eBOOK

April 2013

Save Our Stores; how creative technical innovation can save traditional retailers
A multitude of technologies stand ready to transform stores. But which ones are w for you? In this two part ebook, Mark Schroeder provides an overview of the opportunity and the tech tools available.
PART 1: WHERE WERE AT AND WHERE WEVE BEEN
Theres been a problem with writing this eBook: customer-facing in-store digital technologies have been moving faster than my drafting process! If I cant write fast enough to keep up, how do traditional retailers, with their hands already full of the daily challenges, find time to sift though the endless options, assess them properly, procure them, pilot them and finally implement them? It comes down to survival. You do what you must to survive, and traditional retail has surely reached the stage where it knows it must evolve and rapidly. I wont regurgitate the numbers about the move to ecommerce because they move even faster than technology and we all know that people have responded by the billions to the immediacy and value offered by ecommerce including through the second wind provided by mobile - and the trend continues to gather pace. Chances are your customers are carrying better interactive technology in their pockets and handbags than you have in your stores; its as if youre suddenly competing with all the worlds shops that can be accessed by your customers from the palm of their hand at a few keystrokes. The bricksand-mortar casualties are well documented. Consumers have become aware that they stand at the centre of a powerfully complex shopping universe which they have increasing control over. Offer relevance, instant price comparison, group buying deals, ephemeral discounts, recommendation engines effortless rewards, consumer reviews and multiple purchasing options are all commonplace. How do bricks-and-mortar retailers (lets called them BAM retailers) respond to this perfect storm of consumer-empowering technology? Foremost they need to embrace innovation, recognise that technology provides additional ways to forge customer relationships and make a sale. Busy over the past decade focussing on supply chain efficiencies while relying on price discounting to stimulate custom, many missed the fundamental shifts taking place in consumer behaviour. Innovation, creativity and insight seemed to have been discarded and then forgotten over the past twenty years by Australian BAM retailers who seemed spellbound by Harvey Normans success as the standout retailer of their generation. Instead they were led down a dangerous path, made soft by a time of booming consumerism which allowed lowest common denominator retail to work. They must now relearn the creative blind spots that allowed to find themselves so short of answers, because simply opening an ecommerce site isnt going to provide the silver bullet. Just ask David Jones.

Store

Connected

The lack of creativity and differentiation in the Australian retail market has become apparent. Australias reputation as a testing ground for new products hasnt translated into retail experimentation. International retailers and digital entrepreneurs have identified this market is wide open for. Interbrands general manager Andy Wright

INNOVATE NOW. connectedstore.com.au

Save Our Stores; how creative technical innovation can save traditional retailsers

Now that the novelty and initial shock of ecommerce is over, its time for retailers to stop blinking in the headlights and take the fight back to the new kid in town, build on and invest in their inherent advantages in satisfying human drivers of consumption, and identify ways in which technology can allow them to satisfy those drivers better than pureplay online retailers can. The options are stark: take calculated risks now or hand over the baton.

If you think about what made a good store in 1980, in 1990, and what makes a good store todaythey are all different. And while theyre driven by a certain biological constant, there are a series of other factors that are in a continual state of evolution. Paco Underhill, author of Why We Shop

Same as it ever was, but different.

Consumerism has slowed and people dont feel the same need to shop, however when they do they have more choices - technology is providing the means to shop anywhere, anytime, 24/7. If you want them to bother to go to a BAM store, youd better provide a good reason. Too few retailers successfully get to grip with the stores role as anything much more than a bunch of shelves, a roof and a sales counter. Finally its time to heed Paco Underhills almost decade-old call for experiential retail. What people want from their trip to the shops hasnt changed much: seduction, fun, instant gratification, discovery, service, sensory inspiration touch, sound and smell convenience, social interaction, local-ness. This contrasts markedly with online which can only offer a solitary, cerebral version of shopping. A poll by Harris Interactive recently underscored the limitation of online shopping. Of the 2,258 active online adults surveyed, 54% reported reduced face-to-face contact with friends and 31% said they felt lonelier. Something important is lost through the experience of communicating and shopping online and this provides opportunities for the role of stores as social enablers. In his influential book The Great Good Place, sociologist Ray Oldenburg wrote how social environments other than home and the workplace provide important anchors of community life. The general store and pub traditionally provide space for customers to hang out with or without making any (or additional) purchases. Recently, the caf industry has taken advantage of this need to great effect by providing space that Oldenberg says is determined most of all by its regular clientele and is marked by a playful mood, which contrasts with peoples more serious involvement in other spheres. Many retailers replaced that playfulness with grim efficiency or in some case (are you listening Harvey Norman?), just grimness.
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Of course, some important drivers are better served by ecommerce information, value (for now), convenience and comparison for example. Whilst BAM retailers must provide to these requirements as best they can by mimicking the techniques of their online counterparts (and well discuss the technologies to allow them to do so later), theres no point building their offer around them. In other words, BAM retailers must secure their place in the shoppers new world by building on their inherent strengths and exploiting onlines weaknesses whilst at the same time integrating its best tricks into the store experience. An example is location-based social media eg Facebook Places and Foursquare which leverage the communal aspects of shopping. It is this hybridised approach thats known as multi-channel or omni-channel retailing, the catch-all jargonsims that simply mean using digital tools to seamlessly bridge the gap between the online and offline worlds, creating user experiences that are interactive, socially integrated, personally tailored and ingrained into our everyday activities. Omnichannel provides multiple was to capture the transaction including: Search mobile/online, try/buy instore Search/try instore, buy online  Buy online and collect instore (click and collect eg Coles)  Buy instore and have it delivered (eg Sportsgirl)  Search/try instore, buy in the store via the website using touchscreens  Respond/buy anywhere via mobile (eg scan tag instore or QR code on a billboard) and have it delivered. Experiential technologies enhance in-store shopping with engaging, personalised environments, interactive interfaces, customerspecific responses, augmented reality and social media integration to ultimately create a bespoke and compelling experience for each individual consumer to ensure every visitor is a sale and every sale is an upsell.

