Fast adapting customers are leaving obstinate retailers in droves. Hence the headlines dominating retail news portals are about thousands of retail stores closing their doors. That’s happening because retail customers are adapting quickly and easily to the digital world of today.
Many retailers, on the other hand, aren’t keeping up with the changing buying habits of their customers. Indeed, they are ignorant at best and stubborn to keep on doing what they did for decades…
The sad result is that retail brands are disappearing. The Centre of Retail Research reports that during the first eight months of 2017, 35 companies failed in the UK, closing 1,194 stores and affecting 10,611 workers.
There may be many reasons for retailers closing down. However, it may be because the retailers fail to react to the opportunities and threats of the digitized world…
How fast adapting customers are on top of the world
Tech savvy retail customers have never had it better. It doesn’t matter whether they are shopping online or at their favourite Bricks and Mortar store. They can do either shopping effortlessly. In fact, retail customers can shop how and wherever they want in the omni-retail channel. The benefits for adapting retail customers in the omni-retail channel are:
Omni-channel retail is customer focused. It is a powerful strategy adopted by retailers for improving customer experience, says Brad Arsenault (FithQuadrant).
Retail customers expect the same basic brand experience across all channels. Omni-channel retail allows customers to buy from any channel.
The fast adapting customers feel more valued. They have a seamless journey from online to offline and is more likely to return to the brand who they feel gives them a fully personalised experience.
Retail customers in the digital world expect every retailer to offer them the greatest shopping experience they’ve ever had. If retailers can’t achieve that, they’ll probably soon close their doors (if they haven’t already done so). As result thereof, retailers should change the way they’re doing business to keep up with their fast adapting customers, or perish…
How can retailers keep up with their fast adapting customers?
Start right now to change the direction of your business, a turnaround – 180 degrees. Yes, you should get out of that box (the one you’ve been hiding in for decades…), and think out of the box! More importantly, you should be the revolutionary leader (or at least appoint one). Disrupt and destroy the old culture of your business. Burn your vision and mission statements. Therefore, appoint leaders that are humble, adaptable, visionary and engaged. Let go of the rest…
Then, find out what shopping experience your customers most want. And give it to them!
Is voice-activated shopping the digital outcome that retailers need to offer their customers an effortless shopping experience? Or is it taking AI and machine learning a step too far?
Humans are what we are because of our ability to speak with one another, to listen what’s said, to comprehend the info and to react on what we perceive. We also like to be part of a group, to socialize. Said MacFarlane 2, (2014): “Because our evolutionary heritage provides us with genetic material open to forces and influences from the physical environment, we also require a social environment for brain development and for the acquisition of skills such as speech and written communication.”
So we learn from others and learn others by using our voices. But that is now changing. Now, after millions of years of being humans, we’re learning machines how to listen to voices, to recognize and analyze the message and then to respond in a ‘sensible’ way.
So, if you’re still able to speak, say Hallo! to voice-activated shopping. Because, according to Hailee Sosnowski’s post in DigitalCommerce, voice search is projected to account for half of online searches by 2020.
What is Voice-Activated Shopping?
Voice-activated shopping (VAS) means that a customer can use his or her natural voice to control technology whilst shopping. There is no need to touch anything and the customers can do voice-activated shopping by using their smartphones. VAS is already adopted by some retailers.
Laura Agadoni (JLL) remarked the following about voice-activated shopping: “Right now it’s being used for ordering groceries, pizza or coffee. For consumers there’s no driving to stores, logging onto a computer, or pulling out smartphones to open an app. They simply say what they want to one of the new voice activated devices coming onto the market from the likes of Google and Amazon.”
Take the example of Alexa, the AI-based personal assistant from Amazon. With Alexa in your kitchen, adding an item to your Ocado order is a breeze, says Holly Godwin (OcadoTechnology). Run out of biscuits and have a friend coming for tea? – Just tell Alexa “Alexa, ask Ocado to add biscuits”.
Alexa converts the audio stream into a command (for example, “add to trolley”) and a search term (such as “biscuits”). Alexa most probably will find exactly what you want, because Ocado has ‘trained’ Alexa to recognize the top 15,000 commonly search terms from Ocado.com.
How will Voice-Activated Shopping affect the retail market?
In today’s age of digital driven technology, it’s no shame to ask how voice-activated shopping may further disrupt the retail market. However, there is no consensus about what the opportunities or challenges of VAS are for retailers.
More sales. Amazon found that sales of its Echo devices increased nine fold compared to 2015. Also, they also spend 10% more and their buying frequency went up by 6%.
Shopping for customers is now effortless. VAS allows householders to buy groceries just by talking to the fridge.
Gathering data for an omnichannel approach. Voice-enablement could be the unifying force omnichannel has been missing.
Investing for the future. It’s been reported that 55% of 13- to 18-year-olds use voice search every day, so clearly there is an appetite (Emma Lyons, Campaign US).
Speed of ordering. The ability to immediately order household essentials is the most obvious use for voice-enabled retail.
Challenges using VAS
“It’s still quite a new market and quite complex, so it requires advice and people will want to come talk to someone who can explain how it works, so we see it as an opportunity in that respect,” according to Grace Bowen, RetailWeek.com.
Tailoring search algorithms for Voice-enablement. “We know that shoppers will not go past the second or third page of a Google search result – voice will be like that on steroids” (Luke Tugby Retail Week).
Acceptance of VAS. Older generations may take a bit more convincing to adopt voice-activated technology.
Universal use of VAS in retail. A big question is whether voice recognition technology can work for all retail. What about fashion? Consumers can’t very well order a “black dress,” for example, and get exactly what they want, wonders Laura Agadoni (JJL).
