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Will Consumers Stop Spending?

All signs point to economic volatility. NRF is on record predicting sales growth will slow to 3.5 percent in 2008 down from 4 percent in 2007. Citigroup's Deborah Weinswig, managing director of retailing/broadlines, recently wrote that the economic slowdown led by housing, credit and energy is expected to pressure all levels of consumers, including the high end. "We remain concerned about the U.S. consumer and spending due to stronger head winds in 2008 and as such, have downwardly revised our earnings estimates and target prices to reflect our concerns," says Weinswig. Find out what other experts are saying about the impact of looming economic uncertainty on retailing and technology investment.

"We are headed into recession, led by the consumer this time. The most accurate timing is Q2, not Q1. Overall, the industry is in very good condition going into this situation - thanks to technology and collaborative planning. If it were not for the transparency provided by technology, then we would be facing a terrible time in the industry. The chains best situated are those already invested into top quality technology and controls and that have pricing stability. The most vulnerable space is the most time sensitive to price promotion. This puts mainstream, midline department stores at risk for substantial declines in earnings. Apparel and seasonal goods are generally difficult in this cycle, followed by books, hobby and music. Leaders will continue to invest into new technologies and the right stores to capture markets share from laggards. This is a great time to be a leading company, since laggards decline quickly during this cycle and disgorge tons of market share." -Richard Hastings, Retailing Industry Analyst, Trading Partners Collaboration LLC

"I think it is likely we are in a recession now or very close to it with all indicators down including housing, unemployment and consumer confidence. Luxury retailers will continue to do well mostly from global sales. Retailers with strategies that include global growth will continue to do well also. As the economy faces a recession, discretionary spending will decrease for the middle class. Areas that this may impact include apparel, accessories and travel. Most retailers have cut back on store openings for 2008 to prepare for a possible downturn. Most well-run retailers will manage through this better than the average. Darwin's theory usually works. Many retailers have already announced store closings including Macy's, Talbots, Ann Taylor and Starbucks. So, we anticipate that retailers will continue to announce store closings for underperforming stores. The good retailers will survive and gain market share during a slowdown." -Sunita Gupta, Executive Vice President, LakeWest Group
"The big losers would have to be those who sell durable goods or other big ticket merchandise (cars, boats, furniture, high-end electronics) all items that traditionally experience severe droughts as soon as the economy dips. Conventional wisdom says the market for luxury goods is recession-proof. The market seems to be sending mixed messages on that score, with Saks doing well and Tiffany's stock taking a dive. Some have prepared for a recession to the point of being under-inventoried, and some have not. New store openings will definitely be postponed. I think there will be some "winnowing of the herd" in 2008, but let's not forget, 2007 wasn't what we'd call a banner year either. I see it about the same this year as last year. Historically, retailers have contracted their technology spend when they have recessionary concerns. I don't think this is necessarily the best idea, but it's probably the more likely scenario." -Paula Rosenblum, Managing Partner, Retail Systems Research

"Any time there are tougher economic times, IT usually benefits through increases. When times are really good, inefficiencies can be glossed over and absorbed. If things are slow, however, retailers are looking to squeeze more efficiency out of their operations and that often includes upgrades to IT systems. There remains a great deal of low hanging fruit in the areas of task management, merchandising to marketing communication, and improving store execution. Those will be even more paramount if the economy slows to a recessionary level." -Greg Buzek, President, IHL Consulting

"Everyone seems to agree that consumer spending has slowed down. An open question is, what impact will this have on retailer technology spending in 2008? I think most retailers understand that they must continue to add and replace key components of their technology portfolio in order to weather the storm. A large portion of IT spending helps to "keep the lights on," which includes replacing technology that has outlived in usefulness. For many retailers, their current POS and e-commerce solutions that were developed in the 1990's fall into this category. Retailers also need to add features and functions that are consumer-friendly so that they don't have a reason to shop elsewhere. Kiosks, self-checkout lanes and price checkers can be technological win-wins that help to increase revenue and customer satisfaction while at the same time reduce or at least maintain store labor costs." -Bud Wagner, CSC Consulting

-Joe Skorupa, Debby Garbato, Christina Zarrello

New Balance Adds Item-Level RFID Software
New Balance implements item-level RFID software to track its footwear from the distribution center to the corporate factory store. The footwear retailer uses Vue Technology's TrueVue platform which is combined with tags from Avery Dennison Retail Information Services. Handheld and fixed RFID readers and antennas are deployed from Motorola's Enterprise Mobility business. New Balance hopes to achieve better inventory visibility and improve accuracy at the item level using the system.

