What You Need to Know
Disruption in retail has been continuous and has come from all angles, including fierce competition, emerging technologies and now a global health pandemic and economic crisis. The greatest opportunities that retailers have right now to survive and even thrive are:
Many retailers have been so focused on larger digital transformation efforts and distracted by emerging, “sexier” technologies that they have lost sight of the basic expectations of customers. However, customer requirements for the right assortment, product availability, ease of finding products, efficient order fulfillment, and simplified returns are foundational as illustrated in Figure 1. If a retailer fails to execute these basic activities correctly, they risk losing the transaction and ultimately, the customer.
As retailers continue to transform from multichannel to unified commerce, the required changes and execution to meet the customer fluidly across multiple touchpoints becomes more complex.Customer journeys are unpredictable;each customer journey can be completely different from their last one as they utilize the various touchpoints that best address their need state for browsing, transacting and acquiring products. Customers may shop online, in store, through mobile, social, Internet of Things (IoT) devices, or a combination of digital and physical touchpoints. As a result, retailers must be in position to be flexible, have solid understanding of the customer need states and be able to serve them in their market regardless of touchpoint.
Despite being an unprecedented health and economic situation with some dire consequences, COVID-19 has served as a catalyst to accelerate the convergence of digital and physical touchpoints for retailers. This is especially true for the grocery, drug and convenience segments, but will have implications on all retail segments. The pandemic has highlighted the need to provide customer confidence that the products customers need are offered in their local assortments and are actually in stock. This will be remembered, and rewarded, long after this moment.
Stores will continue to play a critical role in unified commerce. Even with the grave severity of COVID-19, retail will not shift entirely to online. The stress on the supply chain and the last mile have illuminated that this isn’t a permanent option, nor would we want it to be, as consumers and social creatures. The need to acquire products immediately can only be achieved with physical outlets in local markets. While the physical estates of retailers may shift to include more dark stores or vending, the need for a local physical touchpoint is apparent. Therefore, retailers must ensure that those physical touchpoints have adequate staff and are leveraging technologies that create relevant assortment and product availability. As importantly, customers and associates picking online orders will need to be able to find products easily and to complete their shopping journey efficiently.
Labor is one of the largest expenses for retailers and is the linchpin in meeting customer needs, so it needs to be protected and optimized. For many retailers, more than half of their online orders are fulfilled by a store today. That number will continue to rise, putting increased demand on store associates, inventory and operational processes. Retailers must enable digital dexterity, incorporating the optimal balance between associates and automation, to facilitate replenishment of products and fulfillment of orders more efficiently.
Online shopping will continue, whether as a result of safety in the short term or convenience in the long term. While some categories like apparel have the highest online return rate, on average 30% of all online orders are returned, so retailers need to be able to simplify the process, as that volume will increase as online orders increase. Many customers verify return policies prior to purchase, so a cumbersome return process may deter purchasing altogether. Returns, regardless of whether the order was shipped or fulfilled by a store, will need to be simplified if retailers want to capture initial sales. Further, while returns have been viewed as a dreaded obligation, with better insight retailers can convert a return into an exchange and increase customer retention.
Overall, customer trust is gained and maintained when basic expectations are consistently met. Customers want confidence in product assortments and availability, as well as convenience in receiving or returning products. These foundational aspects must be inherently included in the experience; otherwise, retailers risk losing customers. The Cool Vendors included in this research offer retail CIOs solutions that can not only assist in delivering customer basic expectations well but also create a foundation for customer trust and confidence.
Why Cool: INCREFF provides a self-learning merchandise planning platform that focuses on improving inventory efficiency through predictive analytics for fashion retailers. Its IRIS solution consists of three modules and a reporting tool:
To leverage the Smart Assortment Plan, analysis is performed at store level, leveraging current sales activity, and is able to consume real-time data. INCREFF leverages inputs including transaction data, master data, algorithmic parameters and operational constraints. INCREFF builds and leverages 22 layers of attributes to generate style clusters by store, to build clusters. It automatically identifies new and ongoing styles, creates and maintains size requirements while correcting for liquidation and brokenness. It leverages never out of stock (NOOS) to designate styles providing high revenue at low discounting to ensure that they are always in stock.