Speech has been argued to be the most natural and comfortable way to communicate 1. So it came as no surprise that it is now integrated in AI technology. So, what do commentators say about voice-activated shopping technology?
“Voice recognition technology is the next iteration of online shopping as consumers increasingly prize ways to complete chores or get the information they need easily and quickly,” Laura Agadoni (JJL).
“The convenience of voice search makes it instantly attractive to consumers, but it also introduces new complexities that retailers who want to survive the age of voice must fully understand,” Hailee Sosnowski, paid search planner, BKV (DigitalCommerce360.com).
My advice? Are your business performing as planned? If not, revisit your business’s digital marketing plan and identify the problem areas. If the most important reason why your business is losing sales is that your customers seeks VAS, then do VAS!
“Marketing automation is growing – sizzling fast, announced Michael Jans recently in his blog AgencyRevolution.com. In fact, there are eleven times more B-B companies using marketing automation than were in 2011 (VBInsight). Most visible marketing automation for retail customers are chatbots.
Advancements in artificial intelligence (AI), coupled with the proliferation of messaging apps, are fuelling the development of chatbots. Artificially intelligent chatbots or conversational agents can be used to automate the interaction between a company and customer.
What is Marketing Automation?
Marketing automation, in general, complements interactive and direct marketing with the help of automation and further on in CRM and email marketing 4. The goal of marketing automation is to target the right customer with the right content 1. To achieve this goal, the optimization of customer data – e.g. name, contact information, transactional data is critical. Consequently customers can be targeted with the right message. Therefore marketing automation allows marketers to respond instantly to identified opportunities in real-time even outside the marketing plan.
This use of marketing intelligence provides valuable management insights to markets, customers and campaigns and leads to enhanced efficiency. Also, this same use of data enables customers to receive personalized, relevant messages and offers at appropriate times. As result of this, customer experience is improved significantly. Indeed, Sarah Burke of Spokal concurs: “Marketing automation is a super effective tool when it’s used to supplement our marketing efforts in an attempt to make the lives of our customers even better”.
However, marketing automation is facilitated by Artificial Intelligence.
Techopedia defines Artificial intelligence (AI) as an area of computer science that emphasizes the creation of intelligent machines that work and reacts like humans. AI is becoming part of our lives ever more. Today we can ask a computer questions, sit back while semi-autonomous cars negotiate traffic, and use smartphones to translate speech or printed text across most languages. For AI to work properly, the machines or robots needed to be ‘learned’.
Machine learning is the process that offers the data necessary for a machine to learn and adapt when exposed to new data. Nello Cristianini suggests we should think of it as training a machine: “It depends on the other two methods by reading mined data, creating a new algorithm through AI, and then updating current algorithms accordingly to “learn” a new task.”
For most retailers and marketers in the digital economy, the intelligent ‘machines’ of choice are chatbots. However, chatbots are dependent on a host of interconnected and emerging technologies, many of which rely on machine learning and require massive amounts of data 3.
The use of data to enable Marketing Automation
Douw G Steyn, owner of the Bricks2Clicks (this blog) had this to say about Big Data: “One of the fall outs of the digitization of business is the massive amount of data that are everywhere. Every time a customer makes a purchase online or registers online, data is generated. The data can potentially tell you almost everything about consumers.”
Randy Bean in MITSloan commented on the use of Big Data with AI: “The impact of Big Data goes well beyond simple data and analytics. Big Data and AI in combination are providing a powerful foundation for a rapidly descending wave of heightened innovation and business disruption. While the first wave of Big Data was about speed and flexibility, it appears that the next wave of big data will be all about leveraging the power of AI and machine learning to deliver business value at scale.“
Data mining can find the answers to questions that you hadn’t thought to ask yet. What are the patterns? Which statistics are the most surprising? What is the correlation between A and B? (upfrontanalytics.com).
“Intelligent machines need to collect data – often personal data – in order to work. This simple fact potentially turns them into surveillance devices: they know our location, our browsing history and our social networks. Can we decide who has access, what use can be made of the data, or whether the data gets deleted for ever? If the answer is no, then we don’t have control” says Nello Cristianini in the New Scientist.
Chatbots as interactive conversational platforms
By definition, a chatbot is a computer program that responds to natural language text and/or to voice inputs in a human like manner 2. Chatbots can run on local computers and phones, though most of the time they are accessed through the internet (Chatbots.org). Moreover, the effectiveness of Chatbots is depended on the quality of the source data and how well they are programmed. They are after all robots! And robots need to be learned…
Once a customer starts to interact with a chatbot, the chatbot’s software identifies the customer. The chatbot will then have the demographic information of the customer, her purchasing history – such as what products she’d purchased most frequently, what time of the year she does most of her shopping, and when last did she purchased? The scope and depth of information can be never-ending.
The of a typical conversation between a chatbot and a retail client (image: Chatbotsnewsdaily)
Eric Samson writing in Entrepreneur.com mentioned 7 benefits using chatbots as marketing tools
Customer service – by providing the chatbot option for customers, you will lower the stress of dealing with customer service and increase customer satisfaction with your brand.
Consumer analysis – chatbots can play a large role analysing customer data, and optimizing sales and marketing strategies in light of this analysis.
Personalized ads – another chatbot strategy that’s proven to be successful is the creation of personalized ads.
Proactive customer interaction – chatbots are ideal for “reach out” initiatives. To do this, the accompanying action should be something small, like inquiring whether or not the customer needs assistance.
Site feedback – chatbots are great for reaching out to customers via simple questions and the gathering of feedback. This strategy is useful, especially for website optimization.
