A single point of truth in retail means having a single view of stock across the business. It means stores and distribution centres aren’t islands of merchandise that are clunkily attempting to share their version of stock information with one another as best as possible. Instead, at the foundation of the business is a unified view of every single product. Because this view of stock covers the entire network, items can move between stores and DC’s and remain in line-of -sight the entire time. This has huge benefits for individual operations and the business as a whole.
A single point of truth for retail inventory must be:
What is gained from having a single stock view?
Delivering a single stock view with RFID
So how do you achieve this reliable and complete view of stock? A single view of inventory starts with the single item. By giving each item an RFID tag, you’re essentially giving it a unique digital identity. This means, using regular RFID reads and sensors, you can easily track the item as it moves along the supply chain. Once it has arrived in a store, the stock becomes far easier to count, monitor and control. Because all this information is stored centrally in a single place, the individual item can be seen by the online store (and its customers) and even neighbouring stores and DC’s. This transparency boosts efficiency and makes cooperation between different arms of the retail operation far easier to manage.
The Detego platform is the single point of truth for retail inventory
The Detego platform puts all this together and delivers a single stock view that can be counted on. Using RFID we effectively digitise every single product in the supply chain and the store network. The information can then be fed into existing systems, such as ERP and OMS. This delivers all the benefits mentioned above, and our in store application guides store staff to effectively capitalise on this complete view of store inventory.
‘Detego is our “Single point of truth” in terms of in-store inventory. As a result, we are able to improve our omnichannel services such as click & collect, returns from e-commerce in the store or directly deliver to consumers from the store in a very efficient way. These are exactly the services our consumers expect today.’
Tobias Steinhoff, Senior Director Business Solutions Sales Strategy and Excellence, adidas
In the modern retail industry, you’ll no doubt read a lot about how ‘customer experience is king’, but with such a subjective notion that can’t be measured in any reliable fashion, it often feels like a vague concept. An actively bad experience is more tangible (and something we described how to avoid in our previous article) but what makes an exceptional one is more of a grey area. In fact, the elusive notion of customer experience is at risk of becoming yet another retail buzzword.
So, what does good customer experience look like? We’ll start with making an important distinction between shopping and buying. Shopping is the all-round experience of browsing in a store, looking at items, trying them on (in the case of apparel) and finding items and making decisions as you go. Buying on the over hand is a more straight forward (in theory) process were a customer knows what they want to buy, or at least has a rough idea, and finds and purchases their item quickly and easily.
It’s often said that E-commerce is ahead of physical retail when it comes to simply buying but struggles to match the shopping experience of brick-and-mortar. Some retailers have leaned into what sets them apart from online, focusing their investment and new technologies on improving the shopping experience, to surprise and delight their customers. Others have looked to implement technology to compete with e-commerce’s convenience and provide a more streamlined and ‘seamless experience’.
The reality is both of these elements are pivotal to a strong customer experience, and retailers should look to improve both, sticking to the principal that:
Retail should be fun when you want it to be, but fast when you don’t.
The fun side of retail is mostly concerned with the shopping side of the retail experience. This is obviously very subjective, and many retail customers will simply find the traditional shopping experience fun, provided they are not hampered any problematic friction points. For other customers though, more needs to be done to amplify the ‘wow factor’, as Steve Dennis says, to tempt them away from either a competitor or the convenience of online.
Retailers are increasingly looking to technology to boost consumer engagement in the store and provide a more entertaining shopping experience. Examples of this include:
Augmented reality (or AR) is an interactive experience where virtual images are placed over images of the real world. Applications of AR in retail include mobile applications and fitting rooms where consumers can virtually try on products like clothes or even cosmetic products.
Smart Fitting Rooms
Smart fitting rooms offer a considerable improvement on the traditional fitting room experience and bring a little bit of the online experience into the brick-and-mortar store. The mirror automatically detects items (when tagged with RFID) that have been brought into the room, displays them on the mirror with product information and suggests other items that are available, effectively bringing cross-selling into the store.
