In today’s retail world, insight is currency and context is king. To offer true value, retailers will need a window into the shopping behaviors of customers, along with a greater understanding of the time, place, and situation in which their shopping journeys occur. Such hyper-relevance implies delivering value — whether greater efficiency, savings, or engagement — to the consumer in real time throughout the shopping lifecycle. This requires an analytics-driven approach that incorporates data from sensors, beacons, smartphones, and other sources to apply intelligence to the context of the consumer, and then dynamically provides the experience that best suits that context. Retailers that can provide a hyper-relevant experience to customers—unique to the context of where they are and what they are looking to accomplish in that moment—will be well positioned to claim their share of a $1.5 trillion opportunity.
Cisco has completed a new study that uncovered unique insights about shopping behaviors and attitudes among U.S. and U.K. consumers in the Internet of Everything age. First, technology innovation is moving fast, and consumers have entered the digital age at an enormous rate. Consumption patterns are no longer defined by traditional demographic segments such as age, gender, and income. And technology has fragmented the customer journey into a thousand pieces. All of this presents significant challenges to retailers who are already dealing with increased operational complexity. Consumers today are looking for a hyper-relevant shopping experience that enables them to receive what they want, when and how they want it. Hyper-relevance is connected to the dynamic interplay of three consumer value propositions—efficiency, savings, and engagement—and consumers are highly receptive to retail solutions that deliver on these values, especially efficiency and savings. Finally, succeeding in this environment demands that retailers transform their business models and processes. They will need to earn consumers’ trust in order to gain the shopper insights that will enable them to deliver hyper-relevant interactions. They will need to focus their innovations on understanding the consumer’s context at every moment in the shopping journey. And they will need to architect a dynamic infrastructure that can deliver unique, context-aware experiences to customers while increasing operational agility. In order to deliver dynamic experiences, every retailer must be a technology company, with a holistic, strategic approach to innovation. The message to retailers is clear: transform, or be left behind.
The new connections in the Internet of Everything are creating unprecedented opportunities to innovate, as well as tremendous challenges. Expanding from 13 billion connections among people, process, data, and things today to 50 billion by 2020 will drive exponential change and complexity. The traditional shopping journey is exploding with a myriad of options, retail business models are being disrupted, and customer expectations are higher than ever.
In only a few short years, technology and changing consumer behaviors have upended the retail landscape. The digital consumer has come of age and expects a rich palette of retail options, channels, and experiences that provide ever-increasing value and convenience. Disruption, meanwhile, is arising from fast-changing technologies such as social media, mobile, the pervasive use of apps, and Big Data analytics. The source of much of this disruption is the Internet of Everything (IoE). IoE is the networked connection of people, process, data, and things, and Cisco projects these connections to surge from 13 billion today to 50 billion in the next decade. With a total Value at Stake of $19 trillion from 2013 to 2022, the Internet of Everything represents a profound market transition, particularly in retail, which accounts for $1.5 trillion of the total private sector Value at Stake. Many retailers have begun the process of harnessing IoE capabilities to transform their businesses, and these have a significant first-mover advantage, enabling them to reduce costs, increase revenues, and build strong customer loyalty.
To illustrate the nature of the change impacting the industry, let’s take a look at the evolution of the shopping journey, which typically begins with product research then proceeds to buying and paying for the product, then to receiving the product, and finally, to obtaining support. Before Amazon.com accelerated the widespread use of e-commerce, options were few and the journey was straightforward. Shopper interactions added up to a total of three linear shopping journeys: in-store, through a catalog, or prompted by print or broadcast-media advertising. The advent of e-commerce expanded this number to approximately 40, with the addition of new payment, delivery, and service options. Now, IoE has opened up more than 800 unique variations of possible shopping journeys. As technology innovations (such as wearables and augmented reality) increase and consumers’ digital lifestyles evolve, these shopping journeys will multiply further.