Lead-nurturing – using the information that chatbots collect about a customer, you can create customized messaging that guides the consumer along his or her “buyer’s journey,” ensuring movement in the right direction that achieves higher conversion rates.
Maintain a presence on a messenger act via a chatbot – by maintaining a presence on a messenger app via a chatbot, you can save money while simultaneously remaining available for your customers 24 hours a day.
Too many functions – most of developers strive to create a universal chatbot that will become a fully-fledged assistant to user. But in practice functional bots turn out not to cope with the majority of queries.
Primitive algorithms – AI chatbots are now considered the best as they can respond depending on the situation and context. However, complex algorithms is required for this purpose. Meanwhile, only IT giants and few developers possess such powerful technological base.
Complex interface – talking to a bot implies talking in a chat, meaning that a user will have to write a lot. And in case a bot cannot understand the user’s request, he will have to write even more. It takes time to find out which commands a bot can respond to correctly, and which questions are better to avoid. Thus, talking to a chatbot does not save time in the majority of cases.
With Big Data, Artificial Intelligence and Chatbots there aren’t a clear ‘pecking order’. The Upfront Analytics Team explain it as such: “Data mining, artificial intelligence, and machine learning are so intertwined that it’s difficult to establish a ranking or hierarchy between the three. Instead, they’re involved in symbiotic relationships by which a combination of methods can be used to produce more accurate results.”
The speed at which technology is moving forward – “software is developing software” and “machines are building machines” an affordable, practical usable chatbot for customer care and marketing is not far away…
3D printing technology for retailers is now emerging as an outcome for small localized retailers that are facing closure. However, as it is with most disruptive technologies, the advantages that 3D printing offer for retailers should be weighed against its potential pitfalls.
Although the 3D printing technology has been used for a number of years, it has been mostly on an industrial scale. Meanwhile, the price of desktop 3D printers has started to come down resulting in an average annually growth rate of 170% since 2008 1. The door is now starting to open for innovative retailers to include 3D printing technology into their business models. As a result, brave small retail store owners have already started using in store 3D printing.
3D printing is a game changer in retailing, according to Richard Kestenbaum, contributing for Forbes. Richard writes: “Last week Ministry of Supply installed a machine in its Boston store that can make a garment on demand in 90 minutes (with finishing done offline after the garment is created). The machine can be set to make garments all day and night or it can be instructed to make a garment to a specific customer’s design, allowing customers to customize the colors they want in the garment.”
Let’s have a look how 3D printing works…
How does 3D printing works?
3D printing, also known as additive manufacturing (AM), refers to processes used to create a three-dimensional object in which layers of material are formed under computer control (Wikipedia). According to Berman (2012), 3D printers work in a manner similar to traditional laser or inkjet printers. Rather than using multi-colored inks, the 3D printer uses powder that is slowly built into an image on a layer-by-layer basis. All 3D printers also use 3D CAD software that measures thousands of cross-sections of each product to determine exactly how each layer is to be constructed 2.
3D printing uses such raw materials as plastics; resins; super alloys, such as nickel-based chromium and cobalt chromium; stainless steel; titanium; polymers; and ceramics. Examples of products that are manufactured by 3D printing includes artwork, automotive parts, ductwork for a mobile hospital, sand cores for automotive engine block castings, architectural models, dental bridges, jewellery, ball bearing assemblies, and gear assemblies 4. But how can retailers use 3D printers to their advantage?
3D Printing technology for retailers – a 3D-printed product out of a desktop printer
What are the opportunities of 3D printing technology for retailers?
Cremona, et al. (2016) identified the following points on how 3D printing may influence a firm’s strategy:
Delivery time of the product: the time to market is extremely reduced, to the extreme that it might become real time.
Product development process: is optimized because adjustments are made in a faster and less costly way.
Quality and flexibility: is under the control of the retailer with 3D printing.
Satisfaction of the single customer demand: personalized products are added to the platform.
Brand awareness: a close collaborative relationship is established between the retailer and the customers thanks to usability testing.
Customer’s loyalty: offering customized, personalized products may help clients to feel special.
Product platform enhancement:
Pushing the limits of traditional manufacturing machines: now new products can be developed also in a different approach and materials are added instead of subtracted.
Personalized modules: products can be designed and delivered exactly how the customers want them.
Sustainable competitive advantage:
Differentiation strategy: carrying out projects on demand makes the retailer to perform a differentiation strategy. It aims at delivering the most technologically advanced product, which is a unique solution with a unique design for each customer.
High specialized production know-how: allow companies to actually integrate 3D printing in the product life cycle. In doing so, an additional service is provided.
The most important strategic advantages that 3D printing offer small local retailers are customization, personalization and control over the supply chain. But what are the pitfalls of 3D printing?
What are the pitfalls of 3D printing technology for retailers?
3D printing is in the introduction phase of its life-cycle in the retail industry. Subsequently there will be a lot of surprises (good and bad) as the technology gets adopted more widely.
Scale and size limitations – you can’t print multiple objects of the same type at the same time.
The absence of economies of scale – because every object or product is printed individually.
Cost of buying and setting up a 3D printer – the initial cost still remains something of a roadblock for most businesses and individuals.
3D printed objects may require heavy duty post processing – it isn’t only the lack of polish that is the problem but also the possible dimensional inaccuracy.
Large scale adoption of 3D printing will result in significant job losses – every new invention ends up taking away jobs amongst the masses.
According to Beck and Jacobson (2017), legal implications may include what is exactly a product, who is the manufacturer, what is the marketplace, and who should be potentially liable for a defective 3D-printed product (once “product” is defined).
At the end of the day, the most important aspect of 3D Printing technology for retailers is whether the customers will accept or reject it.