Virtual & Robotic store assistants
Robotic store assistants are certainly on the more futuristic end of the spectrum, with the ability to talk to customers and guide them around the store. Whilst this technology is in the earlier stages, with fairly low adoption rates, they are an undeniably fun concept that will make customers think ‘wow’. On the other end of the spectrum we have virtual assistants or chatbots, which can communicate with customers through their smartphones and answer queries and provide them with information about items and stock-levels.
But what happens when a customer doesn’t want to spend their time on the full shopping experience? In such a case, a customer is only focused on buying and not shopping. Certain retailers leave something to be desired here, with disorganised stores and long lines for customer service and checkouts. The buying side of retail also happens to be what e-commerce excels at, so retailers need to invest in technology to be able to compete and keep customers choosing their stores when it comes to fast and convenient purchases. These technologies and strategies include:
Advanced Points of Sale
Long lines for checkouts are a common problem in retail, and for customers looking for a fast experience this is a major friction point. Thankfully there are a range of PoS technologies that make checkout fast and frictionless. Self-checkout is very common in the food industry and reduces queues if not the time taken at the checkout itself. Alternatives like RFID PoS on the other hand significantly reduces checkout times, were as checkout-less solutions like Amazon go and Mishipay remove the checkout altogether.
RFID’s smart inventory
The other main thing slowing down the buying process in the brick-and-mortar experience is finding the correct item in the first place. Locating a specific item in the store can sometimes take far more time that it should, especially if staff don’t have the time or the information to help. What’s even worse than this is if after searching for the item the customer finds out that its out-of-stock altogether. We explored this in detail in our previous article but RFID not only significantly reduces out-of-stocks and increases on-floor product availability, but the real-time view of inventory it provides means customers can check available stock online before setting foot in the store.
We’ve spoken about e-commerce being good at the buying half of retail, and with the vast majority of retailers now being online and 73% of customers using multiple channels in their shopping journeys, it’s no surprise the demand for omnichannel is as strong as it is today. For a fast retail experience, customers can take advantage of click-and-collect and click-and-reserve when they just want to buy products rather than shop for them.
Good customer experience does both
So, to wrap things up, if retailers want to establish a reputation for a great customer experience, they need to have an equal focus on the shopping experience and the buying experience. Shopping should be fun; the in-store offering should be superior to online and at its best it should surprise and delight customers with a certain ‘wow factor’. At the same time, sometimes people just want to buy, and if brick-and-mortar stores make that significantly less convenient than online then they’ll suffer to the competition. By effectively leveraging the right technologies retailers can provide a top-level customer experience that delivers on all fronts and keeps customers coming back time and time again.
The UK’s first completely Cashier-less grocery store
The British supermarket Sainsbury’s has recently announced the end of its cashier-less store trial, concluding that ‘it’s clear that not all our customers are ready for a totally till-free store.’
The initiative involved the UK’s first till-free grocery store, utilising a mobile app with smartshop scan, a pay & go technology where customers can scan items with their mobile’s cameras as they move through the store.
Whilst there is huge potential in this technology which Sainsbury’s are trailblazing for, the trial did certainly have some initial setbacks. The pilot store experienced long lines at the help kiosk, due to many customers wanting to pay with cards and cash.
In response to this, Sainsbury’s have added a manned till and two traditional self-checkout tills to support the store’s mobile payments. Whilst this does mean the concept of a completely cashier-less store has been shelved for now, the mobile-scan option was clearly a sucess, with Sainsbury’s adding the payment option to eight additional stores.
Convenience isn’t one-size-fits-all
The first thing this technology-project highlights is the necessity of piloting new solutions before rolling them out on a larger scale. Sainsbury’s not only got this right, but they clearly paid attention to their customers during their pilot.
Whilst it’s possible Sainsbury’s were partly-motivated about the possibility of totally cashier-less stores (and the operational benefits those would bring), they rightly put their customers first and acknowledged an important truth: Convenience isn’t one-size-fits-all.
Improving customer experience is typically one of the main targets for technology investments in the retail industry. But doing this effectively is often about giving the customer more options, rather than just replacing the existing ones with something more modern and innovative.
Ultimately, solutions like this are designed to make shopping faster (One half of a strong customer experience). However, if you take options away from customers, especially ones they will naturally expect to have, you can slow the experience down and inadvertently add a friction point to your store.
- When releasing new technologies, piloting the solution first in a small number of stores is crucial.
