It’s all doom and gloom on the high street. Apparently, Amazon* has it all sewn up and if you’re a bricks and mortar retailer, you might as well shut up shop and go home. That’s the message that pervades the popular press, but don’t believe everything you read. Unless there’s a Royal baby on the way or a sporting victory, good news rarely makes headlines. So, if you’re shopping for information on the state of the retail sector, a bit of balance is probably in order.
In the webinar Debunking the Retail Apocalypse, Greg Buzek, founder and president of research firm IHL*, tells a very different story. While his findings focus on the US retail sector, his conclusions are likely to be universal. In short, the headlines will always emphasise store closures and overlook store openings.
Digging deeper, the research examines the new opportunities being created in traditional sectors, such as apparel, which is being disrupted by the likes of Walmart hoovering up a number of online clothing retailers to broaden its range and increase its appeal. Likewise, Amazon’s dizzying array fashion private labels is set to become even more alluring with the announcement of Prime Wardrobe, which will allow Prime members to try on clothes at home and return them for free, if unsatisfied.
And if that sounds like even more doom and gloom for the high street, then you need to get out more, as the leading bricks-and-mortar retailers have not been idle. Topshop, Zara, H&M, and Forever21, pioneers of fast fashion, have been expanding year on year – tempting buyers with stylish, affordable outfits that they’ll wear half a dozen times, rather than over a year or longer.
“The lead time has gone from idea to shelf in nine months, down to 21 days. And because of that, it has completely disrupted the fashion side of the retail business,” says Buzek. “Particularly hurting not only the apparel retailers but also department stores and their clothing.” In this sector, it seems that if you’re not among the quickest, with a stream of new items for sale, then survival may depend on investigating what makes these success stories possible.
Certainly, it hasn’t escaped Buzek’s notice that those who take their IT spending seriously are looking at a simple equation: the more you spend on IT, the more you stand to gain. He notes that, typically, retailers have used a fixed 1-2 percent of revenue from the previous year to fund IT. If you’ve had a bad year, then IT suffers. Yet the leading retailers, with higher than average growth, are those that have severed the link with revenues and have increased IT budgets. Buzek deduces that retailers do not need to spend more on IT than Amazon but must spend more than their weakest competitors.
Where the complication lies is in deciding on the best use of technology to deliver on business results. It’s not a case of trying to emulate Amazon, but being innovative with sales channels, inventory management and with the art of clientelling, by using the latest point of sale devices. While the message is clearly that you need to tech up to compete effectively, the process involves a considerable amount of planning, targeted investment and commitment, and will be unique to every business, as Janet Kerby, Intel Solution Manager, Retail, Hospitality and Consumer Goods, explains: “It’s about identifying how best to use technology to communicate to customers, convert sales, optimize inventory, and lean out operations.”
“You have to be able to understand your customer and the customer journey”
But this is no fairy tale, it’s already happening in the domestic environment. “Amazon Echo*, Google Home*, are dramatically changing the way consumers are beginning and forming their shopping journey,” says Butcher. “We know that 55 percent of shopping journeys in the US are starting on Amazon.”1 And it seems set to climb higher, as voice is such an intuitive way to interact across generations. He says: “Not only do millennials understand how to use voice, but grandma and grandpa do too. The adoption of voice search in home solutions like the Echo, is much faster than the PC, the tablet, and even the smartphone. It’s rampant.”
It’s no exaggeration that retailers observing this trend are in shock and, regardless of the cheerier conclusions in Buzek’s webinar, some businesses won’t survive the rise of the fourth channel in unified commerce. It’s not a closed door though, with retail giants racing ahead with ever more customer data and no hope of catching up. Businesses can deploy third party solutions such as Nina* from Nuance*, to offer a human-like virtual assistant experience, and amass their own fourth channel customer data. Nina even supports Amazon Alexa*, allowing customers to communicate, using familiar devices, such as Echo*, to any kind of businesses from banks, airlines, utilities, and retailers beyond Amazon’s own store front, without ever having to look for a phone number.
