How Technology Will Transform Retail

16/10/2015 © Thought Provoking Consulting 2015 – Confidential 1

HOW IS NEW INNOVATIVE
TECHNOLOGY GOING TO AFFECT
THE FUTURE OF RETAIL?

An Introduction…
• Consumer lifestyles and technology are changing rapidly
• As a result attitudes towards shopping are evolving
• Success will require an omni-channel approach
• Consumers want convenience
‘I’ve been in retail for 30 years. There has been more
changes in the last 5 years than the previous 25’
Andy Clarke, CEO of Asda Walmart

An Introduction…
• Technology needs to create engaging experiences
• Retailers are undergoing a complete mobile revolution and
apps need to be sophisticated
• Smartphones have already caused large changes in
consumer retail trends
• 58% and 45% of people use their tablet or mobile respectively
for shopping activities
• 53% use their mobile phone to compare prices out while
shopping

An Introduction…
• There are more technological advances to come
• Future is heavily tech-driven with greater customer
expectations
• Retailers need to leverage these new technologies if they want
to stay ahead of their competition
• There are 12 major technological innovations retailers need to
consider. These are:

12 Key Innovative Technological Advances
• Digital Wallet & Mobile
Payment Services
• Bluetooth Low Energy
Beacons
• Wearable Technology
• Augmented Reality Shopping
• Drone Parcel Delivery
Services
• Car Boot Delivery Services
• RFID Tagging
• The Internet of Things
• Smart Appliances
• Home 3D Printing
• Bitcoin
• IT Infrastructure & Software

Digital Wallet & Mobile Payment Services

What is it?
• Using technology already embedded in mobile devices to
make contactless payments
• Can be used at fixed or mobile points of sale

Aim?
‘Remove the friction from the payment experience for
customers with the hope of generating opportunities for
increased sales as a result of reduced waiting times, higher
customer satisfaction and higher consumer confidence in the
security of transactions’

Examples
• Apple Pay
– 1 million credit cards in registered within 3 days
– 220,000 vendors by launch
– 50% of US McDonald’s tap-to-pay transactions within 1 month
• Android Pay
– 700,000 registered vendors
– Over 1000 configured applications

Pros
• More secure than contactless cards as:
– Card numbers are not transferred with payments
– Customers notified with a payment confirmation as soon as a
purchase is made,
– ‘Find my iPhone’ and ‘Android Device Manager’ enable
customers to instantly lock their devices and wipe it clean of
personal data.
• No transaction limit
• Credit charges processed at low card present rates
• It’s security ensures retailers using such services are exempt
from fraud liability happening within their stores

Cons
• *It will decrease the use of the checkout zone*
• Slow Uptake BUT….
• Hard to tell if due to low consumer or retailer adoption rates

What is it?
Bluetooth Low Energy Beacons
• Small Beacons in stores that emit low energy EM radiation
that can detect when other Bluetooth devices are nearby.
• Allows retailers to deliver targeted campaigns to customers’
mobile devices, when entering a store or in store specific
locations
• Notifications about item details, prices, store location, links to
purchase items on the companies’ websites, and targeted
offers based on customer’s online history
• Potential uses in tracking customers around stores, with
benefits over GPS
16/10/2015 14

Aim?
‘improve customer experience in-store by providing
customers with all the information they need, boosting
consumer satisfaction and giving a greater opportunity for
increased sales, while at the same time enabling retailers to
have a smarter and more targeted approach’

Examples
• Trials at US Apple Stores, Heathrow Airport, 100+ Regent
Street Stores
• McDonald’s 4 week pilot
– Over 7 % increase in promoted product sales
• House of Fraser Aberdeen piloted a Mannequin beacon
scheme providing customers with information on the clothes
the mannequins are wearing
• Pilot success has lead to predicted market wide beacon sales,
of over 60 million beacon units by 2019

Pros & Cons
• Allows a more targeted approach for customers
• Opportunities for greater sales for retailers
• Retailers can gain information on customer movement in-store
• BUT…
– Customers need to have store applications previously installed
– Privacy Concerns over tracking
– Need multiple beacons to triangulate locations, raising costs
– Wi-Fi is more accurate but needs to be joined directly

