How Artificial Intelligence Is Transforming Retail
Atos SAP - Simplify Digital Transformation in Retail V01.00
1. Your business technologists. Powering progress
White paper
Simplify Digital
Transformation in Retail
Gain Deeper Insights fromBigData& Mobility
to Engage Shoppers Anywhere, Anytime
Retailers and consumer facing businesses have always had to deal with a big data problem as “retail is detail.” This
problem is only getting worse due to a number of major trends including mobility and the Internet of Things. While big
data is an enabling technology, retailers need to identify how it can be used to drive real business value. Accordingly to
recent research a quarter of the retail CIO’s say while they are actively collecting big data they are not yet leveraging it
to actually improve customer service. Making big data real must begin with a strategic business discussion. Big data
represents an opportunity to change how retailers source sell and service their customers by tracking new signals,
finding new patterns and listening to the voice of the customer within the digital noise. Although this may seem like
something that would only be possible in the distant future, there are already several real world examples of how
retailers are leveraging big data and mobility to engage shoppers in innovative ways anytime, anywhere.
This whitepaper identifies the major trends driving big data, provides some success stories of retailers that are innovating & leading the way, and
recommends what retailers should do to leverage the value of big data and mobility as first step to digital transformation.
2. 2
Retail is Detail
Even before the advent of the term “Big
data”, retailers have always struggled with
large amounts of data. By definition, retailing
involves stocking a broad assortment
of merchandise at multiple, high traffic
locations and selling small quantities of
articles to numerous individual customers
for personal or household consumption.
For a 1,000 store chain with 10,000 SKUs,
keeping seven years of weekly history
would result in over 3.5 trillion data points.
In the past, retailers did not usually collect
customer data but this would have added to
the number of data points they would have
had to maintain.
To deal with this problem, retailers have
historically summarized their point of sale data
by product/location/time and discarded the
detailed transaction log data after processing it
for sales audit, loss prevention and market basket
analysis. Another work around was the retail
method of accounting as attempting to keep
track of the moving average cost of thousands
of SKUs at multiple locations in the days before
electronic computing was a herculean task.
Today, to compound the problem, retailers
increasingly have to deal with an exponentially
growing volume of data driven by a number of
megatrends trends – most notably mobility and
the Internet of Things.
Mobile devices have armed consumers with
the power of unlimited purchase options at
every stage of their purchase journey. Most
importantly for retailers, customers begin their
shopping journey before they enter a store
and can be influenced right up to the point
of sale. Mobility has accelerated the evolution
from multi-channel to omni-channel retailing
to provide a unified customer experience.
Consumers are always on and, if they opt in,
can be tracked geo-spatially and engaged
wherever they are. Mobility has also amplified
the power of social networks to influence
purchase decisions – from friends boasting
about their latest purchase to flaming about
a particularly bad store or customer service
experience.
We are now however not only connecting
people but also things. The mobile phone
was the first device which was tracked giving
retailer’s insight into a consumer’s whereabouts.
Now we have wearables – watches, jewelry,
glasses, apparel and footwear – that are smart
but also machines such as cars, kitchens and
store robotic assistants. Imagine your watch
calling for help if it senses you are having a
medical emergency, or your car booking a
space at parking meter so you can arrive at
your meeting at precisely the right time.
Both mobility and the Internet of Things has
added to the vast amount of data that retailers
not only have to deal with but also, with the
right tools, leverage to their advantage.
3. 3
What Should
Retailers Do?
visibility and perform price lookups to better
support customer needs.
What if you could have real-time information
about your customers – their buying history,
social media use, and fashion trends – at
your fingertips the moment they walk in the
door? A leading fashion retailer and renowned
global luxury brand, transformed each client
experience through personalized fashion
advice generated through an in-memory
analytics platform. With a few clicks on an
iPad, sales people can call up customer
information, consolidate transactional, social,
and RFID data, and quickly generate spot on
recommendations, on the spot.
While big data is an enabling technology,
retailers need to identify how it can be used to
drive real business value. Making big data real
must begin with a strategic business discus-
sion. Big data represents an opportunity to
change how retailers source sell and service
their customers by tracking new signals, find-
ing new patterns and listening to the voice
of the customer within the digital noise.
