Retailers must use technology to enhance the shopping experience, retain customers and increase profitability if they are to compete against traditional and new entrants in the industry.
This is according to Chris Huggett, Cisco Systems` director of retail, transport and media for the networking group`s European, Middle East and Africa region. Huggett says that while the technology is not new, it is being applied to meet business challenges in the retail sector.
"The dot-com hype of the 1990s showed just how vulnerable traditional retailers were to the innovative use of technology by new market entrants and realised they had to use it in order to survive. The classic example is US bookstore chain Barnes & Noble, which were scared out of their wits by Amazon.com moving into their arena," Huggett says.
ITWeb spoke to Huggett at the Cisco Systems Retail event held in Cape Town this week. This was the first of a series of events marking the network group`s strategy of targeting vertical markets such as retail, finance and other sectors.
Cisco conducted the one-day workshop with some of its technology partners, including Sony, Telkom, Dimension Data and Comparex. The main focus of the event was the use of Internet Protocol in the retail environment and how retailers can take advantage of existing technology and apply it to the shop-front.
"The retailer is in a great position to influence the brand decision of consumers," Huggert says. "Research has shown that 75% of consumers only make their brand decision once they are in the store."
While that fact has been known for a long time, only about 5% of brand marketing budgets have been allocated to the shop floor as suppliers have a difficult time controlling the message sent to clients. Huggett says the application of technology in terms of rolling advertising on plasma screens, touch cubicles and mobile point-of-sale systems can help promote brand awareness, improve the customer experience and enhance profits.
So far retailers have mainly used technology for connecting with their suppliers, monitoring security and back-office functions. The use of the same technology can be expanded to include advertising, consumer research, customer loyalty programmes and shortening the amount of time in queues - also known as "queue-busting".
"Radio Frequency Identification (RFID) has been around for some time, but only now is it emerging as a genuine technology for use in the retail sector," Huggert says.
RFID consists of a small plastic-coated chip that can be embedded in either the packaging or the product, and is poised to replace the bar-code system that has been used for about 15 years.
According to Huggett, US company Gillette is negotiating to have RFID tags embedded with its razorblade products, considered to be the item that is most often stolen from retail shelves worldwide.
"Gillette is negotiating to obtain about 500 million of the tags at a cost of 10 US cents each. While even that may be too expensive for some products, they certainly can be used to mark pallets of products that are bulk shipped," he says.
Other applications for technology that already exists includes the use of handheld devices to shorten queue times as store staff can go directly to the customers waiting to pay. Loyalty programmes can also be enhanced as the retailer can monitor clients` purchases and suggest special offers and complementary products.
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