Retail in the IoT era

By Mikael Lindholm, VP IoT, Telenor

Mikael Lindholm, VP IoT, Telenor

Humbly proud to see that the master thesis I wrote in the mid 90's about how Internet will change retail in many cases fallen into place. Slightly different and definitely far of timing wise, disruptive changes take time (although significantly accelerating) from what I predicted but in many ways right. One main difference is that I thought existing large enterprises would anticipate the opportunity and come together and make the end market offering, rather than eBay/Amazon/Alibaba/Lazada. In hindsight with experience I am not surprised about slow moving legacy. However, I fully missed out the possibilities and impact of Machine Learning and Artificial Intelligence, which today I see as the fundamental parts.

Retail as we used to define it, i.e. buying finished goods from the shelf in the physical store (based on what the store decided to put on the shelves) and promoted by print and TV advertising already feels like the dinosaur era. Yes, and that’s from someone born in the 70s, for anyone younger this is seen as something very ancient behaviour.

Today, I find it difficult to see the logic of the global retail chains continuing opening multi stories in same cities. Besides the ever increasing cost of attractive and scarce location, there is also increase in cost of labour to manage. This in combination with an already significant shift to online shopping by the consumer. Look back one month, Alibaba sales alone on November 11, an immense 25 Billion USD, more than 800 million orders. This was a growth of nearly 40 percent from last year. Additionally, 90 percent of the trade was made via mobile terminals. To be clear, China is already highly automated in the whole logistic chain to support this.

The internet (mobile or stationary) retail has some clear USPs compared to traditional retail: 1. Open 24 hours a day – offering shopping experience and opportunities where and when customers want to shop!

Today’s smart phone era where people feel more lonely than ever, physical shopping can be one saviour where one actually "have" to meet with other alive people

2. Offer adapted to me (based on purchase history as well as suggestions based on sales to others with similar profile as me)

3. Easy to make comparison (quality, performance, and price)

4. Delivered home to me, where most convenient (home, work or other)

These advantages to me make me highly sceptical about the future of traditional retail. No doubts a large part of malls situated in and near greater cities will disappear in the years to come. Also in smaller cities a lot of stores will have a challenge to remain profitable and a large portion will be forced to close down.

For this not to happen there are two vital things that needs to happen:

1. People have to realise and value the social aspect of shopping. In many Asian countries I have learned that shopping is seen by its inhabitants as national sports/ favourite hobbies.

2. The truly personalised shopping experience also in physical stores.

To make the digital and IoT solutions part of the personalised shopping experience in physical retail is not so hard. By identifying the user when he/she enters a retail chain store (given that consent is given) promotion and guidelines what to show (personally and on digital displays) and offer the customer is fairly straight forward in a technology sense. By combining technologies on previous purchases in the store in the past, last week Google/Baidu/WeChat activities, browsing on mobile and PC devices, online purchases and use similar data analyses and comparison as online shopping, personalised relevant results should come. Yes the sales rep can of course tell the mode of the shopper, stressed v/s lounge mood, which can be detected on pulse or for instance harsh brakes from the car they took to the store on way to store.

The second element is the social and personal part. This I believe is crucial, the honest recognising smile combined with competence from the sales rep - this part is vital if we believe the human element in retail is to remain. Also the social aspect of shopping is important to promote/take advantage from. Today’s smart phone era where people feel more lonely than ever, physical shopping can be one saviour where one actually "have" to meet with other alive people. Of course Internet retail is trying to manage this part as well through the use of Augmented Reality and Holograms.

Of course prices (and business models) needs to be close to that of online shopping (unless value in personal service can be significant). Loyalty programs and cooperation/ transparency between online and offline shopping is a must in this consumption era. The consumer have to be supported whatever way they want to buy and consume the products. Retail 2020 will be more personalised yet less social is my take...