Executive Summary
Retail business models, have evolved over time; charting out
its journey through the following phases:
·
Brick & Mortar
·
MultiChannel – adding additional physical and
digital channels of sales
·
OmniChannel – channel agnostic ubiquitous
experience for the end customer
Despite the expansion of digital commerce; physical
touchpoints are still relevant for the touch and feel experience that customers
aspire for. The relevance of this touch and feel, is more prominent in case of
certain retail categories and formats. As we move from value segment to luxury
and uber luxury, the experience aspect gets more influential to purchase
decisions.
The advancement and democratization of digital technologies
and the emergence of millennials as the customer of tomorrow; makes it
imperative for retailers, to build PHYGITAL experiences; transforming their
physical touchpoints – digitally.
Objective
Define a generic implementable roadmap, that a retailer can
follow, to craft phygital experiences.
Necessary customizations can be configured, for individual
retailers, depending on their specific business context and the level they are
currently, in their digital transformation journey.
Evolution of Retail
Retailing has its roots traced
back to 10000 years of our existence; starting in the form of barter, till the
introduction of coinage. Thought to have emerged in erstwhile Turkey in the 7th
millennium BC, it has been adopted by civilizations, that lived across the
world. The modern organized retailing, as we call it today, started with
department stores coming up in the nineteenth century - Harrod’s (1834), Le Bon
Marche (1852), Macy’s (1858), Bloomingdale’s (1861), Sak’s (1867), JC Penny
(1902). The biggest of them all, Walmart started in 1950.
Digital commerce, contrary to
common knowledge, traces its roots to 1960, around 31 years prior to the
commercial roll out of the WWW (World Wide Web). It was IBM’s OLTP (online
transaction processing systems), which enabled, the SABRE (Semi-Automatic
Business Research Environment) – the backbone of the ticket reservation system
by American Airlines.
After the advent of internet,
Pizza Hut was the one to have the first online store; and Intershop – the first
online shopping site. The first online transaction is attributed to NetMarket
in 1994. But the real Digital revolution started with Amazon and eBay in 1995. Subsequently,
it took a little less than a decade, for Alibaba to emerge.
At this point of time,
traditional brick and mortar and online only retail stores, treaded a parallel path.
Catalog Phone Ordering was probably the first feature by a traditional
retailer, trying to reach out to a remotely based customer. At this point of
time, some of the brick and mortar players also came up with their independent
dotcom ventures – Costco Wholesale, Nordstrom, Circuit City to name a few.
Simultaneously, dotcom only
ventures started mushrooming; without giving due consideration for viable
economic models. The inevitable happened; the dotcom busted around 2000. In the
ensuing shakeout, Amazons and eBays emerged stronger. The GMV (the gross
merchandising value) on their platform started sending warning signals to their
brick and mortar compatriots. This prompted the brick and mortar players to add
additional channel of sale to their businesses.
Multichannel started
with Merchandise Search; where, in case of a stockout, POS allowed a
store personnel to dig into the inventory of a product across its network and based
on availability, courier it, to the end customer. This progressed to what we
call Brick and Click or BOPIS (Buy Online Pick Up At Store); the
first attempt to integrate the physical with the online.
But customers are rarely
bothered about the channels; they, rather, want a channel agnostic experience,
whereby the product or service offering caters to their needs and goes beyond;
to delight them. It’s not the number of channels, but the elevation in the
level of experience that excites them – omnipresence of the brand, irrespective
of the underlying channels that might be powering the experience. That’s the
genesis of OmniChannel.
Phygital is an extension of this
brick and mortar journey, incrementally evolving through multichannel and
omnichannel. In the subsequent section we will explore an ideal roadmap for this
incremental transition. There will however be players, who will jump phases and
stages. That might help them gain some immediate brownie points; but they will
not be able to harness the full value, that emanates out of this transformation
journey.
On the other hand, there has
been online only players who have traced a reverse brick and mortar journey;
but predominantly in the Phygital genre, the best example being AmazonGo.
Experience Economy
The term experience
economy has its origin in a paper by B. Josheph Pine II and James H.
Gilmore, by the name ‘Welcome to the Experience Economy’.
They have given a very nice
example of a birthday cake to explain the progression of economic value.
To start with, the brithday cakes would be baked at home by using the basic
ingredients – flour, sugar etc. Next, instead of having to buy the ingredients
separately, cake mixes were available, ready to bake. We moved on, to skip
baking the cakes at home and ordering them instead. The cakes got delivered to
our homes on the occasion of the birthdays. Finally, now days, we hire event
organizers to stage the birthdays; cakes gets served as part of the overall
extravagenza.
