Connected sensors and devices will start a retail revolution

David Suydam | August 28, 2014

“Proceed as if your goal is to put everyone selling physical books out of a job.”

That quote, attributed to Jeff Bezos back in 2004 when Amazon.com began development of the Kindle e-reader, should have sent shivers down the spines of every major book retailer (and book publisher) around the world had they heard it.

Earlier this month, Sony gave up competing with Amazon for the e-reader market – a market it created in 2004 with the first device based on e-ink technology. According to a recent Forbes article, “E-books now make up around 30% of all book sales, and Amazon has a 65% share within that category.” How much has that hurt traditional booksellers? Hugely. There are 50 percent fewer of them in the U.S. than there were 20 years ago.

This is but one of the many ways that digital technology has completely changed the retail landscape in the last 20 years. In that time, Amazon has proven again and again that data – in massive quantities and analyzed and acted upon in near-real-time (combined with aggressive pricing) – is a powerful weapon in the fight for consumer’s dollars.

But no advantage stays an advantage for long, and we’re now seeing a change in the way traditional retailers look at gathering data and the ways in which online sites look at bricks-and-mortar.

Know thy customer

One of the reasons that Amazon rose to dominate online shopping was its ability to leverage the huge sum of customer data it collected every minute of every day. Thanks to the use of cookies, it was able to implement a product suggestion service based on the browsing habits of its customers. The company calls it “item-to-item collaborative filtering,” but most people know it as Amazon’s recommendation engine.

Call it what you will, it’s one of the many areas in which the online retailer has managed to exert an influence over the behaviour of its shoppers that goes far beyond what a bricks-and-mortar store is capable of.

But that may be about to change.

The new knowledge

Until recently, if a traditional store wanted to learn anything at all about its customers it relied on its salespeople. Always available – sometimes a little too available – salespeople have always been at the front line when it comes to guiding a customer through the purchase. The really good ones quickly create a relationship with the customer, establishing trust and proceeding to learn as much as they can to facilitate the experience. It can almost feel like you aren’t being sold something as much as you are being helped to buy the right items. The really bad ones, of course, can irritate and often irreparably damage any trust the customer might have had.

Now, however, with the dramatic increase in smartphone ownership, retailers finally have a passive and consistent way to measure many aspects of their customers’ behaviour. It’s the beginning of a new data-driven era in bricks-and-mortar shopping that bears a striking similarity to what happens online.

Connected sensors, everywhere

Recently, Hudson’s Bay became the first retailer in Canada to roll out Apple’s new iBeacon technology – a network of Bluetooth-enabled sensors that can interact with a companion app on a customer’s phone.

According to Mashable’s Christina Warren,

When entering a store that uses iBeacon, users can be greeted with a coupon, sales notifications or even a free item. Its real potential as a shopping platform can be seen when paired with existing customer data; if (Hudson’s Bay) knows you typically purchase clothing from a particular designer and you’re near that section of the store, the app could alert you to an ongoing sale.

Sound familiar? This is the bricks-and-mortar equivalent of Amazon’s recommendation engine.

Architech’s Vice President of Emerging Products, Sanand Patel, thinks this is the way forward for many retailers struggling to define themselves in the e-commerce era. “There are benefits for the retailer because they will know more about their customers,” says Sanand. “But there are also benefits for the customers as they learn about new offers, or receive exclusive offers. This will become the standard practice as it’s a win-win for everybody.”

This same technology enables a new breed of “responsive displays”. If you saw the Tom Cruise movie Minority Report (2002), you may remember a scene where Cruise walks into a Gap store – after having had his eyes replaced by surgery – to be greeted by an automated hologram that says, “Hello Mr. Yakimoto, welcome back to The Gap. How did the assorted tank-tops work out for you?”

In the movie, the responsive technology is able to take an instant scan of a person’s retina to determine their identity. But who needs such an elaborate (and invasive) setup, when our mobile phones can do the talking for us and communicate so much more than who we are. With the right permissions in place, a store-specific app could allow a responsive display to make suggestions based on a variety of criteria (e.g., our last purchase, weather forecasts, travel plans, upcoming birthdays or anniversaries or even planned attendance at an event like a concert or hockey game).

Not just people, things too

While knowing customers so intimately is something of a holy grail for both traditional and online retailers alike, the Internet of Everything is creating a world in which these businesses can know a lot more about their merchandise, too.

“Smart tags on products can offer great insights to both retailers and manufacturers,” says Sanand. He’s referring to the evolution of RFID (Radio Frequency Identification), a technology that is already in use within retail environments. Currently, these tags must be scanned by hand at various points from factory to final sale, but the future is far more granular. With an active RFID smart tag, merchandise can respond to inquiries in real-time, anywhere on the shop floor.

Combined with inexpensive accelerometers (sensors that can detect movement), these tags could tell a retailer which areas of their store are seeing the most engagement with shoppers, which products are being picked up and looked at or tried on, and, of these products, which ones are actually purchased.

Suddenly, the data gap between online and traditional retail has become much, much smaller.

The future is already here

The advantages that bricks-and-mortar have over online are strong, and can be made stronger through the inclusion of IoT-based solutions. But as mentioned in a previous blog post, the ‘Art of the Possible’ needs to be explored now, not at some future point in time.

“Businesses that don’t explore these possibilities are going to be left behind,” says Sanand. “Their competitors will embrace it and develop a deeper understanding of trends, their customers and their inventory, and this will lead to greater market share.”

By the way, it’s not just traditional retailers that are your competitors in this space: online retailers are now in the brick-and-mortar game, too.

Figuring out how this new technology can create advantages for your business can be daunting, but we can help. Contact us and we’ll arrange a preliminary ideation session to help your team discover how your biggest business challenges can be addressed through the creative application of software-based solutions.

No Comments | Tags: Big Data & Analytics, Blog, Strategy & Consulting, Uncategorized, Web, Mobile & Cloud

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