Podcast: Retail Fights Back With Connected Tech

In this episode, we explore the dynamic landscape of retail transformation in the digital age. Learn how the integration of cutting-edge technology is reshaping shopping experiences and customer engagement. From real-time supply monitoring to digital shelves enabling dynamic pricing based on demand, discover how retailers adapt to changing consumer behaviors and preferences. Join us to uncover the strategies and insights driving the reinvention of retail in today's interconnected world.

This podcast is sponsored by Mouser Electronics.  

EPISODE NOTES

(3:00) - Reinventing Retail in The Connectivity Age

This episode was brought to you by Mouser, our favorite place to get electronics parts for any project, whether it be a hobby at home or a prototype for work. Click HERE to check out the article written by our friend Paul discussing the growing role of connected devices in traditional retail.

Transcript

What's going on folks? Welcome back to the Next Byte podcast. And in this one, we're talking all about retail, not shopping, not window shopping, no, none of that. We're talking about how digital technology is gonna revolutionize retail and potentially even help it beat e-commerce by making your shopping experience way better than you could have ever imagined. So, if that's got you hyped up, then buckle up and let's get into it.

I'm Daniel, and I'm Farbod. And this is the NextByte Podcast. Every week, we explore interesting and impactful tech and engineering content from Wevolver.com and deliver it to you in bite sized episodes that are easy to understand, regardless of your background. 

Farbod: Alright folks, as you heard, we are talking about retail in this episode, which doesn't really sound like a topic we would be talking about, but just hang on for a second. It's going to make sense. Now before we jumped into today's topic, we're going to talk about a technical resource by today's sponsor, Mouser Electronics. Now you might be wondering, well, why is Mouser talking about retail? Well, again, it's going to make sense. You see, we're talking about how retail is actually getting transformed and it's coming into the digital age. And I think, this technical resource does a really, really good job at it. It's written by one of our friends from Mouser, Paul, and Paul does a great job of explaining like, hey, when I was getting my MBA, I was actually doing research in retail stores where we would do exit surveys to understand why people are here, what stores they want to go to, what their impression was. And he's talking about, this was written in 2017, by the way, he's talking about how the rise of IoT and big data and AI is kind of alleviating the need for that because we can automate that entire process. Well, now we're in 2023 and it turns out that Paul was right on the money. That's exactly what's happening. And that's what this article is talking about. At the time, this research group was projecting that there would be about 20 billion devices connected to the internet by 2020. And I don't know if we've quite hit that number, but I feel like-

Daniel: I think, I just Googled it quickly. I think we're at 17 billion. So not that far off.

Farbod: I was going to say, I feel like we're pretty close. When I think about my life and how many connected devices I have, and you think about the population of the world that has access to technology, it kind of starts to make sense. So, if you're interested in the world of retail and how it's digitizing, then you should definitely check out this article as like a precursor to what we're talking about today.

Daniel: And I would say like the cool part about that is Paul talks about how like all this data from all these devices. You can use AI to like analyze this data to get actionable insights. I think that's like a key part of what we're going to talk about today. So, this is like an interesting primer on how retailers can leverage data to overhaul the retail experience. And that's actually a pretty solid segue to what we're talking about today, which is like physical stores, brick-and-mortars, using a next generation of wireless technology to overhaul the experience into a way that they're not just holding their own against e-commerce. Brick-and-mortar retail is actually clawing back market share from e-commerce, which in like after the pandemic in 2020, 2021, a lot of the pundits were saying like e-commerce is here and all the sales that it stole from brick-and-mortar are here to stay. Like the pandemic just accelerated a global trend that was going to happen anyway. And actually, since then we've seen brick-and-mortar retail start to claw back market share. And I think a big part of that is the fact that retail is focusing on this new technology, these new trends that we're gonna talk about today to kind of overhaul what retail looks like in a brick-and-mortar. And I'm excited to talk about what they've done to date and then also what the future might look like if they continue on this trend.

