Gartner - Hypecycle For Retail 2012

Industry Research
G00234233
Hype Cycle for Retail Technologies, 2012
Published: 27 July 2012
Analyst(s): Gale Daikoku
Executing a seamless cross-channel shopping experience remains a critical
priority for Tier 1 multichannel retailers. CIOs and IT leaders must diligently
monitor customer requirements to balance the introduction of new
technologies. This research features 43 technologies that should be on the
radar.
Table of Contents
Analysis.................................................................................................................................................. 3
What You Need to Know.................................................................................................................. 3
The Hype Cycle................................................................................................................................ 3
The Priority Matrix.............................................................................................................................8
Off the Hype Cycle......................................................................................................................... 10
On the Rise.................................................................................................................................... 11
3D Printing in Retail.................................................................................................................. 11
Augmented Reality Applications................................................................................................13
Data Visualization in Merchandising.......................................................................................... 15
Multichannel Merchandise Planning.......................................................................................... 16
At the Peak.....................................................................................................................................18
E-Paper Signage...................................................................................................................... 18
Multichannel Feedback Management........................................................................................19
Real-Time Store-Monitoring Platform........................................................................................ 20
Social Media Analytics for Retail................................................................................................22
Multichannel Master Content Management for Retail................................................................ 23
Social Coupons........................................................................................................................ 25
Real-Time Customer Offer Engines........................................................................................... 26
Mobile Coupons....................................................................................................................... 27
Multichannel Loyalty................................................................................................................. 28
Biometrics for Time and Attendance......................................................................................... 29
F-Commerce............................................................................................................................ 30
Sliding Into the Trough....................................................................................................................32
Retail Mobile Shopping (Nonpayments).....................................................................................32
Web Experience Analytics.........................................................................................................34
Retail Mobile Payments............................................................................................................ 35
Integrated Demand and Replenishment Planning......................................................................39
Store Location Analysis............................................................................................................ 41
Store Replenishment Optimization............................................................................................ 42
Multichannel Order Fulfillment................................................................................................... 44
Java-Based POS Software....................................................................................................... 46
Multichannel Order Management.............................................................................................. 47
Time and Labor Optimization.................................................................................................... 49
Multichannel Master Data Management for Retail..................................................................... 50
RFID (Item)................................................................................................................................53
Contactless Payments.............................................................................................................. 54
Customer-Centric Merchandising............................................................................................. 55
In-Store Self-Service: Customer-Facing Applications................................................................ 57
Microblogging for Retailers....................................................................................................... 59
Online Product Recommendation Engines................................................................................60
Retail Biometric Payments........................................................................................................ 61
Store Task Management...........................................................................................................62
Retail Digital Signage................................................................................................................ 64
LCD-Based ESLs..................................................................................................................... 65
Climbing the Slope......................................................................................................................... 66
E-Coupons............................................................................................................................... 66
Merchandise and Category Optimization.................................................................................. 67
Unified Price, Promotion and Markdown Optimization...............................................................69
Mobile POS.............................................................................................................................. 71
Entering the Plateau....................................................................................................................... 73
Self-Check-Out.........................................................................................................................73
Community Reviews................................................................................................................. 75
In-Store Applications: Employee-Facing....................................................................................76
Appendixes.................................................................................................................................... 78
Hype Cycle Phases, Benefit Ratings and Maturity Levels.......................................................... 80
Recommended Reading.......................................................................................................................81
Page 2 of 83 Gartner, Inc. | G00234233
List of Tables
Table 1. Hype Cycle Phases................................................................................................................. 80
Table 2. Benefit Ratings........................................................................................................................80
Table 3. Maturity Levels........................................................................................................................ 81
List of Figures
Figure 1. Hype Cycle for Retail Technologies, 2012................................................................................ 7
Figure 2. Priority Matrix for Retail Technologies, 2012...........................................................................10
Figure 3. Hype Cycle for Retail Technologies, 2011.............................................................................. 79
Analysis
This document was revised on 6 September 2012. For more information, see the Corrections
page on gartner.com.
What You Need to Know
For several years, Gartner has been tracking consumer empowerment through growing use of the
Web, mobile and social technologies as they take greater control of their shopping processes,
including a more personal approach to their shopping experience. This consumerization of retail has
resulted in major retailers continuing their investments in the specific technologies that enable them
to innovate and improve their ability to execute a seamless, cross-channel shopping environment,
and create meaningful interactions with customers.
Multichannel retailing is becoming business as usual for Tier 1 retailers, which are defined as those
with more than $2 billion and operating several channels, including stores. However, four IT forces
including cloud computing, social networking, mobility, and an explosion of information or "big
data" (described by Gartner as the Nexus of Forces) continue to elevate the hype surrounding
several retail technologies. While these technologies on their own can be innovative and disruptive,
the nexus highlights the convergence of these four forces, which will transform the way customers
shop. Tier 1 retail IT leaders who are actively seeking guidance on the right mix of technology
investments and delivery models can use this Hype Cycle to understand how these technologies
can be used now and in the future to support their customers' real-time shopping journeys,
regardless of touchpoints.
The Hype Cycle
This Hype Cycle represents Gartner's global market view of the progress, development and
evolution of the key retail technologies that affect the way Tier 1 retailers do business that is, how
Gartner, Inc. | G00234233 Page 3 of 83
the technologies support the way customers want to interact with retailers through their shopping
experiences. The technologies included in the 2012 Hype Cycle were selected and reviewed by
Gartner on the basis of ongoing consumer and retailer surveys, market forecasts and analyst
opinions, based on our daily conversations with large retail clients and vendors that serve the retail
market. Key consideration was given to each technology's ability to affect a retailer's core business
processes, to improve a retailer's ability to interact with its customers, and to improve the
effectiveness and efficiency of operations.
The target audience for this research includes:
CIOs and CTOs
Vice presidents of store operations
Vice presidents of merchandising
Vice presidents/heads of commerce/mobile/multichannel
Vice presidents/heads of application management
Heads of enterprise architecture
Vice presidents/heads of business intelligence (BI)/information management

Retail CIOs and their leadership teams must continue to diligently monitor customer requirements
that arise from the actual shopping processes, and balance the introduction of new technologies to
meet shoppers' needs. While the timing of implementations will vary depending on a retailer's
tier, segment and geography of operations, as well as on the maturity and ROI considerations of
technologies being implemented retail IT leaders can use this Hype Cycle as a starting point to
refine technology road maps.
The 43 technologies included in the 2012 Hype Cycle update are down slightly from the 47
technologies published in 2011. Here is a summary of the key changes for 2012:
Seven technologies were dropped and are detailed in the Off the Hype Cycle section of this
research: retail mobile commerce (transactional), social software for retail employee
collaboration, retail real estate portfolio management, public social networks in retail, next-
generation retail OSs for POS, video and rich media for e-commerce, and store-based e-
recruitment.
Four technologies were renamed to more accurately reflect their inclusion in the 2012 Hype
Cycle: "retail mobile phone payment" is now "retail mobile payments"; "retail mobile websites
and applications nontransactional" is now renamed "retail mobile shopping (nonpayments)";
"master data management for retail" is now called "multichannel master data management for
retail"; and "multichannel retail enterprise content management" is now called "multichannel
master content management for retail."
Three new profiles appear on the 2012 Hype Cycle:
3D printing in retail: 3D fabricating technologies have been available for some time, and have
enabled the creation of one-off and customized pieces in the manufacturing environment. In the
past year, we have seen a noticeable interest in this technology that retailers could use to
produce low-volume manufacturing of high-margin, custom-designed pieces to support a key
customer basic: stock availability. This interest supports the addition of this profile to the 2012
Hype Cycle.
Data visualization in merchandising: The complexity of the multichannel merchandising

process combined with a new focus on the customer by Tier 1 retailers has limited the
potential impact of BI insights that must be translated across thousands of stores, and has
become unmanageable. Data visualization tools have emerged as a must-have for Tier 1
retailers to use the knowledge that merchants rely on to drive analytic views of information from
broad data sources, including social media and other contextual data points. This justifies why
this profile has been added to the 2012 Hype Cycle.
Store location analysis: This has been around for many years, and was previously covered as
a subset of retail real estate portfolio management, which was dropped from the 2012 Hype
Cycle. In the past few years, store location analysis has become vitally important to
multichannel retailers that need the ability to analyze an increasingly dynamic set of cross-
channel variables and key determinants for store locations, particularly as the store has become
the operational hub for cross-channel shoppers. This particular aspect and its importance to
multichannel retailers' physical store strategy are why this technology was added to the Hype
Cycle.
Three fast-moving technologies on the 2012 Hype Cycle are:
F-commerce: Gartner research shows that 91% of U.S. consumers surveyed report Facebook
as their primary social network. As a result, we expect this technology to move quickly through
the Hype Cycle over the next two to five years. The recent initial public offering and its mixed
performance have increased interest and will drive new revenue generation opportunities for
Facebook that will likely reinvigorate product sales activity. Facebook's recently opened App
Store will also increase activity and hype surrounding F-commerce.
Microblogging: Twitter has become a household name. It allows retailers to connect directly
with people who are interested in their products and services, as well as their sales and support
activities. Microblogging is low-cost; the cost to the retailer consists of the personnel costs to
create the feeds and the analytic software to monitor the microblogging feeds. This is part of
the reason why this technology has accelerated through the Hype Cycle as fast as it has.
Community reviews: This technology advanced rapidly to plateau from the 2011 Hype Cycle
position of post-trough 30% because it has become widely accepted and is considered a must-
have for retailers selling on the Web. As such, Gartner expects that this technology will be
retired in the next 12 to 24 months.
The following technologies have reached the plateau:
In-store applications: employee-facing: On the 2011 Hype Cycle, this technology had just
reached the plateau stage, with less than two years to maturity, and we expected to retire it
from the 2012 Hype Cycle. However, in the past 12 months, we have seen retailers keep up
their interest in these solutions, while also slowly beginning to transition to newer next-
generation solutions. For this reason, we have retained this technology in its current form on
this year's Hype Cycle. We expect to move it off the Hype Cycle next year and replace with a
technology that describes the next-generation type of solutions.
Community reviews: As previously stated, this fast mover is a widely accepted part of doing
business, and we expect this technology will continue to advance to the plateau and be retired
within the next 12 to 24 months.
Through 2012, we expect all 43 of these technologies to have increasing relevance to multichannel
retailers as they adjust to their "new normal," where multichannel retailing is becoming business as
usual (see Figure 1).
Figure 1. Hype Cycle for Retail Technologies, 2012
Technology
Trigger
Peak of
Inflated
Expectations
Trough of
Disillusionment
Slope of Enlightenment
Plateau of
Productivity
time
expectations
Plateau will be reached in:
less than 2 years 2 to 5 years 5 to 10 years more than 10 years
obsolete
before plateau
Customer-Centric Merchandising
As of July 2012
Augmented Reality Applications
Data Visualization in Merchandising
F-Commerce
Social Coupons
Multichannel Merchandise Planning
Multichannel Master Content
Management for Retail
Real-Time Store-Monitoring Platform
Multichannel Feedback Management
E-Paper Signage
Social Media Analytics for Retail
Real-Time Customer Offer Engines
Mobile Coupons
Multichannel Loyalty
Integrated Demand and Replenishment Planning
Biometrics for Time and Attendance
Retail Mobile Payments
Multichannel
Order
Fulfillment
Web Experience Analytics
Multichannel Order Management
Store Location Analysis
Java-Based POS Software
Time and Labor Optimization
Multichannel Master Data
In-Store Self-Service: Customer-Facing Applications
Microblogging for Retailers
RFID (Item)
Contactless Payments
Online Product Recommendation Engines
Retail Biometric Payments
Retail Digital
Signage
Store Task Management
LCD-Based ESLs
E-Coupons
Merchandise and Category Optimization
Unified Price, Promotion and Markdown
Optimization
Community Reviews
Mobile POS
Self-Check-Out
In-Store Applications:
Employee-Facing
3D Printing in Retail
Store Replenishment Optimization
Retail Mobile Shopping (Nonpayments)
Source: Gartner (July 2012)
The Priority Matrix
In the past year, key customer cross-channel processes such as order online/pick up in store,
buy online/return in store, or using a mobile device to browse have continued to emerge as
must-have capabilities for multichannel specialty retailers, such as consumer electronics,
bookstores and apparel.
IT decision makers in these formats need to stay focused on helping the business identify the right
investments that improve the shopping process across the channels, and not overlook the
importance of investing in stores in particular. For grocery and other segments that invest in stores,
but may have underinvested in emerging channels (such as Web and mobile), Gartner research
highlights the relative importance of all key touchpoints on cross-channel shoppers.
According to Gartner's 2011 multichannel forecast, revenue through mobile channels for U.S. and
U.K. retailers is expected to be less than 2% of total revenue by 2015, while e-commerce revenue in
both countries is expected to nearly double by 2015 according to the published forecast figures for
2010. However, while stores' growth rates in both countries will be the lowest of all channels, the
majority of retailers' revenue will continue to come through stores for some time. Also, multichannel
retailers should not lose sight that, for cross-channel-enabled processes, the store becomes the
operational hub for their operations. This means that stores should remain an investment priority for
multichannel retailers. As Tier 1 retailers prioritize their technology investments to deliver innovation
and business value to customers, Gartner reminds retailers using the Priority Matrix to start by
mapping customers' shopping processes and identifying deficiencies that prohibit or constrain a
seamless cross-channel shopping experience.
Four benefit ratings are used to describe each technology included in this Hype Cycle:
transformational, high, moderate and low. Three technologies were labeled as transformational
because they have the potential to "enable new ways of doing business across industries that will
result in major shifts in industry dynamics," as per the Gartner Hype Cycle definition of
"transformational"; however, the time frame to deliver transformation remains several years out.
Contactless payments and RFID (item) have been around for several years, but these technologies
are still at least five to 10 years away from mainstream adoption of these industry payment
processes. 3D printing in retail, a new profile on the 2012 Hype Cycle, is a technology that could
physically deliver a 3D print out of a prototype or item for purchase at a retail location which, for
IT leaders, could potentially change the way they support how inventory is managed,
merchandised, sourced and sold in stores in the future.
Although these technologies have the potential to transform the industry, the customers will
determine how fast they move in terms of adoption and this is especially the case for contactless
payments and 3D printing in retail.
Nearly half (20) of the technologies appearing on the 2012 Hype Cycle are labeled as having a high
benefit rating, which means that they will enable new ways of "performing horizontal or vertical
processes that will result in significantly increased revenue or cost savings." Many of the
technologies with a high benefit rating are expected to reach mainstream adoption in two to five
years, and these predominantly focus on enhancing core retailers' processes in the areas of
merchandising, inventory management, workforce management and other customer shopping
processes. The technologies that enhance merchandising or inventory management capabilities
include customer-centric merchandising; data visualization in merchandising; integrated demand
and replenishment planning; merchandise and category optimization; store replenishment
optimization; and unified price, promotion and markdown optimization. The technologies that
improve workforce management include store task management and time and labor optimization.
The technologies that improve customer shopping include in-store self-service: customer-facing
applications; retail mobile shopping (nonpayments); and social media analytics for retail.
A few technologies with high benefit rating were not expected to reach mainstream adoption for five
to 10 years. This reflects the very complex nature regarding the data requirements and application
integration needed to execute the cross-channel processes that these technologies will enable and
support. The technologies we can ascribe to this category are multichannel feedback management;
multichannel merchandise planning; multichannel order fulfillment; multichannel order management;
multichannel master content management for retail; and integrated demand and replenishment
planning.
Eighteen technologies had a moderate benefit rating. Those with this rating are defined as providing
"incremental improvements to established processes that will result in increased revenue or cost
savings" for retailers. Some of these had a two- to five-year maturity rating because they enable or
extend existing retailer processes for the customer, such as e-coupons, mobile coupons,
multichannel loyalty, self-check-out and F-commerce. Other technologies with two- to five-year
maturity including microblogging for retailers, online product recommendation engines and Web
experience analytics are investments that can enhance the cross-channel shopping experience
for the customer. Several other technologies were rated five to 10 years their ability to provide
incremental improvements was constrained because they required more time to improve or replace
established processes. They are biometrics for time and attendance, e-paper signage, Java-based
POS software, LCD-based ESLs, mobile POS, retail biometric payments, retail digital signage and
retail mobile payments. For two technologies real-time customer offer engines and real-time
store-monitoring platform integration with established processes for real-time review/response
was a factor in the years to mainstream adoption.
Two technologies on the 2012 Hype Cycle received a low benefit rating, which is defined as "slightly
improves processes (for example, improved user experience) that will be difficult to translate into
increased revenue or cost savings" for retailers. Social coupons, which are projected to achieve
mainstream adoption in two to five years, are a form of e-coupon; however, their effectiveness and
efficiency for retailers are still largely unproven. Similarly, augmented reality applications which
have drawn considerable interest in the past year, particularly as retailers explore their use though
mainstream adoption are between five and 10 years away from reaching the Plateau of
Productivity, because these interactive and immersive technologies are still emerging (see Figure 2).
Figure 2. Priority Matrix for Retail Technologies, 2012
benefit years to mainstream adoption
transformational
RFID (Item)
high
Community Reviews
Employee-Facing
Customer-Centric
Merchandising
In-Store Self-Service:
Customer-Facing
Applications
Merchandise and
Category Optimization
Retail Mobile Shopping
(Nonpayments)
Social Media Analytics for
Retail
Store Replenishment
Optimization
Time and Labor
Optimization
Unified Price, Promotion
and Markdown
Optimization
Integrated Demand and
Replenishment Planning
Multichannel Feedback
Management
Multichannel Master
Content Management for
Retail
Multichannel Master Data
Multichannel Merchandise
Planning
Multichannel Order
Fulfillment
Multichannel Order
Management
moderate
Data Visualization in
Merchandising
E-Coupons
F-Commerce
Microblogging for
Retailers
Mobile Coupons
Online Product
Recommendation Engines
Self-Check-Out
Biometrics for Time and
Attendance
E-Paper Signage
LCD-Based ESLs
Mobile POS
Real-Time Customer Offer
Engines
Real-Time Store-
Monitoring Platform
Retail Digital Signage
low
Social Coupons Augmented Reality
Applications
As of July 2012
Off the Hype Cycle
The following seven technologies are off the 2012 Hype Cycle:
Retail mobile commerce (transactional): This technology has been removed, and its largely
overlapping content has been incorporated into "retail mobile payments" to avoid duplication
and prevent unnecessary confusion.
Social software for retail employee collaboration: This is a cross-industry solution and was
dropped for 2012 because it is covered in the "internal community platforms" technology on the
"Hype Cycle for Social Software, 2012."
Retail real estate portfolio management: Store location analysis, as a process, has been
around for many years and was previously covered as a subset in retail real estate portfolio
management. However, in the past 36 months, it has become vitally important, as well as an
increasingly riskier and more complex activity, and we have seen lots of interest in this topic.
This has caused us to write a separate profile called "store location analysis," which we have
introduced on the 2012 Hype Cycle.
Public social networks in retail: This technology was dropped because it is not specific to
retail only. Gartner research shows that 72% of U.S. consumers are members of at least one
social network, with 91% using Facebook as their primary social network. See the F-commerce
profile.
Next-generation retail OSs for POS: Over the past few years, the coverage of technology
profiles on the Retail Hype Cycle has focused more and more on retail business applications,
rather than devices or client operating systems. In light of this criterion, we have decided to
remove this technology from this year's Hype Cycle. Also, it is unlikely that retailers will
implement these OSs for POS as stand-alone initiatives outside of POS upgrades.
Video and rich media for e-commerce: This was dropped because it was not specific to retail.
Store-based e-recruitment: This technology was dropped because e-recruitment is now part
of a broader cross-industry talent management suite, where there have been several mergers
and acquisitions during the past few years. See the talent management suites profile on the
"Hype Cycle for Human Capital Management Software, 2012."
On the Rise
Analysis By: Mim Burt; Pete Basiliere
Definition: 3D printing is a method of converting a 3D model for example, created through a
computer-aided design (CAD) software package, into a physical solid, detailed and potentially
functional model, or salable new or replacement part.
Position and Adoption Speed Justification: For a while now, 3D fabricating technologies have
been available for product prototyping and short-run parts manufacturing. More recently, the
technology has advanced to enable the creation of one-off and customized pieces in a much wider
range of robust materials. In retail, 3D printing is an emerging technology, and we are adding this as
a new technology to our Hype Cycle for Retail Technologies, 2012, because, in the past 12 months,
we have seen a noticeable increase in interest in this technology from retailers and vendors
Six basic 3D printing technologies are in use or under development: extrusion, lamination, fused
deposition modeling, inkjet, stereolithography and selective heat sintering. Additive 3D printers
deposit ink, resin, plastic or another material, layer by layer, to build up a physical mode. Although
at the low end, parts are generally produced in plastics, the same principles are also being used to
create high-end parts from ceramics, stainless steel, cobalt chrome and titanium alloys.
Continued quality improvements and price decreases mean enterprises can justify a modest
investment that streamlines their product design and development programs. In the past 24
months, the number and type of 3D printers has increased, and printer and supply costs have
decreased to a level that broadened 3D printing's appeal to a wider range of businesses, schools
and consumers. 3D printers with multicolor capabilities (less than $15,000) and single,
monochromatic 3D printers (approximately $10,000) are available for a wide range of applications,
with simple build-your-own-printer kits costing a few hundred dollars.
A sign of the market's growth is the consolidation of its technology providers. So far in 2012, we
have seen 3D Systems complete its acquisition of Z Corp. (January) and Stratasys announce its
intention to acquire Objet (April). Interestingly, the major 2D printer manufacturers basically remain
on the sidelines, mainly conducting research or providing OEM capabilities to third parties. HP
remains the only 2D printer provider with a 3D product offering, which is basically a rebranded
Stratasys printer.
User Advice: Advances in 3D scanners and design tools, as well as the commercial and open-
source development of additional design software tools, make 3D printing technology available for a
modest investment. While continuing to keep abreast of this technology, Tier 1 retailers should now
take advantage of the lower cost to begin exploring the use of this technology by experimenting
with low-volume manufacturing of high-margin, custom-designed pieces for example, fashion
jewelry and eyeglass frames. Feasibility studies should include finding out the most appropriate
materials, printing methods and 3D model formats that will best support the ways in which you want
to use 3D printing in your business model. Very importantly, retailers should ensure that they
adequately manage the risk of violating or infringing copyright and patenting laws with regard to the
creation of "knock-offs."
Bottom line: Retailers need to think carefully about how this technology will support the customer
service basics the essential things that a customer expects when shopping with the retailer, such
as stock availability.
Business Impact: This technology makes it possible for the introduction of a new retail business
model a 3D "copying service." In this type of model, the retailer could use its stores for
customers to bring in 3D CAD models of objects they would like to have produced, which the
retailer could "manufacture" using 3D printing. Customers could also use a Web-based service,
where the 3D models are emailed, and physical parts are mailed back to them. The retailer may
even be able to provide a full service from using 3D scanning to scan an object and then using 3D
printing technology to produce one or more copies for the customer. This technology has the
potential to transform several industries, including retailing and manufacturing. For example, in
retailing, as printer costs continue to come down and as they become more readily available,
consumers could these 3D printers to "manufacture" their own custom-designed products.
Benefit Rating: Transformational
Market Penetration: Less than 1% of target audience
Maturity: Emerging
Sample Vendors: 3D Systems; HP; Objet; Stratasys
Recommended Reading: "Cool Vendors in Imaging and Print Services, 2012"
"Innovation Insight: 3D Printing Enhancements, Low Price Bring Design Process Improvements
Within Reach"
"Multichannel Retailers Will Fail in Their Multichannel Strategy If They Do Not Execute Strongly on
in-Store Customer Basics"
Analysis By: Mim Burt
Definition: Augmented reality (AR) overlays real-time integration of text, graphics, audio and other
virtual enhancements onto screens displaying real-world objects. Elements of AR applications are
becoming social, and are increasingly centered on context-aware location-based services for
mobile devices.
Position and Adoption Speed Justification: AR applications are slowly, but surely, gaining more
visibility in the retail market due to the exponential growth of the smartphone market, the
proliferation of QR (quick response) codes and RFID tags, and the increased hype from technology
vendors highlighting advancements in areas such as GPS, digital camera technology and real-time
analytics. AR is also showing a convergence with the trend of gamification the use of game
mechanics in nonentertainment environments to change user behavior and drive engagement.
The main usage scenarios for AR applications include discovering things in the vicinity of the user,
showing a user where to go or what to do, and providing additional information about an object of
interest. In retail, this translates to customers being able to find locations or products with maps
and real-time directions, having access to detailed product information, being able to contextualize
products and receive personalized promotions.
Tier 1 retailers continue to experiment with AR applications in-store, online and on mobile devices,
and this technology continues to climb steadily up the Hype Cycle. Examples of implementations
include enabling customers to virtually try on clothing online or in a "virtual dressing room" in the
store, seeing how furniture items look in their home or room, seeing what unconstructed models of
objects look like in 3D and allowing customers to interact with animated characters.
With the growth of AR applications for mobile devices, we expect to see more hype and activity in
the retail market in the next 12 months, although we do not expect this to translate into large
numbers of Tier 1 implementations.
User Advice: Retailers should not be dazzled by the current hype surrounding AR applications for
mobile devices, because it will be a while before technology will deliver the refinements needed for
a good customer experience. AR is very demanding, even for high-end smartphones. Small
screens, imprecise GPS locations and inconsistent data mean that the AR user experience does not
always live up to the concept. First and foremost, AR applications should be reviewed in the light of
how they will support customer expectations and enhance the shopping experience in more-
immersive channels such as the store or when shopping at home by accessing the retailer's
website on a PC or laptop.
Due diligence should be performed on what integration is needed at the back end, including
fulfillment processes for example, integration of the real-time offer engines to robust cross-
channel content management systems. This will be the backbone for AR applications to deliver a
good cross-channel experience. For example, an AR application could allow online home shoppers
with webcams to place items of digital clothing over their own image, giving an experience close to
an in-store fitting room. The shoppers can then check stock availability and either order online or
come into the store to purchase the item. Retailers must, therefore, ensure that the AR solution is
integrated with cross-channel stock management systems to ensure that items tried on are in stock,
particularly in store, as on-shelf stock availability is a key basic that customers expect when
shopping in store.
Retailers should also remember to tie up their promotions driven by AR experiences to the other
channels, because customers also expect retailers to deliver a consistent cross-channel shopping
experience.
Business Impact: In the more-immersive environments, such as the store, interaction with AR
applications could drive conversion from interest to actual sales. For example, AR applications in-
store could be used to give the customer detailed information when purchasing complex products,
or customers can get information when trying on apparel in a virtual dressing room, which could
enhance the customer experience and drive sales. AR applications can also be used post-sale (for
example, easily downloadable AR manuals for do-it-yourself projects) to increase customer
satisfaction, improve loyalty and encourage positive customer recommendations to other
consumers who have yet to make their purchasing decisions.
Benefit Rating: Low
Maturity: Emerging
Sample Vendors: GoldRun; Iryss; Layar; Metaio; Total Immersion; Zugara
Recommended Reading: "Multichannel Retailing: Customers Want Consistency in Cross-Channel
Shopping Processes"
"Cross-Channel Consistency: Customer Expectations Vary by Product Category"
Data Visualization in Merchandising
Analysis By: Robert Hetu
Definition: Data visualizing enables retail buyers and planners to problem solve by dynamically
creating views of business intelligence (BI) data in the best format for analysis, including
autoselection of display format and trend identification, and creates temporary hierarchies on the
fly.
Position and Adoption Speed Justification: During the past 10 years, retailers have invested in BI
and retail analytics tools to help associates make better business decisions, although they do not
provide integration to core systems. The complexity of the merchandising process, combined with a
renewed focus on the technology-enabled consumer, is limiting the potential impact of BI insights.
Its translation into action across thousands of stores has become unmanageable without
integration. The use of visualization tools will move quickly through the Hype Cycle. As business
leaders are exposed to the benefits provided, the hype will accelerate and move the technology
along quickly.
The availability of nonstandard data that delivers a more complete picture of consumer behavior
through context, or big data, now provides merchandising with the opportunity to personalize
customer service on a grand scale. This promised level of personalization is reflective of the past
customer experience, where all retail was local, and merchants knew their customers and
anticipated their needs. The central issue preventing the transition to personalization is a lack of a
set of tools that can sort through the volume to find data that make a significant difference in
providing a personalized experience.
User Advice:
BI and retail analytics must be integrated within the merchandising process. Sophisticated, yet
simple to use, data visualization tools must be added to the analytical toolkits of retailers,
because they are required to utilize the knowledge that merchants rely on to drive analytic views
of information from broad data sources and drive the discovery of knowledge. Beneficial
capabilities include:
Dynamic presentation The application automatically determines the best method to

