Although e-commerce continues to explode, breaking sales records year after year on big shopping days like Black Friday, it’s easy to forget that traditional brick-and-mortar shopping still comprises a whopping 91 percent of all retail sales in the U.S. We’re talking old-school shopping, where buyers park their cars, walk through the front door and wander the aisles in search of the products they need.
While traditional shopping has seen a few high-tech advances in recent years—coupons on smartphones, digital loyalty cards, tap-to-pay checkout terminals—the actual experience of in-store shopping isn’t much different today than it was in the 1950s.
That’s about to change, thanks in part to a set of technologies now arriving in retail stores known collectively as smart shelves. Smart shelves are a key component of what some experts are calling the “Second Era of Digital Retail,” and depending on the specifics of the implementation, they will extend a wide range of high-tech and data-driven business practices to brick-and-mortar shops in order to keep these stores relevant in the digital age. With this technology, primarily offline businesses utilize the real-world analogs of e-commerce-based tools to keep up with the gaining momentum of e-commerce.
Pricing on the Fly
Dynamic pricing is front and center in the smart shelf movement. Retailers using digital shelf tags can update their pricing much more frequently and effectively than ever before, says Sunit Saxena, founder and CEO of Altierre. Altierre, a pioneer in electronic shelf tags and back-end digital pricing technology, began working on digital shelving 15 years ago, and has finally started to see real adoption in the industry. “People laughed at me,” Saxena says of when Altierre first started. Now you’ll find Altierre’s technology in all Kohl’s stores in the U.S. and in 300 E.Leclerc department stores in France.
The technology required to make smart shelves work is monumental. Altierre’s wireless access points can connect to a million devices throughout a 50,000-square-foot building—each tag a separate device displaying pricing information for a product.
“Our shelving is designed to let retailers keep up with online sellers by letting them make changes instantaneously, up to several times per day,” Saxena says. “E-commerce companies make price changes millions of times per day. How does an offline retailer compete with that?”
Online retailers often fluctuate pricing based on demand of a specific product—once they find the sweet-spot price, sales go up. With smart shelves, brick-and-mortar retailers can leverage consumer behavior in a similar way. Saxena says smart shelves can even outdo the e-commerce giants in a key way: For multi-location retailers, “you can send a different price to every store, which you can’t do online.”
When customers shop online, retailers automatically create a customer profile for them in the backend and serve consumers recommended products based on their online behavior—even reminding them they’ve left things in their virtual shopping cart. With the help of smart shelves, brick-and-mortars can offer a similar, personalized connection.
Smart shelves have already been developed with LCD screens that can display promotional information or digital coupons for nearby products, but companies like Mondelez International have envisioned imbuing them with some intelligence. These displays would use sensors to determine whether an approaching shopper is a man or woman, adult or child, and make other simple demographic decisions to optimize the specific promotion each shopper experiences.
Barcelona-based Keonn markets a shelf that includes RFID (radio-frequency identification) technology to enable related tactics, tracking individual items on the shelf to determine in real-time whether they’re on a shelf, in a cart or out the door, so sales associates can be sure shelves are stocked or even help a hesitant buyer over the edge.
According to Saxena, the possibilities with smart shelves are really endless. Shelves will eventually understand things like emotion and will work with shoppers to help them make a purchase decision based on how they’re feeling, for example. Ultimately, the goal will be to make life easier for the shopper—after all, convenience is a major factor for online shoppers—while also boosting sales for offline retailers.
“We’re bringing the internet out to the edge of the shelf, and we’re limited only by our creativity,” Saxena says. “Eventually we might embed motion sensors into shelves to track how much traffic is coming down each aisle, then correlate the traffic to the messaging we had on that aisle.”
Updating prices and analyzing sales in real-time will require a sophisticated network to support it. “It’s very important to have a robust network and strong security,” Saxena says. “But reliability is increasingly critical the more dynamic your pricing becomes.”
IoT could change the game for brick-and-mortar retailers.
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