To better understand the competitive dynamics that have upended the industry, Cisco undertook a comprehensive, three-pronged study consisting of original research, economic analysis, and interviews with retail industry leaders: Doug Stephens is the founder and CEO of Retail Prophet and author of The Retail Revival. He is a well-known futurist with a focus on technologies that are transforming how, where, and even why we shop. Leslie Hand is vice president of IDC Retail Insights and a prominent retail industry analyst focusing on the Internet of Things and the Internet of Everything in retail, shopper insights, and demand-driven supply chain. Michael Olmstead is a director at Plug and Play Retail, a venture capital / retail incubator. His focus is on analytics, mobile, robotics, and video. The first wave of primary research findings includes 1240 consumer responses from the United States and United Kingdom. The global study of 6000 respondents across 10 countries will be released in spring 2015.
Our research found that digital consumer behavior that was leading-edge just two years ago is now considered mainstream. A growing majority of American and British consumers make smartphones an important part of their daily lives. Tablets are commonplace, and mobile apps are ubiquitous. Today, more than half of shoppers with a smartphone use retailer-specific apps while shopping at least once a week. More than a third of U.S. shoppers and a quarter of U.K. shoppers use independent shopping apps at least weekly. Earlier editions of Cisco’s retail research identified a group of consumers we referred to as “Über Digitals” — people who use smartphones or tablets while shopping in the store, and employ these devices to access the Internet at least daily. In 2012, 11 percent of U.S. consumers could be considered Über Digitals. From 2012 to 2014, this group grew from 11 to 29 percent of U.S. consumers, and from 7 percent to 22 percent of U.K. shoppers. Combining mobile technology with the in-store experience is no longer just for early adopters — it is mainstream. Therefore, the very concept of Über Digitals is falling away as smart devices pervade everyday life, across shopper segments. Mobility and apps represent a disruption similar in scope to what we saw with e-commerce in the late 1990s, which brought about a tidal wave of industry change. With the number of channels and options growing exponentially, today’s retailers face a wave of even larger complexity.
In this video, thought leaders discuss how savvy retailers can leverage the nearly pervasive use of mobile technology to create completely new customer interactions and experiences. Smart retailers are providing capabilities to enable consumers to be more engaged and excited about their in-store shopping experience. For example, the Neiman Marcus shopping app allows customers to customize their own shopping experience—making appointments with specific sales associates and having certain items put aside for them. Offering in-store Wi-Fi can give customers fully-enabled Internet connectivity, allowing them to research and compare products while they shop. Providing the tools to help customers make better decisions can result in increased customer loyalty.
Much of the recent innovation around shopping apps and mobility has focused on delivering more personalized experiences to consumers. But Cisco’s study uncovered a desire for not just a personalized shopping experience, but for a hyper-relevant one that considers the precise context of the consumer.
Hyper-relevance is a new paradigm that enables consumers to receive what they want, when and how they want it. Hyper-relevance is made possible by new IoE-enabled solutions and innovative business models that deliver value — efficiency, savings, or engagement — in real time throughout the shopping lifecycle. It requires an analytics-driven approach that applies intelligence to the context of the consumer (where he or she is, what he or she is looking to accomplish), thereby allowing retailers to dynamically provide the most suitable experience. Many previous efforts at personalization have centered on knowing the consumer’s identity and sending communications personalized by name. Hyper-relevance is all about understanding the consumer’s context, and interacting in a way that meets his or her needs in that moment.
Hyper-relevance requires an awareness of the shopper’s context in order to give shoppers what they want, when and how they want it. In this video, industry thought leaders discuss the importance of contextual interactions. Ever since the recession, retailers have been trying to gain consumers’ attention by personalizing their interactions. The value that customers perceive in these experiences is second only to price in their decision of where to purchase. The potential for technology is that a retailer can immediately recognize the customer when he or she walks in and start to tailor a personalized shopping experience, delivering recommendations directly to the customer’s device—not for what everybody wants, but for what that particular customer wants. A personalized message is meaningless if it offers the customer something he or she doesn’t want. In order to have contextually relevant interactions, consumers will need to be willing to share a certain amount of personal information, and retailers will need to earn consumers’ trust.