What do customers think of 3D printing technology in retail stores?
Retail Customer Experience recently reported results of a survey by self-service solutions company Interactions on what shoppers want from retail technology. The study, “What Shoppers Want from Retail Technology,” surveyed more than 1,000 adult shoppers. Of those polled, 84 percent expect retailers to successfully use tech features and functionality to boost the shopping experience and 62 percent are motivated to shop after an initial human greeting when entering a store. Importantly is what the respondents said about 3D printing in shops…
“According to the survey, 95% of shoppers said they were eager to buy products that were 3D printed, and 79% said that they would even spend more money at a store that offered product customization through 3D printing.”
Wow, really? I think we should end (or start) here…
Lastly, 3D printing technology for retailers is a genuine disruptive digital technology that may (or will) turn the retail industry upside down. There are many recent examples of disruptive technologies that changed the rules of the retail game. As the costs of buying and setting up 3D printing technology are getting less, more retailers will adopt the technology. Indeed, if you invest now in the technology, you’ll be an early adopter and enjoy (localized) market leadership. Consequently, you’ll have to battle through the growing pains of the technology. On the other hand, by waiting a bit longer, laggard retailers my get 3D printers for a bargain, but at that time, probably, the customers will already be with the pioneers.
Video: The 3D printing process
1 Li, Y., Linke, B.S., Voet, H., Falk, B., Schmitt, R. and Lam, M. 2017. Cost, sustainability and surface roughness quality – A comprehensive analysis of products made with personal 3D printers, CIRP Journal of Manufacturing Science and Technology, 16:1-11.
2 Berman, B. 2012. 3-D printing: The new industrial revolution, Business horizons, 55(2):155-162.
3 Cremona, L., Mezzenzana, M., Ravarini, A. and Buonanno, G. 2016. How additive manufacturing adoption would influence a company strategy and business model, MIBES Transactions, 10(2):23-34.
4 Conner, B.P., Manogharan, G.P., Martof, A.N., Rodomsky, L.M., Rodomsky, C.M., Jordan, D.C. and Limperos, J.W. 2014. Making sense of 3-D printing: Creating a map of additive manufacturing products and services, Additive Manufacturing, 1:64-76.
5 Beck, J.M. and Jacobson, M.D. 2017. 3D Printing: What Could Happen to Products Liability When Users (and Everyone Else in Between) Become Manufacturers, Minn. JL Sci. & Tech., 18:143.
The carnage intensified last year. “There were 15 shop closures a day across the UK in the first half of 2016 and the number of new openings has fallen to the lowest level for five years” writes Graham Ruddick, senior business reporter at The Guardian. And the carnage is continuing this year. “Brick and mortar stores are suffering due to competition from online sales and the closures just keep coming” according to Daniel Kline in MotleyFool. What is happening? Where are the retail leaders?
The advent of eCommerce, mobile shopping, interactive social media and marketing automation caused a ‘digital disruption’ in the retail industry. However, many established retail brands failed to adapt to the fast changing behaviors and high demands of their consumers. The digital age has come for them and moved on. As a result, retail leaders that couldn’t cope with the disruption have capitulated. But what type of retail leaders does the sector need during these turbulent times?
Retail leaders in the digital age
Leadership is a process whereby an individual influences a group of individuals to achieve a common goal 1. But how can retailers lead and influence their staff during this digital disruption? Maybe it’s time to challenge retail leadership says Ken Silay, Partner, Innovator’s Equation. Ken suggests writing for Innovative Retail Technologies that “The truth is retail is run by old thinking and old metrics” and “difference between the old and new thinking in business creates a gap in retail leadership that will continue to get wider”.
Dr Ganesh Shermon, Managing Partner for “R for C Talent Management Solutions” (North America) recently highlighted the challenges retailers face. He said that retailers are confronted with dramatic managerial changes, given the convergence of the human mind, (Intellect), behavioral psychology (Cognitive), smart machines, and deep learning science and knowledge (Neural networks) as the basis for management actions. That’s really a mouth full!
The truth is that the old way of leading a retail business does not work anymore. But what should retailers do to get their businesses on par with the digital age?
Strategies that leaders should consider in the Digital Age
Prof Kamal Kishor Jain, Head of HR and Business Psychology Department at IIM Indore, recently said digital age leaders need to acknowledge the limits of their expertise. Additionally, the leaders should build a reliable network of knowledgeable experts to help them navigate through their choices. Prof Jain suggests the following:
Speed – is the most distinguishing characteristic of the digital age. No matter how fast you are moving to transform your business; the depressing reality is that you still probably aren’t moving fast enough.
Knowledge creation – we need to become more right brained to compete and survive. Leadership is not a noun, it’s a verb. The real charismatic leader is one who disseminates knowledge into his subordinates.
Primarily leadership qualities – leaders should be daring, caring and sharing. ‘Failing fast’ and ‘falling forward’ are critical precursors to success in the digital era. Such disruptive change requires leaders to be caring about people are affected by such changes. It is only by caring that a leader can elicit support from followers.
Humble – in an age of rapid change, knowing what you don’t know can be as valuable in a business context as knowing what you do. Therefore, digital leaders need a measure of humility, and a willingness to seek diverse inputs both from within and outside their organisations.
Adaptable – in a complex and changing environment, an ability to adapt is critical. The global reach of digital technologies has opened up new frontiers for organizations, shrinking once insurmountable continental divides and erasing traditional boundaries between territories. Dealing with the cultural and business impacts of this requires adaptability.
Visionary – in times of profound disruption, clear-eyed and rational direction finding is needed. Therefore a clear vision, even in the absence of detailed plans, is a core competency for digital leaders.