display the data graphically or in a tabular format
Pattern matching The application looks for patterns in the data and drives analysis of
exceptions
Predictive analytics The application attempts to model future results, allowing what-if
scenarios that provide decision guidance for merchants.
Ensure applications are available to support analysis of social media and other contextual data
points. Social media has predominantly been associated with marketing activities, and although
there is not a well-defined science to managing social media, most C-level executives believe
the activity is paying off. Most important for success here is the ability to visualize data, allowing
knowledgeable merchants to search for trends and actionable insights that drive sales and
profits through more-targeted execution.
Evaluate core merchandising, planning and assortment tools to ensure they are capable of
utilizing customer analytic information. If merchandising systems cannot integrate analytics (for
example, building assortments by location cluster based on customer analytics), benefits will
not be maximized.
Ensure speed is acceptable; the application quickly retrieves big data elements, while the user
is actively performing analysis in real time. Subsecond response rates are required.
Business Impact: Without the addition of new tools that are much easier to use than traditional
fare, users will find that their BI investments will pay off even less than before, potentially leading to
merchandising decisions that are worse than before. For example, if a fashion buyer makes a
significant investment in an unproven style for a large group of stores based on incomplete or
inaccurate analysis of customer transaction data, simply due to faulty interpretation of trends, the
consequences will be costly for sales, profits and the BI initiative.
Benefit Rating: Moderate
Market Penetration: 1% to 5% of target audience
Maturity: Emerging
Sample Vendors: Oracle; SAP; SAS
Recommended Reading: "Integrating Analytics with Customer-Centric Merchandising"
"An Overview of the Strategic Technology Map for Tier 1 Multichannel Retailers"
Definition: Multichannel merchandise planning provides the ability to simultaneously plan
merchandise assortments, purchases and inventory levels across all sales channels, while taking
into account various marketing and event planning calendars, as well as seasonal influences.
Position and Adoption Speed Justification: Many multichannel retailers use separate and siloed
merchandising and planning processes, based on the channel, to bring their product offerings to
the consumer. This can result in an inconsistent customer experience, and may fail to facilitate a
cross-channel sales path. In many ways, an extension of the concept of customer-centric
merchandising, a key aspect of multichannel merchandise planning involves recognition of the
various touchpoints that consumers experience with the retailer, when they occur during the
purchase process, and how they intersect to close a transaction. The ultimate goal is to build a
planning process that supports customer-centric merchandising. Multichannel merchandise
planning is developing at roughly the same pace as customer-centric merchandising. Performance
metrics for each channel are well-defined. However, the way the channels interact and can be used
to influence customer shopping behavior remains elusive. Once resolved, this knowledge can be
utilized to maximize customer experience, transactions and the lifetime value of each customer.
The fast-paced evolution of e-commerce, social media and mobile commerce (m-commerce) is
driving much consolidation and acquisition within the vendor community. This technology will move
to the forefront for investment as retailers continue to look for ways to personalize service.
User Advice: Multichannel consumers have expressed a desire for consistency in pricing,
assortments, promotions and product information, so successful cross-channel planning will
provide a unique opportunity for retailers to develop a point of differentiation by providing
consistency for cross-channel shoppers. Channel-based silos built into the retailer structure are a
significant impediment to the development of multichannel merchandise planning. Organizational
structure change, cross-channel workflows and change management have to be addressed.
Software providers have picked up on the hype surrounding multichannel merchandise planning
and have incorporated this into their language and capabilities. Because planning is central to the
retail process, and multichannel has such a significant impact on organizational structures, a careful
approach to discovery and evaluation is required to ensure that the technology solution will provide
the desired impact. Retailers currently using a homegrown legacy planning system, an Excel-based
approach or an aged software platform should look at packaged solutions that address the entire
planning process. Others that have recently implemented a new planning suite will need to identify
multichannel capabilities within the existing package and consider best-of-breed additions to
supplement capabilities.
In addition, multichannel merchandise planning requires the ability to analyze, share and utilize
consumer information gathered from transactions, customer loyalty programs, credit cards and so
on. This analysis must include channel-based data and lead to a retailerwide view of the customer.
Retailers need to determine how channel growth will impact the consumer profile and which
channels will lead the way to future growth. Various demand planning forecasts from different sales
channels must use the cost elements and planned promotional activity to more accurately
determine margin plans, develop vendor forecasts and inform key stakeholders of performance
expectations.
Business Impact: When done correctly, multichannel merchandise planning will provide
differentiation and competitive advantage for Tier 1 retailers. Customer loyalty, service and brand
perception will be enhanced, driving growth in sales and market share. A cross-channel planning
workflow and business process will ensure that performance and profitability targets are achieved.
Integrated demand planning activities will support better forecasting and inventory management,
accurate open-to-buy planning, and supply chain information for vendors, logistics and
transportation functions.
Benefit Rating: High
Maturity: Emerging
Sample Vendors: Island Pacific; JDA Software; Oracle; SAS
Recommended Reading: "Multichannel Pressures Drive Optimized Merchandising"
"Cross-Channel Merchandising Success Requires Consistency"
"Multichannel Retailing: Customers Want Consistency in Cross-Channel Shopping Processes"
"How Retailers Can Use Multichannel Customer Intelligence in Merchandising"
At the Peak
E-Paper Signage
Analysis By: Gale Daikoku
Definition: E-paper-based signage is programmable, wireless electronic signage that can be affixed
to store shelves/shelf channels and be displayed as electronic shelf labels (ESLs). It is typically used
in larger form factors as a replacement for paper-based end-cap, department or category signage,
and has higher-resolution displays with pixilated graphics that can appear in two or more colors.
Position and Adoption Speed Justification: "E-paper" is an electronic display technology that has
similar attributes to paper, but it can be written on and erased electronically. Less than 1 millimeter
thick and made of plastic, e-paper does not require a projection device (unlike an LCD-based ESL).
However, the labels typically require a casing to affix and power the labels on store shelves.
Interest in e-paper display technology continues from retailers that are exploring it to power new
types of LCD-based ESLs or as a replacement for paper signage. E-paper requires even less
battery power than LCD-based ESL technology, and Gartner continues to see pricing for shelf-edge
e-paper label costs dropping to be competitive with LCD ESLs at scale, with pricing around $5 per
label.
In the past 12 to 18 months, Gartner has seen a number of North American retailers across a variety
of segments (especially nonfood) revisit the business cases for LCD-based ESLs or e-paper signage
for stores. Several large retailers have trialed e-paper signs, including Tesco, Sainsbury's, Metro,
Groupe Casino, Dixons, Saturn, Best Buy and Sears; however, because deployments in e-paper
signage have been limited to trials, the maturity of the technology is still classified as emerging or
first-generation.
While it can be expected that e-paper ESLs and signage will coexist with LCD-based ESL shelf-
label installations for some time, Gartner believes that the visual quality improvements of e-paper
will continue to generate demand from customers with legacy installations that want to modernize
the look of their signage with the newer e-paper labels. Assuming this demand remains steady, we
expect that the prices of labels will continue to drop, because we have seen competitive pricing for
e-paper shelf-edge labels (which are comparable in size to LCD-based ESLs) that are in the range
of $5 per unit.
User Advice: Ensure that e-paper improves the execution process for price changes, with
readability that is comparable or better than existing formats. Retailers should also ensure that the
necessary change management associated with the price execution process is not overlooked
during implementation.
Business Impact: This technology affects labor productivity, price accuracy and legal compliance
(for example, weights and measures), and can support dynamic pricing. It can also support retailers'
efforts to be more operationally green by eliminating the printing of paper signage in stores. Flexible
displays using e-paper technology offer many potential benefits over other display technologies,
including reduced weight, decreased thickness, improved ruggedness and nonlinear form factors.
Significant improvements in the readability and usability aspects of e-paper score highly in terms of
ease of consumer use.
Maturity: Emerging
Sample Vendors: Altierre; Pricer; ZBD
Recommended Reading: "Case Study: Groupe Casino and Electronic Shelf Labels"
Analysis By: Mim Burt; Gale Daikoku
Definition: Multichannel feedback management solutions provide surveying and feedback analysis
tools suitable for use across a retailer's channels and brands, including mobile and social. Their use
ranges from one-off, tactical surveys (for example, customers taking a brief survey about their
shopping experience delivered on their point-of-sale receipt, or texting feedback via a keyword or
code that appears on store signage) to ongoing strategic feedback to better understand customers,
employees, products and processes.
Position and Adoption Speed Justification: In retail, the shift of multichannel retailing to business
as usual has heightened interest in multichannel feedback management, which can be implemented
to enable consumers to give retailers instant feedback on the shopping experience in and across
any of the retailer's channels. This type of engagement can create a real-time dialogue with
customers as feedback is captured during the shopping experience.
However, this technology has not had much upward movement on the Hype Cycle, because trials
and the few implementations in Tier 1 retailers understandably focus mainly on customer feedback,
whereas the technology includes other stakeholders, such as employees and suppliers, as well.
Functional enhancements continue to focus on analytics (to determine what to do with the data
collected), including feedback from social media. It is clear that vendors are also beginning to align
with specific vertical industries, such as retail, in an attempt to provide differentiated retail-specific
preconfigured solutions.
User Advice: Retailers should take a strategic view of multichannel feedback management. Data
collected should be analyzed, and the results used to enable real-time decision making, such as
making sure there is good product availability in the store or adjusting staffing levels in the store, or
as a feed into buying or product development decisions. For example, the No. 1 topic of feedback
to date is on product availability, especially in the store.
Retailers can use this information to keep track of channel performance in terms of execution, to
input information into merchandising decisions for example, to fine-tune range selections.
Retailers can also feed the information into the supply chain allocation process to improve product
availability at the store shelf.
Retailers starting out on enterprise feedback projects should follow proper best practices for survey
creation to ensure good response rates and valid responses. They could start with customers in
store, because today and for the near future, the store will remain the hub of the cross-channel
shopping process. When assessing vendors, perform due diligence on whether the vendor has
multichannel capability, because some cover only one channel for example, online customer
reviews.
Business Impact: Multichannel enterprise feedback management provides an integrated view of
feedback data across customers, employees and suppliers in and across the retailer's channels. If
implemented correctly, these deployments will ensure that the right individuals are surveyed at the
right time, in the right channel and with the right questions, thus ensuring maximum response rates
and business insights. This will help you to prioritize customers' issues for attention, such as
improving on-shelf availability, influencing staff motivation and performance, and also improving key
marketing and merchandising decisions.
Maturity: Emerging
Sample Vendors: Allegiance; Medallia; Mindshare; Nice Systems; QuickSearch; ResponseTek
Definition: Real-time store-monitoring platforms are a solution that combines dashboards,
business activity monitoring and a real-time data infrastructure to bring together signals from real-
time data sources available in the retail store. These can include traffic counters, queue
management sensors, point-of-sale transaction logs, electronic article surveillance, Internet
Protocol video, Wi-Fi triangulation, mobile triangulation, remote sensors on in-store devices,
pressure sensors and RFID.
Position and Adoption Speed Justification: Today, most retailers that use real-time systems in
the store do so in siloed applications and infrastructures (for example, closed-circuit TV [CCTV] and
traffic counters). Many Tier 1 retailers have focused activity more around queue management
solutions. For example, grocery retailers that have already implemented these solutions for manned
check-out lanes are also implementing the solution for self-check-outs. Retailers are also starting to
use digital video surveillance systems, coupled with analytics software, to measure the
effectiveness of displays, signage and promotions, and to try to sell to shoppers based on their in-
aisle behavior.
However, in the past few years, retailers have been exploring how these real-time technologies
should be combined on a single platform to leverage assets to gain more intelligence in the store.
These platforms can give retailers a real-time monitor of what is happening in their stores.
Vendors have also released next-generation software advancements that include real-time alerts,
shelf inventory monitoring, 360-degree camera integration and employee tracking. Newer solutions
include the use of dual thermal imaging with digital video and stereo video replacing monocular
cameras, as well as software as a service (SaaS)-based delivery models. These monitoring
platforms are complemented with algorithms that can combine and analyze real-time signals to
provide alerts that help retailers take action to avoid stock-outs, keep check-out queues short,
support merchandising decisions and mitigate loss prevention.
In the past 12 months, increased vendor activity has driven more interest around these solutions,
and this is reflected in the movement of this technology nearer to the Peak of Inflated Expectations.
Despite the hype, we still believe that this concept is still relatively new to the retail industry.
User Advice: As retailers upgrade their customer traffic and queue management systems, or any
system that monitors real-time store activity (for example, electronic article surveillance), they
should also think about how to develop a real-time store-monitoring platform. Retailers should look
for vendors that can tie all the real-time sources together and, more importantly, those that have the
expertise to manage the huge data streams from source systems and provide simple, meaningful
actions to store staff and headquarters. Retailers will also need to clearly define how this technology
will aid the various functional roles in their businesses. For example, real-time conversion data can
benefit store staff, even though, traditionally, conversion has been a marketing and merchandising
responsibility. Joint pilots paid for and conducted with consumer packaged goods (CPG)
companies can help retailers to gain insight into customer in-aisle behavior.
Business Impact: At a high level, real-time store monitoring can increase sales and margins, and
reduce costs in the store. More specifically, real-time monitoring with analysis of store operations
can lead to the following benefits: improvement in stock availability; improved customer service;
reduced loss prevention; better execution of processes, including cross-channel processes;
increased sales; and increased loyalty.
Maturity: Emerging
Sample Vendors: Brickstream; Checkpoint Systems; Irisys; RetailNext; ShopperTrak
Recommended Reading: "BVI Networks Delivers Real-Time Store Monitoring"
"Why Task Management is a Priority for Multichannel Retailers"
Analysis By: Robert Hetu; Gale Daikoku
Definition: Social analytics for retail describes the process of collecting, measuring, analyzing and
interpreting the results of interactions and associations among people, topics and ideas. These
interactions occur on various social media sources and provide an important source of feedback for
retailers. Social media analytics is an umbrella term that includes a number of specialized analysis
techniques, such as social filtering, social network analysis, sentiment analysis and social media
analytics.
Position and Adoption Speed Justification: The influence of social networks is growing, and
microblogs can spread news as well as misinformation rapidly. As a result of the growing
influence of social media, and its potential to significantly disrupt or enhance business activities,
retailers need to put tools in place to monitor sentiment about their businesses, as well as the
products and manufacturers that they rely on for revenue generation. They have been used to track
brands as marketers try to determine whether brand assets are appreciating or depreciating based
on consumer statements as evidenced in social media postings, blog entries, microblogging posts
and other Internet media available publicly. By applying these tools in the retail environment,
retailers can not only identify sentiments associated with their brands, but also identify positive and
negative trends regarding the brands that they sell and the individual products that they carry.
Social media is an important source of feedback for retailers. When used by retailers, social media
analytics can identify product trends that are appearing on consumer radars prior to the product
entering the mainstream. These tools can also identify a product or manufacturer that has a
problem in the market, allowing the retailer to adjust pending orders or shipments if necessary.
Most importantly, these tools can help retailers identify potential problems they have with customer
support or sales associate training that may be impacting their businesses on a daily basis more
quickly than they would have if surfaced via other means. Additionally, they can identify members of
social networks that are influential over other customers that may be part of their customer base,
and take efforts to ensure that these influential customers are satisfied with the retailer and its
product offerings; happy customers tend to be advocates for the retailer. Given the level of hype
surrounding social media, we expect this technology to move through the phases of the Hype Cycle
rapidly, reaching the Plateau of Productivity within five years.
User Advice: A retailer that has not yet investigated the social media analytics applications
available in the market should evaluate potential providers of these tools for their usability and
applicability to the retailer's customer segment. When evaluating vendors for social media analytics,
look for vendors that have strengths in other product offerings that involve retail so they can
demonstrate competency and understanding of the retail market segment. If you have other
analytics applications, assess those vendors for planned or existing social media offerings to
maximize the benefits of the social media analytics. If your existing vendors do not offer social
media analytics, evaluate the integration potential for these analytics with other applications that
you have, such as merchandising analytics or real-time offer engines. This technology segment is
also related to the multichannel feedback management entry in this Hype Cycle. Social media
analytics stands on its own, but it needs to be considered with analytics from other channels/
touchpoints for example, analytics derived through solutions for multichannel feedback
management, to give retailers an overall assessment of their customers' shopping experiences.
Business Impact: The impact of social media analytics on your business can be substantial,
especially if your existing customers are avid users of social media. Even if this is not the case, the
capability to identify emerging popular products or problem products before an issue surfaces in
sales figures can be valuable. These tools have the potential to decrease the inventory that may
need to be discounted to sell through, or increase margins on your overall selection. For example, if
a fashion buyer makes a significant investment in an unproven style for a large group of stores
based on incomplete or inaccurate analysis of customer social media, simply due to faulty
interpretation of trends, the consequences will be costly for sales and profits. Expect that in the
future these analytics will offer some predictive insight into what should sell well, helping to manage
inventory more effectively.
Most importantly, these tools can deliver an early indicator of problems in the customer base and
allow a retailer to be proactive in addressing the issues that surface in social media, thereby
preventing damage to the retailer's brand.
Maturity: Emerging
Sample Vendors: Alterian; Buddy Media; Klout; Kontagent; Lithium Technologies; Oracle; Radian6;
SAS; Sysomos; Webtrends
Recommended Reading: "An Overview of the Strategic Technology Map for Tier 1 Multichannel
Retailers"
"Turn Information Into Insight With Social Analytics"
Multichannel Master Content Management for Retail
Analysis By: Mim Burt; John Davison
Definition: Multichannel retail enterprise content management relates to all types of structured and
unstructured content for products, customers, employees and suppliers. Included in this definition
is structured content, such as master data, as well as unstructured content for example,
documents, images of forms, photographs, XML components, video clips, podcasts and email
messages. Having a combined, consistent view of structured and unstructured content underpins
the knowledge needed to make effective multichannel business decisions.
Position and Adoption Speed Justification: There are many vendors that provide enterprise
content management (ECM) and master data management (MDM) systems with components such
as product information management and customer data integration. However, retailers are starting
to realize that all the disciplines previously associated with the management of structured
information like master data need to be applied to unstructured data as well. This is particularly so
when taking into account the emerging touchpoints that the consumer has with the retailer, such as
mobile and social networks.
This is a major issue for multichannel retailers. However, although there has been increased interest
and some hype, there have not been any implementation references in major Tier 1 retailers, and in
the past 12 months, retailers have largely focused their investments on multichannel item master
projects. Retailers are also coming to grips with the implications of multichannel retailing becoming
"business as usual," which will, in some cases, necessitate complex projects to implement master
content management across the channels. There is also a dearth of vendors that are in a position to
deliver this type of truly comprehensive multichannel retail content management solution.
User Advice: Before implementing a content management system, perform due diligence on
identifying and mapping the "as is" position on all the sources of structured and unstructured data
and information, where they are currently stored, and how they are used in the context of the core
retail business processes. This will afford opportunities to streamline business processes and also
helps to remove redundancies and duplication in preparation for a phased implementation of a
multichannel content management system. To deliver a master content management solution
across the channels also requires a merging of the metadata models for both structured content
(MDM) and unstructured content (ECM), with MDM taking the governing role.
Business Impact: As the multichannel shopping experience becomes more and more important,
retailers are being driven to create, capture, manage, store, and deliver content and documents
related to multichannel customer and business processes to provide a single view of business
information across the enterprise. Supported by good master data management, multichannel retail
content management solutions will enable retailers to increase efficiency in their core business
processes to improve the multichannel customer shopping experience and minimize multichannel
operating costs for example, real-time feedback provided by customers through any channel that
leads retailers to analyze structured data (such as store operations metrics and contact center
metrics) and to adjust staffing levels "on the fly."
Maturity: Emerging
Sample Vendors: hybris; IBM
Recommended Reading: "The Multichannel Revolution Is Ending: The Consumerization of Retail
Continues With Personalization and Customization"
Social Coupons
Definition: Social coupons are a form of e-coupon that is delivered through a website community.
Social coupons are found on membership sites that offer a local retailer's products/services to
consumers at steep discounts for example, selling a coupon at face value of $10 for $20 worth of
a retailer's product/service. The purpose of these communities is to provide consumers access to
discounts, and as a result, they do not typically drive customer loyalty, at times discounting
purchases that might have been made by the customer without the coupon.
Position and Adoption Speed Justification: Social coupon sites originally saw strong growth
because they offered significant discounts many offered up to 50% discounts to consumers that
buy the coupons. Social coupons typically require a minimum number of buyers for the offer to
become effective and can have a limit imposed on the number of consumers who can take
advantage of the offer. The social coupon provider then shares the proceeds with the local
merchant.
Retailers were originally attracted to the sites because they offered the ability to attract new
customers to their businesses. There were few barriers to entry for social coupon sites, and thus the
market has seen hundreds of variations launched in just a couple years. This has led to a high
degree of hype, creating fragmentation in a hypercompetitive environment with many sites for
retailers to qualify and consumers to find. Given the continued hype surrounding social media,
Gartner expects this technology will continue to advance rapidly through the Hype Cycle, reaching
the Plateau of Productivity within a few years.
User Advice: The greatest appeal of social coupon sites has been for small retailers needing to
expand their customer bases. As such, large retailers may find that these sites are less than
effective unless they are opening new locations and want to attract customers using the social
coupon instrument. Large retailers may want to consider these sites to close out an end-of-life
product in an overstocked position. Retailers that choose to participate in social coupons should
ensure that they place limits on the promotion so they can be certain they can fulfill on the offer
particularly if in stores to avoid upsetting and potentially losing customers. A recent Gartner
survey shows that, while 41% of all U.S. consumers are currently members of a social coupon site
with 15% showing interest in joining, 44% are not at all interested in joining. And just because
consumers join a site does not guarantee these customers want these coupons. Given this
guidance, retailers may be best-served by taking a wait-and-see attitude about social coupon sites.
Business Impact: Assuming the social coupon sites continue to maintain popularity and
membership, smaller retailers or large retailers entering new markets may find that they are
invaluable in establishing a new business or launching new products/services.
Benefit Rating: Low
Maturity: Emerging
Sample Vendors: 1SaleADay.com; Groupon; LivingSocial; Woot
Analysis By: Gale Daikoku; Robert Hetu
Definition: Real-time customer offer engines have the ability to create personalized promotions for
a specific customer or customer segment by taking real-time interactions and transactions, and
using advanced analytics to determine the "best offer" in real time that can be delivered to the
customer. These systems are becoming context-aware to formulate an offer for example,
consumers' locations shared by their mobile phones or consumers' social network activities can be
used to create more-relevant offers.
Position and Adoption Speed Justification: Gartner estimates that real-time offers have expanded
slightly to between 1% and 5% of Tier 1 retailers. Three trends continue to converge and support
increased interest in and adoption of real-time customer offer engines. First, the ability to access
context-aware, real-time information on customers is increasing (for example, customers' locations
communicated via their mobile phones). Second, advances in database and cloud computing are
significantly increasing the analytical capability to produce real-time offers. Third, some consumers
are becoming more receptive to receiving and requesting promotions "in the moment" (for example,
on their mobile devices and via Twitter).
The ability to create customized promotions has been in use in retail for a while, typically executed
as an offer based on a specific item purchased and issued at the point of sale or delivered with a
customer receipt. However, store offers were not determined in real time. Rather, they were
determined in days/weeks prior using data that was available at the time. In fact, many customer
offers and promotion analytics remain activities that are predominantly not done in real time (except
on the Web). In the next few years, Gartner expects that real-time customer offer engines will
converge with online product recommendation on the Hype Cycle.
User Advice: Creating a compelling offer requires more than just promotional algorithms. Retailers
that are considering real-time offer engines will require good customer data (ideally, across all
interaction channels), context-aware data (for example, location), and a vehicle by which customers
can receive and respond to offers. Real-time customer offer engines should be evaluated not only
on their science, but also for their speed and their ability to be integrated into any customer process
in any channel. Even if the engine is fast, the way it retrieves and delivers an offer can be
