Retailers Look to E-Tailers for Survival Tips

Now that the holidays are over, retailers are focusing on the rest of the year and beyond. And they're increasingly looking at what shoppers are doing online for ways to perk up sales at bricks-and-mortar stores.

At the annual Big Show conference of the National Retail Federation Jan. 9-12, merchants seemed to agree on one thing: Shoppers are bored. Three years into a recession and lumpy recovery, consumers aren't getting comfort from retail therapy. Instead, they're increasingly price-shopping online and running in and out of stores, looking for a better deal, say merchants.

Retailers need to "debore" the consumer, says Dan Hurwitz, president of shopping mall landlord Developers Diversified Realty. He notes that his company did focus groups and found shoppers just weren't excited by store experiences anymore.

By next year, half the purchases made in the U.S. will be either done online or influenced by online shopping, according to a study by KPMG. So, with shoppers so used to shopping and buying online, many vendors are rolling out hardware and software that will put the Internet on the shelf, take over your mobile phone and get you out of the store without standing on a checkout line.

Shoppers "expect the Internet experience in store and the store experience on the Internet," says Lisa Fretwell, senior director of the Internet business solutions group at Cisco Systems (CSCO).

At the NRF trade show, there were bar-code scanning applications for smartphones, portable credit card swipe terminals to replace cash registers and touch-screens to access social media feeds in-store. Many programs are coming this year, and some pilots are already being installed at retail locations.

The Web on a Shelf

Technology companies are working with retailers to install touch-screen displays and interactive screens that let shoppers access a lot of the same information they get online, such as product reviews and ratings.

The key influences when people shop are still the recommendations of friends and family, Fretwell says. And while many retailers are focused on mobile-shopping applications, she notes that Cisco's research found most Web-savvy shoppers still make decisions while looking at the Web from their home computers. Shoppers say they want to see the same information they get online in store displays, according to Fretwell.

At the NRF show, Intel (INTC) demonstrated a prototype developed with Adidas (ADDYY) that places touch screens in stores. The screens let the shopper browse thousands of sneakers available online, even if they're not in stock at the store, and order the shoe to try on. Then the shopper can read Facebook and Twitter comments about the chosen shoe, or play video and access other online content while waiting for a sales associate to deliver the pair from the storeroom. If the shoe isn't in stock, the shopper can try on a similar one and buy the desired model online before leaving the store.

"Online shopping is a problem that bricks-and-mortar stores are trying to address. They're concerned that stores will become museums or showrooms," says Shailesh Chaudry, strategic marketing manager at Intel. "This is bringing the digital into the physical world."

A Salesperson in Your Phone

Brian Slaughter, director of end-user solutions for large enterprises at Dell (DELL), held up his new Android phone: "This device that you're carrying, it's huge," he says. "Over the next two years, we should see about 80% of the market will have one of these."

And vendors are offering systems to turn any smartphone into a shopping and payments tool. For example, Verifone (PAY) has developed a system that allows the shopper to pay by resting their smartphone on a pad attached to the card-swipe terminal. That deducts the cost of the purchase from an electronic wallet or electronic gift card stored in the phone. The hardware is being offered this year to stores.

Sponsored Links

On the software side, AT&T (T) will launch a program this year that offers smartphone users a bar-code scanner application and lets retailers and manufacturers encode instructions for the phone. Once the bar code is scanned, the phone will perform functions such as open a product information page on the Web, dial a customer-assistance phone or create an email or text message the shopper can send to ask for more information. The application is already available for AT&T iPhone (AAPL), Android (GOOG) and BlackBerry (RIM) smartphones, and 25 companies are participating, but it will be launched officially this spring.

With consumers increasingly using smartphones to do comparison shopping, retailers feel they need to intercept those shoppers before they lose them to rivals, noted Bob Russell, AT&T director of industry solutions.

"Any of the retailers we can think of don't want shoppers walking into the store, scanning an item and then it lands them on a [Web] page where they can find it cheaper, and then they walk out the door," he says. "Retailers have a choice to make: They can either proactively assert their message in that medium, or not. And if they don't do anything, they're in trouble."

The technology exists to do even more, such as location-based services that can recognize customers by their phone signal and change the digital signage if they linger in a certain department or by an in-store display, says Slaughter. But he adds that retailers are holding off on installing those features because of privacy concerns.

Goodbye, Checkout Lines

Some retailers, such as the Apple Store, already have equipped salespeople with portable terminals that let them scan purchases and swipe credit cards. Technology companies are mashing tablets and smartphones with card-swipe terminals and PIN keypads to turn every sales associate into a potential cashier.

Verifone was showing a cradle at the NRF show for an iPhone or iPod Touch with a swipe terminal and keypad, so store employees can scan the product bar code with the phone, then process the payment by credit or debit card using the keypad, and send the shopper a receipt by email. Dell also showed tablets that store employees can use to find items in the store, get information and complete transactions in the aisles.

Consumers are pushing all these changes, say retail observers. Flat-screen TVs and smartphones are becoming common household items, so shoppers expect to find the same kinds of features in stores. And with electronics prices still falling, the cost of the hardware is less of an objection to implementing these programs, say the vendors.

Despite retailers' concerns about rising costs in a difficult economic environment and the return on these investments, the customers are forcing their hand, say the experts.

"I can't tell you how many [chief information officers] have told me their CEOs have told them: 'When are we going to get this done? My children can already do this.'" says Slaughter. "It used to be 'We're going to tell you how you're going to experience our store.' Now the consumer is walking in and saying: 'No, I'm going to tell you how I'm going to use your store to give me more information.' The tools they have at their disposal are very cool."