- When evaluating the success of pilots, it’s important to be unbiased and measure the full range of impact of the technology – This includes qualitative results as well as the regular measurable statistics.
- When improving customer experience, technology should look to give customers more options rather than replace existing ones that they may have grown to expect.
RFID in Retail at a Glance
RFID (Radio Frequency Identification) uses radio waves to track and identify tags attached to objects. The tags contain electronically stored information and are counted or ‘read’ by either handheld or fixed RFID readers.
In many ways RFID is used in retail as an alternative to a barcode system (although it doesn’t have to replace barcodes entirely). The more advanced technology involved in RFID mean it has a far greater level of accuracy and efficiency when it comes to counting inventory. As a result of this it has far broader applications in retail, most of which are built of off the back of this reliable inventory visibility.
By implementing RFID retailers can on average increase their revenue from 5-15% depending on the business. This on top of a margin increase of up to 1% and 10-15% lower working capital due to optimised inventory levels.
According to research in 2018, 69% of retailers cite a significant level of adoption, and this number is continuing to rise.
The 6 Key Benefits of RFID in Retail
Due to the ease and accuracy of RFID stock counts, retailers using the technology can reliably achieve full item-level inventory visibility across their stores and supply chains. Crucially, due to the speed of RFID inventory counts, this can be achieved whilst actively reducing the labour intensity of operational processes. This accurate and up-to-the-minute inventory information is the backbone of so many of RFID’s uses in retail (including many of the points discussed below).
One crucial aspect of modern retail that relies on having accurate inventory visibility is Omnichannel retailing. With a complete and up-to-date view of stock across all channels, it is possible to open up the inventory of your entire store network to customers, providing a better customer experience and increasing sales.
Benefits of item-level inventory visibility
- Improved shipping accuracy
- Excellent baseline for advanced omnichannel retailing
- Produces more data for better insights
- Reduces inventory size (and therefore working capital) significantly
- Increased customer satisfaction from reduced out-of-stocks and a more connected experience
Increasing Product Availability
Ensuring a high product availability is vital to maintaining retail sales. Despite this, low on-floor product availability and out-of-stocks are an alarmingly common problem in the industry, causing unnecessary lost sales as a result of inefficient replenishment processes and stock inaccuracy. This latter cause is practically removed completely by RFID, with typical stock accuracy being increased to 99% from the standard 60-80%.
Additionally, RFID platforms provide an unbeatable basis for efficient and reliable replenishment processes. The main advantage these platforms have is the item-level and real-time inventory visibility gained from regular 99% accuracy stock counts.
How does RFID increase product availability?
- Makes regular cycle counts possible with efficient RFID stock reads
- Removes stock inaccuracy (from 70-80% to 99%)
- Creates complete item-level view of stock between both backroom and sales floor
- Item visibility makes replenishment easier and more accurate
- Real-time view allows for replenishment alerts for when items/sizes are running low
- Item-level data from RFID allows for advanced, even AI-assisted planograms for individual stores
Supply Chain Traceability
We’ve discussed the difference item-level visibility makes for stores, but when it comes to supply chains the benefits are just as great. With RFID, inbound and outbound reads become far easier, and are done on an individual item level rather than SKU (stock keeping unit). This means each item is accounted for at each step of the supply chain, rather than just shipments or boxes.
This level of stock visibility also drastically reduces the rate of shipping errors or picking mistakes as they are detected by RFID readers and corrected by warehouse staff during exception handling or outbound reads.
Additionally, the location or status of items and shipments are visible in real-time, so stores and DC’s can easily track shipments and know exactly what they will be receiving. This makes any individual item fully traceable, as time and dates of when the item passed each read point in the supply process can be stored.
Benefits of RFID in the supply chain:
- Item-level visibility across entire supply chain
- Trace items against individual shipments
- Smoother operational processes
- Track shipments for delivery
- 100% inbound and outbound shipping accuracy
Increasing Process Efficiency
The difference in process efficiency from using RFID in retail is extensive, at every end of retail, be it the factory or the shop floor. An RFID reader, regardless of whether its fixed or a handheld, can read hundreds of individual items at once. Crucially though, as each item has a unique ID, they can never be read more than once. The signals also do not require line of sight to be read.
