LPRC - CrimeScience – The Weekly Review: The Future of Retail – Episode 37 with Dr. Read Hayes, Tony D’Onofrio, Tom Meehan and Featured Guest Leslie Hand (IDC Retail Insights)

Episode Date: December 17, 2020

By 2023, 80% of retailers will offer contactless payments and app-based scan-and-go pay systems in store, increasing conversion rates by 40% and customer retention rates by 30%. 75% of grocery ecommerce orders will be picked up at curbside or in-store. On this week’s episode, our special guest Leslie Hand, Group Vice President for IDC Retail Insights, joins our co-hosts to discuss these predictions and much more, including computer vision, biometrics, enhanced video surveillance, COVID-19’s impact, Wall Street Journal’s retail trends, and the recent U.S. government hack. As Group Vice President for IDC Retail Insights, Leslie Hand manages the retail research team for IDC Retail Insights and conducts research digital and contactless omnichannel retail technologies, given the threats and opportunities now facing the entire retail ecosystem from evolving consumer behaviors. Hand works with retailers and technology providers on developing best practices and strategies leveraging IDC quantitative and qualitative data sets. Before joining IDC, Ms. Hand spent 28 years in the retail industry. As an analyst, Leslie has been widely acknowledged at the person that coined the term “omni-channel”. The post CrimeScience – The Weekly Review: The Future of Retail – Episode 37 with Dr. Read Hayes, Tony D’Onofrio, Tom Meehan and Featured Guest Leslie Hand (IDC Retail Insights) appeared first on Loss Prevention Research Council.

Hi everyone, welcome to Crime Science. In this podcast, we aim to explore the science of crime and the practical application of this science for loss prevention and asset protection practitioners, as well as other professionals. We would like to thank Bosch for making this episode possible. We use Bosch Camera's onboard intelligent video analytics to quickly locate important recorded incidents or events. Bosch's forensic search saves you time and money by searching through hours or days of video within minutes to find and collect video evidence. Learn more about intelligent video analytics from Bosch in zones one through four of LPRC's zones of influence by visiting Bosch online at BoschSecurity.com. Thank you, everybody, for joining us for another episode of Crime Science Podcast. This is the latest in our weekly series of updates. And I'm sure, of course, everyone out there knows that, you know, breaking news that the first of the coronavirus vaccines were approved by the FDA under emergency use authorization, similar to what we saw in the UK. And I know here in Gainesville at the University of Florida, at the Jacksonville UF Health, we received 20,000 doses of which 4,000 came over today, this morning early to Gainesville

to the main UF Health. And as we speak today on this Tuesday, tomorrow, UF Health professionals, those most exposed to the virus through the treatment protocols that they administer, will be vaccinated. I saw that the president of UF Health Jacksonville emergency physician, Doc, he was the first to get the vaccine yesterday. So UF Health Jacksonville is already administering. And through communications at UF, I've been seeing that we'll get weekly to biweekly vaccine deliveries until all the health care providers there and most exposed physicians have gotten both doses 28 days apart. anticipation the FDA is already very favorable on the Moderna vaccine being approved, potentially even this week as we speak, maybe as early as Friday, and that the Vaccine Independent Committee, the same one actually that voted, I understand, 17 to 4 with one abstention, additionally to vote for the emergency use on the Pfizer BioNTech, we are going to be reviewing or already have the data, of course, reviewing and voting on whether or not to approve the emergency authorization or at least a

recommendation for that on the Moderna. So, you know, very exciting. Both mRNA virus or, excuse me, vaccinations. So this new technology, my understanding is that there are two or three others that are very, very close, potentially even J&Js. And as we talked about before, there are another 10 other in phase three trials vaccines, but over 130 vaccines in different preclinical and phase one, two trials as well. And then again, literally 300 plus therapies. So, you know, the good news on that front. So with no further ado, I'm going to go ahead and turn it over to a friend and colleague, Tony D'Onofrio. And so on behalf of the team here at LPRC, I want to thank you for dialing in. Tony, if you want to take it away. Thank you very much, Reid. And really, today is a special day. We have

a special guest. It's my pleasure to introduce Leslie Hand, Group Vice President for IDC Retail Insights. As IDC Group VP, Leslie manages the retail research team for IDC Retail Insights and conducts research on digital and context-based omni-channel retail technologies. This research is especially relevant today given the threats and opportunities now facing the entire retail ecosystem from evolving consumer behaviors. retail ecosystem from evolving consumer behaviors. Leslie works with retailers and technology providers on developing best practices and strategies leveraging IDC quantitative and qualitative data sets. Before joining IDC, she spent 28 years in the retail industry. As an analyst, Leslie has been widely acknowledged as a person that has coined the term omni-channel. So it's my great pleasure to introduce Leslie Hand. Welcome. Thank you so much, Tony, and thanks for the invitation today.

