NRF 2019 The Urgent Retail Revolution - January 2019 By Eric Klein, Director, and Andy Adelson, Senior Analyst with David Krebs, Executive Vice ...
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NRF 2019
The Urgent Retail Revolution
January 2019
By Eric Klein, Director, and Andy Adelson, Senior Analyst
with David Krebs, Executive Vice President
THE VIEW INSIDE
On the heels of the best holiday shopping season in six years, VDC embarked on our annual trek to NRF – Retail’s Big
Show – to kick off 2019. However, by the time we arrived, the US Federal Government had already been shut down for
20+ days and there was a palpable sense of both urgency and uncertainty surrounding the outlook for retail in 2019.
Make no mistake, 2018 was a phenomenal year for retailers (save department stores), brand owners and retail-focused
technology vendors. Nevertheless, the outlook for 2019 – while still largely positive – is also increasingly uncertain.
The pace of change in retail is only accelerating and herein lies perhaps the greatest challenge for retail CIOs today.
With this massive change witnessed in retail over the past decade, many retailers have been caught flatfooted and are
now rushing to update their core infrastructure to be in position to leverage retail technology innovation to deliver richer
shopping experiences. Fundamentally, the challenges facing retailers – from labor optimization to inventory management,
out of stocks and customer engagement – remain largely the same. What has changed are customer expectations and
the timeframes retailers have to address the new normal. Traditional two-year evaluation and deployment timeframes
are now the exception and consequently simplicity is king.
Simplicity was a common theme among CIOs who already
struggle with a long list of priorities and do not have the time
to evaluate every emerging trend. In this context, we found the
Kroger and Microsoft alliance particularly intriguing. Almost
every leading retailer today has invested in their own digital
technology lab where new technologies are tested and evaluated
for everyday use. What is unique about Kroger’s approach is
its intent to commercially co-market their “retail as a service”
solution to other retailers. Kroger is one of the most “data-
forward” retailers and has been developing innovative solutions
for years. An example of this is their EDGE Shelf, which links
shopper’s smartphones with electronic shelf displays for a more personalized shopping experience. Other capabilities
enabled by the EDGE solution include, for example, a pick to light productivity solution for store associates that provide
visual cues to accelerate the time to find items when picking orders. While the jury is still out whether a retailer can
successfully sell retail solutions to other retailers (WalMart will certainly not come calling) finding new revenue streams
and monetizing its massive datasets represents a strategic priority for Kroger as its core grocery business offers little
growth potential over the coming years. Retailers need to not only be innovative in their application of technology but
similarly in their business and go to market models.
Retail Scorecard: Work To Be Done
According to recent research conducted by VDC Research among retail executives, it is evident that much work remains.
At its core, retail is data-driven and data-forward retailers are typically the ones that excel. This is only increasing with
real-time access to accurate data – be it inventory, customer or workflow operations – so pivotal when implementing
unified commerce or omni-channel initiatives. This is especially acute with in-store inventory visibility. With more retailers
offering in-store fulfillment options for their on-line purchases, having an accurate read of in-store inventory (including
location) is paramount. RFID has proven successful in segments such as apparel. However, RFID is not viable across
all retail segments. Yet the current approach to identifying products and supporting core workflows like cycle counting
and managing stock outs or recalls is no longer viable. The need to not only accurately identify a product but also extend
the definition of that product – be it lot and date codes, origin or nutritional content – will be particularly important. In
our view the machine readable barcode remains the most viable solution for the near to mid-term – especially when
considering the need to encode variable information unique to that product. However, in the world of “frictionless” retail,
eliminating the need to manually locate and scan the barcode represents a key goal.