Naturally, this makes RFID inventory counts and inbound/outbound checks incredibly fast and reliable. In the case of store inventories, RFID has been found to reduce cycle count times by a staggering 96%. This therefore means they are far more convenient to perform and can be done multiple times in a week rather than a year.
Processes transformed by RFID:
- Cycle counts/inventories
- Fast & Efficient Inbound & Outbound reads
- RFID-enabled picking and packing
- Mobile guided replenishment from backroom to salesfloor
Providing Real-Time Data
Analytics and data is one area that e-commerce is ahead of physical retail. This is largely due to the fact that everything online can be measured, whereas retailers don’t really know what’s happening with their stores and customers in any specific detail, and the stats and data they do collect are often historical and at risk of being outdated.
However, with RFID this can all change. The simplest and most effective use of the data allows retailers to better leverage their greatest assets; their products and their stores. Quality data and analytics can allow retailers to ensure merchandise is in the right place to be sold. Information on which stores are performing better or worse is a basic retail KPI, but with specific item data, RFID produces far more detailed insights. This includes how well individual items are doing in specific stores, right down to specifics such as which sizes of items are selling better where. Insights such as these are naturally actionable, meaning retailers can take steps to move or reinforce stock at specific stores.
Data insights and results possible with RFID:
- KPI based performance tracking
- Detailed merchandise data & Analytics
- Operational excellence
- Actionable recommendations
- Compliance tracking
- Eliminates reliance on historical data
- Predictive capabilities for inventory counts and merchandise management
Transforming Customer Experience
There are many effects of RFID in retail that go beyond simple operational benefits to actively improve the customer experience. At the most basic level, this includes things already mentioned like increasing product availability, offering convenient omnichannel services and freeing up store associates to spend more time assisting customers.
However, because of the real-time inventory visibility it provides, RFID can go way beyond this in terms of improving the customer experience. For example, with reliable and up-to-the-minute stock information stores can utilise technologies like chatbots or smart fitting rooms to assist customers with their queries, supply information about other items or sizes available and even cross-sell to customers in the store.
What ways does RFID improve the customer experience?
- High product availability
- Store associates have more time for their customers
- Convenient omnichannel services
- A connected experience between online and offline
- AI-powered chatbots delivering assistance and product information via mobile.
- Smart fitting rooms providing a hugely improved fitting room experience.
- RFID-enabled Point of Sale – including self-checkout services
The age of digital disruption has caused a shift in both consumer expectations and the retail landscape as a whole. Naturally, many retailers have looked towards implementing new technologies in an attempt to either adapt to or capitalise on these changes. When researching new retail technologies, the focus should be on transforming the customer’s experience and eliminating existing friction points.
The question needs to be asked, is this directly solving a major problem for retail customers? In other words: Is there a demand for it? Focusing on the comparatively mundane details first needs to be a priority, as attention on what drives customer experience at the most basic level can be the difference between success and failure in the age of digital disruption.
One technology that consistently meets these demands is radio Frequency identification. RFID is a growing force in retail, with 69% of retailers around the world citing a significant level of RFID adoption. The technology involves tagging individual items of merchandise, like a barcode but entirely unique to the individual item that can be ‘read’ and tracked with ease. One of the most common business cases for the technology is the process accuracy and efficiency that it delivers, but the difference that RFID can make to the customer is not to be overlooked.
Empty shelves are a simple problem, and yet are still a painfully common occurrence in retail. In a survey by Elastic Path, it was found that 55% of shoppers surveyed had experienced an issue with out of stock inventory. Is it then any wonder then that ecommerce is putting pressure on brick-and-mortar stores?
As obvious as it might sound, a product can only be bought if it’s on the shop-floor. If replenishment isn’t automated or falls victim to human error, stores can be temporarily faced with unnecessary out of stock situations that damage both sales and reputation. This problem is often a subtle one, with stores and retailers having no way of observing the true level of item availability.
With a cloud-based RFID platform that utilises the Internet of Things, on-floor availability becomes much easier to manage, significantly reducing out-of-stock situations by up to 50%. The main way this is achieved is through fast and accurate stocktakes and automated replenishment processes. Store staff can now perform stock takes of an entire store (50,000 items) in just 25 minutes to a level of 99% accuracy.
