Citigroup has long been considered the most influential technology tracker on Wall Street, so its annual lists are not to be dismissed. IT used to be a backstage corporate function in Wall Street's eyes, but there are more indicators lately that the money folk are carefully watching the tech folk.
Whether it materializes in decisions about announcing the CIO's departure or rumors that the next CEO of Home Depot will be chosen based on his or her IT chops, such observation is happening. (This intriguing piece in Bloomberg Businessweek suggests just that, by profiling the home improvement chain's Chief Financial Officer and saying that her promotion will likely be based on how she handles tech decisions.)
Deborah Weinswig, the Citi Investment Research Managing Director who handles retail, gave the presentation at NRF during one of the RetailROI (www.retailroi.org) analyst presentations on January 8.
Weinswig, who made a similar presentation last year, pointed to mobile as a good example of where chains are making serious investments. She specifically stressed efforts by Home Depot and Nordstrom. Home Depot's associates' mobile devices provide access to all inventory, locate products and handle buy-online-pick-up-in-store purchases, in addition to functioning as a walkie-talkie.
Nordstrom's move is a bit more subtle, with Citi pointing to its late-2010 rollout of Wi-Fi to all stores, which it said was "setting the stage to enable mobile checkout from within the store." Nordstrom's Colin Johnson confirmed that his chain did start installing Wi-Fi for customers in all of its stores in November 2010, but he would not say it the chain plans to use it for mobile payment. When asked if Nordstrom's would, Johnson would only say: "We'll see." (Tesco also announced plans to offer Wi-Fi for all of its stores, but it said nothing about mobile payment.)
The Citi presentation also spoke of RFID "making a comeback in retail. RFID is increasingly being viewed as a solution to store-based inventory management and replenishment issues, rather than merely a supply chain solution." Here, I offer a contrasting view. Merriam-Webster defines a "comeback" as "a return to a former position or condition of success or prosperity." Therefore, I think that beyond the supply chain, retail RFID is missing a key prerequisite for a comeback.
Beyond picking at the word choice (don't even get me started on "solution"), I'm not seeing a lot of retail activity beyond the traditional supply chain. Inventory management and replenishment are fine areas for RFID, but the per-tag costs are still daunting for average merchandise. Also, RFID project proposals have a hard time these days passing the smirk test, given how many times it has been publicly associated with projects that were over-hyped and ended up fizzling away. It's arguably the best example of "The IT Manager Who Cried Wolf." Even if RFID really is the best technology in 2011 for an inventory management or replenishment project, it's going to have trouble being taken seriously.
Getting back to Citi's presentation, some of the chains seem to have gotten their positioning because of what is needed—or expected—from those segments. Alternatively, if all of the rivals in one vertical have a certain capability, anyone in that segment needs to do the same, even if many other similarly sized retailers do not.
"We consider CVS and Walgreens to be the most advanced from a technology perspective, as the drug retail business model requires these companies to have advanced inventory management and pharmacy workflow optimization systems," a Citi slide said. "BJ's and Costco have fewer technology and inventory management needs as a result of their unique business model."
Weinswig also talked about where specific chains are investing, from an IT perspective. In workforce management, for example, she included Dollar General, Family, Dollar, Wal-Mart and Target among "the clubs, discounters and dollar stores investing in technology." But for RFID she listed only Wal-Mart. The only chain she listed in mobile was Target. Online had just three: BJ's Wholesale, Target and Wal-Mart.
It got more interesting when she limited her choices vertically, such as department stores versus food and drug or home improvement stores. In food and drug, Weinswig thought no chain could be honestly said to be investing in next-generation optimization tools, RFID, merchandise lifecycle management or multi-channel integration. In workforce management, she included CVS, Kroger, Supervalu and Walgreens, while both online and mobile had the exact same listings: CVS and Walgreens. Kroger was the only name in the localization/personalization category.
Department stores fared much better, with all five of the chains examined (JCPenney, Macy's, Nordstrom, Kohl's and Saks) qualifying as investing in mobile and online. The same group—minus Saks—qualified for multi-channel integration and merchandise lifecycle management. For localization/personalization, it's the same group minus Kohl's and Saks. Only JCPenney and Macy's qualified for investment in next-generation optimization tools, workforce management and RFID.