constrained by the performance of the delivery systems, which defines the customer experience.
Retailers should not attempt to supply customers with real-time, customized, 1-to-1 ratio offers until
they are confident that they have adequate segmentation and behavioral analysis. The promise to
provide meaningful, relationship-building and relevant offers can frustrate or offend consumers if
they arrive late or seem irrelevant.
Business Impact: Real-time customer offer engines are designed to improve sales, margins,
satisfaction and frequency of visits.
Maturity: Emerging
Sample Vendors: FICO; IBM; Infor; Oracle; SAP; SAS
Recommended Reading: "Real-Time Customer Offer Engine Vendor Landscape for Retail"
"Personalized Offers: Do Consumers Value Them?"
"Marketing Service Provider Capabilities in Retail"
"Personalization and Context-Aware Technology's Impact on Multichannel Customer Loyalty"
Mobile Coupons
Definition: A mobile coupon is a form of e-coupon that comes in two forms: a specialized, targeted
offer delivered as a unique, identifiable serialized code, bar code or other means, sent to a mobile
device via SMS, mobile application, mobile URL or other mobile technology; or the communication
of an offer via SMS that might normally be available to any customer.
Position and Adoption Speed Justification: The retail industry is still maturing in its distribution
and redemption of mobile coupons, and in its communication of promotions via mobile phones.
Gartner consumer surveys show that there is a growing willingness by consumers who use
smartphones to adopt mobile coupons and promotions; however, the vast majority of these
shoppers (79%) are not that interested. Many Tier 1 retailers, such as The Kroger Co., Safeway,
Target and JCPenney, are trialing or using mobile coupons, which Gartner estimates has penetrated
slightly more than 5% of Tier 1 retailers.
Hype around mobile capabilities, utilizing context-aware technology specifically (such as location
awareness on mobile phones) and print-to-mobile coupons (such as scanning a Quick Response
[QR] code or bar code, or texting a code advertised on print material) continues to emerge rapidly in
retail. Coupled with the desire of retailers to improve their ability to personalize and develop more
relevant offers in real time, it has driven real-time offers and this technology to near the peak of
hype, and we expect this hype to continue for at least the next year or so.
User Advice: To get a quick start with mobile couponing, retailers can use outsourcers and mobile-
only coupon technology vendors. However, in the midterm to long term, mobile coupons will have
to be part of a multichannel e-coupon strategy that is aligned with how consumers are using their
mobile phone as part of the shopping process. Consumers will want to be able to access and
redeem coupons in any channel, so retailers will need to ensure that technology used in the mobile
coupon process is multichannel-capable. Tight integration between campaign management
systems and the couponing systems of the brand manufacturers will be required. Retailers must
monitor the relevancy of their offers and play an active role in managing customer opt-in and
privacy settings to avoid spamming customers.
Business Impact: The biggest advantage mobile coupons have over e-coupons is they are
immediately execution-ready for customers and do not have to be printed or brought to a store. The
benefits of mobile coupons center on increasing the frequency of visits to the store and increasing
the overall transaction value. Sales, margins and customer loyalty are all targeted to increase as a
result.
Maturity: Emerging
Sample Vendors: Cellfire; Coupons.com; Scanbuy; You Technology; Zavers
Recommended Reading: "How Can Retailers Get Started in Mobile Commerce?"
"Mobile Consumer Shopping Preferences, 2010: U.S."
"Creating Real-Time Personalized Offers for Consumers"
"Consumer Survey Shows What's Ahead for Retail Coupon Management"
Definition: Multichannel loyalty systems are next-generation systems that enable retailers to use
loyalty functionality from one centralized management system to transact with, interact with, and
reward customers across any and all channels. Providing loyalty capability to point of sale (POS), e-
commerce and call centers is the minimum. Mobile and social capabilities continue to emerge in
importance.
Position and Adoption Speed Justification: Multichannel remains a hot topic with clients, and
managing multichannel loyalty management is no exception. Most retailer loyalty programs function
across one or two channels, such as the store and the Internet. However, the proliferation of
customer touchpoints has forced retailers to re-evaluate their investments in legacy CRM and
loyalty systems to support customer interactions across any channel.
Many retailers are exploring the possibility of building a multichannel loyalty system that is capable
of handling any new channel. However, most investments remain directed at improving the
channels that retailers already use to transact and interact with customers. High interest from
retailers in vendor multichannel capabilities particularly around mobile and social media and
context-aware technologies continues to keep this technology up near the top of the Hype Cycle,
although it has now moved just past the peak, as customers perceive mobile and social capabilities
as part of the shopping process. Guidance on market penetration for technologies that appear at
this point in the Hype Cycle curve is typically 1% to 5% target penetration. However, because
multichannel loyalty is an established investment priority for many retailers that sell to customers
across multiple channels, Gartner estimates that penetration is actually between 5% and 20% of
Tier 1 retailers.
User Advice: Ensure that you are investing in supporting multichannel customer processes,
including loyalty management. Look for vendors that offer Web services/API capabilities that will
enable retailers to extend loyalty functionality, such as member bar codes, to any channel-specific
application (for example, mobile applications). Some vendors also have channel-ready graphical
user interfaces (GUIs), such as mobile websites, that retailers can use with minimal modifications.
Retailers should be cautious of the hype around context-aware, real-time offers that are delivered to
consumers' mobile devices. Gartner research continues to show that consumers are not interested
in these types of personalized rewards, so retailers need to invest some resources in educating
customers on how they could benefit from context-aware offers to improve the overall shopping
experience, and to build loyalty from the small base of customers that may be interested. Until
consumers trust you, their willingness to engage and remain loyal will be limited.
Business Impact: Although this is likely to affect a small base of customers, increased sales
because of improvements in marketing and customer services across all channels can be expected
from multichannel loyalty systems. In addition, retailers will have an enhanced ability to segment
customers based on improved cross-channel visibility into customer activity in channels. Customer
satisfaction will also result from the ability to provide loyalty functionality in any channel.
Maturity: Adolescent
Sample Vendors: Aldata; IBM; Micros-Retail; NCR; Oracle; RedPrairie (Escalate Retail); SAP; Tibco
Loyalty Lab; You Technology
Recommended Reading: "Personalization and Context-Aware Technology's Impact on
Multichannel Customer Loyalty"
"Retail Loyalty Management: Reward Strategies That Consumers Value"
"Retail Loyalty Management: Consumer Membership Trends"
"Marketing Service Provider Capabilities in Retail"
Definition: Biometric technologies provide an automated determination of individuals' identities
based on their biological characteristics (such as fingerprints, face or hand topology, iris structure,
or retinal structure) or behavioral characteristics (such as signature dynamics, typing rhythm and
voice). In retail stores, biometric implementations are being used to authenticate the identities of
store-level associates punching in and out of shifts to more accurately track and manage time and
attendance (T&A).
Position and Adoption Speed Justification: This technology has been deployed chainwide by
many large retailers (including grocers, drug chains, and apparel and specialty retailers) that
manage tens of thousands of employees, and Gartner estimates that penetration has advanced as
more of the world's largest retailers make investments to update their time and attendance
processes. Gartner is starting to see vendors emerging with specialized software that can leverage
consumer device cameras and geolocation capabilities to provide biometrics that support T&A,
although we have not seen any trials or implementations with Tier 1 retail. This technology is not
typically deployed as a stand-alone initiative, but part of a larger time-and-labor-management
application upgrade.
User Advice: Retailers that are evaluating whether to update or upgrade their store-level workforce
management processes, and seeking more-effective ways to manage labor budgets especially
compliance with legal labor requirements and the accuracy of their time-keeping process should
consider the business benefits of biometric technology. In certain "dirty" environments, such as
manufacturing operations and warehouse distribution environments, users should expect usability
challenges.
Business Impact: Fraudulent T&A practices, including "buddy punching" (employees who punch in
or out for co-workers) and time spent "fooling around," can be reduced with this technology.
Biometric technology has been especially effective at eliminating T&A fraud, which is estimated to
be as high as 1% to 2% of payroll costs. Retailers can stop paying for unproductive or unapproved
labor hours by deploying biometric technology at the point of work (that is, at a point-of-sale
terminal or in the work area) so that employees sign in there, as opposed to at the back of the store,
away from their responsibilities.
Sample Vendors: Accu-Time Systems (ATS); CMI; Kronos; SecureTouch Retail Systems
(Inducomp)
Recommended Reading: "Retail Time and Labor Vendor Update, 2010"
"Understanding the Fragmented Workforce Management Solutions Market"
F-Commerce
Definition: Facebook commerce (F-commerce) is the retail transaction capability offered within the
Facebook social network platform. These transactional capabilities are facilitated via the utilization
of Facebook APIs that allow retailers to present products, information and offers to consumers, as
well as allow consumers to complete transactions within Facebook.
Position and Adoption Speed Justification: Gartner research shows 91% of U.S. consumers
surveyed report Facebook as their primary social network and, as a result, we expect this
technology to move quickly through the Hype Cycle during the next two to five years. Its recent
initial public offering (IPO), with its mixed performance, has increased interest and will drive new
revenue-generation opportunities for Facebook that will likely reinvigorate product sales activity.
Facebook recently opened its App Store, and this has also increased activity and hype surrounding
F-commerce, resulting in rapid forward movement on the Hype Cycle.
Retailers can choose to market selected featured items or replicate an entire catalog within the
Facebook social network environment. Among multichannel retailers, F-commerce implementations
that included the entire catalog have been unsuccessful, and most have now transitioned to
selected feature items with links to the retail website for completion of shopping events. JCPenney
has dropped its full store on Facebook but still incorporates featured items from its new Fair and
Square marketing campaign with links to its website for purchase. Express continues to provide
catalog shopping capability within Facebook; however, the check-out process is completed on its
website. Retailers have learned that direct marketing in a social environment is, to a degree, a misfit,
like a small business owner trying to sell products at a dinner party. However, just as a small direct
seller needs to be present at the dinner party for networking and word of mouth advertising,
retailers must keep an active presence on Facebook. Gartner expects retailers will continue to
experiment with F-commerce as they seek to leverage the extensive market share of Facebook.
User Advice: Retailers should:
Focus on relationship building activities on Facebook. Featured products that build interest
among fans will drive commerce in a less direct manner.
Utilize Facebook as a tool to reinforce feel-good activities like charitable opportunities, games,
contests and exclusive events.
Continue to enable commerce via links to their websites, where more-detailed product
descriptions and content are maintained.
Pay careful attention to Facebook's technology road map as it becomes a public company.
Pressures to continue to grow revenue will push Facebook to provide more-successful commerce
channels that could directly impact retailers. Facebook has access to a tremendous amount of
consumer activity that could drive it into direct retailing.
Business Impact: F-commerce has a short-term benefit of giving retailers another touchpoint
within an online destination that enjoys very high use levels. It remains to be seen whether
consumers will embrace commerce within the Facebook environment. Facebook is very protective
of its user information, and while F-commerce offers retailers another touchpoint, it is not clear that
retailers will have the same level of access to information about these customers that Facebook
enjoys and could use strategically for its own direct retail activity at some future point. Retailers
should acquaint themselves with the data that Facebook makes available to retailers that engage in
F-commerce to ensure that they receive critical customer data for transactions taking place in
Facebook. With the launch of Timeline, retailers have gained a significant tool to analyze Facebook
activity, create more-targeted advertising and evaluate demographics of their followers.
Maturity: Emerging
Sample Vendors: Adgregate Markets; Facebook; Payvment
Retailers"
Sliding Into the Trough
Retail Mobile Shopping (Nonpayments)
Definition: These applications support consumers' ability to research the market and make
selections when shopping on their mobile devices. They allow retailers to provide consumers with
shopping tools and promotional information that can enhance the shopping experience, and some
could also support mobile payment transactions. Payment capability through mobiles is covered in
"Retail Mobile Payments" elsewhere on this Hype Cycle.
Position and Adoption Speed Justification: Over the past 36 months, many Tier 1 retailers have
launched these applications, whether they be browser-based, message-based, downloadable to a
mobile device or native applications that come preinstalled on the mobile device. The applications
can support shopping activities, including the ability to find stores, browse items, build shopping
lists, reserve items, "check in" to see whether their friends are in their vicinity, receive and review
promotions, receive coupons, get and share in community reviews, check prices and inventory,
check the status of their loyalty program points, and perform other activities. Retailers can use
these applications to conduct advertising and marketing, and increase brand awareness and
loyalty.
Many retailers have chosen to launch these nontransactional mobile websites and applications as
"first steps" before implementing a mobile payment capability. Our consumer research confirms
that consumers prioritize the ability to use these informational mobile shopping tools well ahead of
the ability to conduct a mobile payment transaction. In the past 12 months, the topic of mobile, in
general, has been very hot with a plethora of vendors, small and large, either entering the market or
consolidating their offers regarding mobile browsing and payment functionality. For example, some
vendors who initially only had payment capabilities are now realizing the value of providing
upstream solutions that enable shopping activities, such as checking for store stock availability.
In the past 12 months, there has been escalation of activity and concomitant raised levels of hype
on solutions in this market. The following factors have contributed to this:
A trend toward the convergence of mobile and social, with the rise of mobile social networking
for example, native mobile social networking sites such as Foursquare and Gowalla. Social
networking websites have also been creating mobile applications to give their users instant and
real-time access from their devices.
Retailers' interest in activity around vendors' development of geofencing solutions in order that
geofencing data can be used in conjunction with push notification systems for example, to
push location based offers to consumers in real time as they visit the store and use their
smartphones to find and research products.
A trend toward consumers using mobile applications on tablets in their homes has also caught
the interest of the retailers.
The emergence of the HTML5 standard, which is expected to have a major impact on mobile
technologies, especially in terms of portability across platforms.
This, together with the increasing implementation of these types of websites and applications in Tier
1 retailers, means that this technology has accelerated quite fast to this year's position of peak-
trough midpoint.
User Advice:
Place priority on building mobile shopping tools that consumers value. Start with understanding
how these applications can support the consumer service basics, such as having products in
stock, making it easy to find items and making it easy to find product information. Our
consumer surveys indicate that "finding a store location" is the No. 1 priority in terms of
preference in the way consumers want to use their mobile devices. The ability to check stock
availability, check and compare prices, read product reviews, and get promotions are also high
on the list of things that consumers want to do with their mobile devices.
Understand that your mobile channel could have a significant impact on your other channels
in particular, the store and e-commerce rather than being a major receiver of revenue in its
own right. It is crucial, therefore, to focus on the user experience in terms of how the mobile
device is used in the overall cross-channel shopping experience. An example of this is making
sure that the store is ready to service a customer who is browsing and reserving items on their
mobile for pick up in the store.
Mobile devices, particularly mobile phones, do not lend themselves to immersive experiences.
Focus on improving the usability aspects of the solution. The actual process of browsing has to
be easy to conduct on the mobile device for example, minimizing the number of buttons to
press to get to the essential information.
Business Impact: Our retailer research indicates that, through 2016, most retailers expect m-
commerce revenue to be a little under 2% of overall revenue. However, the mobile channel will be
important in driving cross-channel revenue and could influence a significant percentage of sales
(completed in other channels). For example, a mobile application used to find the nearest store that
has a desired item in stock may influence a customer to go to that store and purchase the item, or a
review checked on a mobile site while a customer is in a physical store may push the consumer to
purchase the item. One thing that could drive consumers to purchase via mobile devices is an
increased use of flash sales by retailers, which adds a time element to a product sale or promotion.
If this behavior becomes commonplace, then retailers should evaluate adding commerce
capabilities to all their applications and mobile websites.
Sample Vendors: Digby; mPoria; NearbyNow; Netbiscuits; Sapient; Scanbuy; Usablenet
Recommended Reading: "Distinguish How Consumers Want to Shop on Their Mobile Devices for
Best Investment Decisions"
"Mobile Consumer Shopping Preferences, 2010: U.K."
"Mobile Consumer Shopping Preferences, 2010: BRIC Countries"
"E-Commerce and M-Commerce: Increase Investment in Retail Store Technology"
Definition: Analytics tools are meant to measure consumer engagement and purchase activities in
the e-commerce and m-commerce channels.
Position and Adoption Speed Justification: Web experience analytics are analytics tools that
measure various aspects of Tier 1 retailers' commerce sites, including websites and mobile sites, to
help ascertain customer sentiment. These analytics include more-mature analytics tools, such as
page load times and shopping cart abandonment rates, as well as tools that are newer, such as
multivariate A/B testing, interaction sequence and navigation tracking, and sentiment indexes.
These tools vary in maturity, which is why we show this technology as moving more slowly within
Tier 1 retailers. The more direct measures, such as page load times, are relatively mature, while
other measures, such as sentiment indexes, multivariate testing, information clarity measures and
customer satisfaction, are just beginning to emerge. To some degree, some of these tools are as
much art as they are science, such as neuromarketing, which measures consumer brain activity
when consumers are engaged in shopping activities.
With new innovations in big data, there is a possibility to use as an information base for experience
analytics. SAP, through its Hana offering, and Oracle with Exalytics both provide in-memory
computing that allows for fast processing of large amounts of data.
User Advice: These measures help Tier 1 multichannel retailers improve the customer experience
on their sites and adjust elements of their commerce sites, such as rich-media applications,
navigation and flow paths, and shopping aids to suit changing consumer tastes and preferences for
e-commerce sites. Multichannel feedback technology can also provide retailers an assessment of
their customers' shopping experiences especially for cross-channel shopping processes.
Deploy the straightforward measurement tools, such as page load times and shopping cart
abandonment measures, if you haven't already done so, as these factors can have a significant
impact on your overall revenue. As consumers grow tired of generic offers and retailers run the risk
of losing customers, measures such as multivariate testing can be valuable tools for retailers in
migrating toward a more personalized presentation of their website. The emergence of sentiment
analysis and social media monitoring tools can give retailers insight into where changes are needed
to ensure customer retention. Still, retailers should proceed with caution and confirm findings over
time, rather than make changes that run a greater risk of alienating customers.
Business Impact: When used appropriately, these tools can lead to improvements in the customer
experience and engagement for the e-commerce and m-commerce channels for the retailer. In
addition, these tools can help retailers identify the right combination of media elements and
applications that lead consumers to purchase more and that attain a higher degree of satisfaction
from customers.
Maturity: Emerging
Sample Vendors: Adobe Systems; Celebrus Technologies; Google; iPerceptions; IBM Coremetrics;
IBM Tealeaf; Oracle; ResponseTek; SAP; SAS; Teradata; Webtrends
Retailers"
"E-Commerce Websites: Features That Make Consumers Buy"
"Key Challenges in Web Analytics, 2009"
"Key Issues for Customer Experience Management, 2010"
"Top 10 Mistakes in Web and User Experience Design Projects"
Definition: Retail mobile payment applications let customers pay for products or services via their
mobile device using debit and credit cards, retailer-issued store cards, and stored-value cards
excluding mobile banking and person-to-person (P2P) remittances. Some of these applications
could also include nontransactional functionality, such as consumers' ability to browse for product
information. Such applications are not covered here and can be found elsewhere on this Hype
Cycle.
Position and Adoption Speed Justification: Retail mobile payment applications can be browser-
based, message-based, downloadable to a mobile device or native applications that come installed
on the mobile device. Transactions are initiated or authorized through technologies such as Near
Field Communication (NFC), Short Message Service (SMS), Wireless Application Protocol (WAP)
and Unstructured Supplementary Service Data (USSD).
The delivery of mobile payments in the retail market is a mixed bag, with the different technologies
involved in mobile payments showing varying rates of adoption and growth in the different
geographies.
This topic has been very "hot" in the past 12 months in all the major Tier 1 retail markets, with
tremendous hype and publicity regarding solutions from a multitude of vendors of hardware,
software, card payment services and particularly on the NFC-based solutions, including those from
Orange/Barclaycard, and the NFC-based mobile wallets from Isis and Google. Non-NFC-based
solutions, such as the Starbucks mobile phone payment solution via its stored-value loyalty card
and mobile bar codes, and PayPal's mobile payment solution for Home Depot stores, have also
been in the headlines. It's because of the magnitude of the hype, rather than large-scale rollouts in
Tier 1 retailers, that this technology has made a considerable leap forward on the Hype Cycle.
Current retailer trials of NFC-based stickers for promotions, the growing use of mobile coupons, the
increasing use of mobile bar codes at the point of sale (POS) and contactless payments using
prepaid services for transportation applications, such as ticketing, may well speed up the general
adoption of NFC technology for mobiles. Currently, for the most part, these are done through cards
that customers touch on contactless readers and do not involve NFC-enabled mobile phones in the
payment process. Also, some schemes may support only the front end of the process, such as
downloading tickets to mobile phones for payment on the Web. However, increasingly, carriers,
banks, payment card schemes and local authorities are looking at porting payment solutions onto
mobile phones.
Levels of adoption of browser-based payment using WAP, for example, are still relatively low,
because consumers have concerns about security and data charges. More importantly, the
consumer experience is called into question as the WAP-based payment tries to replicate the online
purchase experience on the mobile devices, and this is subject to the constraints of a device with a
much smaller user interface.
USSD is mainly used in developing markets in Eastern Europe, Southeast Asia and Africa. It is
compatible with most Global System for Mobile Communications (GSM) phones and has faster
response than SMS or WAP. However, USSD implies strong control by the mobile operator, which
limits partnerships with payment providers, and the technology itself does not support message
encryption.
SMS is used in the payment process because of its ease of use and ubiquity. Although we don't
cover P2P remittances in this definition, it is worth noting that P2P transfers are a very popular use
case of SMS. It has become popular among the "underbanked" population in developing countries,
such as Kenya, where migrant workers, who are the main income earners, use SMS-based mobile
money transfers to send money to their families. Also, overseas workers can buy airtime or pay
tuition for their home dependents using the same service. Remittances are popular in the Indian
subcontinent and in parts of Africa.
However, it will be some time yet before consumers see the real value for them, and this will slow
the rates of consumer adoption of mobile payment solutions, in particular those based on NFC, for
the following reasons:
Many consumers still have a perception that mobile payments are less secure than, for
example, credit or debit transactions conducted at the check-out in a physical store. In a recent
Gartner consumer survey in 10 countries, the top barrier to using mobile payments was
customer concerns about the security of personal and payment data with mobile payments.
Consumers' concerns regarding the resolution of problems are also a major barrier. Moreover,
consumers also felt that the process was cumbersome and slower than using cash, checks or
cards at the check-out.
During the past few years, Gartner surveys on mobile commerce retail consumer preferences
indicate that, in general, services such as checking prices and checking store locations on
mobile phones were at the top of consumers' priority lists, with ordering and payments at the
bottom of the list. According to a recent Gartner retailer survey, retailers indicated that revenue
generated through their mobile commerce channel is not likely to exceed 2% through 2016.
However, the mobile commerce channel will have a significant impact on driving sales to the
other channels.
Widespread adoption, especially for NFC-based mobile payments, requires the convergence of
infrastructure with critical mass and the backing of financial institutions, telecommunications
providers, transportation entities and major retailers, together with clear regulations and
guidelines. Two major areas where collaboration needs to take place are compliance with
industry data security standards, and processes and procedures to deal efficiently and
effectively with customer services, such as investigation and resolution of issues relating to
transaction disputes, occurrences of fraud and chargebacks.
For these reasons, we think that mass global consumer adoption (particularly for NFC-based mobile
payment) could still be around five to 10 years out.
User Advice: Retailers:
Don't let the projected rate of smartphone adoption or the hype around NFC-based contactless
mobile payments drive investments in this solution. Note that, even in often-quoted examples of
mobile payment adoption in Japan, adoption rates of NFC contactless mobile payment are very
low. You could start with non-NFC-based solutions, for example, using a stored-value card
payment solution linked to loyalty. However, you should monitor the market for signs that the
banks, carriers and payment processors are moving to a unified standard for NFC payments,
because this could help accelerate the adoption of NFC-based payments.
From an investment point, find out the priority your customers place on using mobile devices as
payment vehicles, how they want to use mobile devices for payment and how this stacks up
against other ways in which mobile phones could be used to generate sales. Our research
shows that the majority of payment transactions still take place in the store. Moreover, when in
a store, consumers also say that manned check-outs are still their preferred choice for the
check-out process (either through the main bank of tills or through the retailer-provided mobile
POS terminals administered by the associates), rather than self-service using technologies such
as self-check-outs or their mobile devices.
Investigate what types of purchases are likely to drive the adoption of payment through mobile
devices (for example, micropayment and impulse purchases). Mobile wallet schemes should be
able to handle more than just presentment, because consumers will want the option of having
control over setting preferences for example, prescribing a preference for using particular
cards with particular retailers.
Pay careful attention to continuing customer concerns about the security and privacy of data
and developments regarding mobile payment standards, demonstrating compliance where
necessary. Work with key stakeholders for example, banks, card payment companies and
telecommunication providers to ensure the smooth delivery of a streamlined customer
process. It will be especially important to make provision for corrective action when things go
wrong for example, disputed payments.
Keep abreast of and assess the progress of contactless-payment transportation schemes in

