- Retailers realize that information security needs more attention – 8 of 11 see increased leadership attention from two years ago, and 9 of 11 expect increased budgets over the next two years.
- They are making progress – all of the retail respondents indicated a slight (7 of 11) or a dramatic (4 of 11) improvement in their information security position from two years ago.
- However, they currently don’t have the information security organizational structure to address the changing landscape – only 2 of 11 have a CISO, 2 of 11 have a budget line item, 4 of the 11 have a security or risk committee and 5 of 11 use a standard set of metrics.
- Internal threats and mobility are top concerns – 6 of 11 respondents indicated mobility as their top technology concern. Internal threats were ranked the highest overall security threat with 5 of 11 ranking it #1.
- Retailers will be focused on employee education and using managed services to improve their security situation over the next two years.
IBM Center for Applied Insights
DAVID JARVIS 1000007UE6 email@example.com Tags:  security ciso retail security_leader 2,041 Visits
Special thanks to Geert Van De Putte and Tim Appleby from IBM Software Group for their help with this post.
Like other industries, retail has its own set of unique security challenges. Loss prevention is a significant component of that challenge. The latest National Retail Security Survey stated that in 2011, U.S. retailers lost $34.5 billion to retail theft – combining employee theft, shoplifting, paperwork errors and supplier fraud. That accounted for approximately 1.4 percent of total retail sales last year.
Today, the checkout/point of sale is the nexus for retail security. Here, the four most important flows for a retailer converge – cash, inventory, electronic payments and customer data. All sorts of different security incidents and fraud can happen at this point – self-checkout fraud, shoplifting, counterfeit coupons, employee theft and compliance in theft, and the theft of customer data through compromised equipment.
As the boundaries of retailers extend beyond the traditional brick and mortar of their stores, additional security concerns come into play. There is fraud around online ordering and home shipment, portal security issues for retailer websites, supply chain security associated with contamination, theft and low quality, and even stealing intellectual property (if retailers have their own private labels).
On top of all of this, retailers are also transforming their business with emerging technologies that all have their own unique security challenges. These include new payment technologies like mobile point-of-sale and in-aisle purchasing, e-receipts, RFID and near-field communications, video and social analytics, mobility and multi-channel access and social networking.
All of these are increasing the number of contact points between the customer and the retailer – pushing out the security boundary further and further. Retailers are struggling to create a better, deeper customer experience and, at the same time, mitigate the potential risks to the organization.
The threat landscape and new technologies are creating a need for an integrated security environment. Are retailers up to the task? Are they approaching physical and information security in new, united ways? Is loss prevention being included in more and more technology conversations? Are retailers moving away from being purely reactive?
We gained a bit of insight into this as part of the IBM 2012 CISO Assessment. There were eleven retail respondents from four different countries (France, Germany, Japan and the U.S.). Their answers compared to the overall statistics from the survey shed some light on the issues:
Another statistic that highlights the fact that retailers know the importance of information security but are struggling to address the changing technology environment comes from IBM’s Global Workforce Study. Overall, 49% of respondents stated that they have “completely addressed” their mobile security concern. For retail it was only 22%. However, 73% of retail respondents expect to make significant investments in their mobile environment in the next 1-2 years, signaling they know it is an issue.
Retailers are not only responsible for protecting their own information, but they are under considerable regulatory pressure to make sure they protect customer information as well. They are faced with a diverse array of threats and technologies that are creating new potential vulnerabilities. They need to have the right security organization and capabilities that unites information and physical security, risk, loss prevention and others into a holistic approach. Retailers realize this, but they still have a way to go before they’ll be confident in their capabilities.
Feel free to contribute to the conversation. Are these the right security challenges for retailers? Will it take more than just technology to address them? How do you think they are addressing this important issue today? Do retailers have a harder go at it than other industries because of the nature of their business? Let us know what you think.
Derek Franks 1100007YTJ firstname.lastname@example.org Tags:  roi-for-smart for state industry insights ibm_center_for_applied_in... center analytics of retail applied smarter_analytics state-of-smart smarter_retail smart ibm 1,513 Visits
Consultant, IBM Center for Applied Insights
Welcome! This is the first post in a series of articles I’ll be writing over the coming months that delve a bit deeper into some of the more interesting findings from our State of Smart research here at the IBM Center for Applied Insights. Today we’ll be discussing some of the interesting data points for the retail industry including some surprising findings about CRM.
If you’re not familiar with our State of Smart work, an overview of our research and findings can be found in our Executive Report. We surveyed over 1100 executives worldwide across 9 industries to determine their organizations’ information and analytics capabilities (we refer to these capabilities as “listen” and “anticipate”). We found that organizations with these capabilities significantly outperformed their peers: 1.6x revenue growth, 2x EBITDA growth, and 2.5x stock price appreciation over a five year period. Not bad, huh?
