Since 2000, time-strapped fashionistas have been able to avail themselves of the latest designer fashions online through Net-a-Porter, a popular leading luxury apparel online retailer. On the face of it, one would think that selling luxury items, especially designer frocks, requires a face to face interaction with the customer - bearing in mind the products have a very high ticket price. However, the retailer had done its homework and targeted what it accurately predicted was going to be a growing majority of young, sophisticated, cash rich but time strapped fashion divas. Indeed, their customers have an average income of $300,000 per customer, an average age of 35 and generate average orders of around $1000 per order. To some extent, in recent years, the media has also caught on to this target market and has had phenomenal success with the steady release of zany rom-com “chick flicks” of the Bridget Jones variety. In other words, this is a customer segment not to be ignored.

The attraction of Net-a-Porter is not only that they can command the loyalty of high fashion houses, but, very importantly, they have got it right with the customer. The website is well constructed and easy to use with clear instructions on how to shop, how to return and get refunded and shipping policies (they ship to 170 countries). Most importantly, they offer several ways for customers to get in touch with them on order inquiries - 24/7. Customers can also talk to real live fashion advisers for advice on products, styling or even how to choose a gift, with service currently available 9am - 6pm GMT. Net-a-Porter has also been innovative. In Feb 2008, it teamed up with the re-launched Halston fashion brand to offer customers the chance to buy and receive two key pieces from Halston’s new season’s collection less than 24 hours after it was seen on the catwalk, thus beating store stock by weeks.

According to customer blogs and review sites, customers like the site because of the helpful comments on accessorising and finishing off outfits, the catwalk videos and information on the latest trends and the most wanted items. Apparently the trick is to just go ahead and buy something if you like it - to avoid what retailers term "WIGIG" (When It's Gone, It's Gone)! This is because Net-a-Porter has got their catalogue down to a fine art - if you prevaricate, there’s a good chance you’ll be disappointed.

However, even the fashionistas have fallen victim to the credit crunch and are desperately hunting to get pieces from their favourite fashion house at bargain prices. Again, the retailer has judged the mood correctly and in February, they will launch "Outnet". This site will offer deeply discounted designer prices by taking advantage of cancelled shipments of clothes and shoe orders by department stores feeling the negative impact of the credit crunch.

Net-a-Porter has been well rewarded by its customers and no wonder. It has demonstrated that it not only knows the likes the wants of its customer base, but knows how to keep them loyal - with well chosen merchandise, good customer service and by being innovative, even in the economic downturn, in their approach to the customer proposition.

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We attended the NRF 98th Annual Convention and Expo show in New York last week and we will shortly be publishing our official report on the event. However, here are a few observations that we wanted to call out.

The general impression was that there was less "buzz" this year, with no big retailer or vendor announcements - beyond the latest bankruptcies. Without looking at the official stats, in general, numbers appeared to be down at the speaker sessions, although the Expo floor appeared to be as active as the past couple of years. Over the years, we have observed that the annual NRF convention is steadily increasing its technology content - this year continues to support our observations.

A half hour acrobatic circus act first thing in the morning was not necessarily an inspirational way to kick off the main convention in one of the worst years facing retailers. It was certainly a strange way to set the scene for main keynote speaker Lee Scott, the outgoing CEO of Wal-Mart. That said, and given that globalization was a key theme, it was disappointing that his address as well as many of the main sessions were US-centric. Though NRF's membership is mainly US-based, there has been increasing international participation. There was a sizeable representation from international retailers and vendors from places other than Western Europe - we came across several international retailers including some first time attendees from South Africa and Brazil.

On the show floor, demonstrations of customer-facing technology drew the crowds. Particularly popular was the Customer Experience concept store showcasing a total immersive customer experience, especially targeted to multimedia through a combination of technologies. There was a "nod" to green retailing with the Green Concept store showing how green technologies could be incorporated into the store environment. However, the merger of the two concepts – showing how to be "green" in a customer friendly store - would have been more effective. If "green" is meant to be separate, then its success will be limited.

Customer-centricity and multi-channel retailing emerged as recurring topics in our discussions with retailers and vendors alike. However, these were set in the context of the overarching theme of the challenging global macroeconomic climate. We heard of many capital expenditure cuts, but at the same time, we heard that large technology initiatives that were already under way were not being stopped.

The coming year is going to be hard, so retailers need to focus on strong execution in the channels, offering the best customer experience they can and keeping a watchful eye on their cash position.

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It's been a tough year already for retailers. Last week, Circuit City announced it would start to liquidate all stores and that its 30,000 employees would be joining the unemployment ranks soon. Also last week, California based Gottchalk's joined the list of retailers filing bankruptcy protection. As retailers continue to run their businesses and execute their rebound from the worse holiday season in 30 years - essentially planning their safe landing in the same way the USAir pilot saved all 150 passengers on his plane - the good news is there is still time for many retailers to get their stores and business focused on things that matter most to customers.

For years our consumer research has shown that the most important things consumers want when shopping in stores in any segment is in-stock items followed by easy to find items, informed associates and faster checkout. Soon we will publish more detailed findings from research that explores in detail what consumers say are the most important shopping basics across all of the major segments and selling channels. What is clear from this research is that the top thing consumers want from retailers across virtually every segment and selling channel is in-stock items. How retailers structure their business to deliver on what's most important to customers by channel and segment can be the difference between filing bankruptcy this year, or sustaining their business for the coming year and the long haul.

