Retail IoT: Why the future is about connecting with the customer

Retail IoT: Why the future is about connecting with the customer

Scott Thompson reports on a retail sector in flux, with IoT and other cutting-edge technologies paving a new way forward.

“The high street has to greet us with hospitality and make us feel like we’re the centre of the universe,” according to ‘retail futurist’, Howard Saunders. “Smart brands have learnt they must connect with us emotionally. This is where the real revolution is,” he says.

The big thing in the sector at present is experiential retail, as witnessed by Macy’s recent acquisition of New York City-based concept store, Story. The latter’s model takes the point of view of a magazine, changes like a gallery, and sells things like a store.

Every four to eight weeks, the space undergoes an inventory and interior design overhaul to highlight a new theme (for example, its ‘Love Story’ motif featured the likes of scented candles, lingerie, and heart-shaped goods.)

Technology has a key role to play in experiential retail. “Virtual reality is very exciting. Virtual showrooms are amazing pieces of technology,” says Caroline Philipson, head of store development at Ann Summers. “What fascinates me, technology-wise, is what you learn about your customer and how to cater to them.”

As Saunders puts it: “Imagine waking up from a coma to find a celebrity as US president, Elon Musk wanting to colonise Mars, and The Times with 740,000 subscriptions while vloggers boast millions of followers. These things creep up on us; the world has turned upside down.”

A “world turned upside down” neatly sums up the current state of the retail sector. Connected stores, transaction-less checkouts, RFID technology, virtual reality, and artificial intelligence are just a few of the innovations that have shaken things up in recent times, along with the massive impact that online retailers have had on bricks and mortar brands.

As a result, the big high street players are now engaged in a frantic race to see who can develop the best supply chain and omnichannel experiences to drive greater efficiency and customer engagement, keeping people coming back to physical stores.

Let’s get physical

Up to 80,000 more physical retail stores could close by 2025, according to a recent report from financial services provider, UBS. “We estimate for each 100 bps increase in e-commerce penetration (currently at 16 percent), an additional 9,000 stores would need to close,” wrote UBS analysts. “To put this in perspective, it would be the equivalent of seven Toys ‘R’ Us chains.”

Anywhere from 30,000 to 80,000 stores could disappear should ecommerce penetration reach 25 percent of all retail sales by 2025, according to UBS. The 80,000 figure is based on two percent total retail sales growth, and the 30,000 figure on three percent sales growth overall.

There is, however, still a place for physical stores in the future, says Maria Koutsoudakis, head of brand and marketing general merchandise at Marks and Spencer; it’s just that there may be fewer of them as bricks and mortar stores fulfil fewer needs in a world in which customers can order anything online and have it delivered the next day. M&S is evidence of this: in May, the British food, clothing, and homeware brand itself announced a new programme of store closures.

“In the future, stores will more like showrooms or places where you host an event,” adds Ann Summers’ Philipson.

Could Pepper add spice?

Robotics may have a role to play in retail as well. Pepper, the customer service robot, gives an intriguing glimpse of that future.

Pepper in store

Developed by SoftBank (formerly Aldebaran) Robotics, Pepper is pitched as the first humanoid machine capable of recognising human emotions and adapting its behaviour to the mood of the customer. More than 140 SoftBank Mobile stores in Japan are currently using the robot, which is also deployed in French supermarket chain, Carrefour, among other retailers.

BT, meanwhile, is showcasing a digital store, underpinned by Internet of Things (IoT) capabilities. The aim is to highlight how new technology can drive immersive and engaging retail encounters for customers, enabled by agile, dynamic networks.

Alison Wiltshire, global practice lead for retail and consumer goods at BT, says:

The physical store is far from dead, but it does need to evolve to survive and be relevant for today’s connected customers, whose expectations and demands in store have been shaped by the rise of e-commerce and their online experiences.

“Digital transformation and, in particular, having a clear roadmap for digitising the store will be vital — not just in terms of enhancing customer experience, but also in driving in-store conversions.”

Ones to watch

There is no shortage of startups looking to grab a piece of the digital retail action. Romania’s Tokinomo was recently announced as the Retail Business Technology Expo (RBTE) Innovation Award winner. It picked up the gong for its motion sensor in-store advertising solution.

Another new venture that stands out from the crowd is France’s Occi (pronounced ‘oxy’). The retail technology provider is on a mission to make the shopping experience more customisable via a combination of IoT technologies, indoor geolocation, data fusion algorithms, and AI.

Using these, Occi’s tracking technology allows retailers to follow individual customers and understand their behaviour in store – the physical world equivalent of Web cookies.

“Over the past two decades, traditional retailers and brands have had to adapt to the rise of e-commerce by diversifying distribution channels – websites, click and collect, mobile apps, and so on,” says Louis Millon, co-founder and CTO of Occi.

“However, their main strength remains their stores, where shoppers can see, touch, and feel the product before buying it, which explains why 90 percent of retail sales data still takes place at bricks and mortar retailers.

“We realised that, unlike their pure-play ecommerce rivals, the only data collected by bricks and mortar retailers is receipt data. They don’t have any information about non-purchasing visitors. That’s why we decided to bridge the gap between online and offline channels.”

After spending its first year in incubation at an Auchan store, the startup’s solution was launched in 2016 and is now live at the likes of Auchan, Carrefour, Galeries Lafayette, and brands such as Nestlé.

“Although the presentation of our solution is usually received with enthusiasm by retailers, industry adoption has been slower than expected, mainly because decision processes in large retail companies are slow,” admits Millon. “But we’ve signed huge clients who operate a large number of stores, which means the growth potential is very large.”

Internet of Business says

These are tough times for many on the high street and main street, but all is not lost; technological innovation can be a key differentiator and solutions that are currently niche will soon be mainstream. For instance, 85 percent of CIOs will be deploying AI by 2020, versus just four percent today, according to Gartner research.

Those who understand this – and that tech for tech’s sake is not a winning formula – will not only survive, but thrive. Those who continue to be hampered by outdated processes and myopic decision-making will probably go the way of Maplin and Toys ‘R’ Us.