The Third Era of Digital Retail - WHERE HUMAN RHYTHMS MEET ALGORITHMS David Roth and Jon Bird - brandZ
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The Third Era
of Digital Retail
WHERE HUMAN RHY THMS MEET ALGORITHMS
David Roth and Jon Bird
[ Prepared for the WPP Global Retail Forum May 2018 ]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ]
The scale of change taking place
within the retail industry is utterly
phenomenal. Things that just a
couple of years ago we thought
impossible - or couldn’t even have
imagined - are fast becoming reality.
But we're sure that the biggest change is It's true that we now have access to entirely new ways that create something far
yet to come, and it's coming soon. unprecedented computing power, near- greater than the sum of the component parts.
limitless data, Artificial Intelligence (AI) to
We're on the brink of an entirely new make sense of it all, plus, through visual By connecting technologies and ideas in new
era of digital retail, and the difference and voice computing interfaces, the and interesting ways, retailers and brands
between "then" and "now" will be ability to absorb and process information can develop new products, services and
completely unlike what we've seen so far. in a way that once was purely the domain business models that challenge conventional
of humans. All that will only increase. assumptions. (We call this notion "Mixology",
Why? Is it because of the continuing and we explore it further in the "What to
rapid advances in technology? Well yes, In addition though, these different do about it" section of this report. You'll be
but that's not the only reason. technologies are now being combined in delighted to know that if you get that far in the
report, there is a drink waiting for you. More on
that later too.)
[2] [3]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ]
Our vision of where things are people shop, and the way stores This will be a time in which screens Can’t we just
going is not just based on a hunch, do business. At the cutting edge of recede and product experts step adapt as we go?
nor is it simply a retail version retail, our predictions have largely up to take their place, augmented
of Moore’s Law, which states become reality already. by instant access to data. The The scale of the change coming
that computing power gets keyboard will begin to be replaced our way means that making minor
exponentially faster and cheaper Now, in 2018, we’re looking another by the voice – fewer “taps” and tactical adjustments or course
over time. Our premise is built on four years out. And the view to “clicks”, more “OK Google” and corrections on the go just won’t
a series of futurecasting projects 2022 looks very different to where “Alexa” (although it’s very likely cut it.The Third Era of Digital Retail
involving some of the brightest we are today. that these specific wake words will will bring us shops that don’t look
Welcome to the Third
minds – and newest technology disappear too). Bricks and mortar like shops, experiences we don’t
applications – in the world. In essence, we’re anticipating will be “smart” and responsive. now associate with shopping, and
a future that will be much more Visual computing – software new competitors for people’s time
Our view of the future actually digital than today, but one that that can see and interpret the and money that are only just being
begins in the past, back in 2014, will look less digital and feel far surrounding environment – will
Era of Digital Retail
developed.
before the first days of Apple more human. And that’s great take off, turbo-charged by AI. All
Watches and Oculus Rift headsets. news for carbon-based lifeforms up, technology will be less visible In this new era, everyone can be a
Even Instagram and Snapchat were – people! – but far more empowering. For retailer, and every surface a store.
relatively new. consumers, retail will be frictionless There will be new competitors
How different can it be? and effortless – and almost from outside the sector as well,
WPP worked with Intel Labs indistinguishable from magic. reimagining what retail can be.
to define the ways in which We’re predicting not just evolution,
technology was changing the but revolution. In this new era, we believe that Thriving in such challenging
retail sector. We observed that we the retail revolution will come conditions requires entirely
were in a Second Era of Digital Our point of view is that the nascent full circle, back to a time when different combinations of skills
Retail, and we looked at how Third Era of Digital Retail will be less service was personal and and the courage and creativity to
wearables, smart shelves, drones about phones, devices and screens, products personalized, but in a rethink entire business models -
and robots would change the way and more about a seamless, contemporary way. not just adapt them.
intuitive, human experience.
[4] [5]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ]
" S h o p p i n g w i l l b e ' h i d d e n' i n 2022. M o re a u to m a te d
a n d m o re i n te g r a te d i n o u r eve r yd ay l i ve s ."
Jason Ferrera, Group Creative Director, VML
[ 2022 ]
Why look at 2022? Between now and 2022, brands and We’ve worked closely with some In short, we’ve used a combination
retailers can do more than respond of the world’s leading technology of human understanding and
Four years (officially a to the new future; they can create it. companies and watched what’s Artificial Intelligence to help us
“quadrennium”, but we prefer the coming out of the most advanced predict an increasingly AI-enabled
term “four-cast”) is a time frame (Oh, our “four-cast” also falls in line markets, particularly China. We’ve future.
in which retailers and brands can with the cadence of FIFA World then taken our base hypothesis
make plans and change the way Cups – the one in 2022 will be in and sought out the opinions We hope you enjoy the pages
their businesses are run, in a swift Qatar, by the way.) of talented people from the ahead, and find the inspiration
but unhurried way. They can start global WPP network through and motivation to take a leap into
to implement the future, now. Isn’t it all guesswork? in-depth interviews. Finally, we’ve the Third Era of Digital Retail.
augmented our desktop and
This horizon is the right balance No, our work is a blend of informed qualitative research with new, tech-
between near and long-term intuition and science, which is what driven testing techniques to help us
change. It’s far enough out for the we think the future of retail itself bring the emerging landscape into
world to be different, but not so far will be. sharper focus.
