Evan Schuman's StorefrontBacktalk

With all of the new data coming in from mobile and social, retail IT has a truly strategic psychological problem. The old way of creating interfaces between systems can’t scale and will not deliver the results this new world of information overload demands. You’ve got to stop thinking about interfaces and start thinking about services. You’ve got to stop thinking about batch ETL processing and start thinking about real-time data integration and unstructured data.

You’ve got to start accepting cloud computing as a method of scaling your computing platform up and down, pens Retail Columnist Todd Michaud. In short, you’ve got to rip out most of your information architecture and start over.

When the $7.3 billion Hy-Vee regional grocery chain on Monday (Jan. 23) rolled out its in-store mobile app, it encouraged customers to use Twitter to report out-of-stock items. It’s a wonderful move, acknowledging—and addressing—a communication hole that exists because of an outdated management structure.

In a typical chain store, what happens when a customer discovers a problem, be it an incorrect price label or an out-of-stock or expired product? It’s up to the customer to track down an associate. What happens then? Usually nothing, because it’s quite unlikely it’s the primary responsibility of that employee to deal with that problem.

In the power struggle between retail marketing and retail IT, IT is getting its server farms kicked. It started with E-Commerce and is now growing with mobile and social. What has to go? If it can go in the cloud, get rid of it. E-Mail? Gone. Web hosting? Out of here. CRM? Exit, stage right. If it can be easily outsourced by specialist firms or even done by people in the business unit, you need to let it go.

It’s time to evict Web and mobile app development, and pretty much any marketing initiative that isn’t core to your business. Heresy? Certainly, pens Retail Columnist Todd Michaud. But it’s necessary.

Best Buy’s Black Friday disaster is a huge deal precisely because it strikes at the very heart of E-Commerce fears. Namely, a consumer needs to feel confident that once an order is paid for, the product will absolutely be arriving shortly.

Although Best Buy has yet to spell out how this happened, the most likely scenario is that it was the so-called perfect storm of bad timing and possibly a quantity typo. How much of a delay happened while employees desperately tried to find the—unknown to them at that point—non-existent merchandise? In a $50 billion chain, news can travel upstream very slowly. When the news is bad, it travels upstream even more slowly.

As is our tradition, StorefrontBacktalk shuts down for the last two weeks in December, due to the fact that y’all are far too busy (a) supporting the biggest selling weeks of the year until December 25th, (b) supporting the biggest returns-and-exchanges week of the year after December 25th and (c) closing the quarterly books until December 31st on what everyone hopes will be a bigger year than 2010.

That means our next regular weekly issue will arrive on January 5th, 2012. In the meantime, everything else will still be live (the Web sites, our Kindle version, our Twitter tweets, our mobile sites, etc.). And we’ll, as always, send out breaking news alerts if circumstances merit.

A message from our beloved business side: As the NRF Big Show happens next month, StorefrontBacktalk has a couple of last-minute slots for anyone wanting to communicate with NRF attendees. In mid-January, as our readers leave their postmortem holiday shopping meetings with the list of everything that went wrong, every feature management wants to add and a wishlist of products to make it all, it’s a nice time message.

We will also be adding several content channels next year—including several new weekly podcast series, more monthlies, events in addition to our usual weekly and monthly newsletters, and Web sites—and if your marketing people have any interest in getting involved, we now have new opportunities. Some of these new channels were specifically created to enable smaller vendors, with much more limited resources, into our community. If your marketers want to get your brand in the middle of these discussions, please drop us a note.

Late on Wednesday (Nov. 30), the 11-year-long battle between the 288-store 29-state Dillard’s chain and JDA Software/i2 finally closed, when JDA agreed to write Dillard’s a check for $57 million. The vendor’s check was to compensate Dillard’s for what were allegedly lies the software company used when selling a supply chain system. But the filings in the case provide a rare look into how software companies regard sales tactics and it’s essential reading for all IT execs before their next meeting with any software sales rep.

Quick background: JDA was not involved in this matter when the sale was made in 2000 and is only now involved because JDA bought i2 in January 2010. In June 2010, the case went to trial and a Texas jury awarded Dillard’s $237 million. That’s an impressive amount given that Dillard’s had only paid $2.4 million for the software. JDA/i2 appealed and Wednesday’s settlement happened while the appeal was still processing. Dillard’s position has been that JDA lied to them during the sales process and that the $6.1 billion chain didn’t receive the value the vendor had promised.

Just a reminder that StorefrontBacktalk now has five free monthly newsletters, each one focusing on a different key area for us: E-Commerce, Mobile, PCI/Security, In-Store and CRM. The Monthlies—see the descriptions here—are available to anyone via a quick E-mail sign up.

