By Bill Davis, Director, MB&G Consulting
For much of the last year, traditional brick-and-mortar retailers have been mired in a slump. Not only was last holiday season the toughest in several years, the consumer discretionary sector, which includes retail, was the only one of the 10 macro S&P sectors to be in the red for the first half of 2014. As a result, retail is widely perceived to be in a funk.
And to change their fortunes, retailers are being encouraged to embrace omnichannel retailing, which can be summed up as an integrated and seamless customer experience across the retailer’s various sales channels. I believe the primary reason why retailers are being encouraged to look at omnichannel retailing is that the majority aren’t viewed as being able to compete against the pure play e-tailers because:
1. E-commerce is not in their DNA like it is for Amazon, eBay and others;
2. The technical skill sets required to excel in e-commerce are not readily available and there already is fierce competition for those resources amongst the digital leaders; and
3. With $260 billion-plus in online sales in the U.S. alone in 2013, it’s too late to put the lid back on Pandora’s Box.
As such, retailers need to find ways to leverage their historical strength, the store, which is currently viewed as a more of an anchor than an advantage. However, with 90% or more of retail sales still occurring in-store, retailers need to push back against the e-commerce competition to help stop the bleeding. And leveraging an emerging channel like mobile helps, as the ability to identify that a loyalty or regular customer has entered the store and to message/engage them via their smartphone assists retailers with an omnichannel initiative whose focus is to enrich and improve store performance.
The challenge most retailers face is determining which in store location technology to use as there are several emerging and each has its pros/cons. Below is an incomplete list:
• Bluetooth Low Energy (BLE) Beacons (aka Bluetooth Smart): a wireless, personal area network (PAN) technology using low power, low cost transmitters supported by the latest versions of the major mobile operating systems (e.g. iOS, Android, Windows, etc.) to enable proximity sensing of the device using the same 2.4 GHz radio frequency as classic Bluetooth.
• Wireless Fidelity (WiFi): a wireless, local area network (LAN) technology based on the Institute of Electrical and Electronics Engineers (IEEE) 802.11 standards that enables an electronic device such as a smartphone, tablet, etc. to connect and exchange data with the Internet.
• Global Positioning System (GPS): a space based satellite navigation system that provides location and time information to GPS enabled devices such as smartphones, tablets/laptops, etc. in all weather conditions anywhere on earth where there is an unobstructed line of sight to 4 or more of the GPS satellites.
• Indoor Mapping: usually based on planograms, which are the output of a retail space planning software application that defines where and in what quantity products are placed on shelving units inside a retail store.
• Mobile Wallets: applications on smartphones to store payment, loyalty and gift cards which because of their ubiquity on Android (Google Wallet), iOS (Passbook) and Windows (Wallet) devices can be leveraged to identify the person carrying the device as well as their location.
• Radio Frequency Identification (RFID)/Near Field Communication (NFC): is the wireless non-contact use of radio-frequency electromagnetic fields to transfer data for the purposes of automatically identifying and tracking objects; NFC is based on existing RFID standards.
• Magnetic Field Variations: many animals utilize local variations in the Earth's magnetic field to find their way; these same magnetic variations commonly exist inside buildings and smartphones can sense and record these variations to map indoor locations.
• Visible Light Communication (VLC): is a data communications medium using light-emitting diodes (LEDs) and can be used for ubiquitous computing because light-producing devices are everywhere.
Given the variety of technologies mentioned, it would seem there won’t be a single solution that dominates, although BLE Beacons are off to the early lead. That being said, I would suspect that in a few years there will be a shake-out, no doubt influenced by retail technology solution providers like Apple, Google, IBM, Oracle, etc. Personally, I think there’s an opportunity for third party(ies) to become the “trusted advisor(s)” testing out these technologies so that retailers don’t have to learn by trial and error which location based technologies work best in their physical environment.
The ability to engage consumers in store via smartphones so that they are no longer invisible, with their permission, of course, has tremendous upside for their business. And for customers to participate there has to be something in it for them. Similar to the Internet, retailers have to give something to get something. But knowing a loyalty customer has crossed the threshold without having to wait for them to walk up to the register to buy something seems like a great place to start, especially if they leave the store without purchasing, but eventually expanding this to make suggestions to consumers based on their location and past purchase history, as well as incentivize them seems like the logical evolution.
Brick-and-mortar retail needs to reinvent itself to compete with the e-commerce threat and while price matching and consistent prices across sales channels efforts are being implemented, it’s not enough. Traditional retailers need to go on the offensive where they have the advantage, and that means their stores. Without this, it’s my opinion brick-and-mortar retailers are going to continue to cede market share and the retail landscape will continue to be reshaped by the e-commerce tsunami.
By Bill Davis, Director, MB&G Consulting