0 1134137 2245574521 6 Smart Stores Rebooting the retail store through in-store automation 2 Smart Stores – Rebooting the retail store through in-store automation Introduction In our always-on world, consumer expectations in retail have This report explores four key themes: skyrocketed. With the advent of sub- two-hour delivery, where consumers can search for a product, read the 1. Why automation in retail stores appeals to consumers reviews, and then get it ordered and delivered within hours, and what technologies they are most comfortable using shopping at a physical store can seem like a chore. In fact, in-store in our past research on digital’s impact on retail, we found that consumers would rather wash dishes than go to a retail 2. The benefits that companies are reaping from store.1 Today, consumers increasingly expect that efficient automating retail stores and engaging online experience to be replicated in-store. 3. Why in-store automation depends on winning customer At the same time, retailers across the world are facing an trust and confidence onslaught from ecommerce players such as Amazon and Alibaba. We found that while large traditional retailers 4. How organizations should think about accelerating and such as Walmart are fighting their ground by digitizing scaling in-store automation. and automating their physical stores, only 40% of retailers consider automation a strategic imperative. With nearly half To examine this topic, we launched an integrated global of consumers stating they would shift purchases from a non- research study across 10 countries and two dimensions: automated store to a store with automated technologies if they have a positive experience, automation has become a • The consumer view: We surveyed more than 5,000 real battleground. consumers, with the majority of them having visited stores that use automation technologies. The aim was to build Fortunately, the technology exists to enhance the customer a richer understanding of what consumers want from experience and make physical stores attractive destinations. automation. Automation can help consumers meet whatever their needs • The business view: In addition to conducting one-on-one are – getting in and out of a store quickly, discovering new interviews with retail executives, we surveyed 500 of the and exciting products, or providing an enhanced interaction industry’s executives across five sub-sectors – grocery, with a sales associate. It will also help traditional retailers to fashion/apparel, electronics, home improvement, and fight back and ensure they are not driven into irrelevance quick-service restaurants. The goal was to understand or obsolescence by the digital natives muscling in on their their perceptions of the benefits and challenges of turf. The fact that our research shows that many retailers are implementing automation in stores. lacking automation at scale means there is a real urgency to accelerate. In this research, we define automation technologies as the in-store use of robots, sensors, cameras, digital signage, electronic shelf labels, or mobile apps to help customers with questions and product information, make payments, enhance the quality of interactions with sales associates, and improve in-store operations such as replenishment, inventory, and facilities management. More details on the research methodology can be found in the appendix. 3 Key Findings Overall, automation in retail stores appeals to Retailers must recognize that in order to scale, consumers. they must win consumer trust and confidence. It is most attractive to the younger demographic Most retailers are in their infancy when implementing – notably Gen Z and millennials. In fact, 59% of automation use cases at scale, with fewer than consumers who have previously visited stores with a quarter of stores deploying the leading use automation would shift purchases to a store with cases. Even though consumers are positive on how automation technologies if they had a positive automation can address their in-store challenges, experience. The majority of consumers (66%) they feel that retailers are mainly focused on believe that automation can improve their shopping implementing automation solely to reduce costs. This experience by solving the challenges they face when expectations mismatch is supported by the research they shop in retail stores, such as long queues for – only around a third of retailers (35%) consider checkout and payment. They also believe it can be “solving customer pain points” as the important a means for retailers to be more sustainable. For criteria when deciding which automation use cases example, 69% of consumers overall prefer to shop to implement. In addition, consumers want some with retailers that use automation technology to level of human interaction within stores, yet only reduce food waste. 39% of retailers tell consumers that they will have employees available to help with the automated task. In-store automation can bring significant benefits. Furthermore, despite consumers being very wary of Most consumers would reward a store by visiting facial recognition technologies (59% would avoid a more often or purchasing more if automation helped store that uses it), only 23% of retailers are aware of them in their in-store shopping journey. Nearly half this strong preference. (46%) of consumers are also willing to shift their In order to drive scale and capitalize on the online purchase from a wholly online retailer to a benefits that automation can bring, retailers retailer with stores that use automation technology. should focus on the following best practices: Retailers are also beginning to see the impact of their automation technology on the top and bottom lines. • Prioritize automation as a strategic imperative For example, because of automation, retailers have • View automation initiatives through witnessed an 11% increase in visits by customers and consumers’ eyes a 9% decrease in costs from avoiding shrinkage. • Ensure a data-driven approach to scaling automation use cases • Determine your automation operating model • Secure employee’s buy-in for automation through training and reskilling. 4 Smart Stores – Rebooting the retail store through in-store automation In-store automation appeals to consumers Consumers like in-store automation as an enabler to improve Consumers who have visited stores with automation the store experience. It helps solve shopping challenges and technologies would shift purchases from a non-automated they also believe it can help retailers become more ethical store to a store with automated technologies if they had a and sustainable. positive experience. This is true for 59% of consumers overall and 67% of millennials (see Figure 1). Gen Z and millennials are particularly keen automation Consumers believe automation advocates can solve issues they encounter when they shop in stores Close to half of consumers overall have visited stores that use automation technologies, and this increases to approximately Consumers feel automation can solve major pain points two-thirds (64%) for millennials (aged 22–36). they face when they shop in stores, such as long queues for payment and checkout, or difficulties in locating products. For example, as Figure 2 shows, 60% say long queues are a pain point and 66% say automation could help resolve it. Figure 1. Gen Z and millennials are most positive about automation technology in a store Percentage of consumers by age group who have visited stores with automation technologies and are willing to shift their in-store purchases from a retailer with no automation technology in stores to a retailer that uses automation technology 13 19 21 17 34 20 45 22 20 20 27 67 63 36 59 58 39 19 Overall 18-21 22-36 37-52 53-71 72 Agree Neutral Disagree Source: Capgemini Research Institute, Automation in Retail Stores Research, Consumer Survey, October 2019, N=2,552 consumers who have visited stores with automation technologies. 5 Consumers want to shop with to shop with retailers that use automation technology to retailers who use automation to reduce food waste (see Figure 3). promote sustainability Dutch food retailer Ahold Delhaize is rolling out electronic shelf labels in its stores that show product information Sustainability is becoming an important differentiator for and allow automatic price changes such as price reductions retailers and automation is key to achieving this. Seventy- for products approaching the expiration date.2 UK-based five percent of retailers view automation as a way to offer startup Wasteless uses automation to dynamically change more sustainable and environmentally-friendly solutions to the prices of food based on expiration dates, helping customers. Leveraging automation as a means for retailers supermarkets combat food waste.3 Albert Heijn, the largest to become more ethical or sustainable is also attractive to Dutch supermarket chain is the first grocer to implement this consumers. For example, 69% percent of consumers overall – technology in the Netherlands.4 and more than 80% of consumers in China and India – prefer Figure 2. More than half of consumers believe automation can solve traditional retail store challenges Top five consumer pain points in stores and whether consumers believe automation can help solve them 66 60 60 59 56 54 48 40 26 24 Long queues for Products are out Difficulties in locating Not being able Lack of product payment checkout of stock when products in the store to find a store information when I visit the store associate to help me I select products Percentage of consumers that say this is major pain point while shopping in a store Percentage of consumers that believe automation could help solve the pain points they experience while shopping in a store Source: Capgemini Research Institute, Automation in Retail Stores Research, Consumer Survey, October 2019, N=5,110 consumers. 6 Smart Stores – Rebooting the retail store through in-store automation Figure 3. Consumers prefer retailers use automation to be more environmentally sustainable Percentage of consumers who would rather shop with retailers that use automation technology in their operations to..