Circuit City was so busy chasing Best Buy rather then defending and differentiating their value proposition, that they missed their opportunity to focus their business and execute on the things that mattered most to customers: keeping items in stock, having informed staff and easy to find items. The few times I did shop Circuit City in the past year, I could see that some items I was looking for were not in stock or available, or it seemed that most of the time I had more knowledge of specific electronic products than the associate. These were symptomatic of a retailer in trouble. To survive these tough times, it's worth repeating: stay focused on what is most important to your customers. This is the best advice we can give for 2009.

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As noted in this story, Sears is planning to open a warehouse-style location where consumers can pick up orders they placed online. The concept store, which Sears calls MyGofer, will offer consumers the convenience of online ordering combined with the instant gratification of local pick up. The store pickup will include a drive-through option so that consumers can receive their merchandise without having to get out of their car. The concept store will be located in Joliet Illinois and is scheduled to open this summer. While this is a new approach for Sears, the approach has been tried in the past with chains such as Service Merchandise, however the model is much more viable in today's robust online commerce environment. Additionally, the combination of online ordering and in-store pickup is becoming more commonplace among retailers, with stores such as Best Buy offering it. The Sears approach is a lower cost approach and should appeal to consumers watching their spending.

For retailers, one of their largest expenses after inventory and labor is found in operating their physical locations. For Sears, this concept would offer a compelling value proposition to consumers and the store should be able to service a large consumer segment without having the high costs associated with merchandising, store fixtures, managing shrink and to some extent labor costs, as this concept store should require fewer sales associates to operate. The store reportedly will have 80 percent of its space dedicated to warehousing and 20 percent dedicated to showroom. Sears is trying to implement a store which bridges online shopping and physical store fulfillment. Gartner research has shown that many consumers see cross channel consistency as important and they could potentially value this combination of convenient ordering via online shopping and rapid fulfillment via the physical store location. Sears is noncommittal when it comes to plans beyond the concept store, but in this down economy where consumers are looking for convenience and value, this approach may be just the ticket for picky consumers. More importantl,y it may give Sears a cost reduced business model that could help in its efforts to turn things around for the chain.

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January 11th saw the opening of the 2009 National Retail Federation (NRF) show in New York. Given that the main vendor showcase Expo Hall had not as yet opened it doors, and that the current economic climate has constrained travel budgets, the sessions were surprisingly very well attended.

One session that was packed was the "Global Powers of Retailing" session led by Deloitte Touche Tohmatsu.

There were no real surprises in this session, but a couple of points are worth calling out:

· The global financial crisis and credit crunch meant that consumers both cut back on spending and shifted to discount-led retailers. As a result, there was a shake up in the top ten retailers in Deloitte's rating of the largest 250 retailers (based on publicly available revenue data for the companies' fiscal year 2007 (to June 2008). Wal-Mart still leads the pack, with Carrefour and TESCO placed second and third respectively. While Home Depot dropped down the list, the hard discounters made considerable gains with the Schwarz Group (owner of Lidl) moving up considerably and ALDI secured 10th place, making it into the top ten for the first time.

· Globalisation continues, with European retailers in particular dominating in terms of the degree to which they operate internationally. The emerging markets of Middle East and BRIC (Brazil, Russia, India, China), although resilient, have proved in varying degrees that they are not completely "de-coupled" and as immune to the global financial crisis as previously thought. However, the engine of global economic growth is shifting away from North America, as almost all the top-ten fastest-growing companies are in these and other emerging countries of Latin America and Asia Pac.

The most optimistic forecasts predict the start of recovery of the global economy towards the end of 2009, and in the short term retailers, understandably, are engaged in heavy price cutting to keep the business afloat. However, in order to deliver sustainable bottom line growth, retailers need to

· keep a close eye on everyday cash flow to get a clear idea of what is coming in and going out in order to manage the financial risk,

· focus on smarter operations including cost containment, and

· drive the top line by offering customers a differentiated and superior customer experience.

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Our most recent IAS Retail blog highlighted how music retailer HMV revitalised itself in 2008 following a poor performance in 2007. The sector which HMV operates in is heavily reliant on targeting young shoppers in the 18-25 age bracket. There has been some talk that retailers who serve such a client base will be more resilient in the current financial climate than some others, as it is believed this segment of the population will continue to spend relatively freely for the here and now. They are seen to have more disposable income by virtue of not being burdened by mortgages and are highly driven to purchase "must have" fashionable items in sectors such as music, media, gaming, consumer electronics and fashion and sports apparel.

Certainly some retailers who target a predominantly younger age group have had success in 2008 - HMV being one of them. However, while HMV has flourished in the last year in the UK music retail sector, one of its biggest competitors, Zavvi, has entered administration. Similarly in the consumer electronics sector in the US, Circuit City applied for administration in November 2008. This should be good news for Best Buy, but even they were seeing falling year-on-year sales heading into the 2008 holiday season, despite serving key segments in areas with appeal to the 18-25 age group, such as video, gaming and mobile phones.

Fashion retailing also throws up both sides of the coin. Some of the world’s largest fashion retailers, such as H&M - who continues to expand globally - and its rival Inditex - which operates the Zara facia worldwide - continue to trade well. However, their offerings are targeted towards not just the younger and more image-conscious age groups, but also towards cost-conscious shoppers in that segment. Contrast this with relatively poor trading by other mass-merchandise fashion retailers who target a similar demographic but with generally higher price points, such as The Officer's Club from the UK, which went into administration just prior to Christmas.

