July 30, 2008, 12:00 AM

One Big Store

By bringing web access to store checkout counters, retailers can present a unified face to customers.

Many cross-channel initiatives have added features to retailers’ web sites, such as ordering online for in-store pickup or visibility into a store’s inventory. But some retailers are starting from the other end-the store-and adding Internet connectivity to their point-of-sale systems, giving employees access to the retailer’s own web site and other web-based data.

Whether the retailer is a national chain like J.C. Penney Co. Inc., which has web-enabled all 35,000 of its POS terminals in nearly 1,100 stores, or a single-store merchant like Loser Kids Inc. outside of San Diego, the goal is the same: make the retailer appear to the customer as one big store, even if it sells via the web and catalogs as well as through bricks-and-mortar stores.

$466 versus $313

That’s important because customers increasingly shop the retailers they like online and off and expect each retailer to recognize them across channels, and because multi-channel shoppers tend to be profitable customers. The typical multi-channel customer spends $466 per year versus $313 for someone who shops only one channel, according to a Forrester Research Inc. survey of retailers last year for e-retailer trade association Shop.org.

Many retailers, especially the most successful ones, are striving to appeal to that multi-channel customer, suggests data from research and consulting firm Retail Systems Research LLC. In a survey this year, 59% of the most successful retailers and 40% of others called meeting customer expectations of seamless purchase and delivery options across channels a top challenge.

“Retailers don’t have any choice; the multi-channel imperative is real and serious,” says Paula Rosenblum, managing partner of Retail Systems Research. “You have to provide customers the convenience they expect.”

That’s the view at J.C. Penney, which has integrated instruction about how to use the company’s e-commerce site, JCP.com, into the training of all store employees since web-enabling its POS system nearly two years ago.

“Not a single associate goes to the floor to help customers without being fully trained on web navigation at JCP.com and understanding how our ability to offer these assortments really impacts customer experience and loyalty in our stores in a very positive way because customers get what they came in for more often than they do at our competition,” says Kevin Gebhardt, director of multi-channel coordination and implementation.

Having access to the retailer’s web site enables J.C. Penney store employees to check on the online availability of an item not on hand in a store, and to order it for the customer on the spot. They can also check whether an item is available in another store.

Most retailers can’t offer similar service. Only 33% of multi-channel retailers say store associates have access to information from other channels and only 43% say they can place online orders from stores, according to the Forrester/Shop.org survey. One reason more retailers can’t offer those services: only 23% have Internet-connected POS systems, according to the survey.

Tough work

Why haven’t more retailers brought the web to the checkout register? It’s hard to do for retailers with older POS systems hard-wired to perform certain functions, Rosenblum says. Modern hardware and software, based on industry-standard technologies like Microsoft’s .Net and the J2EE version of Java, offer the flexibility to add Internet connectivity and applications to use such connectivity, she says. But only 63% of retailers in the RSR survey say they have such modern POS systems, including 14% that deployed them in the past year.

The cost of upgrading POS systems is also deterring retailers, especially now that the economy is weak, says Michael J. Brown of retail consulting firm Kurt Salmon Associates. Retailers also are concerned that web connections could create security vulnerabilities, he says.

That security concern is real, as hackers routinely scan Internet addresses looking for weak points, says Michael Petitti, chief marketing officer at information security firm Trustwave. There are several ways to address those risks, including with firewalls and secure connections between POS systems and a retailer’s central office, he says.

J.C. Penney employs firewalls and other measures to protect its connections, says Gebhardt. In addition, the web connection is used only to search for information; if an associate finds the item the customer wants, the transaction is entered through the POS system like any other store purchase so no customer data travels via the Internet from the store.

Nor does J.C. Penney use its web connection at the register to process credit and debit card transactions. But many retailers, especially smaller ones, do because web hookups are typically faster than dial-up phone lines and to free up a phone line for other uses. It’s important to keep hackers from accessing that data.

Any web-enabled POS system processing card transactions must meet the PCI security mandates of card brands like Visa and MasterCard. Petitti says most large retailers have complied with PCI standards and that POS security problems most often turn up at smaller merchants whose systems are implemented by resellers or integrators with limited security expertise. One way to avoid problems is to encrypt all data coming from the POS system, as Loser Kids does, says Chris Martin, director of marketing at CoreSense Inc., which provides the software for the Loser Kids system.

Penney antes up

While there are costs associated with web-enabling every POS system in its stores, including ensuring security and sufficient bandwidth, J.C. Penney’s Gebhardt says the benefits far outweigh the costs.

The retailer added the web access initially to make it faster and easier for store employees to place orders for customers through the J.C. Penney catalog or web channels. While employees had been able to place such orders previously, it was a slow and cumbersome process of entering data through a host-based system. And finding the item the customer wanted sometimes required thumbing through as many as 40 J.C. Penney catalogs that stores keep on hand.

That process was too slow. “If you slow down the transaction in a store, the associates just won’t use it,” Gebhardt says.

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