The retail industry has been subject to enormous change in recent years, a trend that looks likely to continue even now retail has found its feet in the digital age. This significant shift in the landscape coupled with the collapse of numerous household brands naturally created something of a panic in the industry and a fear an impending ‘retail apocalypse’. So, has this taken place and are brick and mortar stores heading toward extinction in the age of online shopping? The short answer: no. Retail sales, in general, are increasing, and whilst online sales are certainly growing at a faster rate than in stores, in the UK market Brick and Mortar stores make up roughly 84% of all sales, a trend that applies globally.
In fact, with the help of new technology, in particular, AI brick and mortar stores can take lessons from e-commerce and bring new innovations into the physical store. A study by Capgemini found that around 68% of pure-play online retailers have implemented artificial intelligence in some fashion, compared to only 10% of brick and mortar stores. Utilising new technology can often be the key to growth, so perhaps it’s no surprise that online retailing is growing at such a faster rate. This is beginning to change however, as physical stores are learning to adapt.
AI-assisted cross-selling in the store
The ability to cross-sell using AI is a huge strength of online retail. Online stores use machine learning to make intelligent and tailored product recommendations to customers while they are shopping This naturally increases sales, but does so relative to the quality of the product recommendations, hence the use of AI to perfect the process and make more successful recommendations. Brick and mortar stores have traditionally never been able to make use of cross-selling like this, having to rely on in-person customer service to drive sales. But as technology has improved, they can now make use of both.
The main reason for this is the emergence of chatbots as a mobile platform for in-store product recommendations. Whilst chatbots themselves originate from online, certain retailers now implement them in their stores to assist customers. Their primary function is often to assist customers if store associates are all occupied. Chatbots can help customers locate items, find more information on products and check stock availability, all through their smartphones. Intelligent AI-powered chatbots will then be able to recommend products similar to the item’s customers were searching for, not only increasing sales but improving the customer experience.
The fashion industry has taken this concept even further with the use of smart mirrors. Smart mirrors use advanced tagging technology (RFID) to sense the items that a customer brings into a fitting room. It will then display the products on the mirror and, like a chatbot, assist customers by providing information on other available sizes and colours and recommending products that are often bought with the ones being tried on. Most smart mirrors also have a feature that calls store staff to assist the customer, either providing face-to-face support or bringing the recommended items the customer has chosen to the fitting room. Smart fitting rooms are the epitome of the merger of the digital and physical in brick and mortar stores.
AI-powered in-store business intelligence
Artificial intelligence can also go a long way to revolutionising traditional brick and mortar store processes. One of the best examples of this is the use of AI assisted planograms. A planogram is essentially a plan of where items should be displayed on a shop floor to maximise customer purchases. In certain sectors such as fashion, planograms must be even more detailed and include the optimum display quantities of each different size and colour.
Artificial intelligence can revolutionise the planogram, using machine learning to constantly optimise not only the positioning of merchandise but the most efficient quantities of different articles to display on the shop floor. The advantages of this process being performed through AI are huge. Not only does it largely automate the process, saving time for staff, but it will constantly adapt and improve and can personalise and optimise the planogram on an individual store level.
The future of retail, online and in-store
To conclude, the impact of digital technology on the retail industry, in particular brick and mortar stores, has been significant but not actively catastrophic as many feared it would be. The emergence of ecommerce has gone from a threat to a strength for some physical stores. Not only has omnichannel retailing (something we did not have time to explore, but we go into detail on here) allied the different methods of shopping, but brick and mortar stores have now begun to incorporate certain technologies from online.
AI technology, originally something only online retailers could really utilise, is now finding its way into brick and mortar stores and improving both store processes and customer experience. We are also just scratching the surface of AI’s uses in retail and as more retailers choose to adopt the technology more benefits will be discovered. So, in reality brick and mortar stores are far from going extinct; they are in fact evolving and will continue to do so.
