The tide is turning, a new day is dawning, change is a brewing – insert whatever euphemism you want because, when it comes to describing the transformation retail is about to go through over the next 10 years, they are all true.
The pandemic shook retail to its core, woke it up in a manner of speaking, and now the pace of change has picked up exponentially. New ways of shopping physical retail stores from Amazon Go to Zara’s newest flagship in Madrid herald new ways that shopping can and should be done differently.
And these new ways of shopping, when done correctly, are all predicated on the idea of a “smart store,” i.e. a store that harnesses the power of data to read and react to customers’ needs organically over time, much in the same way as e-commerce retailers react to data gleaned from their websites.
The data derived from a smart store philosophy will soon be at the center of every retailer with staying power’s flywheel, not just because of what it means for their businesses, but also because of what, as I will discuss later, it means for the betterment of the world.
In September, SES-imagotag’s North American CEO and smart store expert Philippe Bottine will join me on our Omni Talk Retail podcast series to discuss this very subject. So, in preparation, I have put together my thoughts below on smart stores – what they are, how to build them, and, most importantly, why they are such an important piece of retail’s ongoing evolutionary puzzle.
What is a smart store?
First, let’s start with some definitions. What do I mean when I say the phrase, “smart store?”
In its simplest form, a smart store is one that operates with data as the grounding centerpiece of everything that happens inside of it and also outside of it, too.
Say a customer comes in, picks up an item off of a shelf, puts it back, and the idea is then that the data across all these activities is all captured in real-time. Same goes for a customer that takes a leisurely stroll through a store, fills up a shopping basket, and then decides to wait in line to pay. Or even a customer that places an order for curbside pick up, and then goes to pick up that order at the store on his or her way home from work.
All of the above actions need to be recorded and captured in real-time, and hence that is why I also used the mouse across a browser analogy above. Because that is what we are talking about here. We are talking about understanding every customer’s browse path, every customer’s add to cart, and every customer’s final basket at all times – exactly as we understand it in e-commerce today.
But a truly “smart” store adds a couple of other important elements into the equation as well. It isn’t just about the customer. It is also about understanding everything that happens in and around that customer and also about helping retailers to operate more efficiently.
For example, knowing what interactions a customer may have had or not had with an employee on a shopping trip, or what prices a customer may have seen on that trip, or even what lighting or temperature conditions greeted that customer on his or her journey, are all just as paramount.
Within a fully operable smart store, almost any piece of data can be correlated against the ultimate actions of a customer on any given day to better predict what that customer will want in the future and, in turn, to help retailers to automate low value added tasks so that their associates will also be able to serve these same customers in a better, more productive way.
That, in its essence, is what a smart store is all about.
How to build a smart store?
There a couple of must have ingredients for building a smart store of the future, and, fortunately enough, Amazon and its “Just Walk Out” technology have already provided a blueprint for the entire retail industry to follow. In fact, I even went on record as saying that Amazon’s “Just Walk Out” technology is already the greatest retail innovation of the next 30 years earlier this year in Forbes.
For my money, there are three essential foundational elements that all retailers should take away from Amazon’s “Just Walk Out” technology deployments.
#1 – Computer Vision
Computer vision is the same technology that powers autonomous vehicles. It is what helps a Tesla identify if there is an old lady crossing the street, for example.
So it shouldn’t come as a surprise that the technology is making its way into retail. After all, driving a car is life and death. Not so much in retail.
The value in computer vision technology comes from cameras being able to record anything and everything that happens inside of a physical retail store. Computer vision records where items are on a shelf, how many of a given item are actually there, and, hence, is also the ultimate mechanism by which every great customer design nuance can spring to life, like, for instance, the ability of an Amazon customer to “Just Walk Out” of a store and pay like they are getting out of an Uber or a Lyft.
It cannot be understated but having 100% visibility and accuracy around inventory in store is the centerpiece of “smart” retailing.
#2 – Cloud and Edge Computing
Computer vision serves as a great recording device, but it is also useless without an ability to process and take action on any recorded data in real-time. Running a physical store, where hundreds of actions are happening in mere seconds, requires unprecedented speed and coordination.
I recently interviewed Sam’s Club CTO Vinod Bidarkoppa and asked him, point blank, “What is the number one, most important technology to become an effective omnichannel retailer?”