regions where you operate, because they will give a good idea of customer behavior in terms of
acceptance and adoption of this type of mobile payment solution, and there could be some
merit in taking note of any lessons learned.
If you are a mobile virtual network operator or offering financial services, take note of the
adoption levels for all forms of mobile payment, from SMS-based transactions to mobile NFC
POS-based payments.
Business Impact: Mobile payments could address the need for speed of throughput and
convenience at the cash register. This is important in some retail segments (such as grocery and
convenience stores), but is less important in other segments (such as luxury fashion). If payment
transaction fees using mobile devices are lower than traditional credit and debit cards, then there
are clear savings for the retailer. However, retailers do not see a robust business case for upgrading
POS terminals to accept contactless payments that include factors such as the cost of NFC-based
POS terminal readers and the cost of merchant interchange fees. However, the speed of adoption
of mobile payments will be dictated by consumers, so mobile payment solutions must demonstrate
how they can support a secure, hassle-free and fast check-out the latter being a key in-store
customer service basic.
In emerging economies, mobile payment may act as a viable alternative to cash, because a robust
banking and credit infrastructure may not exist. If mobile payment comes with the ability for
consumers to access microcredit through their mobile payment accounts, then retailers may see
higher spending from transactions that used mobile payments.
Maturity: Emerging
Sample Vendors: Google; G.Cash; NTT Docomo; PayPal; Safaricom (M-Pesa); Sprint; Visa
Recommended Reading: "Distinguish How Consumers Want to Shop on Their Mobile Devices for
Best Investment Decisions"
"Mobile Consumer Shopping Preferences, 2010: U.K."
"Mobile Consumer Shopping Preferences, 2010: BRIC Countries"
Integrated Demand and Replenishment Planning
Definition: Integrated demand and replenishment planning (IDRP) represents the latest generation
of planning engines that integrate demand forecasting and replenishment across the entire demand
and supply chain. The most common examples of this are across retail stores, distribution centers
and warehouses through to supplier distribution and even ex-factory.
Position and Adoption Speed Justification: The characteristics of IDRP include time-phased
planning, based on historical demand data, which can be altered by taking into account future plans
from the stakeholders across all channels. Additionally, with the movement toward price, promotion
and markdown optimization, and their reliance on demand forecasting, another demand element is
available for consideration in the demand planning process. A unified demand forecast that drives
merchandise planning, replenishment, price management, store operations and financial planning is
seen as idealistic by some, but if there is recognition of the appropriate variations and limitations, it
is a worthy goal. This integrated approach has been hard to do for many years, due to complexities
in the process, lack of clean and consistent data, performance challenges in processing the
necessary data, and, mainly, cultural barriers that prevent stakeholders from aligning business
goals.
This integrated approach is required to move retailers from a sense-and-respond stance, often
boiled down to the "sell one, buy one" historical approach, to a predict-and-act stance that better
anticipates future demand and maximizes inventory availability. This trend will drive sales, reduce
markdowns and enable merchandising to optimize assortments. Replenishment must be informed
when prices, promotions, planograms and assortments are changed. Timely and systemic
communication through the supply chain will enable the replenishment system and the vendor to
more quickly react to the changes.
Technology has stalled and will likely be limited to a relatively few leading retailers and suppliers,
and will be restricted to pilots for the foreseeable future. If we continue to see a lack of movement,
this technology may be removed from the Hype Cycle in 2013. Economic pressures are driving
price increases in raw materials and transportation, having a significant impact on the cost of
goods. These pressures are revitalizing interest in total supply chain visibility to support efficient
sourcing, transportation and inventory planning and, therefore, offsetting cost increases. Retailers
are moving production from some long-standing partner countries to new producers. Continuation
of the trend to grow private-label product penetration and speed to market is driving advancements
in product life cycle management (PLM) tools and retail interest in an integrated demand planning
approach. The same pressures are also impacting relationships with the vendor community, where
better information is required across the retail and vendor supply chain (although much less impact
has been seen in this scenario). Closely linked to replenishment optimization, retailers are finding
the step of optimizing replenishment a first move in the direction of IDRP.
User Advice: Change management is required and should not be underestimated when IDRP is
attempted. Adopting integrated demand and replenishment is a major change in how the retail
operation plans, responds and executes to consumer and market conditions. It requires a
significant amount of organizational, cultural and system changes, including the implementation of
store replenishment optimization technology. This strategy should be undertaken only when the
need has been recognized and sufficient planning has taken place. Users should also be aware that
vendor hype in this area, and the maturity and completeness of what is offered are often far apart.
Users may need to assemble different pieces of the solution from different vendors until the market
consolidates more, or until vendors develop more-mature offerings.
Business Impact: The effects of IDRP are:
Removal of lead time and latency from the supply chain
Synchronization of demand, driven by supply-optimized chains
Inventory and order visibility across the network
A high degree of automation in the supply chain response
Improved performance
Increased customer service through improved inventory availability
Reduced inventory
Reduced waste and supply chain costs