Farbod: Absolutely. And I'm gonna give a little bit of context to the folks listening about what the status of physical retail and e-commerce looks like. So, I think every year, I'm pretty sure this is the most recent data, but every year e-commerce is clocking about $1 trillion a year in revenue in the United States, which sounds like a lot. It is a lot. But what surprised me is that traditional physical retail is doing about $4 trillion a year in the US. And maybe it's because I'm in this bubble, maybe it's because I've grown up so much with the internet age, but I did not think that that gap was so large. Now, you know, my first job was working at Best Buy and even the people there, like the employees there when I was working, we'd joke around that Best Buy was really the showroom for Amazon because people would come in, see what they like and order from Amazon anyways. And you know, we do things to try to make up for it. We do like price matching and a lot of other stores do that. They try to keep the people's business, but that can only go so far. And that's where it like really drew me to this entire article, where it like digs into how physical retail has, you know, been drastically changing to keep up and really compete with e-commerce. And they drop like a couple of buckets of technologies that they're deploying. But I don't know, I guess I kind of want to get started with one of them. And that one is this connected, like digital connectivity of what the shopper wants to buy and what's available to them and what they're actively doing. Cause this kind of sounds creepy to me, but the value-add eases the creepiness for me. And so, let's get into it. Basically, they're saying, like, what happens if, you know, Farbod goes into Best Buy and I want to buy a keyboard. I see the keyboard and let's say that the keyboard is sitting on a digital shelf that can communicate with my smart device, right? And it knows that I'm interested in this, yada, yada, yada. But then I pull up my phone and I Googled that exact same keyboard model and I somehow come across it for $10 cheaper on Amazon. That right there is like the sale loss to me, right? Because I can save money. Well, what if they could dynamically change that price? Like no one has to tell me that they can price match none of that. They can just update that price right then and there for me. Isn't that crazy? Like just the premise of that idea is so mind blowing to me from someone that's worked in traditional retail.

Daniel: Well, and not just, Farbod looked it up on his phone. He found that there's a better price out there somewhere in price match. If retailers really want to be competitive like this, they're not going to make you dig for it. They can catalog the entire internet. They can understand if their competitors selling this product at a lower price, and they can automatically update the pricing across all their stores, across hundreds of stores in the world. They can update their pricing automatically, dynamic pricing. And I think that's something that comes out net positive for consumers, right? If we're using technology, leveraging technology in a way like this, that enforces price competitiveness between different retailers to try and drive the prices lower and lower for us. I think that's something that would come out as a net win for us as a result of them having these dynamic pricing using wireless devices to change the prices on the shelf, not having us have someone run around with the new printed labels and swap them all out that traditional method of doing things probably leaves a day or two of lead time in the system for someone to communicate the new pricing, get it approved by corporate, get the labels printed out, have someone do it during the night shift so you're not scrambling around mixing the shelves during the day. Imagine you have a digital shelf that can change the price like that. And then when the competitor drops their price, you can also drop your drop your price instantly like that. Again, that's just one of the different facets of the way that wireless technology is already being used in retail stores. It gets me more excited about the physical shopping experience if I know that amenities like that are going to be available to me.

Farbod: I'm totally with you. And then like I want to quickly harp on something that I feel like might have been lost over, but you touched on. And that's, you know, it's not just one digital shelf in one location that understands that I'm looking something up. Imagine this level of insight extending across like an entire chain, like let's say Walmart, right? It's not just Farbod went in to buy a keyboard and we adjusted the price. It's, hey, people his age of his background are interested in this product and they are coming in for it. And if we adjust the price, not only are they buying a keyboard, but they're buying a mouse and speakers as well, right? Like that's the crazy part to me is like how much insight you can get from these little interactions that are like completely, I guess unimportant and not utilized at all right now because it's impossible to do it. And, you know, selfishly, I was interested in this because for the folks that don't know that are listening, Daniel and I went to college together. We took a couple classes together. One that really stood out was like engineering and entrepreneurship where we have to pitch an idea. One of the ideas that we pitched that we were really into that we tried to setting up a prototype was essentially a shopping cart that could track customer activities, what items are standing in front of to try to give this level of feedback on. And we hit technical roadblocks, we got some great feedback, but to finally see something like this happening, and by the way, this is happening in the real world, apparently Walmart has placed an order for 60 million smart shelves across 500 locations to be deployed in the next year, year and a half. Yeah. So, the fact that it's like becoming a reality is incredible.

