Evan Schuman's StorefrontBacktalk

Now it is IT’s turn to take the blame for JCPenney’s woes. On Tuesday (May 15), JCPenney COO Michael Kramer told analysts that problems during the chain’s terrible first few months under its new “Fair and Square” pricing approach (store traffic down 10 percent, sales down 20 percent) were compounded by out-of-control inventory management and legacy system maintenance that ate up 90 percent of the IT budget—both fundamentally IT problems.

The result: It costs JCPenney at least $600 million per year more than it should to run the chain—which explains a lot about the quarter’s $55 million operating loss. “I can think of no other thing to say about our systems and our IT infrastructure, and I have seen a lot of them: It’s a mess,” Kramer said.

Who cares about Big Data? You should. All of a sudden, Web logs that were kept simply for troubleshooting purposes can now be mined to determine valuable information about customers’ preferences, writes Retail Columnist Todd Michaud.

Logs that are created by physical machines can now be analyzed en masse to look for information to help advance a business. Data from social networks can now be mined for customer sentiment. These problems were too big and too complex before. But now, answers are within reach.

With more than 3,000 stories, columns and GuestViews in the content database here at StorefrontBacktalk, we thought it was time to do a little upgrading. Starting this week, readers (both free and Premium) can search for stories by limiting the search to just the story’s headline—as opposed to the headline and the full text. (Note: Right below the search bar, readers can choose HED Only or Story And Hed.)

The ability to isolate a search to the headline can be useful in two ways. If you happen to remember that the headline mentioned Target, for example, you need not see every story that mentioned Target (or even used the word “target”). The second way is practical. If you want a story that is primarily about tokens—and not a story that merely mentions the word somewhere—the headline-only search can be helpful.

It’s you versus the sales guy in an epic battle over your IT career. The sales guy has a polished presentation about the features and benefits of his products and services. You have a status report. The sales guy has access to unlimited resources to make your business partners’ wildest dreams come true. You have one really great guy who you’ve overworked to the point that you carry a ton of personal shame.

The sales guy says, “Yes. Yes. Yes.” You say, “No. No. No.” In this surreal world, pens Retail Columnist Todd Michaud, you are watching your hard-fought IT career be dismantled by an onslaught of companies that shake your hand and look you in the eye as they pitch your demise one product and service at a time. And you had better buckle-up, Buttercup; it’s only going to get worse.

It’s not just those birds that are angry these days. The process by which Apple allows teens, pre-teens and even toddlers to download free apps, and then purchase game currencies within these free apps, may have landed the computer giant in hot water—with both parents and at least one federal district court in San Jose.

The case revolves around a longtime legal reality: Minors cannot agree to a contract. If they pretend to agree, it’s non-binding and can’t be enforced, writes Legal Columnist Mark Rasch. But what if an adult gives the child their password and permission to make a purchase? It’s still the child doing it and the contract, therefore, probably can’t be enforced.

Why is it that the same people who will easily spend hours playing Angry Birds each week won’t spend an extra hour improving their retail operations? Saving money just isn’t sexy or fun. It’s boring, and that’s the biggest problem.

After many years in retail operations, Retail Columnist Todd Michaud is still surprised how little traction well-developed back-office applications receive. You would think that saving money on inventory, labor or marketing expenses would be all the motivation that a retail owner or general manager would need, but that rarely seems to be the case. That got Michaud thinking about some of the new social applications, like Foursquare, and what makes them successful: Gamification.

The POS industry on Monday (April 16) had the most significant announcement in the last 10 years, as Toshiba TEC announced the purchase of the IBM Retail Store Solutions Business. The fact that IBM RSS was for sale was one of the worst kept secrets in the industry among analysts.

Several years ago, when Tom Peterson was general manager of RSS, it was a much larger group than the $1.15 billion in revenue reported in the release. Pretty much everything that wasn’t mainframe or core supply chain fit under RSS, writes GuestView Columnist Greg Buzek.

As retailers—over the years—have asked for POS improvements, vendors have responded by baking changes into the core products. The problem is that the results are now over-burdened with so many options they are a nightmare to use, tragically difficult to support and wallet-emptying to purchase.

Retail Columnist Todd Michaud has a suggestion: Go pull out the last POS RFP you put together and see what percentage of requirements that were in the RFP are actually in use today. It’s a safe bet you’ll be surprised, especially if it was a long time ago.

When IBM on Tuesday (April 17) announced it was selling its entire POS business to Toshiba TEC for US$850 million, it was arguably the most explicit sign yet that the retail POS hardware business is on its last legs. Not IBM’s POS business, but retail POS activity in general.