But this only tells part of the story. We also asked these enterprises about where they realize value from analytics and how they deploy “listen” and “anticipate” capabilities. So let’s dig into the retail data a bit deeper.
For our purposes, we’re going to refer to retailers in the top right quadrant as “Outperformers” and everybody else as “Others”. Only 29% of retailers are Outperformers. About 62% of retailers have a high level of “listen” capabilities while only 38% of retailers have a high level of “anticipate” capabilities.
What this tells us is that retailers are pretty good at “Listening” – i.e. capturing data. By and large, most retailers have done a good job of laying down an information foundation. However, a much smaller proportion of those retailers are then translating that data into actionable insights.
So we know that retailers have room to improve when it comes to leveraging the data that they capture. What other interesting insights did we uncover?
For starters, as you might expect from the high “listen” capabilities, retail Outperformers are very good at capturing different types of data. Specifically, 84% of Outperformers capture data at every customer interaction (this was the highest % across any industry we surveyed). The 'data at every customer interaction' spread between outperformers and others is 2.2x, the second highest gap among the nine industry categories.
Additionally, the 56% of the Outperformers captured unstructured data versus 35% of the Others. Essentially the Outperformers are looking beyond individual transaction data and are mining social media, weather patterns, etc to drive more robust information for applied decision making.
The Outperformers then leverage this information to drive actionable insights about their customers. For example, 84% of Outperformers (vs 38% of Others) use their information and analytics capabilities to recommend actions to customers. This can take the form of both customer facing recommendations, such as cross-selling or up-selling opportunities, or internal actions such as identifying next best actions to convert abandoned baskets or reactivate a dormant customer.
The holy grail of retailers has long been to develop deep insights about customers from a variety of data sources and then use these insights to drive actions that positively impact the customer experience and consequently improve their top and bottom line. Our data shows that the Outperformers are doing just that.
What we’ve talked about so far is fairly intuitive. However in the course of analyzing the State of Smart data we saw several things that intrigued us. For instance, found that only 36% of Outperformers vs 31% of Others realized value from customer relationship management. We expected the overall percentages to be higher and gap to be wider. The data suggest several things. First, the true value of CRM has likely not yet been realized by most retailers. Second, the outperformers haven’t yet found a way to drive the additional insights they’ve been generating into their CRM practices.
Hopefully you found this deep dive into our State of Smart retail industry data to be interesting and useful. If you're interested in calculating the potential impact that developing your "listen" and "anticipate" capabilities can have on your business, I suggest you take a quick look at our Smarter Merchandising and Smarter Shopping Experience toolsets. We've developed online calculators that let you quickly and easily get an idea of the potential economic benefits that leveraging analytics can have for your organization.
I’ll be posting more deep dive articles over the next few months. Check back next next week for a deep dive into the banking industry data. If you have any questions about this article or requests for future articles, please feel free to let me know.
Derek Franks 1100007YTJ email@example.com Tags:  marketers surjit_chana cmo marketing retail marketing-science digital-marketing analytics 1,388 Visits
The Guardian's Media Network recently hosted a live chat around the topic of how CMOs can align and use digital marketing and data analytics - two areas we've taken a close look at since the inception of the IBM Center for Applied Insights.
The Guardian notes:
It becomes the job of marketers and CMOs to make sense of all that data and not get lost in the noise. Doing this, takes an analytical and curious approach to data. It's easy to find the "big numbers" but more challenging to find the "right numbers." As Surjit Chana, CMO of IBM Europe, has said, the core principles of marketing haven't changed. What has changed, dramatically, is how those principles come to life in today's marketing campaigns, customer experiences, and business results. In our paper, Marketing Science: From descriptive to prescriptive, we found that only 23% of marketing professionals use tested analytic approaches to understand the vast amount of data they have access to. More traditional marketers, using data to describe outcomes but not determine actions, consistently use data at face value - without applying data models or scientific thinking.
When technology and analytic skills don't exist in the marketing teams, it makes perfect sense to build partnerships with those who do. The closest partner in most organizations is IT. Thus, the renewed focus on CMO + CIO collaboration. We're continuing to watch, collaborate, and recommend approaches to our C-Suite colleagues. Check out "Understanding leading retailers" to see how the retail industry is collaborating with IT and partners to serve customers better.