What is it?
Wearable Technology
• Clothing and accessories that incorporate computers and
advanced electronics with practical functions or just aesthetic
qualities
• 15 million wearable smart devices by December, 2015, set to
increase to 70 million by 2017
• 2 major players:
– Apple Watch
– Google Glass
16/10/2015 18

What is it?
Apple Watch
• Apple’s first venture into the wearable technology market
• A smart watch that syncs applications with your iPhone,
allowing for a variety of different functions
• Integration with Apple Pay and iBeacon enables:
– In-Store location specific promotions
– Swipe-to-Pay at portable POS
16/10/2015 20

Examples
Apple Watch
• Amazon, Asos and Zara are some of a long list of companies
to have launched applications designed for the Apple Watch
• Amazon’s App only has three functions:
– Item search using Siri
– Save products to your Amazon Wishlist
– Check-out using Amazon’s 1-click ordering system
• Predicted Sales of over 10 million in the first year alone
• Sales predicted to overtake all previous wearable technology
sales combined in one year despite ‘poor’ sales figures

Pros
Apple Watch
• For Customers:
– Improved information
– Reduced waiting times
– Greater consumer satisfaction
• For Retailers:
– Higher sales
– Wealth of data on customers
– Ability to observe how digital advertisements directly impacts
physical behaviour
16/10/2015 22

Cons
Apple Watch
• Limited operating platform capabilities, due to constrictive
screen size & operating system require a different marketing
approach
• Doubts due to ‘poor’ sales figures, has led to it being labelled
as a ‘flop’
16/10/2015 23

What is it?
Google Glass
• Augmented reality glasses with internet access, making use of
an optical head mounted display
• Production stopped, but rumours of Google Glass 2

What is it?
Google Glass
• Potential uses for customers:
– comparing item prices, reviewing similar products, checking
inventory availability, placing orders for out-of-stock items &
suggestions for suitable accessories
• Potential uses for retailers:
– hands-free order commissioning in warehouses, decentralized
fulfillment centers and store locations.
– Mobile order fulfillment by utilizing barcode scanning using the
glasses, adopting a ‘pick-by-vision’ approach

Example
Google Glass
• Tesco Labs piloted Google Glass application, allows
customers to browse goods, view nutrition info and add items
to their online basket
“Glass is not a new platform to shopping as it’s functionality is
different and more immediate. Instead it compliments other
devices and integrates shopping into everyday life”
Pablo Cobely, Tesco Lab’s Innovation Engineer

Pros & Cons
Google Glass
• Quicker access to relevant data for retailers
• More personalized customer service with client specific
suggestions and geo-targeted promotions
• Facilitated real time virtual sales
• Increased foot traffic and sales increases
• BUT…
– Intrusive design means low sales volumes anticipated
– Needs collaboration with major (sun)glasses brand(s) to boost
sales figures
– *May contribute to decrease in importance of the checkout zone*

Augmented Reality Shopping

What is it?
• Objects that enables users to ‘locate, interact with and take
photos of GPS-linked virtual objects positioned in the real
world’
• Equipped with powerful promotional and social networking
tools tailored for the mobile environment.

Aim?
• To drive customers to both physical and online destinations
and hence increase product sales and enhance brand
engagement.
• To attract customers with visual suggestions & complimentary
options, expediting the fitting room process and providing a
hassle free experience, enabling a better customer-associate
interaction

Examples
• Holiton has conceptualized plans for a ‘smart store’,
leveraging facial recognition technology and allowing retailers
to pull up shopping histories and recommend products.
• H&M have incorporated AR technology into their mobile app
based on AR platform, ‘Goldrun’
• Lego kiosks show a completed model when the box is held up
to a camera
• L’Oréal trialled a 3D AR makeup mirror & Macy’s opened a AR
clothes-trying-on mirror
• IBM’s ‘Memory Mirror’ captures a clip of a customer trying on
multiple outfits & offers the ability to review outfits16/10/2015 © Thought Provoking Consulting 2015 – Confidential 32

