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Towards the Future of Retail

March 9, 2019 steffbro Leave a comment

It is the end of the season and we all know what that means: time for SALE! Whether we like it or not, many of us are drawn to the shops with the biggest red letters on the window screaming about how they reduced their prices of some of their products to even 70 %… However, shopping during sale periods if often not the most pleasurable time to hit the shops.

As a resort many of us shift to online shopping where products are perfectly displayed on beautiful models and you don’t have to dodge elbows from fellow shoppers while diving into a pile of shirts. Nonetheless, this might not be a perfect customer experience either, as our perfectly displayed dress in the web shop is often disillusioned and the real product leaves us disappointed upon arrival.

Now I hear you wonder… how can we solve these problems and create a better customer retail experience? Do not worry; the answer is radio-frequency identification (RFID). RFID is a technology used to read and/or save information of RFID-tag labelled products such as paper tags. The technology was first discovered in 1945 and has been patented in 1983 by Charles Walton (Barcoding, n.d.). Opposed to traditional barcode techniques, each RFID-tag is uniquely identifiable and can store more specified information for the tagged product. Ever since, the technology has experienced extensive development and is currently used in many industries ranging from security, to advertisement, and mobility to live-stock. In retail environments we for example have already seen RFID-tags to protect valuable products in our local drugstore from being stolen.

As the technology has been growing over time, the price of a simple RFID-tag has been reduced to 10 cents (Barcoding Inc., n.d.). Now that might seem very cheap, however, when all products in a store need to be labelled this will add up to quite a substantial amount of money. So what exactly are the benefits of using these RFID-tags in your favourite retail store?

Example of an RFID tag used to label products.

Security Benefits
For all shoplifters among us, this might be rather a downside than a benefit. With RFIS-tag labelled products, the security systems of stores can be significantly improved to better the customer experience. Normally, when you walk into a shop, you are welcomed by security gates with which shops are essentially saying: Feel free to check out our product, but be careful, we know you might steal!. New technologies using RFID-scanners are able to operate more precisely and therefore capable of scanning products from a bigger distance in a more distinct area. This allows for the development of overhead scanners at the entrance of shop that are nearly invisible for the customer (Nedap Retail, 2019b). Furthermore, the labels will contain more information about the products they are attached to and while checking out information about the sales status can immediately be updated (Nedap Retail, 2019b). Therefore, less security details such as pins need to be added as the label itself can signal immediately if it is being stolen. Lastly, once certain products are identified to be stolen more often, increased security measures can be taken such as giving the product a more prominent display in the store or adding traditional prevention measures such as colour bombs and security pins (Nedap Retail, 2019b). The difference is that this will now only need to be used for products that are frequently stolen rather than every product that shows increased value.

Example of overhead scanner at the shop entrance.

Recommendation in fitting room
Another benefit comes in the fitting room. With the uniquely identifiable labels, shops might in the future be able to build recommendation systems based on what products customers bring to their fitting room and decide not to buy (GDR, 2019). Once data is more incorporated within the business, shops can create a system in which customers create a profile that collects information about what the customers likes (GDR, 2019). This may start with online browsing behaviour, but can be extended to the fitting room where items can be scanned, and customers can indicate what they liked or did not like. Based on the input information, the system can give recommendations on products with for example a similar colour or a different fit if the customer indicated the product did not fit well. With this, the customer will receive better in shop recommendations without having to scan every shelf in the shop for different yet similar products. In a fully integrated supply chain where shop attendants are able to get the items for the customers once requested through the system, even more efforts for the customer are saved. This becomes especially interesting with the increased development of virtual fitting rooms where products can be tried without putting them on (GDR, 2019).

Example of a virtual fitting room with product recommendations in different colours.

