Technology and Relationships in Retailing

Technology is beneficial to retailing relationships if it facilitates a better communication flow between retailers and their customers, as well as between retailers and their suppliers, and there are faster, more dependable transactions.

These two points are key in studying technology and its impact on relationships in retailing:

1. In each firm, the roles of technology and “humans” must be clear and consistent with the goals and style of that business. Although technology can facilitate customer service, it may become overloaded and break down. It is also viewed as impersonal by some consumers. New technology must be set up efficiently with minimal disruptions to suppliers, employees, and customers.
2. Shoppers expect certain operations to be in place, so they can rapidly complete credit transac­tions, get feedback on product availability, and so on. Firms have to deploy some advances (such as a computerized checkout system) simply to be competitive. By enacting other advances, they can be distinctive. For instance, consider the paint store with computerized paint-matching equipment for customers who want to touch up old paint jobs or who threw out their old paint can without saving the custom color number.

Throughout this book, we devote a lot of attention to technological advances via our “Tech­nology in Retailing” boxes and in-chapter discussions. Here, we look at technology’s effects in terms of electronic banking and customer-supplier interactions.

1. Electronic Banking

Electronic banking involves both the use of automatic teller machines (ATMs) and the instant processing of retail purchases. It allows centralized recordkeeping and lets customers complete transactions 24 hours a day, 7 days a week at bank and nonbank locations—including home or office. Besides its use in typical financial transactions (such as check cashing, deposits, with­drawals, and transfers), many retailers now use electronic banking. These retailers accept some form of electronic debit payment plan (discussed further in Chapter 13), whereby the purchase price is immediately deducted from a consumer’s bank account by computer and transferred to the retailer’s account.

Worldwide, there are more than 3 billion ATMs—450,000 in the United States alone—and people make several billion ATM transactions yearly (there are 800 transactions, on average, per month per ATM machine).²⁶ These automated machines are located in banks, shopping centers, department stores, supermarkets, convenience stores, hotels, and airports, as well as on college campuses and other sites. With sharing systems, such as the Cirrus, Maestro, and Plus networks, consumers can make transactions at ATMs outside their local banking areas and around the world.

The widespread acceptance of the smart card, which contains an electronic strip that stores and modifies customer information in real time, is important for retailers and shoppers alike. A smart card includes an embedded integrated circuit chip and communicates with a reader through physical contact or with a remote contactless electromagnetic field that energizes the chip and transfers data between the card and the reader.²⁷

The adoption of Apple Pay, Android Pay, and Samsung Pay apps since 2014 through NFC- enabled mobile devices allow for contactless payments. Contactless payment transactions do not require physical contact between the consumer payment device and the physical point-of-sale (POS) terminal. The consumer holds the NFC-enabled mobile device in close proximity (less than 2 to 4 inches) to the merchant POS terminal and the payment account information is com­municated wirelessly (via radio frequency).²⁸

2. Customer and Supplier Interactions

Technology is changing the nature of retailer-customer and retailer-supplier interactions. See Figure 2-10. If properly implemented, benefits accrue to all parties. If not, there are negative ramifications. Here are several illustrations.

Retailers widely use point-of-sale scanning equipment. Why? By electronically scanning products (rather than having cashiers “ring up” each product), retailers can quickly complete trans­actions, amass sales data, give feedback to suppliers, place and receive orders faster, reduce costs, and adjust inventory. There is a downside to scanning: the error rate. This can upset consumers, especially if they perceive scanning as inaccurate. Yet, according to research on scanning, scanner errors in reading prices occur very infrequently; although consumers believe most errors result in overcharges, overcharges and undercharges are equally likely. One way to assure consumers is to display more information at the point of purchase.

One type of point-of-sale system involves self-scanning (which is discussed further in Chapter 13). Here’s how a basic customer-operated point-of-sale system—a self-scanning checkout—works: Shoppers do not interact with a human cashier (although a supervisor is usually nearby to assist the customer) because these shoppers scan merchandise themselves, insert coupons in designated slots, use an electronic cash register to process a cash, credit, or debit payment, and bag their merchandise themselves. The display at a self-scanning check­out is typically touchscreen and visual. Items are placed on a flatbed scanner that reads each item’s barcode; for produce, the item category is entered, the item weighed, and the price then processed by the scanner. If the shopper forgets to scan an item, an alarm will alert the supervisor.²⁹

The combination of self-scanning and mobile technologies in the form of scan-as-you-shop yield a form of self-checkout. Also, customers can scan items as they select items from store shelves and add to their cart using a smartphone app. They can tap to redeem the digital coupons offered by the retailer’s loyalty program that they had selected earlier. Those customers can pay at a self-checkout unit using cash or saved payment data from their mobile wallet, get a receipt, and get cash back—as in an ATM—before exiting the store. It is an easier, quicker, and automated experience for customers and allows retailers to standardize payments, reward redemptions, and personalize product recommendations based on prior purchases via mobile marketing campaigns to the individual customer.

Other technological innovations also influence retail interactions. Here are three examples:

• Many retailers think they have the answer to the problem of finding the perfect gift—the electronic gift card. Sales revenues in the gift card industry are over $100 billion annually. Almost 93 percent of consumers have received or given a gift card each year. Gift cards spur buyers into making new purchases, often within the first 90 days, and most consumers spend more than the gift card amount.³¹ Some retailers now offer a gift-card exchange to customers who can swap physical gift cards issued by other firms (sometimes competitors) at a dis- count.³² Retailers promote and sell gift cards as a means to increase sales, improve cash flow, and manage inventory. Retailers may even offer virtual gift cards through Web sites and mobile apps delivered to recipients by E-mail, text, Facebook post, or tweet.
• Interactive electronic kiosks (discussed in Chapter 6) are widely used and accounted for more than 40 percent of the $1.2 billion global interactive kiosk market as of 2014.³³ Smart kiosks equipped with sensors are able to collect and analyze data from customers, display product recommendations, and place orders to customers engaged through the entire path to purchase. Reasons for smart kiosk popularity include increased customer preference for self-service (e.g., hotels, airports, restaurants); a better interaction of customers with kiosks in stores to place online orders (e.g., Lands’ End, Staples); access to product information (e.g., Staples); and the ability to customize products (e.g., Dr. Scholl’s FootMapping kiosks). Smart kiosks reduce or eliminate the need for in-store personnel to do mundane tasks, thus reducing costs. However, mobile apps pose a threat to kiosks. Many tasks performed at kiosks can be done using smartphone apps that require very low investments for retailers. Some kiosk-mobile-integrated uses like Amazon Lockers use mobile apps to communicate passcodes and locations to customers and kiosks as dispensing or collection centers that interact with them.³⁴
• More retailers are using Web portals to exchange information with suppliers. For example, ChainDrugStore.net serves a network of pharmacy stakeholders through its industry Web site, hub.pharmacyfocus.com, to provide efficient pharmacy purchasing, dispensing, reimburse­ment, and contracting. These portals provide a set of online tools designed to streamline com­munications, drive analytics and proprietary business intelligence, and manage the day-to-day data requirements of a pharmacy network. They work with more than 300 manufacturers, wholesalers, and managed care organizations to positively impact pharmacy purchasing, dispensing, reimbursement, and contracting strategy by secure online communications, ana­lytics, and proprietary business intelligence tools. ChainDrugStore.net is the link with more than 100,000 stores and pharmacies.³⁵

Source: Barry Berman, Joel R Evans, Patrali Chatterjee (2017), Retail Management: A Strategic Approach, Pearson; 13th edition.