Daniel: No, I'm with you, man. And it definitely tugs at a heartstring for me because it talks about, or allows us to talk about this thing that we had pitched as a potential product idea. I don't know what was it four or five years ago, but I want to dive into a couple more of the potential applications of this new wireless technology. And actually, before I forget, I wanna mention that this article was written by Lorenzo Amacucci. He's an expert at Nordic Semiconductor. They're a huge manufacturer of low power wireless devices. Like these ones that we're talking about here. So, if anyone knows about low power IOT devices for retail, it's probably Nordic. So just to mention that they're probably a subject matter expert in this field. So, they know what they're talking about. So as an extension of that, us reading their article, we know a little bit about what we're talking about here. One thing that was most interesting to me was like this combination of supply chain monitoring and in-transit supervision to increase the quality of the product that's delivered to the customer in the end state. So, one of the key examples I like to think of our food, but then there's also electronics as another key example where the conditions under which they're transported, mean a lot about the actual end function of it. So, the food example is like a banana. If a banana gets tattered, like beaten around and bruised, it may still look yellow to you when it's on the shelf, but you're going to open up that banana and you're going to peel it open, you're going to see that it's all mushy inside and that's going to be disgusting. You're not going to want it. Similarly with like, say something like a dairy product, right? If the temperature got too high while that gallon of milk was in transit, the milk could have spoiled. You won't know that till you go home, you buy it, you open it up and you sniff it and it's awful, or even worse case you consume it and then it gives you like stomach problems. All of these, and then, you know, the other example of electronics, like say you had bought a new GPU for this computer you're gonna build at home and something had actually accidentally screwed up the like anti-electrostatic packaging and someone had static shocked this GPU that you bought. You paid hundreds of dollars for and you will go and plug it into your desktop computer to try and turn it on and it's fried. All of these situations are things that can be addressed by having smart sensors available during the transit process, available during the stocking process to help maintain the quality of the product that's delivered to the customer. The knock-on effects of that are one, when you buy something you can have higher confidence in the fact that it'll work, but two, the kind of second-order effect there is that returns and refunds are incredibly expensive for retailers. And the fact that you might get a defective product and have to return it, you know, the grocery store is not going to go put that produce back on the shelf. Best Buy is not going to be able to put that GPU back on the shelf. They end up eating the cost of that return because somewhere along the process in the supply chain, that product got compromised. And the only way that they can possibly compensate for that is by raising their prices. So again, this is like going to be me being like idealist economist here during this discussion. But I think that there's a very real possibility that we see better supply chain monitoring and in-transit supervision eventually turn into lower prices for consumers because there's much higher yield, let's say, you know, more of the product that they buy from their distributors ends up delivered to customers and it works. That higher yield means they're paying less cost to refund, less cost for returns along the way, and that will allow them to be more competitive with their pricing across the board.

