Next Best Action in the Ever-Virtualizing Physical Point of Sale

Big Data Evangelist, IBM

The retail world is undergoing a wrenching transformation, due to the onslaught from online commerce. Brick-and-mortar outlets are crumbling before our very eyes. The "Big Boxes" are hollowing out from want of customers. Or they're being "showroomed" out of existence as customers use them to check products out in person prior to acquiring them from lower-cost online rivals, of which Amazon is the most noteworthy example.

Retailing is becoming an industry where the digital channels will predominate. The situation for retailers who only operate through brick-and-mortar is growing more dire every day. That's why the old-line retail industry is desperately looking for new strategies, many of them involving advanced information technology, to keep their physical footprints relevant and profitable in this new age. This recent New York Times article shows some of the IT-driven options that retailers are exploring to fend off death-by-showrooming.

Actually, "showroom" is not a bad concept for the next-generation brick-and-mortar retail outlet. We live in an experience economy. If they get their act together, traditional retail stores could potentially offer the coolest, most immersive shopping experiences of all. The showroom-centric retail outlet could be a brand differentiator, as long as it supplements the online option seamlessly, is combined with other functions that benefit from a physical footprint, and can generate sufficient transaction revenues to support itself. Some other functions that might be combined with the retail showroom include order pickup, merchandise returns, service depot, community hub, and entertainment spot. In fact, the benefits of in-person order pickup--same day, onsite inspection, delivery charge avoidance--could some day make the showroom the preferred option for customers' most urgent, cost-sensitive orders.

It's with the concept of the next-generation retail showroom in mind that I took great interest in a recent eWeek article on IBM Research's prototype of a mobile shopping app for Smarter Commerce. The app uses augmented-reality (AR) technology to transform the in-store shopping experience. Essentially, AR leverages gadget-embedded image-recognition technology to display an automatically, continuously generated visual overlay of icons, label, avatars, and other visual elements over their gadgets' video views. In this way, apps can use AR to layer additional content and context over the objects in their environment that users see and interact with.

In a retail outlet, the IBM app, once downloaded to a smartphone or tablet, allows shoppers to create a profile of the product features most important to them, including price, promotions, brands, ingredients, color, designs, packaging, and so forth. As they roam the aisles, they point their gadget's video camera at merchandise, and the IBM app immediately recognizes products, using AR to overlay digital details over the moving images of the products in their vicinity. The app even allows shoppers, upon opt-in, to overlay product-specific comments and recommendations from their social networks. Shoppers can also use their AR-enabled gadget app to pan store shelves and receive personalized product information, recommendations, and coupons.

That latter use is next best action in its purest sense. If you're a retailer and you want to make "impulse buying" something that customers do in every part of the store, not just the checkout lane, you should be adopting this technology. To the extent that the AR overlay presents context-sensitive offers and the like – leveraging customer segmentation, behavioral propensity, cross-sell, market-basket affinity, experience management, geospatial optimization, and other statistical models – they've got a rich showcase for big data.

Under this next-best-action scenario, the embedded analytics and rules guide the customer "journey" continuously, both to boost their satisfaction and to maximize the merchant's sales and margins. Offers find the consumer at the point of decision, which can be anywhere and everywhere in the store or in its vicinity, so that the physical store itself is virtualized to the larger community that surrounds it. To the extent that the consumer can, through the magic of gadget-embedded UPC scanning, purchase the items on the showroom floor without having to visit a checkout lane, you've also virtualized the the in-store transactional experience in a powerful new way. And you've underlined the indispensable role of brick-and-mortar outlets in a world of online shopping.

Retailers don't need a "Big Box" or any other particular brick-and-mortar footprint to implement this exciting new operating model. But they do need to get creative in exploring how best to extend their next best action infrastructures to embrace and transform their physical points of sale.