Amazon’s success is because the e-commerce giant satisfies a lot of customers with its competitive prices and refined logistics, and retailers can definitely learn from leading companies who use technology to optimise customer convenience. While being able to level the playing field somewhat certainly helps, if the strategy is to merely copy the leaders, then an opportunity is being missed, as Andrew Moore, General Manager of the Digital Transformation Office at Intel, explains: “Don’t lose sight of all the things that made you successful in the past, but look at what you’re really, really good at. Look at what you’re exceptional at and explore ways in which you can adapt, adopt, and deploy that capability in different ways to grow your core business or grow in some form of adjacency.”
Where this tends to lead is not just offering great products, but in providing a memorable shopping journey for all the right reasons. “The customer experience in most retail environments today is horrible,” Buzek observes. “You go online, they treat you like a king or queen. They know what you like, your preferences, and they have specific offers. When you go into most retailers today, the associates could hardly care less that you walked in the door.” That’s kind of harsh Greg. Still, he goes on to ask: how can you can change that, when offers and loyalty schemes are neither as integrated nor personalised in the same way as on-line?
It’s a problem and there are solutions but the biggest issue is inventory management and visibility, which, if dysfunctional, inevitably leads to customer dissatisfaction. “The industry as whole struggles with out of stocks,” declares Buzek. “Consumers will experience out of stocks in one in four trips to a store.” We’ve all been there, right? Yet the biggest selling point of a bricks-and-mortar store is that you can handle the product and own it immediately. You could even relate this to Moore’s attention to previous strengths, and that this is one of the things that made the business successful in the past but as Moore goes on to say: “If you’re not able to deliver the immediacy and the seemingly unquenchable desire for instant gratification, your edge is lost. Then what?”
No product photos or five-day free delivery service is going to compete with being able to try on a pair of gloves and walk away with them on a cold day. You’ve just got to hope that they’re in the shop and in your size, but even then, retailers still might not end up making a sale because the items are not locatable, despite showing up as available on the in-store inventory system.
Fortunately, such scenarios are likely to be consigned to history, just follow Moore’s advice and deploy a new capability but as you do so, consider how it will enable you to reach the customer differently. Radio frequency identification (RFID) tags have found their way into hospitals and educational establishments to keep track of precious equipment. As their cost continues to fall they are being used in retail stores with systems that offer greater tracking sophistication than ever before with real-time, accurate data on inventor y– ultimately, adding value for the customer.
Detego* is a software developer that has devised a modular suite of applications focused on inventory management with RFID playing a key role in enabling real-time article visibility across the retail supply chain. Detego InWarehouse* starts the process, as articles on the production line get RFID tags attached before they leave the plant. This allows items to be tracked as they are dispatched to bricks-and-mortar stores.
At the retail outlet, Detego InStore* keeps tabs on the goods, so managers know precisely where they are – in the stockroom, on the rail or left in the changing room. Although RFID tags don’t provide a huge amount of information, it’s the in-store sensors, using the Intel® Responsive Retail Platform, that capture this data from hundreds of articles in real time. Using an Intel®-based gateway, this data is filtered to deliver both the location awareness and stock level intelligence, as well as connectivity to the cloud for an enterprise-wide view of business activity and inventory.
Using Detego InReports*, inventory status and analytics on KPIs, as well as recommended actions, can be viewed in-store from an intuitive dashboard to keep managers informed of the health of the business. Information can also be shared with sales associates on mobile devices and at kiosks for browsing customers.
Meanwhile, back at HQ, decisions can be made to redirect inventory from the distribution centre of supplier and promote overstock items. If they’re using their big data analytics correctly – gathering inventory and sales information across stores – then, not only can forecasting become more accurate, but the real-time sales data enables trends to be identified and adjustments made so that overstock and out-of-stock losses are minimised, ensuring consistent sales. For soft goods, “RFID is a key technology, getting to a single view of your inventory across the chain. It can save the sale, it has the ability to attack this out-of-stock problem and convert your customers when they come to your stores,” evangelises Buzek.
