Sanjeev Sularia of Intelligence Node discusses how online and offline are fusing into one coherent omni-channel shopping experience by tapping analytics technology.
According to market watcher Mary Meeker, well known for her annual “state of the Internet” reports, if you ask what the future of offline retail is, her answer is stark: “brick-and-mortar retail is on its deathbed”. So how come, at the end of last year, online retail behemoth Amazon.com launched into offline by opening a physical store in its native Seattle, and recently announced plans for a chain of 400 to follow?
It seems there is still life in the traditional retailing model, after all. How do these two facts cohere? What explains this apparent paradox? There’s actually nothing paradoxical at all taking place – since those savvy operators at Amazon are acting very smartly, after all. What’s taking place is the long delayed successful marriage between online and offline, finally.
You will probably have witnessed this in your own personal shopping habits. You are probably starting to do more online – from books, groceries, clothes and even large white goods. It’s a well-documented trend with more than 10 percent of retail purchases now made in cyberspace.
In response, many retailers have shifted their operations, or at least a significant portion of them, online. Old school retail operators such as Macy’s and JC Penney are as a result feeling the heat, as they have remained rooted in the physical. But at the same time as everything seems to be pointing to things moving inexorably into the digital sphere, there is a shift taking place in the other direction, with former pure-play online players making the move into the Mall.
Amazon is leading the way as we’ve seen, but other online retailers are following suit, such as fashion site Bonobos and makeup subscription service Birchbox, both making a similar move from virtual to physical store.
The crucial role of analytics
The trend we are seeing is a coming together of what have previously been quite separate domains as far as most brands have been concerned, online and offline. Online is moving to physical because of the advantages of managing distribution and also returns this way; physical stores can serve as mini warehouses for home delivery and for managing the returns process, which can be difficult to organize for both parties online. The growing number of these physical stores means they also double as a showroom for the online merchandise; as customers, we like to see and handle what we’re planning to buy, while we may want to make the purchase online and at a time of our choosing.
The physical shop is also an important retail asset in and of itself. That Amazon flagship bookstore stocks just 5,000 books, which when compared to the online choice at Amazon.com is miniscule. But the ecommerce giant is confident it can carry these select lines because it has pored over the online intelligence it has collected from its online activities in order to establish what appeals to shoppers and what will bring maximum return and steal a march on their competitors – plus giving customers exactly what they want, even before they get into the shop.
We shouldn’t be surprised at this business smart technology-driven way of doing things. Amazon has always used technology to mine data and it pioneered the “if you bought this, you might like this” personalization technique, after all. Now, the same technologies and techniques that fuel the Amazon online experience are powering the offline shopping experience as well, through smart use of data.
What these pioneering retailers, who have conquered online and who are now venturing into brick and mortar, are getting right is that they understand that these types of business model are not separate, let alone competitive entities – as it can often end up being in the less flexible retailer. Now we see a true partnership evolving between the two sides of the businesses, enabling that elusive omnichannel shopping experience to be realized.
The trick is technology
The way these retailers are achieving this clever fusing of these two spheres is through the application of retail analytics. Analytics can tell you what the competition is doing, in real-time, and enable a rapid turnaround in pricing strategies in product lines. It can pinpoint trends, enable ordering to keep in line with demand and allow targeted promotions based on customer preferences.
According to Gartner, companies such as Amazon have seen their total data volumes increase by around 1,000 percent year on year. With that level of analysis, you can have advanced features like highly personalized smart cart discounts to customers to make purchasing ever more efficient; if you order pet food and a cat bowl for your pet, the software will find out if you can buy an animal bed or collar at a discount and at almost no additional shipping cost, enticing you into making another purchase. At the same time, multilingual features can help firms gain merchandising intelligence no matter the geography.
That’s going to be more and more important as country boundaries evaporate, as via Natural Language Processing (NLP) contextual meaning can be accurately preserved and exploited. For example, the word σακάκι can mean both “jacket” and “blazer” in Greek, so without contextual understanding it can easily be mislabeled on an e-commerce website.
As firms compete globally, being able to get localization right is going to matter more and more. And as Amazon is showing, all this is what you need in place to inform a coherent online-offline fusion– something we can expect to see increasingly more of in the near future.
Sanjeev Sularia is the chief executive officer and co-founder at Intelligence Node, a provider of retail analytics that helps retail brands make timely, data-driven decisions.