Retailers, even in those sectors who serve consumers that at first sight seem most resilient to the deteriorating financial climates, can not afford to take anything for granted. To cope with the financial climate through 2009, retailers will be forced to deploy various financial strategies like selling land, shares and stores, cutting dividends or cutting expenditures. However, amidst all of this the one thing they must keep front of mind is their focus on their consumers' changing expectations in the current economic climate. With many shoppers likely to have little or no disposable income in 2009, it is vital that retailers devote as much attention to making sure their customer value proposition is tuned to the changing needs of their target market as well as delivering good customer service basics to shoppers.

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Customer centricity emerged as one of the main themes with case studies on Best Buy and TESCO, highlighting the importance of getting it right with the customer.

Best Buy's story was based on how they've turned around the shopper experience in the store since 1997. Key phases included mining the vast bank of customer data (90 million customer records), categorising the customer base into discrete segments with clearly identifiable but unique needs and wants, building a "killer" value proposition and testing the proposition in real-life store laboratories - the "Geek Squad" being a notable innovation of that phase. This drove shifts in their strategy to become more customer centric - moving emphasis away from the product and focussing on the experience. For example, there was a shift in merchandising from emphasis on "category" to "domain" - televisions became part of the home-theater "domain," so that when a customer came in, they were assisted with buying not the product, but the experience. The same principle was applied to advertising and pricing. For example, in 1995, the Best Buy motto for pricing was "Beat everybody, everyday on everything, everywhere". Today, using price optimisation applications, they are moving towards pricing for the customer. Whilst we cannot attribute how much the new customer centric approach has contributed to their market success, today, Best Buy has 22% of the US market share and continues to make progress with international expansion into China and Europe.

However, the master of customer centricity has got to be TESCO. Their focus on the customer has underpinned their phenomenal growth both in UK, with 30% market share making it not only UK's leading store-based retailer, but also the top online retailer. With turnover last year of $56 billion, and at least half of their operations outside the UK (currently they also have 100 Fresh & Easy supermarkets in the US), they are truly a solid international retailer. Today, they are the world's biggest online retailer and they started their multi-channel operations way back in 1994 with only telephone and fax machines to accept orders and three vans for delivery! Currently, $2.6 billion comes from their online operations - Tesco.com and Tesco Direct.

Having got it right in the store, Tesco took the same three-pillared store strategy and applied it to their online operations:

1. Focus on what the customer wants - don't expect the customer to change, but change your business to suit the customer. TESCO leverages the data from their hugely successful Club Card to refine not only offers and promotions to customers in all their channels, but the data from online operations also informs their store operations, for example, store stock availability.

2. Leverage existing assets - when other businesses were building warehouses to satisfy online demand, TESCO leveraged their store infrastructure for picking and dispatching orders and also reduced their transport costs. They deliver from 350 stores within drive time of 25 minutes radius. Two warehouses have recently been added to ease burden on local stores which were becoming overwhelmed with orders.

3. Continually refine the business model with small innovations. For example, for a small extra fee, their customers have the option to book a dedicated two-hour delivery slot. According to TESCO, this is definitely a differentiated offer, as none of their competitors offer this.

This simple but well executed strategy "template" in domestic and international operations has got TESCO to where it is - the third largest retailer in the world. If they continue in this vein, then some industry watchers are predicting that sooner rather than later they will be Europe’s largest retailer and second in the world after Wal-Mart.

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There is no doubt that 2009 will prove challenging for retailers. Most retail CIOs and their teams will be forced to work with budget constraints - making small incremental projects more popular. However, this should not serve as an excuse to relegate IT to a "quiet" year. In my many interactions with retailers, I have seen small IT projects that have been perceived as big successes by users. Though these projects were relatively small in size compared to large efforts (such as implementing a core merchandising system), they were big on perceived value - earning the IT department "good will" points with users. Many of these small initiatives sit in the business intelligence area. For example:

- Use advanced visualization capabilities such as map-based interfaces to spice up online reports and dashboards.

- Provide more advanced users the powerful, yet simple-to-use, new analytical capabilities found in in-memory, columnar and other next generation BI tools

- Merge unstructured consumer data found in reviews, blogs and social networks into reports - imagine being able to see sales trending alongside average customer review scores.

- Create the ability to send key reports and metrics to your managers' smart phones.

If you haven't done any of these, now is the time to consider them. There are other projects like this in different areas. The idea is to think of small projects that deliver big perceived value to users. It's a little bit like giving someone an iPod Nano for Christmas instead of an expensive home theatre system - both are appreciated, but one costs a lot less.

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The credit crunch and global economic crisis of 2008 has forced companies to take immediate short term prudent action to manage cash flows more aggressively or raise capital. In the selling channels, amongst other things there have been price wars, heavy promotions and sales of up to 70% off in both the pre and post Christmas period. Yet, by all accounts, this is not enough to save some UK retailers, as declining sales and thinner margins to accommodate the promotions take their toll. Athough the rot set in well before the credit crunch for most of the retailers now in administration - such as the UK's Woolworths - other casualties such as Whittards, Officers Club and Zavvi (previously Virgin Megastores) signal a grim 2009 for the UK high street. Whether the global and domestic economies are resilient enough to pick up in the next 12-18 months or whether we are in for a longer term freeze, the bottom line is that high street store consumption is significantly down and likely to remain down for the foreseeable future in most retail sectors. So, how should retailers tackle 2009? Many retailers could learn from one retailer, the HMV Group, that has had to tackle dwindling consumer spend since at least 2006.

