The Omnichannel Retail Store of the Future: Customers Take the Wheel

RIS:The COVID-19 pandemic changed the way consumers shop and increased the focus on resiliency. Given this, what are the implications for the omnichannel retail store of the future?

Krishnanji: Since the pandemic, humans have been the biggest disruptive force in retail. Because of the way we have adapted, there has been a new shopper in town, one whose shopping behaviors are very different. Retailers are responding to this new shopper and must continue to do so proactively. For example, we have seen a distinction arise between essential versus non-essential items. The new potential uncertainty about the availability of essentials has put some of us a bit on edge. As a result, there is an extent to which shoppers, when they interact with businesses today, expect more emotional understanding and empathy across their various touchpoints with the business.

Forget: That’s right, and the net result is that consumers are driving the change in the buying experience. The challenge for retailers today is how to engage across many diverse channels while also personalizing the emotional connection. For example, what type of marketing communication and personalization would resonate with, say, a mother with a couple of children, and is it different from what would resonate with a grandmother? 

The implication of this omnichannel and multi-generational environment is that retailers need data. Data gives retailers the ability to market to the individual, because leveraging AI and automation to gain actionable insights from data can help retailers build long-term relationships, for example across the journey of a mother as she becomes a grandmother. If you can relate to the customer and really understand what they're going through, then you can market to them dynamically. And that's something that's lately been referred to as quantum marketing.

RIS:What are some questions retailers have about better understanding customers in physical stores, and what are some of the use cases?

Forget: One of our customers, a nationwide retailer, has identified several questions. Traditionally, they have focused on cost optimization. But right now, they're also immersed in the world of how to drive revenue. For example, in-store category analysis from a shopper point of view, similar to e-commerce analysis, is something that they're asking us about. They are looking at how to understand shopper interactions at the shelves, analyze the correlations between various products within a section and between their placement, reach, and visibility, while improving in-store targeting activities.

They’re also looking at inventory — searching for ways to align inventory with demand and sales while optimizing KPIs for cycle counting, ordering, and stocking processes. As they learn where the customer hotspots across the store are and with the right products available at the right place at the right time, they will be able to provide a better experience for the customer. To further delight customers as they navigate a store, wouldn't it be terrific for them to use their smartphone to find out the nutritional value of certain products, or potential allergens in certain products, so that they could make a better decision quicker and more efficiently?

Another use case is the last mile delivery challenge. We're seeing a hybrid fulfillment center model in which the store serves as the last mile pickup. So, one question is, how do you efficiently communicate to your customers as they're navigating to pick up the product? For example, knowing the shopper is five minutes away can help to have their product ready, as well as let them know the status and where to go inside the store to pick it up. In such scenarios, being able to predict the timing of pickups of online purchases at the store can help improve customer engagement while optimizing operations.

RIS:Can you share your perspective on the power of IoT technologies, AI, and automation to enable the “Smart Retail” store?

Baver: The idea of a “Smart Retail” store is closely linked to leveraging data and analytics to improve customer experience and operational efficiency. 

IoT technologies, computer vision, AI, and automation are creating new possibilities for retailers to collect the right data in physical stores and combine with external data sources. Examples here would include competitors' pricing or social media or weather forecasts to improve situational awareness and decision making for key roles, such as store associates, store managers or category managers, in order to achieve optimal store performance. 

When it comes to improving the shopping experience in stores, IoT technologies can be an enabler for finding a parking space close to the store entrance, knowing the on-shelf availability of products, and feeling safe while shopping in physical spaces. This would happen through solutions such as crowd or queue volume monitoring and by providing insights for redesign of the physical store layout in order to make it easy, quick and safe for shoppers.

It is also important for retailers to go from detection to prediction by leveraging predictive analytics. In this case, we can tell retailers which times and days of the week will be the busiest ones in stores or which products are in greatest demand and therefore need to be restocked more often, or even just which aisles are more visited and therefore need to be cleaned and sanitized more often.

Forget: One of the exciting things that we're working on right now is reducing lost revenue. As you know, self-checkout has come into play, and it's expanding. In the case of our grocer client, we recently did a study and identified a $38 million annual opportunity to obtain new revenues that they're currently losing because of "sweethearting," or even just people missing the scan. Our client has a terrific opportunity to put a solution in place that could analyze both manned and self-checkout lanes to prevent the problem and reduce lost revenues.

Bergeron: Another opportunity for retailers is through the utilization of real-time data to understand consumer sentiment. Understanding how consumers want to engage with specific retailers to drive that experience will be critical so that you can guide your investments accordingly.

On the inventory and distribution side, one emerging trend is that consumers are expecting to see product availability at their local stores, before making a trip. Availability matters because shopping behavior has changed significantly. You're going to see retailers take an unprecedented level of interest in the supply chain. It’s inevitable: Supply chains are being disrupted across multiple industries, including retail, by factors like restrictions around imports and exports — and that impacts retailers’ ability to have products available. Using inventory and supply chain data and applying AI and machine learning (ML) techniques can reduce risk and drive a better customer experience.

RIS: A recent report by NTT DATA across industries shows nearly 69% of leaders indicated they would have been resilient if they had invested more in digital. What are the learnings for retailers from this study? How can retailers approach their journey towards the Phygital Store of the Future?

Bergeron: Some of the key takeaways for retailers center around digital transformation. Our view is that digital transformation is not a project or program. It's an approach that must be ingrained in the DNA of the organization. Retailers must not think about digital transformation as a reaction to the pandemic that is forcing them to launch new digital channels to attract and retain customers. Instead, they should embrace a digital-first mindset and culture across the board moving forward.  

It’s about change management and organizational readiness, but it really starts with retailers having a fundamental vision of where they want to go. Without that vision, it becomes a bifurcated strategy of just trying to pick up the pieces. One of the things that we recommend for clients that are trying to articulate that vision is to hold discovery design thinking sessions, iterate through the vision and allow ideas to manifest themselves into a go-forward strategy.

NTT DATA has developed a foundational solution called "Smart Retail" to help retailers to accelerate this digital transformation. From a solution perspective, it’s about IoT data being collected onto a "smart" platform. There, the data is analyzed so that it can produce actionable insights. Those actions are then automated depending upon the usecase and business case.

When we think about a "Smart Platform" environment to enable retailers’ journey, we see the platform as the orchestrator that brings together all components and solutions inside the retail environment from physical to digital and in between in a harmonized fashion within a digital platform strategy, while providing insights into experience, productivity and optimization recommendations. The platform is standardized, based on open standards and flexible enough to take advantage of advancements in technologies as you move forward.

Consumer behavior has shifted, and it is up to society to determine whether it will revert to how it was before. So far, all the studies are saying no, that's not going to happen. The increase of digital adoption with respect to customer and employee engagement and physical space awareness in retail stores is here to stay. Retailers must embrace this shift to a seamless phygital world and move forward.

Editor's Note: For more digital insights from Jeff Bergeron, read his latest blog: Digital Transformation: The Oxygen of IT - NTT DATA Services and for more information on NTT DATA Retail and Consumer Packaged Goods Solutions, visit: us.nttdata.com/en/industries/retail-and-consumer-packaged-goods