Save Our Stores; how creative technical innovation can save traditional retailsers

Retail therapy is alive and well according to Paco Underhill. Online-only stores sometimes become real-life stores or pop-up shops because, as Vicki Cantrell of shop.org says the consumer wants the total experience. Depending on the category, the sensory aspects of retailing can be as important or more so than the operational and functional components. Underhill observed that most retail environments continue to be designed and operated by men for women. BAM retailers who embrace the emotional dimension of the shopping experience can regain the high ground by using without getting lost in technology.

Technology combining operational and marketing benefits demand new management approaches
One things for sure in retail, millions still go unspent due to abandoned purchases driven by out-of-stocks, limited staff assistance, long check-out processes and ineffective in-store marketing. Ready to help BAM retailers meet the ecommerce challenge is an array of technologies at varying degrees of maturity and uptake. Some offer operational improvements (faster checkout, smaller stores), some enhance marketing effectiveness (competitive response speed, geo-specific offers), and most combine both. BAMs need to work through the options, identify those most pertinent to their offering and heres where it gets really complex, figure out how to combine them to enhance rather than confuse the shoppers experience. This is going to take a willingness to energetically innovate, invest and experiment if further carnage is to be avoided. Sigificantly, retailers need to cut across internal silos in order to deploy these technologies. IT, Operations and marketing departments need to converge, just as the technologies have done. Historical budget and responsibility allocation models have prevented large retailers coming to grips with omni-channel retailing; entrenched management territories and practices need to be challenged.

The Information Buy-Way; integrating technology into the path to purchase

Conventional wisdom said that 70% of purchase decisions are made in-store but, driven by instantly accessible real time shopping information, an ever-growing share of decisions is being made online before the store is even entered. Now, consumers simply use a range of different tools and inputs whilst moving through the path to purchase, and many of these provide potential touchpoints for the retailer. According to Googles Zero Moments Of Truth (ZMOT) analysis, consumers on average research 10.4 pieces of content before making a purchase (note, this has increased 2-fold from 5.27 in 2010).

technology has turned the corner and smart retailers and brands are using it to put a human face back on the shopping experience. Piers Fawkes, Founder PSFK

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Save Our Stores; how creative technical innovation can save traditional retailsers

The key to identifying these touchpoints and applying the appropriate technology is to understand the shoppers journey now that the tradition funnel model has evolved to a much more complex but empowered model. Shopper Marketing as a range of connected disciplines targets shoppers at multiple touchpoints using data-driven insights from search to purchase to deliver the right message to the right person at the right time all along the shoppers Information Buy Way. Messaging throughout the journey need to be consistently delivered right through to the store using conventional and digital techniques. Doing so will help minimise the threat of showrooming, the name given when shoppers research and/or try on products instore tying up sales assistant time - and then seek out cheaper prices online, perhaps using a comparison shopping app on their mobile right in your store! Keep this in perspective; Shop-ability found the number of Showroomers is significantly less than the number of shoppers who research online and then buy in bricks and mortar stores. The issue in the US has seen chains increasingly giving staff tools to response to the threat - pricing/deal flexibility, layby, extended terms, home delivery, loyalty rewards etc - whereas Australian retailers have mostly just complained about it. It goes without saying the stores job is to convert that enquiry which further highlights the importance of taking your digital brand right through to store delivery.

THE PURCHASE JOURNEY HAS EVOLVED FROM THE FUNNEL... FROM THE FUNNEL

View TV or print ad

Go to store

Compare options

Choose best option

Buy Item

Join/align with brand

AWARENESS

CONSIDERATION

SELECTION

PURCHASE

LOYALTY

TO PURCHASE DECISION JOURNEY TO AN ECOSYSTEM OF SHOPPER TOUCHPOINTS with an ecosystem of shopper touchpoints
Visit Mall Send info to mobile Upload pic to social media

Interact with rich media ad

VISIT STORE

See marketing

RESEARCH PRODUCT

VISIT WEBSITE
Receive recommendation Check Reviews Customise Product

BUY PRODUCT

Earn Rewards

Discuss online

ACTIVATING AT THE THE MULTICHANNEL STORE

AWARE

The shift in consumer decision making means that marketers need to adjust their spending and view the change not as a loss of power over consumers but as an opportunity to be in the right place at the right time McKinsey Quarterly

MALL GENERATED OFFERS INTERNAL DIGITAL SIGNAGE OFFERS

CONSIDER

RECEIVE eNEWS

RESEARCH PRODUCT

INNOVATE NOW. connectedstore.com.au

WELCOMED VIA APP/BLUETOOTH ON ENTRY PURCHASE IN STORE

INTERACTIVE DIGITAL BROWSING SCAN TAGS VIEW DEMO VIDEOS, SPECS ETC CREATE WISHLIST DOWNLOAD CONTENT EMAIL/SMS/ TO SELF AND/OR OTHERS