Beyond IBM’s history of selling out key areas (printers, laptops, disk drives, etc.) a year or so before the market is about to die, this time it’s the popularization of in-store tablets along with the integration of mobile and E-Commerce that is aggravating POS’s demise. Retail Columnist Todd Michaud predicted in January that this year would see the death of the traditional POS. IBM apparently agrees. (Related Story: Unhappy With Your POS System? Take A Peek At Your Last POS RFP. Don’t You Feel Bad Now?

The great New Jersey giftcard exodus continues. On April 5, Blackhawk Network and InComm announced they’ll pull their giftcards from New Jersey retailers to avoid a new state law requiring them to collect and store the purchaser’s ZIP code. (American Express giftcards are already gone from the state.) Their complaint: It’s an IT project that’s all cost and no business benefit. But in a merged-channel world, that’s not the only problem with the new law.

In fact, what lawmakers probably thought was a simple idea runs into a buzzsaw of complexities—and the IT project is the easiest part of the problem.

A two-year-old experiment at Costco to try self-checkout in a handful of stores has not gone well, with at least one Costco in Idaho pulling the systems out after finding—and attributing entirely to self-checkout—a $60,000 inventory loss in six months, said a Costco management source.

One of the problems with the Costco system in various stores was either inadequate or non-existent notification to customers when a purchase was rejected. If an item’s weight was different than expected, the system would void the purchase and not charge the customer. But many customers didn’t notice the item was rejected, so they placed it in their cart, took their payment-card receipt and left the store.

Oracle took an unusual—and an unusually public—stance against the PCI Council this week, arguing that the Council is gathering too much information about data breaches. Oracle’s concern? The more data that is gathered, the easier it will be to leak.

PCI’s current rule “imposes new obligations on vendors that are extraordinary and extraordinarily bad, short-sighted and unworkable. Specifically, PCI requires vendors to disclose—dare we say ‘tell all?’—to PCI any known security vulnerabilities and associated security breaches involving VPAs. PCI is asking a vendor to disclose specific details of security vulnerabilities, including exploit information or technical details of the vulnerability and whether or not there is any mitigation available, as in a patch.”

Retailers everywhere are finding themselves being hit upside the head with big data. This data is generated by their internal systems, external systems and end customers, and it’s growing at exponential rates. Quietly, this trend is going to add a new player to the corporate ranks: the Chief Data Scientist.

Organizationally, these functional experts will challenge the traditional organizational structure. Data scientists will likely enter an organization through the IT group, because that department is most likely to engage their services to help drive value from information mining projects, pens Retail Columnist Todd Michaud.

Nordstrom found itself paying nearly $1.5 million last year in a scam that was ironically made possible because the chain had banned two brothers, and then compounded the problem with what Nordstrom described as “a lapse in communication” with an affiliate. The retailer’s system for blacklisting lost-package fraudsters worked fine. So did its system for sending commissions to affiliates. But no one ever realized that the two systems might someday interact. After all, why would a blacklisted fraudster keep trying to order online, knowing the order would always be blocked? How likely was that?

And the thing that made the systems interact was something that Nordstrom’s software developers had no control over: the homegrown system that the affiliate site used to handle Nordstrom orders. That’s what couldn’t be tested until a problem actually showed up.

When Amazon on Monday (March 19) announced its $775 million cash deal to buy Kiva, a popular robot automation fulfillment center player, it put many of its existing retail clients in a bind. This includes current Kiva clients—Walgreens and Saks, among others—plus other recent (and possibly current) customers, such as Gap, Crate & Barrel, Staples, Dillard’s, Toys’R’Us and Office Depot. How will all of them feel about systems in their warehouses—which know everything about product flow and, even worse, can control speed, accuracy and efficiency of product flow—being owned and controlled by Amazon, a direct rival? Granted, Amazon would have to be crazy to risk being caught using that information or deliberately slowing down operations. But will the latest technology get shared quickly? Or will Amazon hold onto it for extensive testing in its own warehouses?

And what about the psychological impact of having execs at Walgreens or Toys’R’Us having to write checks to Amazon (or to a Kiva account, fully owned by Amazon)? The devices themselves are impressive little robots, capable of carrying a half-ton of products and knowing where to fetch and where to return. For any sci-fi fans out there, we’re talking about intelligent powerful robots controlled by a corporate empire and working in the inner operations of its rivals. What could possibly go wrong?

Is TJX about to re-enter E-Commerce? Depending on your point of view, that event is either a ways off (and certainly not imminent) or it has already happened. Yes, TJX CEO Carol Meyrowitz said last month that the retailer sees a big future in E-Commerce—but she’s said that during every earnings call for the past year. And if, as Meyrowitz said, TJX has already assembled its E-Commerce team, what’s holding things up?

One answer: Nothing—in fact, TJX has been doing E-Commerce since 2009 in Europe. A different view: TJX really doesn’t want to be the next Target.com.