David Roth Jon Bird
ahead that it feels like predicting the CEO Executive Director
impossible. The Store WPP, Global Retail &
EMEA and Asia Shopper Marketing
David.Roth@wpp.com VML
Twitter: davidrothlondon
Blog: www.davidroth.com
[6] [7]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ]
[ 01 ] [ 02 ] [ 03 ]
Third era? THE FIRST ERA OF DIGITAL RETAIL BEGAN IN 1995, with
Amazon and eBay launching online in the US. This age was all
about the internet as a research and shopping tool, and was
THE SECOND ERA OF DIGITAL RETAIL STARTED IN 2007, with the
launch of the iPhone, and kicked into gear a decade of tremendous growth
in computing power, a corresponding drop in processing prices, the rise of
THE THIRD ERA OF DIGITAL RETAIL will be marked by
the rise of data analytics and the increasing sophistication
of AI. We’ve already progressed from XL to CX, and now CX
What were the first two?
largely anchored to the desktop, accessed via phone connections. the cloud, and the birth of the “Internet of Things” (IoT) and “omnichannel” is moving to ME – not an acronym, but "me", the individual.
(Remember that dial-up sound?) This shift to online, while slow to shopping. Mobile devices freed the shopper, and connectivity was the Retail will become truly personal and the customer
begin with, shook up a physical retail world that at the time came in goal for the retailer. Brands and retailers began experimenting with new experience will take a much more intuitive, human form. The
one size: extra large (XL). The early and mid-90s were all about the technologies such as robotics and drones. In physical retail, the Apple Store Third Era of Digital Retail is gathering momentum now, and
“category killer”. Stores and malls were big, and getting even bigger. redefined what shopping was about – experience, interaction, and service. retailers and manufacturers alike need to start swimming
Retailers aimed to generate a “wow” factor with the largest array of The old XL scale of retail was replaced with CX - Customer Experience. fast if they are to be ready to surf this wave of change.
product possible in a physical location. All that was to change.
The story of the journey of retail over the three eras:
All about size - All about All about "Me" -
Category Killer Customer Experience Personalization
[8] [9]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ] CO NTENTS
Computing is becoming more
powerful, but less obtrusive
Technology is becoming less
visible, but can “see” more
RETAILING WILL
Voice, visual computing and AI are
BE MORE DIGITAL,
The Third Era of Digital Retail being linked in formidable new ways
BUT WILL FEEL
How it adds up
Anyone can be a retailer,
and any surface a store
Retailers and brands must connect
MORE HUMAN
technologies and ideas to reinvent
what retail can be (see "Mixology") WHERE HUMAN RHY THMS MEET ALGORITHMS
Business structures need not just
linking but entire rethinking, uniting
teams with a breadth and diversity
of technological and human skills
[ 10 ] [ 11 ]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ] CO NTENTS
Where We’re Headed What To Do About It How To Make
[ Contents ]
The Magic Happen
[ A HUMAN FUTURE ] [ A HUMAN FRAMEWORK ] Ten ways you can get started
Nascent technology can help us decode The new world of retail works like a connected on the Third Era of Digital
the shape of things to come. Human system. Introducing the Face, Bones and Brains Retail
intuition and Artificial Intelligence are of modern retailing – a useful way to reframe
combined in a piece of WPP-exclusive retail your thinking about experience, infrastructure
research that focuses the View to 2022. and data intelligence, and how it all connects.
[ HUMANIZING TECHNOLOGY ] [ BEING HUMAN: BECOME A 'MIXOLOGIST' ]
Look up from your screens and usher in a Prepare for the Third Era today by thinking differently
new wave of technology that makes retailing about what retailing is and what it can be. Introducing the
– and life – feel more human. We explore how idea of “Mixology” and some guidelines for success with
Voice, Vision and Virtual Neurons will make a focus on innovative retailers who are showing what’s
digital retail seem more natural. possible now.
[ 12 ] [ 13 ]
[ Where We're Headed ]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ A HUMAN FUTURE ]
To get a realistic view of the future, WPP and VML
commissioned a joint research project that draws on
the best human minds of today, and combines it with
what’s fast becoming the technology of tomorrow.
[ A Human Future ] [ The View to 2022 ]
After forming a hypothesis Unanimous AI at the 2018 SXSW and useful than the sum of the Creative, Geometry Global
and testing it via qualitative Innovation Awards. This research individual parts of the process. and Barrows, representing a
interviews, we used Artificial solution builds on the old adage Think of a swarm of bees or a wide variety of roles and skills:
Intelligence-based research to that two heads are better than flock of birds, and what they can planners, creatives, analysts,
help us decode an AI-influenced one. achieve collectively by sharing customer engagement
world to come. their intelligence. This is the same professionals, business leaders
A Swarm is sometimes referred principle in action. and digital experts.
We partnered on the research to as an artificial “Hive Mind”.
with a company called The concept is that scores of For our View to 2022, we brought A series of in-depth interviews
Unanimous AI. We used the people can connect, share their together around 130 senior helped shape the questions for
same technology – Swarm AI® foresight, and “think together” people from WPP companies the Swarm AI® sessions, which
- that won “Best-in-Show” for in a way that is more powerful such as VML, FITCH, SET then utilized an online interactive
[ 16 ] [ 17 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ A HUMAN FUTURE ]
Our hypothesis (proved out
via research) is that the Third Key findings across the
Swarms include:
Era of Digital Retail will be
Optimism about the outlook for
more digital (but appear less shoppers, brands and retailers in the East.
so), and feel more human. The West is optimistic for shoppers, but
more cautious for brands and retailers.
Artificial Intelligence is forecast to
have a huge impact on retailing in
the next four years
North America,
Europe & South Africa Asia-Pacific (APAC) Top Findings Mobile payment for “everything” will
become reality.