ENGAGE

REDEEM MCOUPON

SIGNUP VIA TABLET FOR eNEWS, LOYALTY

BELONG

SOCIAL POSTS, FEEDBACK, REVIEW

SHARE

Save Our Stores; how creative technical innovation can save traditional retailsers

Retailers need to experiment with combined technology solutions with due care
The increasing use of technology to enhance store environments will soon give customers a reason to visit one brands outlet over another, based on what excites, engages and motivates them. Marketers who can use it effectively will be able to better connect the online with the offline so that customer engagement wont have to end when a retailers doors close. Retailers need to move ahead with both caution and commitment to the future. Experimentation will be the only way to find the optimal fit between online, mobile and store based technologies but they key will be to integrate around the needs of the customer. In Germany, a grocery store devoted to exploring these types of innovations the Real Future Store has been in operation since 2008 and is considered a success but it also shows that not asking customers to change their tried-andtrue habits needs to be done with care. For example, customers enjoyed the recipe kiosks and were enchanted by the ocean sounds that complemented the seafood department, but were less enthused about an option to identify themselves at the register using just a fingerprint. Nick Marfleet, chief technical officer at Blocks Global, a software company specialising in omni-channel retailing and customer experience solutions, points out that most retailers have built their different digital channels in isolation, and reactively rather than proactively. Fragmentation between the channels is causing friction in customers experiences, he says. Working through the range of options and testing the right combinations might sound tricky but lets not forget that this has been done by that most conservative of industries banking. We take the on-line banking and ATM channels for granted but their co-existence alongside physical branches has really been a journey into the unknown for the industry. While no single banking channel has proved capable of replacing the other, together and properly balanced they represent an effective solution that fits the diversity of customer needs and preferences.

be clear, the biggest challenges in even getting to test stage are usually to do with internal resourcing rather than designing a suitable platform. Most businesses spend 80% of their IT budget maintaining existing systems. How many retailers have an innovation budget, let alone a suitably qualified and empowered manager to drive cross departmental innovation? A major issue is project ownership; whilst these technologies serve marketing (and sometimes training) objectives, they involve the kind of technologies that are generally designed, procured, managed and even funded out of the IT department. Often the two functions work at cross purposes or even in opposition! Then there are the physical aspects of installing hardware, which normally involves Operations. A top-down commitment to co-ordinated planning and execution along with the allocation of sufficient personnel and funding is absolutely crucial in order to spend a lot of time effort and money on a poorly designed experiment thats destined to fail from the outset.
MARKETING

STORE OPERATIONS

Adapt or die. This time its real

CROSS So, although significant hurdles and DISCIPLINE complexities are involved, the imperative to PROJECT TEAM innovate is there. If it aint broke, dont fix it doesnt work in todays shopper marketing G/ NG YIN ISI world. As Jon Bird, BU AND H CEO of retail ad agency RC ME Ideaworks wrote recently Online is devastatingly effective as a transaction medium. Its a fast, efficient way to browse, compare and purchase. But it cant compete with TRAINING physical retail when it comes to delivering an experience. Retailers will need to invest more in creating experience centres, which should be always high-touch, often high-tech and designed to get talked about, like the Apple Stores all over the world. Customers may want it, efficiencies may demand it but technology alone will not save retailers in fact it will be the demise of some. But to truly become customer-centric and therefore relevant tomorrow, the smart use of tech tools will be the key. Retailers who dont master the application of technology to create emotional connections to their offering, enhance their operational effectiveness, and to make their physical stores relevant to their customer base are inviting their competitors through the front door.

N IG ES E D UT R O O ST FIT

IT

Overcoming the organisational barriers

Even though the potential applications and impacts of digital shopper media tools might
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Save Our Stores; how creative technical innovation can save traditional retailsers

Until this point I have deliberately avoided mentioning Apple stores, but its unavoidable. Few retailers would be unaware of the rewriting of just about every rulebook achieved by Apple - Apple stores make more money per square foot than any other U.S. retailer, almost doubling second place Tiffanys and generating $51m in each store on average each year. Getting a job at an Apple store in the US is statistically harder than getting into Harvard!

PART 2: FOUR TECHOLOGIES RETAILERS SHOULD BE LOOKING AT IF NOT ALREADY USING

1.  Digital merchandising coming of age signage and interactive Shoppers afflicted with ADD (Analog Deficit Disorder) see static signage and merchandising displays as nothing more than wallpaper, but technology can now transform these into dynamic, always current, responsive, informative and interactive displays.

Are Apple multi-channel retailers? Yes. Are their stores digitally engaging? Yes. Do they use technology to demonstrate product as well as to speed transactions? Yes. Do they provide an engaging, human and sensual shopping experience? You bet. And these guys werent even retailers. Traditional BAM retailers need to discover the will, develop the creative and technical capabilities, carve out budget and establish project management silos required to become multi-channel retailers in a hurry. As Wayne Gretzky once said, A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.

In the case of retail, its VERY clear where the puck is heading and how fast its moving.