Unfortunately, roadblocks keep many retailers
from realizing their big data goals. Many retailers
lack the expertise to connect big data projects
with the business imperative. Complex IT
infrastructure can inhibit retailers from tracking
new signals cost effectively and at the pace of
business. If that weren’t enough, retailers often
lack a way to apply those signals within their daily
business operations.
Retailers need to achieve tangible results for
their top business priorities by accelerating
how they acquire, analyze, and act on insights
and applying those insights continuously
through their people and processes. A real-time
data platform can simplify their technology
architecture and help them become a real-time
business. They can mine massive volumes of
data on low-cost storage to uncover deeper
insight into customers, channels, products, prices,
and promotions at speeds that are typically
thousands of times faster than traditional
databases.
By analyzing a billion transactions a day a leading
online marketplace provides timely intelligence
to sellers, improving predictability and
communicating areas of opportunity. To do this
the company needed a better way to sift through
its massive 100 petabytes of data to separate the
signals from the noise. With an early detection
system powered by predictive analytics on a
real-time platform, they were able to get real-time
insight into the health of their marketplace. In
this way, the company focused on what it does
best: connecting buyers with things they need
and love.
Mobile solutions simplify business and drive
innovation where it matters most by changing
how people learn, work and shop. Mobility
enables retailers to personalize their interactions
with customers and frees and empowers
mobile workers to interact more intimately
with shoppers. Marketers can support their
campaigns with more personalized promotions
to foster loyalty and drive sales. Store operations
can gain on-the-go visibility into sales, inventory
and staffing to support strategic decisions. Store
associates and managers can access inventory
More than 50 billion devices will be connected
to the Internet by 2020. Not just phones and
tablets, but almost anything with a sensor on
it – coffee makers, cars, cattle, plants, jet engines,
oil drills, wearable devices, and more. To gain
value from the Internet of Things and to start
their journey, retailers need to connect to the
new generation of Internet-enabled devices in
the cloud. They can then transform their existing
business processes by harnessing the machine
data generated by their connected devices
and reimagine customer experiences from the
ground up.
4. 4
Connected Kitchen
The Internet of Everything and Big data
are the new technology domains that are
having a disruptive impact. The key to sus-
tainable success for businesses that rely
on customers’ personal data, is to regain
the trust of the individuals by demonstrati-
ing control over the usage of their data.
Today, Atos offers retailers to get installed inside
a consumer’s home to offer them innovative
digital services. At any time, via a fridge magnet
Wi-Fi connected at home, Connected Kitchen
allows consumers to scan and add everyday
products to their shopping list in real-time, in
a simple, fast and fun way. Connected Kitchen
will be available for on-line players in the
retail industry including e-commerce, and is
particularly interesting for the ‘store pickups’
that are increasingly present for daily errands
and with which consumers expect to save time.
Real Life Examples
Digitization is a step change that will have
a bigger impact on business than even the
Internet. To win in the digital economy,
companies must act now, or be left behind
wondering what happened! Let us take a few
news making examples where retailers are
pioneering seamless customer experiences
in their own micro vertical.
adidas Virtual
Footwear Wall
A solution deployed in more than 12 countries,
adiVerse has helped improve store sales by 10-
12% by putting the ultimate aisle of shoes at the
fingertips of the consumer while they are in-store
and ready to buy. This solution is an extension of
the real product displays where products (shoes)
would be shown on a shelf, but virtually. adiVerse
Virtual Footwear Wall potentially puts as many as
8,000 shoes at shoppers’ fingertips in a futuristic
mash-up of e-commerce and the mall. It taps
into the rich interaction possibilities in the digital
world and combines it with the real product
interactions that are only possible in physical
world to create a unique shopping experience.
Built-in anonymous video analytics provides
metrics on shopper trends, demographics, and
shopping patterns, enabling adidas to provide
personalized experiences and relevant value-add
services to shoppers. Finally, shoppers can also
buy products via tablet based checkout.
Atos Advanced Market
Basket Aanalysis powered
by SAP HANA
A solution deployed in more than 12 countries,
For retailers & wholesalers, inventory is usually
the largest single asset on the balance sheet
and the cost of that inventory is the single
largest expense item on the income statement.
According to retail consultant Ted Hurlbut, inven-
tory carrying costs are estimated to often repre-
sent 25 - 30% of the value of inventory on hand.