Progression of Economic Value
Source: Welcome to Experience Economy by B. Josheph Pine II and James H. Gilmore
Based on the two dimensions:
o
level of customer
participation
o
the connection
she has with the overall environment
the four realms of an
experience is depicted in the diagram below:
The Four Realms of an Experience
Source: Welcome to Experience Economy by B. Josheph Pine II and James H. Gilmore
The four realms in Retail
context can be interpreted as:
Esthetic – the physical, virtual, augmented relaity space,
that consitutes the overall environment where the customer engages in an
immersive shopping experience.
Education – based on their personal urge, the consumer consumes
the knowledge of the products and services on offering, at their own pace. This
knowledge pack is constituted of iinovaive interactive product displays, demos,
personalized recommendations, reviews, ratings and much more.
Escapist – it represents the behavioural traits of customers
to seek for an alternative mode of engagement; something that is innovatively
different from what anybody else is providing – something, that transcends them
from their daily mundane existence to one on an aspirational hyperplane.
Entertainment – As millenials and the Gen Z attains relevant purchasing
power; shopatainment will become increasingly indispensable, to crafting
lasting impressions.
The amalgamation of these
relams, will help craft memorable experiences. This in turn, will auger brand
visibility, contribute towards sustained customer loyalty; thus resulting in
higher customer lifetime value.
The level of experience will
be commensurate with the price segment; will cater to the customized needs of
the specific clientile. Moving through value to luxary continuam, as the
margins increase; the experience level will be expected to elevate accordingly.
Experiences will become increasingly
personalized trying to delight every individual customer in their own special way.
The incremental retail
evolution that we talked about, are the stepping stones of this experiantial
shift in retailing. The stores cannot afford to stay away from this wave;
they rather need to complete this omnichannel loop by providing a seamless,
consistent, channel agnostic, immersive environment, that takes experience to a
whole new level.That’s how Phygital, at the sweet cross junction of
physical and digital, sets the foundation for the next stage in retail
evolution.
Stores Of The Future
The word ‘Store’ has a natural association with a physical
location. However, over time, we got used to the concept of a virtual
storefront.
Retail transactions can now happen, somewhere in between the
currently defined physical and virtual barriers, as well. They may even be
split between multiple such intermediate mediums. The concept of shoppers
coming to a shop, is making way, to the shop reaching out to the shopper.
Instead of shopper having to designate specific time, for shopping can be intermeshed
within the daily life of the shopper. Instead of the consumer having to raise
an order, it might be the systems which gauges the need appropriately and raise
a proforma invoice on behalf of the consumer. The consumer just needs to give her
approval. As the trust between the buyer and seller increases, the process of
shopping might be a completely seamless and automated process. This scenario
might get more pronounced, as the ‘ownership-based models’ make way for the ‘sharing
economy’.
A few instances of such alternative forms of store are:
Interactive
Shoppable Videos –
Interactive videos with shopping links to products on display. Normally these
links end up taking the consumer to the advertiser website akin to affiliate
marketing. But it becomes more useful, when the purchase loop is completed
there in, before evaporation of motivation of the shopper. The shopper gets
inspired by what she observes in the video, gets to learn more details about it
and if this information satisfies her, then goes on to complete the purchase.
Virtual
Stores – It’s not
too different from a standard store; just that, you might be using mobiles or
similar forms of gadgets to, shop. Below are two examples:
1. Tesco HomePlus Virtual Stores in Subway Stations –
with virtual product displays having the barcodes; use mobile to add it to your
cart and by the time you reach home, the product might already have been
delivered to your doorstep. https://www.youtube.com/watch?v=fGaVFRzTTP4
2. Ted Backer – 360-degree view of the store, is
provided on the device of your choice. Virtual reality can simulate an entire
physical in-store experience.
In-Store experiences can also be augmented with virtual
shelves – Adiverse, an instore shoe wall constituted of long
tail items. https://www.youtube.com/watch?v=7uCWRAgN51A. This
is nothing but a modern day, in-store kiosk.
The kiosks can be taken out of the confines of the stores
and put out at strategic locations as Experience In A Box –
probably a modern form of PopUp Shop Marketing.
Virtual Window Shopping – You might be able to
entice some of the window shoppers to your store through interactive virtual
walls, on the outer perimeters.
Shoppable
Print Media / Content
– While print media is said to be on the wane, a lot of printed stuff still
gets distributed at trade shows. A lot of us still like to start our mornings
with a physical newspaper. The airlines have a copy of its monthly newsletter. Smell
of a hard-bound printed book still catches the imagination of some of us; while
educational books are still, largely, printed. The content is interspersed with
advertisement. Even if the ad inspires a person, she cannot make the purchase
right away; she needs to do move on to a different medium, in order to initiate
and complete the purchase process. However, if the print ad, is appropriately
electronically coded; then the entire process - starting from inspiration, to
exploration and then the final purchase, can be made seamless.
