- Although online mobile shopping is gaining substantial momentum, bricks-and-mortar stores will remain the dominant revenue-generating channel for the foreseeable future.
- Bricks-and-mortar retailers are leveraging digital technologies to enhance the customer shopping experience and to improve their ability to exceed customer expectations and create a differentiating value proposition.
- Digital technologies, examples of which include in-store tablets and kiosks, virtual/augmented reality, interactive hangers, location-based-services (LBS) and even 3-D printing, can be used to increase shoppers’ convenience, gamify the retail environment, improve the customer/product match, and a range of other applications.
- Most of the experimentation with these digital technologies has been in higher-margin or bigger-ticket retail categories, and their wide-spread adoption and commercial benefits remain to be seen.
This piece serves as a preview of the material covered in Strategic Planning and Management in Retailing, a Babson Executive Education open enrollment program.
Creating a Great In-Store Experience
Clicks and Bricks
We are witnessing a significant shift in shopping patterns away from brick-and-mortar to online mobile shopping. However, bricks and mortar stores will remain the dominant revenue-generating channel for the foreseeable future (Gartner Group). Online shopping is still less than 10 percent of revenues in most developed countries.
The benefits of online shopping, which come mainly from digitization, will be married with the human need for physical and local experiences to create a better shopping experience. This is a win for the consumer. This also is a win for retailers that digitize aspects of their business and use this to understand and be where consumers shop. They will be able to better meet and exceed customer expectations and create a differentiating value proposition that leads to an overall better brand experience.
Digital technology can be used to:
- Enhance the store experience
- Take advantage of mobile user capability
- Increase shoppers’ convenience
- Promote a retailer’s online presence and the store together as an omnichannel approach to the customer
Digital Technologies That Enhance the Store Experience
These technologies include tablet technology, video screens and in-store kiosks, digital signage, interactive hangers, augmented reality, use of social proof, and virtual reality.
Touchscreens have become key components to the in-store experience. They come in two forms: kiosks and digital signage. Touchscreens encourage interactivity and engagement on the part of the user. Some retailers have used tablets to remove checkout desks.
Tablets can turn an ordinary dressing room into a place where customers try on new clothes and then capture and share experiences through their social networks. Giant touchscreens on showroom floors could become interactive mirrors people use to assess the potential for new purchases. At some retailers, tablets are made available inside stores in order to capture customers’ interest and then lead them to the right product at the right price. Retailers are learning to adapt to shoppers using personal devices before, during, and after purchases.
Tablet technology in store can help to ensure the correct fit for customers. Acustom Apparel in New York customizes clothing with the help of a 3-D body scanner. Using its digital measuring technologies, the store gathers 200,000 data points to create a 3-D body model that is then fed into its proprietary algorithms to create custom clothing.
Hellman’s Mayonnaise installed touchscreen tablet computers on grocery carts. The devices could detect RFID (radio frequency identification) tags on the products inside the carts to suggest recipes that use the condiment. The tablets also served as an additional informational resource.
Tablets offer retailers a chance to deliver meaningful visual experiences that engage shoppers who are using tablets to blend the best of digital and real worlds to get the right size and color at the right price.
Video Screens and In-Store Kiosks: Two Forms of Touchscreens
Retailers such as Tesco and John Lewis have “kiosks” that allow customers to browse product ranges and order items while in store, while brands like Oasis have been using iPads for the same purpose, as have a number of other retailers.
Digital signage promotes engagement in store and encourages customers to take the retail experience with them when they leave the store. Digital signage can connect with content management systems to allow for quick and seamless updates, as well as the ability to either broadcast updates once to any number of devices or custom update each device with localized content. It can be used to assist customers with in-store purchases as well as to update prices anywhere—anytime. It also can be used to gamify the retail environment, share content from screen to screen, create wish lists that can be sent to a customer’s mobile via SMS or email, and run “loyalty” and “just in time” promotions.
Interactive Hangers (IH)
IH works when the hanger is picked up by a shopper and triggers preprogrammed visual media to be played on a nearby screen. IH also can be programmed to change lighting, background music, and other media around the store.
Augmented Reality (AR)
AR allows for a digitally enhanced view of the real world. AR can add layers of digital information on top of items in the world around us. It also can be used for reading product reviews, watching videos, and ordering online.
A retail furniture AR app allows users to see how a piece of furniture looks inside their home before buying it. This AR viewer utilizes the live camera feed of a mobile device and projects a virtual representation of the object in real time on a tracking marker, allowing the user to view the virtual object from any angle. The application solves the problem of picturing how a piece of furniture would fit in its intended environment.
