By Thomas Lee
San Francisco Chronicle
WWR Article Summary (tl;dr) Last year, e-commerce sales amounted to $341.6 billion — and while that number has been slowly rising over the years, it still represents only 7.2 percent of the $4.7 trillion in total retail sales
San Francisco Chronicle
The era of Amazon and e-commerce was supposed to herald extinction for brick-and-mortar establishments. But in the Bay Area, retailers are fighting back, using homegrown technologies to keep customers coming through their doors.
From robots and virtual reality to digital mirrors and beacons, the region has become ground zero for testing software designed to make shopping quicker and easier — or simply more fun.
That’s not surprising, given the allure of Silicon Valley. Retailers like Target, Sephora and Walmart operate research and development centers in the region. They also recruit engineers, partner with startups, or, like Lowe’s Companies, consult with innovation outfits like Singularity University in Mountain View.
These efforts matter because consumers still want to shop at physical stores. Last year, e-commerce sales amounted to $341.6 billion — and while that number has been slowly rising over the years, it still represents only 7.2 percent of the $4.7 trillion in total retail sales, according to data from the U.S. Commerce Department. In other words, more than 90 percent of retail sales were firmly analog.
A recent survey by software firm TimeTrade found that 71 percent of shoppers prefer to buy a product in stores, even if the same item is available online. At the same time, though, the report found that consumers don’t think much of what they experience in stores today: bad customer service; messy, confusing layouts; and uninspiring merchandise.
That’s where technology comes in. It can make shopping more pleasant, with faster checkouts and more personalized options. But even the most sophisticated robot can’t fully replace humans in offering informed, soft-touch customer service. And no individual piece of gee-whiz technology will persuade people to buy something unless the store has something compelling to sell.
“I can’t really think of anything (technology-wise) that has really moved the needle” in generating sales and visits, said Steve Dennis, a retail consultant and former top executive at Neiman Marcus.
That each employee at an Apple Store can check out a customer on an iPhone is definitely a plus, he said. But most customers probably would have visited an Apple Store even if they had to wait in a traditional checkout line.
The best use of technology in a retail environment, it seems, is either to solve a specific problem or enhance the overall experience of the store.
Take clothing. The category offers perhaps the best example of why consumers would want to visit a store. Despite the growth of online apparel sales, many consumers want to try things on before making a purchase.
But the process can be cumbersome: lack of right sizes, bad lighting, dressing rooms with piles of discarded clothing.
In 2014, designer Rebecca Minkoff partnered with eBay to create a new “connected store” in San Francisco. A 122-inch interactive wall allows customers to browse and request specific items be sent to their fitting room. A text message notifies them that the room is ready.
MemoMi Labs in Palo Alto has developed smart mirror technology that allows shoppers to capture images of themselves wearing outfits on a full-length screen and then compare the images side by side. Consumers, who can control the mirror with body gesture or a mobile phone, can also see how a garment looks on them in different colors. Neiman Marcus and Uniqlo are among the stores testing the technology.
Nadia Shouraboura, a retail entrepreneur and former top Amazon executive, said making the process easier will allow consumers to sample more clothing and thus increase the chances they will buy something.
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Hointer, a Seattle startup Shouraboura founded, has developed in-store warehouse technology that automatically transports apparel from the backroom to individual dressing rooms.
“People want to try on a whole look, not just an item or two,” Shouraboura said. “When customers try on more, they buy more.”
Moreover, the less time employees spend folding and unfolding clothing is more time they can spend on customer service, she said.
Lowe’s is working on a similar strategy. The hardware store chain partnered with Singularity University and Mountain View startup Fellow Robots to roll out the “LoweBot”, which is being placed in 11 stores throughout the Bay Area.
These robots can scan inventory and answer simple questions, freeing employees to help customers with more complicated tasks.
“Leaving the simple recommendations to the (robot) allows Lowe’s employees to devote their attention to the customer, to provide them with thoughtful advice and personalized service,” Fellow Robots CEO Marco Mascorro said in a statement.
Technology doesn’t just have to be functional. It can entertain and excite as well.
Perhaps the most important advantage the physical store enjoys over the Internet is spectacle. Why else do people go to Razer, an electronics store that recently opened in the Westfield Mall in downtown San Francisco, where sales of mice, keyboards and other accessories take second place to playing rounds of “Mortal Kombat XL” or “League of Legends”?
Conveying experience is particularly important to activewear maker North Face in Alameda. The company generates most of its revenue as a wholesaler but also operates stores where consumers can interact directly with its outdoor gear.
“When you walk into a North Face store, you see our brand big and bold,” said CEO Todd Spaletto. “We see the stores as the single best place where people can experience it. Stores need to be the center point of activating consumers. We want you to come to our store so you can be a part of those experiences.”
Technology like virtual reality can enhance those experiences. Last year, North Face began using virtual reality devices that allow consumers to see immersive, 360-degree 3-D video and audio of people climbing mountains or trekking across the Moab desert.
Getting people to experience nature, even on a virtual level, is crucial to inspiring them to buy North Face products, Spaletto said.
“I can’t think of another $2 billion athletic brand that doesn’t have a bat or a ball,” Spaletto said. “It’s all about the beauty and epicness of the places you go. With virtual reality, if you’re able to follow the stories of our athletes on the summit of Mount Everest, that’s a pretty cool way to connect with consumers.”
Retailers are also experimenting with more subtle technology, things that consumers wouldn’t necessarily notice. The goal is not just to sell to consumers but also to learn from them.
Alumni at Nest, a smart-home company owned by Mountain View’s Alphabet, recently launched a high-tech store in Palo Alto where consumers can try gadgets from new tech firms. B8ta is providing these companies with real-time data from cameras that track which products consumers examine and for how long. Stores can use the data to steer people toward certain products or tweak the store design to better accommodate foot traffic.
“All of this data has now become actionable,” said Carol Spieckerman, president and CEO of Spieckerman Retail consulting firm. “We now know how to parse it or find partners that help make sense of the data.”
Makeup retailer Sephora has been experimenting with beacon technology–small devices that transmit a continuous radio signal that uses a shopper’s smartphone to transmit information, like a user’s location, to a remote server. Retailers can access the server and create a personalized experience for shoppers based on that data.
But for all of this exciting new innovation, technology can also introduce problems. Using cameras or beacons to track consumers may yield good data, but such Big Brother tactics could creep out shoppers. And should criminal hackers access consumer data, retailers will find a lot fewer people willing to trust them.
A recent report by Capgemini Consulting found that 80 percent of consumers loved it when retailers offered them service and deals based on their personal preferences. At the same time, 93 percent of consumers felt retailers did not do a good job in protecting their privacy.
Retailers can’t think of technology as some kind of magic wand that can fix all of their problems, said industry consultant Doug Stephens.
“If I hear one more retailer say something about beacons, my head is going to pop off my shoulders,” he said.
“Technology needs to add value,” Stephens said. “If technology doesn’t do those things, then you don’t do it.”
Thomas Lee is a San Francisco Chronicle columnist. He is author of “Rebuilding Empires” (St. Martin’s Press), a book about the future of big-box retail in the digital age.