Since the COVID-19 pandemic happened, consumers’ expectations of physical stores have changed dramatically. In recent years, it is no exaggeration to say that having the right in-store technology is an “indispensable prerequisite” for improving the convenience of stores.
Prior to the pandemic, the primary reason for brands to invest in technology in their brick-and-mortar stores was to focus on the customer experience, “providing an entertainment element to the customers who visit the stores.” By introducing the latest technology, integrating it with digital, and adding novelty to the brand’s traditional DNA, stores became “places to experience the latest technology” that uplifted visitors and triggered them to return.
Among them, New York-based fashion brands have been using technology tools in their stores from a very early stage. Kate Spade began introducing “interactive display windows with touch-screen shopping” in its stores around 2013. Rebecca Minkoff made headlines in 2014 when she introduced “magic mirrors” in her stores’ fitting rooms and installed screens that allow shoppers to request additional items.
What Customers Now Want in a Physical Store Experience
However, these brand initiatives, once practiced by retailers as a way to energize their stores, are now in a transitional period of change. That’s because more and more consumers shopped online during the pandemic.
A study by Digital Commerce 360 estimates that the pandemic caused e-commerce sales to far exceed original expectations for the 2020 and 2021 biennium, bringing in an estimated $218.53 billion in additional revenue. Also, throughout the year 2021, consumers spent $870.78 billion online at U.S. retailers. This figure is a 14.2% increase over the previous year’s $762.68 billion. It is estimated that if the pandemic had not occurred, online sales would have remained at $754.33 billion in 2021 and would not have reached $870.78 billion by 2023.
E-commerce had been growing at a fast pace before the pandemic, but the Covid-19 Disaster’s “Stay Home” triggered a rapid growth in demand for online shopping. Since the pandemic happened, consumers realized the convenience of online shopping, where they could easily search for discount coupons, exchange or return items, and order from a brand’s full catalog, and today people came to expect the same convenience in physical stores as they did online.
RFID Technology Contributes to Long-Term Profit Enhancement
With rising operating costs and concerns about the economic downturn, however, many brands and retailers are finding it necessary to reevaluate the types of retail technology they are deploying.
Among the most effective in-store technologies are tools designed to solve infrastructure problems, such as RFID to help manage inventory. In brick-and-mortar retailing, the right technology tools can help brands connect with customers, improve back-office management, and improve store visits.
For example, the London apparel brand River Island improved its average inventory ratio across its stores from 72% to 97% in two weeks by implementing RFID technology. The brand reported that the increased merchandise utilization allowed it to break even on the cost of the RFID setup.
RFID technology is also being used by Ralph Lauren, a leading American fashion brand. The company has installed interactive virtual screens in its physical stores that allow shoppers to try on a variety of products in different sizes. The virtual screen uses RFID technology to read data from inside a clothing tag, which is then used to overlay the product on a live image of the customer. Shoppers have a 360-degree view of the item they are trying on and can change the color or pattern of the garment with a simple gesture.
Also in 2017, Reformation, a well-known sustainable brand, introduced “touch-screen monitors” that eliminate the need for shoppers to fish through racks to find products. At the same time, the company also developed a “magic wardrobe” concept that allows shoppers to select further sizes and styles on touch-screen monitors in each fitting room. Currently, Reformation has made these core elements of the store experience and offers this feature in 28 of its 39 stores. And the company plans to introduce this feature in future new stores.
Dubbed the “department store of the future” and representative of “RaaS” (Retail as a Service), New York’s Showfields is being used by many startups as a place where consumers can find new D2C brands. The company began introducing an app called “Magic Wand” in 2020. This allows users to scan a QR code on an in-store display and then use the app to get more information about that brand. Last November, Showfields added a discount code to the app that shoppers can apply when checking out in-store. This change has encouraged consumers to make purchases and has provided the brands with more data about the people who visit Showfields stores.
This convenient, efficient shopping space in a physical store provides the next level of personalization that increases customer loyalty and keeps them coming back for more. At the same time, RFID technology in stores provides the foundation for building agile inventory packages that are predicted from enhanced sales data, reducing obsolete inventory and markdowns, and achieving increased sales through a stable inventory supply.
Development of in-house systems with flexibility for changes and updates
On the other hand, as many retailers continue to face operating constraints from the unstable economy, they are becoming more cautious about investing in new technology. Despite the perception that decisions based on ambiguous inventory visibility can reduce profit margins, investing in new technology has not been a top priority. In addition, RFID is sometimes seen as a low-risk expense because it can help improve inventory management, but it can be difficult to implement because it must integrate with retailers’ existing systems.
On The flip side, companies that invest in more advanced solutions are like constant bettors on what effect or empathy their new in-store endeavors will have on the customer experience. For this reason, some brands are investing more in tools that highlight their DNA and are focusing on developing solutions that can be modified and updated according to their needs.
Farfetch, an e-commerce site that focuses primarily on luxury brands, dedicates millions of dollars each year to developing its own technology; in 2017, the company developed an innovative operations system that helps retailers with cross-channel initiatives by making better use of the vast amount of data held by its physical stores. This is a superior customer recognition feature that notifies sales staff when a customer using the Farfetch app visits a store or enters a “smart fitting room” of a boutique or brand that partners with the app. In the “smart fitting room,” when shoppers want to try on items in different sizes and colors, the Farfetch app can be linked to a smart mirror in the store to make it easier for them to request the items they want.
In addition to that, the company has already developed a “hanger rail that can recognize the clothes a user picks up. When a shopper picks up an RFID-tagged garment, an ultrasonic rail sensor detects it. The data is then automatically linked to the smartphone or tablet of the user closest to the hanger rail, and the items seen in the store are recorded in the customer’s online “wish list.” Sales staff can then use this functionality to provide more personalized advice and recommendations to each customer.
Farfetch sells such innovative technology systems developed in-house to other brands such as Thom Browne, Harrods, and Browns, from which it also earns profits.
In this way, retailers are implementing a variety of approaches to improve the in-store experience. As people demand the same level of convenience from brick-and-mortar stores as they do from online shopping, the use of retail technology is critical to the success of retailers.
By putting the right technology in place to meet the challenges of each store, retailers can strengthen the relationship between brand and customer and contribute to sales in the brick-and-mortar store.