Engaged – painting visions for the future, successfully communicating these visions and being adaptable enough to change them, requires constant engagement with stakeholders. This broad-based desire to explore, discover, learn and discuss with others is as much a mind-set, as it is a definable set of business-focused activities or behaviors.
How can leaders change their retail business to digital?
It is impossible for retailers to change overnight from doing their things the old way to embracing the digital economy. Indeed, the process must get started and in quick time. Therefore, the ability to digitally re-imagine the business is determined in large part by a clear digital strategy supported by leaders who foster a culture able to change and invent the new 3. Kane et al proposed the following strategies for retailers to use getting their business to the digital age:
Create a strategy that transforms – when developing a more advanced digital strategy; the best approach may be to turn the traditional strategy development process on its head.
Get the right people for job – just as important as developing talent is reducing the risk of losing it.
Take risks – to boost risk taking in their companies, executives need to change their mind-sets.
Sparking new ideas – many new ideas arise through collaborative efforts among people of different backgrounds.
Telling the story – storytelling is becoming a popular means of gaining employee buy-in and organizational traction for digital transformation.
After all, it will probably require an extraordinary retail leaders to facilitate the move of their businesses from analogue to digital.
Watch this video: “A successful leader must be a global leader, says Marshall Goldsmith.”
“If something isn’t working within your organization, challenge it. And if your leadership steps on your challenge, find someone to work for who isn’t afraid of a challenge. An organization that doesn’t try to define their future isn’t moving forward anyway” advises Ken Silay. Therefore, if you are one of the retail leaders raising your hand to lead your company into the digital age, make sure that you have the right qualities.
1 Saint, S., Kowalski, C.P., Banaszak-Holl, J., Forman, J., Damschroder, L. and Krein, S.L. 2010. The importance of leadership in preventing healthcare-associated infection: results of a multisite qualitative study, Infection Control & Hospital Epidemiology, 31(09):901-907.
2 Shermon, G, 2017. Bringing disruptions into the workplace, Human Capital, p44. March, 2017.
3 Kane, G.C., Palmer, D., Phillips, A.N., Kiron, D. and Buckley, N., 2015. Strategy, not technology, drives digital transformation. MIT Sloan Management Review and Deloitte University Press, 14.
Retailers are frequently yelled at by frustrated customers, or, if things go well, they are commended. That’s part of the emotional exchange that comes with a retailer’s job description. However, chatbots may change all of that.
A chatbot is a computer program which conducts a conversation via auditory or textual methods. In other words, sales assistants in a number of retail businesses are now robots. To this end, bots can help retailers in many other ways.
“Chabots are seen as easy and fun ways to help customers achieve an outcome. You’ll encounter them on web sites, social media and even on your smartphone. Say hello to Siri, Allo and Alexa, to name a few”, writes Christine Crandell recently in Forbes.
Siri, Allo and Alexa are computer characters which, through natural language-style dialogs with humans, perform various tasks, such as answering questions, helping them to navigate websites. “They can either look like a human being, or a digital avatar, an animal, alien or may have an image that does not look like a living creature at all” according to ChatBots.org
Apart from retailers not having to face angry customers anymore, the bots allow Bricks and Clicks retailers to catch up on lost sleep. A chatbot is a handy aid for retailers with online customers when their bed time arrives. “We’d all like to be all things to all customers, but even the most dogged marketer has to sleep sometime”, according to TargetMarketing magazine. The fiction of chatbots has now became a reality as many retailers has bought into the technology.
How chatbots can be used by retailers
Chatbots can be used in many ways by retailers. Nicki Baird (Forbes) suggests that chatbots can do everything – from interacting with customers about new products, to helping them to figure out the trading hours of your shop. Furthermore, leverage chatbots the ubiquity of messaging apps and allows retailers to conduct one-to-one conversations with customers in real-time. Besides, retailers have the opportunity to make money with chatbots.
Ross Simmonds (Crate, Hustle and Grind), identified seven ways retailers can make money with bots:
Bots as a Services (BaaS) – help people and teams to be more productive. They can manage tasks or tackle communications challenges – by replicating business models already in use;
Bots plus sponsored and native content – native or sponsored content is a model in which brands pay to have their content distributed by media companies directly into their channels;
Bot leveraged affiliate marketing – for example: retailers can develop a bot that offers tips and tricks on how to stay healthy and use affiliate links to send people to fitness products that have affiliate links associated with them;
Bots for research – there are bots that you can pay to do the research for you.
Bots for lead generation – may act as a lead generator with an initial focus on content. Chatbots designed to deliver insights and information to users who are looking for advice or information can be lined up with products that the retailer offers;
Pure retail sales bots – the user will make the purchase directly through a chat with the bot and it will act similar to a transaction from a typical website;
Cost per conversation/task – as bots become more sophisticated, people may be willing to pay to have conversations with the bots that can help them with various challenges in life.
“Thanks to big data, artificial intelligence (AI) and predictive analytics, as well as the proliferation of messaging apps, retailers finally have the tools (including chatbots) to get the right messages to their customers”, suggests Craig Alberino in TotalRetail. However, the chatbot hype is not favored by everyone…
Consumers that use chatbots can complete a purchase in a minute or two. Have a look at the video from Kore:
The future use of chatbots
Although the use of chatbots is getting much attention nowadays, not everyone is excited about it. Jon Evens writing last year in The Walrus reminded us of the “Eliza effect: “Humans unconsciously assume that software which communicates conversationally has much more intelligence and sophistication than is actually present.
