Scenes from a
Retailing and Problem Solving
To the consumer, shopping is primarily a problem solving activity. Whether buying a new car or a carton of orange juice, the actions consumers take and the decisions they make are in response to some fundamental problem that they are trying to solve. Their problem-solving behavior generally follows the model outlined in figure 1.
fundamental process is repeated billions of times a day
by people all over the world in marketplaces ranging from
street markets to mega-malls, and, more recently, in the
non-physical world of cyberspace. This model drives both
the mundane and the critically important decisions
consumers confront in their lives.
When consumers take on a new problem solving activity, they do so in the context of a lifetimes worth of experience. The decisions that a consumer makes between competing products and competing vendors are heavily influenced by past experience experience both with the tangible goods and services being offered and with the organization offering them. A consumers decision to shop at a particular grocery store may be influenced as much by the experiences they have had at the checkout line as it is by the price and quality of the stores products. The challenge facing the retailer is not only to help customers solve a problem, but to do so in way that is pleasant, efficient, and in some way memorable enough for them so that they will return the next time they have a similar problem or need. Through these repeated and familiar patterns of behavior, consumers establish trusted relationships with retailers.
Technology and Retailing
While the problem solving nature of retailing remains constant, the way it is being played out in the world is changing radically. For most of history, technology was most evident in the production and transportation of goods from place (factory) to place (market). The retailing process was "one-on-one" between the vendor/shopkeeper and the customer.
The introduction of the cash register by NCR Founder John Henry Patterson in 1884, created a new relationship between retailers and technology. This has evolved into an extremely sophisticated reliance on technology to handle all aspects of retailing from merchandising to point-of-sale devices to inventory management.
More recently, technology has played an increasingly important role as a mediator between the retailer and the consumer. The telephone, the Automatic Teller Machine (ATM), and now the Internet have become part of the retail experience. Technology has moved out from behind the counter and directly into consumers hands, homes, and wallets. Technology has advanced to the point where the physical marketplace has become much less critical as a venue for problem solving.
Electronic Retailing and the Exchange of Value for Value
These technological changes have evolved into the concept of Electronic Retailing. Electronic Retailing is a generic term for consumer activated devices and applications in and out of the retail environment that enable shoppers to obtain and act on information relevant to their shopping goals. The lure of electronic retailing is that it combines the one-on-one intimacy of personal service with the mass exposure of the emerging global information infrastructure. For electronic retailing to succeed, it must provide tangible value to both consumers and retailers. Value can be specifically delivered via electronic retailing by offering one or more of the following:
to these very practical metrics of value to the consumer,
there are also intangible sources of value in electronic
retailing that need to be considered. These include such
things as a sense of security and trust when sharing
personal information, and the feeling that even just
browsing without purchasing is a worthwhile and rewarding
Value to the retailer comes from their ability to offer more products at lower prices or cost than their competitors, and from their ability to learn more about the needs of consumers. Electronic retailing can offer this in any or all of the following ways:
retailer and consumer seek value out of their
interactions with each other, the "value for
value" equation is not necessarily a zero-sum
proposition. Progress occurs when changes are made that
improve the "value equation" for both parties.
For example, it can be argued that increased product
quality improves value for consumers by giving longer
lasting, more reliable product. For the retailer, this
quality improvement can translate into lower costs for
customer support, lower product return costs, and greater
customer satisfaction. In electronic retailing, more
efficient operation enables the retailer to offer lower
costs to consumers due to the decreased reliance on
physical infrastructure. Electronic retailing offers
potential economies of both scope and scale, as well as
opportunities to develop stronger, and more direct links
to their customers.
