The Retail Store of the Future
How the retail store is transforming to meet customer needs.
- With shoppers using multiple channels, enterprises are forced to respond with a connected omnichannel experience.
- The effects of omnichannel are being felt in all entities of the store and retail ecosystem. In-store shopping functions differently than in the past and requires new mindsets, models, and capabilities.
- Drivers of in-store digital technology transformation require superior intelligence competencies, infrastructure technology, tools, and retail store environments to provide an integrated connected experience.
Our Advice
Critical Insight
- Executing omnichannel is the key to the success of a retail organization’s strategy. Unified in-store and hybrid customer experience is crucial for retailers to drive value in today’s marketplace.
- Digital tools are facilitating retailers to keep the cost of operations low in a cost-competitive and information-rich environment.
- Assessing in-store technology effectiveness, enhancing current technology infrastructure concerns, and identifying cost-competitive advantage creators are some risks of digital transformation in retail.
- Retailers can implement technology in each phase of the shopping journey. However, they should take a structured and methodical approach toward developing a robust strategy before technology implementation.
Impact and Result
- Identify customer opportunities across their shopping journey then capitalize on IoT, store technology, infrastructure, and environments to monetize key customer insights and transform into a “smart store hub.”
- Realize the effects of omnichannel that are being felt on all entities of the store and retail ecosystem. Learn how the best-in-class retailers are already reaping business benefits from adopting technology demands (instore and hybrid) with the Retail Omnichannel Framework.
- Envision infrastructure components, cost, and competitive advantage creators in unison for your enterprise along with industry best practices and then design a list of initiatives to integrate into the IT strategic plan.
The Retail Store of the Future
How the retail store is transforming to meet customer needs.
Analyst Perspective
The retail store of the future capitalizes on IoT, infrastructure technology to enable retailers to monetize key customer insights and transform into a “smart store hub.”
In the last couple of years, retailers have taken extensive steps in setting their stores up to realize e-commerce orders seamlessly. They've had to re-configure the online-to-offline technology, train staff on new responsibilities, and perfect curbside pick-up services. The main reason for this transformation is the growing demand for ease of shopping and quicker delivery.
As merchandise on shelves has a reduced footprint, retailers shift more space and resources to online fulfilment, digital engagement, and even green recycling gains. Meanwhile, real-time customer analytics and automation resolve become key to store operations. Using new tech-enabled tools, the smart store hubs will drive to provide a more connected and personalized experience that meaningfully engages customers.
Brick-and-mortar businesses in all walks of life can effectively enable online businesses by intelligently leveraging their assets and physical infrastructure. What matters is how brands merge the offline-to-online channels to provide a cohesive, frictionless, and delightful experience to customers.
The function of the store is no longer just a channel to display and sell products. Retail environments now present an opportunity to play a far greater role in promoting the brand, driving innovation, fulfilment, and much more. The retail store of the future combines embryonic future innovative technology trends including in-store robotic fulfilment, contactless checkout, live personalized dynamic pricing, and other advances to provide an all-in-one connected experience to transform into a “Smart Store Hub.”
Rahul Jaiswal
Principal Research Director, Retail
Info-Tech Research Group
Executive Summary
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Info-Tech’s Approach |
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Info-Tech Insight
The rapid transformation of the retail industry over the last couple of years has led to new instore hybrid functions. The retail store environments now present an opportunity to play a far greater role in driving value in today’s markets.
Executing “omnichannel” is the key strategy needed for the retail store of the future
Info-Tech Insight
Omnichannel is increasing the adoption of technology tools and processes within all aspects of an organization. It brings businesses closer to customers by understanding their need.
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Mastering the digital domain as a strategy for enabling seamless customer engagement
Optimizing operational excellence in order to realize key functions
Using ‘Window’ to showcase value proposition: Push based
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Customers are actively using technologies across all phases of their shopping journey
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Awareness |
Consideration |
Transaction |
Delivery |
Engagement |
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Omnichannel Enables |
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Info-Tech Insight
Today’s shoppers expect to be able to transact with you in the channels of their selection. The correct technology stack is critical in order to support world-class e-commerce and brick-and-mortar connections with customers. Leverage Info-Tech’s proven, road-tested approach using personas and scenarios to build strong business drivers for your omnichannel commerce strategy.
