Post Categories: Market Watch

Retail 2.0: Startups Spark Marketplace Innovation

By Retail News Insider


Most of us are all too familiar with the challenges of having to track down an associate when looking to cross that last item off our grocery lists or staring at rows of similar products, wishing there was an easy way to know what really worked best, tasted good or fit our specific needs. For decades, this has simply been a standard part of the retail experience with few people giving it much thought once they’re beyond the store walls. That tide, however, is starting to turn.

Within the last few years, numerous retailers have introduced mobile apps and in-store gadgets designed to enhance shoppers’ experiences—from providing in-store navigation to mobile coupons to instant access to customer reviews anytime, anywhere. But by and large, these technologies haven’t been coming from the retailers themselves. Instead, small startup companies have been the driving force behind many of the innovations that are helping to reinvent the retail experience. And in-store use of these cutting edge technologies is becoming increasingly commonplace as retailers discover they hold the keys to growing basket size and market share, and improving customer loyalty in a tight and highly competitive retail environment.

“The average customer wouldn’t know it, but there are startups all over the retail environment.… I would argue that the average consumer interacts with two to three startups per transaction,” says George Damouny, Venture Associate for Plug and Play Tech Center, a business acceleration firm that focuses on identifying, funding and growing promising technology startups. Through its Retail Center of Innovation, Plug and Play Tech Center has worked with many startups that are driving changes at some of the world’s largest retailers.

“The retail industry is slow-moving, but I think [brick-and-mortar] retailers are picking up on innovation,” continues Damouny. “Competing with the Amazon shopping experience is a constant challenge and bridging that gap between the online and offline experience is becoming increasingly relevant.”

Several technology solutions to come out of the Plug and Play Retail Center of Innovation are prime examples of this merging of the online and offline experiences. Take SmartAssistant, a multichannel product advisor platform that acts like an in-store sales associate, helping shoppers find the right products for their needs through a conversational, web-based guidance tool. The tool not only guides consumers to certain products, it also explains why those items are likely to be the right fit based on shoppers’ answers to questions about needs, wants and plans for use.

Another leading example is in-store marketing startup aisle411, which developed and was the first to market a digital indoor mapping platform that allows shoppers to easily navigate stores and find the products they are looking for—just like browsing the searchable “aisles” of an e-commerce site. The platform also enables retailers to present real-time, in-aisle offers based on where shoppers are inside a store. Major retailers like The Home Depot, Walgreens, Hy-Vee and Price Chopper are using aisle411’s technology to help reduce lost sales, drive basket lift and increase conversion rates.

Click on the video above to see the aisle411 app in action!

“Retailers are finding they’re losing up to 20 percent of their sales because of walkouts,” said Nathan Pettyjohn, CEO and founder of aisle411, in a recent interview with CNBC. “Our technology keeps people there…. We’re also able to enhance the customer experience. When you’re building a retail brand, that experience in the store means everything.”

aisle411 allows retailers to send real-time, in-aisle offers to shoppers based on where they are inside the store.  Photo courtesy of aisle411

aisle411 allows retailers to send real-time, in-aisle offers to shoppers based on where they are inside the store.
Photo courtesy of aisle411

As Pettyjohn notes, customer experience is a critical concern for retailers—and a key area where startups are driving improvements. Big Data and analytics have been big buzz words in retail for the last couple of years, and startups are developing platforms to help retailers turn them into real actions that improve consumer engagement. For example, retail analytics startup Euclid has developed a system that uses WiFi-based tracking technology and location-based analytics to help retailers better understand what types of promotions, events and displays drive customers into their stores and keep them engaged while there.

In a recent partnership with a home furnishings retailer, Euclid was able to track and analyze shopper movements and behaviors inside 170 stores to show that hosting in-store events increased new customer visits by 10 percent and loyal shopper visits by 19 percent. The analysis also revealed that consumers who visited during in-store events shopped 75 percent longer and spent over 12 percent more than those who visited at other times. These results led the retailer to make in-store events a regular part of its marketing plan.

Retailers are also using similar tracking and analytics platforms to target advertising and promotions to individual shoppers. Startup companies like Capillary, Everbeam and Bluefox have developed technologies that integrate retailer loyalty data, in-store interactions and even feedback from facial recognition software, such as estimated age and mood, to allow retailers to send targeted coupons, promotions and advertisements directly to shoppers via their preferred mode of communication—whether it’s social or mobile—and soon, even local.

oct14-calendar“Imagine walking into a coffee shop, a digital signage display shows ‘Hello George, welcome back. Would you like the usual today?’ It recognized me by connecting to my phone and using facial recognition… It sounds like a sci-fi movie, but it’s coming!” says Damouny.

As for how startups have been able to have such an impact in a well-established environment, Abhi Beniwal, Senior Vice President of IT for Interactions, credits their speed and ability to focus on a single issue at a time. “Big companies have a lot of resources, but they are structured to work on a large scale. Startups bring the speed and agility. They can have that singular focus and dedication to create a technology that helps solve one problem, even if it’s something small, without having about the other things established companies do.”

More and more retailers are coming to see the benefits of capitalizing on startups’ ability to help them target their unique challenges—from how to drive their business, to how to compete with e-commerce, to how to engage consumers.

“The biggest retailers are now gravitating toward [startups and business accelerators like Plug and Play Tech] to help them solve their pain points and find innovative solutions for doing so,” says Damouny. “We’re in an exciting time now with all of our connected devices, and they’ll play a major role in the future of retail.”

“We are in a stage where we are moving from ‘let’s test this, let’s test that’ to more reliable and sustainable innovation,” adds Beniwal. “It’s an issue of maturity. It took 10 years for online retail technology to get to the maturity stage. Mobile retail technologies only really started five years ago. It’s just now that we’re starting to see some of those technologies and their use inside major retailers, like Target and Walmart, really take off and become mainstream.”