Evolution to the Integrated Store
Historically, each major retail store function has been managed in silos — security and loss prevention, labor/workforce management, inventory, promotions, and merchandising — each with its own separate systems, strategies, and personnel. That is starting to change. Loss prevention is being consolidated into other organizations. The management of promotions, labor, inventory, and merchandising is being integrated. We are moving towards the concept of the Integrated Store.
This is in part driven by changes in the technology. We are moving from the single-bit EAS (Electronic Article Surveillance) tag, which does not distinguish between items, to item-level RFID tags, which can identify each unique item. We have already moved to digital video, which can be analyzed by computers. Mobile computing has become more powerful, affordable, and ubiquitous. Wireless networks have become higher and higher in bandwidth for less and less expense. Now the opportunity exists to combine all these, instrumenting the store with sensors, and integrating all the information in the store together to solve business problems in ways not possible just a few years ago.
Broad Portfolio of Technologies Required
The integrated store requires a broad portfolio of technologies which, in most cases, a retailer has to piece together using the individual solutions they have acquired from many vendors. No single vendor has all the pieces, but Tyco Retail Solutions (TRS) is one of the companies with the broadest collection of technologies. Recently we had a discussion with several executives at Tyco Retail Solutions (TRS) — Scott Clements (President), Robert Locke (Robert Locke, GM Store Performance Solutions), and Jim Caudill (Sr. Dir., Strategic Marketing and Alliances).
The roots of TRS (Tyco Retail Solutions) are in EAS systems which have been used in retail stores for almost half a century to help reduce theft. The EAS market has been dominated by two companies, Sensormatic and Checkpoint Systems. In 2001, Sensormatic was bought by Tyco and formed the core of TRS which was formally created by Tyco in 2008. In the last three or four years, TRS has moved beyond traditional security loss prevention to include productivity and efficiency solutions. Much of this has been through a series of targeted acquisitions:
- Retail Expert (acquired 2007) — retail data analytics software and services in loss prevention, vendor management, refund management, pharmacy inventory and shortage, case management, and inventory control.
- IntelliVid (acquired 2008) — IP-based video for loss prevention and capturing consumer shopping patterns and behaviors.
- Vue Technology (acquired in 2008) — Item-level RFID systems including networked antenna arrays for smart shelves and surfaces, RF Routers and Switches, RFID middleware, data management, planogramming tools, application workflows, mobile capabilities, EPC commissioning; all with standards-based interfaces for integration.
Today TRS is organized into two groups: Loss Prevention Solutions which includes traditional loss prevention (EAS) and traditional safety and security (intrusion detection, video, monitoring services) and Store Performance Solutions which includes Inventory Intelligence (mainly Item-level RFID, also video technology for tracking inventory positions), Traffic Intelligence (people counting, video analytics), and Store Execution (to drive the activities by store associates).
TRS has been making strides to integrate these technologies together. They currently have the ability to acquire a broad range of sensor data in the store, including EAS, item-level RFID, various forms of video, people/traffic counting, and intrusion detection. All these sensing systems are being integrated using a common platform based on the TrueVUE multi-standard platform (from the VUE acquisition). This integration process is strategic and key to TRS’s vision.
EAS/Security — the Evolving Core of TRS
EAS is still by far the largest portion of TRS’s revenue, with significant contribution from video and other security technology as well. There remains a significant opportunity for retailers to further reduce shrink. EAS and video will be a central part of that. Loss prevention is becoming more of an information-based game, rather than a cops-and-robbers game — how to lower shrink, rather than how to catch the crook. It used to be when shoplifting was detected, the alarm goes off and store security chased the thief into the parking lot. That is not tenable in the US any more. Retailers want to go from reactive to information-based prevention. They are gathering information about what is being stolen, when, how, and by whom and using that to take steps to prevent. TRS links EAS (and increasingly RFID) and video systems together to collect information about what is happening in the store and at the exits — what is going out the door, when and how. This enables the retailer to craft more effective preventative approaches.
Dynamic Retail Landscape
The stalled economy means that most retailers cannot drive top line growth by opening new stores. This is forcing them to focus on improving the store performance. At the same time, the whole relationship between consumer and retailer, and how people shop, is changing radically. The use of mobile, social media, location, cross-channel media, and the web is exploding and changing faster than retailers can keep up. People now expect that they can go online or on their mobile phone and know exactly where items are available in-stock and at what price. The enabler for many of these new capabilities is accurate and up-to-date inventory data and intelligence. Up to now, solution providers have not addressed this higher level of integration.
TRS appears to be quite serious about providing the broad integrated technology foundation required for the Integrated Store. They are financially strong and looking to expand their solution footprint and portfolio. Robert Locke, TRS’s GM of Store Performance Solutions, who was formerly the CEO of Vue, said he has been impressed by the discipline in Tyco’s M&A strategy and process and has a high degree of confidence that the acquisitions they made are the right ones. A deliberate and well-reasoned approach is important, especially in areas where irrational exuberance can prevail, as is happening right now in mobile and location-based technologies — a lot of excitement and rush to the market.
An integrated store requires integrated technologies. It is unlikely that any single vendor will ever have every piece of the puzzle. But TRS is well positioned to be a dominant provider of the integrated set of solutions required for the next generation Integrated Store.
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