HOW TO ACTUALLY SCALEYOUR “STORE OF THE FUTURE”

AUTHOR: HEALEY CYPHERJANUARY 2019

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PREFACE

2019 may very well be marked as a turning point. For the

first time in five years same-store sales are stable (versus

declining)1, break-out e-commerce brands continue solidify

their positions of growth by opening physical stores2, and

as retailers turn to their previously under-capitalized fleet

of stores (after-all, they were investing in the big growth

of ecommerce when 90%+ of their sales still happen in

stores). Success stories like Target, which invested $7BN

in 2017 into capital improvements3, are encouraging other

retailers like Ulta, Home Depot, and more to follow suit4.

(For any haters/mathematicians, while the absolute square

footage of retail closures is still closing at a notable pace

because of big brands like Bon Ton, Toys”R”Us, and others

shuttering their doors - it’s the continued results of a

consumer flight to quality).

So, now that it’s come to it, what do you do? How do you

revamp your stores? Many times when we sit down with

retail executive teams considering building out the future of

their store fleets, the words on the board begin to look like

a TechCrunch word cloud. “AR! VR! Chatbots! A.I.! Drones!”

Seriously.

But the reality should be, well, different. When considering

deploying retail technology your team’s decisions should

center around one singular ideology: human interactions

have to come first, and technology should come second.

And that technology, by the way, should beautifully integrate

into authentic store experiences. Consumer expectations

are still out-pacing a lot of the retail experience of today.

The retail market itself is on the cusp of massive change

as it sprints to meet these demands. In this white paper,

discover ways to thoughtfully execute retail-technology

solutions that enable experiences that delight customers,

empower associates, provide unprecedented analytics, and

measurable sales growth.

We’re at an inflection point in physical retail experiences:

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NEXT GEN CONSUMERS BY THE NUMBERS

According to data collected from the IBM Survey and Kiosk Marketplace Surveys, this is what your digital-first consumer looks like today, and these numbers are only increasing.

ENGAGEMENT

88%of retail customers expect dig-

ital engagement

61%of consumers are willing to shop in a completely

automated storet

78%of customers say their experiences using an

automated service was positive.

52%of consumers indicated

that they prefer self-service checkout.

CONVENIENCE

ENJOYMENT

CONTROL

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If you look at an image of a department store in 1910 vs.

a department store today, not a whole lot has changed.

In the mid 1900’s, retail growth was booming. Top line

revenue was driven by opening more and more stores

with huge selections, huge square footage, great

prices, and relative proximity to the customer. Proximity,

selection, and price were the currency of the mid-

century retailer.

As a result, we now have anywhere from 25-29 square

feet of retail space per EVERY man, woman, and child in

the United States. The next closest country is the United

Kingdom with 9 square-feet per capita. Today’s stores

are competing on a very different set of principles.

According to MasterCard, over 40% of soft-goods

purchasing takes place at boutique stores with 5-10

locations. As such, today’s currency is now experience,

service, and urgency. And all of that retail space built in

the last century? We now have an opportunity to use it

in creative ways with a small footprint and low overhead

(spoiler alert: kiosks can play a big part in this creativity!).

STORES CANNOT COMPETE LIKE THEY USED TO.

1910

TODAY

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Online retail today continues to accelerate. It proves challenging

for executives determining where to invest (e.g. vs. brick-and-

mortar stores) largely because there is almost absolute attribution

in ecommerce where most stores are data-starved. For example,

if you’re a soft-goods retailer with 25% conversion of store traffic,

that means 75% of customers walking through your store are

absolute mysteries. If they go to shop online later… how

do you possibly know that the in-store experience

was a part of that journey? But this doesn’t

mean the future is purely online, it just means

the role of physical retail stores has shifted.

When the best known ecommerce brands

start doing well, what do they start doing?

They open up stores. Warby Parker, Bonobos,

Cuyana, ModCloth, even Amazon and Alibaba,

ALL opening up stores at a rapid pace.

Retail has morphed into a packaged deal

inclusive of Online and Offline components.

Successful brands realize that they need to

cater to all shoppers, not only online ones.

Physical retail shoppers combined with online

shoppers equals huge growth channels,

and retailers who span both channels come

out ahead with CLV’s (Customer Lifetime

Value). Customers from across all generations still prefer to try

products before buying them. “Traditional” online retailers have

recognized that the try-before-buy trend can be an opportunity.

As and example, stores like Bonobos have opened Guide Shops

which are specifically meant for try before you buy. By the way,

when Bonobos has done this their customer base grew, average

basket sizes grew, and found the numbers were very compelling.