Inevitably, the software eventually fails to match that assumption, disappointing and frustrating the user who unconsciously expected more.” Consequently, your frustrated customers may want to communicate (again) in person with you. Because the computer does not understands… Above all, what is good and bad about chatbots? Quora.com responded as follows:
The Good Things about Chatbots
The Bad Things about Chatbots
1. Chatbots are a good alternative for mobile apps
1. Chatbots have a high error rate
2. With bots, nothing new needs to be learnt
2. Chatbots don’t put people first
3. Bots are capable of providing a great user experience
3. Bots are limited in their capabilities
4. Chatbots as the factotum for all business needs
4. Chatbots aren’t as intelligent as humans
In summary, are chatbots the “silver bullets” that retailers can use to compete in a digitized retail environment? Or will it be another fad with demanding customers not getting assisted properly? I suppose we have to wait and see. However, Leo Sun (fool.com) recently asked: “Were the social network’s chatbot ambitions ahead of their time?”
Importantly, this is after Facebook is reportedly scaling back its chatbot efforts on Messenger after the programs failed to fulfill 70% of users’ requests. Consequently those requests couldn’t be handled without human agents, and bots built by outside developers “had issues” because the “technology to understand human requests wasn’t developed enough.”
Finally, perhaps Dale 1, (2016) sobering comment can be noted by all: “If we want to have better conversations with machines, we stand to benefit from having better conversations among ourselves.”
Bricks and Clicks (B&C) retailing is with us for more than two decades. The adding of the online channel to their physical business has allowed retailers to survive and grow even during tough trading conditions. However, a recent report by Andria Cheng in eMarketer suggests that B&C retailers are struggling to the get their omnichannel strategies to work.
Andria refers to a 2016 survey of about 350 retail and consumer goods CEOs in countries such as the US and China. The survey was conducted by PricewaterhouseCoopers (PwC) for JDA, a supply chain software provider for retailers from Ann Taylor parent company Ann Inc. to grocer Albertsons. Several worrying aspects about the use of the omnichannel in the retail industry came to the fore with this survey.
How effective are Bricks and Clicks retailers using the omnichannel?
Results from the survey commissioned by PwC (reported by eMarketer) indicated the following:
More than half of retailers haven’t started implementing, are struggling to define or don’t even have plans to develop a “digital transformation strategy”.
Only 10% of CEOs say they are able to make a profit while fulfilling omnichannel demand because of delivery and other supply chain complexities.
75% of retail executives said their online operating costs as a percentage of sales have seen either “significant” or “some” increase in the past 12 months. One key driver of that increase: 74% of retailers said customer returns are hurting profit to “a great extent” or “to some extent.”
CEOs, especially those in the soft-lines (like apparel) and hard goods (like appliances) sectors, said that their greatest concern is inventory exhaustion, or “out of stock.” Out of stock is a big problem hurting retailers’ ability to convert sales when consumers visit stores.
More than half (51%) of respondents said they offer or plan to offer pick up in store in the next 12 months.
With the high costs of free shipping and other delivery offers, 33% of survey respondents said they would offer same-day delivery in 2017, down from 44% last year. Meanwhile, a third of respondents said they plan to increase the minimum order value. The percentage of retailers offering specific delivery time slots also has declined.
Almost three-fifths of retailers surveyed said they have no plans to reduce their store investment and said their online sales are “additional” sales that aren’t hurting their physical store sales.
Automation and internet of things rank lower on their investment list for now, even though these are the areas that are gaining ground as retailers consider them “true game changers,” according to the survey.
Digital technology such as artificial intelligence (AI) and self-service technology (SST) are for long now available for retailers to use.
How to add digital technology seamlessly to your retail business
Digital communication technology is part of the retail setup and is here to stay. However, retailers are reluctant to adopt the technology for a number of reasons. Retailers should consider the following when deciding to add digital:
Visualize what your business will achieve by adding digital and how your customers will respond to it;
Develop a business plan to integrate the digital with the physical operations of your business;
The integration will cost you money – find out how much and where the funds will come from;
Before your spend a cent on it – discuss and argue the process with all the stakeholders – allow everyone to have their say;
If possible, do a quick survey with your customers to get their opinion on the matter;
Once everyone has agreed with the integration, develop and implement an integration strategy;
Measure the results and make corrections as the process moves forward;
If you lose money continuously, start again or discard the process.
Most of the reactions of the CEOs coming from the PwC survey can probably be because they didn’t plan properly. To be honest, failing to plan is planning to fail.
A strategic planning session
The digitization of retail is as revolutionary as it gets. Not only that, it is disruptive. Integrating the digital with the physical is no more ‘a nice to have’. Retailers ignoring the revolution facilitated by digital communication technology, and driven by their customers 1, will fail. Strategic planning may help retailers to do the integration orderly and seamlessly. Only then retailers can enjoy success in the omni retail channel.
1 Picot-Coupey, K., Huré, E. and Piveteau, L. 2016. Channel design to enrich customers’ shopping experiences: Synchronizing clicks with bricks in an omni-channel perspective–the Direct Optic case. International Journal of Retail & Distribution Management, 44(3):336-368.
Artificial intelligence (AI) is intelligence exhibited by machines. AI, still science fiction for most of us, is now becoming a daunting reality in the retail sector. Although we have learned machines (e.g. robots) for some time now, connecting them with the internet may accelerate digital disruption. Digital disruption occurs because unmet needs in the market and in our societies can be addressed through digital means1.
What does Artificial Intelligence means for retailers?
“Artificial intelligence is the key to the future of online retail, providing a crucial way to help shoppers find what they want” suggests Isabell Fraser business and property reporter at The Telegraph. It is about consumers using voice commands using their smartphones to order products from retailers.