Examples of technology adoption by retailers and brands at various stages of the shopping journey
Awareness | Consideration | Transaction | Delivery | Engagement |
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THE OMNICHANNEL RETAIL FRAMEWORK
Effects of omnichannel are being felt on all entities of the store and retail ecosystem
With customers using numerous channels, online and offline are being increasingly viewed as one channel, forcing retailers to respond accordingly
- To personalize effectively, retailers first must know who their customers are – Retailers are optimistic that by being able to deduce a consumer’s shopping objective quickly, the experience can be fine-tuned to meet the consumer’s objective: offering the right products, prices, content, and services.
- Retailers need to also ensure unified transition across channels – Retail stores continue to play a big role in the customer experience by bringing in impulse purchases, acting as brand builders, and efficiently traversing the last mile to get purchases into the hands of consumers faster than ever.
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BOPAC (Buy Online, Pick Up at Curbside) |
BOPIS (Buy Online, Pick Up in Store) |
BOPIL (Buy Online, Pick Up in Locker) |
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Average time to order |
5.5 minutes |
4 minutes |
>30 seconds |
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Average time to return an order |
Limited availability, substantial wait time |
3-5 minutes (once greeted by a store associate) |
>30 seconds |
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Projected retailer labour cost ($15 an hour) |
$1.38 per order |
$1.00 per order |
$0.13 per order (employee time + 30 seconds) |
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Observed wait time for customer |
8-12 minutes |
2-5 minutes |
>2 minutes |
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Sales impact and customer loyalty |
Sales increases of 2X (approximately double) |
85% of shoppers buy additional items when picking a BOPIS order |
Shoppers are 4X more likely to repeat purchases if the wait is under 2 minutes |
Source: Quadient
Awareness and Readiness
Retail brands are under pressure to keep up with consumer demands and personalization.
The legacy e-commerce platform may not be the best choice now. The retail industry is now definitely entering the third generation of e-commerce.
- Gen. 1.0 was standalone.
- Gen 2.0 was integrated with back-office processes.
- Gen 3.0 is all about e-commerce services being vital to retailers’ operations
Current e-commerce solutions promise better performance, adaptability, and scalability. It is driven by an ecosystem of digital technologies such as microservices, headless, API-first, and cloud-native SaaS.
Technology will likely double store profitability and improve the customer experience
Awareness and Readiness
This example from retail grocery usage shows the financial effect of in-store technology; this impact will be evident across the sector.
- Personalized offerings and optimized assortments drive sales and cut waste, while prospects upsell and cross-sell, and increase basket sizes and conversion rates.
- Generally, the store of the future is estimated to achieve earnings before interest and tax (EBIT) margins twice those of today.
- The in-store technologies called out exist currently; they are not just a prototype or proof-of-concept.
- Retail leadership should act now to prepare their enterprises for a technology-enabled revolution in customer experience.
Real-time business intelligence presents the best opportunity to help retailers respond to rapidly changing consumer instore and hybrid demands
Awareness and Readiness
Optimal shopper experience through real-time convergence of sensors, advanced analytics tools, and mobility.
SENSORS
InfraRed, Grid EYE IR-based Occupancy, iBeacons, NFC Tags, QR Codes, In-Store Video Cameras, Thermal, Temperature, Pressure Sensors, Intelligent Display Experience Suites and IoT Gateway
MOBILITY
Retailer App M-Commerce
PLATFORMS
New-generation cloud-based platforms are easily extendable, enabled by AI/ML, encourage innovation, and form the foundation on which retailers can offer a personalized, highly relevant experience and help build consumer loyalty.
