Preparing for the Smart Store of the Future

Retailers are diligently upgrading and enhancing their in-store technology and IoT applications to ensure a safe, memorable, and differentiated shopping experience. To provide this in-store utopia, retailers require nimble and reliable network connectivity capable of scaling to meet increased demand. This Targeted Research report examines the current state of the in-store network and explores where savvy retailers are making strategic investments to ensure their stores continue to provide the tech-fueled experience today’s shoppers require. Cellular is a growing part of retailers’ in-store networks, but it continues to be primarily used as a backup network/failover solution. Nearly half (46.7%) of survey respondents report that cellular is only used as a backup solution, and another 13.3% say they leverage the technology in concert with traditional networks during traffic spikes and application-based offloading. Interestingly, another 13.3% report that cellular is their only in-store network. While this group represents a minority, it is a significant minority, and one that will only grow as retailers continue to embrace the convenience of cellular for emerging retail concepts like pop-up shops and outdoor retail. For those reluctant to make the shift to a 100% cellular store network, an unlimited data plan (70%) is the biggest carrot that could sway them to consider a switch. Beyond the obvious financial implications of an unlimited data plan, retailers point to reliability (63.3%), security (53.3%), and bandwidth (46.7% broadband, 49% fiber) parity with wired networks as key requirements that would need to be met to consider full cellular. While many retailers are still weighing the benefits of a cellular network, others are investing in next-gen 5G solutions. Survey respondents were split on the urgency of a 5G upgrade, with 46.7% planning to deploy the technology within the next three years, and 53.3% reporting no plans to do so. Network failover is the No. 1 use case for in-store cellular networks, which makes sense considering the cost associated with downtown. More than half of retailers (55.2%) report that downtime costs them more than $1,000 per minute, per site — which can clearly add up to significant loses very quickly. Expenses can accelerate exponentially for retailers with greater costs per minute. For example, 17.2% report that downtime can cost $5,000 or more per minute and 3.5% say it costs between $4,001 and $5,000 — it doesn’t take a math wizard to conclude that keeping a network up and running is a top priority for retailers both big and small. Speed is also a key factor when implementing an in-store network, especially in the age of the pop-up. Cellular networks can be set up in days and even instantaneously if the retailer has the necessary hardware on hand. Compare this to the relative lengthy time it takes to get a traditional hardwired network up and running. Around 40% of retailers report it takes about a week or two; 34.5% say it can take up to a month; and a whopping 24.1% report that it can take multiple months to get a store network hard-wired. Having an iron-clad, reliable, and cost effective in-store network is an operational must have. With the influx of differentiating digital solutions streaming into the physical environment at an increasing rate, having a network you can depend on is more important than ever. One of the keys to a memorable in-store experience is tailoring the shopping journey for the consumer. In fact, in RIS’ recently released “31st Annual Retail Technology Study,” retailers report that CRM/personalization will be the No. 1 digital investment area over the next two years. Fueled by that insight, we asked respondents for this Targeted Research project for the amount of store IT budget they are allocating to personalized marketing today and in the future. What we found is that investment in personalized marketing is going to increase significantly over the next few years. For example, most retailers (60%) place their current personalized marketing spend at less than 1% of their total store IT budget. But next year the largest cohort (41.4%) will allocate between 1.1% and 5%. The growth is even more striking when you look at the largest category — 15% or more — with just a little more than 3% of retailers investing at that level this year and into next year. But when the timeline is stretched to 12-24 months, we see more than 17% expect to be allocating at least 15% of their total in-store IT budget to personalized marketing. There are numerous ways to deliver these personalized marketing messages in-store — geo-location, WiFi, POS, etc. — but a beacon-based system remains one of the most popular and cost effective. Half of those surveyed for this report say they either have up-to-date beacon technology in place or plan to institute it within two years. While the industry has certainly experienced a massive increase in digital shopping over the past year fueled by the ongoing health crisis, the store is still the center of the retail universe. Not only are traditional store purchases (74.1%) still the clear-cut leader in revenue by purchase path, the store continues to be leveraged as a fulfillment arm at increasing rates. Services like ship-from-store (6.7%), buy-online-pickup-in-store (5.5%), and dark stores (0.6%) are here to stay. Retailers must fortify their in-store networks to satisfy the increased demand and ensure the solutions required to run these new services are available regardless of network demand spikes. In addition, unique retail experiences like pop-up stores (2.5% of total retail revenue) are poised to grow in popularity in the coming years and require an affordable, reliable, and quick-to-deploy network that can scale with them. Methodology This study was conducted in February and March 2021, and only senior executives from national or large regional retailers were invited to participate. More than half (57%) of responded come from chains with more than 50 stores, and 20% are employed at retailers with more than 1,000 physical locations. Nearly one in four (23.3%) respondents hold C-level titles, and 83.3% are director level or above. Sixty-two percent of respondents come from companies with more than $100 million in revenue, and 20.7% work for retailers with more than $5 billion in annual sales. Conclusion The growing importance of digital commerce cannot be understated; however, the store is still the heart and soul of the retail enterprise — albeit digitally influenced. As the distinction between physical and digital shopping continues to blur and shifting consumer shopping patterns become permanent, retailers’ in-store network needs will only increase. Fueled by new retail concepts and the mandate to adapt to changing market conditions, retailers demand reliable, affordable, and quick-to-deploy network solutions that meet the needs of the modern retail enterprise and its customers. The traditional use of in-store cellular networks solely for backup are giving way to hybrid and in some cases full cellular models designed to provide a level of flex and scalability wired networks alone cannot provide. Key Takeaways 46.7% of survey respondents use cellular only as a backup solution, while 13.3% report the technology is their sole in-store network. Retailers point to reliability, security, and bandwidth parity with traditional wired networks as key requirements that must be met if they were to consider a fully cellular network. Nearly half (46.7%) of retailers plan to deploy 5G technology within the next three years. 55.2% report that network downtime costs them more than $1,000 per minute, per site. Even more alarming are the 17.2% of retailers that lose more than $5,000 or more per minute. Over the next 24 months 17% of retailers expect to allocate more than 15% of their total in-store IT budget to personalized marketing. Traditional store purchases (74.1%) are still the clear-cut leader in revenue by purchase path.

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