Derek Franks 1100007YTJ firstname.lastname@example.org Tags:  merchandising elana_anderson customers merchandisers marketing cp consumer-products jay_henderson cpg retail consumers retailers demandtec analytics 1,189 Visits
I came across this Smarter Commerce video a couple of weeks ago and I really like because it gets to the core of what Smarter Commerce is and why you should care about it. If you take a few minutes to watch it, what you’ll notice is that it keeps coming back to the customer as a central theme.
And at the end of the day, that’s really what Smarter Commerce is all about. It’s taking all of that data you’re collecting, helping you develop insights about your customer and the marketplace, and then applying all of that to every aspect of your business.
We recently conducted some research on a couple of specific areas with our colleagues from IBM DemandTec. Specifically, we looked at retail merchants and CPG sales organizations. The retail merchant research was conducted in collaboration with Planet Retail and the CPG sales org research was conducted in collaboration with Kantar Retail.
As we looked at the data from these research projects, we kept coming back to the same central theme as the video above: the customer. Everybody talks about being customer-centric. It’s almost a cliché. But what we found was that while everybody talks about it, most aren’t actually doing it.
Merchants tend to be product and category oriented, and CPG sales orgs tend to focus on their customer, the retailer, rather than the end consumer. Now we’re not saying that merchants should forget about product categories or that CPG sales teams should ignore the retailer, but we found that groups that placed a strong focus on the customer (or more specifically the consumer when talking about CPG) tended to outperform those that didn’t.
These “leaders” were customer-focused and collaborative, both within their enterprises and externally with vendors and partners. And they also made much greater use of analytics to uncover insights about their customers and the marketplace. The differences were really quite striking. For example, Leading Merchants were 1.6x more likely on average to use analytics to drive merchandising decisions, while Leading CPG Sales Organizations were more than 1.7x more likely to use analytics to improve product innovation.
If you’d like to learn more, our CPG paper, Putting consumers at the heart of the consumer products industry, is now available for download, as is our Retail paper, Understanding leading retailers. Take and look and let us know what you think. We're always happy to talk about our research and maybe your question or comment could be the basis of our next blog post.
Derek Franks 1100007YTJ email@example.com Tags:  cloud retail customer_experience retailers 1 Comment 589 Visits
This week, at the annual National Retail Federation conference, “customer experience” is a hot topic. Whether they’re doing anything about it or not, retailers instinctively know experience impacts loyalty, and loyalty keeps customers buying. Forrester Research analyst Harley Manning has long argued it’s the only thing that matters. His premise: “The only source of competitive advantage is the one that can survive technology-fueled disruption: an obsession with customer experience.”
While there’s a lot of truth in Manning’s assertion, I have a corollary – one reinforced by the research we’ve done recently at the IBM Center for Applied Insights: The only way to provide a superior customer experience is with technology-fueled delivery. In other words, fight fire with fire.
Take showrooming, for example. Mobile phones have clearly disrupted the traditional shopping experience. And some retailers are still wringing their hands about sales lost from shoppers checking competitors’ prices and assortments via smart phones while in their stores. Meanwhile, other retailers are finding ways to capitalize on all those devices in shoppers’ hands – through real-time analysis of in-store shopping behavior and merging real and virtual experiences.
What will the next retail disruptor be? Will Square and Paypal do away with POS terminals? How will retailers re-imagine the cross- and up-sell process when checkout counters and wrap-stand displays disappear?
Will cognitive systems like Watson sell products and field customer service questions? What about augmented reality? Wearable technology? Rather than view emerging innovations as threats, smart retailers will see these as opportunities to improve the customer’s shopping experience.
Although Manning might consider IT “table stakes,” I disagree. Obviously, there’s a certain technology bar retailers must meet to stay relevant, but IT – executed well – can still be a differentiator when it comes to the retail customer experience. Admittedly, I’m a bit biased (given where I work). But my opinions are backed by a fair amount of evidence too.
IBM’s annual State of Marketing study – involving more than 500 organizations across 15 industries – showed companies that effectively integrate technology to influence the customer experience are outperforming financially. These leading companies are experiencing 3.4 times the net income growth – and 1.8 times the gross profit growth – of their peers. The study outlines a suite of differentiators that set these leading companies apart, but two fundamental IT capabilities stood out to me.
First, these leaders have tackled the tough job of integrating all their channels. Unlike many of their peers, they’re equipped to deliver a consistent omni-channel experience. This behind-the-scenes plumbing allows them to accomplish the second feat – adjusting those customer experiences as they happen, often based on cloud-enabled data analytics (Listen to IBM Distinguished Engineer Frank DeGilio discuss how cloud is changing the customer experience).
Through integration and contextual insights, these leaders are building the muscle mass they need to tackle technology-fueled disruption. As new possibilities emerge – even when disguised as threats – leading companies will be ready to turn the tables, using technology to reinvent the customer experience.