Long before the credit crunch and global economic crisis of August 2008, the music and entertainment industry was facing exactly the same problem of declining consumer spend in their stores, even if for a different reason. The market had changed profoundly, with entertainment being both generated and consumed in ways very different than the more traditional forms. As far back as 2007, HMV set about designing a back to basics strategy to reflect the changing market. The group put into place a three year plan which included the following three pillars:

(1) Protecting and revitalising their core retail businesses of music (HMV) and books (Waterstones), giving the customer the products they wanted and giving them a reason to stop for longer in their well located high street stores. In particular, HMV evolved their re-vamped store format to deliver an enhanced shopping experience to entice shoppers to stop longer. With music CD sales declining, they changed the mix of products, by both introducing a range of portable products and very successfully, re-vamping and enhancing the value proposition around gaming. HMV also introduced a new cross-channel and cross-brand loyalty card with features such as "card holder"-only shopping evenings.

(2) Growing revenue from new channels. HMV plans to grow the HMV online channel to deliver 20% of HMV UK & Ireland's sales. To this end, they have improved their existing HMV and Waterstones transactional sites and have integrated them with the stores. HMV's digital offer will be integrated within their website to provide customers with a choice of physical or downloadable product from a single site. Customers can also buy tickets for shows and events through the HMV site. HMV also plan to launch a new social networking site.

(3) Driving cost efficiency. HMV has modernised their supply chain and cut costs by rationalising back office function. The Group has also set up a Group level purchasing department to buy "goods not for resale".

HMV are certainly reaping the benefits of their re-focus on revitalising the basics in their stores. While one of their nearest competitors, Zavvi UK has gone into administration, HMV's financial summary for 2008 records total sales from continuing operations up 11.3% on 2007, including like for like growth of 7.3%, and profit before tax and exceptional items from continuing operations up 25.2% from 2007. It remains to be seen whether this performance will be sustained through 2009 but it is far cry from the 73% slide in pre-tax profits that the HMV Group incurred in 2007.

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Earlier this month, Apple announced that the App Store had 300 million downloads and 10,000 applications. The sheer volume of applications might be impressive, but from a consumer perspective, two of the free applications go to the top of the list as having the potential to generate retail revenue - the Google Mobile App and the very recently released Amazon Mobile App.

Earlier this year, Google released their Google Mobile App. This was Google's first native application for the iPhone and iPod touch and combines powerful Google services with a slick interface, so you can find what you're looking for faster and more easily. It's user friendly with a single text box to search through your contacts and the web. As soon as you start typing, it scours Google and comes up with suggestions to help make the search easier. These could be typing suggestions, website suggestions or easy access to a search you made before. Google Mobile App even searches as you type so that you see results as soon as you finish typing. Over time, the App remembers the things you do most and puts them at the top.

However, it's the newer new voice search feature that could make this a killer mobile app that people will frequently use. The "Search with My Location" feature with voice search uses the searcher's location as the starting point for finding movie theatres, restaurants and other local businesses. Google Mobile App also has an apps tab that lets you easily launch other Google products, such as GMail and Google News. The bottom line: fast web search with fewer key strokes.

Another Apple app that is going to be highly "sticky" is the Amazon Mobile App. Released just a few days ago, in time for the holiday season, this application is being hailed as one of the best yet released through App Store. Through this application, Amazon allows iPhone users to shop for merchandise, giving them access to millions of products available from Amazon. Users can access wish lists, shopping carts, one-click shopping, plus all the customer reviews and ratings that might help them make a purchasing decision.

An added bonus is a new experimental feature released with the app called "Amazon Remembers", which allows consumers to do comparison shopping. This feature can be used to create visual lists of things to remember while out and about. Photos created by the iPhone camera are automatically uploaded and stored both on Amazon App and on the website, Amazon.com. Additionally, if the item to be remembered is a product, and Amazon sells that type of product, then, through Amazon's Mechanical Turk program, the application will try to find a "matching" item like the one in the photo, send an e-mail alert and also post search results along with the original photo. The items can be purchased directly from the phone, with all purchases made on the Amazon App routed through the same secure servers used by Amazon's website.

However, if this type of feature is to entice consumers to buy products from Amazon instead of its offline rivals, then Amazon will need to look at a couple of things: 1. Improving a key performance indicator - the time taken to return the search results, as currently it's not instantaneous; 2. The iPhone's high resolution camera is ideally suited to this "cool" feature, but Amazon will definitely need to consider adding the more prosaic bar code scanning functionality.

Admittedly both these applications are tied to Apple's devices as both Google and Amazon have meshed their services to Apple's strong mobile platform. Of course, for mobile commerce to really take off, we need the applications to be un-tethered from specific devices. However, it's not about the device per se. Retailers must realise that they can generate sustainable m-commerce revenue from consumers' "cool" devices like the iPhone only by giving them access to "hot" applications that will support a great shopping experience. Amazon's Mobile App is going in the right direction.

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Target has launched an iPhone application that is fun for consumers and useful in driving consumers to Target stores in their area. The application is based on a snow globe theme and leverages the iPhone accelerometer to encourage consumers to shake the snow globe to reveal a recommended gift. The consumer first selects the gender and age of the person the consumer wants to buy for and then shakes the iPhone to stir up the snow in the snow globe, which clears to reveal the gift suggestion.

Consumers also have the ability to build a shopping list from the suggestions and use the built in GPS to identify Target stores that are close to the consumer's current location. While we applaud Target for an innovative and fun application for consumers, the application could be improved. First the recommended gift selection appears to be fairly narrow, as several shakes of the iPhone results in duplicate gift recommendations for profiles with the same gender and age. Additionally, Target should have incorporated the abilty to check stock, place an order on hold or order the item from target.com directly. Despite these shortcomings, it is laudable of Target to harness the potential of the iPhone application to drive retail sales during the holiday season.

