Retail Store Fronts - Amazon's Next Battleground
Retail stores stare down a growing threat as technology heavyweights, like Amazon, go on acquisition sprees to improve their physical store footprint. To fend off this threat, retailers must improve the in-store experiences of their customers, which presents an opportunity for both OEMs and technology specialists to provide innovative technologies, like smart shelving and personalized marketing services, that will help them secure a slice of the growing Smart Systems retail market that is expected to reach $98 Billion by 2022.
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Ecommerce Represents 8% of All Retail Transactions, But Commands All Of The Market’s Attention
The convenience offered by online-shopping has and will only continue to disrupt traditional stores, as evidenced by recent acquisitions like Alibaba’s $9.5 billion purchase of Ele.me, a China-based food delivery service. However, the fact remains that physical storefronts increase the likelihood that consumers will purchase their goods. For instance, according to a study by the University of Ohio, consumers are 40-60% more likely to purchase an item after holding it. While strengthening online footprints is critical to the survival of retailers, modernizing storefront operations with IoT technologies that lower costs and strengthen relationships with consumers in the store through innovative engagement technologies is equally, if not more critical to a retailer’s long-term viability.
Retailers’ recent investment strategies have shown increased attention to in-store technologies and supply chain enhancing solutions. This year, Walmart announced its plans to commit approximately $11 billion during fiscal year 2019 to improve operational efficiencies with a goal to reduce $2 billion in costs. Further, Macy’s has announced its plan to spend $1.05 billion in capital expenditures to upgrade 50 ‘test’ stores. Technology vendors and OEMs must position their portfolios to capitalize on the disruption playing out in the retail space as customers modernize their in-store environments with emerging technologies, or risk missing out on the growth opportunity that has been both recognized and heavily invested in by Amazon (see below).
Breaking Down Key Investments Made in Retail
The Retail Market is Ripe For Growth, But Where Should OEMs and Technology Suppliers Focus Their Efforts?
Players who Focus on Delivering Their Solutions Via Complex Ecosystems With Strange Bedfellows Will Win In Retail
To fend off advances from Amazon and other technology suppliers who are disrupting the market, big box retailers want to transition towards fulfillment-center focused models that accommodate the consumer’s demand for convenient and rapid product delivery. Both big box and large-scale specialty retailers want to improve operational efficiency and to differentiate their products through technologies that directly engage the consumer and analyze that consumer’s online/offline behavior.
To win in an omni-channel retail world, a more cohesive relationship between distributers, retailers and consumers is needed. Emerging IoT technologies have enabled a range of new use cases that address needs in the rapidly shifting retail market. However, this is only the first step. The true winners in this market will integrate today’s largely siloed world of warehouses, retail stores and consumers into a close knit, end-to end environment.
Delivering new solutions will require ecosystem development and new channels to market. Increasing levels of integration will require new interactions and the need for players to seek out ‘strange bedfellows’ to develop the ecosystems required to address increasingly sophisticated customer needs. OEMs and tech vendors will also need to adopt new channels to market that leverage systems integrators and other value adders that understand how to properly sell and integrate new IoT technologies.
Harbor Research has many client cases where it has engaged with both technology vendors and OEMs in designing their ecosystem strategies to succeed in the Smart Systems landscape. Contact us to learn how we can help your company increase its standing in the market today.
How Harbor Helps Clients Realize The Opportunity