Example – Times Alive App (this applies to
news items and media; however, the same approach can be extended to retail)
Self
Driving Stores – this
is the ultimate example of shop reaching the customer, rather than the other
way round. The first commercial pilot of this Robomart device is in progress.
Now let us dig deeper into the
blocks needed for building such next generation experiences, at the sweet cross
juncture of physical and digital, in a context and content aware state.
Smart Store – Building Blocks
While the smartness of a store depends on the type and
format of retailing and the unique business context of every individual
retailer; there are a few basic building blocks that impart the requisite
smartness.
In this section, let us assume, that a retailer has already
transcended the path of multi and omni channel, to reach the current stage.
Some amount of superficial smartness can however to assigned
to stores in silos; but that will not necessarily seamlessly trickle down to
downstream processes.
Identifying the customer in store
Experiences get elevated based on the extent of
personalization. The key to this lies, in being able to uniquely identify the
customer. This opens the treasure trove of customer specific insights in terms
of - demography, individual choices and preferences, purchase behaviours,
in-transit transactions (that might have been initiated in some other channels)
etc.
The best possible way to establish the identity of the
in-store customer, is through a contactless process; right at the moment, when she
procures the cart on her entry to the store. If not feasible, it should be done
subsequently; by convincing her to voluntarily divulge her identity.
Contactless Mechanisms:
·
AutoIDs (RFID or others) embedded within
some thing, that the customer regularly carries to the store – Smart Loyalty
Card (in a physical or Wearable format). They can be tracked through
RFID Readers / NFC protocols.
·
Facial Recognition exposed as APIs can be
put to use (provided the retailer has the relevant customer pictorial data)
·
GeoLocation / GeoFencing – this is
largely untapped in retail store scenario but used in other parts of the value
chain. A GeoLocation service can pass on the information, as soon as a
registered customer has breached the GeoFence of a retail store location.
The identification, if successful, needs to be broadcasted
to all systems / processes / devices that are going to interface / engage with
the customer in store.
In case, the customer has the Bluetooth turned on and the
mobile app is open, the Beacon technology can be used for identification.
AutoID Tags for SKU identification
Traditionally barcodes have been used to identify products
and procure additional information like price etc. But barcoded products need
to be manually scanned. RFID tags attached to the products can however make the
process of product identification completely contactless. The tags can be
tracked using RFID Readers; any information stored within them can also be
fetched.
Digital Cart Assistant (better if voice enabled)
A Digital Cart Assistant is the backbone, around which the
entire experience is to be woven; spread across the complete shopping
lifecycle, culminating in the final checkout. Most of the standard Smart Cart
products available in the market, is centred around a display in the form of a
tablet; but sticking with the BYOD philosophy, the app on the customer’s
personal mobile device can act as a proxy for the Digital Assistant.
The actual smartness can be attributed to the cart, by
encasing it with RFID Readers of appropriate range, that covers the area within
the cart precisely. As RFID tagged products are placed inside the cart, they
are tracked real time; the information passed on to the mobile app on the
customer’s device via cloud, Bluetooth, NFC integration. The customer gets to
see a real time update as she places products in and out of the cart.
Smart Shelf
Smart shelves can track items placed on them; in the process
enabling and aiding different other business processes:
·
Track real time inventory of items, placed on
the shelf
·
Track changes when an item is placed on a shelf
and when taken away
·
Validate Planograms
·
Auto triggers for replenishments to the shelves
as well as STOs (Store Transfer Orders) from the DC \ Warehouses
·
Assuage pilferages by raising alerts, if more
than a specified number of a product of a particular type is removed from the
shelf at once (sweeping)
The functionalities can be extended to digital price labels
and digital marketing boards with more audio \ visual detail of the specific
products on the shelves.
Two different sets of technologies attributes smartness to
the shelves:
·
RFID tagged products on shelves, enabled with
RFID readers \ antennas
·
A mixture of weight sensors and computer vision
(image recognition)
RFID Smart Shelf Demo:
Contactless Checkout
Checkout can happen in two modes:
·
On the fly, as customers add items to the cart,
the real time state of the cart can be viewed on the display / mobile app. As
the customer completes her shopping and crosses a particular zone, towards the
exit gate; checkout can get triggered. The payment can be directly enabled
through the mobile app or through SMS Payment Link, via the Payment Gateway /
Digital Wallet
·
Alternatively, the entire checkout process can
be delegated to the fag end; whereby the customer takes the cart and places it
on a robot, which calculates the cart as a batch and charges the customer.
Refer to the video, for a view of live implementation of a deferred contactless
checkout process: https://youtu.be/Hpp-3Ver7ig
If the entire checkout process is successful, the cart will
accordingly send signal for the exit door to open; else the customer can be
delegated to a store personnel for support.
