E-commerce is a real challenge for traditional stores. However, the bricks-and-mortar points of sale are on the whole still the central pillar of the retail sector and they are now starting to draw on the best practices of the Internet.

Stores are now adopting Internet best practices

2016 will be remembered as a pivotal year for the retail industry. For the first time e-commerce sales in the United States took 10.6% share of overall retail business. In fact US retailers as a whole saw only 2% growth while Internet retail sales delivered 15% growth - Amazon leading the way with 16.3 e-commerce growth, well above the 15% average. Online selling is now proving to be a real challenge for traditional players

Still, close to 90% of all sales take place at physical outlet, so this is a good moment to take a look at what stores are now starting to borrow from the Internet world with a view to optimising their own business.  

 

Stores as an essential aspect of retail

At the opening ceremony of the National Retail Federation Show 2017, held mid-January in New York City, the NRF’s then Chairman of the Board of Directors Kip Tindell reminded his audience of the importance of physical stores, which underpin the vast majority of total revenue. He pointed to the reciprocal input of online and offline channels, with for instance $1,800 million worth of in-store sales originating on an online channel. These figures support the predictions by Forrester Research that by 2020 30% of all offline sales will come from online activities.

Despite their potential, bricks-and-mortar stores are too often regarded as one of the weak links in the omni-channel customer journey. They have therefore been looking to re-invent themselves. The hot topic is first and foremost customer experience, the idea being to make stores places where you can really try out products hands-on and learn more about them. In order to help brands and retail stores to re-invent themselves effectively, an array of alternative solutions – based on an analysis of in-store customer data – are being developed to optimise people flows inside the stores and boost sales.

Understanding customers… just like websites understand their users

Just like websites, stores are a source of traffic from which highly useful data can be extracted. Customers can be classified according to their profile – gender, age, demographics, and so on – so as to adapt both the offering and customer service in real time. By their very nature, web interfaces capture such data more easily by counting clicks, or by using cookies that enable them to track users across different Internet pages. These tracking technologies are of course more difficult to apply in the offline world, but it does appear that they are increasingly becoming the norm in-store.

From the moment customers enter a store, Chicago-based retail analytics solutions provider Countbox enables the retailer to count them by using video equipment installed throughout the premises. In addition to stores being able to put numbers on people entering and leaving, they can also garner qualitative data such as age, gender, ethnicity, and even mood, thanks to facial recognition technologies. And in the same way as a website can spot returning customers – as long as they do not deactivate their identification systems – Countbox enables a store to detect its returning customers in real time, by for example getting them to sign up to a loyalty programme.

Facial recognition system developed by Countbox

Once inside the store, the task is then to understand the behaviour of customers by measuring the spaces they occupy and the time spent on each product so as to ascertain what are the drivers for sales. This is what San Francisco-based Prism is doing, by analysing customers’ in-store journeys and noting the areas where a given customer lingers. Prism’s solution detects the percentage of customers by journey type and carries out a form of one of the most effective tests known in the Internet world, A/B testing. This practice creates several versions of a message, a button, or some other action trigger so as to reveal the most effective means of ensuring sales conversion. When the system is applied to a store, it enables the retailer to test several product positionings with a view to optimising sales.

Store tracking solutions from Prism

At this stage of the customer journey Seattle-based Impinj enables companies to make suggestions for product purchases in real time, in the same way as websites do. Impini has come up connected fitting rooms that use Radio Frequency Identification (RFID) technologies. This approach enables sales assistants to offer customers products that are similar to those s/he has already selected but for example in a different size or colour. Impinj’s technology also provides stores with highly valuable indirect feedback.

Retailers can also obtain key analytics at the checkout. How much time do customers spend at the checkout on average and which shoppers might potentially abandon their shopping expedition if the queue is too long? From the very beginning, the Amazon website has used a set of tracking indicators to ensure that as little time as possible is spent on the payment process. This approach led the e-commerce giant to come up with the iconic ‘1-Click shopping’ technique. Today a number of firms, including such giants as US IT conglomerate Cisco and UK-based Ipsos Retail Performance, supply retailers with precise data on waiting times and queue abandonment rates, which enable store managers to adjust their layout in order to solve these problems.

Some tech firms are even offering camera-based systems to tackle fraud at the checkout. Stoplift Checkout Vision Systems, based in Cambridge, Massachusetts, enables stores to combat a common employee-perpetrated fraud, known as ‘sweethearting’, when an employee makes a ‘fake scan’ of an item in order to offer a freebie to a friend. Stoplift’s connected cameras are able to establish a correlation between the pictures they are taking and the product registration system and will alert the store manager if they spot a fraud taking place.

 

The bricks-and-mortar store as a customer analysis lab

Meanwhile the bricks-and-mortar store is gradually morphing into a test laboratory where data collection is a key route to optimising sales performance. These practices have not been invented by the Internet: back in the hey-day of department stores and during the advent of supermarkets in the 1950s in France, retailers used to carry out tests and had tracking tools to hand for customer flows and product positioning. However, digital technology has enabled the automation and development of these practices so that they now cover every aspect of the customer journey and are in widespread use. Nowadays, retailers, assisted by increasingly effective technologies, are working hard to keep up with online best practices and replicate them in-store.

Far from celebrating the advent of in-store customer data analytics technologies, the NRF 2017 Show highlighted just how far the development and application of these techniques have come, in emulation of the technology giants, which are able to look at any given issue and provide solutions that can be integrated all along the value chain.

All this raises the question of how people will shop in the future. Amazon, which was not represented at this must-attend retail show, recently unveiled Amazon Go, a 100% automated store where customers do their shopping in self-service mode. The retail industry should be keeping a close eye on this data collection pioneer, not only as regards the solutions the online giant develops itself but also the partnerships it signs up to. With its latest innovations, Amazon could well bring about a new seismic shock in the sector by attacking retailers not so much in the area of e-commerce, but directly in their traditional preserve – the bricks-and-mortar store.

 

By Léo Courbon
Strategy & innovation Analyst