Hyper-relevance is connected to the dynamic interplay of three consumer value propositions:—efficiency, savings, and engagement. This slide illustrates the rich array of experiences shoppers can enjoy in an IoE-optimized store, including digital signage for in-store maps and special offers or ads; augmented-reality apps for product reviews, recommendations, and in-store guidance; and checkout optimization.
Our study showed a high degree of willingness to participate in retailer programs that deliver value in these areas, especially efficiency and savings. Up to three-quarters of consumers in our study expressed interest in using retail solutions that help them find their way quickly and efficiently through the store and the checkout process. Digital solutions that help consumers find special deals were the most popular of the concepts we tested. Consumers were also interested in concepts that would help engage them in the shopping process, but only if they are relevant to shoppers’ needs and context.
Taking a deeper look, Cisco tested 19 IoE-enabled shopping experiences, spanning all four stages of the shopping journey and addressing many maturing digital enablers, including video, mobility, augmented reality, and analytics. Consumers made clear they are very interested in using a broad range of applications to get more value. This chart illustrates the interest level of our respondents for the 19 individual concept tests, along with the financial opportunity from each of three value proposition categories: efficiency, savings, and engagement. The concepts that delivered savings drew the most positive response from consumers, with an average of 65 percent saying they would be somewhat or very likely to use them (versus 58 percent for efficiency and 48 percent for engagement). However, our economic analysis revealed that roughly two-thirds of the total potential opportunity comes from those applications that deliver greater efficiency for consumers. This amounts to $208 million for an illustrative retailer with $20 billion in annual revenue. Overall, the survey showed particular interest in new delivery models, augmented reality, mobile solutions, and digital signage, and these concepts should be considered for any future retail strategy.
As we have seen, the lion’s share of Value at Stake lies in the solutions that provide greater efficiency and convenience. And this is also the area where consumers would like to see the most improvement. When asked about the areas where they would like to see improvements, 39 percent of our respondents identified the process of selecting and purchasing goods (for example, having the products they want in stock and an efficient checkout process), showing a need for greater ease and efficiency. By contrast, only 13 percent sought improvements that would create a more personalized shopping experience.
What should retailers do develop the capabilities needed to deliver hyper-relevant experiences to their customers? To succeed in this new paradigm where customer insight is currency and context is king, retailers must earn consumers’ trust in order to get the data that can enable them to provide a truly relevant experience. Once consumers are willing to share a certain amount of personal data, retailers can use real-time analytics to turn that data into actionable insights and architect dynamic, situationally aware experiences. By architecting a dynamic infrastructure and transforming business processes, retailers can begin to transform their business models and their customer experiences. The resulting innovation at speed and scale will be the key that sets them apart from their competition, and ultimately enables them to win in a challenging new environment.
One key to delivering hyper-relevant experiences is obtaining the data that can be turned into contextually aware insights and action. In this video, our panel of experts discusses how connecting the store will bring retailers the rich array of data that can enable them to deliver hyper-relevant customer experiences. People are starting to expect the same kind of rich data-driven experiences in the store that they experience on the web. When you log on to a retail website, the system immediately recognizes you and can align recommendations to your past purchases. This isn’t happening today in the physical store. The opportunity is to connect the store, bringing in an overlay of web technology to provide the same sort of rich data experience shoppers have online. By developing a robust data-gathering and analytics capability, retailers will be able to know their customers and predict their needs, providing interactions that engage and satisfy.
To develop this robust analytics capability, however, retailers first must win consumers’ trust. Cisco’s research has identified a “trust cliff” beyond which consumers are reluctant to share certain types of information. Many consumers have little or no reservation sharing “basic” information about themselves, their past purchasing behavior, or their interests and hobbies. Beneath this is the trust cliff — the areas where consumers are not convinced they can trust a brand or retailer with their information. This includes factors such as the consumer’s location, purchases from other retailers, and so forth. According to our survey, however, a quarter of consumers are open to sharing this information. The question is how to convince the remaining majority of consumers to do the same. This is the battle for the middle of the trust cliff. One way to earn consumers’ trust is to be completely transparent about which information is being collected, how it is being used, and what the consumer benefit is. Seventy-four percent of survey respondents said they would be somewhat or much more accepting of retailers tracking in-store behavior if it were “anonymized” so it could not be linked directly to them.