[ TH E WEST ] [ TH E E AST ]
From The Future Product experts and style consultants
are the humans in retail least likely to be
replaced by technology
process to collectively identify a super-expert – a “brain of choices. In real time, they could
In terms of the detailed findings, will take place in physical stores Shoppers’ biggest concern about
the key features of the future brains”, if you like – that drew on see which way other contributors
the results of the North (although less dramatic than technology will be protection of
of retail. We ran two Swarm AI® the input generated by every were pulling. An algorithm made
America, Europe and South you might expect). personal information from data hackers
sessions: one involving experts individual. sense of all the movement to
Africa Swarm were in many
from the US and Europe, and the create consensus. The point of the
ways consistent with those of Both Swarms also expected Tech-based companies will drive the
second for those in the Asia- Participants in the Swarms exercise was to achieve a degree For more information on
the Asia-Pacific Swarm. Both a rise in the use of voice as greatest change in retail between now
Pacific region. responded to a series of of clarity that singular in-depth Unanimous AI and detail about
predicted strong growth in a shopping tool, along with and 2022
questions using a magnet icon to interviews alone cannot generate: how the Swarm AI® process
e-commerce, and a decrease greater take-up of mobile
The Swarm AI® process, in just drag a virtual puck towards their to focus the thoughts of many works, see page 60.
in the amount of shopping that payment services, and Governments are expected to start
two 30-minute sessions, created preferred answer among several people into a collective vision.
extensive deployment of regulating the dominant online retailers
Artificial Intelligence.
[ 18 ] [ 19 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ A HUMAN FUTURE ]
The major points of
divergence between the According to PwC, 56% of global According to a 2017 Cap Gemini study Given that PwC found 70% of global
two Swarms were: consumers surveyed* reported across the US, UK, France and Germany, consumers surveyed* said they still preferred
shopping with Amazon in 2017. What 35% of users of voice assistants (e.g., to make their grocery purchases in a physical
% will shop with Amazon in 2022? Google Assistant, Amazon Alexa, Siri, store in 2017, what will that be in 2022?
[ What’s ahead? ]
Respondents in Asia-Pacific (the etc.) reported buying products via
East) expect e-commerce to grow
much more aggressively than do our
[ The West ] 71% voice in 2017. What will that be in 2022? [ The West ] 60%
experts in North America, Europe [ The East ] 40% [ The West ] 58% [ The East ] 60%
and South Africa (the West).
[ The East ] 50%
Respondents in the East see Here’s how our Swarm groups responded to The flywheel effect will continue to accelerate Physical retail will not die out. Stores –
mobile being a much bigger part of for Amazon over the next four years, at least in particularly grocery stores – will still be
e-commerce – largely because it is big questions about the future of retail... the US and Europe. In APAC, a much stronger
These stats show the trend towards
important, but relatively less so than today,
already happening that way in these role is seen for Alibaba, rather than Amazon. and more of the trade will be “click and collect”.
“conversational commerce”.
markets. Given that Statista estimates Given that PwC says 14% of global consumers
10.1% of global retail sales were surveyed* used their mobile or smartphone
While our experts in the West expect made via e-commerce in 2017, what for daily or weekly purchases in 2017, what
will that percentage be in 2022? percentage of shoppers will be doing this in 2022? Which companies will have the most impact on the future of retail? What is most important for brands to be doing
Amazon to play a growing role in
(In order of perceived priority) now in order to prepare for 2022?
retail, in the East, its influence is
tipped to diminish. In the East, Alibaba [ The West ] 33% [ The West ] 37% [ BOTH ] Improve understanding of shoppers
– already the sector heavyweight in
the region – is expected to intensify [ The East ] 60% [ The East ] 80% [ The West ]
its influence. Again, this largely
[ The East ]
reflects the difference in the status
quo between regions. JD.com, You may well argue that in 2022, the whole Essentially, instances of buying via mobile will at What should retailers focus on now to be best
another strong Chinese e-tail pioneer concept of “channels to market” will disappear, least triple; we know that this form of purchasing is positioned for 2022?
but these figures show the trajectory of the ubiquitous in urban China already.
in China, also performs well. The relative positions of Amazon and
shift to online. Alibaba reflect their current footprint. [ The West ] Speed of fulfillment through every channel
*The PwC survey covered 6 continents and 29 territories, including 24,471 respondents. Source: PwC “Total Retail 2017 Report” entitled
“10 retailer investments for an uncertain future” - https://www.pwc.com/gx/en/industries/assets/total-retail-2017.pdf.
[ The East ] Unique customer experiences
[ 20 ] [ 21 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ HUMANIZING TECHNOLOGIES ]
The technology that consumers and sales
associates spend significant time with now
is, in many ways, dehumanizing. As they
look down at their screens, they’re blocking
Humanizing
out the people and the world around them.
Technologies To browse, shop and entertain themselves
using today’s tech, people must have their
eyes on a screen and their fingers tapping.
This carries through to stores – digital kiosks
aspect of their lives to be: simple, seamless,
and natural.
What’s exciting is that technology is being
And in the Third Era, there are three key ways
in which technology will make retail feel more
human again: it will be dominated by Voice,
Vision, and Virtual neurons.
and “endless aisles”. Sales associates too are applied in new ways that are starting to look
“screen-bound” – both in checking stock and and feel more human. In our thinking and our research, all three
How Voice, Vision and Virtual also disappearing into their own world on their
smartphones during down-times.
And what’s distinctive about these
developments is that the tech itself is often
themes emerged as important ways of
giving shoppers a more intuitive, natural and
hidden. It’s becoming an enabler of activity, ultimately more personal experience of retail.
Neurons Add the Human Touch We’re convinced this is unsustainable. rather than the activity itself.