Pros & Cons
• Allows for inventory trading and management alongside
increased data collection with the ability to expand loyalty
programs, sales tracking and social media sharing
• Allows for cheap and easy advertising campaigns
• Can be used to gain feedback on up-and-coming product lines
• Minimises the risk of losing sales
• BUT…
– The technology is costly

Drone Parcel Delivery Services

What is it?
• The use of remotely operated drones to deliver small parcels
to local residents

Examples
• Amazon CEO, Jeff Bezos, hopes drone deliveries will be
reality by 2020 with pilot schemes in major US cities by 2016
• ‘Amazon Prime Air’ will use Octocopters to deliver small
parcels to homes up to 10 miles away, in 30 minutes
• Google trialled fixed wing drones that can deliver faster and
over longer distances. They lower goods from 150 feet.
Successfully delivered dog treats, medications and cattle
vaccines to the Australian Outback
• DHL is using drones to deliver medication to the German
island, Juist, 12 km into the North Sea. They fly under 50 m
avoiding flight authority regulations16/10/2015 © Thought Provoking Consulting 2015 – Confidential 36

Pros & Cons
• Speedy deliveries
• Environmental friendliness
• BUT…
– Concerns remain about technology safety
– In some countries:
• Unmanned drones are forbidden
• Owners have to maintain eye contact
• Drones forbidden within 50 m of buildings
• Drones can’t at altitude more than 50 m

Car Boot Delivery Service

What is it?
Car Boot Delivery Services
• Retailers deliver parcels to the boot of a parked car
• Delivery drivers are issued the approximate location of the car
and a digital key to allow temporary access to the car boot

Examples
• Trialled by Volvo, 86% agreed it saved time & would use it
again
• Amazon, DHL and Audi are also trialling it around Munich
• Amazon also working on a similar returns system

Pros & Cons
• By providing alternative delivery services that suit customer’s
personal needs, retailers may attract increased sales,
generate larger revenues and encourage customer loyalty
• BUT…
– Concerns remain over the services security

RFID Tagging

What is it?
RFID Tagging
• ID system using radio frequency devices for identification and
tracking purposes.
• System includes RFID tags, a read/write device and a host
system application for data collection, processing and
transmission.
• Originally used for supply chain management by Walmart.
• High costs and benefit concerns caused the project to be
scrapped in 2007
• System allows in inventory management

What is it?
RFID Tagging
• Can be used to close sales, on buyers’ terms, in store, on the
web, on social media & ensure products advertised on the
web are available in store
• Allows associates to check inventories by walking quickly
keeping inventory accuracy percentage in the high 90s
• Potential for tracking products around the store and live
inventory counts

Examples
RFID Tagging
• You can’t be good at omni-channel, without having high
confidence at store level, at size and colour level.’ - Macy’s’
senior VP of logistics and operations
• Macy’s trialled successful pilot, with RFID tags built into item
tags resulting in RFID infrastructure rolled out in all US stores
• Zara estimate that 2 associates take a store’s inventory in 30
mins. Previously took 10 associates 5 hours
• Burberry using RFID tags to activate AR mirrors showing
video’s of the tagged item, improving customer experience

Pros
RFID Tagging
• Quick, automated, cost efficient and accurate way to track
inventory through the supply chain & in the retail environment
• Allows faster optimal reorder cycles, reduced cycle stock,
reduced out-of-stocks and a multi-channel capacity that allows
for greater sales figures, lower costs and therefore greater
sales revenues
• RFID potential helping retailers become more competitive with
online sellers through omni-channel sales.
• Especially beneficial for retailers with high number of SKU’s
and large sales volumes e.g. apparel/consumer goods

The Internet of Things

What is it?
• A network of physical objects embedded with electronics,
software, sensors, & connectivity enabling objects to
exchange data with manufacturers, operators and/or other
connected devices.
• Allows objects to be sensed and controlled remotely across
existing network infrastructure, creating opportunities for more
direct integration between the physical world and computer-
based systems.
• Sensors provide both consumers and retailers information in
order to make decisions.

