Retail: 5 key areas where digital is adding value, keeping the physical space relevant

As brick-and-mortar, how can you compete with online retailers, whose growth per-annum is suggested to be three-fold to physical retailers? We explore 5 key areas where digital is adding value to physical retail spaces, to understand the developments made possible with technological evolution, urging retailers to consider what opportunities lie ahead in 2018. The adapted content in this slide deck, shared last week, answers the questions "What are the key digital developments in retail?" and "What does this mean for my business?"

We focus on 5 key areas: (1) Consumer Engagement, (2) Payment, Security & Authentication, (3) Proximity Marketing, (4) Virtual Reality, and (5) Augmented Reality. Market examples demonstrate how these trends play out, and suggest applications that spark ideas for incorporating digital into your retail model.

The new normal

Japan (39%), Brazil (35%), USA (37%) and Germany (34%): these reflect the top four countries where consumers shop less often at retail stores due to Amazon. One must question, is this due to online being the consumer preference, or are these statistics related to certain FMCG products that are repetitively bought or can be bought exclusively online? According to the Pew Research Center, only 10-15% of U.S. adults make online purchases at least once a week. Is online a threat? Is the physical store relevant? There is consistently contradictory information emerging about the present and future of retail, where multiple studies have different findings due to their focus and variables.

While some mass-retailers are under threat with stiff competition and online retailers booming, we can be sure that Omni-Channel has become an attractive offering to consumers, and Connected Retail is re-designing and re-imaging the traditional brick-and-mortar, drawing in foot-traffic and re-igniting excitement within the physical store. Click-and-Collect may be the next Omni-Channel mass-development; predictions are that from 49% in 2016, 90% of consumers will buy online, and pick up in store in 2021, which makes the case that physical and online will both continue to gain traction.

“Retail Showrooms” are a flagship store that is engaging and invites consumers to immerse themselves in a brand, testing products and learning more about them. Modcloth, purchased by Wal-Mart-owned Jet.com, opened its first permanent showroom in Austin, TX in January 2017. Amazon Go is another example of digital going physical. In short, the physical space maintains relevance – but is being forced to adopt digital technologies, through NFC, RFID, and Virtual Reality, to name but a few to be discussed here.

5 Key areas where digital is adding value

(1) Consumer Engagement is the means by which a company creates a relationship with its customer base, to foster brand loyalty and awareness, and multiple technologies serve to strengthen this.

Blue Bite

Through the use of NFC tags & QR codes Blue Bite creates meaningful and measurable connections beyond visuals. Getting users to engage with brands by offering relevant and valuable content, accessed through mobile devices.

(2) Payment, Security & Authentication, enabled by technology, allows consumers convenient, secure contactless payment, while ensuring the authenticity of the item and outlet. 

Waitrose launches scan-as-you-shop retail app

British supermarket chain Waitrose launched its scan-as-you-shop service through its Quick Check smartphone app. The app allows customers to scan the barcode of each purchased item and present the scanned data at the checkpoint for faster and efficient checkout.

(3) Proximity Marketing is location technologies to directly communicate with customers via their mobile devices. Uses of proximity marketing include distribution of media at concerts, information, gaming and social applications, retail check-ins, payment gateways, and local advertising.

Estimote Beacon

Estimote beacons are low power computers attached to walls or objects in the physical world. Using proximity technologies they detect human presence and behaviour and trigger pre-programmed actions delivering contextual and personalized experiences.

(4) Virtual Reality is the computer-generated simulation of a three-dimensional image or environment that can be interacted with in a seemingly real or physical way.

Mastercard develops VR shopping experience prototype

Mastercard could potentially help retailers to enhance in-store shopping experiences, and also to share relevant product information with customers via multi-sensory, immersive channels.

(5) Augmented Reality is a technology that superimposes a computer-generated image on a user's view of the real world, thus providing a composite view.

Apple and IKEA develop AR furniture app

Apple has collaborated with Swedish furniture manufacturers IKEA to develop an augmented reality app. Announced in May 2017, the iOS 11-compatible app will allow customers to position 3D renderings of furniture in their homes using only a smartphone, take the uncertainty out of big purchasing decisions.

Key takeaways in the shift to Connected Retail

• The Omni-Channel demands of consumers set the expectation for touchpoints that feel integrated, related and consistent; they expect a seamless blend between a retailer’s physical and online store. Omni-Channel’s core function is to form a strong connection at every step of the customer journey, aiming to enforce a congruent and seamless brand experience at every touchpoint. Connected-Retail and Omni-Channel will be trends that will develop alongside one another.
• Venture capital database CB Insights projected a record-high venture funding of $796 million to go towards in-store technology startups in 2016, compared to $641 million in 2014 and only $213 million in 2012. Nokia, Motorola and Google are some of the heavyweights actively investing in this sector, while the most noteworthy startups include in-store analytics company RetailNext, management software Lightspeed POS and mobile point-of-sales firm ShopKeep POS. As hardware costs come down as mass-adoption occurs, more retailers will be able to access these technologies.
• More technology inevitably means data-collection and analysis will become paramount to retail strategy.
• Consumers respond favourably to technological integration in stores, because the Connected Retail experience is more efficient, pleasant and informative than traditional brick-and-mortars of the past.
• Key areas within Connected Retail in 2018 will include richer consumer engagement, improved payment, security and authentication, targeted Proximity Marketing, plus Virtual Reality and Augmented Reality. As a retailer, you need to understand where the opportunity lies for your business, and how to implement the structures for ROI and to maintain market relevance as other stores adopt digital methods.

Lacuna Innovation is a boutique innovation consultancy that works with the world’s most admired global organisations to sustainably innovate new products, services and business models by combining trend, insight and commercial expertise in one place.

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