Smart Retail Gets Its Smart Store

Bridget Johns
Bridget Johns
Chief Marketing Officer, Head of Growth Strategies

Shopper expectations have been set and the smart technologies are readily available, today; a new retailing era has begun, and smarter retail is ready for its smart store.

[This article was originally published in an edited form in the January issue of The Robin Report.]

The Internet changed everything. It rewrote all the “rules,” rocking the foundations of industry, tipping economic and business models upside down, all the while creating new, iconic brands while burying so many old stalwarts. And, I’m not referring to retail, I’m referring to nearly every industry.

Now, retail, in particular, has been especially changed.

Over the past two decades, the retail industry endured more disruptive change than it experienced collectively in all its previous history. The Internet enabled an entirely new channel in online e-commerce, and smart Internet technologies informed and empowered consumers like never before, placing shoppers in an unprecedented position of power and authority – for the first time ever, shoppers are calling the shots.

However, whereas most all agree the Internet and its related technologies have been the catalyst for change in the retail industry, where retail is headed has been in much debate. Initially, for years, industry visionaries forecasted online e-commerce would make physical retail irrelevant and kill it off. However, the lack of online profitability led many e-commerce brands to brick-and-mortar stores in an effort to develop and deliver differentiated, branded experiences, shifting the pendulum, and foreshadowing the poor long-term health of pure-play e-commerce.

The answer to where retail is headed, we’ve learned over time, lies somewhere in the middle, a seamless shopping experience that transcends single channels and encompasses them all, sometimes in sequence, one channel and touchpoint at a time, but more often synchronously, with multiple touchpoints and channels being engaged at the same time. For the most part, mobile and digital channels are keeping up with the pace of change dictated by shoppers – they’re closest to meeting expectations. Stores, for their part, aren’t holding up their end of the bargain.

Not entirely stores’ fault

Not only are stores not leading the change to a new retail reality, most haven’t changed at all. It’s true.

Think how technology has changed the way consumers – aka, shoppers – approach nearly every facet of their lives, from consuming music, books, news and entertainment content to managing traveling and transportation needs through collaborative consumption models along the likes of Uber, Lyft, Airbnb and others. Think also of products themselves, and how technology pushed advancement along, from typewriters to notebooks, gas guzzling cars to electric vehicles, cellular phones to smart mobile devices, and more.

Now, think of the tried and true brick-and-mortar store.

If you took at stores over time, nothing much has changed – the same displays fill the same layouts. Comparing images from a mall in 2016 to a mall in 1986, would you be able to tell a difference?

It’s not entirely stores’ fault, of course. With the advent of the Internet and online e-commerce, established retailers needed to build out an entire new channel, and at the time, most thought the best way to do it was through parallel and autonomous set of systems, processes and inventory supply chains. That channel building took all of the investment budget of retailers, and then, later, their rebuilding took even more when retailers discovered their folly of parallel infrastructures that didn’t reflect – or serve – shoppers’ cross-channel shopping journeys.

Now, digital channels are built and relatively mature. It’s time – and long overdue at that – for stores to get their makeover. It’s time for smart retail to get its smart store.

Why can’t conversion be 100 percent?

The first step to the smart store is an acknowledgment that different retail realities dictate a different retail approach. The numbers don’t lie: retail is much, much different today than it has been even in the recent past.

Consider shopper traffic to brick-and-mortar stores has declined monthly, as measured year-over-year, for over 48 consecutive months. That’s more than just “a trend.” It’s irrefutable proof retail, as so many experienced and successful professionals knew it, is forever changed.

Traffic is down, but both conversion and sales yield/sales per shopper generally trend slightly upward. Even with slight increases though, the best converting retail segments – outside of grocery and convenience stores, it’s the beauty segment – convert below 50 percent, with most segments absolutely ecstatic with 30 percent conversion. So, faced with those realities, why are so many retailers pulling out all marketing stops in order to drive more traffic?

Asked differently, why are retailers ineffectively investing in rather futilely driving store traffic when they have opportunities to invest in better engaging, serving and converting the traffic they already attract?

New smart store retailers like confectioner Lolli and Pops are building strong businesses without the word “marketing” appearing in a single job title in the company. Now, certainly, marketing is a key function that, in fact, gets performed at Lolli and Pops, but the clear organizational priority – the very ethos of the brand – is the engagement of each and every customer who enters through the door.

Using smart store analytics, Lolli and Pops not only staffs around historical traffic trends to ensure proper floor coverage, it also staffs within the store at the places where shoppers need the most engagement, ensuring the store can sweeten the day of every shopper with timely, relevant, value-added shopper and associate interactions. For the store operations team at Lolli and Pops, getting the right sales associates to the right place at the right time is no small, trivial concern. It’s the cornerstone of the entire business model.

The Right People, at the Right Place, at the Right Time from RetailNext on Vimeo.

Shopping experience as a differentiator

Every retail channel has its inherent strengths and advantages, and physical retail’s biggest strength lies in its ability to deliver high-touch shopping experiences, be it an ability for shoppers to “touch and feel” merchandise, a quality interaction between sales associate and shopper, an inspirational or aspirational shopping environment, or other.

It’s those shopping experiences that make stores the best conversion tool known to retail professionals.

Smart store operational technologies make shopping experiences all about shoppers, the way retail is supposed to be.  Data – coupled with the arts of design and merchandising – drives product selections on the floor, with analytics applications optimizing assortment planning and the like. Innovate smart store retail concepts like b8ta deploy analytics platforms like RetailNext’s SaaS offering to provide data and a feedback loop regarding shopper engagement on the floor – both with sales associates and product displays – and cycles back to even better merchandising and store layout planning.

At Levi’s and other smart stores, item-level RFID enables smooth processes around product movement and restocking, and delivers insights into whether products move – or not – because of design, placement, fit, price and more. RFID tags are able even empower the fitting room to become a digital engager, examining different designs, sizes, colors, etc., and even initiating shipping straight to a shopper’s home or other location, immediately connecting the dots between online and in-store activity.

And, that’s just “behind the wall” at the new smart store. At smart stores like Ralph Lauren, technologies like Oak Labs’ interactive mirror bridge online and offline channels, and enhance the in-store shopping experience. Inventory management applications are powered by dwell, engagement and purchase behaviors. Operational tasks are diverted to times when shoppers are not in-store, and even HVAC, lighting and ambient music systems are throttled by store traffic and other data inputs like weather.

When retailers feed rich activity data into smart store applications and then measure the combined and integrated impact of all of these applications on the same playing field, retail magic occurs. Smart store systems don’t replace the carefully curated “art of retail” built on judgment and experience. Rather, the science complements and leverages the art, and allows retailers to more quickly move in the right direction, as determined by shoppers.

Technology as a competitive advantage

Today’s smart stores and the shopping experiences they deliver aren’t being changed by technology, rather they’re being changed with technology. The technologies are enabling a more effective delivery of consumers’ desired shopping experiences, and it’s being done more efficiently. It’s technology as a competitive advantage, and the have’s are winning out over the have not’s.

The retail industry can no longer succeed by ignoring the needs of its cross-channel shoppers – there are simply too many global alternatives for frustrated shoppers to turn to. The customer expectations have been set and the technologies are readily available, today. A new retailing era has begun, and smarter retail is ready for its smart store.

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