© 2019 VDC Research | NRF 2019 2Factors Impacting Retail and Ability to Address: Performance Gaps Evident
Critical impact to retail operations Retailer's ability to address
Visibility of in-store Personalized customer Ability to fulfill e- E-commerce competitive
inventory engagement commerce orders in-store pressures
In this context the camera or computer vision – in combination with advanced machine learning and artificial intelligence
capabilities – were on full display at NRF. Everseen and Stoplift (recently acquired by NCR) both demoed compelling
solutions to address loss prevention at self-checkout lanes using overhead cameras and image processing solutions
to detect fraudulent behavior. In another demo, Intel partner AOPEN developed a smart scale solution that was able
to accurately identify perishable items (in the case of their demo a bag of mixed nuts) using only image recognition
and machine learning solutions. Accurately identifying produce using cameras (and removing the need to key in
PLU codes) would symbolize a key breakthrough for the market. While digital image recognition solutions represent
the future of item identification, overcoming accuracy
challenges – for example distinguishing between organic
and non-organic items – remains a barrier. To get ahead
of the curve, we heard from many technology vendors,
brand owners and retailers the desire to create standard
image libraries by leading standards organizations with
the goal of establishing truly unified global standards and
preemptively avoiding today’s regional fragmentation
surrounding item identification.
Mobile Technologies Come of Age
That mobile solutions are central to retail operations should
come as no surprise. The retail workforce is inherently
mobile, benefitting from real time access to key product
and/or customer information at the point of interaction. In
addition, the customer’s smartphone represents the digital
bridge through which retailers engage. One major development over the past year that is expected to extend into 2019
and beyond is the broad acceptance of Android as a viable and stable OS to support retail initiatives. Equipping retail
associates with enterprise-grade Android devices was a point of emphasis for many retailers.
© 2019 VDC Research | NRF 2019 3Leading Retail Mobile Solution Investment Drivers
(Source: 2018 VDC Retail Decision Maker Survey)
Personalize customer engagement 33.0%
Increasing revenues 31.2%
Improving staff responsiveness 29.4%
Enhancing customer experience 29.4%
Improving mobile workforce productivity 26.6%
Increase accuracy of in-store inventory 20.2%
Competitive differentiation 20.2%
Reducing out of stocks 19.3%
0% 5% 10% 15% 20% 25% 30% 35%
Long commonplace among many European retailers, personal shopping solutions are gaining traction in the US. Zebra
Technologies displayed its dedicated PS20 devices. They were displayed with Philips’ unique indoor positioning
systems that works with LED lights that are embedded with visible light communication technology. Using the light
from the bulbs, the systems sends a unique code to the front facing camera in a mobile device, accurately pinpointing
the users location to within six inches and enabling location aware use cases. Datalogic, another leader in personal
shopping solutions displayed its latest Joya Touch A6, which includes the industry’s first integrated wireless charging
(Qi standard) for this class of product. The elimination of wires, enhanced TCO by removing charging contacts and
improved charging reliability are key benefits Datalogic is looking to extend to its customers.
Honeywell Technologies, looking to enhance its retail in-store footprint (Honeywell’s solutions have primarily been
deployed in retail warehouse and logistics environments) was emphasizing several mobile solutions. These spanned
Intelligrated’s workflow optimization and analytics solutions for retail in-store workflows, Honeywell’s Mobile Edge
platform and a new reseller relationship with Theatro that is designed for Honeywell to leverage their voice-controlled
mobile applications, employee location capability and analytics to optimize retail workflows and associate collaboration.
Data Privacy Presents Critical Roadblock to Personalization Efforts
Retailers know fast order fulfillment only takes their customers a few clicks — this has made evolving their stores to
become key components of their overall brand experience a priority. For this reason, many vendors at NRF continue to
showcase solutions aimed at helping retailers better understand who is shopping and what will keep shoppers inside of
their stores. Retailers have no choice but to invest in technologies that will offer their customers more personalized and
localized products that can help to set their stores apart from their digital competition. Interactive displays and signage,
and Video analytics solutions, are a logical starting point; for this reason these solutions continue to be emphasized at
NRF — these solutions can help identify who is shopping, how long they are staying in the store and track where they
go and what is interesting to them. IBM, Intel, and Fujitsu each showcased their analytics and customer engagement
solutions at the event, and detailed use cases on how these solutions have helped their retail customers engage with
their customers and measure the performance of their campaigns and advertising spend. In addition, Samsung unveiled
its Nexshop solution at a separate event in the HARMON NYC store. The solution includes a cloud-based analytics
dashboard and real-time behavioral sensing technology that enables retailers to gain greater insight by capturing
customer traffic data and delivering a more interactive shopping experience. When deployed in conjunction with
interactive displays and smart mirrors, the solution will launch customized content tailored to a customers demographic.