In times gone by, a retail business could rely on knowledgeable sales associates who would recognise loyal customers and recall their purchases and preferences and make recommendations. Called clientelling, it was all part of the shopping experience but it’s not dead yet it’s just been adapted, with customer consent. You might not have a familiar face assisting you with buying decisions, but using customer relationship management (CRM) systems, a mobile device, kiosk, or workstation can be accessed to view or modify wishlists and profile information and check purchase history.
As for the store manager, even their most inexperienced sales associates can become both customer and product savvy using these devices. At their fingertips they are not only informed of customer likings and stock whereabouts but are guided to ensure their customer interactions are executed professionally.
Bringing analytics, real-time inventory tracking, customer profiling and on-the-go training to the shop floor makes the most of what a bricks-and-mortar store can offer to the business and the customer experience. But in this world of unified commerce, how do other aspects of the operation create a frictionless buying experience? The app or website store front could be perfect but then there’s that final decision, how to get it delivered. Amazon’s logistics are the benchmark here and while its drones have yet to take off, its delivery options are very straightforward.
For any online business, matching those choices is a challenge and for the customer, delivery decisions feel like an unwanted hurdle that can really undermine what might have been an otherwise pleasing user experience. So how do you go about levelling the logistics playing field?
Moore offers some clues: “As you look at reaching the customer with something more than just the product, that can sometimes lead you down the path of exploring partnerships with maybe companies you wouldn’t have thought of partnering with before – competition becomes collaboration, becomes shared benefit. This can deliver additional value to the customer in an integrated manner so that the customer has access in one device rather than jumping from portal to portal.”
So, fancy hooking up with a Swedish ecommerce veteran that has never owned a fleet of delivery vans, to handle all your logistics requirements? Of course you do. Based in Stockholm, software company Shipwallet* doesn’t do deliveries but knows a huge number of companies that do including big names like UPS* and FedEx*, down to local courier services.
What Shipwallet does is provide an aggregation service that finds the best courier for your package and elegantly integrates this into any website with just a single line of code. There’s no favouritism, the algorithms are geared to find who can deliver according to your needs. Fast, cheap, to a collection point, and numerous alternative permutations can be determined swiftly thanks to machine learning and predictive analytics based on customer data.
Even more exciting is that Shipwallet intends to offer real-time delivery options, so when the package arrives at a freight hub in your area, for a minimal charge you can decide on the final delivery method which could be to receive it at work or include it with a food delivery or even have it dispatched by a neighbour with a moped, all within 45 minutes.
It’s all about convenience and although there will be multiple partners in the chain, at the customer checkout it appears as one logistical portal. It’s a vital consideration as Piotr Zaleski, Shipwallet CEO, explains: “Amazon has a certain level of excellence in this area that is impossible to compete with alone but if we at some point unite all these last mile guys, together with the major shipping companies, and start sharing data, especially making sure it’s consumer-centric, then this could actually be something that works as a counterweight.”
Zaleski’s sentiments add a slightly different meaning to the phrase ‘unified commerce’, as businesses need to look to each other for symbiotic relationships, uniting their sources of data to better inform operations and offer new customer benefits. The accuracy of predictive analytics and data mining always improves with large data sets and if you’re looking for an antidote to Amazon, then learning to share, both within your business and beyond, is surely the way forward.
Data feeds machine learning and artificial intelligence and the company or consortium with the most to work with, has the greatest potential to shape the future of retail. Yet as we continue to innovate there will always be shifts in strength among companies, so perhaps we should think less of a retail apocalypse, but more an age of enlightenment where the customer always reigns as king or queen.
* Other names and brands may be claimed as the property of others
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