Consider this Scenario…

Pros & Cons
• Improved efficiency, accuracy and economic benefit.
• By using data provided and seamless integration between
various technological innovations both the retailer’s and
consumer’s aims are realized.
• BUT…
– Still some way off yet

Smart Appliances

What is it?
Smart Appliances
• Smart Appliances are home appliances that have been
connected to the Internet (as popularized by the Internet of
Things) and often are connected to each other.
• IHS Inc. predict growth with a compound annual growth rate of
134%, with over 700 million connected appliances by 2020.

Examples
Smart Appliances
• Samsung has vowed to ensure that all its new products will be
able to be interconnected.
• Functions on Samsung’s RF28HMELB refrigerator include:
– Barcode scanner to monitor contents
– Adding items to users’ online shopping accounts
– Recipe suggestions
– Switching the oven to certain temperatures
– Setting an oven timer

Pros & Cons
Smart Appliances
• Potential to affect how supermarkets operate with more focus
on delivery services and less emphasis on the checkout zone.

3D Printing

What is it?
3D Printing
• The printing of items, such as replacement parts, using a
variety of materials.
• Items are built up by layering the ‘ink’ until the blueprinted
design has been created
• ‘Inks’, include plastics, ceramics, metal, sand, sugar and
chocolate but creations limited by printer size
• Boeing wants to 3D print an entire plane by 2050
• Recent patent expiration has caused price drops from
thousands to hundreds
• Credit Suisse predicted increases of up to 30% in 3D printer
sales16/10/2015 © Thought Provoking Consulting 2015 – Confidential 56

Examples
3D Printing
• Retailers could offer product ranges without need to consider
stocking or replenishment concerns – Amazon’s 3D Printing
store
• Customers could bring blueprints into stores for 3D printing -
the customer acts as a producer and the retailer as the service
provider.
• Likely to see increases in printers in stores and homes due to
their ability to provide immediacy and customization.

Potential Effects
3D Printing
• 3D printers in homes:
– Render delivery firms pointless, also risks to physical stores
– Consumers print out a product at home using a centralised open
source blueprint directory for object design
– Retailers move into printer sales and requisite materials and/or
developing 3D printing designs or design platforms to sell

Pros & Cons
3D Printing
• Environmentally friendly technology
• Easy & quick to use
• BUT…
– Technology and price isn’t there yet
– Limited to printer size

Bitcoin

What is it?
Bitcoin
• First decentralized digital currency, created as a reward for
payment processing work in which users offer computing
power to verify and record payments into the public ledger or
in exchange for different currencies, products, and services.

Examples
Bitcoin
• Bitcoin Banks e.g. Coinbase - estimated value of $400 million
• Dutch City of Arnhem has over 40 Bitcoin accepting retailers
• Overstock.com received over 830 orders, worth over £80,000,
on the first day it started accepting Bitcoin
• US stock exchange NASDAQ is experimenting with
incorporating the underlying technology of a bitcoin
cryptocurrency into its pre-IPO trading arm and NASDAQ
private markets.

Pros & Cons
Bitcoin
• Merchants may accept it because of lower charges
• Bitcoin point of sales solutions are readily available for
retailers
• BUT…
– Concerns remain over Bitcoin’s security and legality
– Scandals such as, ‘The Mt. Gox Arrest’ have hindered its
popularity

IT Infrastructure & Software

• So far…
• BUT…for retailers to run technologies, must have relevant IT
infrastructure and software packages able to deal with these
new innovations
• IT infrastructure has to:
– Ensure an omni-channel approach for retailers
– Be able to maintain retailers global presences
– Track and analyse customer data
– Run relevant promotions.
• Leading IT systems providers are building the capability to do
this

What do retailers need?
• Good Customer Relationship Management System
• Good Merchandise Management System
• Good Order Management System
• Good Analytics Software Package

