Oct 5, 2020
From dark stores to live shopping, BoF outlines the essential innovations every brand should consider in the pandemic-era retail landscape.
Have you ever bought something from an online brand then immediately received an email promoting that very same item?
If you have (and you almost certainly have), you’ve seen firsthand how companies waste money on wonky technology. Those emails are sent automatically, and the software behind them doesn’t always factor in customers’ shopping activity first.
As fashion spending moves online, brands are spending big on technology meant to make it easier to attract customers, and create a smoother shopping experience. Global brands spend millions of dollars on custom apps, customer analytics tools and virtual try-on services. But as the pandemic stretches on, small brands are also feeling the pressure to improve their tech offerings to meet the demands of consumers who are shopping online at unprecedented rates.
“A frictionless experience… is the cost of entry,” said Melissa Jackson-Parsey, chief strategy officer of creative firm B-Reel, which specialises in digital user experience design for brands like H&M and Fenty. Anything less, she added, “is annoying. You just expect better as a consumer.”
There are thousands of options for off-the-shelf tech products that all promise to better convert sales, and it’s easy to get lost in all the hype around innovation. Whether tech can actually solve a problem — such as the redundant email conundrum — will depend on execution and integration of different services.
Ultimately, meeting the standards of service shoppers expect today is mandatory, and technology plays a critical role.
“There’s already a big bifurcation among retailers that are ready on the capabilities side, and retailers that aren’t,” said Christopher Perrigo, partner at PwC, technology strategy for retail. “Those that aren’t will fall behind … And there’s absolutely urgency around it.”
Below, BoF outlines the most critical services to consider, from online clienteling services and microfulfilment to live shopping and dark stores, with advice on how to adopt them.
Pandemic-Proof Data Analytics
Consumer behaviour changed almost overnight when the coronavirus crisis struck, halting in-store sales and redefining what purchases people considered necessary. Retailers that had spent years gathering data on shopping patterns and consumer preferences found much of their findings obsolete.
“People were forecasting based on rudimentary seasonal trends, and with the pandemic, everything changed,” said Laura Kennedy, senior lead analyst at CB Insights.
Fashion companies must look for new models of forecasting that take into account the seismic shifts in consumer behaviour. Kennedy pointed to Edited, a firm that helps retailers optimise their assortment and price by forecasting trends. When Covid-19 threw off its predictive models, Edited pivoted to provide its clients "Covid dashboard" of real-time market data, such as top selling categories and popular marketing language around certain trends, according to Edited lead data scientist Joe Berry.
Bringing Store Associates Online
Retailers don’t always need software to track customer preferences. In the cases of brick-and-mortar retailers, their best asset is often the in-store staff, Jackson-Parsey said. Finding ways to bring real-world expertise online is critical, however.
During the pandemic, Neiman Marcus rolled out an in-house app that connects the retailer's 4,500 store associates with their personal shopping customers online and offline. By prioritising customer service, the luxury department store hopes to drive growth from the 10 percent of its top-spending customers that currently account for 40 percent of overall sales.
Retailers can also buy third-party technologies that enable in-store sales staff to act as digital stylists, said CB Insight’s Kennedy.
In Europe, BSPK works with luxury brands, providing a platform for their sales associates to reach customers by text messages, What’sApp and WeChat. On Monday, the company announced a $7 million series A funding round, led by Northern Light Venture Capital.
For brands that don't have an army of store employees, automated text messaging has proven to be particularly effective in the pandemic, said Veronika Sonsev, co-founder of CommerceNext, a firm that organises retail technology conferences.
Known as SMS marketing, these services send out text messages to customers who provide their phone numbers when signing up for a promotion or make a purchase. Typically, these texts notify customers of sales, new arrivals, popular items that are back in stock, as well as information about their orders, such as when something has shipped from its warehouse.
For instance, fashion retailers can use SMS to reach out to customers who browsed something online but didn’t purchase it when the item is discounted, Sonsev said. “For a customer who’s very loyal and passionate, it works well and has high conversion rates,” she added.
