Physical retail is not dead, it’s different
The narrative since 2017 has been filled with warnings about an imminent retail apocalypse, where physical stores will no longer be profitable and where e-commerce will unleash upon it a world of doom. In 2020, these voices grew even stronger, as many stores closed, driven by the Covid pandemic. Innovations in in-store technology were postponed indefinitely.
It is news to no one that e-commerce is growing fast – up to three times faster than retail in total, and this growth accelerated further considerably in 2020, to a 45% annual growth in sales.
For some, this was a clear signal that the prophecies were true and the end of the physical retail store had arrived – companies had nothing left to do but close their stores and turn to e-commerce.
The reality is less dramatic – retail is not dead, and likely won’t be anytime soon. It’s only changing. The potential of physical retail stores is still strong, which is also evident from the following examples:
Digital native stores (like Bonobos) are going offline, opening physical retail stores
Amazon, the ultimate eCommerce player, bought Wholefoods, going into physical retail
And, last but not least, let us not forget that around 80% of retail revenue still comes from physical stores and this trend is likely to continue in the future
What changed
The role of physical stores, however, has changed and will continue to do so.
The role of stores changed to be marketing centers, idea inspiration stages, showrooms, or order fulfillment centers.
It changed as consumer habits evolved, more so due to the Covid outbreak. Factors such as great experience, convenience, and safety have become considerably more relevant than in previous years.
It changed thanks to an explosion of innovations, especially those in in-store technology. You can’t think about the revolution and evolution in retail without thinking about the underlying technology that is triggering it.
The innovations in in-store technology that will change retail in the near future are already here. This includes AI, IoT, 5G, AR, Robotic process automation – just to name a notable few of these technologies.
Innovations in In-Store Technology are booming
Fundamental changes in retail are coming in the near future – some have been around for quite some time now, but have not reached mainstream status, mostly because the market was not ready for them. If there is anything the covid pandemic did well, it was speeding up innovations in in-store technology, and many of these technologies found a ripe market ready to embrace them.
What is in-store technology?
In-store technology is technology applied in brick and mortar stores that has the potential to enhance both the operational excellence and the customer experience in physical retail stores. The tech that helps with improving customer safety has lately also become a relevant factor.
1, Augmented Reality (AR)
AR is an interactive experience of a real-world environment that is enhanced by computer-generated perceptual information – a good example of this is pointing your phone at an object in the real world and additional information is suddenly displayed on your phone.
Some retailers have already succeeded in applying augmented reality with great creativity in their stores, and we’ll walk you through some of the better examples:
Enabling customers to experience the product (Amazon Salon)
Amazon has opened its first hair salon called Amazon Salon where the customers can use the wonders of technology to simulate how changes to their hair color or hairstyle would visually look like before using the service itself.
Technology was used with great skill to eliminate a perceived risk for customers – uncertainty.
By removing this barrier with AR, conversion rates for these stores are likely to exceed those who are competing with Amazon Salon but are not able to provide this additional service.
Entertaining customers (Coop Sverige)
COOP Sverige used augmented reality to keep children entertained inside the store while shopping with their parents. Innovations in in-store technology came to the rescue.
How it works: the parents (or the kids themselves, in case they are old enough) install a store app on their phone and children play games inside the store – may that be a scavenger hunt, finding recipes, following animals in store.
If you regularly shop with children, you may well know how difficult it can get. This advancement really simplified family shopping for some, keeping the parents happy, the kids happy, and as such it’s a really good example of how augmented reality can be utilized to improve overall customer experience and customer loyalty through entertainment.
Speeding up restocking (Walmart)
This is an example of how innovations in in-store technology can help the store employees instead of the customers – Walmart uses a designated app to help employees speed up restocking.
Instead of the grind of having to go through all the boxes in the backroom and scanning them one by one, they can just hold their phones toward a heap of stacked boxes and the app will select the right box to be moved.
Walmart claims that with this innovation they were able to increase the speed of restocking by 60%.
Immersive experiences (Albert Heijn)
When entering the store, you’ve got the option to point your phone at the marks on the ceiling, and after it calibrates it serves as your personal navigation system.
It allows you to add a shopping list and will find the fastest buying route. It can take you to the desired aisle and show you information about selected products.
Without any additional sensors, this innovation in in-store technology really creates an immersive store experience.
2, Autonomous Mobile Robots (AMR)
One of the most striking trends during the pandemic was that people really started to accept automation technologies at the stores, mainly because of the social distancing rules.
The fear of contraction of the virus has prompted many experiments and rollouts of this technology, where moving robots were deployed to navigate autonomously in the store.
Some were even able to learn and adjust behavior based on the collected data from their sensors, allowing them to avoid obstacles, adapt to changing environments, even seamlessly interact with the customers.