Planograms: Planning and implementation
Planograms aim to optimise article availability and thus specifically stimulate sales. The term planogram refers to two aspects: on one hand the actual merchandising, i.e. which articles are presented on the sales floor and how, and on the other hand, the detailed quantities for individual colors and sizes in order to meet customers’ demands in the best possible way.
Ideally, merchandising and planogram go hand in hand: customers are inspired by the form of presentation and then, their desired product is available in the matching size. The reality, however, most often paints a different picture.
Planogram – Merchandising
Planogram – Quantities and Priorities
Visually appealing and available in relevant sizes
Breaking this down, there are two questions that retailers face: 1. How to define a planogram for my stores with a suitable size distribution? and 2. How can we implement an efficient refill process such that the plan is properly executed?
With AI (Artificial Intelligence) and RFID-based processes, Detego InStore helps to answer both questions. Since the manual maintenance of the planogram per store can be enormously time-consuming, we rely on machine learning procedures to define a precisely optimised size distribution for all articles across the store. Not only does this save an enormous amount of planning time, but also addresses the ongoing dynamics in individual stores. The self-learning system adapts to possibly changing conditions and continuously optimises the plan.
During the operational process in the store, Detego InStore also supports the store personnel at several occasions: The software offers two parameters that provide information about article availability at any time and therefore represent important KPIs:
- On-floor availability: The percentage of all available articles that are currently displayed on the sales floor
- Planogram compliance: Provides information on how well the planogram with its individual size distribution is implemented on the sales floor
If one of the two parameters fall below certain threshold values, store staff needs to action: In addition to classic ERP systems, Detego InStore offers a finer level of granularity in the stores, by telling store staff that certain articles are available in the backroom but not on the salesfloor and therefore need to be refilled to comply with the predefined planogram. Retailers benefit from a complete process for the planning and implementation. Another advantage: Refill advices in the app are sorted such that the search in the back room is made as efficient as possible by minimising walking routes.
Shelf space is used for top sellers and is not wasted on sizes that are rarely or never bought. With its self-learning components, Detego InStore makes a suitable proposal for all sizes and facilitates implementation in daily processes – including relevant KPIs for measuring performance. And if a certain size is not available in one store, Detego InStore offers an exact inventory view of surrounding stores – ready for click & collect.
Benefits for retailers:
- Individually optimised planogram per store
- Efficient use of shelf space according to bestsellers per store
- Guided processes: from planning to refilling
- KPIs to provide insights on operational excellence per store – in real-time
Benefits for consumers:
- High on-floor availability for the locally popular sizes
- Positive customer journey
- Overall increased article availability through exact inventory data on the entire store network – including reservation options
“By optimising the sizing profile of individual items for each store and greatly simplifying the in-store refilling process, we provide retailers with tools that make it easier for them to plan and implement optimum product presentation and thereby help them to boost their sales.”
Dr. Michael Goller – CTO Detego
Stocktakes are mandatory for retail businesses. With the right software, they can fulfil much more than just legal requirements. A real-time view on inventory provides the basis for high on-shelf availability and customer-oriented services.
The word inventory has its roots in the Latin “invenire” which means “to find something“. Anyone who has ever been involved in the process of a stocktake knows exactly how well this terminology fits. Finding something becomes particularly complex if the ERP system displays a different stock than what is counted on the sales floor and in the backroom. Usually, the products are written off as loss or attributed to shoplifting – which is a big problem especially in the fashion retail industry. But what if articles that could not be found are still in the store? And what about “positive differences” – meaning a surplus of stock?
The crux with inexact stocks
RFID-based article management with permanent inventory offers a very precise and reliable view on the stock-figures. Businesses are presented with real-time data, which the store personnel can access at any time. With this form of inventory, retailers get accurate stock information at any time and do not have to deal with numbers which may or may not be accurate at present. At the same time, the level of granularity can be increased: RFID technology makes it easy to determine which items are in the backroom and which ones are on the sales floor – the ideal starting point for a truly efficient refill process.
