Five Considerations When Developing an Edge Retail Strategy
Have the reports of retail's death been greatly exaggerated?
E-commerce is thriving. Global in 2021, based on a 38% year-over-year increase in the first quarter. While the pandemic-era digital acceleration continues, physical brick-and-mortar is still relevant. In fact, it remains the widest path for how the consumer shops and is still crucial to a profitable retail strategy. Though U.S. e-commerce brought in over , it only makes up 13% of the country's total retail sales.
Rather than mourning a death, perhaps we are witnessing a transformation built off the e-commerce wave and the birth of a new physical channel in the omni-channel portfolio called "edge retail."
What Is Edge Retail?
The idea for edge retail started with vending machines.
Vending machines were the first widespread method of automated retailing. In Japan, these refrigerator-sized shops act as a depository for almost every kind of product imaginable: artisan lattes, party decorations, flying fish soup and more. Although vending machines haven't reached similar critical mass and cultural penetration throughout the rest of the world, edge retail is on a mission to leverage this concept to make shopping a more personal and convenient as well as offer automated solutions for brands and their consumers.
Edge retail is the physical manifestation of the e-commerce investment and growth that has occurred in the retail industry over the past decade. It leverages technology, connectivity and the skillset of an emerging digital workforce to improve operational efficiency, better understand the customer and to deliver targeted storytelling that will unlock consumer value and loyalty over a lifetime.
We've seen the same revolution in the automotive industry. Ten years ago, a car was just a car. But now, vehicles are becoming increasingly connected, and automotive manufacturers are making substantial investments into electric vehicle adoption, transforming cars from means of transportation into two-ton phones on wheels. Effectively, stores are also becoming mobile devices.
That doesn't mean traditional brick-and-mortar is disappearing. Even digitally native brands are having to extend outward and create physical connections with their consumers in order to scale, sustain growth and build relationships.
Just a year ago, more than half of retail decision-makers said that they were investing equally in both in-store and e-commerce technology. In 青青草App's 2021 study of 201 executive-level omnichannel decision-makers about their sentiments and plans for edge retail, that number jumped to 71% — indicating that they are now deploying and establishing strategies that are more balanced and omni-channel in nature. This includes edge retail; 79% of respondents said they plan to increase their investments in self-service retail kiosks and intelligent vending machines outside of store locations in 2022, up 11% from 2021.
An online presence is not enough to fully capture customer loyalty and value. Brands need to provide tangible experiences at the time and place where their products mean the most to their consumers.
Informed retailers are emphasizing the importance of creating a seamless experience across all platforms. For example, Amazon is one of the most forward-thinking companies in the industry. But even the biggest online market has stepped into the physical world by acquiring and building out various brick-and-mortar stores across the U.S.
A brand's online presence focuses on transactions. Its physical presence focuses on interactions. E-commerce is where people can find the item they want quickly and effectively. In-store is where customers can engage with the product in real life, thus enabling brands to connect with their customers and form long-term relationships. Therefore, it is more important than ever to implement technological solutions that will cultivate both in the "brick and click" era.
How to Develop Groundbreaking Edge Retail Solutions
For digital brands, edge retail solutions are economical to operate, adaptable to changing market conditions as well as rapidly scalable and responsive to fluctuating demand. These solutions are more difficult for brick-and-mortar to implement. But they are becoming more purposeful in leveraging technology in their retail strategy.
In 青青草App's 2018 survey, 22% of participants stated they were not undergoing a digital transformation initiative, but by 2020, that number plummeted to 12%. In 2021, it dropped to 1%, with 83% of respondents saying they are undergoing a major digital transformation. Although this indicates exciting growth in the utilization of retail technology, some brands are still unsure where to start in implementing an edge solution.
1. Engage Your Customers
The end-goal of every retail trend is the same: increase customer engagement. Digital brands invest heavily in getting to know and interact with their digitally native consumers. Although accessible and convenient for all consumers, edge retail solutions will especially appeal to a generation that has grown up using digital devices as their main mode of communication.
As brands develop seamless experiences across their various touchpoints, they are collecting data, feedback and insights about their consumers.
As retail expert Doug Stephen points out on his , although brick-and-mortar used to be the primary (or only) means of distributing products, e-commerce is now fulfilling many of the responsibilities brick-and-mortar used to, such as merchandising, conveying product information and enabling transactions. This means that selling products is no longer the primary purpose of stores. They are becoming more of a media center, a physical presence and visceral experience that captures the hearts and minds of their customers. To look at it another way, physical stores are evolving into another device in the Internet of Things portfolio, a stucco-covered mobile device that delivers physical products.
However, to build consumer lifetime value, brands must establish a direct connection and continually nurture it through relevant brand messaging. In our 2021 survey, 38% of respondents said the ability to tailor messaging on self-service kiosks is one of the most important features when considering an edge retail device, while 23% found the ability to integrate messages between different channels critical.
