E-commerce now accounts for just seven percent of all retailing in the United States,* yet it’s so powerful a force that it’s radically reshaping the book and consumer electronics industries, and others are bracing for similar shocks. What are retailers to do?
They can use the forces that threaten them to their own advantage. That’s the message from Sima Nadler, IBM Research Lead for Retail.
These days, many consumers browse in stores to see what interests them–then use the Internet and portable communications devices to learn more about their options and find the best prices. At the same time, when people are shopping online, e-commerce retailers are able to track their interests and connect with them in ways that, up to now, have been impossible for brick-and-mortar retailers to match. As a result, increasingly, brick and mortar retailers serve as a showcase for consumers, but online retailers close the sales.
IBM Research is developing a portfolio of new technologies that make it possible for retailers to understand the needs of consumers better and cater to them when they’re in stores–making it more likely that they will make the sales. “What we’re seeing is the blurring of the physical and the virtual,” says Nadler, who coordinates retail research globally and is based in IBM’s Haifa Research Lab.
Here are two of the technologies:
Augmented Reality: Researchers are developing an augmented reality based system that makes it possible for consumers to use their smartphones and tablets to pan store shelves and receive additional information beyond what’s on the labels, personalized product recommendations and discount coupons while they’re shopping in a store. Consumers download the mobile application, register, and create a profile of preferences. Upon entering the store, they launch the application. When they point the video camera on their device at merchandise, products are recognized using advanced image processing technologies. The system displays information about the products, superimposed on their images on the mobile device. If the consumer allows it, information from their social networks can be integrated into the information stream. For instance, if a friend had reviewed or made a comment about a product they’re looking at, they’ll see it. (Here’s a video panel discussion of the role of augmented reality in commerce.)
Indoor Location Tracking: Businesses use GPS to provide location-based services to consumers, but that only works outdoors. IBM Research’s technology tracks the movement of consumers’ within stores who have opted in to the services. This is done by tracking signals emitted from the individual’s mobile device and matching that information with data about the merchandise that they’re standing close to. As a result, retailers can present offers to consumers when they’re considering a purchase. Retailers can track and analyze the paths shoppers take through their stores, and they can use that information to optimize the store layout and arrangement of merchandise. Also, they’ll know immediately if there are not enough clerks in an area of the store to wait on all of the customers, and they can immediately dispatch more.
In the past, a few pioneering retailers tried electronic tracking and information systems, but they were forced to use proprietary devices, sometime attached to shopping carts. That was expensive and inconvenient. The exploding popularity of smart phones and tablets means many people carry easy-to-use, wirelessly-connected devices in their pockets or purses. So, a revolution in brick-and-mortar e-tailing has begun.
Nadler foresees a time when retailers will have sophisticated systems that allow them to not only identify an individual shopper when they enter the store but also to understand their context . If mom has the kids in tow after work hours, it might be a good time to present her with a coupon for kid friendly snacks. Even further in the future, Nadler anticipates a time when people will activate holograms in their homes and “see” merchandise presented to them as if it were in a physical store.
Nadler’s work is part of a larger trend in society–the need to understand people better as individuals, enabling organizations and institutions to serve their constituents better. The technologies she and her IBM Research colleagues are working on will also have applications in banking, transportation, government services and many other industries. This is a path toward truly personalized interactions in all dimensions of life.
Here’s a post on the IBM Research blog that explains what’s in the augmented reality application for consumers.
A number of retailers are experimenting with mobile technologies in retailing. Read about one of Tesco’s experiments here. Wireless technologies have a spotty history in retailing, but RFID seems to be getting a new lease on life.
*not counting gasoline, autos and groceries. Source: Forrester Research.