Retailers of 2 minds on use of digital tech

  • Article by: THOMAS LEE , Star Tribune
  • Updated: January 21, 2012 - 3:06 PM

Booming online sales are driving interest in futuristic gizmos and gadgets. But many retail executives still aren't sure what to make of them.

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Attendees at the National Retail Federation visit a Microsoft display, Tuesday, Jan. 17, 2012 in New York.

Photo: Mark Lennihan, Associated Press - Ap

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NEW YORK - Retailers had a lot on their minds during the National Retail Federation's annual conference last week: the weak economy, overseas expansion, Internet sales taxes. But for some executives, one particular image came into focus: the actor Tom Cruise.

More specifically, the character Cruise played in the 2002 sci-fi movie "Minority Report," directed by Steven Spielberg. In one scene, Cruise walks into a Gap and after a computer scans his retina, a holographic image appears and offers him a deal on clothing based on his past purchases.

"I thought that was kind of creepy," said David Jaffe, CEO of Ascena Retail Group Inc., which owns Duluth-based women's apparel store Maurices.

Conversely, David Lauren, the executive vice president of advertising and marketing for Ralph Lauren Corp., was impressed with the futuristic technology, in particular a smart window of various images and data Cruise could manipulate via sensors attached to a special glove. He liked it so much that Ralph Lauren actually created one.

"Spielberg called and asked how we built it," Lauren boasted.

In some ways, the two keynote speakers' contrasting takes on the film reflect retailers' ambivalence toward the latest gizmos and gadgets. Despite the explosive growth of mobile devices and online sales, retailers have waded only gingerly into digital technology, experts say.

Nowhere was that conflict more on display than the NRF gathering, where attendees pondered how to best integrate websites and social media into old fashioned brick and mortar stores.

"Retailers are starting to get cautious" about spending big money on high tech, said Alison Paul, vice chairman and U.S. retail and distribution leader for consulting firm Deloitte. "Just because the guy next door is going to give his sales associates tablets doesn't necessarily mean it will work with your store and customers. Every new, expensive technology is not going to fit in with the brand experience."

According to a recent Deloitte survey of retail executives, nearly half said they are playing catch-up to competitors or taking a wait-and-see approach.

"Making the right investments in [information technology] is not a matter of money," the report said. "It is a matter of priority."

Retailing is generally a conservative business, and tech crazes over the years have come and gone to no avail. Just a few years ago, analysts predicted radio frequency identification (RFID) tags would transform the industry. But RFID, which uses radio waves to track items going in and out of stores and warehouses, proved to be too expensive and cumbersome.

Today, smartphones and tablets are the latest buzz -- and for good reason. Fueled in part by mobile devices, online holiday sales last year jumped 15 percent to $37.2 billion, according to ComScore. As traditional stores' share of overall shopping dollars continues to fall, the growing consensus among experts is that retailers have crossed some sort of technological/cultural threshold.

"E-commerce has joined the mainstream as a holiday shopping option and we can no longer think of e-commerce as an 'emerging' channel," according to a recent report from Chase Paymentech.

But what exactly does that mean?

Take Ascena Retail. The company recently experimented with equipping its stores with iPads. The company theorized customers can purchase items not found in the stores like clothing in different sizes and colors. In the end, shoppers didn't bite.

"There were very few orders," Jaffe said. The iPads are great but expensive."

Ascena also tried interactive store windows that shoppers could touch to access information. Again, few takers.

Like many retailers, Best Buy Co. Inc., based in Richfield, monitors chatter about the consumer electronics giant on Twitter and Facebook. But the retailer has yet to figure out how to make sense of all of that information, said Mark Herzog, who oversees consumer research for Best Buy.

"We're trying to be more research-focused," Herzog said.

Retailers are cautious because consumers, not businesses, possess the latest technology and know how to effectively use it, Paul said. Shoppers today can instantaneously compare prices, locate products and identify the best deals with a click of a button.

A better bet for retailers, Paul suggested, is to invest their cash on people. Stores today need a more skilled workforce that can promote brands and guide shoppers through this interaction between online and physical stores, she said.

"Consumers don't see the difference between the website and the store," Paul said.

Thomas Lee • 612-673-4113

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