Question: In order to get a more personalized shopping experience, which personal information would you be willing to share with retailers? TOTAL U.S., U.K. Basic information about me (e.g., name, age) 51% 53% 49% Past purchasing history or loyalty program information 49% 49% 49% Likes and dislikes, my interests and hobbies 41% 40% 42% Information from products I am using 28% 26% 30% Past purchasing history from other stores, as recorded in credit card or other loyalty cards 25% 23% 27% My location – information sent automatically from places I have been 23% 24% 22% Web activity including web browsing history, likes and preferences from social media sites 12% 10% 13% My reviews on social media such as Yelp! 11% 11% 11% Information about my family 9% 8% 10% Personal financial information – how much I earn or spend annually 8% 7% 9% None of the above 16% 16% 16%
Much of the IoE Value at Stake for retail will be generated by innovations that depend on real-time analysis of data that is captured at the “edge” of the business — from sensors, cart tags, IP cameras, access points, beacons, mobile devices, and even weight and motion sensors and ambient condition sensors for moisture and weather. Retailers, more than those in other industries, recognize that more and more of this data will be processed at the edge of the network, where it is captured, in order to make real-time decisions and offer relevant interactions to consumers. Economic analysis from Cisco Consulting Services shows that real-time “edge” analytics can make a significant contribution to the bottom line, both through revenue uplift and cost reduction. The right side of the slide shows the estimated EBIT profit increase as a result of various edge computing use cases. Based on an illustrative $20 billion retailer with a 7% EBIT margin: Smart store operational analytics $132 million (9.4% EBIT increase) Targeted offers $357 million revenue uplift driving $25 million in margin contribution (1.8% EBIT increase) Checkout optimization $38 million in revenue uplift (0.2% EBIT increase) $8 million reduction in OpEx (0.6% EBIT increase)
Given the complexity they confront, retailers now need to respond dynamically. Manual processes will not be able to keep up with complexity and change. Retailers will need new strategies to meet the rising customer demand for IoE-enabled solutions that this study has illuminated. We have identified three key IoE attributes that retailers must possess to deliver hyper-relevance and build a dynamic infrastructure and processes: Hyper-aware: By implementing and automating IoT technologies such as sensors, beacons, and RFID tags, retailers can capture value from the intelligence and automation that is now available to them. This is the way to gain true visibility into what the customer is experiencing in the store. Predictive: By overlaying intelligence and analytics on top of these technologies, retailers can gain real-time anticipatory insight into what is happening, and what to expect. If the parking lot is filling up but the store is nearly empty, staff can be redeployed before a bottleneck occurs. Agile: Agile infrastructures and organizational models are critical to the kinds of dynamic experiences that we discussed. When business processes can change dynamically, human, technology, and product resources can be managed in real time with tremendous efficiency. These capabilities will go a long way toward answering a critical question: How does the customer experience your store? When retailers implement real-time analytics and dynamic processes, they can offer the kinds of hyper-relevant experiences consumers now demand.
The rewards for becoming an IoE-optimized retailer can be great. Cisco Consulting’s economic analysis showed that for a $20 billion retailer with 7 percent EBIT margin, the total net annual EBIT opportunity is $219 million, or a 15.6 percent margin improvement. We calculate that implementing the full array of IoE-enabled retail solutions we tested can provide $142 million in annual revenue uplift, and $170 million in OpEx reduction, for a gross annual value opportunity of $312 million. After deducting $93 million in annual enablement costs, the potential net profit improvement is $219 million. Retail is an industry where IoE represents the highest unrealized potential. In 2013, our analysis showed that retailers realized only 45 percent of the IoE Value at Stake for the industry. Retail has a major opportunity with digitization. Innovation is happening fast, and there is a growing competitive differentiation gap between firms that have achieved a minimum level of digitization and those at risk of being left behind. As we have seen, there is a great interest in IoE-enabled solutions for retail that add convenience and value to the customer. Getting these experiences “right” is about delivering value to the consumer in a demonstrable way that aligns with their shopping-journey preferences. This is the key to capturing new levels of wallet share and unlocking Value at Stake in the IoE era.