© 2019 VDC Research | NRF 2019 4But, going forward, vendors selling their tech to retailers should be wary of privacy; indeed, retailers are shifting to data-
driven business models and are investing in tech to obtain more granular analysis of their customer data. At the same
time, vendors must ensure that they are addressing their customers’ concerns regarding data privacy and design their
solutions accordingly. Retailers know that they will need to be more transparent going forward about how they intend to
use the data they are collecting; for their part, vendors must ensure their solutions can easily integrate with regulations
and data governance programs. Regulations such as the General Data Protection Regulation (GDPR) in the European
Union and the California Consumer Privacy Act (CCPA) will force more transparency around how personal identifiable
information (PII) is collected and stored. Vendors focused on selling their solutions to retailers must ensure that their
solutions can help retailers deal with the expanding chain of responsibility relating to the data they are collecting and
the associated privacy that come with this data. Smart vendors should continue to think about privacy as they continue
to innovate their solutions for the retail sector, as the scope and scale of privacy requirements will inevitably continue
to evolve and change.
Attendees in Absentia: The Most Important That Retailers Weren’t
There
What keeps retailers up at night? Sears and Amazon Go, the founders of traditional and next-generation retailing,
were conspicuously absent at NRF 2019 except in influence, as their respective bankruptcy and boom are compelling
so many retailers to adopt the latest technologies. VDC noticed big signs of powerful players adopting new solutions.
Walmart and Kroger were showcased within the Microsoft booth, leveraging the Azure platform for cloud commerce.
Walgreens Store Managers were stationed in Zebra Technologies’ booth to discuss their ongoing deployment of
Zebra’s TC51 rugged handheld computer and TC50 rugged tablets to support in-store operations and customer
engagement applications. While we didn’t spot the Costco, its Kirkland house brand, along with Wegmans, were on
display at the Digimarc booth. Similarly, several leading brands are in development with solution providers, such as
Asics (athletic footwear) with Intel. There are countless similar examples.
NRF’s Innovation Lab - Real-Time Insights
Checking out the Innovation Lab at NRF is a mandatory stop for team VDC at NRF each year. Vendors were eager
to show off their innovations around key technologies that we see their retail customers continuing to invest. The
most visible areas of focus in the Innovation Lab were: robotics, personalization, augmented reality, faster checkout
systems, and spatial recognition. Several vendors stood out; Mystor-E was one such vendor, the Israeli-based vendor
has developed a solution that can provide retailers with real-time merchandising insights. Mystor-E’s solution utilizes
cameras and computer vision to enable retailers to make real-time changes to their merchandise displays. Once a
shopper’s demographics are determined (gender, height, weight and age) the solution triggers a change in the digital
display to feature a garment suitable to the person standing there. We see these types of displays as viable alternatives
to traditional static displays (hanging signs or mannequins) that are not only more becoming interactive, but are more
visually appealing. Other standouts we saw included New York-based Perfitly who has developed a AR/VR platform
which provides shoppers the ability to see themselves in specific garments and find the right look and fit. We were
skeptical, but Perfitly has differentiated from past attempts at streamlining the process of trying on clothing by combining
that process with a mobile app (visualizations are flattened to display on a shopper’s smartphone). This type of customer
interaction makes sense given the changing demographics and the increased usage of devices inside of stores. Seattle-
based Glympse was another standout, displaying its location-based tracking prowess at NRF. Glympse’s solution is
aimed at retailers (primarily brick-and-mortar grocery stores and restaurants) who need help dealing with the operational
challenges that arise with order online and BOPIS; the last-mile-as-a-service solution provides these retailers customers
with ability to track packages in real-time, get an ETA on deliveries and arrange curbside pickups.
