In Fight Against Amazon, Retail Finds New Ally In Tech

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Baskets vector illustrationNearly two decades after the launch of, brick-and-mortar retailers still face a very real threat from the Web. But today, the industry has a critical new partner: the tech community. Retail has emerged as one of the fastest growing sectors in the technology industry, with venture capitalists, startups and retailers themselves, building products to fuse the web with our in-store experience.

Last year, the prospects looked exceptionally dim for the brick-and-mortar crowd. The press pointed to a new trend in showrooming, where consumers would browse offline and buy online, and revered venture capitalist Marc Andreessen predicted the total collapse of the system. But thanks to investment in new strategies and upcoming changes to the tax code, legacy retailers have managed to rebound from a gloomy outlook. After a turbulent 2012, Best Buy, for instance, has nearly tripled its stock price this year and, for the moment, slowed its massive losses.

The rebound stems in part from a strategic decision made by many retailers to realign their ecommerce and in-store businesses. Speaking at an Advertising Week event in New York Wednesday, Macy’s chief marketing officer Martine Reardon said that the company has made a material investment in implementing an omni-channel strategy that went beyond buzzword to create a seamless experience between the online, mobile and brick-and-mortar experience. After hiring a chief omnichannel officer in 2012, the retailer started to recreate its back-end systems to synchronize its inventory across its stores and e-commerce sites, and installed displays in-stores where shoppers can search and buy goods in other locations and online.

The transformation, which can be seen across the industry, requires executives to approach the problem in a way, argues Rick Chavez, chief solutions officer at Microsoft Advertising: “The winner in all of this in my mind is the consumer,” said Chavez during an Advertising Week panel on technology and retail Thursday morning. “One of the major problem that a lot of [brick-and-mortar] player’s face is thinking about this as a channel or device problem, rather than a consumer problem.”

But the promise of an omnichannel strategy — the ability to create a consistent experience wherever the consumer interacts with the brand — still remains more buzzword than reality today. Retailers and technology companies face deep technical challenges in working between channels, complicated by a wavering consumer, who remains skeptical about giving up the personally identifiable information needed to string these experiences together.

However, new technologies like Apple’s iBeacon feature, which uses Bluetooth LE to broadcast information between devices at short distance, may help ease the friction for retailers. Earlier this month, PayPal released its Beacon dongle for stores, which allows customers with a Bluetooth LE-enabled device to pay retailers simply by giving their name and without touching their smartphones.

“It’s not just about reaching people nearby anymore; it’s about coming to that decision point where people are being swayed by information at the last minute,” said John Dee, president at Placewise Media, a startup that builds marketing technology for shopping malls. “We used to target people who walked in thee model. Now the accuracy is going to be down to the shelf.”

In considering these tools, the marketing opportunity is a big part of the equation for retailers, and the brands that sell through them. But investment remains stymied by an inability to measure success in dollars and cents. Today, technology firms and retailers have worked to tie impressions to purchases, but the projects are still more anecdotal and experimental than quantitative and scalable, says John Roswech, CRO at Hooklogic. During the panel, Roswech said that the retailers who have invested in attribution programs through opt-in programs or passive user ID matching, are able to tie back around a fifth of their purchases to some form of previous engagement. “It’s exciting, but it breaks really quickly. It’s still years away,” he added.

With the point-of-sale ecosystem slow to respond, mobile payments services could offer a more imminent solution. Given the billions of dollars payment processing firms generate annually on interchange fees, retailers have a large financial incentive for bypassing the existing payment system. Meanwhile, many of the firms driving the mobile payment efforts — namely, Google — view the processing of the payment as a loss leader to accumulate the purchase data needed to demonstrate attribution or drive other marketing products. Paying with your phone may do little for the consumer, but together, retailers and digital marketing firms have a large financial stake in their success.

Steven Jacobs is Street Fight’s deputy editor.