When I attended New Yorks National Retail Federation conference back in 2005, digital signage was the hot topic. Although now well established internationally, digital displays are just starting to make an impact in Australia where Frost & Sullivan expected the local industry to grow at 12% pa, and be worth $58 million in 2013. Digital merchandising technology is not new or particularly challenging; media players are solid-state dependable and display screens are light, thin, energy-efficient and affordable, even at high definition. To date, most digital signage has been passive, but this is quickly changing as interactive screens and tablets become cheap and reliable. This is seeing two channels of digital merchandising emerge:

Technology has become too embedded in the fabric of business and too critical for competitive performance to be left to the IT function above. McKinsey Quarterly: Elevating technology on the boardroom agenda

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Save Our Stores; how creative technical innovation can save traditional retailsers

large broadcast displays are being integrated into the store design itself, mounted in walls, buttresses and aisle-ends as well as becoming walls themselves - video walls. These are being supplemented by smaller screens and tablets for a more personal interaction at shelf level, in tables or even worn by staff! The best software can manage multiple screen formats and channels of content on the same platform. British fashion brand Burberry launched a range by streaming live catwalk shows into stores worldwide, displayed on video walls. Customers could purchase items from the shows using tablets located around the store. Voice and sensory-activated interactive screens can display promotions until they register a nearby shopper and then prompt them to explore information about the products around them. Reaching out and grabbing attention with engaging content and arresting offers still has its foundations in firm logic; in the Journal of Consumer Research, Nielsen reports that only 26% of shopping list items are branded, 24% of grocery purchases are unplanned and 75% of shoppers still expect to make unplanned purchases. Impactful selling in the store is no less important today and as Nielsen has widely reported, digital signage is an affective way to achieve it. In fact Nielsen has published studies across a number of networks (largely in the US) notably WalMarts where ad recall topped 32% and approval was 64%. In terms of sales lift on promoted product, Walmarts creative director Andy Johnson reported 7% lift in Electronics, 13% in food and 28% in health and beauty, and response to offers saw a 7% lift on a mature item boost, 6% on price reductions, 9% on launch and 18% on seasonal push. Quick Service Restaurants have reported 5% lifts rising up to 20% in food courts. Ernesto Smith, Burger Kings senior director of U.S. merchandising claims an ROI payback at Burger King stores of 9 to 12 months. With digital, from the get-go its just a much better image of the product and [theres] much more appetite appeal. Because of its high visibility, digital signage makes for an effective centrepiece around which a range of technical tools can be oriented screen content not only providing atmosphere and selling messages, but also directing customers to the other technologies on offer. Ralph Lauren used interactive digital window displays which enabled customers to buy
INNOVATE NOW. connectedstore.com.au

Digital shelf edge screens for promotion and pricing clothes by scanning their phone over the display, tuning the store into a 24-hour proposition. Then there are the operational benefits: content (perhaps including pricing) tailored to each store location, instant updates and response to competitor offers, the elimination of paper PoS (along with its freight costs, carbon footprint and display compliance issues) and no more labour costs and OHS risks associated with hanging posters. Digital shelf-edge pricing can be updated in an unlimited number of locations at the click of a button, eliminating labour-intensive processes.

Interactive touching infinite possibilities Touchscreens seemed so exotic so recently when they were only found in clunky kiosks, and then came the iPad. And now you can buy one with the latest Android operating system for under $300 and tablets are expected to outsell both desktops and laptops in the immediate future. This opens up a world of interactive possibilities for store operators. I was involved in providing touch hardware for a manchester brands store-within-a-store rollouts where instead of shelves full of bedlinen which constantly needed tidying after every customer interaction, touchscreens allowed them to browse from a bigger range of products and view their shortlisted preferences in a room setting. To achieve the same without digital would have taken a superstore. Touchscreens open up a whole range of other interactions; shoppers can email product details to themselves, join mailing lists, share information and transact on screens paced into the store.

Adidas digital merchandising; more colourways, less space

Save Our Stores; how creative technical innovation can save traditional retailsers

Additionally, interactive screens have an important hidden benefit they track every touch, silently building data profiles about customer interaction and providing realtime feedback reports just like Adwords.such data is retail gold. Instant expertise everywhere Thanks to online pre-shopping research, theres a good chance a customer knows more about a product than your store people - a Motorola found that 55% of store staff thought so. Tablets loaded with the right interactive information and videos can be used to guide customers through complex information, providing product comparison and demonstrations that would be impractical otherwise. Reliance on staff knowledge is reduced and the selling process is better managed. Accessing instant knowledge means that sales staff can de deployed across departments. Additionally, if the product is not in stock, the tablet can be used to place and order and even receive payment on the spot, reducing the chance of a lost sale. Nearly 25% of surveyed shoppers said they would be very likely to take advantage of a sales associate using a handheld payment terminal to complete their purchase, compared to only 9% who would be very likely to use their own mobile phone to scan their items and process payment without assistance. When shoppers received guidance from a staff-member armed with a tablet, 43% reported an improved shopping experience.

Borsheims jewellery; staff trigger displays that match what a customer is looking at.

Monetising retail screen networks icing on the cake?

What will the new digital store look like? Digital merchandising has the potential to profoundly alter the format and the function of the store. If product ranges can be browsed on a screen, if augmented reality means customers can try on a range of colours without changing the garment then why hold all that stock, and why rent all that space? If selling displays are activated when a customer touches a product, if customers can learn everything there is to know about a product by navigating a digital display, if they can self scan and checkout and if ecommerce-level fulfilment efficiencies mean the purchase can be home delivered the next or even the same daywhy have all those staff? Given that a Cisco study found that 71% of shoppers want to access digital content instore, and retailer touchscreens and shopper mobile devices are the preferred options, integrating these technologies is not likely to make a retailer unpopular.
INNOVATE NOW. connectedstore.com.au