© 2019 VDC Research | NRF 2019 5The Fulfillment Profitability Paradox
While many of the technologies on display NRF will find their way into retail operations, most will likely not. The retail
sector has some of the lowest profit margins with net profits ranging from 2.8% among grocers and food retailers to
7.3% among building support retailers. Often absent from the exuberance of “next generation retail” is ROI of the
technologies and their impact on retailer profitability. A common theme in retail over the past couple of years and evident
again at NRF this year is the concept of using the physical retail store as a fulfillment center, in particular for online
orders. While this may sound like a great service to offer customers, what retailers often fail to fully assess is its impact
on profit margins. Retailers generally make the greatest margins on items purchased directly from a physical store,
followed closely by online orders (that are fulfilled via a centralized DC). When leveraging a store to fulfill online orders,
profit margins will typically drop – in particular for online orders shipped from stores (that incur double shipping costs).
Successful retailers will need access to real time analytics that weigh these scenarios to determine not only the most
efficient but also the most profitable options; problems we see vendors like Manhattan Associates begin to address
for their retail customers.
VDC’s Enterprise Mobility, AIDC and IoT research teams are eager to hear from you. Please reach out to
info@vdcresearch.com to learn more about our 2019 research calendars including retail-specific initiatives.
© 2019 VDC Research | NRF 2019 6ABOUT THE AUTHORS
Eric Klein is a market research and consulting professional who specializes in the design, analysis, and delivery
of project-based research. Over the past 15 years, Eric has worked with a wide array of firms across a number of
industries, leading quantitative and qualitative research in areas such as innovation in enterprise software, supply
chain risk management, manufacturing operations/automation, and IT spending research. Eric has worked in a
variety of market research and management roles, providing market data and competitive intelligence to Fortune
500 firms. His previous employers include: AMR Research, The Yankee Group, and Affiliated Computer Services
(ACS). Eric holds a Bachelor of Science degree in Finance from Boston University.
Currently serving VDC’s AutoID & Data Capture practice, Andy Adelson has spent his career as an analyst,
consultant and research expert. During the first half of his career, Andy excelled as an IT industry analyst, covering
several technologies which were precursors and adjacent to AI&DC. He has provided continuous syndicated
services, plus consults to clients for their more complex challenges. During the past decade, Andrew held executive
sales and management roles with research and insights providers. Andy also serves on the Board of the New
England chapter of The Insights Association, the largest US trade association for research professionals. Andy
earned an MBA from Babson in Marketing, and a BA from the University of Michigan in English and Economics.
David Krebs has more than 10 years of experience covering the markets for enterprise and government mobility
solutions, wireless data communication technologies, and automatic data-capture research and consulting. David
focuses on identifying the key drivers and enablers in the adoption of mobile and wireless solutions among mobile
workers in the extended enterprise. David’s consulting and strategic advisory experience is far reaching and
includes technology and market opportunity assessments, technology penetration and adoption enablers, partner
profiling and development, new product development, and M&A due diligence support. David has extensive
primary market research management and execution experience to support market sizing and forecasting, total
cost of ownership (TCO), comparative product performance evaluation, competitive benchmarking, and end-user
requirements analysis. David is a graduate of Boston University (BSBA).
ABOUT VDC RESEARCH
Founded in 1971, VDC Research provides in-depth insights to technology
vendors, end users, and investors across the globe. As a market research
and consulting firm, VDC’s coverage of AutoID, enterprise mobility, industrial
automation, and IoT and embedded technologies is among the most advanced in the industry, helping our clients
make critical decisions with confidence. Offering syndicated reports and custom consultation, our methodologies
consistently provide accurate forecasts and unmatched thought leadership for deeply technical markets. Located in
Natick, Massachusetts, VDC prides itself on its close personal relationships with clients, delivering an attention to detail
and a unique perspective that is second to none.
© 2019 VDC Research Group, Inc. | P 508-653-9000 | info@vdcresearch.com
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