Maturity: Emerging
Sample Vendors: Infor; JDA Software; Oracle; RedPrairie; SAP; SAS; Teradata
Recommended Reading: "Integrated Supply Chain Planning and Execution: Connecting the Retail
Store to the Factory Door"
Analysis By: John Davison; Mim Burt
Definition: Store location analysis involves methodologically researching and evaluating optimal
sites on which to develop profitable retail stores. The most prevalent tools and techniques used by
leading retailers include the analog method, gravity modeling multiple regression analyses and the
use of GIS.
Position and Adoption Speed Justification: Store location analysis, as a process, has been
around for many years and was covered as a subset of retail real estate portfolio management In
previous Hype Cycle reports. However, during the past 36 months, it has become vitally important
and an increasingly riskier and more complex activity, and we have seen lots of interest in this topic.
This has caused us to treat this as a separate and renamed technology for this year's Hype Cycle.
While "location, location and location" has been a retail mantra for some time, retailing is now
entering an increasingly important phase in which retail formats are likely to become increasingly
short-lived. At the same time, mobile-enabled cross-channel shopper consumer behavior has
become increasingly difficult to predict, as consumers make ready use of context-aware information
inside and outside stores. This has caused a number of high-profile companies (such as Best Buy,
Gap and others) to rationalize their domestic store portfolios as e-commerce sales continue to grow
and they feel the impact of large online retailers, such as Amazon, and traditional retailers
expanding into their categories.
Many retailers, rather than building new stores, are looking to downsize operations, develop
shorter-lived formats, and/or are executing market exit strategies in domestic markets while they
enter foreign markets. This is exacerbated because key determinants of store location such as
customer demographical analysis, trade areas analysis and competitor analysis are becoming
increasingly dynamic cross-channel variables and much more difficult to predict.
As well as the use of GIS, store site location analyses are often undertaken using these models:
Analog method which looks at trade areas and market penetration achieved from existing
similar stores to calculate sales forecasts for new store sites.
Multiple regression modeling which uses existing store performances and variables, such as
demographics and competitor analyses, to predict sales at new store sites.
Gravity modeling which produce store sale forecasts by analyzing store sizes, the distances
and relationships between competitor sites, as well as population distribution and density.
User Advice: Retailers need to ensure that the inherent risk involved in store location is minimized
at a time when the nature and role of the store in retailing are changing. The techniques and
technologies associated with store location analysis need to be carefully planned, managed and
executed better than ever before.
While there are many solutions in this area, no one vendor has the capability to entirely support a
large Tier 1 retailer's requirements for store location analysis. For example, while the use of GIS has
become increasingly common for Tier 1 retailers, such systems need to be augmented by store
location modeling and the application of practical retail reasoning and good "on the ground" local
site knowledge.
Also, store location analysis does not just impact store development teams, but also key
operational areas in the context of multichannel strategies (such as marketing, merchandising and
store operations). Harnessing the expertise of these business areas will help mitigate the inherent
risks associated with opening, closing and/or reformatting stores.
Business Impact: The impact of achieving optimal store locations for retailers has always been a
crucial part of a retailer's overall strategy. However, in the current retail environment, the
significance of store location has become even more important. With the advent of e-commerce
and mobile channels, the importance of the store as the hub of multichannel retailing has, and will,
continue to increase significantly because it will be at the store that the multichannel shopping
experience will be increasingly executed.
Store formats are likely to change fluidly during the next five to 10 years, and there will be greater
investment in international markets, which will drive more complexity in this area. This will be a
significant period of time for retailers, and one of the key success factors during this time will be
having a rigorous methodology and the correct tools and technologies to determine optimum store
locations domestically and abroad.
Maturity: Early mainstream
Sample Vendors: Bricsnet; Esri; Experian; IBM; MapInfo
Recommended Reading: "Multichannel Retailing: The Store Remains the Hub of Retailing"
Definition: Replenishment systems use advanced forecasting and optimization techniques to
create a time-phased forecast at the store and stock-keeping unit (SKU) level. Additionally, these
systems provide economic order quantity (EOQ) calculations that incorporate many components of
the cost of goods, purchase order cost, service level, and other business rules and objectives into
the order process.
Position and Adoption Speed Justification: This rule-based capability enhances replenishment's
ability to respond effectively to business objectives. With the advances in price, promotion and
markdown optimization, combined with merchandise assortments that are tailored by location,
demand forecasts generated from other tools have to be integrated as part of the replenishment
forecasting process. For example, understanding the impact on demand from a price decrease for a
given product should be considered by the replenishment system when additional orders are
generated.
Multichannel activities such as in-store fulfillment of online orders will add significant complications,
as retailers will need to maintain sufficient inventory to meet normal store demands in addition to
online orders. Retailers need to ensure that inventory is flexible and available to meet demand
without segregating into various purposes within the store for example, stores should not be
expected to keep separate storage of inventory for order fulfillment.
An increasing number of Tier 1 and Tier 2 retailers have implemented store replenishment
optimization systems. There has been an increased interest in demand-forecasting-based systems
to drive replenishment. The technology is early mainstream, as it has a fairly well developed vendor
offering. It is located on the midpoint between the Peak and the Trough due to surrounding issues
impacting demand forecasting and other merchandise optimization capabilities. Retailers are trying
to determine whether they should completely replace their store replenishment systems or
supplement their existing replenishment systems with better forecasting capabilities. Many of the
vendors in this space, especially the best-of-breed vendors, offer the ability to help retailers with
either approach. This will increase adoption of store replenishment optimization in the future.
User Advice: Retailers need to decide how they will include replenishment optimization in their
architectures. At a high level, there are two choices:
They can improve their existing legacy replenishment systems by harnessing a replenishment
optimization engine in the background.
They can use a next-generation replenishment tool to completely replace their existing systems.
Other factors retailers should evaluate are proven forecast accuracy in the types of merchandise a
retailer sells; the ability to perform at scale, as store replenishment is often reforecast on a daily
basis across all items in all stores; and the need for perpetual inventory as a starting point. Three to
five years out, retailers must have a good sense of how demand planning and forecasting will be
centralized into all merchandise and supply chain applications. The goal will be for replenishment to
be aware of all demand-changing actions, such as a promotion or a change in the number of
facings.
Business Impact: Efficient inventory management is the main benefit. This translates into greater
sales due to improved availability, increased customer satisfaction, and reduced carrying costs from
having too much inventory.
Sample Vendors: 4R Systems; Aldata; JDA Software; JustEnough; Oracle; Predictix; Quantum
Retail Technology; Revionics; SAP; Teradata
Recommended Reading: "Merchandising Optimization for Multichannel Grocery Retailers"
"Rethinking Retail Forecasting and Optimization Architecture"
"Q&A: Price and Merchandise Optimization in Retail"
"Revionics Grows Beyond Its Price Optimization Roots"
Multichannel Order Fulfillment
Definition: Multichannel order fulfillment refers to the set of processes and applications that
support customer order fulfillment in a multichannel business-to-consumer retail environment. This
includes the physical movement of goods and resources for example, processes such as
management of the flow of goods and resources, optimization of transport by in-house or third-
party logistics providers, shipment visibility and tracking, coordination of outbound scheduling, and
reverse logistics.
Position and Adoption Speed Justification: Multichannel order fulfillment requires centralized
planning and management of distribution logistics and transportation activities across the channels.
The continued emergence of newer channels, such as social and mobile in particular, has
undoubtedly increased the complexity of multichannel order fulfillment operations. It is clear that the
execution of multichannel order fulfillment is particularly important in the store that is the hub of
multichannel, and where many key cross-channel processes are executed.
Returns management will also become increasingly complex in the multichannel world, yet most
retailers are unable to handle multichannel returns in a systematic way, and most vendors have yet
to fully address this issue. Moreover, most retailers have yet to address multichannel supply chain
planning and multichannel order management, both of which are important inputs into multichannel
order fulfillment processes. Real-time centralized views of inventory movement across the supply
chain in all channels to ensure accurate, timely and well-informed stock decisions are also vital to
optimize multichannel order fulfillment.
During the past 12 months, retailers and vendors have continued to focus on how to offer
customers seamless fulfillment, regardless of the channels in which they shop. Retailers have been
fairly successful in the "order online/pick up in store" process; however, in a Gartner survey,
customers regarded "order online/deliver anywhere" as a higher priority. There is much more work
to be done across the end-to-end order fulfillment process by Tier 1 retailers, especially as the
store's role as a major node in logistical network optimization with regard to fulfillment of
multichannel order management continues to evolve. As a result, this technology has been
positioned just past the Peak of Inflated Expectations to the midpoint of the Trough of
Disillusionment. It should be noted that this technology is intrinsically linked, but not as advanced as
multichannel order management.
User Advice: One of the biggest challenges with multichannel fulfillment is how well retailers can
manage cross-channel orders in terms of inventory visibility and order picking (for example, picking
up from a store or distribution center, or providing available-to-promise responses to shoppers),
because these are important inputs into the fulfillment process. Retailers will, therefore, need to
improve cross-channel order management systems to optimize fulfillment in order to provide
customers; for example, with the ability to buy, pick up and return goods in any channel. This also
applies to the returns process, because many retailers will experience a great increase in the
volume of returned goods during the coming years.
Some retailers are using services-enabled applications, through service-oriented architecture, to
improve fulfillment. However, retailers need to map out the cross-channel customer process and
supporting business processes to ensure that their multichannel order fulfillment applications meet
their customers' requirements. In this regard, retailers also need to understand the impact of
multichannel order fulfillment on the various customer touchpoints, particularly the store. For
example, one of the most popular ways in which customers want to shop is to order online and pick
up in store. This will require the integration of information on customer orders with fulfillment
processes and applications outside the store, as well as with store task management applications
to deliver accurate in-store put-away, and picking the customer orders for collection.
Retailers should, therefore, build robust business analysis capabilities to get a good idea of the
requirements for a robust cross-channel order fulfillment process. Key skills required are the ability
to understand the business and strong business process modeling skills.
Business Impact: Improved multichannel fulfillment will lead to greater customer satisfaction in the
multichannel shopping environment through streamlining the customer fulfillment process and will
enable retailers to optimize inventory across all channels.
Sample Vendors: IBM; Manhattan Associates; Oracle; RedPrairie; SAP
Recommended Reading: "Multichannel Retailing: Customers Want Consistency in Cross-Channel
Shopping Processes"
Definition: Java-based point of sale (POS) software applications are "open" POS applications
written to the Java for Point of Sale (JavaPOS) standard. The device-independent nature of Java
gives retail application developers independence from the proprietary details of the peripheral
devices that they access and the POS hardware platforms and OSs on which the application runs.
This language-centric platform is decoupled from any hardware or OS specifics, and gives the
retailer flexibility in its choice of POS infrastructure.
Position and Adoption Speed Justification: Drivers for JavaPOS applications include flexibility of
choice in hardware and OSs, decreased time to market, and reduced costs for POS upgrades.
During the past few years, the market for Tier 1 retailers has seen some consolidation, and a
number of robust Java-based POS applications have become established parts of the POS
application landscape.
In the past 12 months, interest has continued unabated from retailers embarking on POS
replacement projects, and attention has been focused on how to harness the multichannel
capability of these solutions. Particular attention has been given to integration of POS to other
applications for multichannel promotions, multichannel loyalty, and cross-channel order
management systems for example, to deliver processes such as ordering online and picking up
in the store. The solutions are becoming more componentized and service-oriented, and this has
given rise to much discussion and consideration on the options for centralized, decentralized or
"mixed" application implementation architectures.
Moreover, raised levels of interest in the market have been due to the hype around mobile
payments and mobile POS in general. Vendor developments of cross-channel "hubs" and vendor
acquisition activity such as U.S.-based Micros Systems' 1H12 announcement of its intent to
acquire Torex has also contributed to the hype. All this, together with the completion of at least
one major Tier 1 rollout in the past 12 months, has caused a considerable forward shift in the
positioning of this technology.
Retailers that have implemented these applications typically describe cost savings in areas such as
training within the first 24 months. However, in the past year, we have also been able to gauge the
longer-term revenue benefits gained and lessons learned from at least one large "bedded in"
implementation by a Tier 1 retailer that initially completed a rollout in 2006.
There is still a big opportunity in the market for this type of "open" POS application, because many
major retailers still operate legacy POS applications in some or all parts of their estate, and this
includes in-house-developed applications. It will, therefore, take five to 10 years for this technology
to reach the Plateau of Productivity.
User Advice: Retailers must make a choice based on their needs, rather than on market-driven
hype. When evaluating the applications, they must consider not only the functional capability, but
also the nonfunctional requirements, such as the application architecture, usability, security,
support and services, and delivery model (for example, software-as-a-service-based solutions),
offered by the vendor. They must also consider which assets they already possess in terms of
applications, operating software, hardware and middleware; the level of experience and relationship
that they have with a vendor; and the skill mix required to service these applications.
Business Impact: Java-based POS software can deliver cross-platform compatibility and
interoperability therefore, reducing capital costs when retailers upgrade POS solutions and
reducing the ongoing costs of enhancement. It can also reduce operational costs, such as ongoing
training, thus lowering the total cost of ownership.
Sample Vendors: GK Software; Micros-Retail; Micros (Torex); Oracle; PCMS
Recommended Reading: "Oracle Point of Service: Oracle's Point-of-Sale Solution"
"GK Software's Point-of-Sale Solution for Tier 1 Retailers"
"Advanced Retail Solution: NCR's Point-of-Sale Offering for Tier 1 Retailers"
"Retail Research Brief: Point-of-Sale Applications for Tier 1 Retailers"
Definition: This set of processes and applications supports cross-channel customer order
management processes in a multichannel business-to-consumer retail environment. It includes
handling cross-channel ordering across customer touchpoints, sourcing inventory from multiple
locations, providing cross-channel inventory visibility, order brokering, providing order status
information to multiple channels, and handling cross-channel returns. It does not cover the physical
movement of goods by in-house or third-party logistics firms.
Position and Adoption Speed Justification: During the past year, social and mobile have gained
prominence, and many Tier 1 retailers are looking to integrate these touchpoints, especially mobile,
with the more traditional brick-and-mortar and e-commerce channels to give their customers a
contiguous shopping experience. The cross-channel order management capability is critical to
achieving this. During the past 12 months, there has been considerably more interest in this topic as
retailers are looking to implement cross-channel ordering applications.
Vendors of both enterprise and store-based applications have responded by developing and
consolidating service-enabled solutions for cross-channel order management hubs, creating
stronger messaging on their cross-channel order management capability.
We expect this area to continue to be hot, at least for the next 24 months. To reflect the increased
interest and activity in this area, we have plotted this technology as just coming into the trough as
retailers are realizing the following:
The cross-channel customer shopping process will have a major impact on ordering
applications.
Managing the cross-channel ordering process across multiple touchpoints is complex.
Retailers will have to go through a considerable period of learning before they can successfully
implement fully optimized multichannel order management.
In view of this, we believe the time to plateau for this technology could take from five to 10 years.
User Advice: The lack of inventory visibility in the cross-channel ordering process will affect the
processing and fulfillment of customer orders. The discipline required to execute cross-channel
inventory management, which enables the customer to buy, pick up and/or return goods in any
channel, has not always been readily supported by retailers' existing systems. For example, store
task management technologies could be integrated with multichannel order management to
manage goods that were ordered online to be picked up in the store.
Retailers must map out the cross-channel customer process and supporting business processes to
make sure that their multichannel order management applications meet their customers'
requirements. They should, therefore, build up a robust business analyst capability to get a good
idea of the cross-channel order management process. Key skills required are the ability to
understand the business and strong business process modeling skills. Retailers also need to
understand the impact of multichannel order management on the various customer touchpoints
particularly, the store.
Business Impact: Improved cross-channel order processing and stock visibility will lead to greater
customer satisfaction and cross-channel inventory optimization. The greatest benefits will be for
retailers when executing complex orders involving substantial bills of materials, such as orders for
kitchens and solariums.
Sample Vendors: hybris; IBM; Oracle; SAP
Recommended Reading: "Multichannel Retailing: The Store Remains the Hub of Retailing"
Time and Labor Optimization
Definition: These are store-level, integrated applications that automate labor planning, scheduling
and time keeping for store management. Solutions are Web-based and provide greater visibility to
store-level scheduling practices. Advanced time and labor (T&L) optimization incorporates many
factors, including capacity, staff availability and budget constraints, to produce a schedule that
maximizes store efficiency and compliance to labor laws, while minimizing budget variance.
Position and Adoption Speed Justification: T&L management applications are not new to large
retailers. However, the ability to automate and electronically deliver an optimized, integrated time-
keeping and scheduling solution as part of a single, licensed solution for stores is not something
that all retailers have widely adopted. Vendors' technologies are mainly out of the box (configuration
versus customization) and proved, with an expanding list of referenceable customers.
In the past 12 to 18 months, the hype around cloud computing has provided the opportunity for
some vendors in the T&L space to gain some market visibility for their software as a service (SaaS)
capabilities and cloud-based delivery models. This has resulted in a few proofs of concept and
contractual commitments from Tier 1 retailers. However, Gartner is only aware of a few large
retailers that have rolled out at least one process (time and attendance [T&A] or scheduling) from a
vendor, not the vendor's entire SaaS suite to support the mission-critical capability associated with
managing staffing and attendance for stores.
The current position on the Hype Cycle has this technology near the Trough of Disillusionment,
based on continued awareness of some large, early adopting Tier 1 retailers moving into
replacement cycles, because their existing deployments and technology fell short of expectations,
while some are struggling to find significant value from their T&L optimization initiatives. Gartner
knows many retailers that have deployed a single-vendor solution capable of supporting an end-to-
end T&L management process that includes T&A, scheduling and task management capabilities,
and nearly all retailers we speak with are seeking guidance about single-vendor solution suite
capabilities as part of their RFPs. Yet, only a few vendors have commercially available task
management applications that can support the end-to-end T&L management process, and no major
retailer we are aware of has implemented a solution from a single vendor to support their end-to-
end T&L process.
User Advice: Start by working with the business to evaluate your end-to-end, store-level labor
management process to ensure stores can execute cross-channel processes that will become
increasingly important to your customers. Consider the business benefits that can be gained by
deploying a single vendor's Web-based T&L management solution. In addition, ensure that you
have established labor standards before you deploy labor scheduling to be able to apply
optimization technologies. Without labor standards in place, it is difficult to optimize or impact labor
budgets, and your project will fall short of meeting your expectations for this initiative. Finally, if you
are struggling with your initiative or implementation, consider getting help from workforce
management specialists.
Business Impact: T&L applications will improve store productivity and labor use. Store capacity
and workload to support the execution of cross-channel processes will be better matched to deliver
the highest value to customers.
Sample Vendors: Ceridian Dayforce; Empower; Infor (Workbrain); JDA Software; Kronos; Micros
(Torex); Oracle; RedPrairie; Reflexis Systems; SAP; Tomax; WorkPlace Systems
Retailers"
"Retail Time and Labor: Working Through the Biggest Project Challenges"
"Retail Time and Labor Vendor Update, 2010"
"A Quick Look at Cloud Computing in Retail, 2012"
Multichannel Master Data Management for Retail
Analysis By: Andrew White
Definition: Master data management (MDM) is a technology-enabled discipline in which business
units and IT organizations collaborate to harmonize, cleanse, publish and semantically ensure
master data that needs to be shared across the retail organization in operational applications as
well as business intelligence data warehouses. In 2012 retailers are focused on MDM supporting