The Monthlies publish the first few days of each month, and they are a great way to catch up on all of the news in a given area. So before you miss the December Monthlies, sign up for your free copy.

Given the dominance of the key U.S. holiday next week (we mean Thanksgiving, not Black Friday), StorefrontBacktalk‘s weekly newsletter won’t publish on November 24. Everything else will still be live (the Web sites, our Kindle version, our Twitter tweets, our mobile sites, etc.), but we need a little time off to burn some turkey and over-season some stuffing.

Speaking of which, we want to tap into the knowledge of our audience with a question that has nothing to do with retail technology. One of us here at StorefrontBacktalk is going to try something new for Thanksgiving: Cooking the turkey on a gas grill. The problem is that, well, it’s me. And my Weber grill seems to have two temperature settings: 750 degrees Fahrenheit and OFF. To be precise, it has tons of settings, but those two numbers seem to be the only heat levels the beast is capable of delivering and maintaining. In a short duration grilling (say 5 to 8 minutes), it’s easy to compensate. But when dinner for a dozen people needs to cook for five hours, I’m open to any tricks to get the temperature to get down to 325 degrees and to stay there. Any suggestions? If you do have any suggestions, please E-mail me at Help Evan To Not Turn His Entree Into Sawdust Held Together By Static Electricity.

Macy’s is testing a merged version of its brick-and-mortar and online inventory systems chain-wide, and it expects to go live with the new system early in 2012. On Wednesday (Nov. 9), Macy’s CFO Karen Hoguet told an earnings call that “we’re going to be able to do [chain-wide merged inventory] very soon. We’re testing it right now. And early next year, I think we’re going to start doing it more and more, with the systems we have today. Having said that, we are going to invest over time in better systems that allow us to maximize the inventory easier without as much manual intervention, but it’s not going to prevent us from doing the site to store to door.”

That merged inventory will presumably be the base for Macy’s item-level RFID efforts, which are slated to go chain-wide by 2013. Merged inventory could also smooth out some of the kinks in Macy’s Search-and-Send program, which lets one store access inventory from another store and have items shipped directly to a customer. That’s currently in only a few dozen stores, but it should be easy to roll out chain-wide once the merged-channel inventory is in place.

Shoplifters and employees who steal are classic in-store loss-prevention problems, but fully one-fifth of shrink is due to administrative errors and supplier fraud—things that LP isn’t designed for but that conventional IT should be a lot better at dealing with. According to the annual “Global Retail Theft Barometer” report out this week from the Centre for Retail Research in the U.K., about 20 percent of shrink worldwide is due to administrative errors (including “pricing mistakes, accounting errors and process failures,” the report says) and fraud or errors by suppliers.

That’s a huge chunk of loss that should be fixable with nothing but better automation. The other 80 percent is predictably split between external and internal theft, though that split varies widely: In the U.S. it’s 36 percent shoplifters and 44 percent employees, while worldwide that’s flipped: 43 percent shoplifting and 35 percent internal theft. But using IT to cut administrative-error shrink has at least one big advantage over Loss Prevention: Those errors aren’t working hard to hide themselves. And if you can use better systems to cut admin-error shrink in half, that’s roughly as good as catching a quarter of your shoplifters.

Macy’s on Wednesday (Sept. 28) pledged an aggressive chain-wide RFID rollout, promising to item-level tag some 700,000 UPCs in every Macy’s and Bloomingdale’s by the end of 2013. That will represent about a third of all of the $25 billion chain’s products and one of the most aggressive retail item-level deployments yet. Macy’s won’t be tagging any of the replenishment goods directly, leaving that task to its suppliers, who will ship products to Macy’s already tagged.

This massive item-level selling-floor-to-the-stockroom project began as a pilot at the Bloomingdale’s New York SoHo, which is a pilot-friendly place apparently—the chain is now using Bloomingdale’s SoHo to test Google Wallet. As a practical matter, this rollout will give Macy’s a wide range of technology options as the potential of full item-level RFID gets closer. But Macy’s is officially focused fully on just one RFID function: faster and more accurate inventory.

Starting today (Sept. 14), we are making our monthly topic-specific newsletters available for all of our readers, for free. These five newsletters—each one covering solely E-Commerce, Mobile, PCI/Security, In-Store or CRM issues—have until now only been available to Premium subscribers.

For readers focused on any of those areas, the Monthlies provide an easy way to keep up-to-date and to make sure you don’t miss any story important to your operation. The Monthlies also have two other helpful features.