Use of Social Proof
Nordstrom shows top pinned items (on Pinterest) in its stores. This makes it easier for customers to find the items and serves as social proof. An in-store app allows salespeople to match popular Pinterest items with the available inventory to best serve shoppers.
Virtual Reality (VR)
Topshop’s latest use of technology was to live stream a VR “experience” of its London Fashion Week show. Customers could use VR headsets to experience the show in 360 degrees.
Digital Technologies to Take Advantage of Mobile User Capability
“Quick Response” (QR) codes are a response mechanism for mobile users. They can be placed in various places—in a shop window, on point of sale (POS) in store, in print ads, and so on. In store, they can be used to provide more product information at the POS. QR codes offer a quick way to respond to ads, access vouchers, and learn product details simply by scanning quickly.
Smart Phone Coded Tags
A store in Seattle called Hointer allows shoppers to scan a coded tag on an item of clothing with a smart phone, use the phone to select color and size, and find the item ready to try on in a dressing room.
Near Field Communication (NFC) Shopping
Customers use their smart phones to access information on products and pricing, access loyalty programs, and share content on social media via NFC-enabled shelf-edge labels, and scan items added to their basket. When they’re done shopping, they can quickly pay for their items by tapping their phone on a reader attached to the cash register.
Browse and Order Hubs
These hubs allow users to browse the catalog or scan barcodes on items and explore product information. Customers can choose to order on the device and collect at a later date or have the product delivered. These touchscreen devices resemble huge iPhones and come with a card payment machine.
Outdoor Location-Based Services (LBS)
Outdoor services are geolocation services that tap a smart phone’s internal GPS to match consumers’ whereabouts to local businesses and special offers. For a retailer, knowing when its best customers are nearby—and simultaneously being able to reach out and invite them into its stores with a message or promotional offer—can be a huge marketing boost.
LBS technologies, in their simplest form, provide the ability to track someone’s exact location through his or her mobile device. In general, LBS allows retailers to “find” customers when they come near the stores and to deliver a targeted sales message, usually in the form of a text message. In general, customers engage retail LBS via a mobile app such as Foursquare or Shopkick. Customers download the app and then access all of the data and benefits through the app’s interface. Foursquare created a rewards program to recognize its most avid users.
Indoor LBS allows the same kind of tracking and promotional capabilities as outdoor LBS, but inside a store. This technology is based on Bluetooth beacons throughout the store that connect to mobile devices. The beacons push notifications to users as they walk around the store. Apple and Google are two players in this field.
At Macy’s, customers with the Shopkick app installed on their iPhones will be alerted about deals and items they may be interested in. This kind of precision marketing can be very effective. It uses real-time behavioral data to deliver immediate, personalized content and initiate ongoing dialogues with shoppers to drive loyalty and sales (as seen in this advertisement).
Digital Technologies to Increase Shoppers’ Convenience
These technologies include digital personal shopper, 90-second skin care guide, price comparison, holograms, smart mobile solutions, and in-store wi-fi.
Digital Personal Shopper
IBM recently introduced a new “personal shopper” that will be rolled out in North Face stores later this year. This digital assistant device utilizes knowledge of the brand’s product database to provide recommendations to the end user. For example, a shopper can tell this device that his or her family is planning a trip and needs a tent, sharing the location of where the family would like to go. The technology behind this “shopper” takes into account the user’s request and contextual information about the location in order to recommend the best product for the shopper’s request.
90-Second Skin Care Guide
Using software on the Apple iPad at Clinique counters, consumers identify their skin care concerns and receive personalized recommendations using a 90-second computer-guided skin care analysis. The diagnostic tool processes more than 180,000 product combinations that match each consumer’s personal needs. At the end of the intuitive analysis, consumers receive a printout or email with a list of their custom-fit product recommendations.
A comparison shopping website—sometimes called a price comparison website, comparison shopping agent, shopbot, or comparison shopping engine—is a vertical search engine that shoppers use to filter and compare products based on price, features, and other criteria.
Holograms are 3-D models of retail products that can be used to instantly try on different colors or styles of clothing and accessoriess. You can see 30 or 40 items realistically without physically trying them on. The technology can be used in a virtual dressing room as well, showing what the clothes look like when you are, say, walking down the street or hitting a golf club. Technical innovation and falling costs mean holograms will likely be used soon by retailers to personalize the shopping experience and create a virtual environment.