The optimal inventory cycle
The objectives of an intelligent inventory management process go far beyond the accounting requirements. A question that is frequently asked is “how often do we need to do that in order to achieve our targets”? Today’s systems, using AI and machine learning techniques, can automatically suggest the optimal inventory cycle, providing increased efficiency and store performance with positive effects on the overall profitability. A perfectly balanced inventory requires systems with an integrated and automated replenishment process, analytical forecasts on top sellers and the corresponding size breakdown.
Project implementation: a few hours. Stocktake duration: a few minutes.
It’s not only expensive to close down the store and hire additional personnel to carry out stocktakes – also the degrading accuracy has severe impact on the top and bottom line results of a store. For a quick start into exact inventories, intelligent software that drives article availability and inventory accuracy near 100% within just a few hours is now available –without having to invest heavily in a time- and resource consuming project. The quick-start system delivers a convincing performance in the store from day one and makes the roll-out across the entire store network easy and fast. The tedious and time consuming way of looking for articles that may or may not be there will be a thing of the past. Maybe it is time to find a new Latin word that is more suitable?
This webinar discusses intelligent planograms and how they enable an individual size distribution for fashion retail stores and make sure that products are available on the sales floor in the appropriate sizes.
It provide insights into how the self-learning system adapts to possibly changing conditions and continuously optimises the plan – with a direct impact on the store revenue.
The one-size-fits-all sales approach is outdated. In the store, intelligent systems are needed to provide the customer with a personalised experience. Key elements for this are individual and personalised recommendations from the current product range and simplified processes that give stores associates more time for the customers.
In this webinar you find out how “Data Driven Empowerment” activates cross-selling potential, increases the number of articles per receipt and finally leads to satisfied customers and happy retailers.
The hype about cloud-based systems continues: There is hardly a software system that has not stepped into the cloud. Many applications, especially in the business environment, rely on an “infrastructure-as-a-service” or “platform-as-a-service” model, where existing solutions are simply hosted and operated by a large cloud provider.
In addition, there are true “software-as-a-service” solutions that are available for a monthly fee with guaranteed performance.
Regardless of the actual model chosen, the cloud offers enormous advantages for retail companies, especially with respect to RFID-based inventory management.
Advantages of inventory analysis in the cloud
- IT infrastructure does not have to be operated and maintained by the retailer: Focus on core business
- Lower costs: in comparison to individual operations
- Flexibility: For store openings and closings, and even for the operation of pop-up stores
- Easier integration with existing systems: standardised, open APIs
Smart processing of data at scale
Compared to traditional inventory management, an RFID-based approach brings one thing in particular from a system perspective: More data. Frequent, even permanent and real-time stock takes and tracking of each individual article movement generates more data than before. More data is not necessarily an advantage, and must be processed and stored somewhere. In addition to the – almost unlimited – storage space that cloud-based systems offer, here is another decisive advantage: On one hand, sufficient computing capacity is available for complex and -intensive processing steps, which can be activated simply and automatically “when needed” (“scaling up” and “scaling out”). On the other hand, in cloud-based systems, the application of modern algorithms such as machine learning methods are significantly simplified in order to actually benefit from operational data.
What does data reveal?
This gives retailers access to a broad portfolio of analytic tools, algorithms and necessary infrastructure, without having to become a specialist in the implementation and operation of complex systems and tools for large-scale data analysis. Sounds abstract? The following examples show concrete use cases:
Analysis of the performance of individual articles:
While classical analysis is mostly limited to sales data, new technologies allow far deeper insight into what is happening in the store. With RFID-based inventory management, in addition to sales data, other parameters can be precisely measured and correlated. Derived from this, influencing factors are used to determine in which store the sales probability for certain articles is actually the highest. What is the result of the analysis? Easy to follow recommendations for the sales personnel in the store in order to make the most of the potential of the sales area. Sales personnel receives notifications directly on the smartphone which is processed as soon as possible.