This full and accurate view of store stock combats out-of-stocks in two ways. Firstly, the visibility of stock provides store staff to easily monitor stock levels. More advanced RFID systems like the Detego platform can not only operate in real-time and provide replenishment alerts, but can they can also use machine learning to suggest optimised replenishment advice, set on either a set planogram or an AI-optimised one.
Disconnect between online & offline
The increasing influence of online and ecommerce is arguably the biggest driver of digital disruption in retail. The convenience and choice that shopping online offers has resulted in highly demanding modern customers. Whilst these days practically every brick-and-mortar retailer has expanded into e-commerce to meet these consumer demands, there is unfortunately a noticeable disconnect between many retailer’s online and offline shopping channels, damaging the customer experience despite best intentions.
The key to a good ‘omnichannel’ shopping experience is not to necessarily be everywhere, but to be seamless and flexible at every step of the shopping journey. Non pure-play retailers that can do this will have a competitive advantage, not least because of the choice they offer customers, but with features like click-and-collect and ship-from-store, they can offer an unmatchable level of flexibility whilst opening up the entire inventory network to all channels.
To be able to do this, retailers need a complete and real-time view of stock across their store network in all channels. RFID provides this through digitising stock (utilising the IoT) and tracing the movement of individual items in real-time. With this foundation, it is possible to build extensive and reliable omnichannel services, blending shopping channels and providing a flexible and convenient experience for customers. RFID is the backbone of strong omnichannel services such as this. In fact, 83% of RFID adopters offer three or more omnichannel fulfilment options compared to only 24% of non-adopters.
At its most basic level, this can include opening up stock transparency to customers so they can check availability of items online before coming into a store. The more advanced features include click-and-collect and ship-from-store, both of which provide a competitive edge against pure-play ecommerce, as customers get a more convenient and flexible shopping experience regardless of which ‘channels’ they use.
Limited Customer service
When discussing disruption and new technologies, its easy to forget about core principles and traditional strengths, but technology should be built with those in mind. For retail stores, that means customer service. This remains a key part of physical stores’ USP today, but with the demand for store associates’ time being severe, these traditional strengths can sometimes be left behind.
In studies by Elastic path it was found that 42% of shoppers surveyed said they’d had an issue with long wait times for customer service, suggesting that something new is required to stop what was once a core strength of stores becoming a friction point for customers.
RFID platforms meet this demand in two different ways. First and foremost, is simply the fact that RFID operations are much leaner and less labour intensive, for example it cuts cycle count times by up to 96%. This has the simple yet effective result of drastically decreasing the amount of time retail staff have to spend on manual processes like replenishment, therefore freeing up a significant amount of staff time to be spent elsewhere with customers.
The other significant ways RFID can assist customer service are the platforms and features that can be built around the technology. Mobile chatbots can assist customers with queries about item availability and available sizes, thanks to the real-time item transparency produced by RFID. In the fashion industry, Smart-Mirrors can do this whilst also reducing the friction points associated with changing rooms, as they can provide information from within the fitting room and can also be fitted with features to call store assistants to bring any items required to the fitting room.
In recent years the digital age has shaken up retail in unprecedented fashion, and this trend looks sure to continue. One of the main causes of this change is the internet, not only the increasing influence of e-commerce but also the changing standards consumers are used to thanks to their near-constant access to the web. The new status quo of the digital world is connection and convenience, as modern customers have easy access to information and services on demand.
But is retail keeping up with this change? And what does it take for brick-and-mortar stores to meet these modern demands? Thankfully, the growth of retail technology means stores have more tools than ever to do so. Retailers need to look towards digital investment to reduce friction points and offer a more streamlined and connected shopping experience.
In other words, brick-and-mortar stores aren’t going anywhere, but they will have to evolve.
Enter the digital store
With customers being more connected than ever and used to the experience they can have shopping online, it’s time for brick-and-mortar stores to take some lessons and adapt. This shift is well underway, and as more brands continue to adapt one thing is becoming clear, digital doesn’t just mean online anymore.
