Teching-Up Retail

While e-commerce becomes mainstream, other, even more recent technological innovations are also now changing the face of retail in very important ways.
Technology is changing the way people shop and research products, updating methods merchants use to sell products and helping manufacturers get their products to retailers. NPD Insights asked The NPD Group’s industry experts how recent technological advances are affecting the industries NPD tracks. Here’s what they told us.

The effects of tech on tech

Technology affects the selling of technology products in three ways. The first is in the application of technology to improve the supply chain – such as radio-frequency identification (RFID), new POS systems that accurately track sales, and supply-chain software that helps manage the movement of goods and inventory. Second is the application of technology to selling merchandise – including the installation of in-store kiosks, improved Web site technology, and the seamless marriage of online and offline retailing consumer technology. Using these methods, resellers and the entire supply chain can benefit from greater efficiencies within the sales channel. Finally, and unique to consumer technology, are the goods themselves.

“All in all there are clear benefits to being both a seller and a business user of technology,” said Stephen Baker, NPD Techworld director of industry analysis. “Applied properly, today’s consumer technology industry can benefit at every point from leveraging its unique connection with technology to build a better, more profitable business for themselves and offer more price competitive, cutting-edge products and services for its customers.”

Getting hands-on with toys and video games

Like information technology and consumer electronics, the toy and video games industries have been leaders in leveraging various technology elements to improve sales. In-store demonstration kiosks, now used in multiple distribution channels, are aimed at providing shoppers hands-on experience with a console system, bringing to life new software titles via playable demonstrations. For example, shoppers at Target, Best Buy and EB Games can audition newly released titles at in-store PS2, Xbox or Gamecube stations specifically designed to entice the customer to take a closer look. Similarly, toys are often housed in "try-me" packaging that makes toys’ unique features – particularly electronic features – accessible to the shopper without requiring packaging to be opened.

"Another category using hands-on demonstration to engage the consumer is youth electronics,” said Anita Frazier, NPD Funworld entertainment industry analyst. “During the holiday season, endcaps showcasing the features of Hasbro's VideoNow and Mattel's Juicebox systems were very popular at mass-market and toy-specialty retailers.”

Housewares industry: Not afraid of RFID

In less than five years, the retail sector has gone from test piloting RFID technology with a handful of vendors to some of today’s top U.S. retailers mandating RFID compliance by their suppliers within the next couple of years. Both manufacturers and retailers in support of RFID cite long-term benefits the home sector will reap from this technology if and when it becomes standard protocol. Considering that home products tend to be higher-ticket items as compared to low-priced consumables, the utilization of RFID, they argue, will help in ensuring that shelves always remain adequately stocked so sales aren’t lost.

“Consumers will also benefit from RFID in that they will be much more likely to find the products they need in stock, which helps increase their overall satisfaction of the shopping experience,” said Peter Greene, vice president and general manager of NPD Houseworld. “The technology can also help reduce theft, expedite product recalls and potentially help identify items that have been tampered with – all of which can translate in to higher margins and greater efficiency in the long run.”

Paying at the pump delivers benefits – and downsides

Although technology that enables motorists to pay for fuel at the pump has been around for more than a decade, it is still having a significant impact on the retail gasoline marketplace. Through YTD October 2004, 46 percent of consumers paid for their gasoline using a card reader at the pump. Nearly two percent pay cash using pumps with cash acceptors or use some other automated payment device such as an RFID key chain fob that can be waived at the pump to process payment. Additionally, the percentage of consumers paying at the pump continues to increase steadily each year.

There is a downside, however, to pay-at-the-pump technology. The rapid rise in consumer acceptance means almost 57 percent of consumers now purchase fuel with some form of credit card. According to David Portalatin, NPD Automotive industry expert, “gasoline retailers live on very thin margins of often a few cents per gallon, and rising card usage means credit card discount rates are becoming an expense item large enough to threaten profitability.“

Fashion retail technology – A question of speed to market

“Today and even more, tomorrow, fashion is and will be all about speed to market, more fashion at lower prices, and quality that is good enough,” said NPD Chief Industry Analyst Marshal Cohen. “All of these components would not be doable without the aid of technology in the production and backroom of the retail outlet.”

The fashion industry is looking to speed up the production cycle from nine months for most imported product to only three months. In fact, some companies are already achieving that short delivery cycle, thanks to key technological innovations. To succeed, speed to market is critical, so retailers need to reorder and not have to wait the whole season to get those reorders. Today’s clothing manufacturers are now using computers to draw patterns, cut fabric and even sew in many cases, so that the sizing variances are cut to a minimum, the uniformity of product is increased and the cost of production and timing is reduced substantially.

Selling beauty on the Web

According to The NPD Group’s FragranceTrack 2004 Women’s Study, Internet shopping among women for fragrances continued its upward trend in 2004, growing two percent when compared to 2003 results. With the increase in consumers using high-speed Internet services, sales within fragrances, makeup and skincare may increase further, as online shopping becomes a more convenient and efficient way for consumers to purchase beauty products. In addition, companies may increase their Web advertising and marketing budgets as it becomes a more effective – and ubiquitous -- way to capture the attention and purchase interest of the beauty consumer.

“The growth of the online retail channel has increased the interest of leaders in the beauty industry, making it a hot topic of discussion and a potential focus for future studies from NPD Beauty,” said NPD Beauty President Timra Carlson. “We are closely monitoring the impact of online shopping and Internet marketing on the beauty industry and keeping an eye on other technological innovations our clients may be interested in, as well.”

For more from our Industry Experts, visit the NPD Worlds . . .

www.npdfashionworld.com
www.npdfunworld.com
www.npdhouseworld.com
www.npdtechworld.com