One of the very best times for a retail thief to strike is when technology is brand-new, because employees don’t yet know what to expect and therefore can’t recognize unusual activity. That’s the hole an 18-year-old Macy’s associate tried to use when his Syracuse, N.Y.-area store had just started the chain’s new Search-and-Send program, which allows one store to access the inventory from another store and have items shipped directly to the customer.

Indeed, the associate might have gotten away with it, had he not gotten too greedy and obvious. How obvious? He purchased the chain’s most expensive Movado watch—a $2,995 Swiss timepiece with a tungsten carbide bracelet—but not before he “processed an unauthorized markdown” to make the price $2.95. Think a better-than 99.9 percent discount would trigger a flag? The good news for Macy’s low prevention: It did indeed trigger a flag. The bad news: Nothing in the system stopped the associate, who had worked for Macy’s less than five months at the time, from processing it and having the product shipped.

While U.S. retailers—including Macy’s and JCPenney—are just starting to get comfortable with item-level RFID, a pair of German supermarket chains is already taking the next step—tagging associates, too. By using active tags, the chains are able to not only handle access to sensitive areas but flag when an employee has been in a freezer too long and may need help.

The grocers, ALDI and Lidl, wanted to offer hands-free access to security areas, said this report from RFID Journal. “Lidl installed a reader inside the freezer near its entrance. When a person with a transponder arrives, the ID number is recognized, unlocks the door and allows him entrance,” the story said. “As he remains in the freezer, the reader continues to read the tag once each second. If it is still reading the tag in 15 minutes, it triggers a loud siren that can be heard outside the freezer.” It’s long been argued that RFID can deliver retail ROI, but only if retailers forget what vendors have promised and start getting creative about discovering their own ways to profitably use the tags to do what can’t easily be done any other way. Looks like ALDI and Lidl have already started thinking outside the box—and inside the freezer.

A comment from a reader on an E-Commerce Web site caught my eye. Forget about improving POS terminals for mobile, he said. It should work like this: I see something I want to buy. I scan the tag with my phone. I type in my PIN. Bang—it’s mine. That sounds like the perfect merger of in-store and M-Commerce—no more lines at the cash wrap for the retailer, instant gratification for the customer. There’s just one nagging problem. OK, there are lots of problems, but consider this one: When everyone is walking out the door with their items in hand, how do you tell what’s been bought and what’s being stolen?

Clearly it can be done—Apple Stores let roving associates complete transactions and so does Home Depot for some transactions. But doing it on a large scale with easy-to-shoplift items? The obvious answer is to use technology—and it’s possible to do with currently available technology. Unfortunately, there’s a tradeoff between privacy and loss prevention that customers may not be ready to make just yet.

Macy’s is quickly moving ahead with its RFID item-level tagging efforts, with one report saying the testing has expanded to six distribution centers. But the retailer is saying that significant additional moves will only happen when key competing retailers make their item-level RFID moves. It seems that the $25 billion chain has figured out the difference between being an industry leader and leading an army of one.

Nowhere is that distinction more critical than with item-level RFID. Suppliers will resist—if they resisted the early Wal-Mart edicts and risked the wrath of Bentonville, they’ll resist Macy’s—and they’ll only sign on either when they see concrete benefits or when the percentage of retailers making the move is so high that they have no option but to comply.

Every now and then, there’s a retail use of online that is actually likely to do good at the same as it helps retailers do well. The Retail Orphan Initiative on Tuesday (July 12) got quite close when it rolled out a charity-locator feature designed to deal with retail overstocks. One of the historic problems charities struggle with is the logical challenge of connecting companies and people with food, clothing or other items that they want to donate with entities in a position to accept and redistribute where they’re needed.

The Charity Locator is designed to help retailers get tax write-offs while dealing with some $65 billion of overstocked items every year. The locator features an interactive map of nearby charities from a RetailROI-developed database of 501c3 organizations across the country that focus on at-risk children, women in distress or families in need. The charity locator includes the top 125 cities and the top 300 largest malls in the U.S., with information on types of items each charity accepts, including clothing, food, furniture, building materials and educational materials. The system automatically recognizes the address of the retail store and suggests three to five local charities that will accept donations. It’s definitely worth considering.

One retail IT line that is too cynical to not share: In an unrelated interview, a senior IT manager discussed working with certain internal clients—business unit heads who had, until recently, been just colleagues.

What’s the difference, he was asked, between a colleague and an internal client? “Simple,” he said. “An internal client is a colleague who’s had his reasonability removed.”

Some of you may have noticed today that we have added a new pair of graphic icons for the newsletter: one that says Premium and one that says Free. Since we launched Premium back in late April, we have heard from multiple readers who apparently thought—quite mistakenly—that all of our stories are now Premium.

