With the rise of e-commerce, brick-and-mortar businesses have worked to stay competitive. But despite its growth, e-commerce still only accounts for 5% of all retail sales, according to a McKinsey and Company insight report. This is good news for physical stores, particularly as research shows that while consumers find products online, more and more prefer to buy products in physical stores.
Online retailers have traditionally had a big advantage in terms of data, but in-store retail analytics company RetailNext has built a model that allows owners of brick-and-mortar stores to collect, analyze, and visualize in-store customer engagement data. The San Jose-based company, which has raised over $24 million, aggregates the data that is collected from customers and makes it actionable for retailers such as American Apparel, Bloomingdale’s, Verizon Wireless, and Family Dollar.
Street Fight recently spoke with Alexei Agratchev, RetailNext’s chief executive officer (who will be appearing in a panel at next week’s Street Fight Summit in New York), to find out more about indoor retail analytics and how RetailNext is helping retailers provide a better experience for their consumers.
Google’s acquisition of Waze earlier this year brought mapping to the forefront of the tech industry. How is the indoor space different?
If you look at indoor mapping, there are already companies like Google, Nokia, and Navteq that have been mapping indoor spaces for a while, and I think it is becoming more broadly used. When it comes to mapping individual retail stores, understanding the floor plan, and which products are located where inside the store – that space is quite brand new.
Essentially, it’s an ability to accurately locate where people are inside of physical spaces, and helping consumers navigate in-store to find products. The type of mapping we’re focused on at RetailNext is helping retailers understand how their sales floor is being used and whether consumers were able to navigate it efficiently, analyzing which areas of the sales floor are not contributing to their sales, and optimizing the experience for their customers.
So what information are retailers collecting from customers when they are in their stores?
It’s all about in-store activity: the number of customers who walked into the store, where they went in the store, the amount of time they spent in a particular department, and the number of customers who purchased an item — but all of that in aggregate. For example, a retailer can use video to understand the total number of customers who visit their store.
Retailers also collect information on the profile of customers in their store — classifying them as male or female, new vs. repeat visitors, understanding age buckets — all in aggregate. By analyzing this data, it helps retailers optimize sales to that specific type of customer and run their businesses better. You also have to think about the fact that there are customers who opt in, this doesn’t happen often, but they do agree to be tracked as an individual because they are getting something in return, like guest WiFi or discounts.
When retailers aggregate this data, why is it good for customers?
I think today the biggest benefit is when retailers have really great visibility about what happens in their stores, it allows them to dramatically improve the customer experience in-store without personalized marketing. The way this system can be looked at is as a real-time customer satisfaction survey. So if a customer walks into a store and they can’t find an item or a salesperson is not around — preventing them from purchasing an item or making their experience worse — technology like ours can detect that almost immediately. From this information, retailers realize they can serve customers better, make more profit, and their customer satisfaction score goes up.
Personalized marketing will become a benefit of the same technology infrastructure maybe 24 months from now.
Last month, AIG’s Chairman, Steve Miller, said the next industry that is under enormous threat is the brick-and-mortar retailing business because of the rise of online retailers. How does this impact RetailNext?
I don’t think brick-and-mortar as an industry is under threat at all. There are individual retailers under threat because they need to change the way they think of their stores. If the purpose of a brick-and-mortar retailer is to provide product availability at price, they’re probably not going to survive because those things are done better online. In fact there are retailers, like Warby Parker and Bonobos, that started online and are opening physical stores called showrooms and guideshops.
RetailNext sees the growth and importance of e-commerce as a positive for our business because it forces retailers to start thinking about their stores in different ways. It also causes retailers to look at measuring the types of things that we measure, while also considering their businesses with a marketing media interest, not just a pure transactional, distribution center.
Where exactly does RetailNext fit in the indoor space?
When we started the company six years ago, the goal was to take e-commerce and make it possible for physical retailers. When a customer walks through the front door of a physical store, retailers do not have any information until the customer checks out — this helped shape our vision from a technology standpoint.
There are two problems we help retailers with: the first is helping retailers optimize their marketing initiatives designed in a way to bring more customers to their store; the second — which is the core of what our customers use our product for — is for maximizing profit from a shopper walking into their store. This means from the moment the shopper walks into the store and walks out, retailers use analytics to come up with ways to convert as many shoppers as possible into buyers. We’re helping retailers understand what’s happening inside of their stores and optimizing the sales floor.
We have a product that is quite mature and has been on the market for quite a few years now, but we believe when it comes to what you can do with that data in terms of predictive learning, we just scratched the surface – so we are focusing a lot on that moving forward.
Myriah Towner is an intern at Street Fight.