In retail, being programmable is profitable
Transformative technologies help brick-and-mortar retailers stay relevant
In the burgeoning era of e-commerce, physical store sales still make for 90% of the $4.7 trillion total retail sales in the US. → The US Department of Commerce.
“Brick-and-mortar stores will remain the dominant revenue-generating channel… for the foreseeable future.” → Gartner
Something curious happened en route to the unprecedented rise of digital retail: the brick-and-mortar experience survived….
Experience is the key connect
Experiential shopping makes all the difference. According to a PwC report, 60 per cent consumers still prefer to shop in-store instead of online because they are able to “see, touch, and try the merchandise”. This trend is spurring online-only brands like Amazon, Warby Parker, Bonobos, and Alibaba to open physical stores that avoid the common pain points of offline retail — slow-moving check-out lines, missed selling opportunities, poor customer service, ill-informed store associates — and thereby, loss of revenue and clients. Although a major chunk of their revenues still comes from e-commerce, brick-and-mortar stores provide such players a marketing boost and a healthy injection of customer experience.
Retail spaces are evolving from selling points to branding hubs. Stores like Samsung 837 and the new Adidas shop, both in NY, are more of experience centers. Consumers go through concepts (like larger-than-life screens), experiences (like testing sports gear on ‘turfs’ and ‘tracks’), and product-familiarization in these outlets. Purchase takes a backseat; branding becomes priority. The ‘ship-from-store’ concept allows most shoppers to experience and order a product in-store and get it home-delivered (or even drone-delivered). With the ‘click-and-collect’ concept, customers can order online, and experience and pick the product (or not) from the actual store. Either way, experience is the key connect.
The pluggable core of programmable retailers
Digital is the inarguable way forward for brick-and-mortar players. With almost 50 per cent of Internet penetration in the world today and 3.419 billion people acquainted with the WWW, digital is an organic extension of the physical.
Taking cue, physical stores are upgrading their legacy systems and monolith infrastructures, and digitally transforming themselves to more agile and programmable enterprises. Transformative technologies lead to bone-deep innovation. Retail players are leveraging technologies like API and cloud in order to make their core ‘pluggable’. Being pluggable is helping them adapt to the flavour of the season — be it AR, VR, image recognition, location analytics, and so on. This programmability will help retailers stay relevant.
Chinese e-commerce giant Alibaba is opening its first brick-and-mortar mall in Hangzhou, China, called More Mall. Thanks to Alibaba’s dominance in core digital technologies like API and cloud, the mall will see cutting-edge digital offerings like virtual fitting rooms, high-tech makeup testing mirrors, an unstaffed convenience store, and so on. Alibaba has invested as much as $8bn in brick-and-mortar retail in the last two years. The retailscape is shifting for sure. Omni-channel presence is the new retail reality.
Amazon has been the biggest newsmaker in retail of late — what with their acquisition of Whole Foods. Amazon’s expertise in transformative technologies like API and cloud gave it the confidence to go ahead and acquire a brick-and-mortar retail giant. After introducing almost a 50% price-crash in the first week of its operations, Amazon is expected to press its Alexa and Echo services into use soon. It’s a matter of time that Amazon’s technology takes over within the Whole Foods brick walls.
The tech impact on retail processes
Thanks to their programmable DNA, retailers are able to simplify some of their operations. Levi’s has teamed up with Intel’s Retail Sensor Platform to optimize inventory management. Intel’s technology tracks instances of overstocking or understocking in their stores. Through IoT, Big Data analytics, and cloud services, everything is tracked real-time so that customers don’t face any ‘out of stock’ situations and products are removed when demand is less. Levi’s expects a “1% increase in sales with every 3% inventory accuracy gained”.
Simbe Robotics’ Tally robot hovers around product shelves at Target stores in the US. It uses data analytics, AI, image recognition, and machine learning to deduct price errors, out-of-stock situations, and carry quick and routine full-store audits. Simbe Robotics aims to shrink the global $450bn annual loss in retail inventory management.
Proximity marketing — based on Near Field Communication (NFC) — is getting a digital facelift through location analytics. Through API-driven apps like Foursquare and Shopkick, retailers can know when their customers are near their store and invite them over via a text message. At Macy’s, shoppers who walk into the stores are awarded with gift cards through Macy’s API.
In-store Bluetooth beacons come handy. Estimote’s Bluetooth beacons leverages API and send push notifications to users’ phones about products or promotions if they sense someone near. Harrods uses Estimote to assist shoppers to find a particular brand.
Such precision marketing uses real-time behavioral data to deliver immediate and personalized content. This contributes to the ‘impulse economy’ that reflects the evolution of the mobile shopper. According to a Capgemini report, 80% of consumers love this personalized experience.
This is just the tip of the iceberg. Brick-and-mortar retailers are leveraging their programmable core to juggle with a dizzying variety of the latest tech bells and whistles — including AR and VR promotions, API-driven digital kiosks, 3D holograms, Wi-Fi-ready billing devices, and more.
To handle vast amounts of data, it is imperative that the business processes of an organisation are agile. Silos and rigidity are the bane of an enterprise aiming to innovate. Retailers who wish to survive have to constantly respond, adapt, and evolve.
Agility is critical for retailers, now and next
A brick-and-mortar retailer without an agile DNA will find it tough to survive market flux. Failure to compete with e-players and stay digitally relevant is already forcing groups like JCPenney, Michael Kors, Payless ShoeSource, Guess, Crocs, and BCBG to shut some of their brick-and-mortar stores. According to a recent report by Credit Suisse, due to the same set of reasons, over 8,600 retail stores could close this year in the US — more than the last two years together. This way, the 90%-figure mentioned in the beginning is likely to come down drastically — unless corrective measures are taken.
Agility should be in a retailer’s DNA. A retail enterprise should be flexible enough to move with the market and do constant course-corrections. This is possible only if the business is programmable technologically. Enterprises have to be open up their data through rest APIs and thereby contribute to the API economy. Likewise, they have to adopt containerization to leverage cloud services. That is how agility in an enterprise can make it programmable. Investing in transformative technologies like API and cloud gives an enterprise the ability to adopt popular cosmetic technologies effectively and become a dominant force in the market.
The writing’s on the wall: Only programmable businesses will survive. ROI — ‘return on innovation’ — will follow naturally.