by Kate O'Neill
Operational Efficiencies
Besides the opportunities to engage more relevantly with customers, other uses of IoT, RFID, and beacons in retail have more to do with cost reduction through operational efficiencies. RFID is being deployed in many environments to track sales trends and create a smarter supply chain.
In-Store Analytics Tools; Service Market Growing
One indicator that this physical and digital convergence is happening in retail is that the tools and service market for in-store analytics is growing.
Walkbase, the provider of in-store analytics for airports and retail stores, announced that it has continued its record breaking growth in 2015, analyzing the in-store habits of over one hundred million shoppers to date, compared to fifty million shoppers the year before. The company also saw the value of its customer contract base grow ten-fold with its platform now servicing thirty major retailers in UK and Europe.
Loyalty
Retailers are turning to data to engage with customers about their actual actions and purchases on a granular level and reward them for their loyalty to a specific product or product line. This level of attention to customized loyalty can mean great returns for the retailer, and can yield sweet discounts for a product-loyal customer.
Smart Fitting Rooms
From a convenience perspective, e-commerce generally has obvious advantages over brick-and-mortar shopping, since you can do it from your bed, your desk, your morning jog—wherever and whenever. Of course when it comes to buying clothes, one of the reasons the physical in-store experience has traditionally beat out the e-commerce experience has to do with the ability to try items on and see how they fit, how they look, and what they feel like. On the other hand, if you have to decide between a few sizes or a few colors, or both, the actual process of using a fitting room to try clothes on—disrobing and getting dressed over and over again—can quickly become tedious. Since this area of the store is both a weakness and a strength, it’s been a natural focus of many retailers’ attempts at innovation.
There are quite a few variations on this idea.
Images via YouTube
One of the approaches has to do with embedding radio-frequency identification (RFID) in clothing price tags, so that technology in the fitting room can detect which items have been brought in and provide contextual information on an interactive display that also allows the consumer to review styling options or other products entirely. Some systems allow customers to log into their store accounts integrated with e-commerce systems, add items to online wishlists, and sign up for notices when the item goes on sale. They could be integrated with inventory in the store location and across nearby locations. They could show alternate sizing and colors of the items the customer has picked out, so that if the customer would like to try alternate sizing or colors, they could simply select them and alert a store associate to bring the items to the fitting room.79
Bloomingdale’s installed iPads in its fitting rooms in 2014 to allow the customer to signal an associate if they wanted a different size or color. Some retailers’ systems can even allow the purchase of the products right from the fitting room screen.
Another variation on “smart” fitting rooms is smart or “magic” mirrors. Some retailers are installing mirrors that provide a 360-degree view of the outfit, and some provide options for alternate lighting conditions. Fashion design brand Rebecca Minkoff has mirrors that allow customers control of the lighting, in a range of New York City–branded scenarios from “Brooklyn Morning” to “SoHo After Dark.” Topshop has a mirror that uses built-in cameras to track the customer’s body and project the clothes virtually on-screen, so that the customer doesn’t even need to get undressed to try on clothes. 80
In a few cases, these “magic mirrors” have been equipped with motion sensors and algorithms that can recognize the patterns of customer facial expressions and bodily features. These may detect when customers are feeling uncertain about the item. In such a case, the mirror could actually produce a compliment from a range of possibilities, flattering the customer on their taste in clothes, perhaps even complimenting them on their hair.
This kind of machine-driven mirror offering emotional feedback is an uncanny valley version of the all-reassuring salesperson who tells the customer they look good in what they’re trying on no matter what. Is this progress? Who can say. But it’s happening, and it’s important to know that the technology exists.
Some of this is about empowering the person who’s shopping to feel like they have more agency in the process than they’ve had in the past, and some of it is allowing the in-store experience to rival or even improve on the online shopping experience. All of it has the potential to go too far and make customers uncomfortable, so success in implementing these will depend on designing the experience in alignment with both business outcomes and a sensitivity to the customers’ threshold for envelope-pushing experiences.
In retail, we know we need to sell products, but we also know that we run the risk of overstepping the line. “Smart” dressing room mirrors that allow a customer to adjust the lighting in the room are fairly well aligned with realistic customer needs, but mirrors that use facial recognition algorithms to detect micro-expressions of uncertainty and pay compliments to hesitant customers? That seems to cross the line into outright manipulation.
At what cost do we make the sale?
Even just considering profitability, not ethics, you have to think that forcing a sale potentially costs you the long-term loyalty of that customer.
Sometimes conversion rates are high because of persuasive tactics, but conversion rate don't always tell the full story: they don't always take into account return rates, or customer satisfaction rates, or net promoter score, or the elusive, difficult-to-measure concept of buyers remorse. It’s worth consideration when and whether our purposes are truly aligned with our customers to ensure ongoing success.