2. Go Where Your Customers Are Going
One of the keys to successful retailing? Go with the flow.
Self-serve kiosks and intelligent vending machines allow retailers to meet the customers where they live, work and play, providing a pain-free shopping experience for consumers and allowing brands to place their products in the most appealing locations. They can act on the opportunity for low-risk, low-cost entry points, which enables fast testing of new markets (the concept's most important factor for 18% of survey respondents), as well as seasonal and targeted shopping experiences.
For example, instead of spending the time and money it would take to establish a brick-and-mortar building, a sunglass purveyor can install an edge retail device filled with its products right by the beach. Just over a fifth (21%) of survey respondents said the ease of designing and building a kiosk was an important factor of edge retail.
This kind of arrangement is equally valuable for consumers. Time is one of the most cherished and protected commodities people possess, and any setup that allows consumers to save time will be profitable for both parties.
3. Build a Strong and Secure Edge Retail Platform
One of the most daunting challenges retailers face is constructing an IT infrastructure that will support an omni-channel strategy. In our survey, respondents said technology challenges were the biggest hurdles they had to overcome to implement edge retail — including system integrators who do not have experience with the component's technologies (30%), a lack of available turnkey solutions (25%) and supply chains lacking experience with the component technologies (23%).
Ensuring that customers can enjoy a seamless experience, whether online or in-store, requires a complex combination of edge computing and communication technologies with robotics, advanced point-of-sale (POS) and intuitive human-machine interfaces.
As more companies invest in omni-channel strategies, leveraging cloud-based solutions is a must to secure uninterrupted continuity between physical and digital platforms. Brands are craving this high-tech level of connection. In our survey, respondents ranked the utilization of smart technologies like artificial intelligence, machine learning and IoT connectivity as the most important factor they consider in an edge retail device.
In addition to supporting data, security and compliance with privacy regulations will become more and more important to ensure personal identifiable information (PII) and behavioral data will not be compromised.
Stores are already gathering massive amounts of data and creating insights about their customers. While this knowledge allows companies to operate and serve their customers more efficiently, if this information is hacked or misused, it will likely result in the loss of customer trust and possibly legal action against the retailer or brand. Rectifying the situation can cost millions of dollars.
When integrated with leading e-commerce solutions, such as Shopify, Magento and Microsoft Dynamics 365, edge retail platforms can simplify supply chain, POS and marketing. However, they do require Application Programming Interfaces (APIs).
And once built, brands need to maintain, service and upgrade retail edge platforms to maximize uptime and streamline inventory restocking. Enlisting the help of a retail technology partner with strong industry experience and proven technical prowess can ease the burden while accelerating time-to-market.
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4. Take Advantage of the Direct-to-Customer Model
To fully understand what edge retail will look like, it is important to remember the distinction between retailers and brands. In the past, most brands were primarily (or wholly) reliant on retailers to get their product into the hands of consumers. However, with e-commerce and social media, brands now have a way to communicate and form relationships with their customers, allowing them to leverage a direct-to-consumer model.
Instead of having to go through retailers, customers are increasingly interacting with the brands directly through digital means. E-commerce brands are extremely skilled at utilizing the latest digital tools to keep customers informed and invested in customer and product narratives.
Edge retail is the extension of this capability. It allows brands and retailers to provide customized messages for targeted buyer groups. Enhanced cloud services can further amplify content planning via machine learning that uses feedback and sensing data to improve the impact of generated content based on brand goals and objectives. It will allow them to send their message to the exact audience they want to send it to.
5. Use Reporting Technology to Collect Data
A customer's decision to revisit a store can hang on the data that the retailer is able to glean from their previous shopping experience. Shoppers expect a retail experience that is personal, informative and convenient. While it is easy for online stores to gather and retain data on individual shoppers, the only way brick-and-mortar stores can provide the level of experience customers anticipate is by installing the right retail analytics technology and knowing what to do with that data.
Similar to e-commerce, edge retail can provide specific consumer data instantly. In 青青草App's recent survey, 57% of respondents said data generation and analysis is among their top considerations for new edge retail devices. Actionable data can help inform supply and demand decisions, reduce costs, create more revenue, influence quality improvements, accelerate process efficiencies and create better shopping experiences that meet consumer preferences.
The law of conservation of mass states that mass can neither be created nor destroyed in a chemical reaction. This concept has been popularized by the Father of Modern Chemistry Antoine Lavoisier's declaration that "nothing dies, nothing is created, everything is transformed."
This scientific principle summarizes the future state of retail. Retail is not dead, nor are companies knocking down the current structure to build entirely new architecture. But retail is transforming. It is becoming more intelligent, convenient and personal. It is, in every conceivable way, at the edge.