The store footprint is an essential, strategic asset for omnichannel and offline retailers. Omnichannel transaction modes are increasingly becoming the norm, and the omnichannel customer has 30% higher lifetime value than a single-channel customer. The store must therefore evolve and become an asset that works seamlessly and complements its digital counterparts. In-store technologies can help retailers provide a better customer experience, increase efficiency, collect valuable data, and gain a competitive advantage over online-only stores and marketplaces.
For this discourse, the store-related technologies are classified under three primary functions:
- Store front-end: Simplifying the purchase cycle and enhancing customer experience (CX).
- Store management: Optimizing store operations and gaining critical customer insights to unlock trapped value.
- Supply chain operations: Enabling retailers to contain costs and become agile.
Deliver a superior CX with front-end tech
According to a PwC study, shoppers are ready to pay a 16% premium on products and services for an enhanced CX. Moreover, 59% of shoppers said that even if they love a product or company, they would walk away if they experienced repeated sub-par CX.
Here are some ways integrating tech at various purchase touchpoints can lead to superior CX:
- Product search and discoverability: Virtual shelves, endless aisles, in-store navigation, digital kiosks for product search, beacons, wearables, mobile shopping assistants, and autonomous shopping carts can all enhance the discoverability of products, save shopping time, render important information, and provide an endless number of SKUs to shoppers. For instance, Lowe’s in-store app, Vision Navigation, uses augmented reality to guide shoppers through the store, a turn-by-turn most-optimal-route finder based on the list of products a customer is interested in. The app identifies the quickest route to find and check out with all items.
- Product selection: QR codes and magic mirrors, VR (try-on, fitting rooms, memory mirrors), augmented reality, and AI-aided personalization can enable access to key product information, leading to better decision-making for shoppers. Customers can try multiple items on in a short period, check the product (aesthetics, dimensions) in real time, and learn about real-time offers. For instance, Alibaba’s FashionAI technology produces various mix-and-match apparel recommendations as customers move around the store. It then helps them find the selected items.
- Product pricing: Electronic shelf-edge technology and digital price tags can help retailers update real-time prices based on prevailing market rates, sync online and offline prices, and display info like short-term discounts. For instance, Kroger’s digital price tags (also known as “Kroger EDGE”) display real-time pricing, nutritional information, video tags, and coupons for grocery items.
- Checkout and payments: Click-and-collect and BOPIS, kiosk-based self-checkout, mobile-based self-checkout, and automated checkout and payment can help retailers minimize delivery timing, making the entire experience convenient with minimal human intervention. For instance, Myntra, an Indian fashion retailer, has opened a self-checkout store in Bangalore. Customers need to keep their selected items in an RFID-enabled tray that automatically captures the product details, and the attached digital kiosk generates a bill that can be paid with a credit or debit card. The company claims that the average checkout takes only 30 seconds.
Make stores intelligent with store management technologies
Store management technology can make associates, spaces, and sales more effective. It can also unlock trapped value. The objective is two-fold: first, to be better prepared and more efficient in serving customers; second, to achieve personalization and discover new sales avenues.
Here’s a list of actions retailers can take and technologies they can implement to improve their store productivity:
- Empower the store associate: Wearables or mobile apps for associate-to-associate and associate-to-store communication can help combat out-of-stock situations and solve customer and operational issues in real time. For instance, fashion brand River Island uses Samsung smartphones installed with Microsoft Teams for peer-to-peer communication within the store. Having a mobile app for store associates can also help in “clienteling.” In case items are out of stock, the app can recommend similar products or let associates know that another store has the item in stock. The Target app, for instance, enables store associates to access real-time information about products, prices, and inventory levels, which helps them better serve customers.
- Automate store operations: A combination of electronic shelf labels and weight sensors or shelf-mounted cameras and image processing can improve in-store inventory tracking and detect out-of-stock inventory. For example, ZARA has implemented a system called RFID (radio-frequency identification) that uses a combination of shelf-mounted cameras and RFID tags on the products to track inventory levels in real time. Moreover, using AI-enabled object detection inside the store can help retailers find unscanned items at the POS, enable self-checkout, and prevent shrinkage and revenue leakage. Amazon Go stores use AI-enabled object recognition to detect and track the products that customers pick up and put in their shopping carts.
- Optimize store planning: Algorithmic retailing, which is extracting knowledge from complex and large heaps of data using machine learning, can help in assortment planning, demand forecasting, inventory management, promotion planning, replenishment planning, and shelf space planning. It can also provide competitive price intelligence. Amazon Go stores leverage the principles of algorithmic retailing in everything from inventory planning and other supply chain activities to providing a completely automated store experience where customers can pick their items and walk out.
