Bricks to Pixels – A Framework for Digitizing Retail Experiences

Bricks to Pixels – A Framework for Digitizing Retail Experiences

A look into digitalizing retail experiences in-store.

 

There Is No O2O

There is no doubt that digital is spilling over into the physical world. This trend is often expressed under the label “O2O” (offline to online or online to offline depending on one’s perspective). In our opinion this notion of O2O, however hot it may be right now, is conceptually flawed. It still supposes a special activity geared towards shifting consumers from an “offline world” to an “online world”. This vision is outdated. Online and offline have merged, both in terms of brand decision-making and consumer experience. Referring to them as separate spaces obfuscates realities and stands in the way of innovative digital brand actions. In this article, we focus on the topic of digitizing retail experiences and how brands can blend physical retail spaces with digital affordances to drive brand and business performance.

The Future of Retail: Not “All E-commerce”

Across industries, many brands that have historically relied on traditional retail (whether operating their own stores or going through distributors) feel the pressures coming from pure online players. Many of our clients and prospects openly worry about and plan for a future that would be all about e-commerce with physical stores becoming curiosities from a bygone era. We see this position as very much misguided and making investment decisions based on such view of the future could indeed lead to significant mistakes and lost opportunities.

There is perhaps no better illustration of the enduring potential of physical retail spaces than Amazon’s decisions to launch physical bookstores. These Amazon bookstores offer all the benefits of an offline experience (being able to passively browse, flip through books and talk to a salesperson) with a digital twist: store inventory and layout is entirely influenced by Amazon sales data and updated on a nearly live basis to reflect new trends in reader preferences.

The Amazon case clearly demonstrates the on-going competitive advantage of physical retail for certain use cases. These use cases include:
 

  • Passive browsing: e-commerce excels at targeted search but is still lagging when it comes to passive browsing.
  • Commerce as entertainment: e-commerce is built around a functional vision of commerce rather than an entertaining one.
  • Products or services that require a sensorial product experience (touching, trying, smelling, tasting, hearing, etc.): such sensorial experiences are difficult to completely replicate online.
  • Impulse buying: e-commerce can satisfy existing needs but is still lagging when it comes to generating them and driving impulse purchases.
  • Getting access to expert human expertise: despite recent advances in AI and online customer service tools, in many cases nothing can replace real-life contact with skilled human experts.
  • Collective decision-making: certain products require collective decision-making and live feedback from other people (think, for example, of buying a wedding dress). While these experiences can be partly replicated online through social media sharing, here too traditional retail retains its edge.

Once we acknowledge the on-going appeal and potential of offline retail, the key question becomes: how do we re-think the role of physical retail in the customer journey and digitally augment its unique attributes?

A Framework for Retail Digitization

At MADJOR we have a simple, actionable framework for brands to understand the opportunities around retail digitization. We view retail environment through the lens of 3 dimensions:

Dimension 1: physical space – Stores are first and foremost physical spaces. They have floor plans, variously arranged shelving and product displays. These spaces also host the staff, who manage operations and sales, and feature other atmospherics such as music, lighting and scents.

The first dimension of retail digitization relates to the store’s physical attributes. Put simply, it is about using digital tools to optimize these physical attributes. This can include actions such as:
 

  • Tracking and analyzing footfall inside the store in order to optimize the store’s layout. A store can use beacons to track consumers and decide how to organize different sections and elements inside the store (dressing rooms, cash registers, seating areas, etc.) in the way most likely to maximize spending and customer satisfaction. Through modular store design, brands can enable rapid testing to find the optimal solution.
  • Using smart, context-aware music playlists that correlate to shoppers’ behavior, weather and time of day to strategically influence sales of a given range of items (e.g. French wine).
  • Using predictive analytics to estimate store traffic, identify surges and make adequate staffing decisions to enable a more flexible “on-demand” workforce that can cope during peak demand period.

Dimension 2: information space – much of what can be found inside a store, from signage to labels, is about information. Where can I find different products? What are the products most suited for me? What are the features and characteristics of different products?  Using technology, retailers can overlay digital information on top of a physical experience to provide a more immersive, context aware, personalized and seamless experience. Examples of actions include:
 

  • A digital way-finding system that directs visitors towards product categories based on what products they have already checked online.
  • A face-recognition enabled display that scans consumers’ faces and directs them to the right products according to their age and gender.
  • Interactive product search and selection that direct visitors to the right product based on data capture. A sports retailer for example can create customized product selections after analyzing a runner’s morphology and health data through a smart scale.
  • QR codes on products that give access to in-depth information about the product’s features along with user reviews.
  • Augmented reality signage that overlays product information when scanned by the customer’s mobile device.

