The future of retail: bridging the gap between online and in-store

Achieving fluidity across channels is crucial to survival in an ever-changing retail market. Alexandra Leonards discovers how retailers are adapting to the new normal by embracing technology and reinventing the store.

The pace of digital transformation has accelerated dramatically in the eighteen months since the start of the Coronavirus pandemic. As a result, the retailers that were once trailing behind on their digital journeys have caught up significantly – investing money in their logistics, websites, social platforms, and innovative technologies.

Thinking like a tech disruptor

The relationship between retail and technology has changed considerably. Digital-only stores are now a dime a dozen – while brick-and-mortar shops have been pushed further into decline by the pandemic. Traditional retailers have been forced to rethink their strategies, embracing technology to help bring them back from the brink.

“The adoption of technology is really interesting, because there are some retail companies that don't actually view themselves as retail companies, they see themselves as tech disruptors within the retail space, even though to anyone looking at them from the outside they’d look like a retailer,” says the British Retail Consortium’s (BRC) director of insight, Kyle Monk. “The philosophy behind these companies is fundamentally different, they work like a tech company, they talk a different language to what you might call ‘legacy retailers.’”

Most of these ‘tech disruptors’ have come off well during the pandemic. Often because they are able to scale up more quickly than some of the more traditional retailers.

“I think what the pandemic has exposed, is that all retailers have to think that way now, technology is a core part of any retailer's offering,” Monk adds.

Richard McKenzie, chief commercial officer at Ocado Solutions, which develops e-commerce technology for retailers, says that once a customer has shopped online several times, they’ll never turn back.

“Online is no longer a marginal change or channel for grocers – it’s a major channel,” says McKenzie. “Even in markets that have seen online go from one to five per cent –you're seeing the dialogue and the way people are thinking about it has changed.”

He adds: “No longer is this a question of: ‘do I want to play in it?’ It's: ‘I have to play in it.’ It's a strategic channel and retailers see its strategic growth. If I look at our conversations, the optimism on how far you can go in e-commerce has totally changed.”

The shift to online delivery means retailers now need to think about their economics differently. No longer can supermarkets accept marginal loss making when it comes to online grocery delivery for example.

“We've got to say: ‘how can I see a route to making money?’ That's where we get very excited, because the use of technology and aggregated fulfilment centres we see as absolutely critical for making money,” explains McKenzie.

Reinventing the store

Retailers are now adapting their strategies to move with the ever-changing shopping landscape.

“Consumers don’t think in terms of channels,” says the BRC’s Kyle Monk. “They just buy goods where it’s most convenient.”

Following a pandemic, which has forced everyone online and highlighted the ease of e-commerce, replicating convenience inside brick-and-mortar stores is a top priority for many shop-owners.

Experts have also predicted that in the coming years, stores will become more like a hybrid of digital operational centres for delivery and ‘experience hubs.’

“This has to happen because the retail business model depends on it,” says Natasia Malaihollo, head of business development at PopCom, which develops digital pop-up shops. “Retailers have to get creative with customer experiences, to draw people into the mall.”

Declining footfall will likely stick around for a while, but when people do head to the High Street they tend to spend more than they did before.

“Retailers are using innovative tech to adapt to the new normal – one of the new behaviours we’re seeing is people going to stores less,” says Monk. “But the pandemic has brought how stores operate forward in a big way, and lots of the BigTech companies have all sorts of exciting propositions around IoT, smart labelling, tracking – which will make the store of the future a far more competitive proposal.”

Amazon recently launched its ‘Just Walk Out Shopping’ technology in the UK, which uses a combination of cameras, sensors, and machine learning to detect when a customer puts items in their basket, and then automatically charges their account when they walk out.

But this ‘frictionless’ shopping model is no longer just reserved for the technology giant. Last month deep tech company Sensei opened its first autonomous store for the largest food retailer in Portugal, hypermarket Continente.

Sensei also uses an integrated system of cameras, sensors, and AI algorithms to create a quick and contactless shopping journey.

“The Amazon Go concept is based on specific needs required exclusively for their own retail operations, whereas Sensei is a more ubiquitous technological solution, capable of adapting to multiple retailers' needs and retrofitting their thousands of existing stores,” says the chief executive of Sensei, Vasco Portugal. “We also provide a set of digital tools that allow retailers to take full advantage of the intelligence that their stores now generate.”

This week Google opened its first ever physical store in New York City, with technology at the forefront of its concept. The space has a 17-foot-tall circular glass structure called the ‘Google Imagination Space,’ near the entrance, which has custom interactive screens that feature rotating exhibits for visitors to experience different products and technologies.

The company is beginning with an experience around Google Translate and its machine learning capabilities. Customers are able to “speak to” the exhibit and get real-time translation of the words in 24 languages simultaneously.

The space also includes ‘sandboxes,’ or rooms in which people can experience products in real-life scenarios, including a simulated living room.

Other concepts include China’s BingoBox, which has rolled out more than 500 flat pack-built stores over the past few years. Customers scan a QR code at the door, place items in a scanner, and pay via WeChat or Alipay.

“UK company NearSt integrates with Google and other search engines to make stores or stock visible online, it’s great,” says Monk. “And Ikea’s AR tool means you can preview a piece of furniture in your own home, while Dixons has built virtual screens where you can connect remotely to technicians.”

Capturing data in-store

When PopCom was being established, the company’s team were aiming to build the world’s smartest vending machine.

“[We wanted to do this] by providing retailers and brands with the same kind of rich data and analytics found on a website,” explains Natasia Malaihollo, head of business development at PopCom. “On websites you know everything about the shopper, but in brick-and-mortar stores there is very little data – retailers have no idea for example why a consumer is browsing a particular section of the store.”

Popcom’s ‘PopShop Digital Pop-Up Shops’ are almost like a website in physical form. There are up to 340 products in the machine, but shoppers can also browse an entire website at the same time. If the product is there it will be dispensed immediately. If it isn’t, consumers can have it shipped to their home address as if they were shopping at home. Like a website, the machine is not limited to stock in a particular location.

Malaihollo says that gathering the kind of data found online in a physical space remains PopCom’s aim – but that the company’s purpose has evolved over time.

“We’ve found our niche by providing digital brands that are already thriving online a way to take a baby step into the physical retail store,” she says. “Setting up store can be expensive and risky – there’s no way of telling if the store will do well – we allow brands to take a small step with our pop-up-shop to test whether that location works.”

Malaihollo explains that it can be expensive to stand out online because companies are competing with thousands of others.

“And you might not have the budget or experience to know how to do that,” says the business lead.

Achieving brand awareness online is now always easy, so many businesses still seek a physical presence to organically stand out, away from a crowded digital space.

“Through a more efficient operating model and an integrated system that converts store data into deployable actions, retailers improve their business operations by avoiding stock-outs or misplacements while clearly understanding their customers' interactions with the store products,” says says Vasco Portugal, referring to Sensei’s autonomous stores. “Digital tools are fundamentally the key that enables physical stores to boost operational efficiency and business optimisation while providing a frictionless shopping experience.”

Portugal says that while there is plenty of room for new business models in a transformational era, there is something about the physical shopping experience that has not yet surpassed any kind of online purchase.

“The smell of fresh fruit or freshly baked bread is not replicable, nor is the need for grabbing something when we’re in a hurry between two different locations,” he adds.

The coronavirus crisis has lowered the barriers to technology and innovation at a much faster pace than ever anticipated. But with the High Street struggling for a number of years, the switch to online and a move towards technology was always inevitable. If the pandemic has highlighted anything, it’s that the survival of retail depends upon bridging the gap between online and in-store.

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