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The past fortnight has seen more bad news stories from the UK's high street retailers, led by the news of the collapse of one of its best-known brands, Woolworths Group plc. Granted, the credit crunch has dealt a body blow to a company that had been weak for many years, but this type of news - which no doubt signals job losses - has only served to further dampen the general mood of shoppers who spend less, particularly on discretionary items. This can only get worse as credit becomes less available and unemployment rises. Despite cuts in interest rates, value added tax rates and falling inflation, shoppers are holding back in the hope that prices fall dramatically nearer the start of the holiday period.

However, retailers are attempting the fight back and in a bid to lure shoppers into spending more money right now, the first salvo in the pre-holiday price wars has been discharged, but this time with a difference. One of UK's biggest high street retailers, Marks and Spencers (M&S) has been the first to deploy an innovative sales technique that has been described as a "sales ambush". In this model, the retailer offers heavy discounts, for a short period, say 24 hours, and here's the twist - with little or no warning. For example, on 19th November, M&S announced a 24 hour 20% discount day beginning with its online offer at midnight which would also be supported in a large number of selected stores until midnight on Thursday 20th November. This "guerrilla" type tactic was in retaliation to a three-day sale announced by Debenhams, which started on 19th November.

This type of surprise sale, sprung on the shopper, is designed to put the element of fear, uncertainty and doubt into the mind of the shopper, causing them to panic and buy more now so they are not hostage to last minute distress purchases. Far from diluting the sales leading to the holiday period, this technique appears to have had the desired effect of pushing sales up and M&S reported large queues outside the selected stores and very brisk trading. During the 24 hour sale, M&S were also handed an unexpected bonus by Debenhams. Due to unprecedented demand, Debenhams' website crashed for quite a while during this "head to head" period. As a result of the outage, as we warned in our previous blog "Retailers Should Focus on Website Basics in Run-Up to Holiday Traffic Surge", Debenhams' customers switched to the websites of its rivals, M&S's website being the main beneficiary.

However, as with any tactical war time manoeuvre, the end-to-end consequences need to be fully thought out and M&S were caught out in one key area - returns. There are reports that, during the surprise sale, M&S fell victim to thousands of shrewd shoppers who returned Christmas presents only to buy them back at sale price with the number of refunds reported to be 10 times the normal rate in some stores. Apart from the revenue loss, managing the deluge of stock through the returns process will undoubtedly have resulted in an increased level of shrinkage.

If you are going to spring an ambush on someone, then not planning for obvious areas of counter attack will prove counter productive.

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Sales continue to be tough this holiday season for many retailers. A couple of recent tactics caught my attention as I wondered how well retailers will execute these programs, given the increased traffic and chaos that typically happens this time of year.

Layaway has been around for years and this season it's making a comeback in a big way. Recently retailers such as Kmart and Sears began heavily promoting their layaway programs just in time for the critical holiday rush to get customers back into their stores to shop and spend. The option provides a great way for cash-strapped customers to pay what they can (for a small fee) and take home their purchase when the balance is paid off - and this option has the added bonus of not having to hide presents - the retailer does that for the customer.

I also noticed that Walmart launched its "Site to Store" shipping option for web orders. This service provides customers a "free" shipping option, as they pick up their order in a local store. The trade-off is the customer has to wait about 2 weeks to be notified that their order is ready for pick up. (According to the website it can take up to 48 hours to process the initial order, then another 7-10 days before the order arrives at the store.) When I looked more closely at Site to Store, I had several more concerns about the service:

- It costs me more in gas to drive to the store to do the pick up then to have it shipped to my home. The estimated cost to ship this item to my home was only $0.97 and I would have the item next week - which this time is a great thing, given that many of us procrastinate when it comes to holiday shipping, so we need to make sure we have our item in hand, on time.
- If I have to wait 2 weeks to be notified to go pick up my purchase, its highly likely I would forget about the purchase or delete the email (at this time of year) because it might look like retail spam. According to Walmart's FAQ, once the order arrives at the store, a customer has 21 days to pick up an order or it will returned and the customer will be issued a full refund. It's not clear how long the customer has to wait to receive that refund.

When I go to the store to pick up my order, there are a number of challenges here too:

- First, I need to remember to bring a copy of the email with me to pick up the order. If I ask my husband to pick it up, he needs to be entered into the order to authorize the pick up - so customers need to remember to do that upfront.
- Once in the store, there is apparently a specific SIte to Store Window (located in the back of the store) to go and pick up your paid for order. I've spent a lot of time in the back room of a Walmart and I'm wondering how they might operationally manage this process and inventory. Stores typically manage process pallets of stuff, much of which moves through to the sales floor. Stores are not accustomed to process a bunch of small, likely prepacked orders in that backroom. Many of the products that might be ordered for pick up in-store would need to be isolated and locked up, because they are high-shrink items - things like DVDs, small electronics, games. And shrink on this stuff would be even worse for the retailer than typical shrink, because the items are already paid for in advance and the customer expects to pick up their order when they get to the store.

Both layaways and programs like the "Site to Store" require retailers to have operational support to execute the programs in stores. And this will require retailers to have a good customer-facing process and be able to quickly and efficiently locate the orders ready for pick-up, as they are paid in full. Retailers and their staff will need to be organized and have designated secure areas or lock ups in the back of their stockroom to hold this inventory. This is no easy feat this time of year and I know from personal experience that Kmart stockrooms (yes that is plural) are even worse. And, this process creates a new potential headache for loss prevention as well as store management who will need to worry about managing customers when the store cannot locate an order - which is even worse, because customers expect their product as promised.