To take these themes one at a time …
Everybody’s doing it now because there’s no This humanization of technology is one of the
real alternative, but it’s completely at odds hallmarks of the Third Era of Digital Retail.
with the way human beings want every other
[ 22 ] [ 23 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ HUMANIZING TECHNOLOGIES ]
[ Voice ]
THERE ARE THREE
[ BIG ]
Smart speakers are rapidly becoming part of Smart speakers and voice assistants can
our homes, and voice assistants part of our offer a true one-to-one interface between
lives. And why? Because they allow people an individual and a brand in a way that
to behave in a more natural, human way. actually feels personal.
With voice, there’s no need to stop what For brands and retailers, this is an OPPORTUNITIES WITH VOICE:
you’re doing, take out a device, log in and opportunity to reach customers at
start typing. Smart speakers and voice different stages of their decision-making
assistants let users speak in the way they'd journey – including long before they’re even To raise visibility – brands that optimize
converse with a person. Voice recognition contemplating a purchase – and to leverage for voice search will be found, talked to,
is now so good that users no longer have the data and behavioral analytics these shopped and re-visited.
to speak like robots to be understood, and devices and interactions generate.
that’s leading millions of people to feel
comfortable talking to an inanimate object This is a game-changer for brand loyalty. If To build a brand – this is a new way
that talks back to them in increasingly you want to “add coffee to my next delivery” to surprise, delight and engage
sophisticated ways. By 2020, 30 percent via voice, your default supplier and brand with shoppers at every stage of the
FAST FACTS
One in six Americans Virtual digital Spending via voice Google voice of all web browsing is expected to be done stand to gain significantly. In this era, brands purchase journey. Conversation is a
now own a smart assistants will will increase as much recognition accuracy without a screen. that offer the right services, content, tool of engagement.
speaker, with the outnumber the as sixfold for voice improved 20% from personalization and value can become a
Why is this a big deal? Because it’s not just personal companion – almost human! The
number set to rise to world population assistant users in the 2013 to 2017, when another way for consumers to do the same flip side, of course, is that those brands that To sell – yes, this still matters!
over 50% by 2022. by 2021. next three years. it was at 95% - the thing they would have done with a keyboard aren’t locked into people’s preferences Becoming the preferred brand on a
threshold for human and screen. For brands and retailers, it’s a are cut out. For them, the cost of missing voice-activated platform provides
massive opportunity; voice is not just a new out in a voice-activated retail world will be
Sources: NPR and Edison Research, Juniper Research, Ovum, Cap Gemini, Mary Meeker
accuracy. huge potential.
input method. tremendous and long-lasting.
[ 24 ] [ 25 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ HUMANIZING TECHNOLOGIES ]
Facial-recognition cameras and
other biometric tools will enable
[ Vision ]
shopkeepers to magically know your
name and deduce what you want.
It’s just like they did in the old Smart mirrors in stores can help Visual search is helping shoppers Augmented Reality (AR) allows
Visual computing interfaces will be an days of the general store, but take the hassle out of trying find what they want when words shoppers to see how products
increasingly important part of the way at scale. Cameras linked to on clothing by allowing it to be are simply not enough. No longer will look on them or in their
Sometimes, voice just isn’t powerful enough people converse with brands and retailers.
We’re talking here about people being able
Artificial Intelligence tools can done virtually. Massimo Dutti’s do you have to try to describe an homes, and reduces the need for
tell a lot about a person they’ve “flagship mas technologica” item you want, you can simply unwanted items to be returned.
to get consumers what they want. Just as in to see what’s being discussed, AND about never encountered before – age, store in Valencia features snap a picture of something you Sephora, IKEA and Dulux are
technology being able to “see” who it’s gender and even current mood interactive mirrors and virtual like. UK-based ASOS is offering among the brands already using
human-to-human conversations, there are talking to and what someone is looking for. – and adjust their conversation fitting rooms, cutting out some visual search, and its mobile app AR to make decision-making
times you simply want to say “look at this”, and suggestions accordingly. of the very human pain points uses Artificial Intelligence to easier for shoppers. Starbucks
in shopping for clothes, in a way learn from each transaction, then in Shanghai uses AR provided by
that’s the case with technology as well. that doesn’t feel intrusive. adapts and improves the shopping Alibaba Tech to create a unique
journey for the next person. in-store experience – an AR-
enhanced tour of its Roastery.
[ 26 ] [ 27 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ HUMANIZING TECHNOLOGIES ]
[ PLE A SE M I N D TH E GAP ]
We’re moving towards a time in which
there’ll be increasingly two approaches
[ Virtual Neurons ]
to shopping:
Transactional and automated for regular routine “low
consideration” purchases (think toilet paper or laundry
detergent). Everything happens online and the logistics
are invisible to shoppers. Speed is the critical determinant
and products arrive on your doorstep “like magic”.
AI can guide consumers When brands win a consumer’s Experiential and interactive for less regular “high
through the maze of choice permission to automatically re-order consideration” discretionary purchases (think luxury). In-store
Technology is fast acquiring a towards their personal when stocks are almost depleted , it plays a big part, and it is highly visible to shoppers. Perhaps
preferences in a way that feels has won loyalty of a quality that’s rarely
level of processing capability not only effortless but also fun. been seen before and which will be
we will see in some categories the rise of a “slow shopping”
movement (akin to the “slow food” movement), linked to
that until recently was unique to It can link what it knows about far less reliant on price promotions. the pure pleasure of physical shopping, combined with a
an individual, from previous And, just as importantly, when a brand commitment to community and the environment. Note:
humans. Artificial Intelligence purchases to facial expressions, makes itself the automatic choice, It can be that shoppers start with a #2 approach, but once
with bigger data sets such as it locks the competition out of that
can do some of the “thinking” the week’s weather forecast, consumer’s life. This is a world in which
a decision has been made, future fulfilment is automated.