Vinod, to his credit, didn’t shy away from the question one bit, answered me frankly, and said that the most important technology to meet customers’ needs in the future was a robust cloud point-of-sale system, and, from my experience running Target’s Store of the Future work, Vinod is 100% right.
The reason being, to understand our customers in real-time, we need to have real-time records of our transaction and inventory logs. Overnight batch jobs are no longer an option.
And, more importantly, as we talk about real “smart store” experiences, like Amazon Go or anything else like it, where decisions need to happen while a customer is still inside of our stores, and sometimes for just minutes of time at best, then ultimately some of this data also needs to be processed locally on the edge as well.
Because even the cloud, while a necessary condition, is by no means sufficient because it too could end up being too slow, depending on the use case.
#3 – Electronic Shelf Labels
Brand, assortment, price, and convenience – those are the hallmarks of retail differentiation. Amongst the four, though, the one that most often gets lost or overlooked in discussions like this one is price.
Agile in-store pricing will soon become a bona fide weapon of retail differentiation. Those that invest in it will win, and those that don’t will lose. As foundational elements #1 and #2 above start to take root, the last, most essential element of a smart store will be the application of electronic shelf labels.
Electronic shelf labels carry with them many operational benefits that are gaining more and more traction with each passing day. Many retailers have begun to see the value in them as an ally for both consumers and associates. On the consumer side, they can serve up easy to read information, like product ratings, reviews, and specifications. And on the associate side, their “pick-to-light” capabilities make restocking and picking inventory from shelves much easier.
These benefits notwithstanding, however, perhaps the greatest advantage of electronic shelf labels and why they are an essential element of any smart store design is they impact supply and demand at a local level.
For instance, the supply and demand of inventory on a retailer’s shelves has never been fully calibrated. At best, retailers have historically been one to two weeks out on price changes because that is how long it takes to run a physical print job and then to assign labor to affix physical price signs to shelves.
In a truly smart store, however, all these unnecessary gaps in time and the unnecessary workload go away. Computer vision systems can see the inventory on shelves, understand the customer flow patterns to those shelves, and then adjust prices to the actual supply and demand by way of electronic shelf labels, all behind the scenes and without ever having to send another print job to the printer or without ever needing to allocate payroll for in-store price changes ever again.
A smart store world is a world where supply and demand in a physical store can finally coexist as one, just as they do in e-commerce.
So how does a smart store become a sustainable one?
If we can all get behind the idea of a smart store, for the reasons of better understanding our customers and better aligning supply with demand, then smart stores are an important undertaking not only for financial reasons but for another far more important reason as well.
And that reason is that a smart store is also, by definition, a more sustainable store, too.
The more efficient we, as an industry, can make our physical retail operations, the better off it is for the entire planet.
The rise of e-commerce has already created a move to turn stores into microwarehouse logistics hubs for everything from curbside pickup to shipping out of stores themselves. So it goes without saying that the very same principles just espoused above will also make all of these activities smarter as well. In fact, smart stores are so aptly suited to serve as logistics hubs that it could mean the industry never has to build another warehouse ever again!
Think about the benefits.
Better supply and demand calibration means less inventory flowing through the supply chain. Better inventory accuracy means more efficient delivery pick routing in store and less delivery vehicles on the road. And, finally, better designed physical retail experiences, tailored to the individual, that keep people wanting to come back to stores, mean less packages in general being sent out for delivery. All of which means more energy efficiency and one hell of a much smaller carbon footprint in the long-run.
Of course, these are just some of the benefits to be gained. We are only at the early stages of smart store exploration, meaning, like with so many things when it comes to innovation, there is likely even more value to be found in the years ahead. The list above likely just scratches the tip of the proverbial iceberg. Only by studying and applying the lessons learned along the way can we realize a better future.
Therefore, the time to invest is now, not for the geeky, analytical reasons of analyzing a physical store like an e-commerce site, but because life runs in full circles, and the very same ideas, i.e. the principles of e-commerce, whose unending use of cardboard and gasoline to fuel delivery vehicles continues to wreak devastation on the environment, may in fact be one of the best ways to cure what ails the industry and the world.
Don’t believe me?
Then tune into Omni Talk Retail in September when I sit down with someone far more knowledgeable on the subject than I, SES-imagotag VUSION’s Philippe Bottine, to tell me what I got right and what I got wrong above.