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Top 10 of 2014

The year was a computer science quiz for retailers. Some failed

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Technology continues to dominate the retail conversation. Is it any wonder the major retail design trade fairs have begun to resemble the Consumer Electronics Show?

It’s been a combination of the good, the bad and the unknown.

The good, of course, is the enormous efficiencies – ordering, paying, data collection, record-keeping, inventory management, payment processing.

The bad? Technology running amok – system hackings, security breaches, identification theft – which nobody seems to know how to control.

And the unknown: Technology advancing by leaps and bounds – every six months, it seems – something new making something else obsolete that used to be new. Is technology serving the retail world, or are we serving the technology?

Here are some of those stories, and others, that made 2014 so distinctive.

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1. “WE SELL HAMMERS”
Just after Christmas 2013, Target admitted that its debit and credit card systems had been breached during the holiday shopping season and shoppers’ PINs had been stolen. It never stopped. Subsequently, Neiman Marcus, Starbucks and Michaels Stores all announced that their systems had also been compromised.

In early August, the P.F. Chang’s China Bistro restaurant chain said a security breach may have led to the theft of customer data from credit and debit cards used at 33 of its restaurants.

Later that month, UPS Stores said a security breach may have led to the theft of customer credit and debit data at 51 UPS franchises in the United States.

In September, Goodwill Industries announced that 330 of its stores in 20 states had been impacted by a credit card breach – caused by malware installed on a third-party vendor system – and an estimated 868,000 cards were compromised. In October, Kmart announced that its IT team detected a breach of its payment data systems.

But “the biggest data breach in retailing history” compromised 56 million credit cards for Home Depot  customers. Worse yet, employees said the retail giant knew about the potential for problems as far back as 2008.  When store employees had suggested new software and better training, they said the company’s response was “We sell hammers.”

2. TWITTER BUY, APPLE PAY
And Apple sells apps. In October, Apple launched a new payment app that allows users of its new iPhone 6 and 6 Plus to pay directly from the devices.

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Anyone who has an iPhone 6 or Apple Watch will be able to make a purchase by swiping the device past any checkout counter equipped with the software. 

And Twitter announced its first commerce product, a “Buy” button allowing users to make purchases directly within tweets. If they see something they want, they hit “Buy,” and enter their payment and shipping information. The test started out on mobile devices, but the company said it will move onto desktops, as well.

Bad news for the wallet and money clip businesses. And maybe bad news, as well, for retailers’ IT departments, who don’t need any more fires.

3. DO NOT CLOSE TIL AFTER CHRISTMAS
Sad that at this time of runaway science, one of the oldest purveyors of home technology is hanging by a slender thread.

In October, RadioShack (founded in 1921 to sell ham radio equipment) announced a rescue effort by several shareholders to keep the doors open through Christmas.

But what about after the holidays? When successful consumer electronics retailers are selling smartphones and tablets, RadioShack can’t get past its reputation for cables, cords and batteries.

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4. OMNICHANNEL, FTW
Every retailer is trying to woo the customer who researches at a computer, browses in the store and orders via a smartphone. The ancient Latins called it “omnichanneling,” as in “OMG … GR8 … FWIW … CU … BFN … HAK … :)”

Micah Solomon, a Seattle-based customer experience consultant, wrote on the Forbes website (“Omnichannel Beyond Retail: The Customer Experience In Healthcare, B2B, Professional Services,” Oct. 16, 2014): “In an omnichannel customer experience, the customer can order a dress on the phone, pick it up in person, and send it back from her front porch if it doesn’t fit – with her purchase history, credit card information, and personal preference data following her successfully from channel to channel.”

But retail consultant Mike Moriarity of A.T. Kearney in Chicago warns retailers not to forget the store where, he insists, “90 percent of all retail sales are transacted.” In fact, says Moriarty, “omnichannel” itself is a bad term. “We really ought to be thinking of it as consumer-driven channels,” he says. “If the consumer wants to research online but buy at the store, or shop at the store and buy online, the retailer should be accommodating that.”

5. IF IT QUACKS LIKE A STORE
In October, Amazon (Seattle) finally seemed to deliver the other shoe, amid reports that it would at last open a “cement” location on West 34th Street in New York.

But Amazon has been reluctant to call it “a store,” preferring “a mini-warehouse, with limited inventory for same-day delivery within New York, product returns and exchanges, and pickups of online orders. [It may also, one day] feature Amazon devices like Kindle e-readers, Fire smartphones and Fire TV set-top boxes.” Yet it chose as its first location a very high-traffic Manhattan street in a building that was an Ohrbach’s department store for 33 years.

In other words, retailing oozes from the building’s bones.