Cisco offers a broad array of technology solutions to help power retailers’ IoE-enabled innovations.
Winning the New Digital Consumer with Hyper-Relevance
Winning the New Digital Consumer
In Retail, Insight Is Currency and Context Is King
Study Reveals that Retailers Can Meet Rapidly Evolving Customer
Expectations with ‘Hyper-Relevant,’ Streamlined Experiences
Exponential Change Is
Exponential change =
Capture the New Digital
experiences that provide
savings and efficiency,
reflect precise context of
each shopping journey.
New Business Models
Win the trust battle.
Let context drive innovation.
Deliver dynamic experiences,
The Internet of Everything is
creating sweeping changes
in the shopping journey,
disrupting business models
and expanding customer
Mobile commerce grew 47% in Q2
2014, far outpacing e-commerce
(10%) and total retail (3%)
64% of U.S. shoppers use
a mobile retail app while shopping
at least once a week
[Cisco Consulting Services, 2015]
88% of retailers foresee
significant growth of data
captured by their networks
[Cisco Consulting Services, 2014]
Technology and Evolving Consumer Behaviors Are Reshaping the
94% of U.S. omnichannel
retailers had a company
Facebook page as of Q1 2014
[the e-tailing group, 2014]
Exponential Change Creates a Maze of Shopping Journeys
Source: Cisco Consulting Services, January 2015
To Help Retailers Navigate This Rapidly Changing Landscape,
Cisco Conducted a Unique, Three-Pronged Study
1 Surveyed 1240 consumers in U.S. & U.K.*
Blind survey / 627 U.S. + 613 U.K.
Conducted in-depth interviews with retail
industry thought leaders
• Doug Stephens, Retail Prophet Consulting
• Leslie Hand, IDC Retail Insights
• Michael Olmstead, Plug and Play Retail
Drew upon lessons learned from Cisco
Consulting Services customer
engagements to develop economic
42% 28% 21% 9%
Gen Y Gen X Boomers Silvers
*Global findings from 6000 consumers in 10 countries to be released in March 2015
Research Shows that Digital Shopping Is No Longer Just
for Early Adopters
Q Which types of shopping apps
do you use weekly?
Source: Cisco Consulting Services, January 2015
“Über Digitals” have become mainstream
(Amazon, Tesco, Walmart, etc.)
Independent shopping apps
(Groupon, LivingSocial, Zulily, etc.)
“Über Digitals” as Percentage of Respondents
Mainstream Mobile Adoption Demands that Retailers Deliver
New Shopping Journeys and Experiences
Vice President, IDC Retail Insights
smartphone is one of the
most valuable tools that
the retailer has as an
Consumers want a
They are less interested in
which may not address
their needs in the moment.
Consumers Expect Hyper-Relevant Shopping Experiences, Not
What It Is
A new paradigm that
enables consumers to
receive what they want,
when and how they want it.
How It Happens
Hyper-relevance is made
possible by IoE-enabled
solutions and innovative
business models that deliver
or engagement—in real
How It Is Different
Personalization is when the
retailer knows your name.