The opportunity that the Internet of Things (IOT) may offer Bricks and Mortar retailers was previously discussed in this blog (Retail and the Internet of Things). The IOT allows any machine with an on/off switch to be connected to the internet. “The IOT is very closely related to Artificial Intelligence (AI). In fact, IOT would not be very powerful without AI” commented Douglas Green in Quora. According to Mark Jaffe, CEO of Prelert, the realization of IOT depends on being able to gain the insights hidden in the vast and growing seas of data available. Since current approaches don’t scale to IOT volumes, the future realization of IOT’s promise is dependent on machine learning to find the patterns, correlations and anomalies that have the potential of enabling improvements in almost every facet of our daily lives.
Customers of retailers may therefore, in the near future, command any household appliance to function at their convenience.
Not long from now…
Imagine this, not long from now – Mary asks her washing machine (she named it Alice) with the following voice command: “Alice, add 2 kilogram washing powder to the shopping list”. Alice, an AI device, is also part of the IOT. Alice has recognized Mary’s voice command and added washing powder to Mary’s online shopping list which is instantly send to her local grocery retailer. Later the same day, a drone delivered the groceries, also the washing powder that was ordered by Alice.
Allright, we’re not there yet. Two of the most common uses of AI in retail are around visual search, offering shoppers items that are similar to a picture they like and have uploaded, and for personalized recommendations report Leslie Hook and Lindsay Whipp in The Financial Times.
AI inside the physical shop
AI also creates opportunities inside a store. Bricks and mortar retailers hope that AI could draw customers back to their physical stores. Leslie Hook and Lindsay Whipp quoted Michael Klein, head of industry strategy for Adobe Marketing Cloud saying that “merchandising needs to become entertainment”, pointing to digitally enabled experiences such as virtual makeovers or home furnishing demos.
Experts writing in The Future Of Shopping report talk about the impact the “fourth industrial revolution” – a merging of physical, digital and biological technologies – on shopping.
The report, co-authored London marketing agency Holition forecasts the following:
Virtual reality (VR) headsets that gauge your mood in the lighting and atmosphere of a simulated store.
Immersive virtual experiences involving products, such as visiting a cocoa farm to watch beans being picked and processed to make chocolate.
AI assistants that know your interests and tastes better than you do and can pre-empt purchases. For instance, shortly before a seaside holiday they might show you a range of swimwear.
Holographic fashion shows held in unusual locations.
A customer using a virtual mirror in store – image Wikimedia
Wow! There are seemingly unlimited opportunities for retailers, household appliance manufacturers and cloud computing companies applying AI. Or will the digital disruption that AI cause too big to handle?
The other side of Artificial Intelligence
The AI story unfortunately has an eerie side.
Jerry Kaplan2 introduced AI in his book with the following warning: “Recent advances in robotics, perception, and machine learning, propelled by accelerated improvement in computer technology, are enabling a new generation of systems that rivals or exceed human capabilities. These developments are likely to usher in a new age of unprecedented prosperity and leisure, but the transition may be protracted and brutal”. Kaplan foresees that without adjustments to economic systems and regulatory policies, there may be an extended period of social upheaval…
Kaplan’s concerns are shared by Bill Gates reports The Washington Post. Gates said: “First the machines will do a lot of jobs for us and not be super intelligent. That should be positive if we manage it well. A few decades after that though the intelligence is strong enough to be a concern”. Stephan Hawkin, although totally dependent on AI, bluntly suggests that AI could bring an end to mankind. Retailers, however, do need mankind to stay in business…
Retailers that choose to ignore AI may not escape from the digital disruptions it causes. Digital disruptors innovate rapidly, and then use their innovations to gain market share and scale. This happens far faster than challengers still clinging to predominantly physical business models can cope with1.
Retailers will have to decide where and when Artificial Intelligence has the potential to replace human intelligence. Cost and scale will drive these decisions. Future decisions about AI by retailers will probably be about the ethics of using the technology and the effect it may have on society.
The Internet of Things (IOT) may be an opportunity for Bricks and Mortar retailers. The proliferation of connected devices coupled with less-expensive technology platforms can be used by retailers to get customers back into their shops…
Jonathan Gregory, Managing Director – Accenture Strategy says IOT offers retailers opportunities in three critical areas: customer experience, the supply chain, and new channels and revenue streams.
Before discussing the opportunities of IOT, we must first explain what IOT is.
What is the Internet of Things?
There are many complicated, high tech definitions for the IOT. However, Jacob Morgan contributing to Forbes puts it simply – IOT is the concept of connecting any device with an on/off switch to the internet (and/or to each other).
How many things can you think of that has an on/off switch? In your home – TV sets, air conditioners, lights, alarms, stoves, geysers, garage doors – the list is never ending. Now imagine connecting all these devices to your smartphone or, connecting them with each other. And then connecting everything with other persons…
The IOT is a giant network of connected “things” (which also includes people). Hence the relationship will be between people-people, people-things, and things-things, suggests Jacob Morgan.
Let’s get back to the opportunities that IOT render for retailers.
What opportunities do the Internet of Things offers retailers?
The customers of retail are adopting digital devices at a staggering rate. They are eager users of smartphones, tablets and digital watches. Digital devices make their lives easier, and they want the same experience from them in shops as what they get at home or at their workplaces.
“The digital transformation of retail is driven by customers” says Tony Stockil, CEO and Founder, Javelin Group. Most customers want to experience shopping as part of their entertainment. Shopping is now a form of entertainment, available 24/7, wherever people are. Retailers therefore need to ensure that the brand experience is seamless and constant at all touch points.