Dimension 3: transaction space - the store experience for most retailers is designed to terminate with a transaction. This all-important dimension often happens to be the most unpleasant one for store visitors and a critical moment of customer drop-off. Digital tools can be used not only to remove frictions but also to use the moment of transaction as the starting point for a future relationship with the customer. Examples of actions include:
 

  • Self-checkout counters that use social media single sign-on to capture buyer data and deliver personalized promotions.
  • Integration of e-wallets such as Alipay or Wechat payment as payment tools to remove the need for cash or traditional credit cards.
  • Self-checkout kiosks that allow customer to easily select options for post-purchase services (installation, delivery, after sales services, etc.) during checkout.
  • Mobile payment terminals carried by sales staff that allow them to process transactions anywhere inside the store.

Master the Retail Technology Stack

The above framework allows us to better think about the issue of retail digitization from a strategy standpoint. It’s then the task of technology to fill in the gaps and match strategic objectives with the right technical solutions. Retail digitization often requires brands to solve new technical challenges that can include:
 

  • Mastering new, emerging technologies such as beacons, virtual reality or face recognition
  • Integrating different systems to build a single-customer view (Ex: integrating offline POS systems with online CRM platforms)
  • Creating solutions for secure storage, access and analysis of store visitor data
  • Bringing together online and offline KPIs (Ex: connecting geo-targeted ad-buy to store traffic and sales for the advertised products)

Technology solutions are obviously dependent upon each brand’s individual situations and strategic objectives. However we can identify a “stack” of technologies that are key to retail digitization. These technologies should feature heavily on the roadmap of every brand considering new digital retail experiences.

Takeaways: 5 Steps to Go from Insights to Actions

More than any other area of digital transformation, retail digitization is a complex puzzle with many moving parts. There is a need for a comprehensive approach that considers all factors from existing customer journey pain points and user experience, down to long-term technical scalability. We encourage you to consider the following key points:

1. Root your strategy in insights: it’s too often that brands start with technology and get carried away by glitzy new tech with little regard for what customers actually need and want. We advise brands to conduct research aimed at better understanding the status quo of the in-store experience in order to pinpoint moments where digitization can have the most impact. This can be as simple as gathering feedback from customer-facing staff such as store managers or sales people but should ideally also include more sophisticated research techniques such as shop-alongs or digital-based in-store behavior tracking. The results of such research will allow brands to identify:
 

  • Pain points that need to be digitally addressed. This can include areas of customer dissatisfaction such as difficulties finding the right products in the aisles, or KPIs that indicate significant under-performance such as a steady drop in average basket size or a sales drop during certain hours of the day.
  • Assets to be digitally enhanced. For example, a brand may empower its sales staff with handheld devices that can help enable a smooth transition between online browsing behavior and the customer’s offline experience.

2. Engage all stakeholders from the start: retail digitization spans across a very wide range of internal competencies and business units that traditionally operate in different spheres with little mutual trust and understanding. Retail people need to develop an understanding of technology affordances while digital experts need to learn about the day-to-day realities of managing a physical retail space. From day one any retail digitization project must involve all relevant stakeholders to ensure that the issue is correctly framed and the solutions are technically and operationally feasible.

3. Test and iterate fast: we advise brands to use agile methods to go as quickly as possible from insights to initial concept and MVP roll-out. Tests can easily be conducted in pilot locations to collect feedback from consumers and store staff, which can inform refinements before large-scale roll-out. Most importantly, we encourage brands to test out different ideas in different locations to identify those that are most promising and quickly ditch those that fail to get traction.

4. Consider long-term scalability: it is too often that brands create highly innovative, eye-catching store digitization experiences in certain flagship locations. While such operations certainly have some value, it is too often that they do not scale and stay as more of a PR exercise than a systematic program to change the retail experience as a whole. Whatever the issue at hand, we strongly encourage brands to keep scalability top of mind and have a clear plan about how they will roll things out beyond flagship stores and pilot locations.

5. Match technology with behavioral changes: in order to be sustained over the long term, retail digitization requires more than new technologies inside stores. It requires a deep change in behavior on behalf of the retail staff who may be moving away from traditional transaction-focused roles. As relationship building activities and experience personalization come to the fore, project owners need to emphasize training and on-going support to enable the development of more nuanced sales skills.