multiple channels and spanning data related to products, customers, suppliers, assets, location and
employees as well as content.
Position and Adoption Speed Justification: Retail MDM drivers have, for the most part, been
motivated by a supply chain focus (product data/inbound from global data synchronization), a
demand chain focus (consumer/loyalty or product/sell side, increased need to integrate operations
across multiple channels) or, in a few cases, an enterprisewide focus (top-down accompanying full
retail system remediation). It is the latter scenario that really needs mature multidomain solutions on
which to build entire new retail systems. An MDM program is a foundation for a multichannel
customer experience and a key part of a retailer's commitment to information management that
helps organizations break down operational barriers enabling greater enterprise agility, improved
revenue, reduced IT and business costs and simplified integration activities.
The market is characterized by several generations the first of which was signaled by retailers'
desire to master either consumer or product using specific solutions focused on specific
business cases such as new product introduction, supply chain efficiency, or better service or
revenue across multiple channels. These first-generation implementations were focused on a single
version of product; a single version of customer, locations, assets and workforce; or a single version
of hierarchy (for reporting or financial analysis).
As of 2012, some innovative retailers are trying to extend their early implementations across
different domains (for example, starting with customer data and then expanding to product data)
but, due to complexity and volume considerations, this is proving very hard to do with some
toolsets. Other retailers, taking a more strategic approach, are taking the opportunity when it arises
to roll out an enterprisewide system renovation. Tackling MDM as a multidomain problem is in the
minority today.
This generation of MDM-enabled technology is maturing quickly but the second generation
called multidomain MDM, which is a single-technology solution that can master any number of
different domains to any degree of complexity is far less mature due to the difficulty of mastering
and governing the complexities equally across all data domains in any one retail organization. Early
adopters who implemented single domain solutions, and their fast followers, are now catching up.
As a growing number of retailers are also focused on using content like "big data" and social data
to understand and influence consumer behavior, the need for "governing content" (we call this,
master content management) is growing. Consequently, MDM is correctly being seen as a
prerequisite to this.
Progress with MDM in retail is slow due to the effort required to sustain the change to core business
processes that create, author and consume master data such as legacy merchandising, supply
chain, and procurement processes. The current batch of MDM offerings, focused on product data
or customer data, will be the mainstay of MDM in retail until at least 2016. After that date
multidomain MDM, will start to emerge as the next focus for retailers. This technology profile is
named "multichannel MDM" to highlight how the nature of multichannel integration is one of the
largest drivers for MDM in retail in 2012. But this remains a hybrid profile, part generation 1 and part
generation 2 technology.
User Advice: Use MDM techniques and technologies to achieve consistency, accuracy and
integrity of information assets in upstream operational environments. Most retailers focus on drill-
down domain requirements using MDM for product data for individual departmental projects, such
as in support of the Global Data Synchronization Network. Other uses include improving consumer
experience via consistency in data across multiple channels, or in creating a single view of
customers to support loyalty programs and customer engagement initiatives. Some of these
programs link to governance of content (master content management), which really only entered the
market as a (hyped) concept two years ago. There is a potential role for tactical MDM technologies
in solving semantic inconsistency issues in downstream, business intelligence, analytical and
corporate performance management environments.
Organizations must ensure that these activities mesh with their MDM initiatives in the operational
environment. They must create cross-departmental collaboration in adopting the discipline to
realize and sustain the benefits. All MDM initiatives must be aligned with the objectives of the
organization's enterprise information management (EIM) program, which could span master data,
content, analytical data, social data and so on. When addressing MDM issues by subject or domain
(such as customer or product), companies should leverage expertise to expand into other domains.
MDM efforts can originate in any function but, for maximum value, initiatives must be consolidated
into a comprehensive EIM program.
MDM is a discipline so don't focus only on technology. The keys to successful MDM starts in a
retail organization are:
Line of sight to a business case
Business leadership
Governance and stewardship of master data established in a line of business
Metrics and analytics to guide progress
Viewing such initiatives as programs that are ongoing, not projects that stop
Business Impact: Retailers spread master data across many systems. It is fragmented and often
inconsistent. This makes it difficult for organizations to streamline business processes and
operations efficiently and to develop agile new business processes across retail channels. This also
affects consumers who often will not perceive a single view or consistent experience with a given
retailer across all channels. With one view of master data, retail organizations can achieve benefits
in such areas as:
Upselling, cross-selling and leveraging CRM and other customer-facing processes
Operational benefits from merger and acquisition activities
Increased efficiencies on the buy side with deep insights into spending data and vendor
analyses
More effective data compliance
More competitive new-product introduction processes
Increased integration across multicommerce processes for improved customer service, reduced
out-of-stock instances and increased use of inventory
Increased productivity of human capital
Greater visibility of the status and performance of the value chain and master data moving
through it
As retailers adopt MDM, their consumers will also see the following benefits or impacts:
More consistency in marketing messages from retailers
Improved and unified brand management and execution
More reliable service including more accurate store data and available-to-promise inventory
Some form of MDM is fundamental to managing every business more effectively. There is a new
focus on the problem (typically referred to as "single view," or lack thereof) and a set of packaged
technologies has emerged to provide a foundation for a central, shared, single view of master data.
It is suitable for early adopters and fast followers but requires architectural vision and business
commitment.
Sample Vendors: Aldata; hybris; IBM; Oracle; Riversand Technologies; SAP; Stibo Systems; Tibco
Software
Recommended Reading: "Research Library for the Seven Building Blocks of MDM"
"Should Organizations Using ERP 'Do' Master Data Management?"
"Mastering Master Data Management"
"Extending MDM Principles to BI Content"
RFID (Item)
Analysis By: John Davison; Robert Hetu
Definition: This refers to radio frequency identification (RFID) solutions that specifically target
tracking inventory at the item level.
Position and Adoption Speed Justification: Value from RFID will be largely hidden from most
customers until a significant number of products in the supply chain are tagged at the item level.
Tag costs remain the main barrier to the widespread use of RFID at the item level, but costs have
steadily reduced in recent years. Recent large-scale rollout programs by J.C. Penney and increased
commitments by the likes of Macy's and Walmart to ramp up item-level RFID deployments continue
to prove that item-level RFID can bring business benefits in apparel retailing. However, its wide-
scale deployment in other retail sectors, particularly food retailing, remains some time out.
User Advice: Projects at the item level must focus at least as much on the potential customer
benefits as on the inventory and supply chain benefits. Thus, they remain largely "leap of faith"
initiatives, and the best hope of achieving an earlier ROI is when operating in a relatively closed-loop
supply chain.
Business Impact: This technology improves product visibility across the supply chain, particularly
at the store level. It has the potential to improve availability to the consumer and to help reduce
shrinkage. However, to realize the full potential of item-level RFID, retailers must use the technology
in conjunction with improved in-store execution and compliance technologies, such as task
management applications.
Maturity: Mature mainstream
Sample Vendors: Checkpoint Systems; Tyco Retail Solutions; Tagsys
Definition: Contactless-payment technology enables payment transactions via a contactless chip
embedded in payment cards, tags, key fobs and mobile phones. The chip can communicate with a
card reader device that can use radio frequency protocols, including Near Field Communication
(NFC) standards. Contactless payments are more popularly referred to as "wave and pay" or "tap
and go."
Position and Adoption Speed Justification: Contactless payments have been adopted in some
mass-transit applications in several parts of the world, with well-documented examples in Japan,
Hong Kong and the U.K., and more recent examples in the U.S. There have been several
implementations of contactless payments in quick-service restaurant operators and fuel stations.
Here, we focus on contactless payments in the mainstream retail industry. Although contactless
payment has been one of the earliest RFID applications, implementations are thin on the ground,
and no Tier 1 retailer has implemented contactless payments in its entire store estate.
There has been a lot of publicity about and interest in NFC payments, especially regarding NFC for
mobile wallets, and banks and card providers continue to actively promote the technology.
However, this technology remains firmly entrenched in the trough, and we expect it to be five to 10
years before there is widespread adoption of contactless payments, for the following reasons:
These applications have yet to be enthusiastically embraced by consumers, and have not
gained high levels of consumer adoption. During the past few years, Gartner surveys on mobile
commerce retail consumer preferences indicate that, in general, services such as checking
prices and checking store locations on mobile phones were at the top of consumers' priority
lists, with ordering and payments much further down on the lists.
Many consumers still have a perception that mobile payments are less secure than, for
example, credit or debit transactions conducted at the check-out in a physical store.
Widespread adoption requires the convergence of infrastructure with critical mass, including,
for example, availability of NFC-enabled mobile phones; the backing of financial institutions,
telecom providers, transportation entities and major retailers; a global mobile payment
standard; and clear regulations and guidelines for compliance (such as compliance on anti-
money-laundering regulations).
User Advice: Global retailers should take particular notice of the cash in circulation in the various
geographies in which they operate, and get an accurate understanding of the proportion of cash-to-
card transactions conducted by the business. Retailers should also work with banks and credit card
companies to drive down the merchant interchange rates associated with each type of contactless
card transaction. Giving consumers an incentive to use contactless cards, such as rewarding them
with loyalty points for using contactless payments, can help quicken adoption. However,
consumers' concerns around the security of transactions and the privacy of data persist. Retailers
should, therefore, invest appropriately in the governance of payment processes and payment data,
including compliance with industry-recognized data security standards.
Business Impact: Contactless payments enable improved customer self-service and increased
throughput through faster speed of transaction and convenience. The real benefits will come from
convergence with co-branded multiple applications(for example, loyalty and prepaid). However,
widespread adoption could occur through the increased use of contactless payments in public
transportation systems, which will act as the catalyst for increased use in mainstream retailing.
Sample Vendors: American Express; MasterCard; Visa International Service Association
Recommended Reading: "Business Process Solution Maps for Retail Payment-Processing
Applications: What Customers Want"
"Business Process Solution Maps for Retail Payment-Processing Applications: What Retailers
Want"
"Cashing in on Retail Payments"
"Contactless Payment and Biometrics Remain Solutions Looking for a Problem"
Definition: Customer-centric merchandising is a process that incorporates data about consumer
tastes, purchase patterns, lifetime value, and loyalty, as well as context elements of time, place and
social media, into the merchandising process.
Position and Adoption Speed Justification: The retail industry has embraced the need for a
customer-centric approach to merchandising, rather than the traditional product-centered
approach. However, this technology remains firmly in the Trough of Disillusionment as retailers
struggle with the foundational work and change management associated with becoming more
customer-centric. The traditional approach causes retailers to use historical sales patterns,
traditional retail performance measures and market trends to drive merchandising activities. With
today's consumers demanding greater customization or personalization from retailers, as well as
competitive pressures, retail consolidation, and e-commerce and m-commerce, retailers can
become caught in a self-fulfilling cycle. A seasoned buyer for any given category has years of
experience, with numbers to back it up, claiming that the retailer cannot sell product XYZ. He or she
might be right in the aggregate, but are there opportunities to grow the product in some stores?
Would this product resonate with the retailer's "best customers"? Is the product an image item that
the retailer needs to be seen as a player in the category? How would this product impact sales
within another important category? These are just a few of the questions that customer-centric
merchandising brings to the merchandising process.
Retailers using customer-centric merchandising principles include Tesco, Wal-Mart Stores, Best
Buy, CVS, Food Lion, Kroger, Champion and Macy's. Many retailers have experienced the pain that
can be associated with running purely by the numbers. Retailers are just beginning to explore how
to use new forms of customer data in their planning, such as sentiment analysis data gathered from
social networks, reviews and the rest of the social Web. Why not just drive customers to the most
profitable SKUs, biggest sizes, generic packages or private brands? As retailers have seen
repeatedly, consumers still expect choice, identify with established brand names, and will walk
away when they cannot find them. Of course, few merchants fail to take into account "newness" in
their categories, and all strive to maximize their businesses.
The facts are that merchandising is a complex business process, and the considerable effort of
adding consumer data can seem complex and, as a result, overwhelming.
The concept of customer-centric merchandising is well-understood by retailers at a high level.
However, the challenge that remains is how to utilize consumer information in a meaningful way in
the assortment development process, which continues to be product-driven. Further complications
arise when a multichannel retailer begins the process of cross-channel customer segmentation. This
is why customer-centric merchandising remains in the Trough of Disillusionment. For example, how
does a category manager use customer segment and buyer behavior data to plan on a daily basis?
What is the right number of customer segments to use when planning? Should customer data be
used equally with other planning dimensions, such as format and sales or profit metrics, or should
customer data take precedence?
User Advice: Prerequisites for incorporating consumer data into the merchandising process is to
categorize the current customer base, identify target segments, and understand by location and
channel where they interact with the retail brand. Only after the targeted segments are identified can
there be a reasonable expectation that the merchandising process can execute a customer-centric
approach. This involves the practical application of the retailer's overall brand positioning, since the
merchandising process is an integral part of driving the consumer perception of the brand.
Customer-centric merchandising requires strong customer analytics capabilities, combined with the
ability to vary assortments by store. Building assortments at the store or cluster level is required for
Tier 1 and Tier 2 retailers to garner the full benefits of customer-centric merchandising. Few
commercially packaged solutions are available that can merge these two capabilities. Often, a
professional services firm or strong internal customer analytics group is required to bring these
capabilities together. The major planning solutions have evolved, but each has its own definition of
"customer-centric" capabilities. Retailers should clearly understand how vendors are approaching
customer-centric merchandising. For example, retailers with loyalty data should ask how this data is
used during the assortment planning process. Retailers should also look at how sentiment analysis
data gathered from the social Web can impact merchandising decisions. For example, if Facebook
is heavily populated with positive comments about a specific new product, then merchandising
actions, such as buying, allocation, replenishment, promotion and pricing, can be adjusted.
Business Impact: Customer-centric merchandising gives retailers the capability to offer better
merchandise to local customers and to focus on desired customer segments. This results in
increased sales and margins, as well as better management of inventory.
Sample Vendors: Data Ventures; DemandTec; Galleria; JDA Software; Oracle; Revionics; SAP; SAS
"Optimization Strategies for Multichannel Consumer Electronics Retailers"
"DemandTec Buy Will Boost IBM Smarter Commerce but Leaves Loose Ends"
"Merchandising Optimization for Multichannel Fashion and Short Cycle Clothing Retailers"
"Integrating Analytics With Customer-Centric Merchandising"
In-Store Self-Service: Customer-Facing Applications
Definition: This technology includes both informational and transactional customer-facing, self-
service applications (excluding self-check-outs). These have been typically deployed on retailer-
owned wired and wireless in-store devices, such as kiosks, self-scanning devices and mobile
devices, such as mobile phones, tablets, shopping cart computers and personal shopping
scanners. More recently, retailers have been looking at provisioning these types of self-service
applications on consumer-owned mobile devices, such as smartphones.
Position and Adoption Speed Justification: Customer-facing self-service applications that
support information needs, such as checking whether products are in stock, looking up stock prices
and browsing product catalogs, have been around for a few years. More recently, the hype around
iPhones, iPads and the growth of Quick Response Code-scanning capability on mobile devices has
generated a great level of interest from retailers in providing this type of capability on consumers'
own mobile phones. However, from our most recent research in this area, we find that customers
express a preference to use in-store self-service for informational tasks (such as checking loyalty
points or customer information), rather than transactional tasks (such as ordering and paying).
In 2011's Hype Cycle, we indicated that this technology was heading to the trough, and it is now
firmly in that position, because there have not been any large Tier 1 retail implementations, despite
the hype around mobility. This is, in part, because retailers are beginning to understand how to
prioritize investments in these types of self-service applications and also trying to figure out how
these applications can be "embedded" to support the cross-channel customer shopping process.
This will be with particular regard to supporting the in-store customer service basics, such as on-
shelf stock availability. For example, if an item is out of stock on the shelf or not carried on the floor
of that particular store, then the retailer could give the customer the ability to order through an in-
store kiosk for home delivery. In this regard, our research shows that, when in store, in general,
consumers prefer to ask for help from store associates more than using in-store technology
provided by the retailer, such as a kiosk, or using their own mobile devices. Retailers are, therefore,
considering investing first in employee-facing applications to service the customers.
User Advice: Multichannel retailers are considering "write once/run anywhere" types of applications
that can easily be ported onto various employee and customer devices, given that content, user
interface and usability must be tailored to specific devices. Usability is key to customer adoption of
self-service applications, and all customer-facing applications, whether informational or
transactional, must be simple and easy to use, with uncluttered user interfaces and clear
instructions onscreen. Nonetheless, at least for store-based applications, store staff must be trained
so they can solve any application or process issues when intervention is required. These front-end,
in-store, customer-facing applications must also be well-integrated with back-end fulfillment
processes and systems, with special attention to cross-channel process integration, as well as
management of cross-channel content to maintain consistency.
Business Impact: By tackling the key basic informational and transactional requirements that
customers want, especially in the store, these types of self-service applications can help deliver a
high-quality, in-store customer shopping experience and, thus, affect the revenue stream. However,
customers will only use these applications if they are convenient and not cumbersome. These
applications can also help to drive revenue if embedded sympathetically into the cross-channel
customer shopping process.
Store labor productivity is also improved through the full-time availability of self-service technology
for customers, releasing store associates to perform more value-adding tasks, such as dealing with
inquiries on complex products, with opportunities for upselling and cross-selling.
Sample Vendors: Fujitsu; IBM; NCR; Wincor Nixdorf
Recommended Reading: "Retailers Take Note: When in Store, Associates Trump Customer Self-
Service Technology"
"Multichannel Retailing: The Store Remains the Hub of Retailing"
Analysis By: Van L. Baker
Definition: Microblogging is short messages that are delivered to consumers who have chosen to
follow or subscribe to a given microblogging feed. The most popular microblogging service is
Twitter, but other services such as Plurk, Tumblr, Identi.ca and Weibo are popular in other areas of
the world. These services focus on consumers but can be used by retailers, as opposed to
enterprise-centric microblogging sites (such as Yammer and Socialcast), which focus on
collaboration in the enterprise.
Position and Adoption Speed Justification: Twitter has become a household name, and it allows
retailers to connect directly with people who are interested in their products and services, sales and
support activities. Additionally, the use of microblogging is low cost; the cost to the retailer consists
of the personnel costs to create the feeds and the analytic software to monitor the microblogging
feeds. This is part of the reason this technology has accelerated through the Hype Cycle as fast as
it has. It is also an appealing opportunity for most businesses that want to engage customers
directly. Microblogging can also be tied to a retailer's Facebook page to leverage both forms of
social media in customer relationship management (CRM). If you assume that the people the retailer
communicates with also pass along information to a circle of friends, the appeal of microblogging is
relatively apparent. Alternatives to microblogging, such as Pinterest, have expanded the tools
available to retailers with a more visually oriented approach to sharing.
User Advice: Use of microblogging alone is not an advisable approach for retailers. Retailers need
to remember that microblogging is part of an overall social media program, which, in turn, is part of
an overall marketing and CRM strategy. Microblogging should be an element of a much larger
social media effort that includes positions on social networks, search engine marketing, direct email
marketing, loyalty program integration and other parts of an overall strategy. Understand how you
intend to use microblogging because it can be utilized for a number of different activities (such as
brand enhancement, revenue generation, support and CRM). Retailers should assess the