Raw data from the store network – Derive meaningful KPIs – Processing and feedback to the store
Evaluation of periodic inventory data:
The classical stocktake: Not very popular, cumbersome and lengthy – still needs to be done 1-2 times per year for audit purposes. However, an RFID-based system makes it very easy. Reason enough to increase the frequency for better data accuracy. This quickly results in several thousand data records per year. Nevertheless, these datasets contain far more information than just the ordinary inventorydifferences that need to be accounted for in the ERP system: A targeted analysis quickly identifies trends about problematic items, allowing timely countermeasures. As far as the operational process is concerned, smart algorithms can raise additional potential: The classic approach of “one RFID-based stocktake per week” is not necessarily optimal or necessary in every store. Detego InReports suggests the ideal time for a stocktake and can even predict how many people will be needed to complete the process in the desired time. It provides support where it makes sense.
These scenarios show how current methods and algorithms from the world of data analysis, when cleverly applied to inventory data, can show operational benefits.
While this might sound simple, practical implementation is far from easy due to the amount of data that needs to be processed and complexity of procedures used.
Specialized systems that leverage benefits of the cloud can help address this and gain data driven insights rather than pure intuition. This is accessible in a scalable infrastructure that comes with predictable cost within a simple SaaS model.
What needs to be taken into consideration by retailers
Aside from all the advantages, there are also aspects in the use of cloud-based systems, which requires rethinking and possibly even making changes to the existing infrastructure.
Make sure your infrastructural equipment is bandwidth-rich to enable you to run store applications in the cloud with satisfactory performance and to adequately size Internet uplinks for today’s and tomorrow’s applications.
Data collection in the store
Make sure to install optimal WIFI in your stores. That is what customers expect nowadays. Not only do customers interact with their smartphone while shopping, persons accompanying them do so too. That is an aspect which should not be underestimated in order to keep customers in the store and offer new services.
„Shared“ versus „Dedicated“-Cloud-environments
Many software packages allow operation either in a so-called “shared environment” where resources are shared with other companies, or in a “dedicated environment” which is operated exclusively for a particular customer. Both variants have their advantages and disadvantages. While “shared environments” are generally cheaper to operate, there are some dependencies, e.g. in terms of performance. “Dedicated environments” usually offer more flexibility but also entail higher costs.
Lock-In to a Cloud-Provider
Cloud software packages that can be transferred at any time from one cloud to another if necessary are advantageous. This bypasses a long-term dependency on one of the classic cloud providers, e.g. Amazon, Google, Microsoft and Co. It is recommended to make sure that the software you use is not dependent on a particular provider, but can also be operated flexibly with another provider.
Your inventory data contains information going far beyond the typical inventory differences or what ordinary sales data can tell you. Smart analytics and state-of-the-art processing helps you to unlock this potential – a new way where cloud-based systems flex their muscles.
Due to lack of an overall stock view, retailers and in particular, their sales personnel are not able to provide customers with reliable information e.g. on article availability. This results in disappointed customers who eventually buy somewhere else, which in turn leads to an enormous loss of revenues for retailers.
Get new insights on how a single stock view significantly changes the fashion retail industry and what positive effects come with it.
Detego, a market leader in real-time business intelligence for the fashion industry, is launching a new mobile solution for retailers which will give faster and cheaper access to the benefits of digital connectivity. Thanks to imbedded radio-frequency identity (RFID) tags on every product, benefits include being able to painlessly carry out stock-takes on smartphones and near hundred percent inventory accuracy, so fewer gaps on the shelves and no lost sales from missing sizes.
“Most retailers are aware of the advantages of RFID and want to constantly monitor the movement of goods, but many are put off by the perceived high costs of system integration,” says Detego’s chief executive, Uwe Hennig. “With the cost of tags having fallen dramatically over the last few years, the time is right to launch a new, leaner version of our software so that retailers can quickly see for themselves the gains being made in smart tracking devices and the endless opportunities of joining the Internet of Things.”