- Understand in-store shopper behavior: An AI-powered analytics platform can help retailers gain insights on footfalls, conversions, and buying patterns and create limitless customer segments for hyper-personalization. Brands like Sephora, Casper, and Bloomingdale’s use RetailNext, a cloud-based platform that combines video analytics, Wi-Fi triangulation, and Bluetooth beacons to track customer behavior and generate insights on footfall, traffic patterns, and other metrics. Additionally, retailers can use a combination of RFID, cameras, and data analytics to measure in-store promotions’ impact and determine the most effective merchandise layout. For example, Target uses RFID technology and video analytics to measure the impact of in-store promotions on customer behavior. The system tracks customers’ movements throughout the store, capturing data on how they interact with products and respond to promotional displays.
Leverage tech to achieve supply chain efficiencies
In-store retail grapples with increasing real estate and labor costs. Retailers can invest in technologies to control supply chain costs and become more agile. Eventually, the traditional back-office functional silos need to collapse to form an interconnected dynamic network, enabling greater collaboration, eliminating inefficiencies, generating real-time data for holistic decision-making, and infusing greater transparency across functions. The intent is to optimize the supply chain from supplier management to fulfillment.
Below are technologies that can help transform various supply chain activities:
- Procurement: Blockchain technology has many use cases, such as in contract management or tracking product lifecycles. For instance, Walmart partnered with IBM and other food companies to develop a blockchain-based system to track the journey of food products from farm to store.
- Planning: Retailers can leverage predictive analytics for forecasting supplier demand and optimizing inventory. Tesco uses predictive analysis to forecast the demand for weather-dependent products and adjust the inventory and supplier orders to reduce dead stock and save millions annually.
- Fulfillment: Companies can use IoT to remove intermediaries such as banks for settlements, monitor movement, and enable communication between shipment hubs, workers, and employees. For example, P&G leverages IoT-enabled automated logistics monitoring to reduce delivery costs by 10%-20% and shrink labor costs by 20%-30%. Companies can also utilize dynamic order management systems, vehicle tracking software, and drone-based delivery to improve last-mile delivery and reduce delivery times. In 2022, Walmart made over 6,000 drone deliveries.
- Inventory: Retailers can leverage advanced inventory management systems to optimize inventory levels, locations, and mix. ZARA, for example, leverages RFID-based inventory management. RFID readers placed throughout the store and warehouse are used to track the movement of each item in real time. The system allows ZARA to optimize its inventory levels, reducing the risk of overstocking or understocking.
- Supply chain visibility: Businesses can implement advanced supply chain tower solutions to enhance supply chain visibility. For instance, Decathlon uses an advanced control tower solution. The platform can provide alerts when inventory levels are low, enabling the company to reorder products and avoid stockouts. It can also help to optimize logistics and transportation operations, reducing costs and improving delivery times.
Amplify in-store tech investments with a coherent business strategy
Retailers must combine the aforementioned technology implementations with thoughtful business initiatives to create an effective business model. Here are a few steps retailers can take to maximize the benefits of technologies discussed in this report:
1. Bring store and online commerce under one ambit. Retailers should invest in in-store and online technologies as an integrated omnichannel initiative. However, if stores and e-commerce are incented for their respective channel sales or have different leadership teams, you cannot devise an effective omnichannel strategy. For example, Sephora has merged its digital and store team to gain a 360-degree data view of the customer. This allowed the retailer to link the customer purchase journey across channels — for instance, a web search that led to an in-store sale. Retailers need to evolve to this state quickly to magnify the benefits.
2. Invest in technologies that can scale cost-effectively. Retail is a low-margin business. It isn’t realistic for most retailers to spend $500,000 per store because it scales linearly. So, if you are introducing self-checkout, a scan-and-go approach might be far better than weight sensors everywhere, along with overhead and shelf-mounted cameras. Amazon might have that kind of investment appetite — most don’t.
3. Don’t wait and watch — ACT. New technologies that promise to solve long-standing retail puzzles are on the horizon. The moment is nigh when leading retailers deploy such technologies in production, such as Amazon’s fully automated fulfillment centers. Additionally, Walmart’s new packing and sorting robot, Alphabot, installed near its Salem, New Hampshire, store, is equipped to pick and pack grocery orders 10 times faster than humans. This solves the long intractable unit economics challenge in e-commerce to a large extent and provides an unprecedented opportunity for Walmart to formulate new rules of fulfillment. The only choice remaining for rivals is to imitate or perish.
To conclude, stores are not going away, but they are changing. The store of the future is expected to play two roles underpinned by in-store tech: first, to act as an experience center; second, to be converted into a dark store and used as a micro-fulfillment center. Balancing a digital and physical reality that is seamless and customer-centric while driving loyalty and growth will be the promise of emerging in-store technology for successful retailers of the future. Unlocking the potential of (physical) stores is one of the most significant transformation opportunities for omnichannel or offline retailers and possibly their only defense against platform titans like Amazon.
