Brick and Mortar Retail Is About to Get a Technology Makeover
In a week that saw over a thousand U.S. retail stores shuttered, many analysts are quick to lament the end of days for brick-and-mortar shopping. But just as the e-commerce technology of the past 20 years changed how consumers searched, discovered, and shopped, new innovations may reinvent the physical store and leap-frog the online experience of today. As Amazon’s $13.7 billion acquisition of Whole Foods highlights, traditional retail is about have a bold resurgence, thanks to two disruptive technologies: augmented reality and artificial intelligence.
The contemporary supermarket experience hasn’t changed significantly since Sylvan Goldman’s introduction of the shopping cart in 1937. Prior to that, consumers could only purchase as much as they could carry in their arms. The simple addition of the shopping cart increased consumption and with it the variety of items offered for purchase.
Yet in some ways, the retail grocery experience may have actually deteriorated over the last half century. In the quest to satisfy the ever-fractionalized and specialized palatable choices demanded by today’s diverse consumers, supermarkets which in the 1970s stocked around 8,900 different items have now swelled their inventory to over 47,000 SKUs. The end result is that the average grocery shopper buys less than 1% of the available items over the course of the year. Each trip down the aisle has become a challenging quest to find the few products one wants from a sea of boldly packaged choices, stacked in a dizzying array of unit sizes.
Therein lies the opportunity for disruption: How can retailers satisfy the needs of divergent shopping tastes without overwhelming potential customers with aisles of products that most will never purchase? Augmented reality may soon provide an elegant solution.
Most people think of augmented reality as adding something to the real world that isn’t there. (Think of the millions of players collecting Pokémon Go eggs on their smartphones or visualizing the superimposed first down line on a televised football game). But AR can also be used to subtract items from view and help consumers focus on specific objects lost in panoply of visual clutter.
As low-cost augmented glasses become widespread, imagine walking down a well-stocked grocery aisle and seeing only foods that are gluten-free or that fit your new Paleo diet. Vegan or kosher foods could be highlighted in your vision while other packaging would fade into the background. If you wanted to try a new recipe you saw on your favorite morning news show, your glasses can show you the exact ingredients to purchase and even suggest other wine or food pairings.
If this sounds like far-flung science fiction, the just announced software product from Google called Lens aims to make your smartphone’s camera even smarter by being able to accurately identify most objects by sight. Looking ahead at the soon-to-be $100 billion digital reality market, loyalty programs and past shopping experiences could be accessed in real time to enhance the live shopping experience of consumers as they traverse aisles with personalized assistance. While only 24 million headsets are expected to be sold next year, by 2025, it’s anticipated that figure will increase to 500 million.
In the not-too-distant future, grocery shoppers may only have to remember that their doctor recommended a low-sodium diet or one to help control their diabetes and their AR glasses will take care of the rest. The tedious task of reading the fine print of packaging labels will be replaced with Snap-like filters that can sort for price, nutrition, social recommendations, or reviews.
But the innovation coming to supermarkets doesn‘t stop in the aisles; machine learning will continue to refine where, when and how items are best displayed. Several major U.S. chains are already utilizing big data and virtual reality to modify planograms to increase average revenue per cart. Retailers can put on VR headsets to see which items are the bestsellers per shelf and per aisle. Virtual products can be repositioned and sales projections calculated in real time. A process that used to take six months of field research to determine in-store placement can now be completed in a matter of hours.
Additionally, brands can glean better insights on how best to package and position future products. All physical products will carry the same meta-tagging associated with online purchases today. Machine learning can also provide customized store layouts based on actual in-store data and monitor results continuously. By better understanding consumers’ in-store decision making, savvy retailers can reduce perishable waste, expand cart sales to include non-stocked merchandise and improve overall margins. With the aid of augmented reality, mass merchants can efficiently provide targeted shopping as never before—with each aisle of each store tailored to the needs of each individual shopper.
Given the thousands of companies vying to be the consumer’s augmented reality filter of choice, the next battlefront for the hearts and minds of consumers will likely be the brands that learn how best to display coupons, recipes, and loyalty programs in this new augmented world. Trusted brands can enable shoppers to discover new products that enhance their lives while simplifying the overall retail experience.
By experimenting with AR on tablets and smartphones today, retailers are preparing for a world where AR glasses are as common as sunglasses are today. The promise of augmented reality and machine learning is that every out-of-home shopping experience, from big box retail to specialty boutique, can provide recommendations on par with the virtual shopping cart they have grown accustomed to online. Soon, every on-premise shopper can have a bespoke experience with dynamic pricing strategies rivaling today’s airline industry.
Aisle one, the future is calling.
This post first appeared in Fortune June 23, 2017