This is the busiest time of year for retailers in all respects. Retailers need to ensure their stores and staff are ready and informed on these programs to avoid a potential customer service disaster.

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In the run-up to the holiday period, retailers are resorting to the usual methods to attract shoppers into actually making purchases. As expected, the push this year is more aggressive to try to combat the effects of the economic downturn on shoppers' dwindling disposable income. Customers are definitely becoming more frugal and looking for bargains (although it's interesting to note that some austerity measures seem to have gone a bit awry) and retailers are trying many things to push sales through all their channels - for example, value-priced lines, deep-discount sale days, aggressive promotions, encouragement to use the layaway option, free delivery charges.

As sales slump on the high street, expectations are higher for the online channel, and, many retailers are gearing up to field raised levels of online holiday traffic. This year, during the holiday period, websites are going to take a battering, as shoppers spend time hunting for bargains through price-comparison websites, online-coupon websites, bargain-tracking websites and shopping-themed social networks websites. Although retailers will offer all sorts of incentives to get shoppers to buy, we should expect shoppers to spend more time browsing in pursuit of information on getting good deals before actually spending money and the actual browse-to-buy conversion rate could be lower compared to the same period last year.

Given that the back-end fulfilment process is crucial, retailers counting on their website front end to drive holiday sales should revisit these three things:

1. Website uptime - crashes and prolonged outages will be a double whammy. Obviously shoppers will go elsewhere. Not only that, other retailers will use this as competitive advantage to put the squeeze on. If they have not already done so, retailers should immediately revisit the service level agreements with their network connectivity and communications hardware and software providers. Although it may not be possible at this stage to go into full scale re-negotiation, retailers can at least try and ensure that network capacity is well provisioned to sustain increased demand or put risk management measures into place. They should also have a solid executable disaster recovery plan, both in terms of getting the site up and running again, but also to service inconvenienced customers in the mean time.

2. Pushing the right content - personalized content and promotions, is, to some extent, old hat. Retailers will be tempted to make their website more attractive by deploying Web 2.0 technologies - for example, links to social networking sites and also links to many third party partners. Now is not the time to rush with experimenting on such projects, as exposing shoppers to glitches and teething problems will definitely drive traffic away. Instead, retailers should focus on good delivery of information the shoppers want. For example, the credit crunch has driven bargain behaviour, so retailers should focus on frequently optimising their prices and deals and equally frequently refreshing this information on the site to the give the shopper the most current view of prices - in real time, if need be.

3. Offering alternative payment options or encouraging use of cash or debit - if retailers want more shoppers to actually buy online, they should offer them more alternative ways to pay than just credit cards. Particularly at this credit crunch time, when shoppers are less likely to use credit cards, retailers should consider offering payment alternatives such as pre-paid cards or offer loyalty points or a bit of further discount for debit or hard cash payments. At this stage, it may be easier to set up these types of options rather than more complicated alternatives requiring bank accounts, for example, bank to bank transfers.

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In the current global economic slowdown, retailers across the world have had mixed fortunes and for the most part have been on a downturn. However, some markets in the Middle East appear to be relatively buoyant. Even in these times, Dubai, the shopping haven of the Middle East, continues in its pursuit of superlatives, as evidenced by the opening of the world's largest mall on November 4th. In the Burj Al Arab, Dubai already has the world's only seven-star hotel and the 500-acre Downton Burj Dubai site, which houses the mall, will also contain the world's tallest building, currently being built. Expand.

Sprawling over 12 million sq ft, with an internal floor area of 5.9 million sq ft and a gross leasable area of 3.77 million sq ft, The Dubai Mall, the region's premier shopping and leisure destination, opened with 600 stores and, when it's up to capacity, it will eventually host 1200 stores. Besides the retail attractions, Dubai Mall also offers varied lifestyle and leisure offerings which are interwoven into the retail mix. For example, you can shop under the watchful eye of over 33,000 aquatic creatures housed in The Dubai Aquarium & Discovery Centre. The Aquarium is already in the global spotlight, having clinched the Guinness World Record for the "World's Largest Acrylic Panel." If you want a break from shopping, amongst other attractions, an Olympic-sized ice rink beckons; or you can dine at one of 150 cafés and restaurants catering a variety of local, regional and international cuisine. More information on current and future attractions, store locator, events and offers can be found on the mall's website.

In retailing terms, the mall offers a unique mix of old and new ways of retailing that is peculiar to Dubai, which has a heavy influx of expatriates, but also caters very much to the locals. For example, you can buy gold by the ounce or gram in 220 or so gold & jewellery outlets in the gold "suq," look for traditional Arab robes from Arab fashion outlets, and then step into UK's Waitrose supermarket for some groceries. European brands such as Carrefour, BHS and IKEA have been in the market for a while and now other Western brands are becoming increasingly well-known and desired in this market. The mall's two anchor department stores are US based Bloomingdale's and France's Galeries Lafayette - both these stores are these retailers' first store openings in the Middle East.

In might be that, for retailers in mature economies looking to expand into foreign markets, Dubai could present better opportunities for entry in the short term than even India or China. Dubai has never been home to significant oil reserves and, increasing investment in diversification into investment banking, shipping, re-exporting and hospitality means that, today, the non-oil sector is the main driver of economic growth. So although not completely immune, oil prices matter less and less. Indeed it is the stated aim of the Dubai government to ensure that the emirate is free of the direct influence of oil price fluctuations. To this end, government measures to attract investment have included liberal government policies, highly developed infrastructure, and low operational costs. This, together with Dubai shoppers' desire for well known Western brands makes this market very attractive for retailers from North America or Western Europe looking for expansion abroad.