The perfect blend of online and offline comes when retailers

like Bonobos drive physical traffic in their stores and

leverage their online-first. This inventory flexibility

removes huge pain-points bogging down the

traditional retail model – inventory accuracy,

back-of-house allocation vs. front-of-house, and

staff dedicated to “tidying up” vs. selling. While

no model is perfect, these examples of the

broader concept, dynamic fulfillment continues to

be a huge driver of efficiency and growth in the

retail sector. And as consumers gravitate towards

more compelling experiences, other retailers are

offering boutique selections in-store, leveraging

high-touch experiences (like interactive dressing

room mirrors or self-service kiosks), and using

inventory scarcity as an advantage. Get it now or

it’s gone forever!

PHYSICAL RETAIL COMPLEMENTS ONLINE RETAIL

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But why can’t you apply those benefits to physical

stores? You can – if you think of your in-store

experience like a funnel. In the same way eCommerce

sties measure the drop-off points between common

customer journeys, stores are beginning to embrace

the same systems for identifying “friction.”

THESIS: APPROACH STORES LIKE YOU APPROACH WEBSITES

ONLINE

THESIS: APPROACH STORES LIKE

HOMEPAGE ENTRYWAY

PRODUCT PAGES VISUAL MERCH

CART BASKET

EMAIL FOLLOWUP CLIENTELING

CASH WRAPCHECKOUT

PHYSICALWORLD

Many people claim that shopping

online is an easier experience

with better customer service and

less friction

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THESIS: APPROACH STORES LIKE YOU APPROACH WEBSITES

When a customer walks in, they either

know what they want (searching), or they

are looking for inspiration (browsing). Let

customers self-identify and then help them

optimize their journey for either speed, or

experience. Search for moments to make

your shopping experience unforgettable.

48% of customers won’t ask for help when

they see an item they like but not their exact

size/color, when 81% of the time it’s in the

stockroom! Forrester suggests that as much

as 10% of retail sales are lost due to items

not being in stock, when 98% of the time it

can be shipped directly to their door.

48% of customers won’t ask for help when they see an item they like...“

“

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which makes people consider “online” as the superior

form of data, but this is only because that data is

collected through modern website tracking. The

catch is that online captures black-and-whites such as

purchase volume, click volume, and cart abandons,

but that data is only minimally valuable. This is why

even if you are considered a “best-in-class” soft-

goods retailers, you “only” see 35% return rates.

Alternatively, data from stores is shades of grey.

When properly instrumented, physical stores can

understand new metrics: “of the five sweaters in the

fall line, how many were actually purchased vs. tried-

on?”. Perhaps new metrics like “conversion” metrics

can be leading indicators of how a line will perform?

Service is king, we all know that. Customers don’t

want to wait for anything anymore. It doesn’t matter

if it’s luxury or fast-fashion, waiting for someone

else to do their job is not an ideal experience.

Focus on tracking and augmenting service and

wait-times so your customers get what they want,

when they want it. You can also find gems in your

in-store data. When presented with two identical

hotel experiences with only one difference - the

amount of time it takes to check-in upon arrival

– hotels with worse check-in experiences were

rated 20% lower. This is an example of a “gem” that

offline data can present so teams can focus on real,

actionable solutions

BREAK THE MYTH ABOUT “OFFLINE” DATA

With websites, data is B L A C K W H I T E&

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Did you know that mobile phones aren’t actually

“mobile”? Think about it. They aren’t mobile, humans are

mobile, and phones just happen to be small enough for

you to carry around, so 90%+ of the day your phone is

within 6 feet of your person.

When you’re using a “mobile” device, it’s yours, it’s

personal, your head is down, and you aren’t interacting

with the environment around you or other social queues.

When you’re using a retail public computing option (like

a touchscreen kiosk, a digital storefront, or an interactive

smart mirror), your head is up, you’re interacting,

listening and looking for social queues, and you’re

aware that it is a shared technology device, not yours

alone. For these reasons, increasing percentages (60%+)

of shoppers are expecting and desiring interactive

experiences in-store today.

There’s also some more grease when it comes to mobile.

“The” digital strategy of reaching customers from 2010 to

2015 was building an awesome native mobile application

(iPhone App, Android App). The challenge is this pesky

stat that keep surfacing. That stat is zero (0). Zero, is the

amount of new native

applications the average customer downloads a month5.

What’s more is when “Beacons” was the idea du jour

customers all of a sudden were slammed with notifications

on the apps they downloaded. So much that when

customers received a second unsolicited notification within

30minutes the chance they deleted the app forever went

up by 300%. So now, increasingly, brands are realizing

they need to focus on digitizing their in-store experience

to create digital parity in ways that actually produce LESS

Friction than asking a consumer to pull out their phone, log-

in, select the app, and figure out what part of the app they

want. Yes… that’s the state of customer tolerance for friction.

