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Where Retail Technology Needs To Go Now
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There are a lot of ideas around about where retail technology needs to go and most of them are good. But until now, very few of them were going to do what retailers need most: give consumers a great reason to go back into stores. Now, there are ideas emerging and developing that will be highly impactful. These new ideas and software will affect almost every in-store experience in the future, they will change what it means to go to a store and they will make store experiences more worthwhile than ever.

Before we get to that, let’s take a quick sidebar to understand what technology isn’t. Technology is never going to be the point of most retail stores. The most important thing will always be the products and services offered for sale in the store. Technology can facilitate the connection between the product and the consumer and I don’t mean to minimize that, a retailer’s mission fails if that connection isn’t made. But the main event is always going to be whether the consumer and the product are right for each other. Technology can help a lot but some retailers who are focusing on technology as the answer to everything are missing the point. Technology is a tool.

Now back to our subject. The next step in retail technology is informed by what’s been learned from e-commerce. You already know that if you shop online, the site knows what you looked at, how long you considered it, whether or not you bought anything and how much you paid. Aggregating your actions from multiple visits gives a retailer a great window on the kinds of things that will work for you, what you like, what’s your personal style and what fits your shape. Using artificial intelligence that is being developed now, an online retailer can make recommendations about products that you would never think of or find on your own. That’s where online retail is going and some retailers are already there. I keep coming back to something that Mike Karanikolas of online retailer Revolve Clothing said recently at the WWD CEO Summit. The business, he said, is “a reactive science, not a predictive art.” Revolve has 50 metrics on every item they offer for sale. When you buy or look at a product, they can see what you would buy and then they can make recommendations. They can also design their own products that fulfill needs they observe from aggregated consumers’ browsing. It works for consumers and it works for Revolve Clothing, their business grows consistently at 30% per year. Using data, they are creating not just their own products but their own brands. Importantly, because their own brands work so well, they are reducing the importance of well-known brands on their site, improving Revolve Clothing’s margins and increasing their market power. It does not involve guesswork.

What will be even more impactful at retail is bringing that kind of technology to physical stores. Imagine this: you walk into a store, their systems know who you are, they know what you’ve bought in the past, they know what you’ll pay, they know your body shape by the clothes you own, they know what fits you and they know your price range. They also know what you’d like that you would never find on your own. When you come into the store, a sales associate gets an alert instructing them to pick up a particular garment from another side of the store in your size and bring it to you. The salesperson approaches you and says, “Welcome back to our store. We thought you might like this.” If you like it, they can put it in a bag and you can walk out with it. They already know who you are and your card can be charged.

How would they do that? They’d use cameras and sensors to know who every customer is when they enter the store. That technology monitors where customers walk, what they look at, where they spend time, what they touch, what they try on. It correlates that data with other store visits a specific consumer has made to that store or its other branches, their mobile site and their website. It sees what piques a customer’s curiosity, it knows what fits, it knows what kinds of styles and colors a consumer likes and will work well. It’s a better service to consumers because it connects consumers with products they like. The consulting firm PSFK, in a recent presentation I attended entitled, “The Future of Retail,” presented a report that calls this kind of technology, “Ambient Assistance,” using “infrastructure…to provide shoppers with access to always-on information, support and navigation.” PSFK also talks about using a “Living Database,” a retail sales floor that’s a “data-rich environment” providing information on “customer behavior and feedback as well as sales and merchandising strategies.”

Will consumers adapt? My anecdotal research is that when you describe it to consumers they don’t like it, the word “creepy” often comes up. But when it’s actually in use, they like the benefit it brings and they’re willing to give up their anonymity to get the benefit once they experience it. It’s a little like asking consumers in 2000 if they’d ever buy clothes online. Most people said no but when they saw how easy and helpful it was, they kept coming back for more. Consumers object to having the government collect information, they mind a lot less when private companies do it. Once it’s integrated into the background, consumers will expect it and it will become part of the normal course of interacting with sales associates. At the recent Professional Beauty Association Summit in Phoenix last week, the futurist Mike Walsh said, “the real mark of technology is not when it’s there. It’s when you don’t notice it, when it lets the business become more about the human interaction.”

Is This Real Or Just Sci-Fi Talk?

This is real and it’s close. You will start to see this kind of technology developing in stores in 2018 and you will see more of it in 2019. By 2020, if a store doesn’t have it or doesn’t have an implementation plan, they’ll be on a path to failure.

The investment being made in artificial intelligence now is staggering. According to a report recently issued by Stanford University, the number of active US startups developing AI systems has increased 14x since 2000. During the same period, the amount invested by venture capital firms in AI has increased 6x to $3.5 billion.

Even now you can start to see a taste of what this kind of information can tell retailers. The graphic below is from a report by Blis, a location technology company. Using mobile phone monitoring, it shows the amount of time consumers spend in four stores: H&M, Topshop, Victoria’s Secret and Zara. If you’d asked me before seeing the numbers, I’d have guessed that time spent in each store would be about the same. Wrong. You can see that H&M gets less time from consumers. Blis believes that makes H&M more dependent on good foot traffic locations since shoppers are probably less inclined to go out of their way for such a small time commitment to shop. That in turn changes their strategy about where stores should be located and how to act with consumers once they’re in the store. The technology we’re talking about here could be highly impactful to H&M.