It's a pleasure to be here and to offer some thoughts on some of the things that are going on right now in retail and our predictions, so to speak. So, happy to be here. Welcome. So, I was really intrigued by the Futurescape Top 10 IDC Worldwide Predictions for Retail 2021 that you shared last week in your great webinar. So can you tell us how these predictions came together and the sources for them every year? Sure. So, you know, it's actually quite a big deal at IDC. It's an IDC tradition, if you will, that every year we come up with our top 10 predictions. We publish that in a report called a Futurescape. And then we host that webinar you mentioned. But before we get there, we really pull together, you know, thoughts across the various parts of the organization,

the guys that cover horizontal technologies, and then folks like me who cover retail and, you know, industry segments. And I have six peers across the, around the world that also lead different programs that cover different things, supporting retail technology insights. And so we get together and we brainstorm and we really pull from, you know, our experience, our retail interactions, retail and consumer surveys, various other types of research to come up with what do we think the top 10 hottest topics are right now? You know, what's going to be meaningful to our audience, which are retailers and also the retail technologists that support them. And so that's what we did.

And that's what we do every year. You guys do a great job at it. And I actually look forward to them every year. I actually read them every year. So thank you for those. But let's speak specifically to a few of those top 10. Thank you for those. But let's speak specifically to a few of those top 10. Let's start with number three, which is by 2023, 80% of retailers will offer contactless payments and app-based scan-and-go pay systems in stores, increasing conversion rates by 40% and customer retention rates by 30%. Can you elaborate on this one?

customer retention rates by 30%. Can you elaborate on this one? Sure. You know, and the impetus to this one really started with some of the data we'd been collecting from consumers. And, you know, 38% of consumers in October told us that they still felt more safe or safer when they had contactless options to engage with retailers. And for some retailers, you know, 20 to 40% of consumers may be, you know, leveraging that contactless payments option. And, you know, there's been generally an acceleration of self-serve and self-checkout deployments as we go through this. And I kind of think about it as, you know, because the consumer wants the convenience and the safety of contactless, they've given us permission to do something maybe we wanted to do for a while.

And so we see a lot more of those rollouts happening. And, you know, the other thing that we surfaced in our consumer research was that there's a significant acceleration in mobile shopping and ordering and, you know, like I said, payments. And that's utilizing both advanced payments and contactless options. And the phone, therefore, is becoming even more integrated into the shopping journey. And if you've been to a restaurant in the last several months, you might have encountered a QR-driven menu, right, where you just scan that QR code and you got the menu and you could order then with the waitress. And all of these factors have kind of set us up to see accelerated app-based scan and pay acceptance. And what I mean by app-based scan and pay, if you think about what Amazon Go does, some of the mobile capabilities that a Walmart or an Ahold, Carrefour, Tesco, some of those capabilities that they already have for checkout and mobile pay. You know, that's kind of what I'm talking about. And, you know, bottom line is the industry needs to radically rethink these digital and contactless services and processes in order to, you know, create a more the consumer thinks this is really convenient now that you've convinced them to try it. So that is a key consideration.

Yeah, actually, I've been a heavy user of exactly all these contactless experience and totally have actually leveraged that QR codes in restaurants. So that is the new way we seem to be shopping these days. Let's now speak about number six, which is by 2023, following early experiments, retailers will accelerate intelligence capabilities by acquiring AI technology vendors for their own competitive advantage and intelligence, driving 5% to 10% growth. Tell me more about this one. Yeah, so, you know, I want to say first and foremost, I am so proud of how retailers have, you know, stepped up to meet every challenge that's been thrown at them in the last nine months. But one thing we learned through the crisis

was that humans can adapt to any new context. However, it might cost us a lot of money, right? Our operations costs kind of went through the roof. And for that reason, we need to look for other ways to scale and respond more efficiently to new needs. And, you know, maybe that's a little bit of a leap. But essentially, you know, we're thinking about how AI can automate more process and more capabilities, how it can drive smarter systems, how it can, you know, it basically becomes both foundational, but also, you know, specifically deliverers can be embedded in specific capabilities to, to kind of take, take technology to a whole new level. And, you know, just like this other technology leap consumers have taken, given the right motivation as retailers, we're now faced with, well, how are we going to speed adoption of AI?