MOBILE ISN’T ABOUT PHONES – FOR MUCH LONGER

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Payment is becoming increasingly invisible. Think about the beauty of ride-share apps. You sign-in, get-in, get-out. What about payment? It just happens… frictionlessly. They have a card on file, they know your history, so you just get picked up, dropped off, and the rest is history. No fumbling for card or cash. The future of payment: invisibility. (This in the payment industry is called CNP – Card Not Present, for fellow retail geeks out there).

Some of the most impactful and successful brands on the planet are leveraging their loyalty as a means of becoming top of funnel for customers. Amazon takes more than 49% of the “initial” searches for products according to Survata) – Amazon Prime is to thank for that. Starbucks, Target, Ulta – all brands whose loyalty have driven tremendous returns. Both Apple (via iOS’s ApplePay) and Google (via Android’s SmartTap), are growing very, very fast. While they are largely known for payment, what has been less of focus (to date) are the incredible loyalty options they provide. Opt-in customers using both types of wallets allow for geo-notifications, timely reminders, gifts and rewards, and surpass the need for an app at all.

What if your stores became your customers’ store? In a universe where your most valuable customers have a loyalty pass in their mobile wallets, you can start to encourage check-ins earlier in the purchase journey. This means instead of figuring out who they are at a very un-useful time (when they are checking out and about to leave), you can encourage them to check-in early and actually make the store become their store: images, messaging, clienteling. Kaboom.

CHECK-IN IS THE NEW “CHECK OUT”

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Okay, so you’re sold. You’re going to introduce a new

digital experience to your customers in-store. But

don’t forget that they need some encouragement

when adopting this new technology! Whenever a

customer is introduced to a new experience, it’s

worth considering how to provide an immediate

win. When a player plays a new video game, the

designers make sure they get a “win” in so they

want to keep playing. So give a win first! As the

user continues to use the experience (like a game),

give them reasons to keep playing. ZIVELO has

toyed with animations, fun sound effects, even

lights. And, most importantly, make it a little random.

Slot machines wouldn’t be fun if they did the same

thing every time, right?

Instruction Manuals = Design Failure. B2B design

is a horrible concept. How many hugely bloated

instruction manuals have you been handed when

“learning” how to use a piece of technology? The

best UI will never require an instruction manual.

It will be intuitive, easy, fun, and self-describing.

Remember this doesn’t mean to assume touch-

experiences are like mobile experiences – the

same design principles within mobile and web don’t

actually work in stores. That said, you should focus

on creating experience parity vs. feature parity.

Now for the fun stuff…what if your

stores were self-aware? Listening

to outside events so if it started to rain

outside, signage could show umbrellas

and boots, or if it’s sunny it showed shorts and

sunglasses? The ways a store can “game”

experiences is endless, and we are only in the

early stages of experimentation like this.

UI PRINCIPLES: TREAT YOUR UX LIKE A GAME

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TOP REASONS RETAIL STORE TECH. FAILS DURING PILOTS

Infrastructure.

Wifi isn’t strong enough, internet isn’t fast enough, electricity isn’t grounded, the catalog doesn’t consid-er in-store only products, there aren’t enough images and engaging interactions. These reasons and more are important foundations you must invest in before being able to execute innovative pilots.

Compromises.

So often an intra-preneuer starts with a great idea, an amazing user-flow. And then what happens is through weeks of debate and compromises, the final product that “launches” is really a shadow of the initial idea, and creates a use-case that is so niche its applicability is very, very small. Beware! Hold to your principles.

Associates don’t care.

If your technology doesn’t make your associates feel like absolute heroes, it’s not going to do well. This means it has to make them both 10X more effective AND be 10X easier to use. That’s a touch bar, but many of the most successful brands out there test their technology with associates as first-class citizens and users of the tech along with customers.

Time Horizon (budget) wasn’t enough.

Perhaps painfully obvious, many less-sophisticat-ed pilots are expected to be sure-things and easy wins. Treat the pilot like a test, and realize that when you launch, that’s the HALF-WAY point, and that the subsequent testing and fine-tuning will be the difference between success and failure.

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Alright, let’s get down to business. Well, our business. You

have just been given a road map for bringing your retail store

into the future to better serve both your customers and your

bottom line. But how do you go about implementing these

solutions? Self-service kiosks, smart digital signage, turning

storefronts into an online store, turning dressing room mirrors

into experiential and self-order kiosks…where do you begin?

We’d love if you started with us, at ZIVELO. As a company, we

have seen tens of thousands of deployments of interactive

and store-experience solutions. Our promise is to take you

from novice to expert on what it takes to be successful in

your pursuit of what a store of the future looks like.