Magic Mirror / Digital – Dressing Room / Fitting Room – with Kinect
Magic Mirror is the next generation kiosk; it elevates the
level of experience, by allowing you to get an idea on how things look on you,
or with you. This inadvertently increases the duration of engagement with the
customer and influence her, through an informed purchase process.
Navigation within these devices can be gesture
enabled through Kinect.
This can also enable the concept of virtual social shopping,
engaging with friends and family and soliciting their opinion during the
shopping session.
Examples:
The concept has been extended further, to use cases like Magic
MakeOver; where you can apply cosmetics of different shades and combinations,
on your virtual avatar, to assess the resultant impact of the same, on your
look. With this use case, it is very much possible to extend the store to your
home:
Real World Phygital Experiences
Now let us look at the real world phygital experiences
crafted by different enterprises.
Freshhippo Seafood Restaurant within Hema Supermarket
Within the Hema Supermarket by Alibaba, guests can purchase
the seafood of their choice; check it out at the till and order it to be cooked
and served. While the guests take their assigned seat in the in-store
restaurant, the purchased seafood is sent directly from the till to the backend
restaurant via conveyors. The guest can add additional food items to their
order via the mobile app. The food gets cooked and then served right at your
table by a delivery robot
Adidas Virtual Shoe Wall – New Age Kiosk
Kiosks has got an uber facelift at the Virtual Show Wall
at Adidas store; you can pretty much carry out all functions, as available on
the web or mobile store. Additionally, here you get a better 360 view of the
shoe.
Ikea Place – AR App
Ikea has been a pioneer in augmented reality space. They
started with their physical catalog as a prop. Now entirely on mobile, one can
virtually try out a piece of Ikea furniture in their local setting, scaled to
size. The app claims to be millimetre perfect. Additionally, you can try out
different colour variants; adjust the light shades and so much more.
By the time, the guest is at the store, she is ready with
her shortlist.
Virtual Makeover: Color IQ – Virtual Artist – Sephora & Pantone
Sephora has several tools that helps one to get the right makeover. ColorIQ identifies the right skin tone and recommends the appropriate beauty products for an individual. This list can be persisted with and tried out virtually, to view the necessary effect on a real time basis. Once the guest is happy with the right set of products, then only she goes ahead and makes the purchase.
All of these will need to be supported by a smart
supply with single view of inventory across channels. We will discuss about
this in a separate article.
Parting Note: Does Phygital really matter?
Some interesting findings,
from BRP’s 2019 POS/Customer Engagement Survey, 2018 Customer
Experience/Unified Commerce Survey and BRP Consumer Study, below.
Customer
Expectations:
·
56%
customers would like to shop at a store that offers the facility of shared cart
across channels
·
87%
want a personalized consistent channel agnostic experience
·
To 66%
people, cross channel inventory visibility matters
The below
infographic shows, customer behaviour in an omnichannel world:
As per State of
Connected Customer, Salesforce, 2018:
80% of the customer
value the experience provided, as equally important as the products and
services offered.
As per Power Of
Me: The Impact Of Personalization On Marketing Performance, Epsilon 2018:
80% of consumers
are more likely to purchase a brand that crafts personalized experiences
As per Global
Shopper Study, Zebra Technologies, 2018:
55% shoppers feel
retail experiences are not connected enough
As per 2017
State of Personalization Report, Segment (US):
25% consumers feel
that physical stores need much improvement with respect to personalization
41% expects, the
store systems to be aware of what they have purchased online
As per Analytics:
The Real-world Use Of Big Data in Retail, IBM, 2018:
62% retailers
report that use information and analytics, has given them competitive advantage
Retail Apocalypse:
In first half of
2019, more retail brick and mortar stores have shut doors, than in whole of
2018. Coresight Research says, as of June 21, 2019, there has been a net
closure of around 4001 stores, since the beginning of the year; as compared to
2613 in the whole of 2018 calendar year.
The apocalypse is
fast spreading its tentacles around brick and mortar retail; the rate might be
faster in developed economies; but it will eventually catch up in the emerging
economies as well.
Phygital can
probably be the only answer to arrest this apocalypse.
References
2019-POS-Survey-RealTime
Retail-Diebold-Nixdorf
2017-BRP-Unified-Commerce-Survey-051817
BRP-Customer-Experience-Unified-Commerce-Survey-2018-PCMS
MKWI_3
the-retail-experience-economy-report
Cashing-in-on-the-US-experience-economy
503-MM0025
DI_TechTrends2019
Econsultancy-2019-Digital-Trends_UK
EN-CNTNT-eBook-RetailTrendsPlaybook2020
Microsoft-Advertising-Digital-Trends
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