In anticipation of a future season, it predicts assortments by store and seeds a plan by creating placeholder styles. These placeholders include assortment breadth and depth optimizations, a suggested inventory quantity and a buy plan. In this way the solution is designed to predict assortments, and then reconciles the assortment plan with the merchandise financial plan, building a comprehensive buy plan.
The Ideal Buy Plan module uses “true depletion” to calculate an opening inventory at the start of the open to buy (OTB) period.
The Optimal Store Allocation module is designed around optimizing profitability and includes replenishment, transfers and allocation. It ranks all styles across all stores and all stores across all styles, and then finds the best combination. It creates a product segment allocation cluster in the allocation process. In addition to profitability and sales optimization, it can also use space and other constraints during the allocation process.
INCREFF also offers INCREFFAssure, described as a smart fulfillment web-based SaaS platform that supports B2B and B2C in a single solution.
Challenges: INCREFF’s solutions do not predict revenue, only leveraging it as an overall store revenue input from merchandise financial plan. As it only leverages the historical and current data, it does not presently have the ability to anticipate changes driven by trends and external forces.
Who Should Care: CIOs, merchandising and planning heads for large and midsize apparel retailers, seeking to implement customer-centric merchandising through retail assortment management applications.
Analysis by Joanne Joliet, Kelsie Marian
Why Cool: SIRL uses a combination of Bluetooth Low Energy (BLE) satellite nodes, their cloud-based software and a customer’s or store associate’s mobile phone to determine microspatial locations inside a physical store. The solution provides personalized and efficient in-store navigation to the products they are trying to locate.
As the physical store remains the greatest contributor to a retailer’s sales and revenue for most segments, enabling customer convenience for searching and locating products needs to be as easy as it is when shopping online. The SIRL solution offers software development kit (SDK) integration to a retailer’s app, allowing customers to browse products and create a shopping list. This list is then used to generate an optimal route for that customer to navigate the store to complete their shopping journey. Additionally, the solution gives retailers the ability to provide personalized offers to customers and allows customers to call for assistance from their phones if they need it.
While the solution is targeted to improving the customer experience, SIRL can also aid associates in picking products for fulfillment of online orders more efficiently. As online orders are pushed down to the physical stores, the solution will navigate associates to provide the most efficient and optimized route for picking the products within the order. Additionally, the solution can direct associates to pick more than one order at a time, with projections that the overall labor savings is 2 times or greater.
Aside from elevating the customer experience and improving associate digital dexterity, retailers can reap additional benefits from the solution. SIRL’s analytics dashboard provides real-time reporting for customer behavior, waypathing and heatmaps based on dwell time. Additionally, the analytics will uncover dead zones and opportunities to improve product assortment placement, pricing and other opportunities to drive sales conversion.
Challenges: The greatest challenge for most retailers is to be able to meet the dependencies required by the solution, such as store maps and accurate planograms, especially if their stores don’t have a standard footprint. SIRL’s dynamic mapping capability addresses and augments the planogramming dependency by providing the location of products automatically as a byproduct of the use of operational (for example, picking, replenishment) apps to log and maintain the latest locations (realogram). For retailers who don’t have their own app, they will need one in order to utilize SIRL’s SDK. Both customers and associates may have concerns as well. Customers will have to opt in and turn on location services in order to utilize the solution, which may be disenchanting for privacy-sensitive customers. Associates may be concerned that their productivity is being monitored more closely and fear corrective action. Lastly, with fewer than 20 employees, SIRL manages installation and support using local third-party help.
Who Should Care: Retail CIOs, chief data officers, chief digital officers, chief merchants and chief marketing officers, chief HR officers (CHROs) and store ops, all of whom have ties to elevating the customer experience, identifying operational efficiencies and driving sales and promotional activities at store level.
Analysis by Kelsie Marian, Robert Hetu
Why Cool: Jyve’s technology platform helps grocery retailers and brands find skilled labor to mitigate labor shortages and fundamentally change labor management and in-store execution. Brands and retailers work with Jyve to minimize shortages due to callouts and missed shifts by handing over portions of work. Jyve’s technology replaces the work done by whole departments to recruit, hire, train and schedule workers. In today’s highly competitive retail and labor markets — now exacerbated by COVID-19 — physical stores must possess strength and flexibility to meet customer expectations for unified commerce. In many cases, this means having products available and in the right places, and having labor to do the work and provide customer service as needed.