Electronic Retailing and Consumer Shopping Behavior
No longer can retailers simply display their wares and wait for a buyer. Through the explosion of the World Wide Web (WWW), the Internet, and technologies that support networked communication and visualization, the relationships between consumers, retailers, and technology has made the shopping experience revolve as much around information exchange as monetary exchange. On the business process side of retailing, the concepts of physical inventory and distribution are changing through direct electronic linkages between retailers and manufacturers. All aspects of product merchandising and distribution are being altered by new ways of exchanging information about people, products, and the organizations that bring the two together.
consumer side, the changes in user experience and their
long-term implications are more radical. Consumers now
are able to browse information spaces rather than window
shop. Self-service devices and applications are becoming
more and more pervasive in the store environment and in
the home. One may ask whether all the changes offered by
new technology are changing the fundamental problem
solving process outlined earlier. While the problem
solving process may remain the same, the means by which
the process is carried out are being changed. Some
examples of these changes are outlined below:
Problem recognition occurs when a person perceives that they have a need (e.g., a consumer discovers that they are out of milk). With emerging technology, automation will be able to not only recognize the need, but solve the problem. For example, it is technologically possible today for a consumers kitchen trash can to keep track of and re-order groceries. As a consumer throws packages and containers away, the bar codes on the packages are scanned by a device on the rim of the trash can and added to an electronic list of needed items. The list can be confirmed and modified, and sent directly to a pre-selected retailer who then delivers the required items to the consumers home. The act of disposal serves to log the depletion of that item. No longer does the consumer have to keep track of staple items and travel to the store to replace them. This system is no more than an updated version of the milk delivery truck of yesteryear, but has huge implications for the whole concept of shopping that are only beginning to be explored.
The relationship between retailer and consumer in this situation is much more interconnected than would be found in a physical market. Shoppers are offered timesavings and convenience without any added effort. Retailers, assuming they deliver what they promise, become preferred suppliers. Both parties benefit in the short and long term by sharing information that is of value.
SEARCH FOR ALTERNATIVES
Like a form of electronic Yellow PagesŪ where you "Let your fingers do the walking," hundreds of search engines on the World Wide Web allow consumers to scour the world for alternative solutions to their problems. Although these search engines today do little more than locate items of possible interest, shopping "agents" (i.e., autonomous programs that seek specific information), are quickly evolving into sophisticated consumer advocates that can seek many alternatives to a specified need independent of physical location.
These search engines and agents require explicitness to be most effective. The more you can define your problem, the more you can find information relevant to it. This explicitness is of value to both the consumer and the retailer. To consumers, explicitness means being able to find exactly what they want. To retailers, explicitness is a direct and detailed expression of demand. Having a more accurate view of demand allows better decision making about supply.
The traditional approach to evaluating alternatives has been based on identifying suitable products within an acceptable physical proximity (either on the shelf or around town) and then comparing them. Technology is changing the nature of this evaluation step by letting consumers experience the product before buying it. Technologies that let consumers "try before you buy" include the ability to "try on" clothes digitally by electronically superimposing images of the clothing on top of images of the shopper. "Virtual Walkthroughs" of architectural plans are becoming more common, as are interactive programs that let you "build your own" car, vacation or dream house. Service industries like banking are able to offer consumer driven simulations and "what if" scenarios that help enable decision making. So powerful are these evaluation tools, that they are likely to become as important a factor in the buying decision as the product itself.
Today, information is emerging as a form of currency. Many examples exist on the Internet and elsewhere where the "price" of access is to reveal information about yourself. For example, in exchange for answering a few questions, consumers can obtain access to products, services and information otherwise unavailable at any monetary price. This information exchange is valuable as a way to establish truly one to one relationships between consumers and retailers. Consumers benefit because the retailer better understands their needs and can react accordingly by offering products of interest, or by targeting the customer with promotions. As long as the consumer believes that that the information they provide will be protected and not abused, the value received may easily exceed the perceived value of the few minutes spent answering questions.
|Critical Success Factors in Electronic
The emergence of electronic retailing presents both challenges and opportunities for retailers. It provides efficiency and convenience to both the consumer and retailer, yet, if not properly implemented, can interfere with the relationship between them. Our experience in electronic retailing has identified several fundamental issues that are critical to its success.
