Hot, Lukewarm, Cool: Taking the Temperature on the Pursuit of Retail Innovation
In their efforts to please customers and grow profits, retailers are tapping into a variety of innovative technologies to help. Sucharita Kodali, vice president and principal analyst at Forrester, examined a number of them in her presentation last week at NRF’s 2019 Big Show in New York City, taking a look at which ones are drawing the most investment and interest, how they’re taking shape, and some of the concerns surrounding each.
It’s not of course, technology for technology’s sake. Kodali named four key goals that retailers are striving for:
1. Grow revenue — via customer acquisition, customer retention, launching new products
2. Improve customer experience (CX) — by improving online cx, increasing frequency of customer engagement, improving store customer experience
3. Improve products and features — by making products and services easier to use, increasing customer input on product or service design, launching products faster
4. Reduce costs — by lowering IT costs, improving supply chain, improving employee retention
In service of these goals, retailers are making investment in the following technologies, some hotter than others. This is how she grouped them:
Hot: data security, personalization, mobility, cross-channel
Lukewarm: digital store, AI, distributed selling
Cool: robotics, AR, VR
Let’s take a deeper dive into some of these:
Personalization. “It is huge,” says Kodali, but there’s a lot of tension in this area because knowing that consumers want “personalization” is not enough to understand what they want and what they expect. Added to that, shoppers, particularly wealthy consumers, are distrustful of personalization. Forrester’s research shows that to varying degrees, consumers worry that retailers know too much about them and are uncomfortable with the amount of information collected about them, which they also often do not think is the information retailers need to personalize to them in the way they want to receive personalization.
Shoppers are much more comfortable sharing data such as products they like and favorite styles and colors, for example, than social data, and do not want companies tracking their online activities; a full 17 percent of shoppers are not willing to share any data at all.
There are a lot of exciting ideas about personalization, but to date the outputs of personalization haven’t really changed much over time, says Kodali, and generally fall into one of the following five areas:
*recommendations in marketing
*personalized greetings or offers on mobile devices
*remarketing and retargeting
Mobility. Smartphones are always with consumers, and while shopping in a physical store with their mobile devices, in the past three months, they were mostly comparing prices, followed by looking up product information, reading reviews, searching for a coupon and checking the availability of the product.
Outside of stores, the order of activity was pretty much the same, with an interesting shift — just 18 percent of consumers used their phones to locate a nearby store or to check hours, decreasing from 30 percent the previous year.
Cross-channel. It’s a word thrown around so much it can start to lose its oomph, but omnichannel is still a crucial area of investment for retailers, with the following seven areas topping the list in terms of recent or upcoming integration plans:
1. Buy online, return in store
2. Direct to consumer (multiple warehouses)
3. Ship from store
4. Drop ship vendors
5. Store to store transfers
6. Online availability of in-store inventory
Digital store. Simply put, this day and age requires your store to enable digital processes, for both consumers and sales associates. Some offerings are more crucial than others:
Must haves: Wifi, labor and task management solutions, digital pricing
Nice to haves: Kiosks, RFID, digital payments
Optional: Connected shelves, connected dressing rooms, “just walk out” technology, same-day delivery
AI. Artificial intelligence is a term used to cover so many different things these days, it’s difficult to get your arms around it, and Kodali demonstrated with a Venn diagram how you might think about AI: Picture AI in one large circle, which is overlapped slightly by a smaller circle that represents machine learning. A small circle that sits at the intersection of those two circles and extends just slightly into the machine learning circle is deep learning. You could think of AI as “imitating human behavior,” and machine learning as “automating data crunching,” with the intersection at deep learning being categorized by neural networks. Think self-driving cars or the HBO series Westworld, with humanoids possessing artificial consciousness.
Kodali identified Amazon Go as the poster child for AI, with its ability to know in real time where products are, but she also reminds that we’ve been doing machine learning for years already especially in areas of marketing, merchandising and operations; it’s just growing more and more refined.
A few areas that retailers say to expect advances in the future include improving route optimization for warehouse picks or package delivery, improving customer service by increasing the ability of chatbots to self-learn, and by converting speech to text and offering a wide variety of visualization and data science around the spoken word. “Engagements with associates, for example, are still a black hole. Are there opportunities to completely automate merchandising?”
Augmented Reality (AR)/ Virtual Reality (VR). More consumers know VR than AR, largely because of gaming, says Kodali, with only 14 percent of consumers noting that they’d never heard of VR headsets, vs. a full 45 percent reporting they’d never heard of AR.
AR and VR still have very little penetration in the marketplace, but 50 percent of consumers say they’d be interested in using AR to navigate or receive directions, and 46 percent to locate restaurants or shops nearby, while 49 percent would be interested in using VR to tour a location or sightsee, with 39 percent interested in using it to train for specific job duties.