Analyst Corner

NRF 2014 – The Vibe

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Now a little more than four weeks post Big Show it gives most of us the opportunity to regroup, reflect, and almost begin to see the light of the day from all of the activities that two plus days of constant meetings brings. As I mentioned last week, my overall observations were a bit beyond what could fairly be summarized in a single article, thus for the sake of brevity, I am splitting my observations over a series of articles. In part two of my multi-part installment on my NRF 2014 experience I would like to highlight the general vibe of the show along with some words around security and conclude with some additional thoughts.

Hard numbers suggest a strong uptick in spending.

Im a numbers guy. One of the things that I love about IHL Group is that we deal with hard numbers, at least as a starting point. Hard numbers provide a firm foundation for drawing solid conclusions. I say that to draw contrast to my unquantifiable yet undeniable feel at the show this year. There seemed to be a much different vibe from the vendor community this year compared to the not so different past. In years past it might be described as pessimistically cautious while this year it felt much more comfortably optimistic. Our Store System Study results suggest a strong uptick in spending at the store and enterprise level that combined with the feel that the absolute worst of retail consolidation is probably behind us suggests that good things are to come from the market in 2014. We certainly hope so!

Breaches are many, PCI is about compliance not protection.

The Target breach has brought about some very scary revelations, though minimal facts and a lot of conjecture has surfaced at this point. We know the breach was at the POS comprising multiple steps, we know that the software used to execute the breach cost less than $3,000, and that at on 11/27/13 none of the 40-plus commercial antivirus tools used to scan malware at flagged the POS malware (or any related hacking tools that were used in the intrusion) as malicious. And if we were to extrapolate from the TJX breach, the largest breach in history, that the total cost for this breach will total in the tens of millions of dollars before the lawyers are finished. This also highlights the widely agreed upon fact that PCI is about compliance, not security, because the companies compromised, were compliant. Amazingly even today I read an article regarding 40 retailers who have been hit with the ChewBacca payment malware.

This leads me to one very important point  there is a serious threat that needs to bring about serious change  fundamental and much overdue change. The bad guys are organized, look at their open markets to sell malware, and their markets around selling stolen information, yet retail has no method by which to share best practices, and lessons learned around breaches such as this. How will what happened at Target be shared? Who will know? Who is impacted and how will they be identified? And how quickly will remediation methods be propagated while the threat continues? We agree with our good friend Cathy Hotka who for the last 12+ years has been promoting the fact that the time is now for an ISAC (Information Technology Information Sharing and Analysis Center) relative to security. Our hope is that the powers that take the lead on this.

Over 85% of retail spend occurs in stores, yet retailers know less than 1% of how the consumer is shopping in their stores.

We have commented in presentations how ironic it is that over 85% of retail spend occurs in stores, yet retailers know less than 1% of how the consumer is shopping in their stores, yet they know close to 100% of our online behavior. At the show, we saw evidence that this is changing as there were significant offerings around the store as source of data collection. While we are at the cusp of this, and retailers will have to address how to not be creepy in doing so, there is much more to come in this area. Intelligent devices are here to say, and with some of the significant Big Data advances, we know have the tools in place to make this coming flood of data actionable in real time.

We didnt hear anyone talking about how to address the last mile into the store.

While we heard a lot of folks at the show discussing the omni word, we didnt hear anyone talking about how to address the last mile into the store. The reality is that omni-channel (there I said it) transforming the store from a merchant to an omni-commerce environment. While top down plans are great, stores that I shop at are missing the execution. It is clearly obvious from both the surveys we and others do, as well as questions in the store, that those systems are in place, yet store employees are not going that last mile and engaging the customer to let them know that there are now a broader range of fulfillment options. While both systems and training offer solutions to the problem, much work is left to bring plans into execution at the store.

Key partnerships occurring around servicing the new way that consumers shop.

While a few announcements do not make a trend, we have to comment on key partnerships occurring around servicing the new way that consumers shop. We will specifically note the integration of Starmounts mobile selling into Manhattan Associates omni-channel commerce platform. To follow this trend, late last weekDemandware announced the purchase of Mainstreet Commerce, which will marry Demandware commerce solutions to Mainstreets order management expertise. We expect a large number of partnerships and acquisitions to occur, aimed at tightly integrated offerings supporting shopping, fulfillment and returns across multiple channels.

Motorola makes welcomed improvements in aesthetics.

In our stop at the Motorola both we couldnt help but note the improvement in aesthetics they are offering in their latest line of handheld scanners. Not only that but you can customize the wav file that is played at each scan. As my colleague Lee Holman noted, wouldnt it be fun to walk into Staples and with each scan the handheld said yes, that was easy! It certainly is a welcome improvement over the standard matte black finish and yet another way for cool and hip brands to reinforce their brand image.


There certainly are much more positive, much more innovative and much more exciting things in the works in retail  a lot to be excited about. Next week well be bringing you information how a Guinness World Record was set at NRF, how the future of barcodes may be changing, and how the two are connected. Stay tuned!