Just like their designer suits and pricy accessories, technology is fast becoming the differentiating factor among luxury retailers to improve their business performance.
While the value players like Wal-Mart use technology to help keep costs down, high-end retailers like Neiman Marcus, Nordstrom and Saks Fifth Avenue can use technology to strengthen their customer service.
Sounding like a matchmaker trying to make a perfect date, William Franks, executive vice president and chief information officer for Saks Inc., said Saks’ new customer-first program takes customer relationship management to the next level. Using the latest technology to build an active data warehouse, Saks stores information about customers such as birthdays and anniversaries or where she makes a purchase in order to to make an emotional connection with the customer and further the relationship.
“We are thinking of long-term relations with customers, much like the long-term relationships we have as individuals,” Franks said. “As you establish a relationship with someone in life, one of the things that happens is there is mutual interest and that is usually the merchandise, shopping experience and service and then there is a tipping point that occurs, as the two become mutually interested in each other, they can exchange small things, a card, flowers, you see the dating become more regular, maybe every Saturday night and then progress in each other’s company a significant amount of time. So loyalty isn’t just a points program or loyalty card that gives you a rebate; it is really an emotional connection.”
In addition, the firm has started to unveil its “point-of-service” store-level system that in essence provides rich functionality to the store and its associates at the “service station” registers. It allows customers to seamlessly move throughout the store’s departments, culminating with one signature. Saks’ new POS provides for a “client telling system,” an associate’s automated customer book that enables associates to better service customers.
For the past three years, Nordstrom has made significant investment in technology — first with its perpetual inventory system, and secondly with its new point-of-sale system.
Nordstrom has invested approximately $185 million in its perpetual inventory system, with the first purchase orders initiated in 2001, and the majority of the investment capitalized between 2000 and 2002. The rollout of the final module occurred in the first quarter of 2003, with intensive training for merchants and salespeople last year. In 2004, the Seattle-based specialty department store will continue to learn and have merchants and salespeople adopt the system to realize its full benefits.
“We look at this as a service initiative, rather than a technology initiative. It will allow us to be in stock, at the right store, for the items our customer is looking for. It will also help our salespeople locate items more quickly,” a company spokeswoman said.
In addition, Nordstrom said it plans to invest $100 million in its POS system, using software and hardware from Fujitsu, with about 40 percent of the investment having occurred in 2003. Right now, 40 stores are live with the new POS registers and the company will continue to roll out the registers so that all stores have them by fall 2004.
“So far, it’s making peoples’ lives on the sales floor much easier. Our ability to get through transactions is about twice as fast as it used to be. Our ability to move through transactions, especially during busy periods, makes the experience more enjoyable and convenient for our customers,” she said.
At Neiman Marcus stores, Connie Wald, vice president of marketing and customer relationship management, said investment in technology to enhance service is “critically important.” She said NM has an in-house information technology group that works with employees to enhance service levels. Specifically, Wald said sales associates are furnished with data to deepen the relationship with individual customers, across all channels, departments and stores, noting it is not used for customer profiling.
For example, Wald said the system informs associates when a client is a working woman with limited time to shop who wouldn’t be interested in receiving millions of promotions, but rather wants an hour with a sales associate. Or if a customer is interested in fine apparel, but is not buying shoes, it is wrong to assume she is going barefoot. With the data in hand, NM will make sure she gets promotions about shoes and would tell a sales associate in shoes to call her.
NM said it has a well-populated database — in excess of 10 million names — because of its customers’ propensity to use credit cards. In addition, it has had a staff statistician for the past four years who takes the data to find commonality among the customers that may lead to a program that could be of interest to a new customer.
In addition, Wald said NM is looking at programs that would computerize the salesperson’s customer books so that an associate, say in designer sportswear, can see the other departments a customer shops.
Still, while the data is invaluable, Wald said it works only in tandem with the sales associates to maintain relationships. “It is our combination of our sales associates’ relationships with the customer that enables us to close the loop and offer additional services,” she said.
Despite these initiatives, analysts and consultants believe high-end retailers can do even more, and will in order to further differentiate themselves in the increasingly competitive retail marketplace.