Detego’s InStore Lean Edition provides a “quick-start” solution for retailers that want to start small and possibly scale over the entire store network later on. Available via the cloud, it is being targeted at retail chains, pop-ups, franchisees and brand store owners that don’t necessarily want to invest in large-scale IT projects, he says.
The new software allows retailers to constantly monitor inventory in real-time and automate the replenishment process, not to mention improve both the availability of products and customer service. A clear path of scaling makes it possible to roll-out the software and later add other Detego products or functions at any time, including additional applications for all in-store processes and omni-channel services such as “click&collect”, as well as managing inventory throughout the supply chain, and comprehensive analytical features.
“The fashion retail industry in particular requires a fast introduction to the digital age, but at the same time a future-proof solution that is scalable,” adds Hennig.
Nowadays, fashion retail is not restricted to one single sales channel only. Fashion retailers rather provide their customers with a whole variety of different channels. Hereby, the customers’ expectations are clear: they demand a smooth shopping experience across all channels. Reliable stock information builds the basis for any satisfied omni-channel customer. A successful “one-face-to-the-customer” strategy can only be achieved with a real-time view on the overall stock; regardless of whether it is being checked in the store, in the franchise store, at the wholesaler or in the online shop. The resulting 100% article availability across all channels guarantees a satisfied customer who may buy again.
Which solution fits everyone?
The one-fits-all approach represents a scalable sizing concept within the fashion industry. Transferred to the IT landscape, the challenge is to integrate all channels in a way that the customer perceives them as one single entity.
Integrated system landscape: Real-time stock view for retailers as well as customers.
Why integrate all channels?
- Brand stores
- Stores of franchise partners
- Concession stores
- Online shop
Customers do not distinguish where and from whom they buy: in the brand store or its online shop, in the department store or in a franchise store. Customers are looking for a specific article and expect a certain price and quick delivery.
System landscape requirements:
- Real-time view on item-level
- Constant updating of involved systems with regards to stock movements
- Central stock view (for stores, franchise partners, wholesalers) on item-level (real-time) as a single-point-of-truth
- Access to stock information for all sales partners in real-time
- Real-time information on item-level also for customers
- Real-time analysis of article movements, aging structure, replenishment performance to optimise article availability
Analysis for everyone
Of course, an evaluation of individual sales channels can be useful to determine its success. However, only an analysis of all the channels, taking into account the entire branch network and all sales partners and online sales, is decisive for the assessment of the collection-, product range- and, above all, the omni-channel success.
Consumer Engagement for everyone
Successful labels roll out their new collections in a multi-channel strategy across all sales outlets. In addition, social media as well as viral campaigns inter-relate with one another. The aim is to offer various touchpoints for customers to interact with brand and articles. A stronger relationship with the brand and more time spent – in the store and in the online shop – lead to more sales.
Detego offers fashion retailers a reliable platform for inventory management, analytics and customer engagement across all channels.
- Scalable: Just as your business requires. Start small. The platform expands itself.
- Modular: In-store management, analytics & reports, consumer engagement – choose what is necessary.
- Flexible: SaaS for switching on and off specific services as needed.
- Manageable: All services on one single platform. Accessible for everyone.
- Economical: Investment protection for the seamless integration of existing systems.
The retail shopping experience is changing rapidly, but one thing remains constant: Customers walking into brick-and-mortar stores want to find the articles that interest them, in the size, style, and colour they prefer. Detego’s innovative software suite provides the real-time insights retailers need to meet customers’ desires—not only by providing complete transparency into every article from the warehouse to final sale but also by enabling a more personalised and positive customer experience.
As part of the Intel® Responsive Retail Sensor ecosystem, Detego solutions give fashion retailers a competitive advantage through unified commerce, increased sales, and a superior in-store shopping experience.