Spanx Expands its Online Business
Spanx, a women's hosiery and shapewear company, selects an integrated e-commerce platform by GSI Commerce to expand its online business for its product lines. The retailer replaces a combination of vendor systems with the GSI platform. The e-commerce business includes integrated web technology, fulfillment and customer care. The company's new Web store is projected to launch in spring 2008.

EZ Lube Installs Environmentally Durable Hardware
EZ Lube installs retail hardware from Wincor Nixdorf. The fast lube company deploys Wincor Nixdorf's BEETLE/ i-POS Terminal for its durability against harsh retail environments. The retail terminal is regularly exposed to weather, dirt, grease and other work related contaminants. Easy Lube installs nearly 500 Wincor Nixdorf iPOS terminals throughout its existing 83 Southern California locations. This technology will be installed in the company's future locations as it continues to expand in the region.

NEXCOM Adds PCI Compliant Wireless Software
The Navy Exchange Service Command (NEXCOM) selects a PCI-compliant wireless platform by Aruba Networks. The Navy Exchange deploys adaptive wireless LANS and identity-based security at its 344 retail stores located at 107 U.S. Navy installations worldwide. NEXCOM chose Aruba's FIPS 104-2 certified platform to combat theft of consumer personal and financial data. The platform features an adaptive wireless LAN, secure firewall and wireless intrusion detection.

More Technology News

By following certain tips at the start of the PCI journey, and by applying these tips collectively, consistently and across an entire enterprise, retail industry IT executives and their teams can create an environment that lends itself to compliance and minimizes the need for piecemeal, reactionary solutions.

#1 Store Less Data
When organizations store less credit card and other customer data, they reduce not only the chances of having data to lose, but also the scope of assets that fall under PCI regulations and auditing. Organizations must determine where data is stored, what it is used for and whether it is needed. Furthermore, legacy reports must be modified to remove data that is no longer needed.

#2 Understand the Flow of Data
IT executives must know where customer data goes from the point of acquisition - either from a customer or third party - to the point where the data is archived, disposed of or leaves their network. Regular discovery and audits also will ferret out unexpected new or temporary data repositories and ensure they are covered as well.

#3 Encrypt Data
Incorporating encryption at the application development phase and having a company-wide encryption strategy are ideal approaches, particularly because they minimize costs and avoid problems associated with managing multiple keys.

#4 Address Application & Network Vulnerabilities
Organizations must address application and network vulnerabilities by updating point-of-sale (POS) applications, identifying poorly coded Web applications and scanning networks on a quarterly basis. Organizations also must implement strict system development life cycle processes to avoid ad hoc fixes, implement replicable processes and document everything.

#5 Monitor Systems for Intrusions & Anomalies
IT managers must have visibility into the network and the over air communication surrounding it, and this entails looking for known attack signatures, data anomalies and variations in your normal host and network logs.

#6 Improved Log Monitoring & Retention
Log collection, aggregation and reporting must be centralized and complemented by sophisticated log management technology, security information management technology and managed log services.

#7 Segment Credit Card Networks & Control Access to Them
Out-of-band management and continuity capabilities, effective router configuration and significant bandwidth capacity, and back up server capabilities can protect networks from attacks and minimize damage from outages. Furthermore, multi-level network authentication, the practice of disabling network ports in non-secure areas, limits to the number of people who can access the credit card systems and multi-factor authentication for secure network access are also critical tools and tactics.

#8 Improve Security Awareness & Training
Many compromises and PCI audit failures can be avoided by simply improving security awareness, particularly mistakes related to poor password control, improper data storage and overly permissive usage policies. Ongoing training and security education will go far in developing and enforcing processes that ensure adherence to security procedures and policies.