Technology is now used to engage with customers before the start of actual in-store shopping
Pre-Purchase
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Key Technologies |
Experience |
Retailers |
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Geofencing Technology |
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Augmented Reality Virtual Assistants Chat Bots |
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Interactive Display Technology |
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Wireless Hotspots IoT (Beacons) |
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Leading retailers are already reaping business benefits from adopting technology instore and hybrid
Purchase
Technology | Application | Business Benefits | |
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| 1 | Real-time monitoring technology like video/ web analytics | Intelligent tracking system that identifies the customer, their last visit date, purchases and returns. | Customer behaviors intelligence, customer loyalty information . |
| 2 | Smartphones | Apps provide a virtual map for the store layout, aisle information. | Easy access to information, greater functionality, faster connectivity. |
| 3 | QR Codes/Mobile coupons | Coupons related to any product promotional campaigns can be directly sent out to customers. | Promotions for targeted customer segments, call-for-action, faster connectivity. |
| 4 | Augmented reality/surface computing devices | Check product information, stock levels, product placement on aisles in store or online. | Customer engagement, interactive experience. |
| 5 | Tablets/Wearables | Assisted selling by store staff for an interactive and personalized customer experience. | Process-driven selling, customer conversion, up-selling and cross-selling. |
| 6 | E-paper signage/digital signage | Supporting customer service by providing information relating to product, pricing, availability, etc. | Price accuracy, dynamic pricing, improved customer readability. |
| 7 | Smartphones/tablets/virtual assistants | Facilitates customers in making informed decisions by providing price comparisons, review. | Customer experience, information aggregation. |
| 8 | Self-checkout kiosks/advanced POS systems | Alternative to traditional POS for faster and easier checkout. | Self-service, queue management, faster checkout. |
| 9 | Mobile payments/NFC/Touchless/ Transact | Transactions authorized using mobile devices have enabled speed and convenience at cash counters. | Faster speed of transactions, information security, customer personalization. |
| 10 | Mobile POS/ Self-checkout system/ Grab n Go | Supports sustainability efforts by retailers with providing paperless receipts and quicker checkout for customers. | Quick checkout, paperless transactions. |
Retailers are positioning innovative models and technology tools to provide post-purchase services to customers and gain their loyalty
Post-Purchase
Info-Tech Insight
“Pre-purchase and post-purchase” are indispensable yet ignored stages of e-commerce. Repeat customers account for ~40% of the store's revenue; a strong post-purchase strategy will drive repeat engagement.
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Waiting in-line for returns is a pain. Walmart launched Mobile Express Returns – an innovative, industry-first personalized experience that combined Walmart’s more than 4,700 sites with the Walmart app to make returning an item fast and easy.
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Retail store environments now present an opportunity to play a far greater role…
THE RETAIL STORE OF THE FUTURE
Smart Store Hub combines future innovative technology trends across retail, including in-store robotic fulfilment, contactless checkout, live personalized dynamic pricing, and other transformational activities to provide an all-in-one connected experience.
- Store as a Market Place Hub
- Store-as-a-Service Hub
- Store as Replenishment Hub
- Store as Growth-Generating Hub
- Store as Brand Image Building Hub
- Store as Invention Hub
Retailers use their stores to extend engagements via the platform. Amazon is the most popular online marketplace worldwide, averaging about 5.2 billion visits a month (Statista, 2021).
Retailers who have developed operational expertise can sell it as a capability to other organizations. For example, Amazon Go has streamlined in-store dynamics, providing in-aisle experiences and eliminating the checkout aisle bottleneck. Amazon will sell this expertise to other retailers as a service (RaaS) offering.
Leading retailers such as Walmart are using their physical stores as replenishment and fulfillment hubs for online orders. This is cost-effective since they are using existing resources. As the click-and-collect trend grows, retailers will find it increasingly necessary to fulfill orders from stores.
Digital e-commerce brands such as Casper (home), Third Love (apparel), 5 Element Pet Food Therapy (pet food and care), and Away (accessories) have opened stores to generate sales and increase brand awareness.
Consumer goods manufacturers like Samsung are rolling out stores to showcase new products via interactive display technology. The Lululemon NYC community space offers a pop-up art gallery, events of evening dinners called “The Gathering,” and a space for transformation.
Retailers such as Walmart, Nike, Adidas, and others use their stores to experiment with new formats, products, technologies, and services.
Case Study: Walmart incubates companies with the potential to transform the future of commerce | Store No. 8
STORE AS INVENTION HUB
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Store Nº8 was set up in 2017 as part of Walmart’s larger innovation mission to shape the future of retail. Goal: Fuel the core business, create new operational efficiencies, and unlock amazing experiences for our customers in the long term. |
Solution At its Intelligent Retail Lab (IRL), a New York-based store that emerged from Walmart’s tech incubator Store No. 8 focuses on the potential of AI in retail. Walmart experts explore AI applications in a “live shopping environment,” using an array of cameras and sensors that can generate real-time data on inventory levels and more. Target investment areas include frictionless shopping, mixed reality, sustainability, the future of food, and health and wellness. Walmart and Store Nº8 have teamed up with the MIT Media Lab to drive this initiative with cutting-edge research, the world’s best interdisciplinary thinkers, and a network of peers from 45 corporate members. |
Results Walmart launched Mobile Express Returns; in-store purchased items can be returned online and then dropped off in person using a QR code. In-store return transaction times dropped by 74% (CB Insights). Other initiatives include
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Source: MarketScreener, 2021. Storeno8, 2021.