Smart Mobile Solutions
According to Walmart, its app-wielding customers make twice as many shopping trips per month and spend 40 percent more than non-app users. Two Walmart innovations include the ability to guide customers (via GPS) directly to products in its large stores, and to let them skip the checkout line and scan and pay for items with their smart phones.
Some retailers offer free internet access in their stores so that customers can use their mobile or tablet devices without any frustrating connection issues.
Whatever the quality of service in store and the range of products on offer, shoppers always have the option of checking prices on their mobile phones and heading online, or to another high street retailer, to make the purchase.
Digital Technologies to Promote a Retailer’s Online Presence
These technologies include Color IQ technology, in-store pickup, and increased range online.
Colour IQ Technology
Sephora has invested in technology that delivers a better customer experience for in-store shoppers. Sephora added Colour IQ technology that matches skin tones to cosmetic products, and iPads for ordering from the full range of Sephora products. Sephora’s retail strategy is not to compete with online channels but instead to offer them in store.
Some stores, such as Officeworks in Australia, allow online customers to pick up their orders in a retail location rather than wait for a delivery. In what it calls "omnichannel" retail, Macy's spent the better part of 2013 completely transforming its supply chain, making 500 stores perform double duty as fulfillment centers to ensure customers could order and receive products from any store location, in any variety, and, when possible, on the same day. Ten percent of online sales are fulfilled from Macy's stores.
Increased Range Online
Many retailers are now using their websites as a showroom for a limitless number of items. Store no longer need to carry their full range of products and can leverage technology to showcase products virtually.
Digital Technologies: A Few More Examples and Extensions
For retailers there is opportunity to gain from integrating desktop 3-D printing in processes all throughout their business. Retailers can benefit from it in customer interaction. With current trends such as personalizing objects, desktop 3-D printing can offer customers a way to fulfill this need of full customization. Another large benefit is helping customers to visualize designs, since retailers can show them the 3-D printed model.
Imagine entering your favorite department store, where you notice a row of machines with different lights busy creating something. One of them is creating a beautiful iPhone case, another is making a bracelet. Next to the printers is a sales associate telling you that you can create your own design as well. You customize the drawing of a well-designed vase and continue shopping. At the end of your shopping day you go home with your own created vase. (Leapfrog 3D Printers (pdf)).
3-D printing will allow consumers to have “personalized manufacturing” in the store of their choice, instead of having to be shipped from factories. Take a simple item like a coffee cup. Instead of buying one that was manufactured in China, transported, and distributed in stores, you could just download the code for the coffee cup and 3-D print it at a retail outlet.
Digital Technology at Burberry Regent Street
Digital and retail can appear separate, but bringing them together can be hugely effective. The Burberry Regent Street store is modeled after its Burberry World website, and features “nearly 500 speakers and 100 screens” as well as other “digital add-ons like virtual rain showers and mirrors transforming into runways while [customers] browse.”
Those digital add-ons include RFID (radio frequency identification) technology, a digitally enabled gallery, digital signage, and the tallest indoor retail screen in the world. Staff use iPads to check stock availability and make orders, and fashion shows are streamed live to the store.
Burberry Regent Street brings its digital world to life in a physical space, where customers can experience every facet of the brand through immersive multimedia content exactly as they do online. Walking through the doors is just like walking into the website. Watch Christopher Bailey Introduces Burberry 121 Regent Street, London on YouTube.
Wearable Technology: Google Glass
Curtis Stanier produced this concept video as a way of demonstrating some of the ways technology might be used in physical retail spaces to help enhance the customer experience. Watch Google Glass and the Retail Revolution on YouTube.
The digital technology world has arrived in stores, and we are seeing increasing experimentation by “Bricks and Mortar” retailers with digitalization for a variety of purposes, but generally to enhance the customer experience. It is early, and the evidence is not yet in to say whether customers will see the benefits of digital technologies in the stores and embrace them, or whether retailers will achieve commercial benefits from these as yet unproven technologies.
To date, much of the experimentation has been trialing of digitalization in higher margin or bigger ticket categories. Or, retailers are using technology to deepen customer interaction, often through social media or through apps, or to improve customer information and service. If customers come to see real benefits and retailers begin to realize commercial benefits, we can look forward to more widespread adoption.
Strategic Planning and Management in Retailing
Being competitive and customer-oriented in today's rapidly changing retail market means retailers of all types-bricks and clicks-need to create and implement a winning market strategy. Strategic Planning and Management in Retailing helps retail businesses develop the effective strategies and dynamic leaders needed to compete and win in the global retail marketplace. The next offering takes place April 27–May 3, 2019.