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A Counterpoint Argument About The Next Gen Store

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Back in March, we published an opinion piece in the Retail Paradox Weekly newsletter about arguments for and against a higher service profile in the stores. The piece pointed out that the jury is out as to whether investments in assisted selling tools for employees along with the commensurate training are worth the effort:

We have learned … that personalizing the value proposition and offering a more high-touch store shopping experience are not the same thing at all. In fact, results of a recent survey we conducted indicate that a lot of over-performers (‘Retail Winners’) are ‘unclear about the value of customer engagement to our business model’ (39% compared to 20% of average and under-performing retailers) … Retail Winners seem focused on refining the self-service model in the context of a seamless digital+physical shopping journeys. Their top-two highly valued opportunities are ‘having stores meet more fulfillment-center-style tasks’ and ‘moving towards cashierless stores’.

With the caveat that there is no one-size-fits-all answer to this dilemma, the prevailing winds of change seem to favor customer enablement more than employee enablement. I wanted to get a better picture of this, and so I reached out to a friendly store solutions provider to better understand what is happening in that company’s sales cycles, as a way of understanding retailers’ points of view.

Here are some of the things I learned:

1. The biggest inhibitor to adding new capabilities and supporting technologies in the store is change management. Retailers often have large store workforces that turn over quickly. A 2022 study by employee search firm Korn Ferry pegged the annual turnover rate for retail employees at 76%, up from 68% in 2021, and the turnover rate for part-time hourly employees was 85%. So, keeping that kind of workforce up to date on store processes and supporting technologies is a huge headache for retailers. The push is to “keep it simple”.

2. Store associates are being asked to do more, but feedback from retailers is that they want to do less. This runs somewhat counter to findings in our most recent benchmark on workforce management, that younger employees in particular have higher expectations about job quality and advancement opportunities.

3. To the extent that retailers are adding more customer-facing technologies in stores, it is with the underlying expectation that consumers’ own mobile devices are the enabling platform. For example, scannable QR codes at the shelf edge are perceived as more important than digital signage for product information, and digital receipts texted or emailed to customers are gaining in popularity especially as more and more consumers object to paper register receipts (in fact, In Europe and some U.S. states, digital receipts may be mandated).

4. One shelf edge technology that may finally be gaining traction in the U.S. is electronic shelf labels. That interest is being driven by price optimization solutions.

5. Most retailers see the trend going toward more self-service than assisted service.

6. Many retailers don’t like buy-online-pickup-instore (BOPIS) but feel that they don’t have much choice. A recent McKinsey & Company study conducted for a technology solutions provider found that fashion retailers have incurred 15-20 percent of sales in new expenses to replenish, pick, and stage BOPIS customer orders. While retailers hold out hope that there is an upsell opportunity created when customers come to pick up their orders, it’s not enough to recoup the lost profits associated with BOPIS. In the long term, retailers hope that faster direct-to-customer fulfillment and delivery will obviate the need for BOPIS.

7. Augmented reality apps are way before their time. Neither retailers nor their customers are asking for them yet.

8. Aside from larger retailers like Target and Home Depot, most retailers are not establishing separate returns handling areas in their stores. Instead, employees are being asked to handle returns as part of the normal checkout flow.

9. Regardless of how many functions that retailers want to offer employees, they want “one app to rule them all”. They don’t want different devices for different jobs. Once again, the rule is “keep it simple”.

10. Retailers want less servers in their store, not more (again: “keep it simple”). Curiously, that hasn’t necessarily translated into a love of cloud-based environments, or for a desire to over-configure network connectivity.

11. While “less servers, not more” seems to be where retailers want to go, they aren’t willing to give up on “offline” failover processing in the event of network failures. In times past, that meant having a redundant POS server somewhere in the mix. Simply put, retailers don’t want to lose a single transaction to system failure – and it’s up to IT to figure out how to do it.

12. While the “cash wrap” in boutique stores may be disappearing in favor of a backroom wrap desk (in order to free up valuable selling floor space), stationary point-of-sale lanes typical in grocery and big box stores aren’t going anywhere. Why? Because of cash management, scales, coupon handling, bagging, etc. – things that traditional POS does quite well.

13. “Grab & Go”? RSR has written a lot about this; we know that over-performing Retail Winners in particular are eyeing these kinds of solutions – but the jury is definitely still out for the industry as a whole.

So, What’s The Answer?

RSR has conducted benchmark studies about the state of the retail store in 13 of the last 17 years that we’ve been in business, and we plan to conduct another one later this year. Our focus will be to get an up-to-the-minute reading on how retailers are approaching tech-enablement in the store today. Obviously, there are some wildly divergent views – and we’ll try to tease them out. Stay tuned!

Newsletter Articles July 27, 2023
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