Thanks to the Internet of Things, it’s now possible to digitise every single item in a store, in conjunction with tracking technology such as RFID. This allows retailers to leverage their most important asset, their merchandise, with greater precision.
For example, let’s present an all-too-familiar scenario.
You are looking to buy a new pair of shoes. You’ve decided to purchase them in-store because you want them today and need to make sure the fit is right. Before going to the store, you checked on the store’s website to check if they had them in stock in your size, but it didn’t say. After failing to find them in the store, you ask a store associate who offers to look in the back. You then wait several minutes, for them to return empty-handed, and offer their apologies.
There are several stages where this scenario could have been avoided with the application of the IoT. If every item is digitised and traced effectively, not only can stores know exactly what’s in stock, but retailers can share this information with their customers, and offer them more options like click and reserve and more.
Stores as Digital hubs
With this baseline of technology providing a clear view of inventory across store networks, the natural next step is combining and unifying digital stores with the rest of the digital network, namely other stores and the e-commerce online store. After all, online is already digitised by nature, and having all stock across all networks digitised allows retailers to leverage their products far better to serve their customer’s needs.
Whilst omnichannel has become a bit of a buzzword, with the focus on connection and convenience for customers, features like click-and-collect and ship-from-store are essential for leveraging physical stores. When supported with appropriate technology like RFID, retailers can offer extensive omnichannel services thanks to a real-time view of stock and the ability to track and trace items across the supply chain.
Features like this go beyond levelling the playing field with e-commerce as they do something pure-play online retailers can’t, offering their customers more options and a flexible shopping experience.
If you are interesting in further exploring how digitisation improves the customer experience, download our free whitepaper on how fashion stores leverage The Internet of Things (IoT) technologies to put the customer in focus of all activities.
If you are interesting in further exploring how digitisation improves the customer experience, download our free whitepaper on how fashion stores leverage The Internet of Things (IoT) technologies to put the customer in focus of all activities.
Just a moment, I have to check…
Making a great shopping experience can happen in seconds, but can also fail just as quickly. The customer who is ready to buy a desired article is often left standing in the aisle, being asked by the shop assistant to wait. He/she goes off to search for the article in the stockroom, perhaps call another location or check with the manager. If the article cannot be found, the sales interaction usually comes to an end with something like “Sorry, we don’t have it.”
The possibility that the desired item, say a skirt in size S, could be available in another store is something that the customer has to find out for themself. Of course they could try their luck online, and maybe even order it in the online shop if it’s still in stock.
That’s a shame. All that just happened because the shop assistant did not have the right information.
Lacking item visibility is a massive problem in the fashion industry, and almost all retailers suffer with lost profits because of it:
- If the article is not on the sales floor, it cannot be sold
- If no one knows that the article is in the stockroom, on display in the shop window or in the changing room, it cannot be sold
- If the sales person cannot give the customer information on the availability of an article immediately, a sale is missed and the customer is disappointed
- If the click & reserve inventory is not kept in sync with the store inventory, the reserved article cannot be sold
- If the article surprisingly “reappears” during inventory, for example someone finds it in an unopened box, it’s too late
- If there’s no item visibility in the individual channels, then flexible redistribution will not work
Getting the merchandise to where it is needed most
It’s the dream of every retailer: the merchandise offered is presented to precisely the customer who would like to buy it. With 5,000 articles in 700 stores in a variety of sizes, even the most experienced retailer can no longer make decisions by gut feeling.
- Sizes should not be evenly distributed among all stores
- Buffer stock should not clog up the stockroom
- Excess inventory that later has to be written off should simply not exist
Intelligent Merchandise Distribution
One is always wiser after the fact, for example at the end of the fiscal year or of a collection season, retailers know which items sold well in different stores and which did not. But then it’s too late. The merchandise ends up in the factory outlet store and eventually sold at discounted prices, the amount written off remains high, sales stagnate, etc.
However, retailers should immediately know which articles are sold well in which locations. Also, information on items that need to be reordered as well as the prevailing aging structure of articles at item-level per store is needed. To take the right decisions, it would be wise to have access to reliable real-time data in forms of dependable analysis and clear recommendations.