The problems of navigation, presentation, and interaction with information in large on-line systems are crucial to the usability and acceptance of electronic retail applications. The sheer volume of information that is currently available on-line combined with the predicted growth in access channels and services clearly points out the need for effective, scaleable navigation schemes. In most electronic retail systems today, users navigate via hierarchical menu screens. Experience is showing that this approach does not scale up beyond a few thousand items several orders of magnitude short of what will be required in the very near future by interactive electronic shopping.
For example, todays typical kiosk application employs two dimensional text-with-image navigation schemes where the user is presented with some number of textual items that they must read and choose between. Once they make a selection, a new screen appears with another set of choices and the process is repeated. The practical limits of this navigational approach is only a few thousand items. Beyond this, either the number of choices on the screen become excessive or the search depth becomes so deep that customers become frustrated and lost. A few thousand items may represent only a small percentage of the items offered by a large retail store.
Building and Maintaining Personal Relationships with Consumers
Manufacturers and retailers alike recognize that the relationship with their customers is fundamental to success. Nearly all retailers are concerned with "customer service", which is usually measured as some function of speed of service, reliability, trust, and personal interaction. Having a retailer that "knows" your problems and has a stake in solving them is extremely valuable to consumers.
retailing, the opportunity exists to create a different
shopping experience for each consumer. Unlike traditional
forms of retailing, it is possible in electronic
retailing to identify each customer as they enter the
environment based on a stored profile or other forms self
identification. This creates an opportunity to create the
ultimate in personalized shopping, an experience based
upon specific needs and upon the knowledge and history
each retailer has with their consumers. This
personalization of experience must be weighed against
issues of privacy and security that concern many users.
Always linking the collection and use of personal
information with immediate utility or reward for the user
can alleviate some of these concerns. As security is
largely a matter of perception, every effort must be made
to create user experiences that convey trust, safety, and
Large retail chains are increasingly looking to electronic shopping as a means of providing better selection and greater convenience to their customers while reducing the costs associated with building and maintaining a physical store presence. One underestimated cost is the creation and management of content. The creation of quality product information for use electronically can be extremely resource-intensive, especially for a retailer that is selling the goods or services of others. Although it is possible to leverage from the existing broadcast world of print and video, this "re-purposing" of content has only limited application in a world where information is now expected to respond when touched, clicked, or downloaded. Electronic media is a new channel of communication and is subject to its own set of rules. Organizations that realize this will create content that behaves appropriately.
Another, often overlooked relationship involving content is the one between a retailers physical and virtual store presence. Since consumers will continue to shop both in physical and virtual markets, it is critical that both "worlds" are kept synchronized with each other. Several lawsuits against retailers have appeared in recent years that were based on an apparent lack of consistency between information available in different types of media. These lawsuits involved a price listed on a website that was not the same as a price in a printed advertisement. This type of problem is indicative of the complexity that occurs when creating and managing huge amounts of information in multiple formats.
The issue of identity is critical when users access an organization through electronic media. In the physical world, seeing the same physical store fronts day after day as part of the routine of living, builds a certain amount of brand equity. In the electronic world, this model breaks down since what is seen is almost exclusively a function of what is sought out.
experience of the retail banking industrys
incorporation of technology provides an example. As a way
to decrease costs, banks have aggressively promoted
self-service and home banking as preferred methods of
interaction. Some banks now charge for interaction with a
teller, but provide electronic access at no charge. With
consumers less physically dependent on a particular bank
brand to service their needs, banks are vulnerable to
losing valuable brand equity and identity to non-banks
such as software companies and financial service
companies. These companies have the same (if not
superior) technology, but lack the long-term brand
recognition and trust earned by banks over decades or
more of interaction with consumers. Realizing this, some
banks are making large investments in electronic branding
strategies that look to maintain and enhance their brand
equity. Branding and identity in the electronic landscape
offers new opportunities to communicate. In addition to
branded screen designs, branding is being applied to such
things as interaction styles for user dialogue, prompts
for voice response systems, and the use of sound.