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The National Retail Federation (NRF) has announced that retailers are adjusting returns policies to provide improved customer service over the holiday period in this time of economic uncertainty ("Retailers Adjusting Return Policies to Provide Good Customer Service in Down Economy," NRF Press Release, 13 November, 2008). It may be trite to call into question why retailers have not sought to maximise customer service in the often contentious area of customer returns prior to the current economic downturn, but more pertinently, this move could cause an increase in shrinkage - which will directly impact the retailer's bottom-line.

In 2007 Gartner predicted retail store returns would double through to 2011, as an increasing proportion of retailer turnover will come from non-store channels and increasing
numbers of multichannel shoppers will want to make their returns increasingly via the store ("Retail Returns Management: Going Backward to Move Forward").

At the moment, most retailers struggle to cope with the current amount of in-store returns, owing to poor in-store back-office processes. Relaxing returns policies is laudable and may well provide better service to customers over the holiday period and even over the longer term, but this could also result in greater disarray in returns processing in most stores. Retailers’ returns policies also often vary by channel and sometimes across brands so there is also a need to adjust cross-channel returns policies in order to streamline back-end returns processes and improve customer satisfaction.

Adjusting returns policies will undoubtedly lead to increased shrinkage in returns unless retailers improve back-end returns handling at the same time. If not, this move could backfire and hard pressed retailers who relax returns policies – particularly those selling high ticket items – could find profit unnecessarily eroded as a result of mounting returns that they can not process effectively.

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In a move that's jolted Australian retailers, JCPenney announced on 17th November that it is withdrawing from Australia. This abrupt exit from the Australian market is out of the blue, given that the retailer entered the market only very recently. It was only in September that the Australian market saw the launch of JCPenny's online presence through a master trade and sales license agreement with a third party, JCPenney International Catalog Asia, owned by a group of investors. Based on the license, the company had the authority and legal right to sell and advertise JCPenney products and services via the internet and catalogues in Korea, Singapore, Japan, Indonesia, China, Thailand, Taiwan, Malaysia, Phillipines, Australia and New Zealand. Between November 2006 and April 2008 JCPenney branded websites opened in Korea, Singapore and Malaysia.

On the face of it, an online transactional shopping site presented JCPenney with a good retail opportunity in Australia. Despite the fact that Australia has lots of rural communities who have limited access to big brand brick-and-mortar stores, Australia's online shopping market is not well developed and most well-known domestic retailers like David Jones and Myers have information-only websites. Not that online shopping hasn't been tried by these retailers before. David Jones's foray into e-commerce resulted in a huge profile failure in 2002. At the time, it was thought that their biggest downfall was a lack of the establishment of a unique selling proposition for their online interface.

Today, and not unexpectedly, the market will be tempted to attribute JCPenney's very short-lived online venture to the biting credit crunch. However, it's clear from looking at the online operating model of JCPIC, that the knock-on effects of the global financial crisis on the Australian retail market has only accelerated the inevitable.

Initially shipping and delivery charges were high. JCPenney is the wholesale supplier to JCPIC and all the JCPenney merchandise is shipped directly from JCPIC Asia, Inc., located in Los Angeles. JCPIC Australia does not carry stock, but operates as a warehousing network for online purchases. Given that the items are picked, packed and shipped from the US, the handling costs and shipping charges were prohibitively high to start with, although, more recently, JCPIC has reduced these rates.

The next issue is the "look and feel" of the website. It's obvious that product information is fed straight from the American website. Aside from the Australian dollar signs and some re-wording of the terms and conditions to make it more Australian, the website makes no attempt to tailor the product information to the local market, so, for example, "pants" remains as "pants" in an Australian market which is more familiar with "trousers."

Their returns policy, too, is not shopper friendly. At the outset, shoppers are warned that JCPIC cannot "carry out refunds simply because you do not like the product or have changed your mind about your purchase, so with this in mind, please select your item(s) very carefully. If you are not satisfied with the fit, size, colour or quality of the item, JCPIC will exchange it for you - so you may return it for the same style in a different size or colour." So no refunds, but a more time consuming exchange process if the shopper simply did not like the style.

This type of returns policy would simply not have been sustainable in the long run. A Gartner Retail Industry Advisory Service survey (1Q06) found that retailers expect e-commerce sales to rise from 8.5% to 15.8% of their overall revenue by 2011. This increase in the proportion of retailer revenue coming from online operations will expose retailers to an increasing amount of returns which have to be handled efficiently and effectively, not to mention the more near-term deluge of Christmas holiday returns.

JCPenney is not a well-known brand in Australia and in order to have survived in that market JCPIC would have had to have excelled in operational execution. Perhaps the timing of the launch did not help. However, JCPIC's operating model was fraught with difficulties and it's this that has probably caused JCPenney to beat a hasty retreat from Australia.

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By now everyone has heard that Mervyn's is closing all of its remaining 149 stores and is in the process of liquidating all of its inventory. Since I needed a couple of new blankets for the kids, I thought I'd stop by to see how the process was going. I walked away strangely surprised (in a good way) and thinking about what other retailers could learn from my experience.

When I walked into my local store I expected to see a store that was picked over and trashed, with not a helpful associate in sight. What I found was a store that was bustling with associate activity. On the surface that seems obvious, because their mission is to get everything out and sell as much as they can. Every single associate was in action - pulling, moving, stocking or setting up merchandise displays - something that you typically see this time of year and just before a holiday weekend (Veteran's Day in the US). But what was different is this store is closing for good soon and the feel and pace I observed was synonomous to activity you see in stores that are successful and staying open. I even heard how this store was going to step up customer service a notch - one of the managers was giving her staff a heads up on the radio that starting tomorrow they would have greeters at every door to help direct customers and provide shopping baskets!

