay a very large price for data breaches and are very well incented by the market to protect their customers and protect their brand reputation.

Retailers have a vested interest in protecting consumers’ financial information – customers won’t shop in a store they don’t trust. Retailers MUST—and do—comply with the PCI Standard, designed by financial institutions, to protect sensitive information first, before they are even able to process payments in the first place. “Assigning liability” is not the issue, the fundamental problem is that the current card number system is too easily monetized by thieves. Thieves wouldn’t be so quick to steal card data online if it were nearly impossible to convert into credit cards and make fraudulent purchases. Requiring a PIN will quickly render this kind of card data theft fruitless.

Whopper #2: Retailers are in the best position to discover and disclose breaches, but they are reluctant to do so as it could adversely impact sales, stock price or reputation.

Truth: In fact, financial institutions are the ones who typically spot breaches, as their fraud detection systems usually trace back suspicious activity to the source from their fraud-prone cards.

In many cases, the reports of fraudulent card activity provide the first signs (even to the financial institutions) of a sophisticated breach. Even when hacked companies discover they have been breached, they may not immediately disclose it for fear of compromising an undercover “sting” or making the breach worse. A total of 46 states and the District of Columbia legally require retailers to notify customers of data breaches and retailers comply with all laws.

Whopper #3: Financial institutions’ systems are better protected than retailers’ systems, and financial institutions have to adhere to much higher standards.

Ten things to do to protect your Point of Sale System from hackers

  1. Install and maintain a firewall
  2. Do not use vendor supplied passwords
  3. Encrypt the transmission of credit card data
  4. Upgrade your anti-virus software on a regular basis
  5. Ask your merchant bank for their PCI validation requirements
  6. Develop a policy manual that defines information security for all employees
  7. Restrict and maintain a log of anyone accessing credit card data
  8. Ask your Point of Sale software vendor to provide their latest PCI compliance certification
  9. Determine your software vendors plans for making their system EMV compatible required by the third quarter of 2105
  10. PCI DSS (SAQ) Self Assessment Questionnaire  is required if you process over 20,000 Visa transactions annually and recommended if you process under 20,000 – www.pcisecuritystandards.com

A man has to know his limitations!

I received an email from a POS vendor after being informed his system was not selected by my client. There was one line in the email that bears repeating, “We were probably not the best solution for your client based on the features they required and the gaps in our system”. Needless to say this is an unusual response since most vendors feel the selection process was unfair or the client made a bad decision.  When I entered the Point of Sale software business thirty years ago systems were very limited and retailers expectations minimal. Today the requirements and needs of retailers from system are very complex and complicated. The confusion is exacerbated by new terms being introduced and the misunderstanding of these terms: SaaS, Hosted, MSP, PCI, EMV, Data analytics, Omni Channel and CRM to name a few. The confusion and complexity is an opportunity for vendors who truly understand the consultative sales process.   A vendor told me when confronted with a prospect who seemed a bit confused by the complexities of the POS systems he encouraged his sales team to employ the “FUD” factor and sow the seeds  of “Fear, uncertainty and doubt” to confuse potential clients from understanding exactly what they were buying.

I truly applaud any vendor who recognizes when his system is not a good fit for everyone and employs the Dirty Harry line form Magnum Force, “A man has to know his limitations”. Without a doubt I will involve that vendor in future projects with great confirdence.   

The black hole of Credit Card Security

Nascar driver

I just got off a conference call with a client discussing a vendor we are evaluating to do a complete PCI compliance audit. The whole process will entail everything from policies and procedures, vulnerability scanning, server and network security controls and testing and remediation. Needless to say this service comes with a hefty cost and my client asked a simple question, “When this is completed will my stores be 100% secure from outside intrusion?” The answer is no, thus the black hole. The simple truth we are using 40 year technology for processing credit card transactions. Will the implementation of EMV by the end of 2015 solve the problem? The answer is no again since the U.S. has decided not to use the version used in Europe which requires both pin and chip; instead we will use the chip only. Everybody agrees a pin is essential to protect credit card data. So the question is why, which is the second black hole. I watched the congressional hearing this week when they questioned Target and the few other retailers who have been recently hacked (Target had passed a PCI three months prior to the breach). It was the usual theatre of outraged lawmakers promising to get to the bottom of the issue. My suspicion is that they we have lagged behind Europe in adapting the EMV standard for financial reasons. All the interested parties, banks, credit card companies and retailers all have a strong interest in who will pay for the new equipment required to process the new cards. I suspect there has been much lobbying of congressmen and senators by all the interested parties. When you watch a hearing you don’t know who’s paying who in the form of campaign contributions. I have a simple solution; let’s require legislators to wear uniforms like NASCAR racers with patches of their sponsors. When I watch a congressional hearing at least I would know who is sponsoring the line of questioning. We would eliminate one black hole anyway.