Providing consumers with efficient and engaging experiences in electronic media requires investment in and knowledge of computing infrastructure. Retailers can control the quality of the user experience if they own the platform and network supporting it. For in-store devices such as kiosks this is no problem. The level of interactivity and use of multimedia such as audio and video are under the total control of the retailer and their level of investment in the technology platforms. On the Internet, however, the retailer gives up control over the consistency, and, ultimately, the quality of the user experience. The Internet is not a corporate asset, and the computers accessing it vary widely in their capabilities. As the user experience is dependent on the level of technology creating it, the Internet is a difficult venue to control quality and consistency. In exchange, it does offer quantity (e.g. number of visitors), which can be of great advantage to certain retailers. Recognizing the tradeoffs in both the quality and quantity of user experience, and then working within them, is critical to the success of any foray into electronic retailing.
A final challenge to the success and acceptance of electronic retailing is that, unlike physical retail environments, in electronic space, individual users are often unaware of the presence of others. With the exception of "chat" rooms, the model for on-line services is one in which each user is made to think that they are the only person using the service. The resulting sense of isolation is in contrast to peoples everyday experience of shopping as a public, social experience.
It is this sense of isolation that must be addressed within the basic fabric of the on-line/ electronic experience. The challenge is to create an experience where the user is moving through an open public space and where social interactions with friends or other participants is possible at any time and any place in the virtual world.
the marketplace has been an arena for both commercial and
social interactions. A virtual retail marketplace should
allow people to move through large offerings of products
and services, examining items and making selections for
purchase. It should also allow interpersonal interaction
in a virtual world where people are able to shop with
friends remotely, with visible representations of the
other shoppers using the service, and where customers are
able to interact with store staff and other shoppers over
the network via the shared environment.
Case Study: NCR Virtual Retail 1995
Virtual Retailing is an emerging form of electronic retailing that uses advanced three-dimensional computer graphics and other multimedia technology to facilitate value for value interactions between retailers and consumers. Products, services and information are presented in the context of a computer generated "virtual world" through which a shopper navigates. Familiar organizational structures such as stores and departments can be used to aid the customer in finding their way to products, while the unique capabilities of electronic information systems can be used to make the experience more valuable and enjoyable.
The Virtual Retailing project team of NCRs Human Interface Technology Center has explored the issues behind electronic retailing through a series of prototypes. The images that follow are from a prototype developed by the HITC in 1995 and which is on display in "Living Tomorrow", a house of the future in Brussels, Belgium. In this prototype, we assumed the widespread availability of a number of emerging media capabilities such as high bandwidth network communications, interactive 3D graphics, video telephony, digital speech recognition and intelligent agents.
The goals of the project included the following:
The screen shots on the following pages demonstrate a unique, general-purpose framework for Virtual Retailing. The prototypes are used to gather end-user feedback and to demonstrate operational feasibility. The implementation prototypes have been developed using a combination of industry standard tools, and proprietary NCR technology.
While the market place is undergoing dramatic changes as a result of new technology, the process of shopping remains unchanged. The basis for retail, whether physical or virtual, remains a problem solving process with a value-for-value exchange at its heart . The value that is being exchanged is not limited to money for product. The customers time and attention are also valuable. Also important is the impression that is left on the visitors mind, and its long term effect on loyalty and brand. We have presented a prototype virtual retail environment that addresses these underlying issues through the use of a three-dimensional, virtual world metaphor. As a framework that supports the integrated presentation of information using audio, video and still images within a 3D graphical framework, the intention of the effort is not to recreate or replace the physical shopping experience, but to open new channels of dialogue and interaction between people that facilitates and enhances the exchange of value for value.