demographic profile of a microblogging service prior to deploying their microblogs to make sure
there is a customer profile fit. Retailers also need to understand that this is a two-way
communication medium and that they have the ability to respond to their customers, just as the
customers can respond to them.
Business Impact: The use of microblogging tools can enhance a retailer's revenue, reputation and
satisfied customer base. Additionally, microblogging tools can give retailers valuable insight into
what their customers think about them. The use of this tool does not come without risks, and it
should be deployed judiciously. However, it is important to realize that the number of active
microbloggers, while growing, is still relatively low. However, the number of members is increasing,
and as such, so is the number of followers.
Sample Vendors: Plurk; Tumblr; Twitter; Weibo
Online Product Recommendation Engines
Analysis By: Robert Hetu; Gale Daikoku
Definition: Online product recommendation engines use a retailer's product catalog and sales
history to determine items for cross-sell or upsell during an online sales transaction at or before the
time of check-out.
Position and Adoption Speed Justification: There are a number of ways these recommendations
can be created. Some of the more popular ones include using behavioral algorithms that analyze
customer navigation and demographics; collaborative filtering that recommends products based on
what other people bought (for example, Amazon.com); and rule-based engines that allow Web
merchants to define rules such as those that recommend top sellers or recommend products based
on sell-through rates.
The product recommendation engines are predominantly used on e-commerce sites. However, this
technology is expanding into display ads, augmented reality and context-aware applications. E-
commerce retail sites continue to implement product recommendation engines. There are many
vendors in the marketplace today, best-of-breed as well as large vendors include product
recommendations as part of their suites. The large vendors include e-commerce platforms, search
vendors and Web analytics vendors. The ability to deliver product recommendations is increasingly
becoming part of the analytics vendor offering. This technology is moving toward the Trough of
Disillusionment, as retailers discover the realities of how the technology helps and doesn't help
conversion. For example, some retailers using purely behavioral algorithms feel that they lack
control over which products get recommended. Other retail implementations have shown that a
simple "top seller" rule sometimes produces better conversion than complex algorithms. The ability
for retailers to mix the results of behavioral algorithms with their own business rules is becoming
increasingly important as retailers seek more control over the product recommendations.
User Advice: Online merchandising is as much about merchant control as it is about algorithmically
determining which product to recommend. Retailers need to look for strong capabilities in these
areas:
The ability for merchants to control how and what is recommended
The ability for the recommendation engine to produce a highly relevant recommendation
The same concept may also apply to consumers. If consumers understand how a product was
recommended (for example, a top seller), then they may be more likely to trust the recommendation.
Retailers will need AB/multivariate testing capabilities on their sites to know if recommendations
lead to increased conversion and/or increased average order value. A related solution that retailers
should consider is real-time customer offer engines. For multichannel retailers this technology will
merge with real-time customer offer engines, because the goal is to increase the value of each
transaction through customer-intelligence-driven offers. Typically, real-time offer engines are
thought of for delivery of promotions; however, it is easy to see how the same technology can
deliver product recommendations. Real-time offer engines must include business rule enforcement
capability to enhance effectiveness for use as online product recommendation engines.
Business Impact: The benefits of online product recommendation engines will be increased
conversion, increased average order value, higher margins, better inventory management and
increased customer satisfaction from receiving more relevant suggestions for items about which
buyers are unsure.
Sample Vendors: Aggregate Knowledge; Amadesa; ATG; Avail Intelligence; Baynote; Certona;
ChoiceStream; Coremetrics; Criteo; Loomia; MyBuys; Omniture; Oracle; prudsys; RichRelevance;
SteelHouse; Strands Recommender
Recommended Reading: "The New Online Merchant: Combining Product Recommendation
Engines With Offline Merchandising Practices"
Definition: Biometric technologies provide automated determination of individuals' identities based
on their biological characteristics (such as fingerprints, face or hand topology, iris structure, or
retinal structure) or behavioral characteristics (such as signature dynamics, typing rhythm or voice).
Biometric payment systems have been trialed at points of sale (POSs) by retailers to authenticate
individuals' identities and to initiate payment using finger scans. Consumers can authorize
payments via defined and registered tender preferences.
Position and Adoption Speed Justification: Driven by consumer expectations for fast and secure
check-out processes, retailers understand the need for faster and more accurate authentication for
payment transactions, such as RFID, Near Field Communication, biometrics and contactless
technologies. Interest and implementation of fingerprint biometric devices in developing economies
such as Nigeria, India and Brazil have largely been driven by government identity initiatives for
example, starting with enrollment for the electoral databases. Emerging economies of countries
such as Brazil and India, and in the regions of Eastern Europe and Southeast Asia, also present
more opportunity for using biometrics for micropayments on mobile devices.
Apart from implementation at the POS, the potential use of biometrics for e-commerce will probably
be an authentication factor, as opposed to a fully fledged biometric payment system. Most
importantly, the continued lack of interest from mainstream Tier 1 retailers in all geographies,
together with a dearth of biometric payment software vendors, has resulted in no verifiable activity
on implementations or even trials in the past 12 months. To reflect these circumstances, the
technology for biometric payments continues to remain firmly in the Trough of Disillusionment. We
do not expect any Tier 1 retail implementations or trials in the next 12 months, and if that is the
case, this technology will be removed from next year's Hype Cycle as being obsolete before
plateau.
User Advice: Biometrics should be considered as part of the business requirements for projects
such as POS, time and labor management or payment processing upgrades. However, when it
comes to customer-facing processes, such as payments, in particular, retailers will need to
determine the barriers or opportunities to using the technology in a particular market. In an
emerging retail market, where biometrics are already commonly used as the primary way for
verifying identity, using the technology to reach the unbanked or illiterate could be a potential win
for retailers. Although this technology is in the doldrums, we recommend retailers keep abreast of
the wider discussion on biometric identification for example, on government-led identity
schemes involving biometric authentication via identity cards or travel documents.
Business Impact: Biometric technology offers the promise of streamlining the payment process for
consumers by eliminating the need to carry payment cards or a wallet. Because a consumer's
payment options are selected during registration, and no physical payment card is presented to
complete the transaction, this technology can eliminate opportunities for cashiers or customers to
commit fraud.
Biometric payments could also be deployed in developing economies to improve the reach and
security of payment services. With no signature required, biometric identification deals with the
issue of illiteracy and reduces fraudulent intermediaries.
Maturity: Emerging
Sample Vendors: it-werke
Retailers"
Definition: Store task management applications are deployed to bridge the gap between retailers'
cross-channel, sales-planning strategies and operational execution in stores. Retail management
from corporate to stores can balance the workload sent to stores, have real-time visibility to
estate compliance of key initiatives, and can quickly collect and analyze store feedback. Exception
reporting and alerts enable the retailer to resolve and respond to store execution issues in a timely
manner, which can be the difference between profitability and loss.
Position and Adoption Speed Justification: Web-based and highly configurable, this commercial
application has been around for several years and has helped many large retailers improve the
design, planning, execution and monitoring of processes executed in stores. In fact, many Tier 1
retailers have deployed task management as a stand-alone workforce solution that has helped them
improve their ability to execute promotions and critical recall issues on a timely basis and to
corporate management satisfaction.
However, although most large retailers Gartner speaks with are interested in having these
capabilities integrated with time and labor solutions to deliver the promise of end-to-end store
workforce processes in a single solution, no major retailer that we are aware of has integrated this
application with other time and labor management solutions (such as scheduling or time and
attendance) to support an integrated, end-to-end process. In addition, although several vendors
offer task management capabilities, not all vendors have comparable capabilities.
Because stores will continue to evolve as the operational hub for multichannel retailing, it's
expected that technologies such as store task management will be even more critical to supporting
cross-channel shopping processes for customers. Store task management is central to a store's
labor-planning model, because the activities to be tasked in a store should be part of a labor
forecast, as well as aligned with the labor budget. However until this application and the process
are integrated with core time and labor management planning and budget management capabilities
primarily around schedule development and labor budgets, the benefits will remain limited for
retailers. Gartner expects the deployment of integrated store task management solutions will
continue to be a challenge through the near term and fall short of being transformational. Because
store task management will continue to be mainly deployed as a stand-alone application, it is stuck
in the Trough of Disillusionment.
User Advice: Work with the business to define the cross-channel vision for end-to-end workforce
management business processes from a planning and store execution perspective. Understand a
particular vendor's task management capabilities to determine whether their capability is suitable to
your business requirements. To maximize the business impact of store task management, ensure
that you have defined the potential integration points with scheduling applications in particular.
Business Impact: Store task management will improve execution compliance for multichannel
retailers, especially in the areas of corporate planning, staff productivity and store communications.
The solution provides real-time, store-level compliance for key corporate or operational initiatives in
the field and will become increasingly important to multichannel retailers. Although the promise of
task management delivered as part of an integrated solution with labor scheduling could be
transformational, the reality today is it is only, at best, high impact when it is deployed as a stand-
alone initiative. Task management should be perceived as the glue that helps optimize an end-to-
end workforce management business process.
Sample Vendors: Dayforce; RedPrairie; Reflexis Systems; WorkPlace Systems
Recommended Reading: "Retail Time and Labor: Working Through the Biggest Project
Challenges"
"Retail Time and Labor Vendor Update, 2010"
"Why Task Management Is a Priority for Multichannel Retailers"
Definition: Digital signage refers to applications that disseminate dynamic media content to
displays or monitors on the sales floor of a retail store. It is sometimes referred to as narrowcasting,
interactive signage, electronic signage networks, digital communications or digital media networks.
Position and Adoption Speed Justification: Digital signage initiatives often have two goals that
don't always align: (1) Create value for customers by improving the cross-channel shopping
experience (for example, deliver an "endless aisle" solution that makes it easier to find and buy a
product when the right style or size isn't on the store shelf or deliver interactive marketing
promotions at the store shelf); and (2) create value for advertisers as a supplemental revenue stream
for the retailer. Although retailers continue to show steady interest in digital signage, this technology
is only beginning to move out of the Trough of Disillusionment, despite evidence of more promising
proofs of concept (POCs). The main challenge for this technology to overcome, which would move
it well outside of the trough, remains its ability to deliver meaningful customer value and measurable
impact on the customer shopping experience.
Improved access to wireless networks within the four walls of many retail stores and more
consumers using their personal mobile devices as part of their cross-channel shopping process
have created a perfect opportunity for hype interest in a promised convergence of display
technologies used in the store setting. Gartner has seen a few POCs that are more focused on
supporting customer basics in stores for example, using digital signage to communicate real-
time queue status on displays so customers know how "fast" the check-out process will be or using
digital signage as part of an endless-aisle solution. Some retailers are trying to synchronize their
digital signage aisle solutions for proximity-based marketing promotions delivered to customers via
their Bluetooth-enabled devices. However, a key challenge retailers continue to face is the inability
to synchronize their digital signage content with an orchestrated marketing effort and the store's
operational realities for example, only promoting items that are available and in stock in the store.
This challenge is further exacerbated by a lack of meaningful measurement standards or analytics
to support the business case for these investments. As it becomes increasingly possible for retailers
to send real-time, context information to consumers while they are in (or near) a store, or as
customers start to interact with products they find in a store (such as scanning a bar code to show
price and/or product information), the ability of the retailer to manage content that appears on
digital signage in real time will become even more critical.
User Advice: Ensure that the business case for using digital signage in stores supports the actual
shopping process and what customers value most when shopping in stores. This includes the
placement and content of displays in stores. In a multitouchpoint world where mobile devices and
applications become increasingly prevalent and are used to enhance the shopping experience, the
business case for digital signage projects may become easier to make, although the
implementations become more complicated and challenging. Context-aware technologies can
literally put marketing messages and offers into the customer's hands, which, ultimately, may be
more influential than what the customer might see while shopping in a store.
Business Impact: Retail digital signage improves retailer marketing effectiveness and
communication to customers. Done effectively, it can evolve into incremental revenue for retailers.
Maturity: Emerging
Sample Vendors: Bell Canada; CBS Outernet; Cisco; Convergent Media Systems; Hughes
Enterprise Solutions; Intel; PRN; Reflect; SapientNitro
Recommended Reading: "Business Case Remains Challenging for Retail Digital Signage Projects"
"Metrics Play Catch-Up With Media"
"Forecast: Mobile Advertising, Worldwide, 2008-2015"
LCD-Based ESLs
Definition: Liquid crystal display (LCD)-based electronic shelf labels (ESLs) are programmable,
wireless electronic devices that affix to store shelves and shelf channels. Segment-based,
alphanumeric displays are typically used to display item pricing or promotional pricing information
at the shelf's edge in real time.
Position and Adoption Speed Justification: Gartner research shows that the majority of
customers (70%) value cross-channel consistency in pricing. ESLs provide an efficient way for Tier
1 retailers to execute price consistency across thousands of facings in stores for those retailers that
have or are implementing price optimization technologies.
During the past 12 to 18 months, Gartner has seen lots of interest in ESLs and e-paper technology
from North American retailers in particular and across a variety of segments. Gartner estimates that
market penetration of this technology has increased slightly because of the growing importance of
executing accurate prices as a result of more retailers using price optimization technologies;
however, we believe it still hovers on the higher end of market penetration (5%). Most LCD-based
ESL implementations have been, and continue to be, in Europe across a few retailers and their
banners, and in new/remodeled stores.
Retailers that have been using LCD-ESL technology continue to show their support by expanding
its use into more of their store estate new stores and remodeled stores, in particular. Although
several large retailers with existing LCD-ESL installations continue to trial newer e-paper signage in
select stores/departments, Gartner expects that LCD-ESL technology will remain the dominant form
for communicating electronic pricing at the shelf level for some time because of lower per-unit costs
at scale. However, Gartner has started to see e-paper, shelf-edge label costs dropping, making
them more price competitive at scale.
User Advice: Ensure that your decision to deploy ESLs improves the accuracy and execution of
price changes in stores. Retail business models that have a large number (hundreds or thousands)
of price changes on a frequent basis can benefit from a labor budget perspective by shifting to the
use of ESL technology. ESLs can also be deployed to flash on a shelf when a product is out of
stock, or they can be programmed with information about inventory on hand to improve
replenishment at store stock availability. However, retailers should not underestimate the
investment required in change management when implementing price change technologies.
Business Impact: This technology affects labor productivity, price accuracy, legal compliance (for
example, weights and measures) and retailers' ability to dynamically price products. It can also
support retailers' efforts to be more operationally green by eliminating the printing of paper labels or
channel strips in stores. Retailers can expect greater consistency, compliance and productivity from
stores when it comes to mandated price changes.
Sample Vendors: Pricer; Store Electronic Systems
Recommended Reading: "Case Study: Groupe Casino and Electronic Shelf Labels"
Climbing the Slope
E-Coupons
Definition: Electronic coupons are the digital form of a paper coupon or voucher (also known as an
"offer"), and can encompass several formats, including mobile and social coupons. An e-coupon
can be part of a single-party process, where a retailer issues a coupon via its campaign
management system for redemption in its stores, or it can be a multiparty process, such as digitized
brand manufacturer coupons that are distributed in a variety of ways, such as redeemed in stores or
processed by clearinghouses.
Position and Adoption Speed Justification: Although e-coupons have been around for many
years, they represent only a small fraction of the overall coupons less than 2% of all coupons
currently redeemed in physical stores. E-coupons, which include mobile and social coupons, are
highlighted as separate technologies on the retail Hype Cycle to reflect their relative maturity, given
the hype of all forms of e-coupons in the market. The movement of the category of e-coupons to
the current position of post-trough 20% reflects a gradual maturing of the technology category and
the influence of the emerging forms of e-coupons mobile and social on consumer adoption.
The greatest barriers impacting retailer adoption are the retailers' ability to accept these types of
coupons, verifying whether they are legitimate to process, and financial settlement.
For customers, key challenges include the ability to redeem coupons, easily keep track of e-
coupons when saved to card, or to remember to print out an e-coupon in-store or at home to bring
to a store. However, mobile phones and the practice of integrating a coupon's discount
automatically onto a loyalty card are expected to continue to advance consumer use during the
next few years. Online and in other direct sales channels, the use of e-coupons or promotional
codes is common.
User Advice: Recognize that e-coupons can come from a large number of sources, ranging from
manufacturer sites and portal sites to retailer sites, group buying sites, and retailer's CRM systems.
Choose a technology or technology partner that will be able to validate and redeem e-coupons
(originating from any source) across channels. Evaluate store-based technologies and processes to
ensure you can accept and process coupons in stores. Retailers with loyalty programs will also
want to be able to "embed" the coupon onto consumers' loyalty accounts so that printed coupons,
or even mobile coupons, won't need to be carried around if consumers have their loyalty cards.
Business Impact: The benefits of e-coupons center on increasing the frequency of visits and
transaction value. Sales, margins and customer loyalty are all targeted to increase as a result.
Sample Vendors: Cellfire; Coupons.com; SavingStar; You Technology; Zavers
Recommended Reading: "Consumer Survey Shows What's Ahead for Retail Coupon
Management"
"Real-Time Customer Offer Engine Vendor Landscape for Retail"
Definition: Merchandise and category optimization technology uses advanced demand forecasting
and optimization to improve merchandise planning processes. Optimization is derived from using
business goals, product, location and customer intelligence data to inform the merchandising and
planning decision process.
Position and Adoption Speed Justification: Traditional planning applications are good at
managing and automating planning tasks. Optimization takes this a step further by improving and
automating decision making required to support seven optimization areas assortment/allocation,
space, replenishment, price, promotion, markdown and size/pack to adjust assortments by store
or cluster, determine buy quantities, optimize space allocation and planograms, and maximize
product allocation and availability. Price, promotion and markdown optimization is directly linked to
merchandise and category optimization; for apparel and footwear retailers, size and pack
optimization is required. Optimization technology can come from individual modules in larger retail
suites, best-of-breed vendors or advanced analytics business intelligence vendors. The market has
matured to the point where most of the major merchandise planning and category management
vendors offer some degree of demand forecasting and optimization as part of their offerings. Early-
adopter retailers have already implemented these advanced technologies in one or more of their
merchandising processes. Space optimization is gaining popularity with grocers and discounters,
while size and pack optimization is popular with apparel retailers. As retailers implement
optimization capabilities into more of their merchandising processes, they are seeking an
architecture that centralizes forecasting and optimization assets across all areas. For example, a
retailer with promotion optimization and replenishment optimization will want a single forecasting
capability feeding both applications for a consistent demand forecast.
User Advice: Retailers are actively researching and implementing merchandise optimization
applications. Cross-channel shopping behavior, combined with multichannel order management
and in store fulfillment capabilities, are causing an acceleration of interest in this technology.
Gartner recommends implementing four of the seven possible optimization capabilities based on
the highest impact on customer effectiveness. Retailers must consider the following when
evaluating merchandise and category optimization solutions:
Scalability (the ability to work with large numbers of SKUs and frequent reforecasts, such as
daily reforecasts)
The ability to account for store execution constraints and status (such as planogram and fixture
compliance)
Performance (the ability to provide users with real-time what-if capabilities)
The ability to easily manage the large number of goals and targets required to optimize
decisions
The degree of integration between optimization and forecasting solutions, and the planning
solutions
The delivery and pricing model (for example, software as a service versus behind the firewall)
An end-goal architecture that brings together common forecasting and optimization