James Wilson, Baiju Shah and Brian Whipple did an open-source analysis of IOT user behaviour (“How People Are Actually Using the Internet of Things”, HARVARD BUSINESS REVIEW, October 28, 2015). They found that consumers want an IOT that provides personalized services that can be adapted to different contexts.
The data show that the most heavily used IOT programs are ones that make home life easier, more distinctive, and more pleasant. According to the results, customers show a big preference for services that don’t require them to go out of their way to make something work.
The supply chain
Connected devices and products provide retailers with the opportunity to help optimize operations in the face of a more complex supply chain, increasingly important digital channels, and a more demanding customer. By utilizing the IOT, managers can track inventory more easily, and adjusting pricing in real time using smart tags.
IOT allow small retailers operating an eCommerce channel to automate their warehouses. By upgrading to automate warehouse retailers will be able to process orders rapidly, accurately, and in real time says the OPEX Corporation. The upgrading may put retailer’s service and standards on par with the “big boys” in their retail sector. The cost benefits of a goods-to-person picking system are that it saving time and it is accurate. The system ensures getting the right product at the right time at the right place.
Automated warehouse system
Creating new channels and revenue streams
The power of the IOT lies in the opportunities it presents to retailers to create new revenue streams or build entirely new channels. As such, household appliances, home security and comfort products, even health and wellness products are all becoming part of the IOT ecosystem.
Some retailers are taking further advantage of the wide array of connected products by becoming an integration “platform.” According to Jonathan Gregory, the idea behind these platforms is to make it easier for customers to make all of their in-home devices talk to one another.
Grocery retailers may partner with the suppliers of connected platforms that would give them direct channel to customers. Subsequently a potential gold mine of customer data can be created – information associated with almost every aspect of the household, from utility usage to consumption trends.
What are the dangers of the Internet of Things?
Jason Bloomberg, President of Intellyx writing in Wired, gives seven reasons he thinks the IOT is doomed:
Security – with products and people connected, savvy hackers can easily access important information about you and the way you live.
Privacy – it is about ‘Big Data’. Therefore, the more IOT you have, the more Big Data they collect, and the more Big Data they collect, the more they know about how you behave.
Digital fatigue – too much social media, too many smartphones, too many YouTube videos to watch. There are also too many apps to download, too much of everything digital and wired and online.
Ecosystems – with the IOT the battle is starting again to dominate this technology ecosystem. There are many dealers, both large and small, trying to establish a foothold, hoping to create their own ecosystem.
No Killer App – so far, the IOT has no Killer App. However, the Killer App could be just around the corner. They have a nasty habit of appearing on the market suddenly with no warning.
Enterprises will mess things up – for an enterprise to succeed with the IOT or any other part of their Digital Transformation initiative, there are no shortcuts – only hard work.
Rather put customers in control of the IOT – let the consumer control the security of each device. Let them determine what data the devices upload to the Big Companies.
Are you ready for the IOT?
Customers want IOT programs that make home life easier, more distinctive, and more pleasant. Also, the IOT gives small retailers the technology to do their logistics more efficiently and cheaper. Further offer the IOT retailers the opportunity to collect data from their customers at their homes and place of work.
There are however a couple points about the IOT that should be considered before using it:
Is the IOT system developed and secured enough to use without facing financial of legal liabilities?
Are you certain that by using the IOT it will be done ethically?
Lastly, let’s hope that the IOT will add value to both retailers and their customers not long from now…
Many retailers find it difficult to remain competitive during times of turmoil. The traditional way to compete is not working and retailers are looking for new ways to survive.
“It is in the turmoil of chaos that we discover what, if anything, we are” – Orson Scott Card.
Being competitive the traditional way
The traditional way for retailers to be competitive is well known. The best location, the lowest prices, the best trained staff, the best stock and the longest trading hours were adequate to survive and grow. The list below shows how the face of retail has change over the past century.
The changing face of retail:
1900 – the local corner shop;
Up to 1940 – department stores and general merchants;
1940 to 1970 – enclosed malls and mass retailers;
1970 to 1990 – value players, club stores and category killers;
1990 to 2008 – eCommerce;
2008 to present – multi-channel retailing.
The change that retailers had to face between 1900 and 1990 were gradual and was the result industrialization and urbanization. The digitization of the retail industry has however revolutionized the rules and economy of retail and resulted in turmoil.
The turmoil in retail is not necessary bad. Retailers should see it as an opportunity to reinvent themselves, by using the new rules of the industry to their advantage.
Competing in the digital economy
The digital economy helps level the playing field so small retailers can more effectively compete in markets that were previously inaccessible. However, if Bricks and Mortar retailers don’t participate in the digital economy, their businesses will stagnate and decline. You therefore need to be part of the digital economy in order to enjoy its rewards.
Here are two ways for Bricks and Mortar retailers to get their sales back on track:
Create an eCommerce website
An eCommerce website will allow retailers to be found online and to do business anywhere. The Bricks and Mortar retailers are now Bricks and Clicks retailers and can cater for customer in their shop as well as in the digital world.
Create a digital experience for your customers inside your physical store
Most customers that visit Bricks and Mortar retailers are using mobile phones to get product info and compare prices. Retailers can beat their competitors by making it easy for their customers to go online in their shops:
Offer a free Wi-Fi service;
Place internet access points at places where technical detail and prices comparison are important for customers;
Introduce a ‘click and collect’ system at your shop. Customers can order and pay their products online and then collect it at the shop.
By adding the online channel to you retail business and setting up digital gadgets in your shop, you have entered the digital economy. Maybe the turmoil of the industry has helped you to discover what your business is about…
Visit eBizplan for more on adding clicks to bricks.