Jyve independent contractors, known as “Jyvers,” are working today in most major U.S. markets and specialize in (mainly grocery) store and fulfillment-related tasks such as stocking, display building, shelf auditing and assembly of hardlines. Working with multiple delivery providers, Jyve enables retailers to execute and manage e-commerce order fulfillment, creating partner networks that grocers can control.
In addition to helping retailers and brands reimagine their go-to-market, moving in-store execution responsibility to Jyve for scheduled work, the platform also gives store managers and field managers the ability to publish tasks to the marketplace in real time. The platform also allows both local and enterprise users to review task details, including before and after shelf photos, units worked and on-time job completion rates. The data is then reviewed by store managers, Jyve’s machine learning (ML) algorithms and, as needed, by Jyve’s human quality review team.
When someone applies to join the Jyve platform, they must first complete a skills demo — in-person or virtually — to ensure that they are a good fit for the work. More than half of Jyvers have experience in retail or brands and come ready to work. Those who don’t have experience can take lessons via Jyve’s skills hub, an in-app tool, to get up to speed.
Once a potential Jyver completes the skills demo, they go through a background check and provide necessary documentation. Brands and retailers that work with Jyve have the option of creating brand certifications that Jyvers must complete before they can claim that brand’s tasks. As Jyvers complete more brand certifications, that opens up more work to them.
Jyve tracks the quality of Jyver work closely using a combination of AI, human reviews and client ratings. Jyve has a remediation process for Jyvers who are not performing to our clients’ standards, and the technology enables Jyvers to receive feedback on how to improve.
Challenges: Founded in 2015, Jyve is still considered an early-stage startup. Therefore, the company itself, along with the platform and gig workers, will likely have to face uncertainties when entering new markets or segments — for example, where new legislation such as AB5 in California is reshaping labor laws. Outcomes from new legislation could impact participation for all parties (workers, platform providers, retailers) in multiple ways. That said, Jyve is fully compliant with AB5 and operates throughout California.
Conversely, as demand for flexible work increases, it is likely that additional providers will enter the space, furthering competition between platform providers. For retailers, this could result in a positive outcome for retailers by increasing the skill levels of flex workers and providing additional choice.
A few providers of flexible work have made headlines when workers revealed instances of unfair treatment. In the case of the COVID-19 pandemic, gig workers require support from platform providers that they engage with (for example, obtaining proper PPE use/health guidelines beyond what they receive from retailers upon entering a store to work). Lastly, as artificial intelligence (AI) increasingly becomes embedded into worker technology platforms such as Jyve and others must ensure automated decision making takes a human-centric approach.
Who Should Care: This solution is relevant to CIOs, head of stores/store ops, direct store delivery (DSD) field leadership, merchandising and HR directors, including regional and store HR-related roles. Just like the CIO found flexible capacity in the cloud versus buying servers, the CIO can once again help their organization understand flexible task capacity in a platform like Jyve. IT leaders can no longer view store labor needs and related issues as HR or store-specific initiatives. The CIO is in an ideal position to help facilitate the response to workplace changes, due to the ability to see activities across all areas of the organization.
Analysis by Joanne Joliet, Kelsie Marian
Why Cool: Takeoff, founded in 2016, is enabling grocery retailers to accelerate fulfillment of online grocery orders with its in-store, automated microfulfillment solution. The solution allows grocery retailers to scale their business by leveraging their physical store to execute online grocery orders efficiently for labor and fulfillment.
While the grocery segment has trailed other retail segments in e-commerce penetration, grocery is now the fastest growing online segment. In fact, estimates project that by 2024, 70% of consumers will likely utilize online grocery shopping. (This could be even higher given changes in customer buying behavior as a result of COVID-19.) For online ordering to be profitable, grocers need to:
Shorten the last mile.