technologies into a centralized approach
Multichannel analytical capabilities

Business Impact: Ultimately, these technologies will help stores achieve higher sales and margins
in their local markets. They facilitate the complex management that micromerchandising requires,
enabling the retailer to do more-detailed planning with fewer resources. This technology is required
to support customer-centric merchandising.
Sample Vendors: DemandTec; Galleria; JDA Software; Oracle; Predictix; Quantum Retail
Technology; Revionics; SAP; SAS
"Multichannel Pricing: Strategically Consistent, Opportunistically Flexible"
"Cross-Channel Merchandising Success Requires Consistency"
Unified Price, Promotion and Markdown Optimization
Definition: Sometimes referred to as life cycle pricing optimization, this technology (unified price,
promotion and markdown optimization) uses predictive analytics and optimization capabilities to
plan and manage every aspect of pricing (regular, promotion and markdown) throughout the life
cycle of an item.
Position and Adoption Speed Justification: Individual price, promotion and markdown
optimization solutions are being combined to form a unified solution to better align with the way
price is managed during the product's life. This comprehensive pricing approach involves building
an integrated demand forecast to maximize inventory availability and sell-through. Pricing rules can
be used to balance business strategy with pure optimization.
Some solutions include deal management capabilities. Deal management is integral to the process
in the food, drug and consumer packaged goods (CPG) industries. Additionally, some providers
offer competitive data. Management, workflow and dashboard capabilities have been added to
these solutions to offer much more than optimization. Master calendar capabilities are also showing
great promise in improving the management of pricing during the entire product life cycle. The retail
industry has accepted that price, promotion and markdown optimization can coexist. All major
software players in this space offer all three optimization types. A new generation of smaller players
is emerging to provide retailers with more choice and different costs and contract models (for
example, pay as you go). Whereas in the past, pricing optimization was in the domain of large Tier 1
retailers; today, these solutions are deployed within Tier 1, Tier 2 and even Tier 3 retailers, in
segments ranging from grocery to electronics to wholesale. Some vendors have more than 50 retail
or wholesale customers. Many vendors' next move is to go beyond price, promotion and markdown
to offer a complete suite of optimization solutions to address all parts of merchandising. Vendors
moving in this direction have started by adding optimization functionality in areas like assortment
planning and replenishment.
While a unified pricing approach is currently available from many vendors, individual
implementations of price, promotion and markdown optimization must be weighed against the
unified implementations. Gartner has detected little movement in the technology during the past
year. At this point, there are many single or multiple implementations but few completely unified
instances. We expect this to accelerate because of continued interest in product life cycle
optimization.
User Advice: Newcomers to price optimization should start with a single process and merchandise
area (for example, markdown of fashion items only), and then progressively add other areas as the
organization gains experience with optimization. This will build the cultural trust and acceptance the
organization requires to make the most of these technologies. Ideally, it is best to start with two or
more years of clean sales, a transaction log, and promotional event and inventory data. Selection of
the initial optimization type will depend heavily on the business impact for sales and profitability. An
apparel retailer or other highly seasonal business may find that markdown optimization is the most
logical starting point, whereas an everyday-low-price, general-merchandise retailer may gain the
most from price optimization.
Retailers considering promotion optimization should start building causal and historical event
databases (for example, knowing when an item was on promotion, and whether it was supported by
an end cap, circular, and so on). Solid category and key item strategies will define the business
rules required by the optimization technology. Retailers should not underestimate the effort required
to develop these business rules and goals. As retailers try to become more detailed by adding price
zones or even conducting store-level pricing, the definition and management of these rules can
become quite cumbersome. Moreover, multichannel retailers should also take into account
consumers' growing interest in cross-channel shopping. This will, for example, drive change in
pricing strategies for multichannel retailers as they grapple with issues associated with pricing when
the customer executes a shopping process across channels.
Retailers looking for a unified price optimization solution that combines price, promotion and
markdown should ask vendors to demonstrate how these areas work together. A longer-term
consideration for retailers is to understand how price, promotion and markdown optimization will fit
architecturally with other optimization areas in merchandising and the supply chain.
Business Impact: This technology can provide improved pricing and promotion planning and
management throughout the entire life cycle of the merchandise. Retailers using this technology
have experienced improved margins and sales, as well as improved efficiency in pricing and
promotion operations. Gartner has seen 30- to 100-basis-point improvements in gross margins in
various product categories.
Market Penetration: More than 50% of target audience
Sample Vendors: Churchill Systems; IBM DemandTec; JDA Software; KSS Retail; Oracle; Predictix;
Revionics; SAP; SAS
"DemandTec Buy Will Boost IBM Smarter Commerce but Leaves Loose Ends"
"Multichannel Pricing: Strategically Consistent, Opportunistically Flexible"
Mobile POS
Definition: Mobile POS refers to a point of sale (POS) application that is usually delivered on a
retailer-owned untethered wireless device to enable scanning, queue busting or payment
processing on the store floor.
Position and Adoption Speed Justification: Currently, the majority of mobile POS applications are
deployed for queue busting. As POS upgrades and refreshes continue apace among Tier 1 retailers,
the past 12 months have seen an appreciable rise in factoring in a full mobile POS payment
capability on the "must have" list of POS requirements. This is especially with the intent to deploy
mobile POS on the same device on which employee-facing applications that enable stock
management, price checks, task management and communication are deployed. This consolidation
of employee-facing applications will enable store associates to conduct both store operations and
customer service tasks (such as line busting and check-out) more easily on the store floor.
Reasons for the increased interest:
The escalation of hype around mobile payments: This hype is a result of increasing publicity
regarding solutions from a multitude of hardware and software vendors and from card payment
providers, as well as publicity for mobile wallets from the likes of Google and PayPal.
The continued move by many Tier 1 retailers toward multiple store formats, with a
renewed focus on smaller neighborhood stores, especially for groceries: These retailers, as
well as retailers with traditionally smaller-footprint convenience and drugstores, are also
expressing interest in deploying mobile POS to reduce queue lengths and to release floor space
for more merchandising. Other retail store models, such as pop-up stores, temporary stores (for
example, at events) and concession stores (a store within a store), would also benefit from
mobile wireless POS.
The continued trend toward the consumerization of IT: This trend focuses on how
enterprises will be affected by, and can take advantage of, new technologies and models that
originate and develop in the consumer space rather than in the enterprise IT sector. Mobile
devices, in particular, are key players in this trend and are encouraging businesses to
reconsider their traditional positions on the acquisition, management and deployment of IT. The
combination of affordable consumer mobile devices, better wireless connectivity, lower costs of
communication and the growing diversity of applications has contributed to the hype around
deployment of mobile POS on consumer devices.
However, despite this, the growth in deployments of mobile POS will be moderated by the following
factors:
Consumer fears and negative perceptions about the security of payments
Retailers' efforts to secure payment data in compliance with industry security standards, as well
as to secure cash payments on the store floor
Some business processes at check-out for some segments not being suitable for mobile POS
for example, items of apparel requiring detagging, folding and bagging
Integration of third-party mobile POS applications with the retailer's main POS application
running on the traditional check-outs
Gartner expects more trials and implementations in the coming 12 months as more and more
retailers factor in mobile POS as an application to be included in the store associate application
portfolio. However, the moderating factors called out mean that the time to plateau stands at
between two and five years, although we expect this to be closer to five years.
User Advice: Factor in the business case for mobile POS when looking at store-associate-facing
applications not just as a business requirement for POS upgrades at the main bank and self-
check-outs, but also as a business requirement to be included when refreshing the traditional
handheld application portfolio for store associates (for example, together with stock management
and price checkup applications).
Consider using mobile POS during peak periods in high-volume, straightforward payment
processes (for example, for the grocery, convenience and drugstore segments). In addition,
carefully consider what capabilities to deploy on mobile POS queue busting only or with full
payment. Remember to factor in cross-channel transaction processes such as reserve online and
check-out or pickup in the store.
Ensure that any applications you use for payment transactions adhere to industry data security
standards, such as the Payment Card Industry Data Security Standard (PCI DSS), and data
protection requirements. Note that the retailer is responsible for any third-party vendor's
compliance with PCI standards.
When investigating third-party mobile POS applications on devices such as Apple's iPhone and
iPod touch, consider how the third-party mobile POS applications that are developed specifically for
those devices will integrate with the main POS application running on the fixed check-outs in the
store.
Business Impact: Customers cite faster check-outs as a key customer service basic and express a
preference for store associate involvement in the check-out process (for example, mobile POS can
improve queue management during the check-out process, especially during peak trading periods
such as the Christmas holiday period). If appropriate for the business model, retailers operating
smaller-footprint, compact stores should consider mobile POS to replace fixed check-out areas,
thus releasing floor space for more merchandising.
Sample Vendors: Fujitsu; Motorola; Oracle; Retalix; SAP
Recommended Reading: "Retailers: Let Customers Guide Your Investment in Mobile POS"
Entering the Plateau
Self-Check-Out
Definition: Self-check-outs are deployed for use by customers as a self-service alternative to full-
service check-out at the point of sale. Customers can scan, bag and pay for their purchases,
completely unassisted by store associates. The units are available as either belted or modular scan-
and-bag units and typically include a scanner, a scale and a monitor integrated with a payment
mechanism.
Position and Adoption Speed Justification: Over the past decade, retailers have implemented
customer self-check-outs in order to reduce store labor costs and to improve throughput at check-
out, particularly in high-volume or high-traffic environments such as grocery. Over that period,
retailers have also been trying to implement the best possible mix of full check-out and self-service
options to deliver good customer service in terms of queue management for example, by using
self-check-out to contribute to delivering the Tesco-defined "1+1" world-leading queue
management check-out benchmark.
The self-service check-out process is primarily delivered through fully integrated scanning and
payment check-out models. However, a few implementations of self-check-out involve splitting the
scanning and payment processes meaning that these actions are no longer integrated in one
hardware unit but are performed on separate hardware units. For example, using handheld self-
scanners, customers scan and bag items in the aisle and then transact the payment through a
separate self-service kiosk or through the traditional till. In the past 12 months, hype and market
interest have occurred around the automated tunnel scanner, which is a new version of self-check-
out.
This technology has already reached mainstream maturity because, to date, there have been
numerous successful implementations in leading retailers, especially in grocery, hard goods, mass-
merchant and warehouse club stores, with good uptake in many geographies, especially North
America and Europe. In the past 24 months, many Tier 1 retailers have begun refreshing first-
generation self-check-out models and taking the opportunity to adjust the mix of self-check-out
units and main bank check-outs at the front end.
Although self-check-out is nearing the Plateau of Productivity on the Hype Cycle, some flex still
remains in the market as retailers continue to finesse the mix of self-check-out models, including
gradual replacement of belted self-check-out units with more-modular, smaller-footprint scan-and-
bag models. Gartner expects more implementations in segments with smaller-footprint stores, such
as drug and convenience, and there is also room for growth in the Brazil, Russia, India and China
(BRIC) markets.
We expect this technology profile to remain in the Plateau of Productivity for the next two to five
years.
User Advice: Self-check-outs are now a mainstay of the mix of check-out options in stores.
However, Gartner consumer surveys indicate that customers still prefer manned check-outs, and
we expect retailers to continue to offer customers the choice of full-service check-outs and self-
check-outs for the foreseeable future. In terms of implementation, our surveys show that customers
prefer to have the scanning and payment processes integrated into one unit separating those
actions reinforces perceptions of queuing twice and breaks the smooth flow of the customer
transaction process.
Consider, too, the impact of the execution of cross-channel processes on self-check-out
implementations. It could mean adjustments to store layouts in order to accommodate a dedicated
customer service area for increased store pickups that are generated from customers buying online,
which could have a ripple effect on the selection of the number, types and placement of self-check-
out models.
Self-check-out technology, by itself, will not yield revenue growth or sustainable reduction in costs.
Retailers should ensure that their investment in self-check-out will enhance the shopping
experience by delivering the service basics that consumers want in a retailer's particular
environment, especially in light of a well-considered self-service strategy. Self-check-out is clearly
more suitable for some segments than for others (for example, grocery stores rather than
department stores). Therefore, retailers should consider the unique needs of their particular
segments as well as the preferences of their customers.
Business Impact: The primary benefits of self-check-out are better customer self-service in terms
of queue management at check-out and reduction in front-end labor costs.
Sample Vendors: Fujitsu; IBM; NCR; Wincor Nixdorf
Retailers"
"Retailers Take Note: When in Store, Associates Trump Customer Self-Service Technology"
Community Reviews
Definition: Community review technologies allow retailers to capture their customers' opinions of
products and services that are sold. The implementations typically allow for ratings such as one to
five stars, as well as reviews where the customer describes his or her opinion of the product by
tagging the product with a set of suggested attributes.
Position and Adoption Speed Justification: Multichannel retailers must incorporate reviews to
maximize sales. Gartner research shows that consumers value ratings and reviews from other
consumers over the opinions of friends and family, as well as expert reviews. Community reviews
have the potential to reassure consumers that they are making good purchase choices. They also
have the ability to help retailers identify products that have problems in the marketplace or have a
bad reputation among consumers, and make changes to their merchandising planning or return
policies to address these issues. This is done via a moderated platform, where moderation happens
manually or automatically via applied business rules and. Integration with social media tools is
increasing as the vendors are expanding the capabilities to include additional analytic tools for
retailers and manufacturers.
Gartner expects to retire customer reviews from the Hype Cycle next year, after predicting it was on
a one- to two-year time frame in 2011. This technology has become an accepted part of doing
business, and this is the main reason that it moved quickly to the Plateau of Productivity for 2012.
User Advice: Retailers with online channels should assume that their sites must include community
reviews, including rating as well as review capabilities. They should be prepared to deploy this as a
service from technology providers or host the capability internally in a moderated environment.
Retailers that have private-label brands should pay especially close attention to community reviews
of their in-house brands, because a negative review can have a significant financial impact on these
retailers.
Retailers must carefully monitor reviews and respond actively when consumers are expressing
complaints or dissatisfaction. These reviews will feed other applications that measure customer
effectiveness and provide context for customer sales activity.
Business Impact: Community reviews have emerged as a "must have" feature for e-commerce
sites. Consumers expect to be able to see what other customers think about a given product.
Retailers that lack this capability run the risk that consumers will abandon them in favor of a
competitor that offers community reviews. Retailers that effectively implement community reviews
should experience decreased shopping cart abandonment rates, because consumers will feel more
confident about their purchases. Retailers also need to use community reviews as an element of
their multichannel feedback management solutions. Additional analytic tools are being offered by
these providers as a means of evaluating manufacturers, brands and product categories in addition
to individual products.
Sample Vendors: Bazaarvoice; FatWire Software; PowerReviews
Retailers"
In-Store Applications: Employee-Facing
Definition: This profile includes applications that enable store associates to access functionality for
in-store lookup of product and item information, product location on shelf or in the stockroom, item
scanning, and location-tracking capabilities to improve store operational efficiency and customer
service. This profile does not cover time and labor workforce applications, such as time and
attendance, scheduling and task management, which are covered in other profiles on this Hype
Cycle.
Position and Adoption Speed Justification: Today, this technology is largely deployed through
handheld mobile terminals. Applications used by store associates over wireless communications
are implemented, in general, over the 802.11x Wi-Fi LAN standard. However, increasingly, retailers
are being pushed to look at deploying their own or their employees' wireless devices, such as
tablets and mobile phones, to improve the customer experience for example, for assisted
service. The Apple iPad continues to push up the level of hype in the media, and has contributed to
more retailer interest in these types of devices to conduct in-store operations. However, these are
not ruggedized for high-volume, high-throughput environments, such as grocery, and may be more
suitable for deploying assisted-selling and clienteling applications in the fashion apparel or specialty
categories.
On-shelf stock availability is customers' No. 1 in-store requirement, and also a key in-store metric
for retailers. For these reasons, stock management devices and applications are widely deployed by
Tier 1 and Tier 2 retailers, and it is increasingly becoming more commonplace for store managers to
use mobile devices for this type of functionality. Applications to manage store operations on the
store floor have reached a level of maturity and market penetration that lead us to believe that this
profile remains in the plateau phase, and we expect it to move off the Hype Cycle during the next 12
months.
In the past several months, retailers have been considering how to incorporate employee-facing
applications to enable execution of cross-channel processes in the store. This will give rise to the
next generation of employee-facing store applications, and will include consolidation of everyday
store associate-facing applications for store operations and customer service onto one mobile
handheld terminal. Many Tier 1 retailers are already considering implementing this, with one notable
implementation in a leading North American retailer. In this case, a common application framework
enables the retailer to equip the store associates with a mobile handheld terminal that combines
inventory management, analytics, phone and store walkie-talkies with payment capability by
connecting to a browser-based interface to the retailer's core point of sale (POS), including a mobile
receipt printer.
This is in line with our recent research that stated, when shopping in store, customers expressed a
clear preference for asking or speaking to a store associate to help them accomplish most of the in-
store tasks, before using either the in-store technology or their own mobile device.
User Advice: With the latest generation of handheld hardware, including the newer consumer
mobile devices, retailers should focus on equipping associates with a handheld device that can
support the convergence of applications for multiple purposes such as gap scanning and
counting, price lookup, product lookup, assisted selling and task management, together with
customer-facing applications. Integration with a printer would enable functionality such as
markdown labeling or printing of receipts. Very importantly, retailers should use the opportunity
when upgrading these applications to look at improving the integration of business processes
supporting store operations to maximize efficiency. For example, integrating store task
management processes into the everyday management of stock in the store.
As mobile devices and applications begin to proliferate, retailers must construct an overall
enterprise mobility strategy to manage current and future deployments of mobile infrastructure,
which should include policies for securing access to applications deployed on these devices and
tracking of their mobile assets.
Business Impact: The use of these devices and applications improves in-store inventory and price
management, customer service, task management, auditing and compliance with internal guidelines
for standard operating procedures, as well as with external legislative requirements.
Market Penetration: More than 50% of target audience
Sample Vendors: Motorola; Oracle; RedPrairie; Reflexis Systems; SAP; Zebra Technologies
Recommended Reading: "Retailers Take Note: When in Store, Associates Trump Customer Self-
Service Technology"
"Why Task Management is a Priority for Multichannel Retailers"
Appendixes
Figure 3. Hype Cycle for Retail Technologies, 2011
Technology
Trigger
Peak of
Inflated
Expectations
Trough of
Disillusionment
Slope of Enlightenment
Plateau of
Productivity
time
expectations
Years to mainstream adoption:
obsolete
before plateau
As of July 2011
Social Coupons
F-Commerce
E-Paper Signage
Multichannel Retail Enterprise
Content Management
Retail Mobile Commerce (Transactional)
Social Software for Retail Employee Collaboration
Mobile Coupons
Integrated Demand and
Replenishment Planning
Retail Real Estate Portfolio Management
Retail Mobile Websites and Applications Nontransactional
Public Social Networks in Retail
Next-Generation Retail OSs for POS
Retail Mobile Phone Payment
Multichannel Order Fulfillment
Video and Rich Media for E-Commerce
Online Product
Recommendation Engines
Master Data Management
for Retail
Time and Labor
Optimization
In-Store Self-Service:
Customer-Facing
Applications
RFID (Item)
E-Coupons
LCD-Based ESLs
Store-Based E-Recruitment
Community Reviews
Unified Price, Promotion and
Markdown Optimization
Mobile POS
Self-Check-Out
Employee-Facing
Hype Cycle Phases, Benefit Ratings and Maturity Levels
Table 1. Hype Cycle Phases
Phase Definition
Technology Trigger A breakthrough, public demonstration, product launch or other event generates
significant press and industry interest.
Peak of Inflated
Expectations
During this phase of overenthusiasm and unrealistic projections, a flurry of well-
publicized activity by technology leaders results in some successes, but more
failures, as the technology is pushed to its limits. The only enterprises making
money are conference organizers and magazine publishers.
Trough of
Disillusionment
Because the technology does not live up to its overinflated expectations, it rapidly
becomes unfashionable. Media interest wanes, except for a few cautionary tales.
Slope of
Enlightenment
Focused experimentation and solid hard work by an increasingly diverse range of
organizations lead to a true understanding of the technology's applicability, risks
and benefits. Commercial off-the-shelf methodologies and tools ease the
development process.
Plateau of
Productivity
The real-world benefits of the technology are demonstrated and accepted. Tools
and methodologies are increasingly stable as they enter their second and third
generations. Growing numbers of organizations feel comfortable with the reduced
level of risk; the rapid growth phase of adoption begins. Approximately 20% of
the technology's target audience has adopted or is adopting the technology as it
enters this phase.
Years to Mainstream
Adoption
The time required for the technology to reach the Plateau of Productivity.
Table 2. Benefit Ratings
Benefit Rating Definition
Transformational Enables new ways of doing business across industries that will result in major shifts in
industry dynamics
High Enables new ways of performing horizontal or vertical processes that will result in
significantly increased revenue or cost savings for an enterprise
Moderate Provides incremental improvements to established processes that will result in
increased revenue or cost savings for an enterprise
Low Slightly improves processes (for example, improved user experience) that will be
difficult to translate into increased revenue or cost savings
Table 3. Maturity Levels
Maturity Level Status Products/Vendors
Embryonic

In labs

None
Emerging

Commercialization by vendors
Pilots and deployments by industry leaders
First generation
High price
Much customization
Adolescent

Maturing technology capabilities and process
understanding
Uptake beyond early adopters
Second generation
Less customization
Early mainstream

Proven technology
Vendors, technology and adoption rapidly
evolving
Third generation
More out of box
Methodologies
Mature
mainstream
Robust technology
Not much evolution in vendors or technology
Several dominant vendors

Legacy

Not appropriate for new developments
Cost of migration constrains replacement
Maintenance revenue focus

Obsolete

Rarely used

Used/resale market only
Recommended Reading
Some documents may not be available as part of your current Gartner subscription.
"Understanding Gartner's Hype Cycles, 2012"
"Agenda for Retail, 2012"
"Cool Vendors in Retail, 2012"
"Hype Cycle for Social Software, 2012"
"Hype Cycle for Business Use of Social Technologies, 2012"
"Hype Cycle for E-Commerce, 2012"
"Hype Cycle for Consumer Goods, 2012"
"Hype Cycle for Manufacturing Product Life Cycle and Operations Management, 2012"
"The Multichannel Revolution Is Ending: The Consumerization of Retail Continues With
Personalization and Customization"
"A Quick Look at Cloud Computing in Retail, 2012"
"Re-Imagine IT Using Insights From Symposium's Analyst Keynote"
This is part of a set of related research. See the following for an overview:
Gartner's Hype Cycle Special Report for 2012

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Industry Research

CIOs and CTOs

Vice presidents of store operations

Vice presidents of merchandising

Vice presidents/heads of commerce/mobile/multichannel

Vice presidents/heads of application management

Heads of enterprise architecture

Vice presidents/heads of business intelligence (BI)/information management

Data visualization in merchandising: The complexity of the multichannel merchandising

Dynamic presentation The application automatically determines the best method to

Keep abreast of and assess the progress of contactless-payment transportation schemes in

Removal of lead time and latency from the supply chain

Synchronization of demand, driven by supply-optimized chains

Inventory and order visibility across the network

A high degree of automation in the supply chain response

Increased customer service through improved inventory availability

Reduced waste and supply chain costs

Managing the cross-channel ordering process across multiple touchpoints is complex.

Line of sight to a business case

Governance and stewardship of master data established in a line of business

Metrics and analytics to guide progress

Upselling, cross-selling and leveraging CRM and other customer-facing processes

Operational benefits from merger and acquisition activities

More effective data compliance

More competitive new-product introduction processes

Increased productivity of human capital

More consistency in marketing messages from retailers

Improved and unified brand management and execution

The ability for merchants to control how and what is recommended

Performance (the ability to provide users with real-time what-if capabilities)

An end-goal architecture that brings together common forecasting and optimization

Multichannel analytical capabilities

Consumer fears and negative perceptions about the security of payments

Several dominant vendors

Maintenance revenue focus

Gartner's Hype Cycle Special Report for 2012

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