September 28, 2004

Will Frustrated Store Managers Revolt Against Corporate CRM?

By Evan Schuman, eWEEK

Frustrated by what some see as IT executives hoarding CRM information, retail store managers are starting to do an end run around corporate with their own customer-information-gathering systems.

One result of this retail technology revolt are smart store kiosks, which today do a lot more than display electronic brochures. As the technology has become much more portable, these stand-alone machines—loaded with tons of hard-disk space and RAM and no Internet connection in sight—are allowing store management to gather much of their own information, which they may never get around to sharing with corporate IT.

This is a trend that seemed to get its start in the car-dealer segment, with its tradition of dealers switching to another carmaker and therefore making corporate hesitant to share too much information. But it now seems to be creeping into more traditional retail segments, and consultants watching the trend see it as the logical result of store manager frustration.

What's the nature of this frustration? The store managers have been asked to support and administer quite a few corporate-dictated CRM (customer relationship management) programs. And yet, they complain, they see little usable information delivered back to the stores, and what does come back is often little, late and not addressing the questions the store managers—as opposed to IT executives at headquarters—want answered.

Store managers "are being asked to do a lot of things at the store level, such as signing customers up for loyalty programs and performing updates to keep the data clean," said Catharine Harding, vice president of retail at sales optimization software firm Blue Martini Software. "They are feeling a lot of frustration that they don't get to see the benefits."

Tom Byrnes, director for marketing for interactive retail at kiosk-maker Planar Systems, agreed. "It is getting very difficult for people in the front lines [store management] to be able to access the kind of data they need to improve the customer experience," he said.

Harding said a small part of the blame can be directed at the very origins of the typical CRM system, which was never designed to be used in the way many retail operations are now using them. They were designed to analyze things like how a quarter of a million ad mailings are doing and whether the campaign response rate could be improved somehow. Store managers, on the other hand, are more focused on things like identifying their store's top customers and their preferences.

A larger chunk of the blame for this disconnect can be given to IT procedures and methodologies, although not necessarily to the senior IT executives themselves, Harding said. "I recently talked with two store managers, who told me what they have to go through to get reports" that are store-relevant, she said. "It was an arcane system to request and to join certain kinds of data."

If you want to blame corporate managers for the frustration, Harding said, don't look at IT: Look at marketing. "The central marketing department. That's where they feel, 'God forbid, the store sent out their own campaign and it wasn't corporate branding.'" Marketers also often fear that store managers might saturate customers with direct mail and contacts "because we're not controlling the store e-mails."

Another market observer is Margo Zenk, technical director and senior partner for Matrix Consultants, a marketing firm that specializes in kiosks. One of her clients is $21 billion car/motorcycle vendor Suzuki. Suzuki's store managers didn't want to share information with the area's other store managers, let alone corporate IT or marketing. "They're not into sharing any information," she said.

In those environments, today's kiosks are a good fit. Unlike an in-store PC with a Web connection, the kiosks have hard disks and memory sufficient to seamlessly run very high-end animations, the kind of multimedia that would either be too cumbersome for download or streaming. The devices can also be placed anywhere, including parking lots, and can show elaborate product demonstrations.

Most importantly, many kiosks today are two-way, which can turn them into information-gathering and sometimes even CRM units.

Consider $11 billion Nike, which bills itself as the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories. But Nike is also becoming a significant retailer, with 15 Niketowns, more than 80 Nike Factory Stores and two stores intended to attract active woman called NIKEgoddess Boutiques.

At Niketowns, customers are encouraged to design their own footwear on the kiosk. The sneaker is then be created and delivered to that customer. Hence, it gathers a ton of customer preference information and can connect to a specific customer, who willingly provides full contact information. Is it a true retail CRM system? Well, if the shoe fits

"Kiosks are not necessarily just Web on a stick," said Planar's Byrnes, whose company makes those kiosks for Nike. "The new kiosks are much more single-purposed, much more product-specific."

Byrnes spoke of the kiosk trend as a natural result of two other trends: Products are becoming much more complicated and sometimes sophisticated; and retail sales reps are becoming younger, less experienced and less sophisticated.

"American retail, by and large, is run by teenagers," Byrnes said, adding that teenagers contribute greatly to retail's very high employee turnover rate. Those factors force store management to reduce product differentiation points to whatever can be squeezed into a few bullet points on an index card, Byrnes argues, while increasingly complicated products demand the opposite.

"It remains a fact of retailing that almost 75 percent of all purchase decisions are made at the point of purchase in a bricks and mortar environment," so any sales assistance needs to happen on-site, and Byrnes concludes that that means kiosks.

Another trend is consumer acceptance with self-service, whether it's in the form of retail self-checkout, electronic ticket machines at airports or the ever-present ATM. "The marketplace is already headed in one direction. Customer frustration is very high. Americans are quite content to be in a largely self-service environment," Byrnes said.