Takeoff accomplishes these three aspects for retailers with their solution, which requires roughly 10,000 square feet of floor space within the store (or backroom), and can be implemented within a few short months. The microfulfillment solution is stocked with the most common goods ordered online, and then uses robotics to automate picking those products by order. For products ordered but not stocked in the solution, those are manually picked and then added by an associate to complete the order. Takeoff has enabled digital dexterity for store associates. By utilizing a balanced human-machine mix, retail associates execute online order picking 10 times faster than manual picking alone, optimizing labor and order throughput.
Challenges: The greatest challenge is the overall cost, which has been stated as $3 to $4 million per store. For smaller grocers with low online order volume, not to mention the incredibly thin margins the ROI will be difficult to achieve. Additionally, retailer’s with still low online penetration will need greater adoption in the touchpoint. Lastly, the microfulfillment solution takes up considerable floor space, so it may be better suited for a dark store than actual in-store use.
Who Should Care: Retail CIOs, head of store ops, chief data officers, chief digital officers, chief supply chain officers (CSCOs) and CHROs working together to enable associates’ digital dexterity to optimize fulfillment and shorten the last mile to the customer.
Analysis by Joanne Joliet, Max Hammond
Why Cool: Since its founding in 2015, Happy Returns has revolutionized the returns process for retailers with its returns software and reverse logistics solution. Recognizing that the returns experience is a key aspect of the customer journey, Happy Returns’ software uses logic to curate intelligent recommendations that convert refunds into exchanges and drive additional sales for retailers.
For retailers using Happy Returns, their customers have the option to exchange or return items in person at Happy Returns Bars, at retailers’ stores or by mail. Shoppers who elect to visit one of the 700-plus Return Bars do not need to pack items in boxes or print labels. Instead, they answer a few questions, leave their items and receive refunds immediately, or initiate their exchange order at drop off. All items then bulk-ship inside eco-friendly, reusable boxes, leveraging low carrier rates and aggregated shipping for economies of scale, to Happy Returns’ regional Return Hubs, where they are sorted, dispositioned and processed.
While online return rates average 30%, apparel and shoes, electronics, and jewelry and accessories report rates as high as 50%. Additionally, half of customers check on the ease of returns prior to even making a purchase. Understanding that returns can be problematic for both customers and retailers, Happy Returns has revamped the return process to benefit both. Shoppers of retailers that Happy Returns serves can take items to one of the Return Bar locations (currently in the U.S. only), without needing to package items or print labels. While retailers pay a subscription to access the network, most offer the option to their shoppers for free. For shoppers, the process is extremely convenient in that it’s usually completed in less than 60 seconds per item and confirmed instantly via email. Further, refunds are initiated immediately, instead of shoppers having to wait for retailers to receive items. Happy Returns’ improved customer experience for returns enhances overall customer loyalty and lifetime value.
There are tangible operational benefits for retailers, too. Retailers:
Retain more revenue by making exchanges easy.
Reduce costs with low carrier rates.
Improve their supply chain sustainability efforts.
Enhance loyalty by giving customers options that are label-free, box-free and that provide an immediate refund or exchange.
While simplified returns drive initial customer sales, Happy Returns’ software makes intelligent recommendations to facilitate exchanges and essentially save the sale for the retailer. Happy Returns guarantees a minimum of 10% savings for retailers, with most retailers saving an average of 20% in the first year. Additionally, retailers using Happy Returns’ full solution average a 94 Net Promoter Score (NPS), two times higher exchange rates and 50% program adoption.
Furthermore, since the products are returned to a retailer’s distribution center instead of a store, the inventory can be resold much more quickly. Lastly, the Return Bars are located within shopping malls and through noncompetitive partner retailers, where coupons or promotional discounts drive foot traffic and incremental sales for Return Bar hosts. Other Return Bars at office buildings and colleges and universities offer tenants and students, respectively, a convenient physical location to return items.
Challenges: While they emulate the same convenient return process as some of the digital dragons, one key challenge with Happy Returns is that their retailer portfolio is still relatively small. Growing that portfolio, especially for retailers that have a large store estate, may be difficult, if customers are inclined to return to stores versus using the Happy Returns service.
Who Should Care: Retail CIOs, CFOs, chief merchants, chief digital officers and supply chain leadership, all of whom share an interest in cost optimization and improving the returns logistics process to drive sales, convert returns into exchanges and extend exceptional customer experiences beyond the sale.