Tell me if this sounds familiar. You’re sitting around a table or bar with a group of friends and everyone is looking down at their phones perusing the latest GoT or cat memes and not a single soul has uttered a word for a solid 10 minutes. If this doesn’t sound familiar, you’re more out of tune with reality than you thought. For a generation that grew up on social media, we’ve become digitally fluent but socially inept. Our lives have become so virtually intertwined, we’re incapable of escaping the harrowing consequences of our digital footprint. And as more and more “things” become digital, the further we’re pulled into the realm of The Internet of Things.
IoT sensors and devices are expected to exceed mobile phones in 2018, growing at a 23% CAGR from 2015 to 2021. The three entities using IoT ecosystems are businesses, governments and consumers but within them, many other environments persist.
Over the next 5 years, $6 trillion will be invested on IoT solutions enabling it to be “as transformative to the world as was the Industrial Revolution”. Of the 5 leading IoT industry adopters, retail will be the one to see the most dramatic changes.
But retailers have been inadvertently slow in jumping on board. Mostly because there’s still a lot of uncertainty in the architecture or even what IoT actually means. In fact, 86% of respondents identified consumers’ smartphones as IoT while only 43% thought beacons should be classified as IoT. Considering beacons provide a mechanism for personalization and location based marketing, retailers really need to shift focus to where consumers are at.
How exactly will retailers embrace IoT?
First. Going Omnichannel
Shoppers who buy in-store and online have a 30% higher lifetime value than those who shop using only one channel. The shift in consumerism has forced retailers to adapt and only the most savvy will be able to convert customers on any channel. Though there is a general consensus in the industry that retailers need to adopt omnichannel initiatives, many don’t even know what exactly it entails.
Conversion rates at brick-and-mortar stores are higher than online-only stores (20% vs 4.8%) however, between 25% to 75% of those purchases are digitally influenced (the huge gap varies significantly across different retailers). What it means is consumers begin their shopping journey through one (or a few) of the plethora of digital channels and end in the brick-and-mortar one. But because shoppers demand the same experience across all these touch points, it’s crucial retailers know where they are.
Omnichannel is about providing a shopping experience where customers want it, when they want it, and how fast they want it.
And considering omnichannel shoppers shop more than those who shop only online or in-store, retailers have no choice but to go omnichannel if they want to survive the “retail apocalypse”. Going omnichannel will naturally produce more and more “things” connected to the internet.
Going down the direct-to-consumer channel is a critical journey for retailers for a variety of reasons.
Consumers are demanding a better experience — As with all businesses — whether it’s SaaS, B2B, B2C, etc, the consensus is the same that people don’t buy products or features, they buy into self-worth (you know, the whole “a better version of themselves”, “benefits vs. features” psychology), especially in retail. So why do so many retailers fail to incorporate a customer-centric strategy? They are so fixated on the products themselves instead of delivering experiences that are true to the shoppers need or buying intent. Consumers don’t want “things”, they want experiences.
The types of experiences are really only limited to the retailers imagination. For instance, Performance Bicycle wanted to leverage their employees’ cycling knowledge to attract and inspire customers to purchase online so they created an interactive learning center. This attracted a 300% traffic increase in the 4th month and boosted conversions up to 20%. Other brands are leveraging social media and encouraging user generated content. Malls are transforming into entertainment centers and pretty soon brick-and-mortars will be more like showrooms than actual stores.
This doesn’t just pertain to retailers. Think innovation. Think disruption(more on that in another post).
Brands are able to build relationship with customers — Social media is a two way communication between the brand and the consumer. It’s imperative retailers use this to their advantage of both proactive engagement and reactive emergency — do not go radio silent if there is an issue! Shoppers move interchangeably from channel to channel and if marketing and messaging is not consistent, the experience is fragmented and disappointing.
Collection of data — This is big and the key differentiator. Because data is deriving from multiple sources, it’s imperative retailers have a fully integrated system. Retailers must assimilate all the data, including shoppers’ online behaviors and browsing history, in-store and online purchases, inventory and market conditions and so much more. Only by tapping into the power of advanced analytics will retailers be able to deliver upon personalization.
Third. Personalization and Localization
By experiencing all the opportunities to understand their customers and interact with them, retailers can begin exploring other channels of disruption to provide a completely unique and personalized experience. For example, mobile computing apps make it possible for businesses to spot where shoppers are at any given time (with their permission, of course). Retailers can even apply the concept of geo-conquesting. Localization allows retailers to identify when a shopper who has opted in is about to enter or has entered their store and where they are. Kohl’s does a great job at this. As you navigate through the store, Kohl’s, using beacons, sends promotions through their loyalty program. So you can shop, collect points and earn rewards.
Fourth. Smart Everything
Things like smart shopping carts and interactive fitting rooms enhance the user in-store experience while lowering the demand for associates in many ways. Panasonic built a smart shopping basket designed to detect items in a cart and calculate the bill. Walmart built a smart shopping cart that helps users navigate through the store to locate items so you can walk in, seamlessly find what you need (and probably things you don’t — I’m looking at you Target), and checkout all without any human interaction. Behind the scenes, technologies such as RFID will enable the digitization of the entire supply chain with sensors and applications throughout every point.
Retailers will begin to know a lot more about you. Probably more than they should but many consumers don’t mind giving up this data if it means they get a better experience.
Consumerism has drastically changed in the past few years. Five years ago, federal surveillance was everyone’s paranoia and now we’re literally telling the FBI exactly where we are going, where we have been, and how long we’ve been there through technologies such as Uber and Lyft.
Disrupt or Be Disrupted
When there’s a threat, there’s an opportunity. And with the crazy Bezos monopolizing nearly every facet of retail and Walmart’s digital land grab among many other things, many retailers are feeling the pressure. Although many have been referring to this age as the “retail apocalypse” the reality is we’re in a “retail evolution” and it’s an exciting time to see where the disruption will lead us.