Farbod: For sure. And you know what? The cost savings on one side, but when you look at it on a more macro scale, especially with food, I think one of the worst statistics I've ever read was like in the United States, we waste enough food to like end world hunger twice over or something like that. And that's just like insane to think about that we have such a surplus and so much of it goes to waste. Now, when you consider the fact that like, hey, potentially putting sensors in refrigerators to make sure that the milk isn't gonna get spoiled and the grocery store isn't gonna lose thousands of dollars and hundreds of kilos worth of milk or dairy or whatever, that sounds like such a low effort thing that we can now do. And it's not even that technically difficult or making sure that food isn't getting spoiled as it's being transported or that we get the right amount to these locations so that there isn't a surplus of apples just sitting there and going mushy and gross or avocados. I can't tell you how many times I've picked up avocados that are just like too ripe and I know no one's gonna want them anymore when avocados are so hard to grow. They're so water intensive and so in demand. So again, it just seems crazy to me what we can do with technology now. And you touched on, you know, the supply chain aspect of it. But one other thing that was mentioned in this article, one other category that was really interesting to me was kind of understanding customer behavior. So, we talked about the digital aspect of shelves and stuff like that. But they pitched this very novel idea of imagine we had, you know, every store has lights. Imagine if we had smart lights, where they had sensors that could detect, you know, if people are there, and if there are people there, we can turn on the lights or regulate how much we turn the lights on and save on edge rack costs and lighting costs and stuff like that, which sounds amazing. But what if we extend that and say, let's collect data on the patterns of how people are coming in and navigating through our store and actually understand how, let's say, this new stand promoting the latest Mountain Dew is impacting people's behavior, right? That is so interesting to me. And the, like, again, the amount of insight you can draw from just a vast amount of data like that. And to fine tune your store layout access to, they always talk about how Costco puts chicken in the back to get people to walk through so that they see other stuff actually understanding what's working as they get to the chicken. I don't know. That just like, it scratches a very interesting, technology meets sociology itch for me.

Daniel: Well, and I think I'm right there with you. I love the Freakonomics podcast and the books because it's like behavioral economics, right? It's where like psychology meets the economy. And in this case, we're also gonna do the intersection of technology with that. That's a really fascinating nexus of those three different disciplines for me. But the most important part for me is like, I think people have been trying to do this for a long time. They're trying to study how we can optimize, you know, shelves in stores to increase sales, but also to improve the customer experience, right? One of the things that drives loyalty to a brand is like, how happy people feel when they leave the store. Did they feel like they had a good experience there, do they feel like they bought the right things, or they had the right options, or they got the right price? Imagine being completely instrumented to be able to do these trials and actively collect data with technology, as opposed to doing surveys and focus groups and all these things that are fundamentally flawed to try and collect feedback. Now you can directly measure the customer behavior as a method of understanding the best way to optimize a retail store. And I think, again, that will eventually drive some competitive pressure for retailers everywhere to have like a completely seamless, a really, really enjoyable customer experience when you go into a brick-and-mortar store. And it makes me think about, and it's actually not something that was mentioned in this article from Nordic, but something that like kind of blew my mind, similar to like when I saw for the first time Amazon Go, like just walk out technology, like you'd walk in the store, put whatever you want in your basket and you can just leave. There's no checkout. We'll bill you because we know exactly what you grabbed and you can leave. The first time I went to Uniqlo a couple of weeks ago, I texted you for about, I was like, this is incredible. It feels like I was shopping in the future. They have RFID tags and like all the barcodes, or I guess they're not barcodes, they're RFID tags instead. But on all the price tags for their clothing, they have a little RFID tag in there, which probably costs a couple of cents a piece. But I was like, oh, that's pretty cool. Like maybe they're using this to measure their inventory. They can drive around the entire store with a little RFID reader and they don't even need to count what's on the shelves. You know, the reader can count for you. That's pretty cool. Like that's interesting. And then I got to the checkout and it was just like, drop all, like put your entire basket, drop it in this bucket and it'll ring it all up at once. And sure enough, like I didn't have to ring a barcode. I didn't, there was no person sitting there as a self-checkout and all I did was dump my entire basket into this bucket in the middle of the self-checkout kiosk and everything rang up perfectly. And I was able to check out and like with like 5 or 10 items in less than 30 seconds. And I was like, wow, this is awesome. That type of technology, RFID is just one of these subsets of wireless technology that has been used in other areas of technology for 10, 15, 20, 30 years in some cases, but hasn't yet been brought into retail. Now we've got this, I like to call it like a retail renaissance, right? Where we thought retail was going to die out, e-commerce was going to take over the world, but it turns out if you can leverage this technology in a really unique manner, you can turn brick-and-mortar into this thing that will actually eat away sales from e-commerce. And it provides a much more holistic and enjoyable customer experience. And I think like, it goes back to what you were talking about at the beginning of the episode, but I looked up some stats to like corroborate what the intro to this article said. Like that. I think what you said around like, 4 trillion dollars of sales in the US in physical retail versus 1 trillion in e-commerce across the world. This research firm, Forrester, projects that even with the growth of online shopping, 75% of sales will continue to occur in person. That lines up about, I think your stats had it around 80% of sales were in person. E-commerce sales actually reverted to pre-pandemic levels, so they didn't just plateau, they actually regressed back to pre-pandemic, and indicating like, that balance between online and offline shopping experiences was skewed by the pandemic experience. It wasn't actually a permanent shift toward online shopping. And this is the stuff that was actually really interesting to me is 83% of consumers expect a hybrid omni-channel option when they go to a store. So, they expect being able to buy something online and pick it up in the store or try something in the store and then order it online and it gets shipped to their home. That's 83% of consumers expect that when they walk into a brick-and-mortar store. I don't think anywhere near 83% of stores actually offer something like that. And similarly, 73% of consumers are excited about stores offering interactive wireless technology experiences, stuff like using the RFID checkout at Uniqlo or the digital pricing on the shelves at Walmart. So, the lion's share of consumers are excited about a technology that might improve their shopping experience. 83% of customers are excited about having hybrid physical versus online shopping options. And now because that demand is there, that expectation is there, I think we'll see adoption of this technology, some of these things that we're mentioning, I think we'll see it rapidly increase in brick-and-mortar stores. And again, as someone like myself who actually really enjoys physically going shopping, seeing something before I buy it, I'm excited for this shift in retail for on a brick-and-mortar retail to kind of have this renaissance or this revival using technology and start to outsmart these digital giants like Amazon who've been eating their market share for years and years.

