2020 was a rough year for brick and mortar retail. A record 12,000 stores closed in the US last year, a 20% increase over the number of store closures in 2019. But for as disastrous as the pandemic has been for brick and mortar, the future may prove to be a golden opportunity for the industry. The new normal of virtual daily life has reconfigured consumer expectations around what they can buy, how they can buy it, and how quickly they can have it. Retailers who are ready to meet these expectations during the in-store shopping experience could be on the forefront of the next retail revolution.
Spark Plug podcast co-hosts Ned Hayes and Karen Jensen recently talked with Joe Jensen, Vice President of the Internet of Things Group at Intel, to discuss the future of in-store retail. A 36-year Intel veteran, Mr. Jensen has spent the last decade leading the team responsible for helping retailers use Intel’s technology. The complete interview is now posted on the Spark Plug podcast, available at SparkPlug.audio.
As Jensen explains, retailers have experienced an enormous amount of pressure to keep up with evolving consumer expectations around the technological changes in the shopping experience. Many retailers feel a sense of urgency to stay technologically relevant, but they also often lack the financial resources to be competitive in tech.
Jensen explains, “We see a lot of players who are still trapped in the cycle of ‘I gotta spend one-and-a-half percent of my revenue on IT, and I can’t possibly compete… How do I do it? I have no money.” He says the better questions to ask are: When do you think you need to be in a position to be competitive with these new technologies? When will your set of competitors be delivering that kind of experience?
So what can new technologies do for brick and mortar? In Episode 1, Jensen shares examples of how technology can optimize the in-store experience and lead to the new retail revolution.
Technology Can Reduce Friction During the In-Store Shopping Experience
“Brick and mortar is not going away,” says Jensen. Shoppers like the in-person experience of shopping in stores. Still, aspects of this experience will completely transform to better respond to consumer expectations. One such expectation is having a quick and easy transaction process. Online has been much better at delivering this experience, especially when it comes to managing inventory. When a customer walks into a physical store, it is probably because they want an item right away, and they expect to walk out of the store with that item in hand. Finding out that a desired item is out of stock–after the customer has already invested time and money getting to the store–can cause friction, and consumers have a very low tolerance for friction. New technologies can help retailers manage consumer expectations around the availability of items and promote only in-stock items to their customers.
Technology Can Reduce Retail’s Dependency on Price Reduction
For a long time, brick and mortar has been dependent on sales. Price markdowns are a proven method for bringing in a large group of consumers, but at the cost of devaluing the product. “Not all consumers are motivated by price,” explains Jensen. Technology can help retailers find the consumer who will pay a higher price for a certain product so that a store does not have to provide a sweeping sale to everyone, including customers who may have paid more.
Technology Can Create Real-Time Demand In Stores
The in-store shopping experience is highly effective at creating real-time demand. Items on mannequins and at check-out stands sell well because they are so visible. Jensen notes that 60% of the purchases by shoppers in the US and Western Europe are of things people didn’t know they were going to buy when they went in the store, and instant gratification is a big part of that. “I think that where retail is headed, your inventory in the store will be linked into your digital promotion system, along with some anonymous analytics, and you’re going to dynamically promote to shoppers what is likely to be interesting to them and what you have in stock right now.”
With all of these technological capabilities and opportunities, how does Jensen see the future of brick and mortar retail? In Episode 2, he shares three predictions for how the in-store shopping experience will evolve.
Hyper-Curation
It used to be that shoppers would find out about the latest Fall fashions by going to a retail store that catered to their demographic. Today, shoppers learn about new fashion trends by following their favorite celebrities on Instagram. Newsfeeds are hyper-curated to an individual’s tastes, and Jensen sees brick and mortar stores becoming more curated as well.
“We think that discovery is one of the key value props that stores deliver to shoppers. And the key there is, do you want to go to a store where all of the content and merchandising looks exactly like their competitors? If you’re delivering a bland, blah experience, what’s the discovery, what’s the excitement, what’s the joy in that for the shopper?”
Jensen says that curation is going to be critical going forward, especially for small retailers. Shoppers will go to stores because they like the look and feel and because the store has already done the leg work of curating the inventory.
Hyper-Convenience
Searching for a specific item in a store takes time, and Jensen says that this endless search up-and-down the aisle is a problem that needs to be solved. “People want things to be as simple, easy, fast and seamless as possible. And we think a lot of online shopping has taken share away from brick and mortar around this hyper-convenience side.”
Take grocery stores, he says. Staple items are still placed in the back of the store because of an old notion that the longer you keep someone in the store the more they will buy. But the reality is that shoppers who spend a lot of time in the store may have had a long shopping list when they went in. Jensen sees enormous opportunity for brick and mortar in this area because shoppers will pay more for convenience. “Instead of having four brands of milk in the cooler in the back, take your house brand and put it up front in a hyper-convenient location, and maybe instead of pricing it cheaper, price it the same as the name brand.”
Hyper-Experience
Shopping will become more an activity for enjoyment, and retailers need to ask themselves how they can make this experience amazing for the shopper. A key here, Jensen says, is to create real-time demand for things that you have to sell right now because instant gratification is an important part of the experience. “This is why you have associates,” he says. “The best associates are going to observe the shopper. They’re going to notice the kind of things they’re looking at. They’re going to go over at the right time and offer some help.” Jensen shares an example of a shopping experience that he and his wife had at a premium department store. His wife was planning on buying two or three shirts. “We had the most amazing sales associate. This lady was so good, my wife ended up buying 11 tops. And she felt great about it. She was so good at realizing what my wife liked and what looked good on her. The experience was amazing.”
Jensen says that with anonymous analytics, technology can help all sales associates deliver an experience that is always highly personalized and is delivered in real time.
A Man with a Mission
Today, many prognosticators see traditional retailers as outmoded and subservient to fast-moving online systems. Yet that idea of retailing as a sunsetted industry isn’t valid, according to Jensen or our hosts on Spark Plug. Instead of doom and gloom, Jensen believes there’s a brighter future for in-person retail, and he plans to make that future happen: “My whole career I’ve had a deep belief that technology makes everything better. I’m on a mission to help brick and mortar retail maintain the relevance they have today with consumers.”
Listen to both episodes of this fascinating interview with Joe Jensen at SparkPlug.audio.
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