A return to brick-and-mortar locations is pushing retailers to be innovative as they juggle customer experience with labor efficiency.
With the wave of COVID-19 pandemic restrictions and store closures at its end, 2022 has largely meant a return to brick-and-mortar retail.
Given the pullback in e-commerce spend and retailers losing sales amid inflationary pressures, overall technology budgets might not be at the height they once were. This leaves in-store innovation in a predicament.
Global retail technology investment dropped 43% to $13.2 billion in Q2 2022 compared to about $23 billion in Q1 2022, according to a report from CB Insights in July. Additionally, retail tech deals were down 21% quarter over quarter, and only seven companies went public compared to 11 in the previous quarter.
However, in-store technology and innovation aren’t exactly dead. Shoppers may have eased their online buying habits to a degree, but brick-and-mortar stores aren’t immune to the longevity of digital transformation. In fact, the store management technology sector saw an increase in funding during Q2 with a 25% quarter-over-quarter bump to $3 billion compared to $2.4 billion in Q1, according to CB Insights.
Retailers can still benefit from innovating with convenience and might want to look at in-store personalization to differentiate themselves in the market, according to a Deloitte report from Rob Harrold and Adam York.
What types of technology brought convenience and personalization to the in-store experience this year? And which ones have the potential to stick around?
Buy online, pick up in store services continue to be sought after even as pandemic restrictions have waned. In March, data from Insider Intelligence predicted that U.S. shoppers will spend $95.87 million on BOPIS this year — a 19.4% increase year over year.
BOPIS, which is sometimes known as click and collect, seemed like a win-win during pandemic restrictions, as shoppers could support physical brick-and-mortar stores without having to spend time in closed public spaces.
The holidays have the potential to show BOPIS’ strength. This season 39% of shoppers expect BOPIS to account for 50% or more of their shopping, according to a report by Bluedot shared with Retail Dive.
That said, overall interest has somewhat decreased since 2020. About 78% of shoppers plan to use BOPIS in some regard this season, which is down slightly from 81% in 2020, according to Bluedot.
Not all consumers are more likely to use the option though. Millennial males in urban environments are more likely to use BOPIS, according to data from Morning Consult. Shoppers in higher-income households are also more inclined to use this purchasing option.
While several retailers added BOPIS and have reported positive results from the service — including Target, Sally Beauty and Office Depot — others are just now jumping on board. Five Below last month released its own buy online, pick up in store program.
BOPIS requires technology or a system that makes it efficient and successful for all parties involved, which is something many retailers are focused on.
Retailers are “starting to think about productivity, efficiency and cost that is top of mind for everybody,” Lokesh Ohri, a principal in Deloitte’s digital practice, told Retail Dive. “Buy online, pickup in store and all the tech involved around doing that efficiently at the store level, either picking front of house or backup backroom … has stuck around and is scaling pretty fast.”
2. QR codes
That weird little black-and-white square that looks like a Rorschach test? Yes, retailers — not just restaurants — are using those.
QR codes are square barcodes that can be scanned using mobile phone cameras to be directed to more information or payment portals. The technology was actually invented decades ago, but quickly garnered adoption during the COVID-19 pandemic when menus and person-to-person payments were pushed aside.
“It’s become ubiquitous in the market,” Ohri said. “But if you and I were speaking seven years ago, there wasn’t this big hype about QR codes.”
QR codes have the potential to be a way in which customers can discover more information about a product, according to Ohri, who added it “gives them better insights into buying that product, into making that decision and into comparing information across other products.”
In January, Walmart launched an interactive store prototype at its incubator location in Arkansas that featured QR codes along with other in-store technology to help “create opportunities for digital exploration,” the company said at the time. Instacart last month began rolling out QR codes as part of an expanded connected technology suite of products with partner retailers. Additionally, Amazon included the technology in its first fashion retail location this May, where the codes provide more information on sizes and reviews.
EThese cases show that QR codes can deliver personalization for shoppers who might want recommendations based on what they’re inquiring about, but also create a level of convenience for associates who can spend more of their time on operational tasks.
3. Store operations
In line with Ohri’s belief that retailers are thinking more about efficiency and productivity, the technology behind store management and operations continues to grow.
That encompasses anything from technology that helps automate tasks — freeing up labor — to using more data-driven approaches to understanding stock levels.
The top equity deals in the retail store management sector for Q1 this year involved a $500 million deal for inventory optimization company Relex Solutions, according to another CB Insights from April. Retail unicorn Swiftly Systems — an e-commerce technology company now focusing on brick-and-mortar optimization — got its second $100 million investment in September. For Q2, a wholesale marketplace platform for retailers to connect with brands took the top spot in the quarter with $416 million.
Labor management is top of mind for everyone right now with the potential to use technology for cost savings, according to Ohri.
“They’re looking at labor management, communication, compliance store tasks, store audits, and using digital tools to simplify, as well as standardize those activities,” Ohri said. “So things that used to take 11 to 13 hours to do are now taking eight hours to do.”
A unique approach to store management technology is Lowe’s digital twin store. In September, the home improvement retailer announced it was experimenting with a digital replica of a store where associates can interact with and visualize store data. The concept was first introduced to two locations and allows associates to use augmented reality headsets for a variety of tasks, such as viewing items available on higher shelves instead of needing to climb a ladder.
4. Fitting room enhancements
Plenty of brands have experimented this year with enhancing the fitting room experience.
H&M started using a smart mirror in some COS stores in May, where customers can get personalized styling recommendations from the mirror as it senses what products — including their size and color — shoppers brought in. Customers can request new items to be sent to their dressing room without needing to leave the space. The retailer also started testing mirrors on the showroom floor that can assist with virtual try-ons, as well as returns.
Similarly, Savage x Fenty opened its first store in Las Vegas this January, which has fitting rooms with digital kiosks that shoppers can use to scan products to check prices and see similar items.
This approach might be considered a way to free up associate time. However, it might not be that simple despite its increased adoption.
“I don’t see virtual fitting rooms work as well as we can always want them to work,” Ohri said. “I find that anyone who’s ever deployed them … they will tell you that the number of associate activities actually didn’t go down. Because first, consumers need to learn how to use that tablet, because it’s usually not as intuitive. Second, they need help with the products that they have anyway. And third, they’re kind of really concerned about the data and the privacy. So it actually has increased associated tasks at store rather than reduce them.”