Digital signage networks are yet to be fully accepted as a commercial medium eg funded by the sale of advertising airtime to suppliers, although it is happening slowly. For retailers the idea is attractive brands pay to reach their shoppers close to decision-time. Its a great way to monitise the retailers store traffic; in the US a hit TV show may draw 20 million viewers. Walmart, in contrast, aggregates 150 million customers every week. However, generally brands have been slow to take up the medium for a range of reasons, amongst them: practical challenges of different ad format requirements on different screen networks; lack of understanding and acceptance by media buyers; and reticence to alter the terms of trade already in place between the retailer and its brands. This is changing and big FMCG businesses including Procter & Gamble now allocate significant budget to in-store media in the US and networks like Walmarts earn significant revenues from suppliers advertising on its screens. At the niche end there are also successes. Lord & Taylor the oldest upscale department store chain in the US, has been successful in selling airtime to its brands including Chanel and Dolce & Gabbana. Said Daniel Ponti who runs the program, We rent screens (airtime) monthly or weekly, and they have more than doubled their net worth in less than six months.

Save Our Stores; how creative technical innovation can save traditional retailsers

2.  Mobile all the worlds stores right in your handand nearly as many applications Mobiles are anticipated to influence 1 in every 5 retail sales by 2016. Smartphone penetration in Australia is nearing 60%. Mobiles are big news for in-store interactive with retail apps, comparative shopping sites, price-finding sites, geolocation marketing, barcode scanning all here to stay. Our girls are on the phones 24/7 and we should be, too. Said fashion chain Sportsgirl groups strategic brand manager, Prue Thomas. Shoppers are using their smartphones to make in-store experiences even better and smart retailers are helping them in all sorts of ways. Mobile usage trends indicate that todays consumers are more likely to use smartphones, tablets, and mobile shopping apps to enhance all facets of the shopping experience online and off by gathering information about products, conducting price comparisons, social shopping with friends, and more. They provide instant access to the shopper, and a medium for the retailer to deliver tailored promotional messages directly. Some use apps to drive in-store traffic using real world redemption mechanics. Mobiles represent considerable challenges as well as opportunities for traditional retailers. Shopping apps usually incorporate M-Commerce; shopping directly from mobile devices is growing rapidly although it still lags way behind ecommerce, despite increasing mobile traffic. To put mobile usage into perspective just 20 percent of the average American users time on a smartphone or tablet is spent on the mobile Web. Instead, gaming apps predominate, followed by Facebook, according to Flurry Analytics. Just 8% is spent on Utility including shopping. In the US, the trend of using mobiles in the store is well established and significant. Nielsen found 63% of mobile shoppers have compared prices with their smartphone while shopping in-store or on their home computer. Owning a tablet also makes it more likely youll use it for product research before making a purchase (68%), and for reading online reviews (53%).

this 60 year old technology is making its way back into the limelight; according to ScanLife, mobile barcode scanning was up 700% in 2010. QR codes are a specialized version of a bar code intended to be scanned by the camera on a mobile phone, providing a fast and easy way to transfer information. The phone uses a reader application to recognize the QR code and convert it to a small amount of data (i.e. the payload), most commonly a URL pointing to a mobile web page containing a link to a shopping app, detailed information about the product, its provenance, applications, variants, complimentary products and product reviews.

Just whilst our Australian retailers who have been pretty abysmal in e-commerce - are starting to invest gazillions of dollars into this stuff guess what? The internet or the web aint really that relevant anymore. Because if you walk out on the street the world is re-platforming again on to smartphones. Peter Williams, Deloitte Digital

Barcode scanning Mobile barcode scanning apps have seeing

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Save Our Stores; how creative technical innovation can save traditional retailsers

Barcode scanning apps are also being used to retrieve discounts or coupons and enter contests. For example, Nine West ran a campaign that allowed customers to scan 2-D bar codes appearing on in-store signage and product packaging. If the customer texts the image to a designated phone number, they are entered into a contest to win apparel and other prizes It goes without saying that QR codes can easily be added to digital signage content, making this one of the simplest forms of platform convergence available.

Time Spent in Shopping Apps per Category

Growth inTime Spent per Shopping App Category

Creative integration of a QR code

Apps and mortar retailing Apps are big with The Wall Street Journal recently estimating annual revenue of $25 billion and on average 7.9 apps are launched every day. Shopper apps have gone from being retails the next big thing to being ho-hum in a matter of a year or two, some doing little more than good Mcommerce sites. They come in various guises and according to mobile analytic leader Flurry Analytics, usage is evenly spread around the different approaches: Flurrys study explored the usage of shopping apps among more than 1,800 consumers on both iOS and Android over a year ending in December 2012. Its heartening to note that retailers saw the greatest increase in time spent, from 15% in 2011 to 27% in 2012 and while overall app usage grew by 274%, retailer apps exploded by 525%. As Flurry comments This suggests that retailers are beginning to
INNOVATE NOW. connectedstore.com.au

better respond to the tectonic shift created by the collision of online- meeting offline-shopping through mobile apps. According to a recent IBM report, more than 18% of shoppers used a smartphone or tablet to access a retailers website on Cyber Monday in 2012, an increase of 70% over 2011. Mobile made up 13% of total web-based purchases. Theres an increasingly standardised approach to many retailers apps: of course the store is at the core (store locator/contact, products, details, prices, wishlist, cart, checkout), and then come the bells and whistles: sharing, scanning tools, rcoupons, reviews and so on . Some allow layby, loyalty points check, and order progress updates. Walmart is testing a feature called Scan & Go that would you scan can items as you shop, so you can go quickly through self-checkout.
10