No one in this store knows when it will close for good, not even the store manager, but somehow every person I saw was motivated to help me and the other customers. This was a pretty weird feeling in a store that could be gone in a few weeks. I truly expected to encounter surly and apathetic clerks ringing up my purchases.

Informed, available staff contributes to a good service experience and is a top service basic according to our research. Kudos to Mervyn's, who has somehow motivated their chain of command to keep store personnel committed to providing a good service experience to customers despite their dire future. Bankruptcy in this case did not kill off good service, it may actually have inspired it. While it appears from their bankruptcy filing their associates will now likely get their accrued vacation pay (which could be a prime motivator), nonetheless what I witnessed was something very unusual - something retailers who are not closing their doors should pay attention to. Times are tough - now more than ever the tone and tenor of associate interactions with customers might make all the difference in the world to customers.

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What do Darjeeling tea, Aloe Vera products and gold coins have in common? It seems unlikely, but these items are all carried in the inventory of goods sold through India Post, the brand name under which the Indian Government operates the postal system in India.

From 15th October, in a pilot project, the average Indian consumer can buy 24 carat Gold coins from some outlets of India Post in the denominations of 0.5g (0.017636981 ounces), 1g (0.0352739619 ounces), 5g (0.17636981 ounces) and 8g (0.282191696 ounces). The coins are packed in a sealed cover with the certification from Valcambi, Switzerland. The certificate is similar to the internationally recognised certification, stating low risk of duplication, quality packaging, product standardisation, numbering and assayer certificate. This India Post service is provided in association with the World Gold Council and Reliance Money Limited.

At first glance, it's surprising why this hasn't happened before now. After all, today, India is acknowledged as the world's single largest market for gold. The Indians' love affair with gold permeates all stratas of Indian society, from the descendants of ancient ruling families, to the sophisticated middle classes with plenty of disposable income, to the "unbanked" farmers who put their faith in gold. Currently gold prices are down at just over $700/ounce and, like any other commodity, the gold rate fluctuates from day to day. Although the gold price this year peaked at $1000, the high demand for gold from India for auspicious occasions such as festivals and weddings is helping to keep the gold market buoyant despite some making smaller purchases or switching to fake gold jewelry.

But why sell gold coins? The erstwhile liquidity crisis has seen a gold rush from both consumers and businesses as they seek refuge in gold, for example in mining stocks or in the physical metal itself. According to reports, even people in the UK were queuing to buy gold bars and coins as a safe place to invest their money. This is classic behaviour in a financial crisis when gold is seen as a safe investment. India Post's selling of gold coins is taking advantage of the times, as it aims at bringing investment in gold to the masses. After all they have the world's most widely distributed postal service giving them a large reach to Indian consumers.

India watchers would not have failed to have noticed that Reliance Money Limited, a partner in this pilot project, shares the same stable as Reliance Retail Limited. Both are subsidiaries of India's largest private sector company, Reliance Industries Group. Reliance's retail business has built up a large mixed portfolio of its own and franchised stores and earlier this year signed a joint venture with a leading UK based retailer, Marks and Spencers. Who knows, if India Post makes a success of this, then maybe we will see gold coins being sold to consumers through Reliance's retail outlets, perhaps even through the Marks and Spencer stores. Supply chain and security issues aside, maybe gold coins will even become a standard item on the inventory of India's retailers!

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In December 2007, European Commission (EC) regulators ruled that cross border interchange fees levied by MasterCard were illegal. In June 2008, MasterCard announced that it was temporarily repealing its current MasterCard and Maestro intra-European Economic Area cross-border consumer card interchange fees in order to conform to the EC decision of 2007. However, as of Oct 1st 2008, MasterCard announced a new acquiring fee structure which includes increasing its 'membership' charges by as much as 161 per cent and also introducing a new 'development' charge.

Strictly speaking, these charges apply to acquirers, but of course these charges are passed on to the retailers by the acquirers. Now the lead body for UK retailers, the British Retail Consortium (BRC), is voicing concern about what it sees as a dramatic increase in domestic interchange fees by MasterCard. Now that MasterCard have withdrawn their cross border consumer interchange fees, it would appear that the rate hikes are an attempt to recoup lost revenues by increasing fees in other areas, without justification. This flies in the face of the EC ruling cited here which stated that as well as withdrawing its interchange fee MasterCard must "refrain from adopting measures having a similar effect".

The increased fees could prove the last straw for smaller retailers in particular, with new charges adding up to $15 million a year in costs on all MasterCard transactions in the UK. At a time when consumer confidence is low, retailers, particularly small business, will be very loathe to pass this extra cost on to consumers. However, if they grit their teeth and absorb the burden, it could put them out of business. Smaller businesses are usually the engine room from which economic recovery is regenerated, so anything which harms their prospects of recovery would be damaging.

With retailers already scouring their business to eke out cost-savings in all departments just to keep afloat, it is easily understandable that serious concerns are being raised at such increases in card fees. MasterCard is not the only culprit, as any reduction in fees, whether temporary or not, should be passed on to the retailers by the acquiring banks - but this is not happening. Retailers need to petition their acquiring banks to renegotiate acquiring contracts to reflect the reduction.

In the short to mid term, retailers should also shop around for the best acquiring deals. Retailers can take advantage of new payment institutions such as PayPal when negotiating with acquirers, both in terms of cost of merchant services and breadth of services provided.

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