Nordstrom’s Trunk Club is an example of this approach.
that used to fall to consumers and popular TV shows in the area brand-switching will be so much harder
and events in the news. to effect; consumers will need stronger
store associates, making shopping motivation than ever to change their The issue is that much of today’s retail falls
somewhere in the middle. It’s neither highly
easier and less of a chore. AI and connected “things” – like
cars and fridges – are already
default settings. (Or they may do so
automatically. Digital assistants could frictionless or amazingly engaging and that won’t work
making purchases show up at put in place algorithms – if washing in the future. There’s too much competition to either
people’s doors before they’ve powder Brand X is X% cheaper or more make shopping more convenient or more immersive.
realized they’re running low. than my normal brand, switch to it.)
[ 28 ] [ 29 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] Where We’re Headed
[ HUMANIZING TECHNOLOGIES ]
Artificial Intelligence can help in
three ways to make consumers
[ FAST FACTS ] feel human again:
This Time
Customized products: Through customer service that
understands their needs quickly
> sell at a 40-50% price premium and responds appropriately – or
> conversion rates are double enables a human being to respond.
> account for 50% of revenue on e-commerce sites
Source: Forrester Helping brands curate – and create –
It's Personal
products, services and promotions
tailored to the individual. The ability to
better understand what a customer
is looking for, their feelings and their
For regular routine purchases, shoppers overwhelming for a human. It can also motivations, enables brands and
just want the job done quickly or, even guide brands towards offering just the retailers to personalize their responses.
better, automatically. When it’s a more right one-off product for an individual.
special purchase, there’s a desire to It then learns from who considers
turn the process of shopping into a what and who ends up buying, and By using known preferences to build
memorable experience – ideally with a improves its suggestions as it goes. loyalty and repeat purchase. When
“ just right for me” product at the end of it. people’s preferences are understood
And when consumers have questions, and anticipated, they tend to spend
AI can help identify that “ just right” item AI-trained assistants can be there more, come back more often, and
from a huge selection that would be with the right answers. become brand advocates.
[ 30 ] [ 31 ][ What To Do About It ]
[ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ A HUMAN FRAMEWORK ]
The evolving retail sector can be confusing
and complex. As we move into the Third
Era of Digital Retail, it’s therefore helpful
to think of retailing as a combination of
complex systems that work together to
achieve mutually desired outcomes.
[ A Human Framework ] [ Why Retail Needs a Full-Body Workout ]
To this end, we’re presenting a new We see retailing as a little like a
framework we initially explored human body, in which different
in our History of Retail in 100 parts each perform specialist
Objects book which has evolved for functions, in unison.
discussions about the development
of retail – one that shifts the focus The most important components
away from store formats and supply of this fast-developing life form
chain structures, which are no are: the face, the bones, and the
longer the heart of what retailing brains of retail.
should be about.
[ 34 ] [ 35 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ A HUMAN FRAMEWORK ]
[ Face ] [ Bones ] [ Brains ]
All the customer-facing experiential elements If someone’s “mission shopping” – looking Sales associates are a key element of a retail As in the human body, the bones of a Out of sight but essential to the
of a retail brand are what can be considered its for something specific, like bread and milk, or brand’s face. But there are other important retail brand are the supporting structure smooth running of a retail brand is
face – so that means stores, web sites, apps, shoes to match their new dress – the face of elements that each play an important role in - all the elements that sit behind the its brain. All the data analytics and
pick-up points and call centers. Ideally, the a retail brand will help shoppers find what they the overall impression a brand makes. These face to feed the retail experience. intelligence deployed through every
face helps maximize the customer experience want and get it efficiently. include merchandising, signage, and other stage of the retail process come
in a way that helps shoppers get what they look-and-feel elements of a store (not just Today these include components like from this brain. This intelligence
want, easily and with pleasure. If the motivation for shopping is less specific “sight”, but also “sound” – music, “scent” – fixtures and fittings, the supply chain, helps retailers to drive operational
and is more about "the experience", then smell; all the senses.) inventory management systems, loyalty efficiency and better understand
the face of the brand will help make that trip card and reward systems, and point- their customers. This knowledge is
(whether online or in the physical world) more Future advances in this area might include of-sale terminals. Future advances in then used to deliver a personalized
enjoyable. interactive brand experiences, virtual the bones of the store might include set of experiences, offers, pricing,
shopping assistants, and spectacular smart infrastructure, indoor location services and products. The brand
holographic displays. Just as important will be tracking, 3D printers, robots, delivery itself is also part of the brain of retail
who a brand partners with – an essential part drones, autonomous cars, facial- – it is the intellectual capital which
of “Mixology” – see later in this report. recognition cameras and automated can be leveraged.
and reconfigurable store fixtures.
The face is also the place that data is gathered
on the shopper and fed to the brain.
[ 36 ] [ 37 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ A HUMAN FRAMEWORK ]
The “face, bones, and brains” analogy is a It helps retailers and brands think
valuable way to reframe the conversation differently about ways that they can
on the future of retail. It offers a helpful differentiate their proposition, and gain
way to let go of old notions that are tied to competitive advantage through the
increasingly redundant retail formats. And deployment of technology that transforms
Move Your
it’s a productive way of assessing ideas for the face, bones and brains of retail.
future innovation and deployments.
These include technology designed to:
Personalize the shopping Create interactive experiences Augment and improve
experience. in the store that make shopping sales associates’ selling
Body
more efficient, more fun, or capability using wearable
Deliver customized products. more personal. technology and assistive AI.
Create new business models Free up sales associates in the Generate the maximum
and revenue streams. store to deliver better customer profit from each customer
service by automating non- over time by using targeted
Enable retailers to embrace value-added activities that can dynamic pricing that varies
the sharing economy with be mechanized or handled by by location, by customer, by
new commerce models. algorithms. minute, and by product.