Retail is the law of the jungle!

Every day the gazelle wakes up and realizes he must run faster than the fastest lion to survive.  When the lion wakes up he know to survive he must faster than the slowest gazelle. This is the same dilemma the independent faces every day to survive and grow. Customers expect more from you while they are more willing to accept mediocre service from a big box store. The question becomes do you view this as an advantage or disadvantage. Your perspective on this question dictates how you handle the challenge of providing better customer service. If your view is that you understand and accept the challenge you’ve struck the right cord. The big guys have more resources but they can’t move quickly. Your distinct advantage is your speed and agility, like the gazelle.  Whenever I hear one on my clients utter a phrase such as “I’d love retail if I didn’t have to deal with customers”, they should get out of the business.  Unless you have a captive audience like having a license to sell marijuana in Colorado proving the best customer service possible is mission. Embrace it or perish.   

Takeaways from NRF- The Super Bowl of retail technology

The National Retail Federation (NRF) Big Show was in New York City last week. It was bigger, better and more well attended that any previous NRF. The show covered the entire Javitts Center with an array of companies from the biggest players in the industry to some of the newest niche companies. If you wanted to cover the entire show and attend some of the educational seminars it took at least two full days. These are some of the key takeaways I got from my two days at the show:
• CRM and Customer loyalty is a top priority from most retailers this year
• Omni channel integration – allowing the customer to order and interact with the retailer in the store and online
• Increase your ability to communicate with your customer on their mobile devices
• Offers that are tailored based on a customer’s past purchases
• More in- store customer engagement using digital signage
• Ensuring that your POS system will be EMV (Europay-Master Card-Visa )compliant by October 2015
• PCI Compliance to protect your system from a data breach
The PCI and EMV compliance are absolute musts from any retailer. My next top priority would be to enhance your ability to communicate with your customers on their mobile devices. This will also provide the double benefit of increasing customer loyalty. Retailer can longer avoid the ubiquitous smart phone that people check over fifty times a day on average. There here and not going away, so learn how reach those customers before, during and after they visit your store.

The real cost of raising the wages of retail workers

 The New York Times Sunday Magazine of January 5th had an interesting article raging the real cost of raising the wages of retail workers. The premise of the article was based on the following:

  1. Big Retailers classify workers as a “cost”
  2. But they can be a major source of profit
  3. The quicker retailers understand this the more profitable they will become.

Treating workers as an asset rather than a cost will usually result in happier customers. Happier customers spend more and remain more loyal to a store. This is not a new concept, Fred Reichheld the author of “The Loyalty Effect” and “The Ultimate Question” has made this point in both books.  According to him there is a direct correlation between a stable, happy workforce and customer loyalty. The more customers become familiar and comfortable with store personnel the more they develop a relationship with that store. The beginning of a new year is a perfect time to reflect on the concept of treating your retail workers as an asset rather than a cost. Loyal customers and happy employees increase profits, what a concept.



The conditioned consumer!

What started out a number of years ago as a simple tactic for gaining a competitive advantage during the holiday season has become a full fledged price war. I think it originally started to spur sluggish sales but then it quickly became a tactic to lure shoppers to spend earlier and earlier in the season. As with most marketing efforts that weren’t well thought out what followed were unintended results. For the first few years the consumer responded to the sales but as retailers tried to one up the competition with bigger and better offers the consumer became very savvy. We’ve now reached the point where the consumer has control of the game. They know the longer they wait the better the deal. Once gift cards became popular the game got ever better for the consumer. They can now use their gift card to buy at post holiday sale prices and get more bang for the buck. It will be very interesting to see the final holiday sales results. Sales are probably up a bit but at what cost. It will be very interesting to see how the big box retailers deal with this in the long run. How can they get the pricing genie back in the bottle and keep the consumer engaged.


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