Our solutions are modular, future-proof, and built with

commercial-grade materials and components to withstand

years of repeat use and abuse without breaking down or

needing to be replaced. When implemented with the right

infrastructure and best-practices in place, our retail clients

see consistently higher ticket sizes, effective up-selling and

loyalty programs, a more personalized shopping experience,

shorter lines, and increased labor efficiency. These solutions

also allow retailers to take advantage of small and unique

locations in high-traffic areas where a store with a larger

footprint couldn’t compete.

Our experience installing thousands of successful solutions

like the above, with our consultative approach, cutting-edge

OakOS software platform, and world-class services makes

us the company to beat when it comes to retail innovations.

We can help you with design UI, User Experience and

Customer Journeys, and thinking through what a playbook

for implementation actually looks like. From the software to

the hardware to the services (installing, maintenance), we can

be your single hand to shake to keep you safe and ensure

you have a successful roll-out that increases your top-line

and saves you on expenses.

THE ZIVELO SOLUTION.

But don’t take our word for it…

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ZIVELO RETAIL CASE STUDIES

~20 secTo Get To Results

~50 secSpent on Results

95%SRP/Session Ratio

25%Of Map Activations Are Sent to Mobile (Using QR Code)

TOUCH WALL

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ZIVELO RETAIL CASE STUDIES

60.9 secSpent on Experience

49 minDelivery Time

441,489People Passed the Storefronts

4.5%Touch + Engaged

DIGITAL WINDOW SHOPS

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ZIVELO RETAIL CASE STUDIES

1 in 8People Stopped to Look

1 in 14People Engaged

370,048People Pass the Windows

6.31%Pushed (Downloaded) to Phone

DIGITAL STOREFRONTS

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ZIVELO RETAIL CASE STUDIES

CONNECTED MALL

15 secAverage Time to Use(Down From 46 Sec)

10%Pushed (Downloaded) Map to Phone

35%People within 15' Engaged

25%Of Map Activations Are Sent to Mobile (Using QR Code)

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ZIVELO RETAIL CASE STUDIES

84% customer engagement20K+ sessions

59% basket lift

40% less time in fitting room

CASE STUDY: “MAGIC MIRROR.” ROI STATISTICS:with Ralph Lauren, Rebecca Minkoff, and More.

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If you’re interested in learning more, we’d love to hop on an introductory call, or host you at our offices in Scottsdale, San Francisco, or Seattle. For more information, please contact us at 877-771-6882 or sales@zivelo.com

WANT TO LEARN MORE?

ABOUT THE AUTHOR.

Healey Cypher (yes, that’s his real name) is CEO of ZIVELO. Prior to this he was the CEO/Founder of Oak Labs (acquired by ZIVELO). He served as Head of Retail Inno-vation team and Chief of Staff to the CTO at eBay Inc. after the acquisition of milo.com where he was VP, Business Development. He has been recognized as Silicon Valley Business Journal’s “40 under 40,” WWD’s “Ten of Tomorrow,” and one of Goldman Sach’s “Top 100 Most Intriguing Entrepreneurs.”

Healey regularly speaks at conferences around the world and with top-tier media. He has hosted or attended several panels at SXSW Interactive, regularly speaks at NRF & shop.org, and has been interviewed by CNBC, CNN, Fast Company, the New York Times, Forbes, WWD, TechCrunch, The Wall Street Journal, VentureBeat, Entre-preneur, TIME Magazine, CBS, Fox, and more.

He is an alumnus of the University of Pennsylvania and from Nebraska, but spent the majority of his early life in Riyadh, Saudi Arabia.

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industrial designs represented within it, in part or whole

without written permission is strictly prohibited. This

document, including all its content is solely intended for

its designated recipient and is not to be forwarded to any

other company, business entity, or person without written

permission from ZIVELO, Inc.

© 2019 ZIVELO® | All rights reserved.

1https://www.nrn.com/finance/same-store-sales-stabilize-2018

2https://www.adweek.com/digital/digital-ecommerce-brands-are-opening-up-stores-and-showing-that-retail-still-has-life/

3https://www.businessinsider.com/target-store-investment-pays-off-2018-5

4https://www.cnbc.com/2018/03/23/retailers-ulta-warby-parker-ross-stores-opening-more-locations-in-2018.html

5https://techcrunch.com/2017/08/25/majority-of-u-s-consumers-still-download-zero-apps-per-month-says-comscore/

Any reproduction of this document, the artwork, and or the industrial

designs represented within it, in part or whole without written permission

is strictly prohibited. This document, including all its content is solely

intended for its designated recipient and is not to be forwarded to any

other company, business entity, or person without written permission

from ZIVELO, Inc.

© 2019 ZIVELO®, Inc. | All rights reserved.