With all the negativity swirling around retail these days, many investors and the media are running away from the challenging environment. But from our point of view, it’s just now getting exciting. The retail and shopping center business is undergoing one of the most profound transformative shifts in its history. With change can come growing pains, but also incredible opportunity.
Technology is a broad term, but the advent of technology and its continual integration into the retail landscape is the primary driving force behind this latest change. As the industry undergoes these shifts, understanding the new paradigm that is today’s customer journey is of paramount importance and nothing has more profoundly impacted that journey than technology. On the other side of the equation, retailers and shopping center owners are beginning to harness technology to create smarter and more dynamic environments to excite shoppers as well as drive greater efficiency and profitability.
There’s no shortage of technology trends impacting the retail landscape, but here are three that I am actively following.
Perhaps the biggest potential game-changer is artificial intelligence. Artificial intelligence is a term that’s especially overused these days, but most of us carry a form of it around in our pockets every day — her name is Siri. Perhaps the most ubiquitous form most people imagine when we think of AI is that of a robot. Whether it is the beloved comical droids of “Star Wars” fame or the far more realistic (and perhaps disconcerting) humanoid robots of HBO’s “Westworld,” the benevolent — hopefully, I’m looking at you, HAL — robot that is able to interact with us has been part of pop culture for many years. While most think only of these artificially intelligent “beings” as the stuff of science fiction programming, we aren’t as far away as you might think from their becoming omnipresent in our favorite stores.
Last year, Lowe’s introduced the LoweBot which is a bot that can greet customers and respond to verbal inquiries. If you ask for help finding a certain product, the LoweBot can guide you directly to it — which, for anyone who has tried to find one specific screw in a home improvement store can attest, is quite helpful. On the logistics end, the LoweBot is also able to scan shelves as it navigates store aisles, giving employees a quick and accurate snapshot of inventory levels. This is incredibly important given today’s digitally savvy customer who often researches products online before coming to the store to buy them. Making sure the store and web inventories match is crucial in servicing modern consumers, and artificial intelligence like the LoweBot can significantly reduce the gap in store vs. screen inventory.
The question on many people’s minds however, is will this type of AI eliminate jobs? Right now this kind of technology is incredibly useful when put in the hands of store associates, but it doesn’t replace the need for those associates. It simply helps them do their jobs better. Kyle Nel, executive director of Lowe’s Innovation Labs, said it best when asked that very question by CNBC, “Most definitely not — my phone doesn’t make me obsolete.”
Just recently, Business Insider and others reported that a new patent filed by Wal-Mart is for a robot that would identify unhappy shoppers. It would use facial recognition software to monitor customers at checkout lanes and, if it notices an annoyed shopper, alert employees in other parts of the store to help staff the checkout area. One of the hallmarks of AI is using advanced metrics to make smarter business decisions, and according to the patent, Wal-Mart will also be utilizing this technology to analyze trends in shoppers’ purchase behavior over time by linking facial expressions with transaction data to determine changes in purchases due to dissatisfaction.
Another advent in technology that is already significantly changing the way we shop is mobile payments. While adoption has certainly not reached critical mass for these “digital wallets,” according to an eMarketer study the estimate for total value of transactions made by a mobile payment will reach $210 billion by 2019 — up from $8.7 billion in 2015. That’s a significant enough share of total retail sales that many retailers have taken note, building out their own apps to enable mobile payments. Of note is Starbucks, which launched a mobile payment and ordering program last year and now has more than 8 million transactions per month.
Other retailers are adopting mobile payment capabilities through third-parties such as Apple, Google and major banks. Both are quality options and will become increasingly necessary as we draw closer to a true cashless society. Not only do mobile payments and ordering speed up checkout times in many instances, but they are more secure. The current chip system that most credit and debit cards have now comes hard-wired with a transaction code attached. If someone steals that code, they can replicate your card to make additional purchases. Payments from a mobile device, however, are able to bring software into play and can therefore generate a unique, or single-use, code every time a transaction is processed. If someone tries to replicate one of those codes it will automatically be flagged and denied as a stolen code.
The advancements in technology on the retail side get most of the buzz, however as property owners, we are also bringing new technologies to bear in order to improve the customer experience as well as provide our retail partners with enhanced information so they can create better shopping environments. CBL recently entered into a partnership with advanced analytics provider, RetailNext, to gain greater insights into the journeys that shoppers take through our properties. This will ultimately provide us with the same level of insights as e-commerce platforms about the purchasing habits of our customers. Additionally, it will provide valuable information about traffic flow patterns throughout our centers.
Are our tenant mixes currently optimized to the highest level of efficiency possible? Do we know if the restaurant that just came in has positively affected traffic? Which tenants have the strongest correlation for cross-shopping? Until now, as property owners we’ve had to apply a lot more art than science when it comes to answering these questions. The art side has its merits of course, but adding the scientific component gives us the leg-up we have been missing.
Over the past several years, there has been a disconnect — landlords did not have access to customer information gleaned from e-commerce platforms while bricks-and-mortar retailers did not have access to demographic information for customers in the common area. Through advancements in technology, that gap is decreasing and bricks-and-mortar retailers can increasingly tap into the same insights as their online counterparts. These advancements in technology coupled with the ability of stores and centers to create meaningful experiences through unique environments for the consumer position physical retail to remain the dominant retail channel. Yes, it will truly be exciting in our business over the next few years as retailers and shopping centers evolve to meet the demands of the modern consumer.
Stephen Lebovitz, president and chief executive officer of CBL Properties.
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