Let us have a look at some real examples of this:
Floor cleaning (Walmart)
Once again we have Walmart, the uncrowned king of retail innovations. This one is not a new project but its usage really took off in the past couple of years.
They deployed store floor cleaning and scrubbing robots, autonomous machines that move around the store and clean the floor with no need for a driver.
It’s not visible on the picture, but it does have a driver’s seat, just in case there would be a need to take over, which is rarely the case.
This robot moves around the store even when there are customers inside the store – it has real-time awareness of what’s going on in the store and really does the job well.
Scanning shelves for stockouts (Save Mart)
Next among the innovations in in-store technology is called Tally. It’s an autonomous shelf scanning robot manufactured by Simbe Robotics.
Its role is to traverse the store a couple of times a day. It has around six to a dozen sensors and acts as an all-in-one inventory management tool. Say hi to Tally!
Disinfection (Amazon)
This is more of an experimental technology but we’ll likely see more of them popping up in the near future.
This robot from Amazon, deployed in the past year, has a slight resemblance to a hotel luggage cart and with UV lamps on its side, it autonomously disinfects the store with the help of ultraviolet light.
3, AI Enabled Sensors
No innovation in in-store technology is complete without sensors tracking the performance. There are a number of sensors used in the retail environment (from radio sensors up to thermal sensors) but our examples will focus mainly on video sensors.
These AI-enabled sensors are put into stores where they collect data – data that can be analyzed and acted upon.
Understanding traffic potential (O2)
O2 Czech Republic is a telecom operator with a strong retail presence. To measure store performance with an objective of higher customer satisfaction in mind, the operator decided to use our solution.
We equipped the stores with stereoscopic video sensors which enabled O2 CZ to get a complete overview of what’s going on in the store. Managers can see how many customers are present, where they go and how long they stay.
The interesting part is in how the traffic potential is discovered by such technology. For example, we noticed that since the shopping centers reopened again this year (2021), customers returned back to their old ways of grocery shopping, so now they again tend to shop more after 5 PM and during the weekends. This was not the case throughout the lockdown, during which most people shopped anytime throughout the day.
Informing customers (Amazon Salon)
We’re back at the Amazon hair salon which uses, in this case, video technology to track the movement of customers’ hands.
This is a point-and-show technology where the customer points at merchandise and sees further information about the product, without needing to touch it or look it up with their mobile phones.
Social distancing (Tesco)
To comply with social distancing regulations, Pygmalios Occupancy Management system was deployed in Tesco in multiple countries.
By installing sensors that track people at these stores, the information about how many people were inside at any given time was available too.
This data has grown in importance as government regulations across the world limited the number of people that could enter stores per square meter.
Tesco applied this data to regulate the customer flow in stores, minimizing the risk of getting fined by the government, keeping customers and employees safe, all in a fashion that was technologically savvy and scalable.
Contactless shopping experience (Choice Market)
One year ago we would’ve picked Amazon Go as an example, but since then we’ve seen plenty of platforms popping up that do the same except they provide the technology for other retailers.
Choice market has deployed Aifi’s contactless technology into their stores, claiming that this is the biggest contactless implementation in the world.
You come into the store, stand in the registration area, go in and do your shopping, leave the store – and don’t pay. At least not as you’re used to. The receipt is delivered to you digitally as you leave the store.
This is a real-world example of a technology that will become very popular in the near future.
Contactless shopping experience (Amazon)
Another interesting example of the contactless shopping experience comes once again from Amazon. This one concerns their intelligent cart, which they have named the Amazon Dash Cart and which is available at their Amazon Fresh grocery stores, demonstrating another great way to avoid the checkout line.
In the previous example from Choice Market, the system watches the customer continuously from all angles as they go through the store, sensors deciphering their actions and charging them accordingly.
In Amazon, the sensors track what’s being collected inside a cart, so as customers put groceries inside, the cart tracks their shopping.
When the customers finish shopping, they walk out through a designated ‘Dash cart lane’ where the shopped items are registered and paid automatically as the customers walk out of the store.
Just-in-time service
We’d like to close off with our own solution that provides Just-in-time service by predicting queue formation at the checkouts.
Since queues tend to be the top pain point of the whole shopping experience, it’s crucial to shorten the waiting time as much as possible.
One of the trending innovations in in-store technology is queue prediction based on traffic data, recurring patterns, and machine learning. Such a model is able to predict the length of queues in the near future providing helpful means of lowering the stress put on your employees and ultimately improving the customer experience.
Conclusion
From all the powerful and actionable use cases we’ve discussed, it is very evident that physical retail is not dying out but, to the contrary, trying very fiercely to defend its position within the whole realm of retail.
And it’s working!
The rapid explosion of innovations in in-store technology only confirms that brick and mortar is more than capable of adapting to the fast-paced and ever-changing market of goods and services.
It might return accompanied by some new roles along the way but, in the end, such transformation perfectly lines up with the memorable experience all consumers crave for.