Actively manage your network of stores using real-time data:
- Real-time control over inventory and more efficient replenishment
- Quicker reordering
- Reduction in reserve stock
- Less merchandise in the channels, combined with greater inventory accuracy
- Smaller lot sizes, more precise control over the flow of merchandise
- Selling out collection merchandise at the planned margin, not via outlet sales
- Fast recommendations for activities to optimise the store
- Real-time dashboards promote the right decisions being made
- Rapid relocation of sale merchandise between the stores
Retail software specialists, Detego, have presented their ground-breaking methodology for in-store product recommendations, helping bring the same quality of cross-selling over from e-commerce and into the physical store. The new AI-based recommendation engine will enable retailers to provide personalized product suggestions utilizing data unique to store locations and point of sale information, without the need for identifying customer profiles.
Cross-selling through related product recommendations has always been a huge strength of e-commerce, with 35% of Amazon’s revenue generated by its recommendation engine (source). In recent years, innovations in RFID-based solutions such as smart fitting rooms and mobile chatbots have opened the doors to automated product recommendations within physical stores. Whilst the technology is now available, there is still one more hurdle between Brick and Mortar stores and effective cross-selling. This is namely the fact that the best recommender systems require vast amounts of both personal and aggregated data to provide effective suggestions, and whilst this is at a surplus in e-commerce, physical stores traditionally struggle with data being limited as well as sparse.
Speaking at the ACM UMAP 2019 in Cyprus in June, data scientists from Detego, who specialise in RFID-based software solutions for retailers, presented their proposed method of data-manipulation for in-store recommender systems with a paper titled: ‘Beggars Can’t Be Choosers: Augmenting Sparse Data for Embedding-Based Product Recommendations in Retail Stores’. The approach involves an alternative algorithm that leverages shopping-baskets and common-item combinations combined with point of sale information. Detego says this allows retailers to provide targeted recommendations with a 6.9% increase in quality, aimed at individual stores, without having to maintain separate models for each location. When combined with the technology to deliver these product recommendations, retailers could see a substantial increase in sales in Brick and Mortar stores, whilst customers will see a more connected and engaging in-store experience, as Detego continues to bridge the gap between online and the physical store.
“Customers who bought this also bought…” is no longer a phrase reserved exclusively for customers of e-commerce platforms. Due to the adoption of RFID-based technologies, such as Detego’s Smart Fitting Room, personalised recommendations can also be presented to customers of brick and mortar stores. Moreover, Detego’s AI-based recommendation engine is tailored towards the specific requirements of fashion retail stores, such as fast-changing and varying product assortments.’ says Matthias Wölbitsch, Detego data scientist.
With Detego now successfully rolling out the Smart Fitting Room application alongside their real-time inventory management software, this latest improvement is another opportunity for retailers to evolve their stores for the future.
Although the customer leaves an invisible data trail in the store, brick-and-mortar retailers barely use them to improve customer service. Dr. Michael Goller, CTO at Detego, explains why things need to change in the future.
Online retailing has not only created a new way of shopping, but also has a powerful toolbox to measure its results – with the overall objective to meet the customer’s expectations at all times. For that reason, online retailing has become the highest standard when it comes to measurement and evaluation in fashion retail. There is almost nothing that is not being evaluated while surfing the web shop. Conversion rate, click through rate, average order value, relation between new and returning visitors, bounce rate and retention time are just some of the KPIs that measure the success of online shopping activities. The really powerful thing about this is that analysis is always followed by action – usually fully automated.
And what about brick-and-mortar retail? It is about time to take some lessons…
The need for real-time data
For years, brick-and-mortar retailers have been complaining about imprecise stock-figures and unreliable historical data. Unhappy with its purchasing decisions based on last year’s sales figures, retailers would prefer to have real-time data and inventories that allow for reliable and economically viable decisions. After all, it is important to avoid high security stocks in order to reduce capital tie-up.
But why do we actually have this problem? Are the datapoints offered by the ERP systems not enough? Unfortunately not – it is not unusual that the ERP system shows higher stock than actually available on the sales floor. This so-called “ghost stock” is the cause for various problems in sales, e.g. the ERP system says a certain article, for example a red skirt in size S, is in stock, but in reality it is not. It can neither be sold nor refilled from the central warehouse – a classical out-of-stock situation. Or vice-versa, the ERP displays a lower inventory level than is actually available. The reason for these deviations is insufficient accuracy in individual processes that dangerously sum up over time.