“High-end retailers have good salespeople so they need something new to the game because they could be losing their differentiation,” Steven Skinner, a partner in the retail industry group at Accenture, said. Skinner said since high-end retailers have historically been especially adept at serving the customer, using technology can only enhance what they do.
With the increased sophistication of consumers’ knowledge of fashion offerings through Internet searches and the fashion media, Skinner said he believes the battlefront in 2004 and beyond for luxury players will be about building the interaction between the consumer and the store through helping the consumer to make a purchasing decision and improving service.
Reacting to the reality that luxury customers want to be catered to and that they are no longer as loyal as they used to be — say, purchasing a pair of black pants at Target but a designer top at Saks — high-end retailers are now beginning to look at ways technology can help them better serve their finicky customers.
Over the past several years, retailers across the industry have used technology to optimize the store itself, for instance through investing in optimum inventory systems, point-of-sale terminals, replenishment and manager training. But to enhance their customers’ shopping experience, high-end companies need to use technology to transform the interaction between the store sales staff and the consumer, Skinner said.
“They have done a lot of work optimizing the store. Now they want to optimize the consumer,” Skinner said. “It is about getting to the consumer in a different way that hooks them to the store.”
Imagine customers connecting their smart phone or personal digital assistant with their favorite store and instead of having to take a dress to the checkout register, have an employee scan it, offer a credit card and have the employee execute the transaction, the customer can instead scan the dress on their wireless device, get the price and information about the product, decide to buy it and execute the transaction on the spot and walk out of the store.
And that is just one of the ways technology is impacting the shopping experience. Others include “unplugging the store,” where wireless solutions are used to free managers and sales staff so they can spend more time serving customers. For example, messages would be sent automatically to managers and staff about the arrival of new shipments or markdowns.
For the retailers, technology can begin to eliminate the POS terminals in the store, make more room available for merchandise, and thereby drive more sales per square foot without having to change the layout of the store. For the customer, it gives them better service and better product in terms of being more precisely what the shopper is looking for.
With that connection, the store can send customers information about new product launches, discounts or perhaps make them aware of a special showing of a new line of clothing, creating a new series of intimate interactions with the consumer and making them feel special.
The technology used enables the retailer to take into account a number of variables like weather, income, demographics of a neighborhood, how people respond to sale and promotional events and patterns of flight from downtown metro areas to suburban ones, and make a determination about what would be the optimum assortment for a store in a specific area.
“The technology allows retailers to be much more targeted in its merchandise based upon how consumers behave in a given neighborhood,” Skinner said. “It allows you to find microtrends that would otherwise not be readily apparent to a buyer or merchant.”
For consumers, the technology can improve their experience in the store and help them make better purchasing decisions. By using a wireless device, a shopper can virtually send information about themselves into the store and can receive information about special offers she may not be aware of. It can also be used to tap into a database of information about the customer, including her likes and dislikes, and send a targeted message to the consumer based on that insight.
While consumers in loyalty programs now receive information about sales and to some extent promotional events through direct mailers, a more targeted system in fashion retailers’ loyalty programs can offer a more intimate customer relationship and offer a better shopping experience, which will keep them coming back on a non-price basis.
In addition, sales associates at high-end retailers have been much better at understanding and serving the needs of their highbrowed customers. But armed with more information about the customer, this service is now enhanced.
“If retailers can achieve that, they can maintain their margins and increase the frequency of store visits, stores don’t have to advertise by mailer, but instead in a new way that creates more intimacy,” Skinner said.
Eric Beder, a retail analyst with Northeast Securities, said high-end retailers are just now starting to take advantage of technology with the focus on customer relationship management and improving the level of service and said he anticipates spending to increase over the next two years.
One of the biggest advantages, he said, is companies can have a computerized version of their customer book, allowing the company to take advantage of cross-selling opportunities and create a seamless store and thereby increase wallet share. “The salesperson can see wherever a person shops, whether it be at the store, catalogue, Internet and even which departments she peruses throughout the chain,” Beder said. “A customer of Neiman Marcus in Chicago who buys Prada shoes goes to Las Vegas and a sales associate there can call up the name and see what her preferences are.”