Relevance is when the
retailer knows your needs in
“… if you're prepared to
share some information
with us as a consumer,
we're prepared to give you
an experience that feels
very connected, very
Context Is King: Above All, Interactions Must Be Relevant
Founder, Retail Prophet
There Is High Demand for Shopping Experiences that Deliver
Efficiency, Savings, and Engagement
interested in receiving
via augmented reality
57% interested in general
(not related to context or shopping)
Source: Cisco Consulting Services, January 2015
favor in-store guidance
through digital signage67%
favor in-store guidance
through augmented reality63%
would like to view
digital signs with special
deals or promotions available to
everyone in the store
78% 73% favor receiving
special offers via
augmented reality on a smartphoneSavings
19% of Value at Stake
While Consumers Still Want Savings, Efficiency Promises
Greatest Value for Retailers
• Reviews [augmented reality] 57%
• In-store advertising 54%
• Product recommender [augmented reality] 48%
• “Top Ten” rankings and displays 45%
• In-store entertainment 38%
IoE Retail Concepts Willingness To Use*
“somewhat” or “very likely” to use
• General in-store offers [digital signage] 78%
• Special offers [augmented reality] 73%
• Targeted offers [digital signage] 67%
• Targeted offers [smartphones] 54%
• Scan QR codes 52%
$312M Gross Benefits
[based on retailer with $20B annual revenue]
14% of Value at Stake
67% of Value at Stake
• Checkout optimization 77%
• In-store guidance [digital signage] 67%
• In-store guidance [augmented reality] 63%
• Scan-and-pay [smartphone] 60%
• Drive-thru pickup 57%
• Same-day delivery 53%
• Smart cart / automatic replenishment 50%
• Mobile payments 49%
• Secure locker 49%
Source: Cisco Consulting Services, January 2015
Process of selecting and
Quality of interactions
provided by their store
Physical environment in
Level of personalization of
the shopping experience
To Maximize Value at Stake, Retailers Should Focus on
The area with the
greatest Value at
Stake is also the
area most in need
Q In which areas could retailers
make the most improvement?
Source: Cisco Consulting Services, January 2015
The Path to
Win consumers’ trust:
Consumers may be willing to
share personal information—
for the right experience.
Turn customer data into
Deliver dynamic experiences
to deal with complexity,
increase agility, transform
Real-Time Analytics Enable Actionable Insights and Better Decisions
Director, Plug and Play Retail
“The only way you can
predict inventory is if you
predict demand. And the
only way to predict demand
is to predict the right
purchase behavior ....
It’s all going to come back
to predictive analytics.”
None of the above
Web history, social media activity
My reviews online
Personal financial information
Basic information (name, age, etc.)
Purchase history, loyalty program info
Likes/dislikes, interests, hobbies
To Benefit from Analytics, Retailers Must First Win Customer Trust
Information from connected products I am using
Purchase history from other retailers
Win the battle
for trust here
Source: Cisco Consulting Services, January 2015
Repondents willing to share information “to get a more personalized shopping experience”:
Retailers Understand the Importance of Real-Time, ‘Edge’ Analytics
to Maximize Value
Source: Cisco IoT Global Study, 2014
Retailers lead in recognizing the onset of edge computing
Respondents who believe that in the next three years,
“most data will be processed at the edge”
(mobile devices, appliances, routers)
Source: Cisco Consulting Services, 2015
34% 33% 33%
ManufacturingOil & Gas Utilities
Potential EBIT* profit contribution of
illustrative analytics-based concepts
*Earnings Before Interest and Taxes
By Combining Analytics with Dynamic Processes, Retailers Will
Create the Foundation for Hyper-Relevance
Mobile devices, sensors,
beacons, and RFID tags
help retailers gain true
visibility into what the
customer is experiencing in
Intelligence and analytics
anticipatory insight into
what is happening and
what to expect, enabling
When retailers can change
their business processes
dynamically, they can
manage human, technology,
and product resources in
real time with tremendous
Three Key Attributes of IoE-Optimized Retailers
By Implementing Key IoE-Enabled Solutions, Retailers Can
Generate Potential EBIT* Gains of ~15.6%**
For an illustrative omnichannel
$20 billion revenue
7% EBIT margin
113 million square feet
of retail selling space
Annual enabling costs
*Earnings Before Interest and Taxes
**Based on 19 IoE concepts featured in IoE Retail Survey, January 2015
Ingredients for Success in the IoE Era
1 Focus on innovations that deliver hyper-relevance for consumers
Forget everything you thought you knew about the digital consumer—traditional
customer segments are breaking down
3 Go to the edge for visibility into what customers are experiencing in the moment
Build a dynamic infrastructure and create agile processes that allow you to
deliver hyper-relevant experiences
5 Develop new business models that drive innovation and enable hyper-relevance