Going Where the Customers Are: Food Trucks, Fashion Trucks
Borrowing from the food truck trend, converted vans, campers, and trucks are now housing small retailers. As with pop-up stores, sometimes larger retail brands spin up.
Similarly, the disruption to the point-of-sale in the form of Square, Apple Pay, and other mobile and digital processors is lowering the barrier to entry for small businesses and is facilitating mobility. It can be no coincidence that the number of businesses operating out of trucks, such as food and fashion trucks, grew dramatically in the years following the introduction of Square Reader and Register in 2010. When you don’t need conventional hardware to conduct transactions, you can operate unconventionally. The continued movement in that direction will only disrupt more industries, and for good. In evolutionary terms, a dramatically changing landscape creates the environment for hardy new species, just as successful species change the landscape.
It’s rarely just one environmental factor at play, though. Taking an even closer look at food trucks, according to IBISWorld, they represent an $804M industry that has seen 12.4 percent annual growth from 2009 through 2014. Emergent Research projects that will grow to $2.7 billion by 2017. The numbers really started to flourish around the time the economy tanked; as it turns out, food trucks are a great demonstration of the Lean Start-up idea of “minimum viable product.” Investors unwilling to bet on a brick-and-mortar restaurant might take a chance on a restaurateur demonstrating proof of concept at lower overhead. So the timing is a reflection of the economy, but that skyrocketing growth has been heavily led by the prevalence of social media and connected consumers who can learn about a truck’s location with a tweet. Again, the landscape and the species are related.
A 2013 survey by NPD Group suggests that many consumers (about half of those surveyed) opting for food trucks were replacing a meal in which they might have eaten at a quick service restaurant (QSR)—in other words, at least in 2013, food trucks were the new fast food.81
Moreover, in addition to the recession and the proliferation of social media, the
popularity of food trucks was also informed by the overlapping trends of “New Localism,” which is growing consumer interest in supporting local business; a rise in local food movements, in which consumers demonstrate concern over food origins by preferring locally and regionally grown goods; and The New Artisans movement, which are people starting businesses focused on creating high-quality, hand-produced goods with an emphasis on authenticity.
All of this is driven by an adaptive approach to place coupled with digital discovery.
Payment Disruption and the Virtualization of Value
Value has been virtual for as long as we’ve had trade. And pre-internet virtual value exchange happened through credit cards. And personal checks. Even cash, when you think about it, is virtual.
But now payment is increasingly integrated with convenience systems. Through the food ordering app Seamless, you place your order, pay for it, and tip the delivery person all from your home or office or wherever, all before it ever leaves the restaurant to arrive at your door. Streamlining that process blends together the convenience of the app’s interface, the efficiency of the service, and the quality of the food from whatever restaurant you choose. It is all one experience.
One of the big changes in the retail landscape has to do with payment. There are so many payment disruptions in the past few years, from Bitcoin and other cryptocurrency to payment via virtual “gift card” on mobile app, to the way Starbucks and other brands have done it. In all, customers are definitely starting to expect some form of “easy pay,” where, rather than paying with cash, check, or credit cards, the customer can use a mobile phone in some way to pay for good or services.
With mainstream retailers like Whole Foods and Target adopting Apple Pay, that platform seems poised to achieve widespread acceptance in the coming years. What that will mean about privacy and behavioral targeting is still unknown.
Having payment go virtual changes a lot about the context in which people think about their money. It makes money more abstract, and people may be willing to spend more.
It’s already been shown that people who pay with a credit card tend to focus on the benefit of the purchase, whereas people paying with cash focus on the cost82. How will this play out with other virtual forms of payment, like payments integrated into apps? Or in-app purchases using token currency, such as in games? Or Bitcoin?
Rather than seeing this as an opportunity to manipulate customers out of more money, it may be an opportunity to innovate. Again, citing Starbucks: The way customers are presented with their loyalty program in the app, the payment is further removed from a cash concept.
The question, then, is: How do each of the brand stakeholders in that Seamless value chain, for instance, differentiate their value from other options?
The restaurants that have the resources will build their own integrated apps, and many are already doing so. But with dedicated apps, there’s a value that has to be proven about having a dedicated app for one restaurant, rather than using an app that aggregates many restaurant options.
It gets complicated.
In any case, we still have to think about value exchange. If money is made more abstract for customers, then quite likely value is too. It’s imperative to reinforce the value of the experience they’re taking part in. That might mean sending an email congratulating the person on their purchase and offering tips on care of the product, or it might mean reinforcing the values of the brand at the point of purchase. For example, Nespresso wants to counter the idea that pods are environmentally damaging, so one of the parts of the purchase dialogue is for the brand representative to offer the customer a recycling bag for their used pods. Even if the customer declines the bag or never uses it, the brand has reinforced the idea of the value through the experience. Further digital follow-up about recycling might further reinforce this idea, and it might drive loyalty as well.
