Jan 19, 2020Each year, I attend the National Retail Federation (NRF)'s Big Show. This year, the event was larger and busier than in the past few years, and artificial intelligence (AI) was a big theme. It seemed that every booth was offering some kind of AI solution, in fact. Most of it was not really AI, but it's the buzzword so everyone was claiming they offered it. Smart retail, intelligent retail and other forms of the idea were also prevalent.
It seemed to me that there were more innovations on display. It was if every technology company on Earth decided that retail is the new frontier and developed some solution to address retail issue. There were a lot of video-based systems for confirming out-of-stocks, aimed at telling grocery stores that a shelf space is empty. Zebra Technologies, for example, introduced a robot that takes video of shelves to determine when items are out of stock, while Pensa Systems offered a flying drone that records video footage of shelves and reports any goods that require restocking.
There were cameras that measured bodies, display units that could be used to sell product without the need for human intervention, systems for virtually trying on apparel and accessories, exit gates that let shoppers walk about with items paid for on their smartphone, virtual reality experiences, a system for marketing to people traveling in ride-share cars, and even electronic article surveillance (EAS) tags that customers could remove after purchasing an item without going to a checkout counter.
I had two recurring thoughts as I walked the floor. One was that innovation has come to the retail industry (which had historically not invested a lot in in IT systems and technology). The second was that retailers must be overwhelmed with all the technology options being thrown at them. Where do they start to invest?
I think many retailers will invest in customer experience technologies, thinking that will bring people into the store or wow them once they arrive. That would be a mistake. Some may also be seduced by the promises being made by AI vendors. "Just use our software and it will tell you how to make better decisions or make good decision for you!" That, too, would be a mistake.
I wrote a white paper, "How to Succeed in Retail in the 21st Century: A Guide to Digital Transformation for Brick-and-Mortar Retailers," which spells out the steps retailers should take. I encourage you to download the document, but here are the CliffNotes:
Step 1: Create a Team, Formulate a Vision and Communicate That Vision
This means developing a clear view of what your retail chain will look like when your transformation is complete. Will store layouts change? Will products change? Will you be using stores as warehouses to ship locally? Will you be showing 100 percent of local inventory to people shopping online?
Step 2: Improve Your Inventory Visibility and Get Your Inventory Accuracy Up to 95 Percent
Retailers that implement AI systems before doing this will be feeding bad information into their systems and getting bad data out. Those that implement cool in-store experiences risk alienating customers who, after enjoying an experience, can't find the products they want to buy.
Step 3: Become Truly Omnichannel or Unichannel
The difference between online and offline customers is going away. Shoppers want to buy products online and pick them up in-store. They want to buy in-store and have a retailer ship goods to their home or office. They want to buy anywhere, anytime, anyhow, and to have products delivered to them in-store, at home or wherever. Without step two, you can't achieve step three—and without step three, you won't be able to compete in the years to come.
Step 4: Deploy Video Analytics and Other Technologies to Understand Shoppers In-Store
Once you have the ability to see your inventory with accuracy and deliver product anywhere, you can start to layer on video analytics and begin to understand how customers are interacting with products in-store. This will enable you to improve your merchandising, store design and more.
Step 5: Implement Data Analytics and Machine Learning
Now we get into the advanced stuff, like AI or machine learning. You can start to use the highly accurate data you have collected to perform marketing optimization, price optimization, merchandising optimization, inventory optimization and supply chain optimization.
Step 6: Wow the Customer
This can be done before step five or at the same time. Once you have highly accurate inventory data and insights into customer behaviors, you can start to deploy smart mirrors, smart fitting rooms, virtual assistants, augmented reality, automated checkout and so on.
Step 7: Experiment With New Business Models
Finally, once you've transformed your existing retail business, you can experiment with new business models, such as catalog showrooms, stores within stores, product rentals, surprise-me subscriptions, automatic replenishment and pop-up stores.
There is, off course, some flexibility to the order in which you can implement steps four to seven. However, steps one to three are absolutely critical to get right first before moving on to the sexier stuff.
Mark Roberti is the founder and editor of RFID Journal.