6. NOW ARRIVING IN NEW YORK
Another high-profile holdout finally opening in New York is Neiman Marcus.

The Dallas-based luxury retailing group, which has circled Manhattan for years with its full-line stores – in Westchester County, N.Y.; King of Prussia, Pa.; and Boston – has always explained that it already owns the two Bergdorf Goodman stores on Fifth Avenue. And many of its trademark brands have their own uptown New York boutiques, as well.

But this year, it announced intentions to take three levels and 250,000 square feet of the new Shops at Hudson Yards development, with plans to be open by 2018.

Why now, after 107 years? Perhaps because there had never been an acceptable location before. In Uptown, the competition includes Saks Fifth Avenue, Barneys and Bloomingdale’s.

At Hudson Yards, it will have the downtown luxury department store market largely to itself. And maybe the fact that arch-rival Saks will be opening in Canada soon has spurred Neiman Marcus to look for another green pasture in Saks’ back yard.

7. NORTH BY NORTHWEST
Speaking of Canada, the year did not start out well for American retailers north of the border. In February, Target lamented that its 124-store rollout of 2013 was a “remarkable failure,” helping fuel Target’s $900-million loss last year.

But Americans are nothing if not undaunted. In September, Nordstrom opened its first Canadian store, in Calgary’s Chinook Centre, as 2000 customers lined up for hours, waiting for the metal doors to rise. And also in September, Saks Fifth Avenue announced its first Canada location under its new Canadian parent, Hudson’s Bay Co.

What does Saks know that Target didn’t? Plenty, according to HBC ceo Richard Baker. “I’m opening two stores, not 100,” Baker told The Toronto Globe and Mail. “[Target] paid $1.8 billion for leaseholds, then they paid $10 million per store to fix them up. They had no office, they had no buyers, they had no planners, they had no distribution centre, they had no P-O-S system, they had no IT backbone. They created everything from scratch while we’re coming in very quietly opening up two stores with … existing infrastructure.”

Apparently, it takes a Canadian to know Canada.

8. HAVING IT THEIR WAY
Clearly, going to Canada is a lot more complicated than showing your passport and answering a few questions. In September, when Burger King announced it was buying Canadian donut icon Tim Horton’s and moving its headquarters from Miami to Toronto, it had to face the question, “and why have you come to Canada?”

It was widely speculated that BK is taking the action to reassign the fees from its U.S. franchises to Canada and pay no U.S. tax on this income – a legal but unsavory practice called “tax inversion.”

When all this angry publicity hit, Burger King executives explained that the deal is being driven by their plans to expand globally, not by tax considerations.

Hmmm. Do you want a grain of salt with your fries?

9. TEARS FOR SEARS
Is this finally the end of the once-proud retail innovator?

In October, ceo Edward Lampert announced a plan to raise badly needed cash by selling down Sears’ majority stake in its Canadian subsidiary for $380 million. Three weeks earlier, Lampert announced he would lend the company $400 million to get it through the holidays.

In August, the retailer told investors that it lost nearly $1 billion in the first half of 2014. Not a few analysts said Sears was “nearing the end,” and that liquidation was the logical next step.

Have a Happy New Year, Sears.

10. HELLO, I MUST BE GOING
It was a typically tumultuous year for retail executives.

Target fired Greg Steinhafel after the data breach and Canada debacles. The board at American Apparel fired founder Dov Charney for charges of “misconduct.” The board at Abercrombie & Fitch reduced Michael Jeffries’ role after years of his public indiscreet comments, taking away his board chairmanship.

A few ceo’s even lost their jobs due to nothing more than the companies’ poor performances. James Fielding was out at Claire’s Stores. Steve Birkhold resigned at Bebe’s Stores. Glenn Murphy abruptly left Gap Inc. John Goodman was out at Wet Seal after only 20 months. Brendan Hoffman left The Bon-Ton Stores. Mark Brashear left Hugo Boss Americas. Robert Hanson was out at American Eagle.

Many executives continued to play musical chairs. Roger Farah unexpectedly left Polo Ralph Lauren and popped up later at Tory Burch; after Hoffman left Bon-Ton, he was rumored heading for Kohl’s; Kathryn Bufano left Belk’s to replace Hoffman at Bon-Ton; and Angela Ahrendts left Burberry, where she was ceo, to become svp of retail and online sales for Apple. (The old Ron Johnson job.)

And some executives took the job that perhaps nobody else wanted. Marvin Ellison left The Home Depot, where he was evp of U.S. stores, to succeed Mike Ullman as ceo of  JCPenney. (The other old Ron Johnson job.)

And Alasdair Jones left Tesco to become president and chief member officer of Kmart. Was this a case of jumping ship – from the Titanic to the Lusitania?

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