Pop-Up Retail and Dining Concepts
One of the more liberating trends to emerge for retail in the past decade is that of pop-up stores. The origins of these fleeting retail experiences owe partly to street vendors, craft fairs, and art installations. And many were simply an economical option to sell goods while utilizing available commercial real estate in transitory ways. In cities around the world, though, this now happens every day in a wide range of ways, and technology is becoming an increasingly important part both of spreading the word and creating the experience.
The street label Airwalk launched the first invisible pop-ups in 2010: Customers downloaded an app and headed to specified public locations where they could access virtual galleries of sneakers using their smartphones.83
Pop-up stores have also become a sort of clearing-house for conceptually-related products. Even global brands have latched onto the concept for seasonal and thematic shops. Consider Target, with their sixteen-thousand-square-foot “Target Wonderland” holiday store concept in Manhattan’s Meatpacking District in 2015. It was a toy-themed, playground-like experience, but it was also an opportunity for proof of concept for retail experiences that could make it into mainstream Target retail stores full-time. Visitors to the pop-up store were given RFID key fobs instead of carts, and they could swipe these over any items they wanted to purchase. But the tracking on these key fobs allowed Target to analyze patterns of shopper movement throughout the environment, and spot any opportunities for optimizing the merchandising and layout of regular stores.
By combining pop-up stores with beacon technology, retailers can try to orient customers in an unfamiliar store and offer innovative experiences.
Navigation and Wayfinding, Outdoors and Indoors
GPS works great for road navigation, but it’s typically not very effective indoors—for example, inside a hotel, museum, shopping mall, hospital, convention center, or casino. Guests need to know where to find a particular store in the mall, a designated meeting room in the convention center, a specific roulette table in the casino. Yet these large spaces require guests to navigate unfamiliar spaces to make best use of the grounds.
It doesn’t help that these gigantic and often overwhelming spaces don’t always have distinct visual landmarks inside, or any way for a guest to get their bearings and find their way around. So a meaningful use of integrated experience design in these spaces might be to provide contextual guidance on an as-needed basis. Using the hotel as an example, beacons can serve this function by using geo-fenced areas of the grounds to determine where the guest is and offer guidance to their room, the fitness center, the restaurant inside the hotel, and so on.
Digital signage can be a critically important piece of the success of wayfinding in retail, museums, healthcare, cities, event venues, and more.
When a customer approaches, beacons can trigger digital signage to display relevant content based on purchase behavior, other journey insights, and browse patterns through the store.
It can act as an auxiliary screen if the customer has their phone in their pocket or purse, pushing what would be mobile notifications to the digital signage display.
Patterns: Cities, Urban Design, Urban Planning
Cities are rich with metaphors of place, and from them we can derive lessons for integrated experience about community, engagement, identity, culture, and growth. In addition, of course, cities are places in their own right, with integrated experience design challenges of their own.
I love cities. I love the sense of energy they collect and distribute from the people who inhabit them. That kind of palpable energy can really only happen in dense environments.
So when I think about what cities are, that’s one of the key ideas that always surfaces.
It also makes me consider what density feels like online, and what a dense online place has to offer its population. A social network like Tumblr, for example, with a high daily returning visit rate, does seem almost to give off a sense of energy—all the more so if you were to compare it with a deserted chat forum where the last post and comments were from 2004.
But that’s only one of many parallels we can draw and examine between cities and online spaces and communities.
In a city, a great deal of effort goes into balancing preservation of history with progress. Different cities lean different ways on the preservation-progress spectrum. Paris, aside from the La Défense business district, is almost entirely preservation, while say Shanghai, with the exception of a few notable historic buildings and areas, seems with its skyscrapers and cranes to be pegged to progress.
Likewise, the contrast in online spaces and tools could scarcely be better illustrated than with Flickr on the side of history, as it is practically synonymous with “archive,” not active usage. And on the side of progress, we have Snapchat, with its youthful user demographics and lightweight augmented reality features like lens and geofilters—social media toys, for all intents and purposes. Everything about the platform all but promises something even more fun and innovative to happen in the future.
But what about the people in the mix of all this history and progress?
It’s tough to separate community from the place where community forms. So it’s important to preserve some sense of the buildings and cityscape that shaped the community. But it’s also important to introduce new ideas to keep the community growing and moving forward with advancements in society and culture. A community that gets out of step with the society and culture around it is at risk of being cut off. Intentional placemaking can help restore and preserve the functions of historic buildings and urban districts84. That means continuity for the community.
