Radical change and new opportunities await us in the retail sector. The driving force of the change is digitalisation and its shockwaves will spread across the retail sector at increasing speed. Its significance to the structures and competitiveness in retail will be very dramatic in the long term, and these changes can only be controlled with the help of data, information and analyses. Relying on gut instinct will no longer be possible.
Digital invasion of brick and mortar
In the near future, digitalisation in the retail sector will mainly involve sales and marketing via multiple channels, and improved accuracy. Every self-respecting chain of stores has an online store and most actively use social media marketing channels. In general, Finnish online stores’ sales are growing but unfortunately there is no cause for celebration: According to TNS Gallup, foreign companies still account for almost half of all online sales. There is still a lot of work to do and many tears to shed. But there are also opportunities.
We have so far only experienced the first stirrings of the digital revolution in the retail sector. IoT, or the Internet of Things, will eventually change processes in the retail sector, too. IoT is based on the idea that devices and machines communicate across data networks collecting data on their functions and environment. This data can be processed through analytics to control functions and process, with the eventual aim of improving the added value offered to customers. A great example of such applications are the buttons enabling further purchases that the Amazon online store displays to premium customers looking at goods requiring supplementary purchases. Or your washing machine could have a button for buying more washing powder, which sends an order directly to an online store at the push of, well, a button. Samsung even has a fridge application which allows customers to control the content of their fridge with their phone. No more shopping lists or sticky notes!
Various sensors that are used today in industry to boost and monitor processes will increasingly find their way into stores. Sensors can be installed in cooling devices to ensure correct temperatures for goods and provide notification when the device needs servicing. A sensor installed in a shop door combined with purchasing data can provide customer conversion rates, that is, how many of the customers entering the store actually buy something. This is valuable, real-time information for improving the display and marketing of goods.
The manual work involved in stock taking at a store is familiar to many of us. I am sure I am not the only one waiting for the price of RFID tags to fall enough to allow widespread use. Wouldn’t it be great to be able to follow stock values online? Sensor information could allow a store to immediately speed up the sales of a slowly moving product by adjusting its price or moving it to a different shelf. You’ve seen this online!
Customer comments from the online store could also be displayed next to a product's price with electronic price tags, actually combining the benefits of various channels. In many cases it would be easier to choose a product when there is no need to visit the store’s website to see what others think of it. That is another improvement to the customer experience.
In online retail customer clicks are a quick way to find out what customers are doing and to improve the online offering, making it more personalised. The same logic is now available to brick and mortar stores. The use of Wi-Fi or Bluetooth-driven positioning technology in customers’ smartphones is quickly becoming commonplace. With mobile data, you can follow customers’ movements in your store: customer paths, aisles used, stops at the various departments, time spent at shelves, etc. Experiences have been very good, especially in the USA and Great Britain. This way rapid reactions and online development familiar from the online store can be quickly adopted in the physical store, too.
2016 will offer the retail sector many new opportunities and challenges, too. The focus is still on understanding customer need and shopping behaviour, however, but also increasingly on data and analysing technology, that is, optimising your business.