For shoppers at the Westfield mall
in London, U.K., the shopping
experience begins at home. The
Westfield app allows them to
search for specific products and
locate the stores that have them in
stock. At the mall, the app helps
them find, pay for and tag their
parking space. They also receive
notifications for the day's best
deals at the mall, helping them
make the most of their time at the sprawling property.1
U.S.-based specialty retailer,
The Container Store, has
digitized the in-store experience
at its flagship retail outlet in
Dallas to enable personalized
exploration of its vast range of
offerings. Customers can upload a
photo or video of their storage
challenges and set up an
appointment with an Organization
Expert before visiting the store. Interactive screens, customized
recommendations and more offline
customer interactions are allowing
the company to blend online and
physical experiences for enhanced customer service.2
These examples illustrate the
integration of physical and digital
retail, aptly termed 'phygital' by
industry insiders, and the shift
toward digitization initiatives
backed by technology. We capture
some of the trends in retail to
understand how companies are
achieving this shift.
Trend 1: Data is the New Stock Keeping Unit
As data continues to drive
everything from customer
acquisition and loyalty to
personalization, platform solutions and the use of application
program interfaces for data
integration are gaining ground.
In the Westfield mall example,
the app-led integration is digital
infrastructure sitting on top of
the physical, with critical
continuous inputs from the
retail stores within the property
enabling the delivery of an
integrated customer experience.
Retail companies are also
getting smarter about how they
manage the data-to-insights
value chain, and are moving
away from expensive data
research and consultancy
models. Newer models are
emerging where analytics
centers of excellence
are helping companies in
day-to-day decisions such as
pricing and strategic ones such
as entering new markets.
Trend 2: Analytics and
Automation Will Rewire Supply Chains
Automation continues to drive bulk
of the supply chain initiatives in a
bid to enable faster fulfillment
models at manageable costs.
However, as automation systems
increase in inventory management,
picking, order management and
sorting, retailers are looking at
integrated platforms that can offer
consolidated management across
all functions. The recently launched MomentumTM Warehouse Execution
System from Honeywell
Intelligrated is one such unified
platform that merges management
of distribution centers across
automated equipment, workflows, orders and labor.3
This integration is also paving the
way for greater application of advanced analytics and machine
learning capabilities in the
warehouse. As data on exception
management across warehouse
functions increases, machine
learning solutions will be able to
'learn' such exception handling
behavior to devise new business
rules and drive automation beyond
simple tasks.
Radio Frequency Identification
(RFID)-led real-time visibility at
Stock Keeping Unit (SKU) level is
another ongoing area of
transformation, with retailers
trying to consolidate supply chain
and point of sale data via
dashboards to monitor daily service
level, availability and sales. This
consolidation, supported by
advanced analytics, is also enabling
the definition of more efficient
reverse supply chains.
Trend 3: Artificial Intelligence Will Become 'Natural'
Cumulative data insights and
advanced analytics algorithms are
now making intelligent automation
of front office functions such as
merchandizing and marketing
possible. Amazon has been moving
tasks such as demand forecasting,
inventory ordering and pricing to its
algorithms. The company recently
announced the complete
automation of the negotiation
process through which brands
price, market and sell their products in the marketplace.4
Chinese e-commerce operator
JD.com is using an Artificial
Intelligence (AI)-powered writing
bot 'Li Bai' to automate the
development of over 1000 pieces of
product description content daily for its mobile app. Using natural
language processing and
generation capabilities, the bot
trawls through thousands of user
reviews and questions to gain
insights into how customers
describe the product and uses
similar language to describe and
highlight the right features of its products.5
Real-time data generated from
in-store technologies such as
RFID tags, computer vision and
geo-locations is being analyzed
to derive insights on user
behavior, preferences and
product affinities. These insights
are used to drive automation in
areas such as store layout
related decisions. For example, the use of beacons for automated,
location-based, personalized
marketing is driven by data
from customer visits to specific
sections of the store, or items
looked for but not found on
previous visits.
Trend 4: Phygital In-store Experiences Will Gain Critical Mass
Even as digital commerce
continues its unabated rise, stores
have proven their place as
unrivaled stages for immersive
brand experiences. They offer the
greatest scope for gathering data
on customer behavior as well as
for cross-selling, and play an
important role in most of the fulfillment strategies in use today.
