From smart receipts, to shelf monitoring, to customer analytics through free wi-fi, offline shopping has been transformed into a digitally enhanced strategic asset for many retailers, including the very ones that instigated the retail apocalypse. Legacy retail giants are now competing with the likes of Amazon for brick and mortar market share, and those that are surviving have teamed up with tech startups. NewtonX conducted a retail survey deployed to executives and senior managers at legacy retailers such as Macy’s and Nordstrom, in addition to stakeholders at E-commerce giants that are investing in brick and mortar stores including Amazon.
The results of this survey yielded the following key findings:
- Hybrid e-commerce and brick and mortar approaches are the gold standard for 82% of survey respondents
- 78% of legacy retailers say transforming stores into customer data and analytics driven hubs is a strategic priority
- Investment in startups enabling digital in-store strategies is at an all-time high
E-Commerce Giants Are Turning to Tech Startups to Make Legacy Brick and Mortar a Strategic Asset
As the likes of Amazon, Warby Parker, Google, and Alibaba move into brick and mortar, legacy brick and mortar outlets are scrambling on multiple fronts. The most important, according to the NewtonX survey, is in-store personalization: data shows that 65% of consumers say personalization and promotions are the two most important aspects of the shopping experience, but only 19% of consumers have experienced sales associates knowing about their previous purchases.
Considering that almost half of all consumers expect basic personalization from in-store experiences, it’s imperative that retailers give their offline stores a digital makeover. And many of them are. For instance, Macy’s established a partnership with a VR startup called Marxent Labs to allow customers to see how furniture would look in their homes in order to reduce return rates in the retailer’s furniture department. Macy’s also works with RetailNext, a startup that has raised $189M to provide in-store analytics including customer route mapping, smart in-store sensors, and mobile marketing. The startup also counts Casper, Bloomingdales, and Sephora among its customers.
In-store analytics typically belong to one or more of a few different categories: guest wifi, app partnerships/loyalty programs, and smart shelves/inventory monitoring. Each of these approaches optimizes the customer experience through collecting data (via Wifi/mobile app behavior) and then allowing retailers to give personalized in-store experiences. A startup called Zenreach, for instance, which counts Peter Thiel and Bain Capital among its investors, has raised $94M to enable free in-store Wi-Fi to collect customer analytics.
As we recently wrote, China has been at the forefront of offering digitized in-store experiences. BingoBox, a startup with $80M in funding, for instance, has opened up 200 cashier-less convenience stores across 29 cities in China. Both Alibaba and JD.com have invested in digitally-driven brick and mortar retail stores, and are seen as pioneers in New Retail. Alibaba’s Hema stores, for instance, double as retail outlets and distribution centers. Users scan barcodes throughout the store to see product info and recipe ideas, and since Alibaba knows everything that users have purchased, it gives quick options for users to reorder favorite items to be delivered to their homes. Amazon’s four star store and its Amazon Go supermarket will likely follow a similar approach.
Retailers That Embrace Data Will Survive the Retail Apocalypse
A slew of startups have emerged to help brick and mortar retailers compete with digitally native brands such as Amazon. The success of legacy retailers will depend on the readiness with which they embrace in-store personalization and hybrid online-offline systems. 65% of Americans still prefer to shop in person, even though over 90% of Americans also online shop. Retailers will need to meet customers both online and offline with data-driven discounts, personalization, and integrations (such as scanning an item on mobile in person to have it delivered). Those that do this successfully, will continue to own a share of the $175B retail industry; those that don’t, are likely to cede territory to their tech-first competitors.