Top takeaways was gathered by four VMware retail experts who have attended NRF’s Big Show 2019. Paige Handza, Jarek Matschey, Lenka Kaňáková and Paul Kember
Retail fast-paced industry that is under dramatic change
Retail is a truly fascinating industry that we interact with every day of our life from traditional and online retailers, hospitality (coffee shops, restaurants, hotels) and many more businesses with a retail presence. At the same time, this industry directly reflects the overall state of the economy and is at the heart of changes in consumer trends.
It’s important to start our NRF Big Show takeaways with a general perspective on today’s retail business.
Base on a recent Deloitte report, the top 250 retailers generated $4.53 trillion revenue in 2017, and their business is growing 3.3% with compound annual growth rate (CAGR) 2012-2017.
Out of those 250 companies, there are 123 Retailers growing with 5% or more CAGR (the faster growing with 74% CAGR) and 37 companies shrinking their revenue.
The changes in the global economy have had a significant impact on the retail market. In 2018 growth decelerated in Europe, China, and Japan and inflation accelerated in major markets.
In addition to the challenges above, Retailers are forced to react to the changing customer base and their changing needs. From Tech-savvy Digital Natives who are increasing their purchasing power, and using technology while working, interacting with friends and shopping to an equally aging population that is looking for convenience. Then if you also add increasing urbanisation, we have an interesting mixture of needs where almost each customer must be considered individually and their specific needs addressed.
Fortunately, there is technology to help as you simply cannot scale a solution of the challenge without it.
Finally, there are also retail internal processes where digital transformation needs to be a continuous effort in order to change their DNA and transform into a digital business where the physical and digital worlds intertwine evermore.
In my opinion, the retail market is in the middle of significant change, and, ultimately, investment in the right technology aligned with the right business model and the right people is the only answer.
As Andy Grove said: ‘Bad companies are destroyed by crisis, good companies survive them, great companies are improved by them.’
There is no retail without technology nowadays
The NRF Big Show was the biggest industry exhibition I’ve ever attended with hundreds of vendors showcasing their solutions and technologies. One thing that struck me the most was that in these difficult times for retail, every retailer is struggling to find that extra edge to provide differentiation to an ever increasing and demanding customer base. Retailers need to turn to technology more than ever to find that one big reason to bring customers into physical locations, to stay with them on the web, to ensure appeal to a new generation of Millennial shoppers or to better serve the silver generation. NRF was an amazing showcase of technologies that promise to speed up queuing times, simplify or eradicate checkout activities, maximise shelf space , optimise customer traffic, speed up shelf stock replacement, improve the customer changing room experience, automate pricing strategies, use Robots and even Drones within the retail store and above all provide a co-ordination between the physical and the on-line worlds.
We also heard Deloitte speak about the Global retail trends impacting the industry. With customer expectations now “supercharged”, Amazon has not only raised the retail experience, but killed off mediocre retailers resulting in an era of retail “Darwinism” – evolve or die! This may all sound very dramatic, but it is clearer today than ever before that the retailers that use technology for competitive edge will be the ones that survive. The ones that do not invest or bury their heads will be overtaken quicker than they could ever imagine was possible.
It’s all about customer experience
No matter what you do, it must be simple and actionable. Today’s shopper knows more about the product than store associates even do. They have a broader online selection with filtering tools, and can close the purchase more easily on their own with online product upsell options. They expect retailers to provide diverse purchasing options throughout all phases of their buying journey. This was a message repeated time and time again at NRF’s Big Show 2019. Almost every conversation included, “How can I continue to evolve my stores to deliver personalized, Omni channel experiences.”
So what recommendations did we hear regarding what Retail CIOs should do?
- Continue investment for innovation and experimentation for scaling digital in retail. If an organization delivers excellent and consistent operations in each channel, and across channels they will yield consistently good experiences for millions of customers across thousands of touch points.
- Develop advanced customer behavioural analytics capable of incorporating customer personas and motivators in an effort to anticipate and deliver to customer expectations.
- Utilize consistent customer behavioural data across all areas in support of customer centricity.
- Identify modern digital KPIs reflective of business optimization efforts across the organization to lay the groundwork for digital transformation
Customer centricity and ease of the interaction with the retailer across all the channels are key. It is a complex and continuous work.
Retailers rethinking the checkout
How many times have you gone to a store for little something and then when you head to the checkout you see the queue and decide to give up? It has happened to me countless times and that’s without including occasions like “Black Friday” sales when queuing for the checkout seems much like Armageddon. With Amazon Go a seamless checkout has become a trend and a must in retail. Retailers all over the world are rethinking the checkout to make sure it is not a bottleneck point in the sales process.
At NRF 2019 there were many solutions supporting this trend, so I’ll focus on the ones which I found the most interesting, starting with NCR booth’s fastest demo. Imagine you have 8 items (clothes for example) in your basket and you simply want to pay and go. The fastest demo at NCR booth was the RFID powered checkout. Simply throw the items on the POS counter, they are scanned at once with absolute accuracy, you pay and go. Wonderfully simple.
While at the Fujitsu stand, we saw age recognition and smart mirrors – another example of making buyers life as easy as possible. You’re in the fitting room trying your items on and you find out the size is not correct, or you do not like the colour…. To redress and go to find a shop assistant may be one option or you could simply click on the smart mirror, that immediately knows what items you are trying on and shows you available sizes, colours, matching outfits (a great upsell opportunity).
And the age recognition? It was a very American use case I admit but being a fresh mother of a little boy I kind of like the idea that retailers care about whom they sell restricted items to despite the original rationale behind it. The software estimates your age in a very flattering and polite way and gives the shop assistant a buzz when the person seems below age. The assistant wearing special watches can even remotely approve the sale or in case the alert is legitimate comes to inspect the ID.
My attention was also grabbed by a cashier-free checkout system at shops of any size between 15 to 120 m2 and smart vending machines by JD.com which were showcased at the Intel booth, providing an absolutely amazing experience. All you need is an app, you simply scan a QR code when entering the shop and you pick and choose what you like. When leaving the shop your payment is effectuated. We have even tried to mess around the system, put stuff at different places, trying to hide or steal items but we could not trick it. With the vending machines, you scan, your payment details are matched, and you grab what you like, by closing the door of the vending machine the sale is concluded. The fact this has been tested and is in productive use in China already makes it a proven solution to me.
So how cool is all that? And now tell me that Retail is not exciting industry….
All these are excellent examples how technology can help the retailer to differentiate, improve and innovate to make customer experience seamless and pleasant. “Evolve or Die”, we are back to what my colleagues Jarek and Paul pointed out, “Retail Darwinism”.
Technology for the stake of technology.
One of the more innovative conversations going on at NRF 2019 was the use of drones in store to aid inventory control. Retailer’s are using drones as tools to scan aisles where they have the ability to capture misplaced or missing items on the shelves. In the back of house the data captured can give retailers visibility into which products are currently out of stock and can also predict future out-of-stock items based on item placement around the store. According to Richard Schwartz, President and CEO of Pensa Systems he stated, “cutting-edge technology such as AI and drones will be critical in helping with managing inventory, maintaining a clear view of the data, and keeping customers coming back to the stores in this age of e-commerce.” As innovation continues to push forward in retail expect to see more and more cutting edge technology reach the physical store.