Sonsev added her firm surveyed a number of retailers in January and then again in June about what technologies that they're investing in post-Covid, and SMS was among the most popular results: More than 50 percent of respondents in January said SMS was part of their post-Covid technology investments, and nearly 60 percent said the same in June.
Arguably one of the biggest trends to come out of pandemic-era retail was the acceleration of “order orchestration,” or the ability to fulfil a purchase from either an e-commerce distribution centre or a store.
Being able to access inventory from various locations not only offers faster and cheaper delivery options to consumers but also ensures the retailer isn’t sitting on unsold but inaccessible products in stores that are closed or rarely visited.
Brands can train their in-store sales associates to fulfil orders as part of their day-to-day tasks as store traffic remains low, said Paula Rosenblum, a retail technology analyst and co-founder of RSR Research. This solution is sometimes referred to as “dark stores,” or retail locations that fulfill online orders. Retailers don’t necessarily have to close their stores permanently — it’s a temporary solution that could become a long-term change depending when and whether traffic recovers.
But to really pull it off, vendors must be disciplined in organising and constantly updating their system for managing inventory, according to Rosenblum. Order orchestration can only work when a retailer “has a grasp on inventory visibility,” she said. “Inventory visibility is the holy grail.” This means having an integrated inventory management system that ties in-store inventory with stock that’s available for online ordering. Technologies such as RFID (radio frequency identification technology) allow retailers to keep track of what’s sold online and in-stores in real time. Light Fidelity (LiFi) Technology uses LED lamps to transmit data and position for inventory positioning in warehouses.
A number of retailers are now using smaller, typically urban warehouse locations that allow them to provide faster delivery at higher margins. These microfulfilment services are useful for small companies that want to offer speedy shipping options but don’t have the capital to build their own warehouses all over the country.
Services such as fabric or Ohi use algorithms to calculate how much inventory each brand should allocate for their urban customers and then ship those items to their in-house urban warehouses. Ohi goes an extra step of commissioning couriers to deliver the packages from their warehouses, ensuring same-day or even same-hour deliveries.
If you understand where you customers are,” it makes sense to invest in these microfulfilment technologies, said Adam Pressman, a managing director in the retail practice at AlixPartners.
Such companies are seeing major interest from investors. ShipBob, a logistics provider that operates a number of microfulfilment warehouses, raised $68 million in Series D funding last week.
While stores were closed in lockdown at the height of the coronavirus crisis this spring, some retailers got creative with how to keep their sales associates employed: live shopping.
Pink Coconut Boutique in Mississippi, for instance, uses Facebook to conduct live shopping events that generate$25,000 in sales per event, with sales associates acting as the models, according to Bloomberg. Since Covid-19, the offering generates 90 percent of its revenue, One show hit $1,000 per minute.
But beyond the necessity of digital solutions during quarantine, live shopping serves consumers’ desire for community, said Brianne Kimmel, founder of VC firm Worklife Ventures, a fund that specialises in the technology designed for independent content creators and small businesses.
“What we’re seeing today, especially for solo entrepreneurs dependent on Instagram, was that business [surged] for those who hopped on the cam and found ways to integrate live and commerce,” Kimmel told BoF, pointing to the app Popshop Live as an example of a platform that creates livestreamed shopping experiences. PopShop Live allows brands and even individual sellers to get on the platform to create and host their own shows.
Apps like Popshop Live or sneaker focused app NTWRK facilitate live shopping events integrating brands onto their platforms to host live shopping events, but their shoppers must get on the platform as well. Some brands may be better off using technology that consumers are already familiar with, said Perrigo, whether that’s Zoom, Google Meets, Instagram or even FaceTime.
“Retailers have to use technology that consumers are familiar with and if they don’t do that, they risk alienating the consumer,” he said. What matters the most is offering them the ability to shop live with someone knowledgeable about the brand, he added, and making it as easy as possible to set up an appointment.