Innovative Retail Technologies

MAY-JUN 2017

Innovative Retail Technologies (formerly Integrated Solutions For Retailers) is the premier source for innovative yet pragmatic technology solutions in the retail industry.

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Store Optimization: 2017's Major Strategic Focus S tore optimization (i.e., using analytics to right-size format, space, labor, range, and promotions, alongside in-store tech to improve productivity and operational efficiency as well as drive sales) is emerging as a major strategic area focus for retailers this year. This is in contrast to only recently, where retail- ers' technology investment has been seduced by e-commerce growth. While every observer agrees that online sales growth will continue to outstrip store sales, with Planet Retail forecasting 18 percent to 7 percent CAGR (compound annual growth rate) respec- tively from 2017 to 2022, it is perhaps a sign of developing levels of maturity in e-commerce growth that retailers are now beginning to un- derstand the continued importance of the role of the store in any bricks-and-clicks operation. The complex interplay between the store and online results in well over half of sales today being digitally influenced. But nearly nine out of every 10 sales still touches or is completed in a store. In practice, the average shopping journey will move between channels, (i.e., browsing or ordering online, searching for reviews, trying in a store, and ultimately buying either in-store or online, perhaps for delivery or to collect). In all of this, the number-one customer prior- ity is that moving between a retailer's different channels is consistent and effortless (e.g., buy online, return in-store, and find the same price or promotional items in-store to try that are online or on offer, etc.). Indeed, multiple studies have shown that retailers offering buy online-collect in-store services, or '"click-and-collect," can foster increased online conversion that also drives footfall into store. The opportunities that originally lured retailers online are now creating a situation where store optimization is now of paramount importance. And it is the development of e- commerce opportunities through mobile (and m-commerce), with their ability to help integrate the offline customer experience (CX) with online, that will therefore have a key role to play in the store's future. This is why the proclamations of the death of the store were false. But the truth is that stores have fallen behind in terms of living up to cus- tomer expectations of speed of service, choice, and convenience, which are increasingly shaped by their online shopping experiences. Many of those retailers that have failed to integrate and keep pace are now overspaced and underper- forming, where store growth is at its slowest rate in years and closures are on the rise. For example, the latest Planet Retail data predicts that 2017 will represent the slowest rate of physical growth for the world's top-10 largest grocery retailers. Their combined stores numbers will rise by 3.1 percent during the year (down 0.3 percent YoY and 1.8 percent on 2015), but this will be the lowest rate of annual growth since 2011, when, in the wake of the global eco- nomic crisis, the increase was just 0.8 percent. Mobile, Kiosks, And More Invigorate The Store The store is still a crucial informational, expe- riential, and fulfillment hub. But the customer experience falls short, where 43% of consumers in a global Planet Retail survey last year stated that, if they could, they would do all of their shopping online. Therefore, it is not surprising footfall is, in some sectors and formats, in free fall. As a result, it is imperative that those stores that remain are revamped to integrate online with offline through mobile, kiosks (with endless aisle capabilities), and sales assist systems. Offering reserve and/or click-and-collect to incentivize store visits and stimulate footfall, conversion, and upsell is also just part of fully integrating all digital touch points with a physi- cal presence, and that also includes signage at any point of purchase (POP) and POS. The store will also play a crucial role in helping retailers capture information to better understand and cater to their core customer. Us- ing mobility and location-based technologies in and around a store can enable a retailer to infer the context of a known customer's purchase decision (i.e., location, time of day, loyalty to particular brands, etc.), with which they can refine their offering. Then this information can help iteratively enhance and localize buying and merchandising decisions, stock positions, and replenishment accuracy. One could argue that store contraction is a necessary part of rightsizing an omni-channel retail business. And while so many stores are closing, Amazon is constantly rumored to be about to open thousands of new ones. So, any economies of scale gained through physical downsizing must be reinvested in more stra- tegically capable business models that recast the optimized store at the center of a carefully curated CX spanning every physical and digital retail touch point. As the digitalization of the shopping journey reaches a tipping point, this year will make or break brick-and-mortar retailers who are still overspaced and underperforming. BY MIYA KNIGHTS I TECHNOLOGY RESEARCH DIRECTOR PLANET RETAIL May-June 2017 32 What's Next The opportunities that originally lured retailers online are now creating a situation where store optimization is now of paramount importance.

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