[ 38 ] [ 39 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ A HUMAN FRAMEWORK ]
Amplify your
It’s worth noting that investment from operational data allow them manage inventory, and handle ways. Wearable computing will
in the brains of retail can be to be. Without a fully functioning secure transactions. help shop assistants to deliver
considered a multiplier of the retail brain—a brain fed by vast much better customer service.
other two elements. Improving amounts of data and powered In response to new shopper Giant data centers will amplify
the brains can make the bones by sophisticated analytics expectations, they will need the effectiveness of both the
investments by
and the face of the store much software— investments in the to rebalance their IT spend “bones” and “face” of retail by
more intelligent and thus more retailers’ face and bones won’t to include customer- facing connecting them to the “brains”:
effective. yield maximum returns. technologies that improve the analytics and intelligence at
“face” of retail: technology to every stage of retailing in ways
For example, dynamic pricing Technology will remake the face, improve the shopper experience, that multiply the effectiveness of
feeding The Brain
at the shelf won’t truly hit the the bones, and the brains of retail. to make “mission shopping” the bones and face.
mark unless it’s backed up by Specifically, computing capability more efficient, and “experience
cutting-edge analytics and will come at costs, physical sizes, shopping” more enjoyable. These added “smarts” will help
comprehensive customer data and performance levels that will retailers to drive operational
held in the brain. Personalized quickly disrupt retail. Computers that, thanks to efficiency, better understand
experiences won’t be very visual computing and AI, can their customers, and deliver
personal unless the brains can Historically, retail brands have see, hear and understand the personalized experiences,
direct and choreograph them. focused IT spending on the world around them will enable personalized offers, dynamic
And supply chains will only be as “bones” of retail: manufacturer- brands and retailers to hold pricing, and customized products
streamlined and efficient as the facing efforts designed to new types of interactions with and services.
The face, bones and brains quality of the insights distilled optimize the supply chain, shoppers, and tell stories in new
of retail work in combination.
Fa + Bo x Br = Retail Success
in the Third Era
The Face The Bones The Brains
[ 40 ] [ 41 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ A HUMAN FRAMEWORK ]
[ Time For A Full-Body Workout ]
We’ve all seen businesses in The risks of not achieving Retail businesses need to shake In the Third Era of Digital Retail, sector takes nothing away from making decisions would be as
which the left hand doesn’t seem synchronicity between the up their structures to allow there is no time to pass projects the urgency with which internal dangerous as not listening to the
to know what the right hand is face, bones and brains of retail new combinations of skills to along a chain of production, with structures need to be shaken data at all.
doing. are tremendous. come together. Old lines of separate teams each adding their up. While in the past, business
demarcation need to be dissolved expertise one after the other. decisions were perhaps 95 The Third Era of Digital Retail is
In the complex business of This is about more than uniting so that, for instance, specialists in percent intuition and 5 percent all about being human, and in this
retail, in which all the various data and making it accessible merchandising and analytics are Specialists from different fields data, and now should be 50:50 or new era, the art of great retailing
parts of the "body" have to work across departments, although working together, in real time, to need to combine their knowledge even 60:40, the human element will require fresh combinations of
seamlessly together, avoiding that’s an important part of it. determine the best decisions for and their data, not layer it. remains essential. To swing human strengths – in real time.
this situation is an especially large the business right at that moment. The prevalence of data in the too far towards letting the data
challenge.
[ 42 ] [ 43 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ BEING HUMAN: BECOME A 'MIXOLOGIST' ]
Moving with the times now takes more than
simply “going with the flow”. To thrive in the Third
Era of Digital Retail, brands and retailers need to
be proactively rethinking everything: what they
do, why and how they do it, and what else they
can make possible…and give it all a human twist.
[ Being Human ] They need to smash silos and
bring together diverse groups
of people and partners to both
Consumers today look at
the convenience of Uber
and the speed of JD.com
[ Time to Mix it Up ]
conceive to both conceive and delivery (now 100% same day,
BECOME A 'MIXOLOGIST'
When an ace bartender takes and ideas that excite or make
deliver the future. guaranteed) and make these just a handful of ingredients and life easier for consumers, then
the benchmarks for excellence creates a cocktail, they come to bring them together in fresh
They also need to look beyond in every aspect of their lives. up with something that’s so combinations.
their traditional categories – and, much more than the sum of
indeed, outside the retail sector Now businesses need to do the its parts. It’s like a genius chef This requires a step away
entirely – to understand the ways same: look across categories who combines elements of from traditional thinking, and
in which they can bring value and and industries for the most different dishes to come up with a willingness to challenge the
meaning to people’s lives. exciting deployments of ideas something new, unique – and whole concept of what we
and technology, and consider wonderful. traditionally have considered
new ways in which they can be retailing. It requires professionals
applied to retail. We’re urging businesses to look to become ‘Mixologists’.
all around them for technology
[ 44 ] [ 45 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ BEING HUMAN: BECOME A 'MIXOLOGIST' ]
To bring to life the
[ How would Mixology work in retail? ] For Scientific Purposes Only... concept of Mixology,
you may care to test out
[ World's Best Cocktail ]
Just as you'd mix a cocktail, integrate diverse elements and shake it up! Here's how:
this cocktail recipe*.