In fact, the vast majority of our stories (often 80 percent or more) are deliberately not Premium. We are hoping that these colorful images will make it easier to tell which stories are Premium and which ones can be read in their entirety by non-Premium subscribers. We’re hoping that this clarification cuts back on the frustration of non-Premium readers who click on stories that they can’t read fully as well as encourages readers to click on a story, confident that it’s entirely available to them. This is also a good time to explain how StorefrontBacktalk decides which stories are Premium.

Retail CIOs are much more aggressive than their other sector counterparts in planning for more IT hires, according to new survey figures released this week by Robert Half Technology (RHT), which surveyed 1,400 CIOs (of multiple industries) from companies across the United States with 100 or more employees. But when RHT—at StorefrontBacktalk‘s request—isolated the answers to solely the 148 retail CIOs surveyed, the conclusions changed.

The most glaring difference was for projected hiring. When compared with the national numbers and against seven other verticals (manufacturing; finance, insurance and real estate; professional services; construction; wholesale; transportation; and business services), retail CIOs were the most optimistic about hiring IT people, tying manufacturing, with 9 percent of both segments’ CIOs saying they plan to add staff and one percent saying they plan to reduce staff. The national average is 7 percent to hire and 3 percent to reduce. Three percent of wholesale CIOs say they plan to hire, with zero planning to reduce. Finance CIOs also have 3 percent planning to hire, although 8 percent plan to reduce.

The long-awaited GS1 DataBar is about to come into its own, as the high-density barcode becomes the default code for grocery coupons on July 1. Although the increased information packed into a DataBar is supposed to improve inventory management and cut coupon fraud for grocers, early indications are that some manufacturers are getting parts of the code wrong, thereby wiping out some supply-chain and inventory advantages. And if grocers have to be forgiving of all those DataBar errors, it could make coupon fraud easier, not harder.

Big retailers that handle groceries are theoretically ready to handle DataBar coupons at POS, but the reality is that there has never been a large-scale, full-on test of these coupons with no UPC-A codes to fall back on. And no one from the barcode’s sponsoring organization seems to be offering practical advice on cutting the risks—which could lead to unhappy customers and a backlash among grocers.

A group of franchise BP gas station owners are suing the petroleum giant, arguing that the POS systems the chain mandated were overpriced, defective, caused inventory errors and double-charged some customers while giving others a free ride. And the lawsuit further suggests that BP management knew the systems—from Retalix—were defective when they insisted they be used. The legal attack on BP is the latest example of the evolving nature of franchisee IT politics. With BP, it’s the franchisees pushing back on a mandated POS system. But another active case—involving Burger King—is the same issue in reverse, with Burger King suing some of its franchisees for having not implemented a mandated POS system.

Even Visa late last year reclassified franchises for PCI purposes, bowing to the new realities. The issue behind almost all of these incidents is the struggle around who gets to decide IT moves within a franchisee operation.

eBay is pushing ahead with its local inventory search efforts. These include a deal with Intuit’s QuickBooks POS package to feed SMB retail inventory data directly into eBay’s engine with a plug-in, through eBay’s Milo acquisition. eBay seems to have opted to attack the easiest part of the local inventory problem, hoping that the exponentially harder part—getting tens of millions of small retailers to computerize their inventory in at least a semi-rational form—will somehow work itself out.

This is both good news and mediocre news. It’s good news in that major players are at least trying to tackle some of the toughest issues facing retailing today. (The other most challenging retail tech issue today—mastering social media content and marrying it with CRM data—is also being tackled this month, by Wal-Mart. Not unlike eBay’s pragmatic challenges with local inventory, Wal-Mart is discovering that there’s a reason social media data efforts are feared by so many in IT. It’s genuinely difficult stuff.)

A blind call-center worker on April 12 sued a Maryland county government over a job downgrade and pay cut after the county merged its non-emergency call centers but didn’t preserve screen-reading technology. Yasmin Reyazuddin, a multilingual information specialist, said she researched the necessary configuration changes after the county bought Oracle’s Seibel CRM system, but when she raised questions about the switchover she was demoted, moved to a non-call center job and told her pay would be reduced. She wasn’t even allowed to try the system to see if she could use it anyway.

Wait—there’s a call-center employee who’s already using assistive technology, is capable of researching whether the new system can be made accessible (according to Oracle’s documentation, it can) and is willing to look for a workaround for any problems. And that’s the employee IT can’t figure out how to accommodate in the project plan? That isn’t an employee you bury. You loan her to IT to figure out the cheapest way to get a screen reader working and then end up collecting good publicity instead of a federal lawsuit.