Sears is not using technology to spot loyalty customers walking into some of its stores. On Tuesday (March 12), The Wall Street Journal reported the venerable 2,700-store chain is doing that in its Woodfield Mall store near Chicago. By the next day, the story had been tweaked: The store “might soon” do that. A Sears spokesman was more blunt: “We do not have that functionality,” he said.

But Sears clearly wants it—like Neiman Marcus and every other big retailer. The challenge now isn’t doing it, but figuring out how it can fit in with what customers expect.

Wendy’s plans to finish a long-overdue upgrade to POS systems in all its restaurants by June, after suffering downtime due to poor reliability from aging hardware in some of the chain’s 6,600 stores.

That’s not a big surprise—POS hardware refreshes happen all the time. It’s how the news came to light: a Wall Street analyst who took the opportunity of an earnings call on March 1 to complain that his breakfast at Wendy’s took too long because it was freshly cooked.

Apple was issued a U.S. patent on Tuesday (March 6) for an interesting way to deal with the transfer of copyrighted multimedia content from one device to another. Digital rights management security techniques often do a good job of screwing up the music, video, podcast or book so that the transferred file won’t work. Apple’s technique not only permits security while a Wi-Fi connection is available but enables the file to be transferred when no wireless connection exists, because it puts the file in a locked area. It’s then unlocked once a connection is established.

The patent envisions using a device’s NFC to transfer the file and to then alert the copyright holder, so the recipient can be charged. Once the NFC transfer is complete, “a gift file created using DRM keys associated with the giftee’s account may be downloaded to the giftee device. If a network connection is unavailable, the giftee device may transfer a locked gift file and a corresponding gift license to the giftee device using a peer-to-peer connection. The giftee device may authenticate the license and unlock the gift file once a connection to the online provider is available.” Of course, a thief could still trick the app into thinking that the copyright holder had been contacted when no such contact happened.

On your list of must-haves for a new retail technology, application functionality is essential and ease of use is great. But the absolute top requirement should be the portability of the system’s data, pens Retail Columnist Todd Michaud — even if you don’t need that portability today.

Being able to move data around your enterprise gives the most flexibility in using that data, and data portability also future-proofs your system by letting you bolt on new technology quickly instead of slowly and oh-so-carefully making changes to what you’ve already got.

For many years, Microsoft top brass entertained Silicon Valley by predicting when it would release an important application and never getting the date right. Microsoft played Lucy to the media’s Charlie Brown. eBay CEO John Donahoe is trying to bring back some of that old Microsoft humor.

In Donahoe’s case, he has been trying to predict what major retail chains will do. Back in July 2011, he confidently told investors that eBay would have 20 national retail trials in 2012. Last week, Donahoe slashed that figure almost in half, now saying that 10 to 15 retailers will be offering PayPal in-store this year.

Due to the (strange? pyschotic? drug-induced?) unusual policies at Amazon, publishers have no idea who their Kindle subscribers are. That puts us here at StorefrontBacktalk in the awkward position of having to make a plea to our Kindle subscribers: Please reveal yourselves, and tell us how you find the Kindle subscriptions. We’re considering some changes to the service and any customer feedback goes to Amazon—and it’s not sharing. Therefore, we’re begging for whatever feedback you want to share to please share it with us directly.

For you Kindle people who have not yet subscribed to our Kindle feed, it’s not bad for convenience when traveling, when you’d like the latest on retail tech and E-Commerce beamed into your Kindle when you’re not looking.

Target.com’s ongoing teething problems are showing up in the bottom line. On a February 23 earnings call, Target CEO Gregg Steinhafel said that during the critical holiday selling season in November and December 2011, the site’s weaknesses hurt comparable store sales—even though the site was no longer crashing the way it did during September’s Missoni Tuesday.

That suggests the fallout from all that lost learning during Target’s Amazon years goes a lot deeper than it earlier appeared. And any advantage in Target’s latecomer-to-E-tail status may have been lost in the struggle just to get the site working properly.

One of the worst parts about managing retail businesses is dealing with unknown future returns. Is that booked revenue all real? You can certainly know that, statistically, XX percent will be lost to returns. But is it possible to know more specifically?

What if your system could look for hints about specific purchases that could be flagged for likely returns? Perhaps a customer who purchases three of the identical shoe, but each one in a slightly different size?

One of the oldest adages in IT is that corporate tends to issue edicts without checking how they will play in the stores, without asking the foot soldiers and store managers whether it’s a good idea. A consultant this week offered a deliciously illustrative example, and it involves Bloomingdale’s and a CRM project.

The coincidental number that was the program’s weak spot? The required information-gathering with a customer took about 10 minutes, which is also roughly the same amount of time it takes most associates to make a new sale. They receive commission for those new sales and nothing for filling out the forms. Wonder why the program didn’t work well?