Save Our Stores; how creative technical innovation can save traditional retailsers

Woolworths was amongst the first major Australian retailers to launch an app which included the ability to scan a products barcode, add it to their shopping list, and then order and pay for their groceries, which are home delivered. Since then it has had more than 1.644 million downloads, according to the groups corporate affairs manager Clare Buchanan. Predictably Coles was not far behind, adding recipes, shopping list tools, and integrating QR codes into promotional material. Its probably true to say that meaningfully integrating the in-store experience with mobile - surely a pre-requisite of true multichannelling - is rarely achieved, the best example perhaps being rewards-oriented Shopkick, discussed later. Shopping list apps favoured by supermarkets take another approach there are dozens which allow you to draw up and share lists, tick them off, create favourites and set regular reminders etc. Mostly they are designed to enhance the store-based shopping experience. As well as facilitating mcommerce shopping, there are many apps that help users compare prices you simply scan a barcode (or even a book or DVD cover) and it delivers the best online and local price it can find. Some link to reviews and retailer offers, listing nearby stores and allowing listing and sharing. Google has entered the sector with Google Shopper and in Australia comparison leaders include GetPrice and Australian Shopping. Lassoo lets users search current retail catalogues. Discount department store chain Big Ws mobile app allows users to scan a product in any competitors store and get the comparable price at Big W. Most local comparison apps lack the same level of coverage as US sites and therefore usefulness (unless you want to order merchandise online from the US) but its safe to assume theyll get there. This will be a key battlefront for traditional retailers who will have to work ever harder to compete. Big Ws approach is illuminating We are so confident that you wont find any stocked item for less anywhere else that we want our customers to check for themselves with the BIG W App price scanner, Director Julie Coates has said.

asset, providing new tools to drive traffic. Imagine passing by your favourite retailer. a geotargeted alert is sent to your phone with news that a hot new collection just arrived. That prompts you to stop in the store and when you arrive, your personal shopper is waiting with your sizes and colours. Thats the scenario described by eBays Veronica Katz and its now being used daily by retailers. A small gps, bluetooth, audio or wifi unit installed in the store can communicate with smartphones in the immediate area which is called a geo-fence, sending alerts (push messages) when users walk near or enter the store. The idea is to deliver deals tailored to the potential customers location and possibly purchase history/tastes. When shoppers download an app, theyll choose between receiving push messages or not. Consumers can opt-in to receiving text messages in a variety of waysat the store, online, via textmessage, mobile websites or on Facebook. Proximity makes mobile messaging locally measurable ie store by store and it can even provide traffic data by tracking the number and movement patterns of individual handsets more on that below. The range is small so it is ideal for malls, department stores, retail outlets and locations with pass-by-foot traffic. The smarter apps run in the background on your phone, meaning you dont need to open it at the right times for it to work it and it wont wear down your phone battery by constantly running GPS. The latest version of Walmarts shopping app includes an in-store mode, a key feature aimed at keeping Walmart shoppers buying from Walmart, even when what they want isnt in the store and a rival outlet is just a few taps away in the palm of their hands. Two weeks after Walmart launched in-store mode with its app, roughly 60% of its shoppers opted to use it. Moreover, about 12% of the sales that come through the app are coming from customers who are inside a store and using in-store mode. In 2010 retailers American Eagle Outfitters and REI participated in a pilot program by geolocation app provider ShopAlerts that produced astonishingly high results: 65% of shoppers that received a text message ended up purchasing a product. 60% of participants found the messages to be innovative, 79%
11

Geolocation - place-based tools One of the most powerful assets a traditional retailer has is stores on the ground. Geolocation technology leverages this
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Save Our Stores; how creative technical innovation can save traditional retailsers

said it increased their likelihood to visit a store and 73% would definitely or probably use the service in the future (as reported on Techcrunch). News Ltds Australian consumer review website TrueLocal app alerts shoppers when they are near a location that they are interested in or when the brand is offering sales and specials.

Check-in apps Some geolocation services let users check in when they stop at a store, bar, restaurant, park, event place or supermarket. Some allow users to connect with friends and alert them of their location. Checkin apps use geo-specifics to allow retailers to reward people for visiting their stores. The rewards are the usual benefits of social media: Fun, Fame or Fortune. Foursquare hit it big when it pioneered the gamification of loyalty by creating rewards and notoriety for regular customers of participating businesses it claims to have more than 10 million users with over three million check-ins taking place every day. Then Facebook came out with a check-in system of their own, as did Google and others including Pepsi! As the novelty seems to be over, Foursquare is moving its focus to a supplier of place data, leveraging its place database of over 50 million points. Nonethless its rumoured to be in trouble. Enter Shopkick with 4 million users in the US so far and ranked the fourth top shopping app by Nielsen in June 2012. Ultrasonic transmitters installed in a shop identify users ie it does not require the user to actively check in but the ShopKick app, running in the background of their smartphone, provides rewards just for being there and alerts them to special deals. Shopkick is one of the most used shopping apps, with the average customer spending three hours per month with the app. Still new entrants introduce new models Shopular drew 250,000 downloads in three weeks following launch last year, and was instantly the top shopping app on the Android platform. It integrates coupons in a new way. Although geo-location and hyperlocal marketing are important trends, shoppers

should not expect all of their favourite brands to suddenly send alerts as they walk through town, even in the US. According to Forrester Research the perfect model is still elusive and location-based ads represent a tiny percentage of mobile marketing expenditure. Its still nascent, but it has a lot of potential, Julie Ask mobile analyst at Forrester said. Being contextual and personal is the holy grail of mobile, and location is one of those aspects. But the mechanics of how this is going to work and how effective its going to be get a bit murky. One last thing on apps before you rush off to commission yours, remember you have to get people to download it! It may not be enough simply to create a functional, compelling, useful app; Adobe research found that brand likability is a key factor in driving downloads, with some 60% of consumers claiming they only download apps from their favourite stores.