And, you know, we need IT to be more responsive and we need that responsiveness to be more automated. So, you know, what we believe is that retailers are going to balance, you know, kind of just running everyday business, but then placing targeted bets on the future. And I think of it as very similar to what happened in the early 2000s when, you know, obviously Amazon was on the scene. You know, Google hit the scene and there was a little bit of a craze around e-commerce adoption. But most of the systems that were adopted in retail weren't really fully transactional systems. The full catalogs weren't loaded. It was like a soft commitment. And then there were a large number of retailers that really didn't commit at all.

And so, you know, what we saw in the last five or so years were companies like Walmart acquired Jet.com, you know, probably as much an acquisition of talent as it was of technology. PetSmart acquired Chewy, right? McDonald's acquired Dynamic Yield. And more recently, we saw Nike acquire Select, which is an AI-driven assortment and fulfillment optimization capability. And Lowe's acquired Boomerang, which was an AI-driven price optimization capability. So with each of these investments, they both kind of acquire the latest and greatest in skill, in talent, in capability. greatest in skill, in talent, in capability, and that helps them drive to a whole new level from a performance perspective. And, you know, we see that the performance is typically a 5% to 10% improvement in growth. No, Leslie, fully agree with you. I mean, the latest example to me is

what Lululemon did with the magic mirror. That's a perfect example of extending from apparel into actually the experience. So it's an interesting approach that all these retailers are taking. So let me jump to number eight. And number eight is by 2023, 75% of grocery e-commerce orders, which will represent 15% of sales, will be picked up at curbside or in-store, driving a 35% increase in investment in on-site or nearby micro-fulfillment centers. Can you tell us more about this one? Yeah, this has everything to do with the explosion in digital commerce and kind of the new habits that have been formed through the pandemic. I mean, you know, consumers told us in our surveys that they preferred curbside or delivery. You know, we've seen sales up year over year in grocery and general merchandise. However, traffic count is down. Why? Because they're

getting picked up curbside. But what this does is, once again, we've got our consumers learning a new way to shop more conveniently, right? And, you know, if we have to, the retailer's preference is obviously curbside over local same-day delivery because that costs them more money. And, you know, you want to give the customer an opportunity to come in the store. to do is really force retailers into a position where they need to redesign the store and reset their priorities for investment around the store. Ultimately, they'll need more customer pickup locations. They'll need to improve the way, you know, inventory is managed real time, and they'll need to improve how and where fulfillment happens. In some cases, you know, we're going to see the growth of micro-fulfillment centers, which are alongside the store. In some cases, we'll see, like, what Walmart has announced in converting a distribution center to a pickup location for

consumers. And we'll see, you know, lots of varieties of these things happening. And a single retailer may deploy several different configurations because of market dynamics. And of course, the cost of real estate comes into play, what they're allowed to do, you know, all of that. So, ultimately, you know, it's just going to be really interesting to see what happens next. But in a way, I think of grocery and general merchandise evolving into flow-through centers, right? So, turns increase and the velocity of goods that can move through the store increase, which means a number of transactions go up, potentially cart sizes go up, and all those metrics that grocers and general merchants love are improved. No, Leslie, very good points. I actually had an experience at Best Buy of actually buying online

and pick up at store, and I was lucky enough to get one of the designated parking spots. But it was amazing to watch, especially when it gets busy, a whole bunch of cars with trunks open with consumers with their hands folded waiting for that pickup to come out. So that's something retailers will have to work on in terms of how they optimize the curbside. Let me switch to another prediction, which I know this audience will be interested in, which is number nine. By 2023, the COVID-19 related intersection of safety and security will drive shared retailer funding and a 30 percent lift to spending across computer vision, biometrics,

and enhanced video surveillance. Tell me more about this one. Sure. You know, I kind of consider it the perfect storm for physical and digital safety and security initiatives. You know, I've, I spent a long time in retail and I know it can be hard sometimes to get those physical security initiatives funded. And so in any case, what we see happening here is, you know, the top things that retail or, you know, every time a retailer goes to make any kind of investment, we always have to check on the security of the system, right? And it's a part of all our investments around cloud and AI. But now add new pandemic-related retail realities, like concerns about safety, masking, social distancing, sanitizing things, right? And we end up with all these new protocols and regulations, but we don't necessarily have a way to ensure compliance or proactively identify the problems that may be occurring, right? So even though safety and security aren't always the same or, you know, aren't the same, they have common elements.