Today’s intelligent article management is based on three pillars: fast, RFID-based article identification on item-level, tracking of every movement in real-time and proactive analysis with concrete recommendations for actions to take for the sales personnel. This is the foundation for optimum customer service and efficient processes.
Meaningful KPIs in the store
When measuring KPIs, the practical benefits for retailers are paramount. Three areas of data in the store can be distinguished:
- KPIs for inventory accuracy and product availability
- KPIs for campaign performance measurements
- KPIs on customer engagement and service quality
How KPIs are defined depends on the size and number of stores, the assortment depth and the flow of goods. Predefined objectives also play an important role: Whether five or 800 stores, KPIs for measuring inventory accuracy are significant for every retailer and still represent one of the main challenges in today’ business. Retailers, on average, can actually make accurate statements on just about 75% of their inventory (based on SKU level). However, this is not enough to meet customers’ expectations for omnichannel services. Therefore, inventory transparency and corresponding KPIs are essential for retailers´ success.
Product availability on the sales floor, also known as on-floor availability, is the second central parameter. Initially, it is less about the exact position and more about the fact that the articles are on the sales floor – after all, only items that are actually available can be sold. This key figure can be combined with an alert system that makes sure not to fall short of the defined minimum availability. Complementary to classical ERP-systems, an RFID-based merchandise management takes the data granularity to the next level, by knowing exactly at each moment in time if products are really on the salesfloor or still lingering in the backroom of a store. Having data on item level, store managers are also given important information on the dwell times of articles on the sales floor to gauge whether they are corresponding with the sales plan. One of the most famous KPIs in e-commerce is the conversion rate that describes the ratio between purchases and website visitors and also provides information on certain items that were already in the shopping cart, but for some reason have not been purchased in the end. Specifically this aspect was incredibly difficult to measure in the store for a long time but can now be measured in fitting rooms using IoT and RFID technologies. This provides meaningful insights into how many, and above all, which articles does a customer take into the fitting room and which one does she/he actually buy?
On an operational side, KPIs can also be used to manage the service quality. The replenishment rate, for example, states how quickly articles are replenished on the sales floor. On the other hand, the fitting room response time describes how quickly sales personnel handle customer requests coming from the fitting room.
The KPI “Conversion rate per campaign” shows the success of a campaign and if campaign-specific countermeasures are necessary / ©Detego
Turning data into actions
What else can brick-and-mortar retail learn from the web shop? Turning data into actions. Since nobody needs a data graveyard, any analysis of data has the goal to take immediate actions to improve. Today’s systems help the management team as well as the store personnel with concrete and automated recommendations for actions to take. This saves time in the decision-making process, unburdens the sales personnel, and enables them do the right things at the right time.
KPIs should be suitable for everyday business use. Presented visually and self-explanatory, they need to be linked to clear recommendations for actions to take. This frees up store personnel time and provides a data-driven way of optimization. Examples range from simple in-store replenishment advices, i.e. “The minimum stock for article #47699-0010 has been reached – please refill three pieces” to more advanced topics, e.g. to choose a different placement in the store for a specific article when the dwell time on the sales floor is too high compared to other stores.
Brick-and-mortar retail definitely needs support and an update to the toolbox when it comes to analysis and measures. Not only does the sales personnel benefit from intelligent recommendations for action, but the management team also gains efficient control mechanisms across the entire store network. Decisions are made on the basis of real-time data and therefore allow timely action. Ultimately, the end customer is pleased about a first-class service, which – thanks to the individual and informed advice through the sales personnel – even exceeds the standards of the online retail.
Why should fashion retailers deal with IoT? What problems could be solved in the stores? What results can be expected? As a retail decision maker you need to deal with IoT if increased article availability, exact inventories, interaction with customers and operational excellence in your stores are set as objectives. This practice-oriented guide sheds light on the triangle of “customer”, “processes in the store” and “deployment of new technologies” and shows how the use of IoT benefits retailers and ultimately the customer. The whitepaper reveals the formula for the perfect customer relationship, based on the right technologies and processes and shows how retailers can apply them to their business.