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How to break the barriers between digital and physical experiences

By: Scott Thompson

Recent research by law firm RPC highlights that the UK online retail boom shows no signs of slowing down, toplined by the likes of Asos, AO.com and Made.com and fuelled by the rise of mobile commerce.

Not that online outfits are complacent. Rather, as competition intensifies and customers become increasingly demanding and tech savvy, retailers are investing large amounts in such areas as Artificial Intelligence, machine learning, warehousing and logistics, voice search services and analytics and measurement.

Warehouse robots

For example, Ocado is splashing out £150 million on warehouse robotics. Its technology division, Ocado Technology, has come up with a new robotic system which it claims is capable of picking a wide range of grocery products from the 50,000 different items available on Ocado.com. This uses a proprietary computer vision system to calculate grasping points for a given item without requiring a 3D model of the object to be picked.

Elsewhere, the lid has been lifted on the world's first AI-based fraud detection system for online grocery purchases. The system relies on an advanced machine learning algorithm developed by Ocado Technology using TensorFlow and Google Cloud. This is part of the Ocado Smart Platform (OSP), a solution designed to power all aspects of a retailer's ecommerce business, which has been licenced by the likes of Morrisons in the UK, Groupe Casino in France and Sobeys in Canada.

Asos has also been impressive, with many investments to support its global ambitions. Last year saw it ramp up its technology programmes push, with a record number of releases, for instance, the launch of Try Before You Buy and Asos Instant, a same day delivery proposition.

The company boasts 85,000 products on site at any time and 5,000 new items added every week with 850 different brands available. Asos has 21.3 million across its social media accounts, 35 million views of its catwalk videos every month. 70% of its traffic and over 50% of orders are now on mobile devices, with 1,300 updates to the website and app last year. Staggering numbers that many of its fashion rivals can only dream of.

Insert Amazon here

It wouldn’t be an ‘online retailers invest in cutting edge technology’ article without a nod to Amazon. Many traditional retailers complain about uneven playing fields. And they may, to a certain extent, have a point here. After all, only Alphabet (Google) and Apple have larger market capitalisations than Amazon. It has money to burn where its traditional rivals don’t.

Its work in this area would justify an article on its own. But one of its most notable recent initiatives, Amazon Go, has seen it move on to the High Street, the place it has already done so much to disrupt.

Amazon Go

Cashier-free stores are being touted as the next big trend in retail and Amazon has competition in the form of US startup, AiFi. Using its AI technology, sensor and camera networks and seamless system integration, the venture says that it is already working with one of the world’s largest retailers to create its offering on a massive scale.

Closer to home, MediaMarktSaturn Retail Group has teamed with MishiPay for a European first: a pilot of a checkout-free consumer electronics store in Austria. At Saturn Express, located in the city of Innsbruck, customers scan the barcodes of the items they want to buy, then pay via an app. They can also seek advice from shop assistants.

MishiPay was part of Retailtech Hub, a startup accelerator in Munich run by the MediaMarktSaturn Retail Group. “Disruptive innovations are almost always developed by startups. We launched the Retailtech Hub to bring the biggest retailers in various sectors and the most exciting startups for tomorrow’s shopping together, and to enable customers to rapidly benefit from innovation,” says Martin Wild, Chief Innovation Officer at the MediaMarktSaturn Retail Group. 

This is how you survive in a brave new world where the old rules are no longer binding. You go your own way, you don’t nervously square up to Jeff Bezos’ ecommerce juggernaut. That will just lead to crushing defeat.

Easier said than done, of course, but forward thinking omnichannel retailers are boosting their ecommerce and in-store operations whilst playing to their strengths. It’s all about reinvention in the face of frictionless shopping, deploying in-store technology to replicate the online customer experience.

As Sean McKee, Director of E-commerce and CX at schuh, recently commented: “If you attempt to out-do Amazon, you will fail. What can we do that Amazon can’t? Trained staff interacting with customers in real-time in physical locations. The Amazon Go model wouldn’t be our cup of tea.”

When old becomes new

Stock prices

The retail trading environment in the UK remains extremely challenging, as weaker consumer confidence, increasing inflation and the implications of Brexit hit hard. In response, many retailers are shuttering stores and cutting jobs. New Look, for instance, has announced the closure of 60 stores – putting around 1,000 jobs at risk. Marks & Spencer is going down a similar route.

And, at the time of writing, Maplin teeters on the edge of extinction. It is working with administrators but it has not been possible to secure a buyer for the business, resulting in 63 redundancies at Maplin’s head offices in London and Rotherham and an uncertain future for its stores.

In all three of the aforementioned cases, it could be argued that there was a fundamental failure to grasp a seismic shift in consumer behaviour. Shoppers, once served by dated stores and opening hours and five-day delivery times, expect a different experience.

New Look et al dropped the ball in this respect while more nimble, efficient pureplays sped past them. At the same time, however, there are examples of retailers who have adapted to make physical environments a big part of their online success story, transforming old school stores into customer-centric, digital destinations. The High Street is dead, long live the High Street.

Walmart is at the front of the pack here. Its position on omnichannel has been winning plaudits from analysts, consultants, industry talking heads and journalists such as myself.

“We’re saving customers time by leveraging new technology, and connecting all the parts of our business into a single seamless shopping experience: great stores, easy pickup, fast delivery, and apps and websites that are simple to use,” says Greg Foran, President and CEO, Walmart US. “We’re serving our customers in ways that no one else can. Using our size and scale, we’re bringing the best of Walmart to customers across the country.”

Walmart’s efforts in this area come amid intensifying competition for market supremacy, including Amazon’s roll-out of Prime Now delivery and Instacart signing up a number of high profile partners.

Target is also performing well. It recently reported a strong performance in its fourth fiscal quarter, which ran from November to January 2018, with comparable sales rising 3.6%. Traffic grew 3.2%, with both stores and digital channels performing well. Online sales were up 29%, beating Walmart’s growth in this area during the period.

The retailer has spent billions on its omnichannel offering, strengthening its ecommerce business; for instance, buying Shipt, a membership-based marketplace and same-day delivery platform that allows customers to place online orders for fresh food and household items from nearby stores.

The deal, at $550 million, is one of the largest acquisitions in the retailer’s history, and is part of a supply chain digital strategy that has also included launching Target Restock and Drive Up, and acquiring Grand Junction, a last-mile transportation technology company.

Kudos also to John Lewis and Starbucks. The former is rethinking department stores for an omnichannel age, with an emphasis on personalised experiences. And the latter is placing its bets on blockchain, having already established itself as a mobile payments trialblazer.

The retailer's Mobile Order and Pay service, which lets customers order with their smartphone via the Starbucks app and avoid queues, has been a big success, even causing congestion at some Stateside locations. Last year, it reported that payments made via mobile increased to 30% of transactions in US stores. Mobile Order and Pay accounted for 9% of transactions. 

Conclusion

We are living through extraordinary times. Online has changed everything; pureplays have ripped up the retail rulebook and started again. But, as this article has demonstrated, it is more complicated than ‘cool online-only ventures = the future’ and ‘old school bricks and mortar outfits = the past’. There is innovation, and successes and failures, on both sides of the fence.

In the case of Amazon vs Walmart, for instance, Amazon has something Walmart wants (clicks) and Walmart has something Amazon wants (bricks). Both companies are great examples of how retail technology is breaking the barriers between digital and physical experiences.

Whether you’re a pureplay or High Street stalwart, it’s ultimately about evolving via the roll-out of emerging technologies in an ambitious but measured way that meets customers’ demands.

 

By: Scott Thompson, Editor, Retail Tech Innovation Hub

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