Many retailers are focusing on
these strengths and using them in
conjunction with digital
technologies to open smaller,
brand experience or pop-up
stores. These stores stock limited,
curated assortments, but allow
customers to experience the entire
range through Augmented Reality
(AR) 'smart mirrors,' Virtual Reality
(VR), digital catalogs and styling
apps, as well as place orders to be
delivered at home.
The fashion specialty retailer
Nordstrom's no-inventory store
format Nordstrom Local allows
customers to try out clothes,
consult personal stylists, have their clothes altered in-store and
refresh themselves at a bar.
The store supports fulfillment
options such as home delivery, Buy
Online Pickup in Store and curbside delivery.6
Across all stores, greater focus
is being placed on enabling
a friction-free shopping
experience through self-service
and digital payment options.
Recent research has revealed
that customers already expect
their stores to deliver a
tech-enabled experience, with the following must-haves:7
-
Functional, seamless digital
payment options
-
Updated online inventory for
browsing ahead of store visits
-
Self-checkout options
-
Online ordering capabilities, for pickup in store
-
Online ordering with same-day or one-day home delivery
-
Mobile ordering options / capability
Stores are also experimenting
with robots who can welcome,
interact, fetch products, address
queries or complaints, and process
payments to deliver an enhanced customer experience.8
Trend 5: Customer Journeys Will Begin on Mobile Phone Screens
Mobile devices are the primary
drivers of e-commerce today, with a
Deloitte report finding that mobile
orders have grown by 45 percent in
Q3 2017 compared to Q3 2016.
Mobile traffic to e-commerce sites
now outpaces desktop traffic, with
60 percent of traffic coming from
mobile versus 33 percent from computers.9 Mobile, therefore, is no
longer important as a channel in
itself, but is increasingly proving to
be the starting point of several
customer journeys that may end in
a different channel altogether.
Retailers understand this and are
looking at integrating mobile into
other channel experiences as well.
As a result, mobile apps are now
being used for pre-visit inventory
browsing, ordering and even
payments to reduce customer
waiting time in-store. As seen in
The Container Store example
earlier, mobile apps are being used
to enable more personalized
customer service in stores.
Retailers are also incorporating
AR and VR technology in their
mobile apps to integrate the
in-store and online experiences.
Furniture retailer Ikea has teamed up with Apple to
launch the Ikea Place app that
allows customers to use AR to scan
an empty area in their house,
browse through recommended
furniture, and visualize it in that space to see if it actually works.10
Home improvement retailer
Lowe's uses AR in its in-store
navigation app to create a map
of the store. It allows customers
to feed their shopping list on the
app, and then guides them
around the store to their
desired items for a faster and easier experience.11
As the digital transformation of
the retail industry achieves
greater maturity, future
technology will continue to
focus on leveraging data to
drive further automation,
integration and seamless
intelligence across functions,
channels and players.
Retail companies will also start
thinking more like technology
companies, with an agile, 'fail-fast'
attitude toward technology
initiatives. This will help them open
up to more changes, in smaller
installments, and adopt a culture
of ongoing innovation toward
creating the ultimate customer
experience.
References:
1. https://www.fierceretail.com/operations/westfield-debuts-mall-future
2. https://www.fierceretail.com/container-store-thinks-next-generation
3. https://hbr.org/2017/01/survey-peoples-trust-has-declined-in-business-media-government-and-ngos
4. https://www.bloomberg.com/news/articles/2018-06-13/amazon-s-clever-machines-are-moving-from-the-warehouse-to-headquarters
5. https://www.retailtechnews.com/2018/06/13/weekly-focus-alibaba-cainiao-to-build-logistics-hub-in-hk/
6.
https://www.cnbc.com/2017/10/05/take-a-peek-inside-nordstroms-first-tiny-store-without-inventory.html
7. https://www.businesswire.com/news/home/20180627005326/en/Tech-Savvy-Retail-Restaurants-Raising-Bar-Customer
8. https://www.wns.com/insights/articles/articledetail/515/robots-in-retail-driving-innovation-one-aisle-at-a-time
9. https://c1.sfdcstatic.com/content/dam/web/en_us/www/documents/e-books/
10. https://www.cnbc.com/2017/09/13/ikea-and-apple-team-up-on-augmented-reality-home-design-app.html
11. http://www.lowesinnovationlabs.com/instorenavigation
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