Who’s Making This Happen?

I talked recently with Girish Nazhiyath, Solutions Architect Director for Retail Solutions at NEC. NEC generates about $2 billion per year in revenue from services and software for retailers and has over 100 thousand deployments around the world. They developed their implementation ideas over the last year after hearing their retailer customers ask for just this kind of help. The major parts of this technology will be completed in 2018. The deep dive, the detailed consumer movements with each look at an item tracked by the retailer, will take a year or two longer to develop. Everything I described above is the solution they’re working on and developing. They have the resources, experience and understanding to make it happen.

The first step for implementation of this technology is to identify consumers individually, watch what they pick up, put down and walk out with. If you can do that, it’s the critical first step for this new store environment. Being able to achieve that facilitates all the other technology involved.

Amazon is not sitting on the sidelines. If you watch the video above, you will see a test store called Amazon Go at their headquarters in Seattle. You scan a smartphone app when you enter the store and that’s all you have to do in order to shop the store. The sensors in the store watch what you pick up and what you walk out with. When you leave, it charges your credit card for whatever you’ve taken. If you take something and put it back, it sees what you’ve done and it doesn’t charge you. No line, no checkout, just…go. The store was opened in 2016 to Amazon employees only. At the time, the Company said they’d open it to the public in early 2017, the video still says it will open in early 2017 but that didn’t happen. Today the store is still for Amazon employees only. It turns out that that scaling this technology for uncontrolled numbers of people is too taxing, it takes the system beyond its capacity. Amazon says that’s close to being figured out and the store will open soon but no date’s been set. I have seen the Amazon Go store and it’s pretty great.

Amazon is not alone in this. There’s another technology, more developed and market-ready than even Amazon’s. In the video above, you can see an actual cashierless store that works and was open earlier this year by a leading grocery retailer in Ireland. The technology for the store comes from a company in Ireland I have visited called Everseen. In the Everseen technology, called Zeroline, you don’t even have to scan your phone when you walk in as you do at Amazon. Once you register on their app, the store recognizes your face and when you exit a store it charges your account.

The first implementation of Everseen’s technology in the US is a rollout in the self-scan lane at a major US retailer that combines the use of computer vision and artificial intelligence. The software watches for an item being bagged or pocketed without being recorded by the point-of-sale scanner. The cameras photograph the non-scan with a ceiling camera and send the image to a store associate who can approach the customer about it. The associate can even show a picture of the non-scanned item to the consumer. This implementation is the basic building block of the software that will allow the customer experience I described above where the store can see everything you do when you’re shopping. Everseen’s implementation is creating enormous learning. Among other things, between mistakes and shoplifting, non-scans in the self-scanning lanes are much higher than anyone knew, 5-8 times higher than in the lanes where the scanning is done by store staff. As a result, the payback on the investment in Everseen’s technology is faster than anyone expected, about 30 days (whereas a good payback for that kind of project is 18-24 months). A word to the wise: if you’ve been shoplifting at big US retailers by slipping something past the scanner, now would be a good time to stop. Here’s a data point I wouldn’t have guessed: The most non-scanned items are coffee makers like Keurig machines and beer.

The big change that makes all this technology happen is the development of software that can look at video and data together and make human-like decisions instantaneously. That’s what enables stores to see what you’re looking at, what you pick up, what you put back down, what you want and what you walk out with. Combined with artificial intelligence and other information about your habits and other people’s, stores can see what works and what doesn’t. They can avoid making the products that won’t sell and let you know faster and sooner about the things you’ll like. It’s the same technology I described above that lets a store show you what they think you’d like. And there’s no line. There are many implementations of this technology, it has enormous potential and it’s just beginning.

The keynote about the technologies I’m writing about today is that they’re not optional, they are mission-critical, they will fundamentally change the potential for what can happen in a store. They will convert many more browsers into customers, they will reduce shoplifting, eliminate lines, make the supply chain more efficient and many other things, right now the potential is limitless. What’s more, if a store chooses to ignore these technologies, consumers won’t get the service they need so once the technology is implemented, everyone will have to have it. This change is a potential explosion for consumer experience in stores and the companies that can provide the technology.

Mike Walsh, the futurist who spoke at the Professional Beauty Executive Summit said, if you want to know what tomorrow’s consumer’s will expect, “you have to look at it with different eyes.” He said it’s not about millennials, “the real people to worry about are eight-year-olds… If you’re eight, all your experiences are curated for you. No one has the same experience as anyone else. Even their individual newsfeeds are different. Their vision of reality is different. This is the algorithmic world that kids are growing up into…We can deliver highly personal experiences to every person at scale.”

You won’t have to wait for an eight-year-old to grow up to see this happen. It’s coming very soon to a store near you.

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