Innovation in retail: who’s your money on?

No business is immune from the potentially fatal consequences of relying on ‘business as usual’. The recent fates of household brands like Maplin and Toys R Us tell us that. It is true in any industry, but none more so than in retail. Is your business looking in the right places for inspiration? Or are you focusing your innovation efforts on dead ends? How do you know? Start by asking yourself: “As it currently stands in your organisation, would you bet your innovation ideas against the market?” Tell the truth… We’re all aware of the well-known innovation trends in retail, and you’re likely heavily investing in many of them. But, here comes the reality check. We haven’t yet seen anything close to the long-predicted, widespread adoption of augmented or virtual reality (AR/VR) that will revolutionise the customer experience. Likewise, the use of artificial intelligence to drive personalisation and services like visual search haven’t quite taken off as expected. For most, they’ve introduced more sophisticated security technology, and introduced alternative payment choices. So we’ve only seen simple sustaining (or iterative) innovation, as opposed to truly disruptive innovation. The only significant new entrant in the past 24 months? The increased interest in, and experimentation around, voice-commerce with the likes of Alexa, Google Home and Siri. We wanted to look beyond the trends and all the associated hype to find out two things: ⦁ Who is really leading the charge in organic innovation? ⦁ Which technologies are the leaders in retail innovation placing their bets on? So, we teamed up with the excellent Quid, a machine learning platform, to delve into retail patent filing and analysed the 5,800 patents filed by retailers and selected B2C technology companies. Here comes the science bit. Quid’s technology extracts key phrases and words from patents and identifies similarities across all of this unstructured text. In this case, 5,800 documents in just a few seconds. Using a similarity score, the platform then segments the data to reveal patterns and trends. By looking at the underlying language of each patent and comparing each document against each other, we then built a (really quite attractive) network map to explore given variables. And the results were interesting. A birds-eye glance over the initial findings makes it clear which technologies are leading the way, and which are lagging behind. If you’re betting your business on IOT or data centre efficiencies, you might be waiting a long time. It looks like the smart money is flowing into personalisation, voice-commerce, and payment and we can expect sustained growth in security in the light of tightening regulations and legislation such as GDPR. North America leads the charge North America leaves Asia and Europe lying in the dust in terms of number of patents filed and the number of cited patents (see FIG 2). Europe is at the back. While Asian retail giants Alibaba, WeChat, Tencent, and JD.com are clearly very active in patent filing they are typically less influential than their US-based counterparts. Intellectual property (IP) paranoia in China may explain the number of patents filed in this region. Companies are reluctant to file for patents given the poor enforcement of patent protection, and who would blame them? Recent measures by the Chinese government, such as the introduction of the National Intellectual Property Development Strategy and the restructuring of the State Intellectual Property Office of China (SIPO) may help to reverse this trend… but mindsets rarely change overnight. Japan takes the top spot for patent filing in Asia. In comparison to their North American peers, the key areas of innovation investment in Asia are in user authentication and security and, perhaps more interestingly, feature and voice recognition. Imagine being able to buy something directly just using voice and commodity recognition on your smartphone – the check-out process would be easier than ever. As the theory goes, with such technology grocery stores of the future will be able to eliminate lines altogether! No queuing? What a consumer’s dream. Image recognition on the other hand could help retailers conduct more accurate forecasting and determine product availability. And both technologies can also be used in-store or during the logistics process to prevent theft and ensure quality control of products. Battle of the titans: Amazon vs. Walmart Putting geography aside, let’s take a closer look at which tech companies are branching into retail. For example, Instagram recently announced that users can shop on their platform. Facebook, despite the damage they’ve suffered from recent widespread data breach headlines, is also getting very serious about retail. A whopping 98 of their filed patents are in advertising and consumer profiling. Their most recent patents relate to inventory and fulfilment, and AR/VR. With this is mind, the inevitable question raises its head. Is Amazon’s dominance finally under threat? We may think that all retailers are quaking in their boots at the very mention of Amazon, but US giant Walmart looks to be standing pretty sturdy in theirs. They’ve made no secret about how they “expect to crush it over the next two years”. And from looking at the patents they have filed, it’s clear they’re placing their bets on innovations in areas including consumer profiling and the electric shopping cart. The sheer volume of patents filed by Walmart indicates they recognise data as the crude oil of their business. By identifying customers to a granular level across all channels, they can increase personalisation and make their targeted marketing much more sophisticated. And most importantly, this positively impacts their bottom line. Combine this with the additional investment in geolocation technology, both in terms of improving its understanding of in-store traffic and for managing inventory, all signs point to the company’s key priority as building a cutting-edge, customer-centric model. Self-driving the customer experience one step further is the electric shopping cart. It can create digital shopping lists, guide a customer around the store, saving time searching for items to ensure a frictionless checkout, no matter what channel is used. Electric shopping cart technology brings ease and convenience to the digital and physical worlds. Walmart has even filed patents to remind shoppers when they’ve forgotten to put an item on their list into their cart (e.g. if it knows you’ve walked past it). As shoppers, we’ll never run out of milk again… And Walmart never misses out on a potential penny. Compare this to Amazon who are paying even more attention to consumer profiling. However, the key difference is that when it comes to innovation, Amazon remain more narrowly focused on inventory management and fulfilment. The recent opening of the Amazon Go store in Seattle shows that the complexity of brick and mortars is only now becoming a reality for them. Who else should we be keeping our eye on? Major athleisure brands like Nike and Adidas are also playing an important role in pioneering innovation. You may not be surprised to hear this is particularly in product, as opposed to customer experience and user journeys. Much of their work is centered around wearable technology - creating smart, ‘adaptive’ sportswear to improve comfort and enhance performance. Closely connected is their use of IoT technology to track fitness performance. These major athleisure brands are pumping large amounts of R&D investment into innovating products and services, and we’d be foolish not to pay attention. They are some of the trailblazers and what they do will be indicative of what may follow across other retail categories. If you need to place your bets now, lay them on consumer profiling As Walmart and Amazon have clearly recognised, consumer profiling is the enabler for so many other aspects of retail. Done well, a company can build an incredibly rich and detailed view of every single customer. This enables personalisation of every message across every channel. Marketing written just for you. It is the most effective route to customer-centricity, the holy grail of all retail innovation strategies. At the same time as building up a real-time, real-life customer journey map, a business can future-proof itself by ensuring it can continue to respond to the evolving needs of their customers. Many of the more influential patents in this space relate to providing recommendations for shoppers based on past purchase data or colour preferences, as well as categorizing items of interest. So, what does this tell us? Customer-centricity (and therefore customer profiling), with its ability to inform the strategic direction of a business, trumps everything. And North America is clearly leading the way here. Despite the ongoing (over) hype, if you’re betting on the imminent explosion of AR/VR, beware. It doesn’t look like it’s going to happen any time soon. Until hardware costs come down significantly, it looks like outside of the gaming industry adoption will remain slow. So, as the retail dust slowly settles (yes, after all this time) and the future role of the store as a forum for experience and “guiding” is better understood, the key players in e-commerce will be seen less and less as the innovation leaders. Bricks and clicks retailers will fight back and physical store locations will be seen as increasingly attractive assets as part of the evolution of retail as we know it. If you need to be selective with where you place your bet, consumer profiling is a pretty safe one. The retailers that get this right will be those who can truly deliver a differentiated and superior customer experience across all channels. Who’s your money on? By Katie Gillett (Elixirr), Henry Klingenstein and Cara Connors (Quid)

Innovation in retail: who’s your money on?

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