Connected Retail - Lacuna Innovation

© Copyright Lacuna Innovation Ltd. 2017
Connected
Retail
Key developments & market examples of
how the consumer retail journey is
transforming
January 2018

Consumer Engagement
Payment, Security & Authentication
Proximity Marketing
Virtual Reality
Augmented Reality
Consumer Retail Journey
CONTENTS
Key Takeaways
We explore 5 key areas
where digital is adding
value in retail, specifically
in the physical store.
Market examples
demonstrate how these
trends play out in the
market environment. This
slide deck serves to
provide insight into how to
keep consumers visiting
and engaged in brick-and-
mortar spaces, by
delivering their desire for
digital. Persuading the
consumer to keep the
physical store alive is a
challenge, and retailers
need to adopt technology
to maintain relevance, and
at the forefront of
disruption.

4 © Copyright Lacuna Innovation Ltd. 2017
The consumer’s retail journey
In the age of evolving shopper expectations and technological advancements, the global retail industry is in the midst
of a profound shift in both consumer engagement & operational efficiencies

The new normal
Japan (39%), Brazil (35%), USA (37%) and Germany (34%): these reflect the top four countries where consumers shop
less often at retail stores due to Amazon. One must question, is this due to online being the consumer preference, or
are these statistics related to certain FMCG products that are repetitively bought or can be bought exclusively online?
According to the Pew Research Center, only 10-15% of U.S. adults make online purchases at least once a week. Is
online a threat? Is the physical store relevant? There is consistently contradictory information emerging about the
present and future of retail, where multiple studies have different findings due to their focus and variables.
While some mass-retailers are under threat with stiff competition and online retailers booming, we can be sure that
Omni-Channel has become an attractive offering to consumers, and Connected Retail is re-designing and re-imaging
the traditional brick-and-mortar, drawing in foot-traffic and re-igniting excitement within the physical store. Click-
and-Collect may be the next Omni-Channel mass-development; predictions are that from 49% in 2016, 90% of
consumers will buy online, and pickup in store in 2021, which makes the case that physical and online will both
continue to gain traction.
“Retail Showrooms” are a flagship store that is engaging and invites consumers to immerse themselves in a brand,
testing products and learning more about them. Modcloth, purchased by Wal-Mart-owned Jet.com, opened its first
permanent showroom in Austin, TX in January 2017. Amazon Go is another example of digital going physical. In
short, the physical space maintains relevance – but is being forced to adopt digital technologies, through NFC, RFID,
and Virtual Reality, to name but a few to be discussed here.
As brick-and-mortar, how can you compete with online retailers, whose growth per-annum is suggested to be three-
fold to physical retailers? We explore 5 key areas where digital is adding value to physical retail spaces, to understand
the developments made possible with technological evolution, urging retailers to consider what opportunities lie
ahead in 2018.

Consumer
Engagement
This is the means by which a company creates a
relationship with its customer base, to foster brand loyalty
and awareness, and multiple technologies serve to
strengthen this

Through the use of NFC tags & QR codes Blue Bite
creates meaningful and measurable connections
beyond visuals. Getting users
to engage with brands by offering relevant
and valuable content, accessed through
mobile devices.
Blue Bite

Connected stores feature smart walls that suggest
new styles when customers enter the space, smart
mirrors in dressing rooms that allow shoppers to
browse for other sizes or save their shopping activity
for the future, and more.
Rebecca Minkoff develops
Magic Mirror for retail

Payment, Security &
Authentication
Technology that allows consumers convenient,
secure contactless payment, while ensuring the
authenticity of the item and outlet

British supermarket chain Waitrose launched its
scan-as-you-shop service through its Quick Check
smartphone app. The app allows customers to
scan the barcode of each purchased item and
present the scanned data at the checkpoint for
faster and efficient checkout.
Waitrose launches scan-
as-you-shop retail app

Tesco launched its mobile payment app PayQwiq
across all Tesco stores in the UK. Customers can use
the app to make cashless and card-less payments by
scanning onscreen QR codes at the checkout.
Tesco rolls out PayQwiq
mobile payment app

USA fashion retailer River Island has begun to attach
radio-frequency identification tags to every item of
clothing it stocks. First implemented in June 2017, the
tags allow staff to instantly price and identify clothing both
on the shelves and in the store room.
USA retailers use RFID
tags to speed up
stocktaking

Location technologies to directly communicate with customers via their
mobile devices. Uses of proximity marketing include distribution of
media at concerts, information, gaming and social applications, retail
check-ins, payment gateways, and local advertising
Proximity
Marketing

Estimote beacons are low power computers
attached to walls or objects in the physical
world. Using proximity technologies they detect
human presence and behavior and trigger pre-
programmed actions delivering contextual and
personalized experiences.
Estimote Beacon

Virtual
Reality
Computer-generated simulation of a three-dimensional image or
environment that can be interacted with in a seemingly real or
physical way

Mastercard could potentially help retailers to enhance
in-store shopping experiences, and also to share
relevant product information with customers via multi-
sensory, immersive channels.
Mastercard develops VR
shopping experience
prototype

Augmented
Reality
A technology that superimposes a computer-generated
image on a user's view of the real world, thus providing a
composite view

Apple has collaborated with Swedish furniture
manufacturers IKEA to develop an augmented
reality app. Announced in May 2017, the iOS
11-compatible app will allow customers to
position 3D renderings of furniture in their
homes using only a smartphone, take the
uncertainty out of big purchasing decisions.
Apple and IKEA
develop AR furniture
app

Key Takeaways
• The Omni-Channel demands of consumers sets the expectation for touchpoints that feel integrated, related
and consistent; they expect a seamless blend between a retailer’s physical and online store. Omni-Channel’s
core function is to form strong connection at every step of the customer journey, aiming to enforce a
congruent and seamless brand experience at every touchpoint. Connected-Retail and Omni-Channel will be
trends that will develop alongside one another.
• Venture capital database CB Insights projected a record-high venture funding of $796 million to go towards
in-store technology startups in 2016, compared to $641 million in 2014 and only $213 million in 2012. Nokia,
Motorola and Google are some of the heavyweights actively investing in this sector, while the most
noteworthy startups include in-store analytics company RetailNext, management software Lightspeed POS
and mobile point-of-sales firm ShopKeep POS. As hardware costs come down as mass-adoption occurs, more
retailers will be able to access these technologies.
• More technology inevitably means data-collection and analysis will become paramount to retail strategy.
• Consumers respond favorably to technological integration in stores, because the Connected Retail experience
is more efficient, pleasant and informative than traditional brick-and-mortars of the past.
• Key areas within Connected Retail in 2018 will include richer consumer engagement, improved payment,
security and authentication, targeted Proximity Marketing, plus Virtual Reality and Augmented Reality. As a
retailer, you need to understand where the opportunity lies for your business, and how to implement the
structures for ROI and to maintain market relevance as other stores adopt digital methods.

Klaus Schnurr
CEO
Herman Van Zyl
Digital Project Lead
Grant Campbell
Head of Digital Innovation
Team
For any queries please contact:
Grant Campbell
+27 (0)21 422 2033
Grant.campbell@the-lacuna.com

Connected Retail - Lacuna Innovation

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