From products designed by artificial intelligence to virtual reality systems that help shoppers picture merchandise in their homes, retailers are deploying technology like never before this holiday season, betting that they can win business back from the default of online shopping.
These innovations run the gamut, including sensors and cameras that can monitor in-store movements, smart fitting rooms that suggest a blouse or pair of shoes to go with the jeans you’re trying on, and robot sales associates that not only remember the dress you bought for that work party, but also to ask how the garment worked out.
To entice shoppers away from their screens and into stores, retailers are looking to technology as a way to “create new and different in-store experiences,” says Shari Wynne Ressler, founder of SKU, a retail-focused accelerator in Austin.
As the all-important holiday shopping season comes to a close, retailers are paying attention to whether these tools are enhancing traditional marketing and sales campaigns to favorably impact the bottom line. So far, e-retail sales are on track to at least meet last year’s tally of $94.4 billion, according to Adobe Digital Insights.
Retailers hope technology can boost sales, getting shoppers to commit to buying more, says Jill Dvorak, senior director of digital retail at the National Retail Federation in Washington.
“Retailers are using [artificial intelligence] in how they make recommendations, how they design products, and how to get into the supply chain to make more of what customers are buying in real time because there is a demand for it,” she says.
Need further proof of just how important tech innovations are to retail? The world’s largest retailer announced earlier this month that it is changing its name from Wal-Mart Stores to Walmart (NYSE: WMT). “We felt it was best to have a name that was consistent with the idea that you can shop us however you like as a customer,” Doug McMillon, the company’s president and CEO, said in a press release. “As time goes on, customers will increasingly just think of and see one Walmart.”
In fact, Walmart has made introducing new technologies a priority, Dvorak says, using a strategy to acquire innovative tools rather than building them in house.
In the last year, Walmart has also picked up tech companies such as Bonobos, a men’s retailer, for $310 million, and Parcel, a tech-enabled delivery service, for an undisclosed amount. Last year, the retailer made headlines with its $3.3 billion cash-and-stock deal to buy Internet retailer Jet.com, a move designed to help the Bentonville, AR, company compete with Amazon.
“They are really good at it,” she says, pointing to the purchase of online retailer ModCloth earlier this year. “Rather than creating [the tools] from scratch, Walmart acquires them and then it becomes a much larger part of the overall culture.”
Retailers are finding new technologies useful for both streamlining supply chains and operations as well as interacting with customers. A recent report by Aruba Networks, which is a unit of Hewlett Packard (NYSE: HPQ), found that 88 percent of retailers reported cost-savings from using Internet of Things technology, with eight in 10 saying the technology has improved the overall customer experience.
Established retailers “are looking to smaller, outside companies like startups to figure out how to use those technologies,” says Genevieve Gilbreath, SKU’s managing director.
For example, the six-year-old SKU is working with San Antonio-based grocery HEB and Land O’ Lakes in Minneapolis to help connect those companies to innovative startups working on new retail technologies.
In addition, Gilbreath says SKU had been working with Land O’ Lakes and the greater Minneapolis tech ecosystem to set up a second SKU accelerator program there, but now says that those plans are currently on hold.
The Minnesota state capital is home to well-known retail chains including Target (NYSE: TGT), Best Buy (NYSE: BBY), and General Mills (NYSE: GIS). (Last week, Target announced it was buying Shipt, a delivery startup based in Birmingham, AL.) On Monday, Techstars announced a new accelerator focused on food and agriculture innovation that will be based in Minneapolis.
Another example of retailers embracing new technologies is Ikea. Around the world, Ikea stores feature a similar layout with furniture and other housewares for sale. A shopper can browse the showroom, artfully designed to mimic someone’s home (before confronting the warehouse full of unassembled items to take home and build.) Now, the Swedish retailer is using virtual and augmented reality to further blur the lines between home and store.
Fancy a new minimalist Scandinavian-inspired kitchen? Ikea provides VR headsets that allow people to “cook” in their new kitchen, seeing how far it is from the stovetop to sink or how high that shelf is where you could keep your stand mixer. The feature also allows you to view the space through the eyes of someone who’s, say, 6 feet 4 inches tall (can you fit under the vent hood?) or child-sized (giving parents a better vantage from which to spot sharp objects or other kiddie dangers).
By using the Ikea Place app, which was released in September, shoppers can virtually try out furniture in their homes using a smartphone.
To be sure, legacy IT systems for many retailers often impede how quickly they can integrate new technologies, says Dvorak of the National Retail Federation. Amazon, which she says follows a tech-friendly “fail fast” strategy, is pushing traditional stores to change their culture at a faster pace than normal. “I do think [new tech tools] will be a gamechanger for retailers with profitability gains anywhere from 10 percent to 60 percent,” she says.
In addition to enabling consumers to make purchases via laptops and smartphones, e-retail innovations are also starting to change the in-store experience in meaningful ways.
In October, Seattle-based Nordstrom launched its Local store, a boutique space that has no inventory. Instead, the store is billed as more of a “service hub,” a place that shoppers can pick up online orders (or return those that didn’t work out), access personal styling services, and even drop in for a manicure while sipping a glass of wine. “The idea is make it more experiential as opposed to a mere transaction,” Dvorak says.