And that is the need to monitor and control traffic in and out of the store to monitor movement around the store and the interactions of customers with each other with associates with products and with store devices and fixtures so essentially what we're saying is you know even when a retailer has already invested in people tracking and loss prevention, surveillance and analytics and security software applications and solutions, biometrics, computer vision, you know, there's a need to bring this together. a big leap, but you could even augment with temperature sensing technologies and social density and distancing solutions and contact tracing technologies, all sorts of things like that. Computer vision is already helping solve fraud problems at checkout or self-checkout where it's applied, but it can also support other use cases in and around the store, like slip and fall risk cases, issues, parking lot safety, theft, inventory management. I know you guys have covered this on other podcasts,

but we think, you know, the addition of things like thermal cameras and recognition can help, you know, identify whether somebody's sick, right? And they can measure body temperature, or you can possibly alert employees who are ill and send them home. But you can also extend video surveillance and analytics and computer vision to more broadly monitor everything that's going on in the store, right? From a merchandising, from a sales, safety, et cetera. So that's kind of where we were going. There are many opportunities to find operational efficiencies

and trying to maximize how we utilize these systems that we deploy. Leslie, fully agree with you. I've actually been seeing this for a while that traditional security technologies are becoming important sensors to do a lot more. So a camera, even a tagging system now becomes smarter with RFID. It's really becoming a new world. So this unification that you're talking about, it's actually desperately needed because I do think this technology can help run a store much more efficiently. Let me close by asking you in terms of COVID-19 and the surreal year that it's caused. How have these predictions been impacted by COVID-19, do you think? What's dramatically different this year versus last? And any thoughts on 2021? So looking back, looking forward, what are some of your thoughts?

Yeah, you know, COVID-19 actually, you know, impacted technology investment quite a lot. It obviously impacted business and it has reset kind of our planning cycles and our investment cycles for and priorizations significantly um through the pandemic uh since march mid-march we've been surveying retailers every two weeks weeks to kind of get their sentiment about what's changed for them and how it's impacting where they're going to spend money and what they're going to do and um i can tell you that um you know what they tell us is this is a big pivot, right? It's probably the biggest pivot we're going to see in our lives. And the most important things are utilizing data analytics better, becoming more resilient, and transforming how we work, right?

resilient and transforming how we work, right? So the focus on data and analytics will drive better outcomes from business operations, from your products and from those partners that you work with. And resilience, which, you know, could mean a lot of things, is really all about adaptability, scalability and getting the value from all those technologies that you invest in. So it's really about focusing on outcomes, but not just for today, for the future. So how do I build systems that are going to sustain me today profitably, but also be able to adapt if the environment completely changes next you know, next year. Maybe we'll have a different crisis.

You just don't know, and that's the point. So, yeah, so the third one was workplace transformation, and that's, you know, figuring out how to improve workflow, but also automate more work so that the things that don't require human intelligence can be done by machines. So that's kind of what we see going on right now. Well, thank you, Leslie. Very enlightening. I urge this audience to look up IDC and actually look up the other six that we didn't cover in this podcast, but really insightful review in terms of what's possible in 2021 with your prediction. So thank you very much, Leslie, for joining us. Thanks. Appreciate it.

Thank you. So let me close my section by actually the Wall Street Journal just today published the 2020 retail in review. And I just want to share some of their thoughts in terms of as we end the year in terms of what the Wall Street Journal is telling us. So through the first 10 months, retail sales, excluding gas, auto and food service are up 6.4 percent. auto and food service are up 6.4%. Oddly enough, the Wall Street Journal said this could turn out to be one of the best years in overall retail sector in 20 years. But more than 27 retails filed for bankruptcy in the first nine months. Before coronavirus, 15% of sales were online, a spike to 20% in April, but it has settled down to 16% in the last three months. Key trends that the Wall Street Journal said for 2020 that these things are telling us

is that, number one, if Americans have money, they will spend it, and they expect Christmas and the fourth quarter to be robust. The season did come early, as we talked about earlier in this podcast. 52% of consumers actually were shopping prior to Thanksgiving. Number two, the playing field in retail is rapidly changing. Convenience matters more than ever. Enclosed malls will diminish, and this would shock me, and their numbers will shrink from 1,800, the Wall Street Journal is saying, down to 200 or 400 sustainable malls. Number three, the brands we love are changing, and the standard by which we judge them are evolving. Consumers are starting to consider where and how goods are made.

Still don't believe for a minute that people will buy sustainable and politically correct products in lieu of ones that are priced affordably. Number four, and actually a lot of what we just talked about, technology continues to change nearly everything about the retail experience. Personalization and the ability to stimulate our interest via data and artificial intelligence will be startling. Retailers will know us better than our spouses and our families.

