Physical experience, digital convenience: The future of retail

The future of retail is “phygital,” as every retail and ecommerce publication on the internet is screaming right now. If you’ve never heard the term before, it’s a portmanteau of “physical” and “digital” – and represents the merging of the two forms of retail and shopping.

Physical retail and ecommerce are increasingly blending together – and becoming indistinguishable in many cases. Worldwide ecommerce sales are at 20% of total retail sales, while the figure is 15% for the US. And yet, physical sales show no signs of letting down, for reasons of experience and convenience.

If you wanted to quickly pick up a couple of beers or a pack of gum, you wouldn’t fire up the Amazon app on your phone, would you? But having the ability to place an order online and pick it up down the block? Or the opportunity to log in to your store loyalty account using a smart cart touchscreen so you can receive personalized discount offers while you traverse the supermarket aisles?

These examples highlight the customer experience promise of phygital, and today’s retailers are keen to connect the dots. How do they do that? With data of course.

Data means more satisfaction for customers, more sales for retailers

Say you’re buying a rucksack for a short trip from Amazon. You look through a few options and add one you like to the cart. You also buy a few other items for your trip. Amazon is constantly tracking and updating your digital footprint, learning more and more about your preferences so that it can recommend more useful items every time you come back.

What if a physical retailer could replicate this learning and recommendation process? It would make for an infinitely better shopping experience for the consumer as well as significantly increase sales for the store.

Unfortunately, physical retailers are quite some time away from recording and understanding shopping preferences in real time. More importantly, they haven’t even solved long-standing issues in demand forecasting, product stocking, and inventory management yet. A McKinsey study showed that physical stores’ inventory accuracy hovers around 70 to 90% compared to 99.5% for distribution centers of online stores.

How do physical retailers bridge the gap in data and analytics, and use it to improve customer experience? What technologies exist that help them understand buyer behavior and track inventory and sales in real time? Can AI help?

Turns out that the answers to these questions lie in the shopping process itself.

Bringing digital convenience to physical experience

The shopping cart and the payment method are the two fundamental building blocks of an ecommerce store. Its real-world equivalents are, you guessed it – the cart and the checkout. The faster and simpler stores can make these two processes, the better the experience they’ll be able to provide.

“Both consumers and retailers are pushing for tech-driven hybrid experiences that mimic an online experience,” says Raz Golan, CEO of Shopic, makers of a smart cart solution that aims to speed up and personalize physical shopping experiences.

Shopic’s product is a clip-on device that shoppers take off the charging shelf and place on top of the shopping cart when they enter a supermarket. The device uses cameras and AI to identify products that are placed in or removed from the cart, total up the prices, promote and adjust for in-store deals and accept payment via a variety of methods.

A combination of AI and store robotics is giving retailers access to breakthrough technologies as well as data that help them optimize stocking and inventory, reduce operational costs, and deliver conveniences that shoppers have come to expect from ecommerce. For instance, Walmart used AI-powered “machine vision” technology and real-time analytics to increase stocking speed by 90% and sales by 30% in its store in Long Island.

Further, data from returning shoppers can be channelled into optimizing brand messaging, offers, customer service, and continuous communication throughout the customer journey. “The retail floor was a black hole for retailer-shopper communication until now,” says Golan. “Retailers didn’t even know a given customer was in their store until the time of payment. The ability to talk to them from the moment they enter, while they walk through the aisles, and right through checkout, opens up new possibilities.”

The future is hybrid

Retailers would ideally want more customers to shop in-store because of critical advantages such as savings on shipping fees and in-person engagement leading to more loyalty.

Most consumers today are used to shopping both online and in-store but integrating data from both of these channels is key to effective analysis and value addition. However, there is a conundrum here that retailers face.

While innovation serves younger shoppers’ need to avoid hassle and lines, too much technology can overwhelm older consumers used to visiting stores and picking up products by hand. The answer is to make changes in incremental steps, wrote Christian Reichenbach in an earlier article on CIO about digital transformation in retail.

Customers are already using mobile apps to supplement the in-store shopping experience. Therefore, retailers need to shore up their multichannel strategy and tactics to incentivize more mobile app users to visit their physical stores. Here are few game-changing examples from leading retailers:

• Target offers real-time beauty consultancy and product recommendations via text messaging to in-store shoppers.
• Anthropologie’s mobile app shows users exclusive in-store promotions and sale information.
• Lush reduces packaging and labelling waste by letting users of their app scan any product in their stores to view its description, ingredients, and price.
• Nordstrom Rack allows app users to schedule appointments for its free in-store tailoring service even for online purchases.
• Walmart’s app lets in-store shoppers scan and pay for items in their carts via their smartphones and simply exit the shop without lining up at checkout.

Retailers must constantly think about how their customers’ online or mobile experience can be integrated with an in-store one. This could be anything from AR overlays that lead to product information to offering coupons, from location-based push notifications to cashier-free checkouts.

A consistent phygital experience will enable multichannel retailers to deliver unforgettable experiences across online and offline touchpoints in an increasingly competitive environment. It all depends on how they use technology and data to deliver value to every customer segment.