Customer Relationship Management (CRM) System
• A good CRM system must:
– Provide cross-channel, consistent customer experiences using
pre-built business processes
– Integrate customer relationship management with enterprise
applications, providing connections throughout the buyer's
journey and making operations more efficient
– Leverage industry-specific best practices for competitive
advantage and lower the total cost of ownership

Merchandise Management System
• A good Merchandise Management System must:
– Help retailers efficiently manage their operations through
seamless execution of processes such as purchasing,
distribution, order fulfillment & financial close
– Manage key foundation data: hierarchies, suppliers, locations,
and items
– Provide proven Commerce Anywhere solutions to supporting the
customer journey
– Enable visibility of retail, franchise & wholesale transactions
– Be flexible, and include extendable fields for easy process
extensions
– Support multiple financial books in a single instance
– Manage evolving business processes, models and expansion

Order Management System
• A good Order Management system must:
– Enable sale agents to have access to accurate and complete
information via a single repository housing all relevant sales
transactions
– Empower customers through self-service status tracking
functionality, accessible on the Internet, in order to improve
customer satisfaction
– Expedite sales cycles, so blanket sales agreements associate
customer orders (releases) with pre-negotiated terms and
volume commitments

Analytics Software Package
• A good Analytics software package must:
‘Enable retailers to leverage a wide range of information to
operate more efficiently, offer new services and discover new
ways to strategize, plan, optimise business operations and
capture new market opportunities, whether it be promotions
or optimum delivery schedules’
• This will allow retailers to gain insight into every aspect of their
business, plan ahead, and act with confidence

Example
• Arcadia currently undergoing a complete IT systems overhaul,
with the help of TPC Consulting
• Changing from their original Legacy system to Oracle’s Retail
Merchandising Warehouse Management System and Global
Supply chain system, as part of the Horizon programme.
• The system acts as a backbone to enable Arcadia’s
international expansion and omni-channel revolution.
• Arcadia will gain real time supply chain visibility alongside the
ability to perform cost modelling for merchandise orders.

Pros
• Empowers employees with data access, applications and
features
• Lowers IT costs, reduces IT complexity, delivers higher quality
of service
• Speed, reliability, security and ease of use means suited for all
types of database workloads, including enterprise
applications, data warehouses and big data analysis,
• Retailers can create hyper-connected enterprise with solutions
to deliver seamless communications across fixed and mobile
users with high performance, scalability and reliability.

Cons
• Concerns over privacy - retailers should comply with data
privacy standards and convey what they are doing and why
• No software firm is yet to integrate all software packages
effectively so as to provide a whole IT systems programme for
retailers who are looking to embrace the omni-channel
revolution to the maximum

IT Infrastructure Technology and Software
• IT infrastructure technology and software systems have crucial
role in the future of retail
• Systems must be able to cope and adapt to the demands of
new technologies in ‘Big Data’ era
• Infrastructure and IT systems that don’t will ensure retailers fall
behind.
• Without an up to date, reliable, simple and secure IT system,
retailers will not be able to embrace the next step in the digital
revolution

To Conclude…
• The rate of uptake of new technologies will vary
• Some technologies still need to be refined; others are more
advanced
• Adoption relies on whether retailers are willing to install the
infrastructure needed for such technologies in their stores
• Digital Wallet & Mobile Payment Services, Bluetooth Low
Energy Beacons, Apple Watch, and RFID tagging will have the
biggest impact in the short term
• Technological advances will quicken as knowledge develops
• Until adaptations are achieved, the Internet of Things and
complete integration of all sensors and devices seems to be a
distant ideal.

To Conclude…
• Retailers should assess the benefits each innovation bring to
their specific environment and be prepared to adapt as
technologies evolve over time.
• Consumers will have an increasingly personalized and
localized retail experience
• Retailers will have increasing amounts of data which should
be used to optimize and personalise customer experience and
sales revenues

To Conclude…
• The shopping model of the future is poised to look radically
different from the present
• Retailers that fail to take advantage of such innovations and
do not keep pace with changing technology will fall behind

How Technology Will Transform Retail

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