Case Study: Starbucks and Volvo have entered a partnership to offer EV charging at Starbucks locations
Volvo Car USA and Starbucks collaborated to establish the first public electric-vehicle charging network at Starbucks in the United States. Goal: Fuel the business growth, create new operational efficiencies, and unlock amazing experiences for our customers in the short- and long-term. | Solution The pilot program calls for Volvo to install up to 60 Volvo-branded, ChargePoint DC fast chargers at up to 15 Starbucks locations along a 1,350-mile route between Denver and Starbucks’ Seattle headquarters. They plan to install a charging location every 100 miles or so, which is well within the battery range of most electric vehicles. ChargePoint DC fast chargers can bring EVs like the Volvo C40 Recharge from a 20% charge to 90% in about 40 minutes. While cars are recharging, drivers and their passengers will have the option to eat or drink at the Starbucks store. | Results This is a well-strategized partnership that aligns with both companies’ values and business models. Volvo plans to be a fully electric car company by 2030, and Starbucks desires to be an industry leader in reducing and controlling its carbon footprint – an effort that embraces its EV charging initiative as well as increased investment in solar power at its locations. "We are thrilled to partner with Volvo Cars to test how we can charge our customers’ electric vehicles at Starbucks stores," said Starbucks Chief Sustainability Officer Michael Kobori. "Imagine a future where Starbucks helps our customers to connect – more sustainably“ (VolvoCars, 2021). |
Source: VolvoCars, 2021.
Envision infrastructure components, cost & competitive advantage creators in unison
Capitalize on infrastructure technology to evolve for the future
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1. Assess Infrastructure Integration
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2. Review Service-Led Support Model
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3. Develop Holistic Strategy
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Best Practices
Info-Tech Insight
As retailers streamline infrastructure and capture the benefits of real-time insights, ensure IT specialists have sufficient time to execute new applications. Retailers need to consider a solution that can be augmented for each specific location, whether it be a leading flagship or a smaller store.
#1 One size does not always fit entirely
Retail brands are forced to buy a one-size-fits-all solution and try to roll it out across all their sites. That means some sites can end up with too many solutions, while others can end up with too few. The optimal solution is a resolution that is uniform, yet configurable for location needs, and allows non-disruptive growth.
#2 Too much complexity leads to waste
Replicating a data center platform stack on a smaller scale can lead to unnecessary software licensing and hardware costs. Complex system design means higher purchase cost, higher support cost, and more risk to the business.
#3 Deployment takes a significant investment of time and capital
For a retail organization with hundreds or even thousands of locations, just physically getting to all the locations becomes a challenge. It takes time and is costly to send a technician to every site to add new services.
#4 Costs are difficult to predict
Margins are a top priority so solutions must provide a strong return on investment, which is often difficult to predict with disruptive technologies.
#5 Security must be strong - be prepared for ransomware
Given the size of data shared over networks between central and remote sites, minimizing network intrusions and breaches is critical. Retail brands need to ensure that remote sites have secure connectivity, up-to-date firewalls, antivirus, and patches. Given the surge in ransomware attacks, store back-ups and other security protocols need to be encrypted in a secure connection.
#6 Back-up frequently
Data at remote sites need to be backed up often, particularly if the information is critical to the enterprise. Handling remote site backup and failover can be expensive and time-consuming.
#7 Manage and support monitoring services
Systems need the capability to be remotely managed both individually and in aggregate to lessen costs and safeguard up-time. Support services must be tied into system-managing consoles for a swift resolution to failures.
#8 Invest in IT capability at REMOTE sites
Maximum remote retail sites do not have local IT support. Most retail workers are not specialists in different hardware, operating systems, or applications. Extremely specialized systems necessitate a high level of expertise, which isn’t available.
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