And for an average Fortune 1000 company, a
modest 5% decrease in inventory cost translates
into a $20 million increase in profits.
With predictive analytics, once purchasing pat-
terns are identified, an increase in the sales of the
first product can trigger an automated deci-
sion to increase the inventory of both the first
product and its complementary product, helping
to maximize total sales volume and customer
satisfaction.
Atos AMBA powered by SAP HANA, uses
advanced algorithms to analyze huge amounts
of POS TLOG and other sales data in order to
identify and quantify customer buying patterns,
preferences and behaviors. These patterns helps
retailers to sell larger basket sizes by identify-
ing products that drive drag-along sales by
identifyinggeographic trends, local demand and
performance. These patterns will also help plan &
optimize assortments to help drive higher sales &
profits across channels.
With the help of massive parallel processing and
in-memory computing of SAP HANA, the data
can be analyzed at the store level; specific offers
can be formulated and rolled out at a local level.
5. 5
Smart Vending
Machine (SVM)
Identified as one of the “five forward-thinking
pieces of tech that could shape our tomor-
row”, by CNN. The new digital world will see
highly efficient back-office processes elements
triggered by real-time integration with flexible,
personalized customer interaction solutions.
Consider a maintenance trip to a vending
machine – when you reachthe machine:
• to re-stock and find that the ma-
chine is not working or you don’t
have the right product to refill
• to repair and have to make return trip
just because you don’t know what part is
to be replaced and don’t have it handy
Let us do the math, $20 per trip (cost of labor,
fuel cost, vehicle maintenance, etc.), 10 lost
trips per month per machine, 10,000 ma-
chines, converts to $2,000,000 / month i.e.
$24 million per year, which is a substantial
saving. And this even doesn’t consider the
other benefits such as reduced lost sales
because of stock-outs, improved margins due
to demand driven dynamic pricing, etc.
A. Customer experience:
Based on the real-time data platform, Smart
Vending solution provides brands the op-
portunity to engage with their customers
in highly personalized ways in the digitized
world. Consumers can identify themselves
with their smartphones, build profiles, connect
to their friends, play social games, and receive
promotions and offers tailored specifically to
them—transforming the vending machine
into an unparalleled retail experience.
B. Operational excellence:
Smart Vending’s predictive analytics capabilities
power deep, actionable insights that increase
sales by optimizing the product mix for each
machine based on a host of dynamic factors
such as hyper-local preferences, temperature,
and even new product promotions. Further-
more, predictive maintenance and mobile
workforce automation makes replenishment
and service runs more efficient by forecasting
machine downtime and automatically gen-
erating service and replenishment tickets.
6. 6
Interactive Digital Signage
Businesses changes, customer demands change ,then why should solutions remain the same? An interactive digital signage serves the purpose, invest
once and reap benefits in multiple scenarios. Let us look at few scenarios.
Promotion Wall:
Retailers can leverage interactive digital signage to not only drive traffic to the store but also to build intimate customer experience. Digital signage as
multiple uses uses when either placed at different locations or during different times of the day at the same location. They can act as navigational maps to
guide customers to a retailer’s store in a mall or a product in a store. They can also be used to vend promotional coupons via QR codes or use them as trial
room mirrors using augmented reality, without actually stocking the product in store.
Dynamic and Personalize Content:
7. 7
About the Authors
Gerry Yeo
Gerry is a principal in the Industry Value
Engineering practice at SAP. He helps retailers
discover, measure and realize value from their
technology investments through the application
of best practices, benchmarking and thought
leadership to develop strategic roadmaps
and business cases. Gerry has over 25 years’
experience working with retail and consumer
products companies to enable their business
strategies by leveraging people, process
and technology for business innovation and
operational efficiency.
Jayant Chhallani
Jayant is Global SAP Practice Head for Retail
and hybris at Atos. Passionate about Retail and
Digital Business, he has led engagements which
have helped retailers around the globe achieve
their business goals leveraging future ready IT
roadmaps. He has helped large IT organization
build vertical aligned practices, by building
solutions, tools & accelerators to differentiate and
reduce the cost-to-serve to retail customers.
For more information:
Please contact:
Jayant Chhallani
jayant.chhallani@atos.net