That will be interesting. How products are sourced, produced, and distributed will be tracked. The merchant princess of the past is one of my favorite sentences. The merchant princess of the past must become the consumer insights leader and data analyst of tomorrow. Live streaming, which we've also talked about a lot in this podcast in different times, is coming to the U.S. I was actually in the L.A. Times about this this past week. And then finally, in the end, retailers that will win are those that watch their pennies, focus on the customer, and build and sell great products that meet needs and fulfill aspirations.

So with that, I'm going to turn it over to Tom. Well, thank you, Tony. And thank you, Leslie. Leslie, I actually follow everything from IDC and just recently wrote an article and cited a lot of things there. So I appreciate you coming on. I'm just going to talk about one thing today. And earlier this week, there was a report of a major hack on the U.S. government. Right now, it's focused on Treasury and Commerce. I think we'll learn more in the upcoming days, but I'll cover what we know today. entire hack and the reading you may have seen this it was in pretty much every major news publication uh nationally and even globally and what it read what what the headline read in some was the largest uh state-sponsored attack on the U.S government in five years and I think it's important to state that uh while this is uh still a lot of unknowns of how big this really is. This does happen. Right now, it's being driven by a Russian-sponsored state attack that isn't necessarily confirmed, although all the

data really supports that. And it was heavily focused, again, on the Commerce and the Treasuries Department. The information is just becoming publicly available. So I think in the next week or so, we'll learn a lot more. But I want to just go through kind of what we know today and what it means and some of the things around it that really make it similar or different than the other attacks that we recently talked about. First and foremost, the reason it caught so much attention is because the cybersecurity infrastructure security agency uh issued a mandate on sunday evening to stop using a product called solar winds and it's a or the the orin product immediately to the us government um uh why why this is a bit of ironic and challenges solar

winds is one of the largest providers of anti-malware protection software. So what they do for a living, what they provide is supposed to help potentially identify this. And they had a massive breach. And one can draw a conclusion, while I don't have any data to support this, other folks that use this could be potentially exposed. And I know there are some of our listeners today that do. What we know is the hack began early in March, a malicious code that snuck in through the SolarWinds monitoring program. And SolarWinds was designed to monitor networks for both businesses and governments. This isn't really a consumer software. The malware affected product mainly associated with SolarWinds, and it gave a very, very high-level hackers group access to government organizations' computers.

It wasn't discovered until another company found it through a different hack. So right now what we know is we think this is from March. And while I don't like to report or talk about things without a lot of information here, we don't know actually the magnitude of the breach, what data was obtained, or how far it will reach. We talk often about cybersecurity and using good best practices to protect yourself, both from a business and consumer standpoint. This is somewhat alarming with all of the things that occur, and I don't think it's April, we talked about all of the vulnerabilities that we'd have just from pure distractions and trying to manage the pandemic and the things going on. So while I don't have any data to support that the two are related, I'm not a big believer in coincidences that these attacks start around the time that we went through national shutdowns and some real big changes.

So, you know, kind of the roundabout here is more to come on this. But as you read about it, what this truly kind of goes through is that the best industry practices and software in place, still there are still vulnerabilities in our cyber world. And we talked a little bit today or a lot today about how retailers are becoming more digitally inclined. They have to be, right? The acceleration of digital transformation. But as I often say on this, as we introduce more digital applications and increase our digital footprint, we also increase our tax vector and surface for cybersecurity and hackers. So while I don't have any great advice on what you could do to do around this, it's just being mindful of some of the risks that will continue to come. And when you take a state-sponsored attack like this, the reality is that

much like we probably are all who listening draw the conclusion is when you have state-sponsored attacks, the very best safeguards and policies and procedures and technology that can be put in place are still vulnerable when you have such a high level of expertise attacking. So not to round it out with bad news, but I thought it was important. And for that, I'm not sure if Reid is here to end it today. I know Reid had to jump off. So I will sign off by saying thank you for listening, and we'll talk to you next week. Thanks for listening to the Crime Science Podcast presented by the Loss Prevention Research Council and sponsored by Bosch Security. If you enjoyed today's episode, you can find more Crime science episodes and valuable information at lpresearch.org. The content provided in the Crime Science Podcast is for informational purposes only and is not a substitute for legal, financial, or other advice.

Views expressed by guests of the Crime Science Podcast are those of the authors and do not reflect the opinions or positions of the Loss Prevention Research Council.