The method
The provocatively named "Pornstar Martini" was the most visited cocktail on "Difford's
Guide for Discerning Drinkers" for the third year running in 2017. Mix it up, sip it
First, take an autonomous Next, combine the basics of a Finally, take the popularity of thoughtfully, and conjure up ideas for the Third Era of Digital Retail
vehicle, give it racks, shelves vending machine with those supermarket ready meals and link
and mirrors, and equip it with of a fitting room. Facial or it to fast-food production systems, The ingredients The method
data on individual consumers’ voice recognition knows who’s and algorithms showing tastes
preferences and habits. Then opening the door, lets them and preferences in local areas. Use 25ml SKYY Passion Fruit vodka First, fill a Martini glass with crushed ice
send it round, autonomously, try on the items that appeal, this combination of technology to 25ml Absolut Vanilia to chill and place to one side.
to visit the customer at their and simply walk out with what provide freshly cooked meals in a 50ml passion fruit purée
convenience, with a specially they like. Automatic check-out way that eliminates so much of the 50ml orange juice Next, put the caster sugar into a Boston Shaker
curated collection of goods for knows what they’ve taken and wastage that currently cuts into 2 spoons caster sugar glass and add in the passion fruit puree and
them to consider. what’s still in stock. profit margins. 1⁄2 a passion fruit to garnish orange juice.
25ml prosecco
Pour in the SKYY and Absolut, and then stir.
Fill the Boston Shaker glass with cubed ice then
place the tin on and shake.
It’s not alchemy; it’s Business Mixology, and it’s the only way to stay ahead in the Third Era of Digital Retail. Empty the ice from your Martini glass and strain in
the drink, then garnish with the passion fruit.
* www.diffordsguide.com
[ 46 ] [ 47 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ A HUMAN FRAMEWORK ]
T h e s c i-f i a u t h o r W i l l i a m G i bs o n f a m o u s l y s a i d ,
“ T h e f u t u re i s a l re a d y h e re . I t ’s j u s t n ot ve r y eve n l y d i s t r i b u te d .”
We’ve seen this before in retail. Think
back to the first mobile check-out, which
we first saw at the Chicago Apple store in
2006; now, that cash-desk-free experience
[ The Future's Here ]
is commonplace. Even the relatively new
technology behind Amazon Go stores,
promoting “ just walk out” shopping, is
quickly catching on, especially in China.
The idea of seeing the future in the present
seems especially apt now, as we prepare
If you look hard enough for the Third Era of Digital Retail.
That’s why we conduct Retail Immersion
tours in key retail cities around the globe to
help business leaders spot the emerging
trends.
For some retail brands, the Third Era is not
just the future, it’s beginning right now.
Here are three picks from around the world
showing the shape of things to come.
[ 48 ] [ 49 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ BEING HUMAN: EMBRACING THE THIRD ERA ]
“ I t ’s n ot
Nordstrom Men’s, New York City
te c h n o l o g y
fo r te c h n o l o g y ’s
[ What’s New? ] s a ke. A l l of ret a i l
As well as great visual merchandising and stock that runs is ex p e r i e n ce
from Vans to Valentino, this new breed of store links the
physical and digital worlds. There’s a Virtual Reality suit t h e s e d ay s .”
station where shoppers can see their choice of fabrics on Jamie Nordstrom, Company President
an avatar and customize the design; orders placed via the
mobile app can be collected as you pull up at the curbside
after hours (even at 2am); and “Express Returns” are as
simple as scanning your receipt and dropping items in a box.
[ What Makes It Human? ]
The store is very much “high underfoot. It feels good. And Meanwhile in LA, Nordstrom
touch” as well as “high tech”. they’ll even shine your shoes has launched a neighborhood
There’s Nordstrom signature while you sip on a martini. Sales concept called Nordstrom Local
blend coffee in the cafe associates have “Intelligent that’s all about services, not
downstairs, and cocktails and Assistant” earpieces which product. You can return and pick
lobster rolls in the bar upstairs. A allow them to better answer up items, have clothes tailored
DJ pumps out the tunes, there’s customer questions, without or consult a personal stylist, but
art on the walls and plush carpet having to consult a screen. there is no inventory for sale.
[ 50 ] [ 51 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ BEING HUMAN: EMBRACING THE THIRD ERA ]
Alibaba Hema, stores across China
[ What’s New? ]
The online retail giant Alibaba is rolling out Hema
Supermarkets in China. These stores are leading
examples of what Alibaba calls "New Retail", linking
a slick online offering with unmatched offline
experiences. Hema is powered by a mobile app. In-
store, every product can be scanned with a mobilie
phone to find out more information (provenance,
ingredients, cooking instructions, recipe ideas, etc.).
Payment is always cashless - just scan with your
phone or with facial recognition and walk out the door.
Consumers can also order groceries from the mobile
app and inventory is updated in real time, based on what
is actually available in their Hema store at that time.
“ We found that New Retail [ What Makes It Human? ]
doesn’t only merge online When people hear that Hema is Alibaba’s homegrown new grocery concept, they
with of f line, but also expect a lot of flashy technology, robotics and automation. But what has made
Hema so popular is that it doesn’t start with technology, it starts with the consumer
connects day and night.” experience. There is no technology for technology’s sake. It’s only leveraged to make
a shopping experience more convenient, enjoyable, and efficient for consumers. And
Hou Yi , Hema CEO, on after-hours delivery the in-store experience is great - like fresh seafood from all over the world in large tanks
with clean water, and chefs who can cook your selection on demand how you like it.
[ 52 ] [ 53 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] What to Do About It
[ BEING HUMAN: EMBRACING THE THIRD ERA ]
“ We’re not in the cof fee business.
It’s what we sell as a product but
we’re in the people business—
hiring hundreds of employees a
Starbucks Roastery, Shanghai
week, ser ving 60 million customers
a week, it’s all human connection.”