Less stocking and stock-outs
As more date is being tracked on which items are exactly in the store, in the storage and being bought, less items need to be stocked-up within the shopping area. With the exact information which items are being sold in which sizes and of which colours, the personnel can instantly restore the items on display to the optimal level (Bianchi, 2017). This reduces the number of items that need to be displayed and allows for tidier stopping environment, especially during sales seasons. This becomes increasingly easy as the storage of the shop can be scanned quicker as well. With the RFID technology, items can be scanned through their packaging and while they are still in the box on the shelf. Therefore, it reduces time needed to find certain products while they are stored and makes it easier to replenish store displays (Nedap Retail, 2019a). Once more clarity on stock is being reached, more information can be displayed in the online environment as well where information about the current availability of the product in a specific store is displayed and regularly updated. This not only increases informativeness for customers, but the real-time updating of stock levels also lowers the chance of stock-outs when adequately used to organise the supply chain (Nedap Retail, 2019a).

Example of replenishment system working with an application for shop attendants.

All in all, a relatively simple technology such as RFID combined with a sophisticated cloud is capable of changing the retail customer experience. Storing more information in the cloud allows for a friendlier shopping environment that invites people to enter stores and creates clear overview of the products on display. Furthermore, it can compliment the online experience by creating real-time storage updates and improved recommendations both in store as well as online once products are linked to personal accounts. Therefore, the ultimate resort might no longer be just online shopping, as shops will remain tidy and we know what to expect in stores, even during the super sale times.

Barcoding, Inc. (n.d.). RFID FAQs – Barcoding, Inc.. [online] Available at: https://www.barcoding.com/resources/frequently-asked-questions-faq/rfid-faqs/ [Accessed 9 Mar. 2019].

Bianchi, J. (2017). 5 Examples of Innovative Uses for RFID Technology in Retail. [online] Shopify. Available at: https://www.shopify.com/retail/5-examples-of-innovative-uses-for-rfid-technology-in-retail [Accessed 28 Jun. 2017].

GDR. (2019). The changing face of the fitting room – GDR. [online] Available at: http://gdruk.com/changing-face-fitting-room/ [Accessed 9 Mar. 2019].

Nedap Retail. (2019). !D Cloud – Cloud-hosted RFID software – Nedap Retail. [online] Available at: https://www.nedap-retail.com/solutions/id-cloud/ [Accessed 9 Mar. 2019].

Nedap Retail. (2019). iD Top – RFID-based EAS overhead – Nedap Retail. [online] Available at: https://www.nedap-retail.com/solutions/idtop/ [Accessed 9 Mar. 2019].

Articles

Organic food, handmade products, Italian pasta, French wine, and… Customized-ideated products?

February 21, 2019 steffbro Leave a comment

A review of the article “The Value of Marketing Crowdsourced New Products as Such: Evidence from Two Randomized Field Experiments.” by Nishikawa H., Schreier M., Fuchs C. and Ogawa S (2017).

Maybe you have realised it yourself; in just a few years, nearly all muesli bars in your local supermarket have been labeled as organic. Or when you are standing in front of the twenty different pastas offered, your eyes are immediately drawn to the most italian named and looking packaging. Of course, these are marketing tools, used to show a certain quality and lure you into buying this product. The next new marketing buzzword, as identified by Nishikawa et al. (2017), might very well be customer-ideated.

Most prior research is focussed on the positive effects of wisdom of the crowds and how the customers know the pains and gains of a product best (Garcia Martinez & Walton, 2014). In this paper, Nishikawa et al. (2017) pay attention to the psychological value of crowdsourcing product development and the potential positive effects of marketing on sales.

Crowdsourcing: Objective vs. Psychological Argument

The research question the authors ask themselves is how customers perceive crowdsourced new products and whether the inferences they make affect their product choices. Quite some research has been conducted on the objective arguments of crowdsourcing new products (Bayus 2013; Poetz and Schreier 2012; Stephen, Zubcsek, and Goldenberg 2016). The general finding is that crowdsourcing can lead to promising new ideas. However, this can only happen under certain conditions. As such, there should be a necessary match between user expertise and design task complexity. Next, the size and composition of the crowd plays an important role. In comparison, the psychological argument which makes this research paper unique, argues that “customer-ideated” should be used as a cue that sells. Specifically, the authors predict that actively marketing the source of design can increase the product market performance. This because of if-then linkages between information users pick up and conclusions.

