It takes more than digital twins for brick-and-mortar retail

McKinsey just released their view on "The Next Normal" in the future of shopping: Technology everywhere. As a retail analytics engineer, with years of experience in solving business problems for brick-and-mortar stores, I can tell that there is so much more than just creating a digital twin, used for personalization, something that has gotten a lot of hype lately. 

As internet based home delivery shopping becomes more and more convenient and accessible in an everyday life where time is money, the in-brick-and-mortar store shopping needs to become the inspiring and pleasurable choice. Shopping for food should be a relaxing experience inspiring the customers to cook a romantic dinner. To do this, floor space needs to be reallocated. While dry foods can be ordered routinely with home delivery, produce like fruit, vegetables and meat will have a central place in the shoppers in-store experience. As the customers' mindsets needs to be shaped into brick-and-mortar ambassadors, the freshness of the produce is of great importance. Technology solutions can easily be used to both reduce overstocking and understocking on inventories but also to notify the staff when the fresh produce needs to be reviewed. Customer experience is all about the whole shopping journey, stores needs to know their customers to reimagine the space and flow. Technology enables effortless people counting and heat mapping and can help to understand customers' path trough the stores. Computer vision applications and cameras can be used to understand how a reallocation or a redesign affects the number of attracted customers. Sentiment analysis and facial emotion recognition can indicate how the customers feel while moving through the space. 

External factors such as weather or large events in a city affects the number of visitors to the stores. Lately we have seen COVID-19 and pandemic-related regulations affecting on a before seldom seen scale, forcing retail to become agile and flexible. People counting solutions can help to predict short- and mid-term trends, which is crucial both for grocery stores to keep fresh produce and to avoid understocking or overstocking in the fashion industry, which could result in surplus inventory or dissatisfied customers.

Looking at technology for store automation and operational efficiency, I have visited a lot of stores both in the Americas and in Europe. The difference between the two regions, especially in fashion retail, is striking to me. With the strict European legislation, and possibly a much more wide spread integrity preserving mindset, European stores seem to focus more on anonymized group statistics. Stores in the Americas often collect personal descriptors such as e-mail addresses or telephone numbers to build digital twins. This individualized information can be used to direct call to actions or personalized recommendations on a customer by customer basis. This could, however, backfire when the customers don't want an intrusive experience in the store. I do believe more of that data will be combined at an anonymous level with other data sources, such as financial and social media, to predict long-term trends at a group level. These long-term predictions together with aforementioned short- and mid-term trends will be used to create stores that customers actually enjoy going to and spending time in.

Personalization done correct is definitely an important factor but to get customers to brick-and-mortar and physical retail we have to offer more value than what they can get online. Collecting and utilizing data to tailor the experience of the customer is arguably much easier in the online world. The best way to compete with this is in my opinion to pick up on something that much retail has lost during several decades: the service and friendliness from the store staff. Directing the technology investments into automation of repetitive tasks, such as the checkout process and scanning of inventory, staff time can be freed up which can be used to increase the human interaction. The face-to-face communication with a real person is definitely one of the more unique strengths of physical stores, hard to replicate in e-commerce. To challenge today's paradigm of physical shopping the point of sell checkout process could be totally eliminated like in the Amazon Go stores and the carrying around of a shopping basket could be replaced in favor of effortless transport of the items directly to the customers' cars in combination with virtual shopping carts.

the amount of companies piloting automation solutions has increased from 28% to 35% from 2018 to 2020

In a study from McKinsey on automation it can be seen that the amount of companies piloting automation solutions has increased from 28% to 35% from 2018 to 2020. They also conclude that smaller companies are less likely than large companies to have automated any of their processes, which is not a surprise looking at the retail industry, but they continue further with noting that those that have done so are seeing higher success rate than larger organizations. I believe that the large value of technology in the retail industry is not in the automation to eliminate localized inconveniences but rather in transforming how the whole business can be executed. This could mean that a smaller retail store has a huge benefit in their flexibility and seamless communication within the business. While a large retail chain is in many ways divided into silos preventing the spread of gained experiences and observations, a smaller store can easily see the results of pilot projects and proof of concepts through the eyes all the way from the on-floor staff to the upper management. Subjective observations of the effort should also be combined with objective and long-term fixated key performance indicators (KPIs) to monitor the impact of the automation effort. For a more technical view on the evaluation and monitoring of automation performance in retail you can read my article about accuracy measurement in a fully automated Amazon Go neighborhood store.