October 25, 2016, 12:51 PM EDT
Retail Technology: A Snapshot for Retailers
In-store technology and its implications for retailers and shoppers
44% of responders in a recent NRF Smartbrief survey state that the biggest threat to their business is the fast pace of change in retail technology.1
Today, retailers must have knowledge and strategies for geo-location, mobile apps, mobile wallets, authentication, and a slew of other technology-related tools. It is no longer enough to track the developments—today’s retailer must develop action plans and strategies to attract and retain consumers using all the tools available.
The next few pages will detail the technology revolution that has taken place in the retail world and its implications to retailers and consumers.
Table of Contents
1. Internet of Things (IoT)
The Internet of Things is the interconnection of devices embedded in everyday objects (things), enabling them to perform functions or to send and receive data. Due to broadband connections, retailers are deploying and connecting millions of low-cost micro-devices and sensors just about everywhere in the retail environment and in the home. The popular FitBit, the self-stocking refrigerator and the buy button are all examples of IoT.
Implications: The benefit for consumers is increased convenience and access to more information. The payoff for retailers is more data collected in more places, providing rich and invaluable insights into consumer behavior, market trends, buying patterns, customer engagement and the like. IoT also helps retailers generate new revenue streams with new products and services, and it can lead to cost savings through productivity improvements.
Consumers use videos to decide where to shop and what to buy. Video streaming has taken off, particularly among millennials. Using video streaming in a sales context, retailers can answer consumers’ online questions, show the product in action, explain its chief benefits and/or demonstrate how to use it. All of these retail applications can help increase sales. 85% of customers say they are more likely to make a purchase after watching a product video.2 With millennials driving this trend, video-on-demand traffic is expected to double by 2019.3
Implications: For a retailer, using video technology in a store can be useful. The hardware cost has gone down and the software algorithms can be powerful. New startups are looking at using video facial recognition to determine a person’s emotions when examining a product. Virtual reality (VR) technology can be used to communicate the experience of using a product right in the store. Imagine experiencing a new pair of skis before buying them. Also, security cameras can be used to help determine if consumers are lingering in a particular section of your store. You’d better get an associate over there to help close the deal! The next time you are thinking about video for security, consider the latest options to leverage video for improving the sales experience.
Beacons are gaining speed. The beacon is a small, self-contained device that broadcasts a unique I.D. over Bluetooth to devices listening nearby. The beacon can simply be “stuck” to a wall, and its batteries can last up to two years. They are low cost, simple devices, but if the right mobile app is developed, they can add dramatic flair to the integration of a brick-and-mortar store and a digital app.
The classic example is the “museum” app. Imagine walking around a museum with your smartphone, and as you approach a piece of art, a detailed background of the piece comes up, complete with audio or video as needed. Your proximity with your smartphone is all that is required. The appropriate app on your phone can detect the broadcast from the beacon, and take you to information specific to the piece you are viewing based on the unique code that is transmitted by the beacon.
Implications: Imagine this in a retail store setting. Instead of “showrooming” and ordering the item from a competitor’s website, the associate can interact with the customer on their device, providing the “showroom” data as well as targeted deals to make sure the customer walks out with a purchase from your store instead of walking out empty handed, waiting for a shipment from your competitor.
Fashion and function are coming together in exciting new ways—fueling consumers’ craving for wearable technology. What’s hot? Wearable headsets, smartwatches, fitness devices, healthcare monitoring and bespoke fashion design. On top of that, wearable technology is promising to change how consumers shop. In fact, according to a study by eMarketer, eight in 10 shoppers interested in wearables want devices to enhance the in-store experience.4 Retailers should align the shopping experience with growing consumer adoption of wearables in areas such as payments and personalized, real-time marketing.
Biometrics are authentication techniques that rely on measurable physical characteristics that can be automatically checked. Examples of these techniques are fingerprint identification, palm prints or facial recognition. Biometrics has gained widespread adoption with the fingerprint authentication that is now used for newer models of smartphones. The benefits are security and simplicity. Some retailers are beginning to use this technology for data gathering, customer service and personalization. While it has a way to go before it goes mainstream, biometrics may be an up-and-coming technology to watch.
Implications: The best shopping apps authenticate with a thumbprint and don’t ask the customer for the same information every time they engage. Biometrics makes this possible. The app should provide access to everything related to the shopping experience—rewards, travel and checkout (e.g., the Starbucks mobile app has the reward program, payment capability and geo-location all in one place). This makes the process quick, easy and intuitive.
Technology in the payments field has also gone through a transformation. Payment methods—cash, check, or credit/debit card—have not changed very much for the average consumer in the past 30 years. The form factors had stayed fairly consistent. The advent of EMV and mobile wallet heralded a transformation of payment technology not seen since credit cards were first introduced.
With the introduction of Apple Pay, the mobile wallet landscape went through a huge transformation. After its launch, mobile wallet awareness jumped from almost 55% to 81% in just one year.5 So, in the current environment, the consumer became aware of an additional payment form factor—the mobile wallet. But, where is adoption?
Mobile wallets are still awaiting an inflection point for significant adoption. Smartphone adoption is at 82% and growing every year, but only 9% of the U.S. population state they plan to use a mobile wallet.6 The reasons for the lukewarm response are a cross between not seeing a need and a concern about security. There is also uncertainty as to which retail locations accept a mobile wallet for payment.
A recent Forrester® research study found that 63% of retailers feel that consumers will use mobile/digital payments when more features become available.7 This will lead to a new distribution and messaging channel. It also requires a paradigm shift in the retailer’s point-of-sale devices in order to enable NFC (Near Field Communication) payments.
The good news for retailers is that this is likely to lead to increased levels of engagement with the consumer—engagement which the consumer may choose to be part of. It is this value of marketing and delivering value-added promotions which will lead to stickiness in the future.
As a result of increased value propositions for mobile wallet use and increased Point of Sale (POS) acceptance, mobile wallet adoption is likely to grow in the coming years. Therefore, retailers who have not yet embraced mobile payment technology should consider them as they develop POS strategies in the coming years.