Farbod: I think that's a really, really good point in terms of like customers wanting a hybrid experience. And I'm happy you touched on Amazon because what I was going to say is a testament to what you just said is this insane cult following that Target has. Oh yeah. It's just, it's just a store, like at least to me, but a lot of people just absolutely love it. And of course, like, you know, they have great product offerings and everything like that, but when you look at their shopping experience, you can do the full online experience, just like you would do Amazon, or you can do the full physical experience, just like you would do, let's say Trader Joe's, or you can do the hybrid model where you buy something online and after work, you just quickly pull up, pick it up, and then you go home. And I think stores like that, like physical stores that operate like that and are open to changes that come with technology are going to be the ones that are going to end up being like successful.

Daniel: I know I agree. And I think like one of the early pioneers of this was the Apple store, like realizing that they can use most of their floor space instead of using it to hold stock of items, right? They can use it as a gallery, as like an art gallery or like a playground for adults to run around and play with all these toys knowing that they're going to capture that sale online and they'll even give you the opportunity to do that in the store, right? They'll help you to place an online order while you're in the store. That's something that Apple does a really good job of and they've been pioneering that for a while. I think we will see a, you know, again, with all this technology that helps improve the shopping experience, helps collect more data on customer preferences, we'll start to see a lot more creativity in what brick-and-mortar retail looks like similar to the way Apple did that. I don't know that it will look exactly the same because you'll still need groceries when you go to the grocery store. You're not going to expect to buy your groceries, you know, go physically to the grocery store and buy something online. But I'm excited to see them kind of crack the behavioral economics around it and create an experience that feels so new, feels so refreshing and feels intuitive to what consumers actually want. Where, you know, I feel like other than that brick-and-mortar has probably been stuck generally in the same ways ever since it was ever stood up, you know, hundreds of years ago.