[ What’s New? ]
Howard Schultz, Executive Chairman of Starbucks Coffee Company
Augmented Reality provided by Alibaba Tech permeates
the Starbucks Roastery. Both the Roastery app and
Alibaba’s Taobao app reveal the entire “bean to cup”
story of Starbucks coffee as visitors point their phones at
[ What Makes It Human? ]
features around the store. There’s a gamification element: The baristas who work there! the photogenic beauty of the bars presenting some of the
as people move around, they unlock virtual badges Starbucks is big on its stores store and its many copper rarest, small-lot coffees in the
that enable them to earn a customized Roastery filter, providing a “third place” between elements, the musical sound world, while in-house artisan
which they can share on social media. This is all on top home and work, and on treating green beans make during bakers under the guidance of
of the standard Starbucks offering: ordering via the app, its staff well so they do the roasting, and the expertise of Milan’s Rocco Princi produce
personalized offers and rewards, and mobile payment. same for customers. In the highly trained roasters. Artisan complementary baked treats.
Shanghai Roastery, there’s also baristas serve at three coffee
[ 54 ] [ 55 ]How To Make The
Magic Happen
Rebecca Minkhoff changing room mirror, New York City[ TH E TH I RD ER A O F D I G ITA L RE TA I L ] How To Make The Magic Happen
While you contemplate the greater challenges of
Business Mixology, here are some essential first
steps in preparing for the Third Era of Digital Retail.
Find ways to work Partner with existing Rebalance the store Adapt the products Unify the in-store Understand the right Build your ability to Integrate social Customize products Look at ways that AI
with the big online and emerging delivery and channel portfolio and services on offer and online shopping mix of human and digital capture data and networking and experiences for can help you anticipate
players, particularly providers to improve to improve proximity according to the kind of experience so it feels investment needed at make sense of it to throughout the entire an audience of one, consumers’ needs,
Amazon and Alibaba. speed of fulfillment of the services people shopping experience truly seamless for the each customer touch increase loyalty, build shopper journey, from using fun, easy-to- personalize products
for consumers, with want to the people a customer wants at a customer. point to ensure you are brand connections, discovery to purchase use interfaces that and experiences, build
They’re likely to have the aim of best-in- who want them. particular time. able to meet or exceed improve efficiency and beyond. provide just enough loyalty, and improve
a bigger slice of your category convenience. This applies to customer expectations. and increase profits. choice without being behind-the-scenes
target audience – and Focus less on holding Are they stocking up on communications as well Use it to help shoppers
more data on their as the commerce part of
overwhelming. efficiency.
If immediate availability stock and enabling a essentials or seeking Examine existing At the same time, choose, make and share
habits – than you do.. has been the main appeal transaction, and more on inspiration for a special the interaction; enable processes and determine articulate to shoppers memories, and to deepen “Made for me” is something If you’re not thinking
of your physical store, providing an experience. occasion? What they want a consistent, two-way where humans add the value they get from their emotional connection growing numbers of about ways that artificial
develop new brand The right combination will from retailers will be very conversation, using AI true value and where allowing their behaviour with your brand. consumers want, whether intelligence can improve
differentiators. vary according to country, different in each case, as bots and machine learning automation can remove to be tracked, and it’s a pair of jeans, a car or your business, you’re
city and target audience. will the desired balance where appropriate. manual, tedious, or low- demonstrate how you’re just a burrito. It’s also a great falling behind already.
between efficiency and value activities, freeing up protecting their data. way retailers can guard
depth of experience and in-store human experts to against commoditization
interaction. do what they do best. and price slashing.
[ 58 ] [ 59 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] How We Did It
Acknowledgments and additional resources [ How the Swarm AI® Research was done ]
Swarm Thinking
Swarm Intelligence has been share their intelligence in real time
used to predict everything from to make decisions together. The
[ Thanks to... ]
the Grammys, the Oscars and results speak for themselves.
Explained
the Kentucky Derby to Time Unanimous AI and Oxford
Person of the Year. Its developers, University research shows that
Unanimous AI, draw their Swarm predictions of the results
inspiration from the way birds, of 50 English Premier League
bees, fish and even ants form games were 72 percent correct,
swarms (or schools or colonies, compared to an average of 55
as the case may be), and work percent (not much better than a
together to conquer challenges coin toss) for the individuals taking
FITCH Ogilvy that are beyond the capability of part when making their predictions
their individual members. While individually. This degree of
Geometry Global SET Creative humans don’t naturally flock or difference, they say, is the norm,
Kantar VML swarm, the Swarm AI tool allows not the exception.
people to connect with each other
Mediacom Wunderman from anywhere in the world, and
Mindshare Y&R
[ 60 ] [ 61 ][ TH E TH I RD ER A O F D I G ITA L RE TA I L ] How We Did It
BrandZ™ Industry
Read more on RETAILING TO AN AUDIENCE OF ONE:
HOW MASS Insights
AI AND RETAIL... CUSTOMIZATION MAKES
THE PERSONAL POSSIBLE - Report
They’re all brands that have – quite
literally – transformed people’s lives.
AND PROFITABLE Brand Stories from Brand Champions
– Celebrating the Enduring Power of
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SMART provided consumers with
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SHOPPING
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SMART SHOPPING it has lacked immersive,
How Artificial A by The Store WPP in partnership with IBM
personal experiences.
How Artificial Intelligence
Intelligence is is transforming the retail Until now.
CEOs, decision-makers and game-
transforming the conversation
Part of The Store WPP’s Thought Leadership series on innovation
This report explains changers in the world of retail have all
retail conversation Edited by David Roth, CEO,
how personalization and shared their tales about why a particular
The Store WPP, EMEA & Asia
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and Karen Lomas, Director, IoT,
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dispels some common myths, and BrandZ™ Top 75 The book includes stories about brands
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shoes, clothing and table linen. unprecedented challenges. This exclusive WPP report looks at
enduring than spending on tangibles
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Download the Full Report at Download the Full Report at
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[ 62 ] [ 63 ]You can also read
