The NRF Big Show was busy, buzzing, and bustling — an excellent sign after a few years of not-so-excellent times. As Brian points out, the industry seems to be at a very interesting inflection point: just when retailers are finally ready to spend on the promise of cross-channel and digital channels and new shopper experiences, solution providers are ready to deliver on most of that promise. A unique opportunity for everyone involved.

This coincidence of capability and intent has particular meaning for the store, one of my favorite topics. Long have retailers attempted to crack open the black box of the store — to have the same level of understanding about shoppers in stores as retailers have achieved online. To have the same opportunities to reach shoppers and influence their behavior as in digital channels. To personalize the shopping experience, and finally get arms around the relationship between traffic, shopping behavior, and conversion.

This year on the show floor at NRF, I saw every conceivable kind of technology dedicated to solving the digital problem of stores — the fact that so much of a retailer’s transactions and revenue occur off the grid and so cannot be tracked, analyzed, or influenced. Bluetooth tracking in the store, WiFi-based tracking, heat maps, interactive digital signs, store associates loaded down with retail-hardened mobile devices, smartphones, tablets, even flashing digital name badges. Geofencing around the store, targeted ads deployed within the store. Point of sale at the shelf, interactively managed between shelf and self-checkout, loaded straight onto a shopper’s own smartphone.

Better yet, retailers seem very open to various combinations of all of these solutions. In-store video or consumer-device-based tracking is no longer a furtive conversation in the corner (lest the privacy nut-jobs overhear), but one based on case studies and implementation. One that has at least some kind of answer to potential consumer privacy outrage. Mobile devices in employees’ hands, WiFi in the stores not just for employees but for customers too — these all seem to be on the shopping lists that retailers are carrying around for the store.

While this is an important step forward in understanding shopper behavior in stores, in turning that store black box into something as transparent as the eCommerce site, I have some reservations. Maybe that’s not the right phrase. I have some cautionary feelings that border on the first stirrings of alarm.

I know. I have been on a soapbox for the last year complaining that the store is getting left behind, that it risks getting made irrelevant and retailers better hurry up and figure out what role the store is going to play in a future integrated cross-channel customer experience. So it would seem now that I might be backtracking. I’m not. But to get to where this all makes sense, I need to tell a story.

About a year into my tenure at Forrester, I got invited to sit in on an executive roundtable in Chicago that was a meeting of several VP’s of Sales/Operations/Distribution/Manufacturing from some very well-known, name-brand consumer packaged goods companies. I was the sole person in the room representing retail. What followed was a gripe session. Actually, that’s not the right word, but I won’t use the right one here. All of these VP’s spent the next 90 minutes complaining about store operations and retailers’ policies around stores. They would occasionally look to me — glare at me — as if they expected me to somehow justify why retailers behave so irrationally when it comes to their stores.

One complaint has stuck with me through thick and thin. It came from a VP of Sales for a very well known health and beauty product, one that often makes lists of most-often stolen items out of retail. She related an experience she had, walking a store with a Regional VP from the retailer in question, also a large well-known retail brand. They walked the HBC department, where the retail VP pointed out that the CPG product was — yet again — out of stock. The CPG VP was expecting this, as she regularly had to defend against out of stocks, so she pulled out a report she had printed that morning that showed that according to her access to the retailer’s own systems, the store with the empty shelf reported having 50 of the item on hand. She told the retailer that they could not ship more to this store because the store manager had refused to change the inventory to zero.

The retail VP was naturally a little flustered by this, so he called in the store manager, pointed to the shelf, and demanded to know where the missing product was. The store manager shrugged and said it had probably been stolen. The retail VP then demanded to know why the store manager had not zeroed out the missing inventory. The store manager replied — according to the CPG VP — that if he zeroed out that much inventory then he’d take a hit on his bonus, so he was waiting until it looked like he was going to have a bad month anyway and he would just pile all that kind of shrink on at once.

In the meantime, the store was not selling any of a very hot item, all because a store manager was told to do A but incented on B. And honestly, he probably wasn’t missing out all that much because one item out of literally tens of thousands of SKUs is small change, no matter how hot it is.

Let’s marry that up to another panel I was on, where we were discussing voice of the customer and customer satisfaction in a cross-channel world. I have said many times that retailers are missing an opportunity to use social networks and other forms of community to engage with their most passionate shoppers at a store-by-store level. In part, this is because that level of engagement is hard to do, and hard to maintain over time. But it’s a miss none-the-less. A store-based identification and appreciation of local best shoppers is engagement no promotion will ever buy. And people this passionate about a retailer and loyal to a single store undoubtedly feel proprietary about that store — I know I feel that way about my favorite local store. A focus group of 5 of a store’s best shoppers can probably tell you more about what’s right and what’s wrong with your store than all the analytics in the world — and sooner and with more predictive accuracy, I’d wager.

So one retailer in the audience asked some questions about executing on such an idea, and I was going along fine with it, until the retailer said, But what do we do with all that advice? That’s the catch. In this era of transparency, it’s not enough to solicit feedback from shoppers — passionate or otherwise. Just like people get frustrated with negative product reviews that don’t result in any correction of product flaws, they will get frustrated with getting asked for advice about their store and then having that advice ignored. Not all advice has to be taken, but if it’s not taken, there should be some acknowledgement and a brief explanation of why that particular idea is difficult or not the highest priority.

If you ask for ideas on where to improve or change things, you’d better be prepared to change. I’ve seen employee idea boxes backfire with the explosive force of a volcano for precisely that reason — no one who asked for ideas actually wanted to make the changes that would make those ideas real.

So now let’s go back to this new focus on stores. Actually, it’s not new so much as maybe really real this time. 2012 has started us on a course where we will know far more about what really happens in stores than we have ever known before. But all the analytics in the world won’t mean a thing if retailers aren’t willing to make the changes that need to be made to take advantage of the insights this new store transparency brings. And that is my cautionary warning from NRF 2012. And here’s my advice on what to do about it:

• Measure store managers on sales conversion rates based on minutes spent per customer, not on sales per hour and labor as a percent of sales. The corollary to this one is that employee staffing models are about to change rapidly, which Paula touches on in her piece. Cross-channel is part of the reason why — what use the useless employee in a model where the customer already knows everything? Employees must either be pseudo-security guards there to keep the merchandise from walking out the door, or they must be high-value, high-service curators of the in-store experience. If retailers can’t figure out how to get there from where we are today with employees, the store is doomed. Even worse, these measures are just the tip of the iceberg. We already have issues with how stores measure sales in a cross-channel world. Let’s pile more misaligned measures right on top!
• Connect store managers and employees to each other. Social networks can help. But you need to make every store manager as smart as your smartest, highest performing store manager. And you need to make every employee as smart as your smartest, highest performing employee. If a transparent store is coming soon, there will be some store managers that get it and rapidly figure out how to use the analytics to make their store better, and some that are clueless. The clueless will need help. Technology can help connect them to the clued.
• Look at how the store can market itself. You want to talk about giving up control? How about putting your corporate brand and face to the customer into the hands of a store manager, and then arming them with social media and a local marketing budget to amplify that face and voice? Stores will need to make local connections to be successful — and it’s really not scalable to try to control the store’s voice from corporate. That means that store managers will need to be more than cat herders and number crunchers. They will, for the first time in a long time, have a chance to be creative, to engage with their best shoppers — there are too many technology solutions headed their way that will make this happen to stop it now.

If even half of the technologies aimed at the store succeed, it will be a completely new era of analytics, accountability — and store operations. And with cross-channel on top of us already, the wiggle room to figure out the new order is very small. It can mean great things for the store. I hope.