Farbod: Absolutely. Absolutely. Now, let's talk about the so what of all this. I think we actually kind of bundled it in with the earlier conversations but the easy so what answer is that this is gonna make a more streamlined shopping process for the shoppers. It's gonna make sure that physical retail does not die because people don't seem to want it to die and it might potentially lead to minimizing losses not just in terms of profits, but also in terms of goods, like for the planet, you know, like yeah, I'm not wasting food anymore.

Daniel: Like you said, right, like we've got this awful issue. Even inside the US, like a well-developed country with a powerhouse of an economy, 50 million people in the US experience food insecurity, and we're concurrently throwing away 40% of the food produced in the country. Like there's a huge disparity there. And like you said, that's more than enough food to address the food insecurity issue inside the country. And I'm sure that's like a microcosm for the rest of the world. This technology will help improve the supply chain, help improve the customer experience, drive prices lower, but then also optimize the way that we're allocating our resources in our supply chain. Like we said, to hopefully address some of the food insecurity issues and waste and electronics and, you know, basically all this stuff that's ending up in the landfill as opposed to being used the way that it should.

Farbod: Right. So quick recap, just, you know, so we got our ELI5 covered. Everyone thinks e-commerce has taken over the world, but the reality is e-commerce makes up for $1 trillion in revenue every year, whereas physical traditional retail does $4 trillion a year. Now, in the digital age, with the inclusion of some technology that's not even that advanced, we can do so much more in physical retail that's gonna make people wanna stick around and shop there more. We can have smart shelves that know that you're looking up the price at a competitor's marketplace, and they can dynamically change the price to offer you a better deal and make sure that they're keeping your business. They can better understand who's buying what and how much of what is getting sold so that they can have real time supply monitoring. We can make sure that fridges that store our food are actually being well maintained and they're not letting the milk get spoiled or the dairy get spoiled. We can make sure that apples and bananas aren't getting spoiled before they reach the customers. We can do so many different things and that doesn't really seem like something that's far away. We're looking at Walmart ordering 60 million smart shelves across 500 locations over the course of the next, what, 12 to 18 months. So, this is coming, this is a reality, and it's gonna have a drastic impact on how we experience retail in the not-so-distant future.

Daniel: Nailed it, dude.

Farbod: I tried, I tried. All right, so with that said, before we wrap up the episode, I wanna quickly thank our fans across the world, specifically Canada. You Canadians got us to, what, top 150 in your country in the Apple podcast rating for the technology category. Besides that, I think we were in Azerbaijan on and again, off again for the past two weeks and Saudi Arabia as well. Did I miss anything?

Daniel: No, I want to extend a sincere thank you to our friendly northern neighbors in Canada. Being polite and saying, it wasn't enough, you had to get us trending in the top 150 technology podcasts in the country, which is pretty awesome. Obviously, we appreciate everyone who's a part of that. The biggest way you can continue to be a part of that, be a part of growing this awesome community that we're growing here at The Next Byte, is leaving us a review if you haven't already. We hope we've earned five stars from you. If not, we'd love to hear from you on why not. And if you've already left us a review, the best thing in the world you can do is share this episode with a friend. We hope they'll like it as much as you do and then we can continue growing, continue doing this and reaching more people along the way. That's what it's all about.

Farbod: For sure. To our Canadian friends, I will be celebrating with a bottle of, you know, authentic Canadian maple syrup this weekend. And to everyone else, thank you so much for listening. We'll catch you in the next one.

Daniel: Peace.

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That's all for today The NextByte Podcast is produced by Wevolver, and to learn more about the topics with discussed today visit Wevolver.com.

If you enjoyed this episode, please review and subscribe, via Apple podcasts Spotify or one of your favorite platforms. I'm Farbod and I'm Daniel. Thank you for listening and we'll see you in the next episode.

As always, you can find these and other interesting & impactful engineering articles on Wevolver.com.

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The Next Byte: We're two engineers on a mission to simplify complex science & technology, making it easy to understand. In each episode of our show, we dive into world-changing tech (such as AI, robotics, 3D printing, IoT, & much more), all while keeping it entertaining & engaging along the way.