E-commerce and brick-and-mortar will continue to meld together, and user location will be central to it. Commerce is commerce, and your location is the same whether youre online or offline. Location will be key to determining if a consumer will be directed to buy from your e-commerce site or your local brick-and-mortar store. There may be more cross-branding between realworld stores based on location. Rob Friedman, Digital Element

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Save Our Stores; how creative technical innovation can save traditional retailsers

Guess that counts out Harvey Norman! 3. New payment platforms Perhaps less sexy at present than some of the other technologies discussed here, Near Field Communications (NFC) offers ordering and payment technologies which allow customers to self-order and checkout. In Australia, contactless credit card payments are becoming common (mostly Mastercards PayPass), speeding the checkout process, but the technology has the ability to revolutionise point-of-sale systems well beyond this point. Products like Google Wallet let consumers store their bank, loyalty and other cards on their mobile phone which they can use at NFC checkouts to pay, transfer funds and accrue loyalty rewards; based on prior ordering history add-on sales may be suggested and relevant promotional offers delivered. As Jon Bird of Ideaworks put it now my 16 year-old daughter can accept a credit card as payment for babysitting duties

Square

bundle on Samsungs Galaxy S phone, IPhone doesnt have NFC, though Samsung, Android and HTC devices do. Some experts say contactless payments wont take off here until the iPhone one of Australias most popular phones ships with NFC capabilities. The infancy of the sector can be gauged by the fact that Coles is trialling a Coles MasterCard Mobile Wallet in conjunction with GE Capital Australia, Vodafone, MasterCard and Gemalto . among a sample group of just 60 shoppers. Westpac research showed one in five Australians want more banking applications on their smartphones and the banks have been busy with payment app development however issues remain to be solved. Commonwealth Banks Kaching app - because the iPhone has no NFC - required customers to buy a special case the allows the app to work, and even then only on PayPass PoS terminals. However, Commbank also offers Bump which allows people to pay each other by bumping phones and mid last year announced a whole ecosystem called Pi which uses its own contactless, wireless PoS terminal, quaintly called Albert which allows shoppers to make credit/debit card payments via swipe, NFC, and PIN transaction. Combining the functionality of eftpos terminals with the features of smartphones, it pitches the bank directly against EFTPOS. Merchant apps will be developed on the Pi software development framework and hosted in a CommBank app store and youll have to be a Commonwealth customer to use it.

There are some very impressive NFC related payment ecosystems emerging in the US eg Square whose tiny Card Reader plugs into the headphone jack of an iPhone, iPad, or Android device and allows for credit card payments through Square apps. Square charges a rate of 2.75% per swipe. Squares technology had been adopted by over two million individuals and businesses in the US. In Australia the complexity of designing an entirely new payment ecosystem has seen slow progress. In the mix are banks, the EFTPOS organisation, the credit card companies VISA and Mastercard, regulators such as APRA and IT companies Apple and Google. Eftpos chief executive Bruce Mansfield says it is working on new payment platforms for the Australian market, including a mobile widget that will be designed as a funding source within a third partys wallet. Hardware platforms are still patchy and few consumers have access to NFC: Visa plans to
INNOVATE NOW. connectedstore.com.au

Commbanks Albert terminal and Kaching app

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Save Our Stores; how creative technical innovation can save traditional retailsers

4. The futureoops, its here Augmented reality Last year Google teased us with Project Glass, those futuristic glasses that overlay the users field of vision with digital images. Known as Augmented Reality (AR), this technology plays with the digital superimposed on the real world. Complicated at the back end and still in its early stages, its retail applications are becoming evident as is its potential impact: the value of the global Augmented Reality market was approximately $40 million in 2011 and Juniper Research is estimating the market will hit about $15 billion by 2015. One of the most obvious retail applications is the virtual changing room which has been used to allow people to virtually try on glasses, jewellery and fashion. Shoppers stand in front of a camera-equipped touchscreen in the store (or indeed their computer at home!) and select merchandise images that are superimposed intelligently on their image. Body-mapping technology is being used in US department stores like Bloomingdales - 3D scanning machines identify your proportions and spit out a list of items that will fit and where to get them. Its not a perfect world but you get a sense of how something fits and looks, says The Iconics IT head Eben Miller. Other examples of AR being used in retail include a Japanese app that allowed customers to virtually catch butterflies that appear only in certain retail premises. When they do, they collect and use them to earn coupons. Lego, meanwhile, has introduced augmented reality displays to its own-brand stores, which enable customers to hold a product box up

