How IoT is bringing online retail offline
You could call it e-commerce’s real-world moment. Some of the largest online retailers, including Amazon and Alibaba, are rushing to own physical storefronts. Meanwhile, brands that previously positioned themselves as online-only are opening up offline locations around the world.
Amazon acquired Whole Foods and its nearly 500 physical locations for a staggering $13.7 billion and Alibaba invested $2.9 billion for a major stake in Chinese hypermarket Sun Art Retail. Both are also testing out staffless autonomous stores, which aim to offer the convenience of a physical location without the overhead associated with hiring a bunch of cashiers.
What is pushing these digital giants into brick and mortar, the very sector they worked so hard to disrupt? While the online business is growing faster, offline retail is still a huge opportunity. Traditional in-store retail accounts for 91 percent of sales in the US and 83 percent of all commerce in China.
Per Cromwell, co-founder of Moby Mart, a startup that makes autonomous, staffless, and mobile convenience stores, explained why: “Real world shopping experience is quite unique and powerful. Most people want to touch and feel products before they decide to buy.”
He has a point. No screen or digital assistant can replicate the experience of feeling a fabric, smelling a perfume, or tasting a dish.
Offline retail’s IoT-powered comeback
Sensors and smart devices powered by Internet of Things (IoT) technologies enable online retailers to bring digital elements to the offline world.
Take the Amazon Go store in Seattle or Alibaba’s Tao Café in Hangzhou, for instance. Filled with sensors and smart devices powered by Internet of Things (IoT) technologies, they have no staff or checkout lines.
Customers walk into their stores, choose the products they want, and walk out. The store tracks their purchases and bills it to their account automatically, just like in the online world.
“Technology will erase the boundaries and we won’t talk about offline vs online anymore, everyone will be online and offline,” said Cromwell. He expects the Internet of Things to create a hybrid model merging the physical benefits of a real-world store with the frictionless and customized experience of the online world.
Traditional retailers also see the value in blending online and offline commerce. Walmart, for example, is experimenting with a cashier-less store concept called Project Kepler and a personal shopping service “with highly personalized, one-to-one shopping experiences.”
At its traditional stores, the company is deploying shelf-scanning robots to check inventory, prices, and misplaced items in 50 locations around the U.S.
A new hybrid model
This return of brick and mortar could result in a huge makeover of the entire retail industry. It could also totally redefine what constitutes a store.
Some brands are bringing their online businesses to brick-and-mortar locations. Online-only mattress company Casper, for instance, has partnered with Target to offer consumers a touch-and-feel experience before they purchase, with physical stores as experience centers.
Meanwhile, companies like Bonobos and Warby Parker, which got their start with direct sales online, have opened storefronts in major cities around the world. In both cases, those retail locations don’t carry inventory but exist so consumers can see and try on their goods before they place an order.
Increasingly, retailers will look to IoT devices in their stores and advanced data algorithms as an opportunity to collect insights into shopping behavior, which could be used to offer a targeted and highly personalized customer experience.
“We want to build the most customized small store in the world,” said Cromwell, as his company is getting ready to open doors to its first autonomous store in Sweden. The company has lined up a “super-customized assortment of products that are very unusual for a small store,” which is based on their interactions with local residents.
Moby Mart will continue to track what resonates with customers to further fine-tune its product mix and experience, once that store opens later this month.
Some stores, according to Cromwell, will work as fulfillment centers and others as pickup points for customers. Moby Mart’s mobile staffless stores, will move from one location to another on a pre-decided schedule, allowing customers to walk in to experience products before buying them online. People will be able to get their orders delivered or return to pick them later.
“It’s a big deal,” said Cromwell. “Many of us can’t stay at home all the time and end up missing deliveries.”
Payments still a challenge
One of the biggest challenges in setting up these new autonomous stores is the current state of mobile payments in the US and Europe.
“China has a far more mature mobile payment system,” Cromwell said, explaining why they opened their first store in China before venturing into Sweden and the U.S. Moby plans to use an online payment system in the U.S., unlike the mobile payment platforms, such as Wechat and Alipay, popular in Chinese staffless stores.
In fact, Moby Mart has no plans to push any shiny new technology before it is ready. Even as they dream big and experiment with face recognition technologies, their store currently uses QR code to identify customers.
“The bottom line is that these smart autonomous stores are creating a big opportunity for brick and mortar retail,” Cromwell explained, “But it’s a big shift for the customers. Imagine what will happen if we rush into face recognition technology before it’s ready and some customers can’t get in or get out of the store. We can’t afford to mess up and miss the opportunity to revive offline retail.”