To test this prediction in the real world, the authors conducted a field experiment. By labeling crowdsourced new products as “customer-ideated”, the effect on the product market performance increased by 17%. However, the experiment holds some limitations. Namely, the sample size is too small, and only one product type is used. Therefore, the authors test their prediction in a second field experiment, using two product types and a larger sample size. Moreover, the authors wanted to test if the effect of “customer-ideated” is not because of more specific information on the product display. Again, the effect was positive.

After having established their findings in the real world, the researchers wanted to validate the results and performed two control studies. The first study had the aim to verify if it was actually the customer-ideated cue that caused the increase in sales. This study consisted of an online customer survey in Japan in which participants were randomly assigned to a few different conditions. They were asked which of the two products they preferred and had to explain the reason for their preference. The outcome of this control study further strengthens the conclusion found in the field experiment, namely: consumers prefer crowd-sourced new products, if recognizable as such, because they infer these products to be 1) of higher quality and 2) better at addressing consumers’ needs.

The aim of the second control study was to measure the quality inference of consumers. It consisted of a control test in Europe in which participants were randomly assigned to either right or wrong information about the source of ideation. As a result, the participants chose the product labeled as ‘customer ideated’ more often and labeled this product as having higher quality. This outcome confirms earlier findings; products that are labeled as ‘customer-ideated’ are believed to be better because they are more useful to customers and more effectively address their needs.

My thousand dollar (customer-ideated) designer bag

The article has a new take on the use of crowdsourcing for product labeling to create marketing advantages. The fact that this has been studied in different environments, adds to the prove that the effect can be observed for certain products. However, the question remains whether this still applies for other product categories such as luxury brands and high-tech products. For luxury brands, such as Louis Vuitton, customers pay a high premium for exclusively designed products. A label inferring that customers designed the product might lower the value of the bag as the designer him or herself did not put its ‘magic touch’ to it. Furthermore, for high-tech products, consumers might not have the right knowledge to make valuable contributions to the product development process. Therefore, a label indicated the customer contribution might indicate lesser value to other customers who do not feel like their peers can grasp the complexity of the product to design it (Schweitzer et al., 2012).

How about business operations?

The results of the research point out a 17 percent growth in sales, which indicates that it is worthwhile investing in labeling your products as crowdsources. Nonetheless, the results might be offset by the increase in operational costs of including customer in the ideation process. Whether costs of including the customer into the process are higher (additional steps in the process) or lower (lower investment in designers) is not included in the research. Therefore it is not known whether the 17 percent increase is high enough to cover potential costs.

A future of customer-ideated products

Considering how these results will influence what our future would look like is not that easy. However, logically if the effect is positive, more and more producers will start labeling the product as customer-ideated. Once it becomes more common, the uniqueness effect might be lessened, cancelling out the increase in sales. In this scenario, the way of putting the message will become increasingly important for producers to differentiate in the looks of their product. This includes using different wordings and color palettes to avoid sameness. And who knows, once all products are labeled as customer-ideated, the label designer-ideated might conquer our hearts.

References

Bayus, Barry L. (2013), “Crowdsourcing New Product Ideas over Time: An Analysis of the Dell IdeaStorm Community,” Management Science, 59 (1), 226–44.

Garcia Martinez, M., Walton, B. (2014), “The wisdom of crowds: The potential of online communities as a tool for data analysis” Technovation, 34 (4), 203-214.

Girotra, Karan, Christian Terwiesch, and Karl T. Ulrich (2010), “Idea Generation and the Quality of the Best Idea.,” Management Science, 56 (4), 591–605.

Poetz, Marion K., and Martin Schreier (2012), “The Value of Crowdsourcing: Can Users Really Compete with Professionals in Generating New Product Ideas?” Journal of Product Innovation Management, 29 (2), 245–56.

Stephen, Andrew T., Peter P. Zubcsek, and Jacob Goldenberg (2016), “Lower Connectivity Is Better: The Effects of Network Structure on Redundancy of Ideas and Customer Innovativeness in Interdependent Ideation Tasks,” Journal of Marketing Research, 53 (April), 263–79.

Schweitzer, F. M., Buchinger, W., Gassmann, O., & Obrist, M. (2012). Crowdsourcing: Leveraging Innovation through Online Idea Competitions. Research-Technology Management, 55(3), 32–38.