Retailers across segments have been expanding their smart store ambitions for decades. Starting in the late 1980s with the introduction of self-checkout kiosks and progressing to today’s smart RFID tags and even fully automated storefronts, retail leaders have slowly but surely embraced digital in-store enhancements.
This is arguably in no small part driven by consumers’ desire for enhanced personalization and convenience, as well as their growing digital prowess as technology becomes increasingly embedded in their daily lives. Most retailers have heeded their digitally savvy consumers’ demands, embedding connected technology into their storefronts to varying degrees. By 2030, the smart retail market will be worth $91.36 billion thanks to these aggressive investments.
However, that’s not to say that the current state of smart stores is ideal. One retailer has recently come under scrutiny for its automated payment technologies across storefronts, leading experts and consumers to question just how intelligent their smart stores are. And a grocer has dealt with mixed reviews from consumers, employers and the media since the 2019 launch of its fleet of robots that roam storefronts.
Smart stores are still viable tactics in retailers’ broader business strategies, but recent news has proven that retail leaders must think ahead of the curve when it comes to their smart store implementations if they hope to see a return on their digital investments.
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Pros and Cons of Smart Stores
Smart retail storefronts have had varied success across segments and companies. In-store technology investment data and consumer research have proven that these advanced stores aren’t going anywhere any time soon, but it is clear they come with some universal benefits and drawbacks. It’s important for retail leaders to acknowledge these pros and cons as they begin to rethink their implementation strategies.
From a consumer perspective, connected in-store capabilities offer tailored experiences. Today’s shoppers don’t only browse and purchase online, but they also shop — and pick up ecommerce orders — in stores. That’s one reason why customers value seamless omnichannel experiences, such as mobile apps that are connected to inventory management software to enable searching for stocked products at local storefronts, or scanning mobile QR codes for loyalty programs and coupons. Shoppers also highly value convenience. Self-scanning devices, for instance, allow customers to beat the checkout lines and add products to their cart as they shop.
Retailer employees can also benefit from advanced in-store capabilities, particularly smart devices that allow them to track supply chain updates and search for products when assisting customers. And from an enterprise perspective, smart stores have the potential to improve customer loyalty, enhance operations and increase revenue.
Beyond the visible in-store hardware, there are several advanced software capabilities that contribute to these enhancements, such as business analytics, sales and demand forecasting and supply chain and inventory management.
Naturally, with the good comes the bad. Smart stores all but force consumers to have the latest smartphones, or even devices from specific brands that use operating systems that are compatible with the storefront. This can be extremely frustrating for customers. What’s more, when a store prioritizes digital touch points over human interaction, customers are often left disenchanted and disgruntled.
Advanced capabilities also present drawbacks to retail companies. They can be very expensive to not only purchase but also to maintain and update. And if smart storefronts are not properly designed with customers in mind, these digital solutions could have the opposite intended effect on shoppers, disengaging them with relentless personalization. Retailers walk a fine line between making their customers feel seen and making them feel like they’re being watched.
Common Implementation Pitfalls
Capitalizing on the benefits and minimizing the drawbacks of smart stores is no small feat for retail leaders. Traditionally, retailers tend to struggle with smart store implementations on a few fronts.
These issues typically start from inception. The design process is intrinsically flawed – namely, the selection of in-store solutions. Every retail segment, company and storefront differ. These differences call for tailored implementation strategies, in which capabilities are chosen with both consumer experience and business KPIs in mind.
What’s more, retailer leaders must also consider the costs of their digital implementations — which can be high. Advanced technologies like AI, radio frequency identification (RFID) systems, sensors and cameras require significant upfront investments in hardware, software, infrastructure and support. Beyond the financial expense, these technologies come with integration complexities, requiring both time and talent to implement.
Store associates will also need training to operate new technologies effectively and adapt to changing roles in a smart store environment. Resistance to change or lack of adequate upskilling and reskilling can hinder successful implementation.
Developing a Successful Smart Store Strategy
Many retailer leaders will need to adjust their smart store strategies to some extent — whether they have a handful of advanced in-store capabilities or entirely automated storefronts. These adjustments begin at the earliest stages in the planning process.
Companies must take another look at their consumer base and better understand what experiences they value, and what in-store solutions would improve those experiences. Similarly, the business and technology teams must partner together to establish business goals, set KPIs and align on budgets.
IT audits are also essential. Before decking out your smart stores with the latest and greatest technology, enterprises have to consider how these connected capabilities feed into the organization’s current tech stack. All of the bells and whistles in smart stores are enabled by AI, ML, and IoT – and these solutions feed directly into the “back office” tech stack.
Despite what some may think, smart stores have not spun out of the tech hype cycle forever. There is a place for these stores in many retailers’ business agendas. That said, their implementation tactics must be adjusted if retailers hope to reap all of the rewards that smart stores, and a truly omnichannel engagement strategy, have to offer.
We are far off from full-scale automation — and retail leaders and consumers must both appreciate this. Personalized, convenient, omnichannel experiences are still possible and still extremely valuable. However, we have officially entered a period of smart store transformation that calls for a more strategic blend of digital and human interaction. And in today’s crowded retail market, where leaders are vying for shopworkers in a dwindling talent pool and consumer spending power in an inflationary economy has rocked retail sales, there is no time to waste.
Mike Buob is the VP of Experience and Innovation at Capgemini Americas. He has been with the Capgemini Group for over 16 years, helping clients create impactful experiences for their customers. Buob has a diverse background in technology, innovation and strategy which has allowed him to play a critical role helping organizations with their transformation and innovation initiatives. He is based in Cincinnati.