to a screen to activate an animation that reveals what the model looks like when built. Lego director Bernd Larsen Linde says that customers who engage with them are spending between 20-40% more than customers who dont. Ikea recently announced the launch of an augmented reality catalogues for 2013 which allow your smartphone to see inside the furniture on the pages. Closer to home, Coopers applied AR to an FMCG instant win promotional concept by branding cases of Coopers Clear with AR codes. By scanning the code with their phone, buyers were able to view prizes in 3D. The app was downloaded in excess of 2,000 times and Coopers received over 7,000 entries from it. CommBank uses AR in their property app which has achieved over 100,000 downloads encouraged by AR print advertisements which trigger 3D animations of a virtual town to illustrated the features of the app including use augmented reality to search for properties at the users current location to get a real world view of a prospective home. A fascinating use of AR is virtual stores which of course compared to bricks and mortar stores cost almost nothing to create. Airwalk shoes created what it called Invisible Pop Up Stores which saw shoppers being able to access product in a virtual store geo-fenced around specific locations: http://www. youtube.com/watch?v=4erNe_ NpdyE In South Korea, Tescos HomePlus chain there has been testing if commuters will shop virtually on the way home from work via QR codes in a subway station, where scanned items are then delivered to commuters homes. Virtual stores have shown their potential to the extent that Chinese company Yihaodian reported it has secured government approval to open 1,000 augmented reality supermarkets. How long before we see a virtual mall? As well as potentially changing the very nature of stores, AR also poses more dangers for traditional stores in the next couple of years, customers will be able to try on clothes and products at home smelling, hearing and feeling the fabric as if it were real. AR provider Holitions Lynne Murray calls AR clothing the holy grail of augmented retail experiences. We are pursuing active ways in which the other senses can be integrated into augmented spaces, whether that be touch or sound, Murray says, were looking at how to include haptic interfaces to our experiences to allow us to communicate multiple sensory experiences.

A virtual store

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Save Our Stores; how creative technical innovation can save traditional retailsers

Customer recognition and Movement Tracking Big brother is here to serve you! Intel partnered recently with Procter & Gamble to integrate facial recognition into digital signage placed at the end of store aisles. When a customer is within 10 feet of one of these signs, it reacts by gathering metrics such as the persons gender and age, then trigger messages with relevant. A startup called Facedeals uses Facebook photos to recognise individuals: shoppers access the Facedeals app through their Facebook account, then facial recognition cameras installed at the store recognize their face and check them in at the location. This data is then used to identify the shopper and deliver customised offers based on their Like history. Since only about 20-30% of shoppers actually buy from a store, Indoor Position System (IPS) have been developed to allow retailers to track the rest of the traffic to see how they behave. Generally small inexpensive sensor nodes are installed in the store simply by connecting power and internet. IPSs, some of which integrate geolocation push technologies, monitor customer movements using a couple of different approaches: WiFi location: IPS allows pinpoint tracking of any Wi-Fi-enabled device, such as a smartphone or tablet, within a building. The sensors capture the unique identification number of each device (similar to a computers IP address) and track its movement throughout the stores. Bluetooth: Very precise location can be achieved in a specific area, such as inside a retail store, using beacons that send out signals via Bluetooth. The beacons, smaller than a cellphone, are placed every few meters and can communicate with any mobile device equipped with Bluetooth 4.0, the newest version of the standard. Bluetooth is also an excellent way to deliver content and once customers have opted in, they are recognised and welcomed on subsequent visits - the technology knows to deliver them a new offer that theyve never received before no matter how recently they visited the store. It should be noted that IPSs are attracting adverse attention from privacy advocates. It is important to collect this mobile

commerce data, without overstepping boundaries that would lead consumers to feel that their trust has been abused. If all this sounds experimental and of no concern to todays pragmatically focused retailer, think again. Much of this technology has been around for a few years now and smart retailers have been working hard for to get their solutions right, knowing that retailers will soon become as much defined by solution as by physical presence.

In Australia you have the number one market of individuals who can absorb technology in the world. The number one app downloaders per capita are right here, number one users of video online - right here and number one users of online banking are here. But we just do not see that happening in the retail space. Peter Williams, Deloitte Digital

TAKING PRACTICAL STEPS TOWARDS INNOVATION

How on earth can a busy retailer deal with all this new technology that not only moves at breathtaking speed, it also cuts right across different department disciplines? The short answer is hasten slowly. The wrong way is to start calling in vendors to make presentations to see whats out there; youll simply get confused, wasting a lot of your time and theirs. And please dont add to the enormous pile of badly planned, poorly executed, inadequately assessed, underfunded and unloved pilots that we see every year theres no better way to

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Save Our Stores; how creative technical innovation can save traditional retailsers

turn your organisation off the whole idea of applying new technologies. The right way is to take a carefully managed, strategic approach. If you dont have a multidisciplinary team with broad knowledge of the various technologies, experience with a range of vendors and time of their hands, its advisable to bring in external expertise to help you get to the right starting line. Over several years, several pilots and many non-starts. Connected Store has developed a staged planning methodology which works through structured process, each stage with defined objectives and outcomes. Bridging the marketing, retail and technology dimensions, the process is designed to provide all the information necessary to engage with vendors in a meaningful way that minimise risks and maximises organisational and strategic alignment necessary to ensure the successful implementation of new initiatives. For more information contact Mark@connectedstore.com.au 0417 371 071 Connectedstore.com.au

About Mark Schroeder Mark has spent 30 years in communications and marketing, including 11 years at the head of one of Australias biggest specialist retail advertising agencies where he worked with several top national retail chains. For 6 years he has specialised in customer-facing technologies as CEO of Playcom, working with clients including Grand Hyatt, Chemist Warehouse, Movenpick/ Nestle, Specialty Fashion Group, Merivale, Jones The Grocer and many others, deploying a wide range of technologies across hundreds of sites. He also runs Swordfish Marketing and Advertising and blogs about marketing-related ethics and sustainability at marketingheart. wordpress.com

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