Programmable Retail: Reading the Status of your Business from the Network (the Sunny Day Example)
These are certainly not easy times to be a retailer. While consumer spending is continuing to outpace analyst expectations despite the ongoing economic uncertainty, profitability is continuing to slide firmly downwards. Average profit margins for UK retailers reduced from 6.0% in 2008 to 4.1% in 2015 (source: Deloitte), a 32% decrease in just 7 years.
And the bad news? The decline isn’t over yet. Deloitte predicts that profitability could be set to take a further 3-5% hit due to a “Perfect Storm” of factors, including; increasing staffing costs (not least due to the introduction of the national living wage), sharply rising rents and property taxes, volatile fuel costs, higher pensions costs and, last but not least, the plummeting pound.
So, how can retailers counter these factors and cut operating costs? In my last blog, we explored the concept of programmable retail – fusing sensors (including smart phones and wearable devices) with machine-learning, and the possibilities this creates for optimising retail processes, in particular from a ‘front of house’, customer perspective.
Let’s now take a look at how programmable retail can ‘read’ customer behaviour, using a digital network foundation (for example Cisco DNA) to automate many operational processes, optimising the retail workforce and cutting out unnecessary costs:
- A sensor in the delivery bay of my suburban grocery store detects activity, yet the receiving area door is closed. An automated alert notifies the store manager, who sends someone to deal with an urgent delivery we weren’t sure would arrive today.
- And the reason for the urgent delivery? It’s 30 degrees’ Celsius outside (a heat wave that was NOT predicted) and everyone has gone barbecue crazy. Our shelves have been stripped of barbecue meat and our fridges and freezers of beers and soft drinks and ice cream. Sensors on the shelves have notified staff to re-stock whenever stocks were running low, and sensors in the stores flagged an urgent order was required when we got through 10 times the expected volumes.
- The hot weather means nobody wants to do a standard grocery shop. Footfall in some aisles is minimal, while others are seeing legions of shoppers. Sensors send store associates to the busy areas, which change during opening hours as a rush on sunscreen and picnic items is succeeded by a frenzy of shopping for ingredients for an al fresco dinner.
- Machine learning automatically reduces re-stocking in the deserted aisles, focusing all available resource on the in-demand areas, where shelves are re-stocked much more frequently than usual.
- My ‘smart’ store also recognises the lower footfall areas and automatically dims the lights a few notches and reduces the air conditioning to a bearable minimum to save costs.
- And what about the fresh produce nearing its use by date that isn’t selling? Easy – an alert notified store management that less food has checked out than expected and prompted a localised digital campaign. The digital signs around the store begin to feature pre-made content promoting freezing fresh food for later use, offers for bakery items and recipes for refreshing smoothies made with fresh fruit. And shoppers signed in to the app or on Wi-Fi begin to receive targeted promotions on their mobile and wearable devices…
- Finally, the weather has altered the typical path customers take through the store. Heat maps of traffic identified through sensors or video show the store manager the route customers will take, and where to position the high margin special offers to best effect. An aisle end special display of outdoor tableware and unbreakable glasses may prove very popular today!
Digital transformation in retail is about much more than the customer experience. It can optimise the worker experience and drive down costs throughout your retail business.
Attending the Internet of Things World Forum in London next week and want to hear more about programmable retail? I’ll be hosting the ‘Success in Retail’ session at 15:00 on Tuesday 22 May where we will explore the topic in detail. The event is by invitation only, but you can request your invite here.
Or click here to learn more about how we are working with retail customers worldwide to securely digitally transform the customer experience, workforce experience and optimise retail business operations, and why not take our digital retail readiness assessment to see how much more value you could create by going digital?