Retail Tech 05: A Frighteningly Interesting Year

Opinion: From digital signs that change for each customer to cell-phone checkout devices to a government-slowed supply chain, Evan Schuman predicts a fascinating year ahead.

When you think of retail IT operations in 2005, envision an eccentric, wealthy hermit who lives in a comfortable mansion in the middle of the woods.

The hermit certainly knows about the big city and all of the glorious things he could buy there, but he is content. He has what he needs and a sufficient number of things that he wants. His home is sound, and he doesnt have a heck of a lot of motivation to go out and make it fancy and state-of-the-art. Maybe someday, he thinks.

One day, he hears on his ham radio that a huge hurricane is coming and that his comfortable old house wont be able to protect him as it has. He needs to make massive repairs.

"Well," he says, "as long as I have to get out of the house and make some repairs, I might as well go into town and get a lot of those nice things I couldnt justify before." The eccentric hermit knows himself well enough to predict that once he makes his house warm, safe and cozy again, he wont likely feel like venturing into the city again, so hes going to this make this trip worth it.

Think of the hermit as your favorite retail IT operation, replace the hurricane with mandatory RFID (radio frequency identification), and you have a pretty good feel for what retail IT will be like in 2005.

Clearly, many of the key retail technology trends of 2004 will continue to play themselves out in 2005.

This includes RFID (which is actually an early American Indian name standing for "Thing of Much Smoke and No Fire"), CRM ("state-of-the-art technology to tell you lots of things about your customers, which youll never end up using") and self-checkout (although 2005 may see the next logical step, which involves asking customers to drive a forklift to populate their favorite aisles. "Have your aisle your way at Pathmark!")

There are, however, several serious trends that likely will take shape in 2005.

Secure Supply Chains

As federal authorities try to consolidate intelligence resources, there is reason to expect severe slowdowns in the supply chain, particularly at ports of entry, with a frightening ripple effect in retail.

Outgoing U.S. Health and Human Services Secretary Tommy Thompson has warned that the food supplies are exposed to terrorist assaults. As a practical matter, they are so exposed and will likely continue to be almost as exposed no matter what the U.S. government tries to do.

But there is a good chance that highly visible efforts will be made to show that were tightening security on food shipments. The likely result: minimal inconvenience to murderous terrorists, but huge headaches for retailers.

/zimages/5/28571.gifRetailers have lots of security issues to worry about. This includes protecting against everyday thieves. To read how some are using technology as their shield, click here.

John Fontanella, vice president of supply chain services at analyst firm The Yankee Group, has expressed strong concern about such attempts. Many retailers today "have just-in-time assumptions," and they calculate down-to-the-hour product deliveries.

"Were already seeing backups in ports like Hong Kong," he said. "If the government does slow down the flow of goods, retailers will feel it."

"The governments caught in a tough spot if they do slow down the movement of goods coming from offshore. Its going to have a significant and detrimental effect to the U.S. economy," Fontanella said.

"Most retailers are now set up to manage their inventory in the most efficient way possible. Theyre minimizing inventory in their distribution centers, trying to get just the right inventory on their store shelves. A disruption like this, where a third party steps in and artificially slows down the flow of goods, its going to set the industry back 10 or 20 years."

Next Page: Contactless POS and digital signage.