Data Analytics

Analytics-based Insights from Experimental Retail Lab in Shanghai

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This week at the National Retail Federation’s annual “Big Show,” thousands of retailers are coming together to meet with and learn from their peers. Much of the conversation will focus on the future of this industry, which has already shifted so dramatically in the recent decade as technology has changed both business models and consumer expectations.

A few years ago, omnichannel was the primary topic of discussion at NRF — how to provide consumers a seamless way to go from the store to online and everything in between. Today, retailers the world over know this requirement is mere table stakes. It’s the minimum a savvy consumer expects as the bar for their experience is set ever higher.

Yet the industry is still grappling with what comes after omnichannel, when the customer becomes the channel. To help figure this out, the Fung Group opened its large-scale laboratory in Shanghai to allow brands to experiment with new business models and techniques that will shape the future of the retail industry. Called the Explorium, it is a unique platform for brands to observe and explore in real-time how consumers interact with new technologies, products and environments.

Since then, we’ve been running a number of experiments using IBM Presence Insights — a location-based solution that helps companies understand mobile activity in and around a physical area — and analytics. This has yielded some early insights on how customers shop that demonstrate how the Explorium will, in future, be able to help brands yield better conversions, higher profits and greater retention throughout the customer lifecycle.  

For example, the Explorium helped a well-known toy retailer identify that parents were leaving children to play in the store on their own, impacting engagement. In response, the retailer redesigned the layout and customer touchpoints in its store to encourage parents to stay with their children. For example, they put sample toys inside plastic boxes that the kids need a parent’s help to open and created an area for kids to “test drive” ride-on toys that requires them to be accompanied by a parent. As a result, the retailer has achieved some early results, reducing dwell time by 27 percent and increased conversion rates three fold.

We compared a kids apparel retailer against a direct competitor and uncovered that while it had 42 percent more customers entering its location and 12x longer dwell times, it achieved a less than 2 percent conversion rate compared to its competitor’s 17 percent. By cross-analyzing in-store browse and dwell times with purchasing behavior, IBM recommended that the retailer focus less on customer engagement and instead provide a new mix of merchandise.

Presence Insights also lets Explorium retailers track both group and individual customer journeys, revealing valuable insights about purchase patterns across a certain segment. For example, in China is it common for families to shop together — including children, parents and extended family like grandparents. The Explorium found that grandparents tend to gravitate towards toys and play, while parents focus more on clothing and educational toys.

Some stores, such as French luxury children’s brand Petit Bateau and U.S. retailer Build-A-Bear, are new to the Chinese market and are using their presence in the Explorium to better understand the needs of its consumers.

The Explorium’s model is membership-based. Consumers originally Fung Group employees, their friends and family, which then broadened through social media — opt to participate in these retail experiments. They provide demographic information — age, male/female, family status, etc. They wear a bracelet with a beacon in it that contains this information so their activities can be tracked and analyzed.

The eventual goal of the Explorium is to enable participating retailers to use these learnings to inform their retail strategy. Based on what we’ve learned so far, we’re confident the Explorium and its use of analytics will help the industry evolve and thrive.

Global Program Manager, Cloud Communications; Managing Editor, IBM THINK Blog

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