Retail Technology and Innovation – a Conversation with Michael Guzzetta

Retail Technology and Innovation – A Conversation with Michael Guzzetta

We recently spent some time with Michael Guzzetta, a seasoned retail technology and innovation executive and consultant who has worked with brands such as The Walt Disney Company, Microsoft, See’s Candies, and H-E-B.

Tell me about your background. What brought you to retail?

Like many people, I launched my retail career in high school when I worked in the men’s department at Robinson’s May. I also worked for The Warehouse (music retailer) and was a CSR at Blockbuster video – strangely, I still miss the satisfaction of organizing tapes on shelves.

I ignited my tech career in 2001 when I started working in payment processing and cloud-based tech, and then I returned to retail in 2009 when I joined Disney Store North America, one of the world’s strongest retail brands.

During my tenure at Disney, I had the privilege of working at the intersection of creative, marketing, and mobile/digital innovation. And this is where the innovation bug bit me and kicked off my decades-long work on omnichannel innovation projects. I seek opportunities to test and deploy in-store technology to simplify experiences for customers and employees, increase sales, and drive demand. Since jump-starting this journey at Disney Store, I’ve also helped See’s Candies, Microsoft, and H-E-B to advance their digital transformation through retail innovation.

What are some of the retail technologies that got you started?

I’ve seen it all! I’ve re-platformed eCommerce sites, deployed beacons and push notifications, deployed in-store traffic counting, worked on warehouse efficiency, automated and integrated buyer journeys and omnichannel programs, and more. I recently built a 20k SF innovation lab space to run proofs-of-concept to validate tech, test, and deployment in live environments. Smart checkout, supply chain, inventory management, eCommerce… you name it.

What are the biggest innovation challenges in retail today?

Some questions that keep certain retailers up at night are, “How can we simplify the shopping experience for customers and make it easier for them to check out?”, “How can we optimize our supply chain and inventory operations?”, “How can we improve accuracy for customers shopping online and reduce substitutions and shorts in fulfillment?” and “How can we make it easier and more efficient for personal shoppers to shop curbside and home delivery orders?” Not to mention, “What is the future of retail, and which technologies can help us stay competitive?”

I see potential in several trends to address those challenges, but my top three are:

Artificial Intelligence/Machine Learning – AI will continue to revolutionize retail. It’s permeated most of the technology we use today, whether it’s SAAS or hardware, like smart self-checkout. You can use AI, computer vision, and machine learning to identify products and immediately put them in your basket. AI is embedded in our everyday lives – it powers the smart assistants we use daily, monitors our social media activity, helps us book our travel, and runs self-driving cars, among dozens of other applications. And as a subset of AI, Machine Learning allows models to continue learning and improving, further advancing AI capabilities. I could go on but suffice it to say that the retailer that nails AI first wins.

Computer vision. Computer vision has a sizable opportunity to solve inventory issues, especially for grocery brands. Today, there’s a gap between online inventory and what’s on the shelf since the inventory system can’t keep pace with what’s stocked and on the shelves for personal shoppers, which is frustrating for customers who don’t expect substitutions or out-of-stock deliveries. With the advent of computer vision cameras, you can combine those differences and see what is on the shelf in real-time to inform what is available online accurately. Computer vision-supported inventory management will be vital to creating a truly omnichannel experience. Computer vision also enables smart shopping carts, self-checkout kiosks, loss prevention, and theft prevention. Not to mention Amazon’s use of CV cameras with their Just Walk Out tech in Amazon Go, Amazon Fresh, and specific Whole Foods locations. It has endless applications for retail and gives you the eyes online that you can’t get in stores today.

Robotics. In the last five years, robotics has taken a seismic leap, and a shift has happened, which you can see in massive, automated fulfillment centers like those operated by Amazon, Kroger, and Walmart. A brand can deliver groceries in a region without having a physical store, thanks to robotic fulfillment centers and distribution centers. It’s a game-changer. Robotics has many functions beyond fulfillment in retail, but this application truly stands out.

What is a missed opportunity that more retail brands should take advantage of?

Data. Data is huge, and its importance can’t be understated. It’s a big, missed opportunity for retailers today. Improving data management, governance, and sanitation is a massive opportunity for retailers that want to innovate.

Key opportunity areas around data in retail include customer experience (know your customer), understanding trends related to customer buying habits, and innovation. You can’t innovate at any speed with dirty data.

There’s a massive digital transformation revolution underway among retailers, and they are trying to innovate with data, but they have so much data that it can be overwhelming. They are trying to create data lakes, a single source of truth, and sometimes they can’t work because of disparate data networks. I believe that some of the more prominent retailers will have their data act together in a few years.

“Dirty data” results from companies being around for a long time, so they’ve accrued multiple data sets and cloud providers, and their data hasn’t been merged and cleaned. If you don’t have the right data, you are making decisions based on bad or old data, which could hurt you strategically or literally.

What do you wish more people understood about retail technology and innovation?

Technology will not replace people. In my experience, technology is meant to enhance the human experience, which includes employees. If technology simplifies the process so much that the employees become idle, they are typically trained to manage the technology or cross-trained to grow their careers. Technology isn’t replacing the human experience any time soon, although it is undoubtedly changing the existing work experience – ideally for the better, both for the employees and the bottom line.

Technology doesn’t always lower costs for retailers. Hardware innovation requires significant capital expenses when it’s deployed chain-wide. Amazon’s “Just Walk Out” is impressive technology, but the infrastructure, cloud computing costs, and computer vision cameras are insanely expensive. In 5 years, that may be different, but today it is a loss leader. It’s worth it for Amazon because they can get positive press, demonstrate innovation, and show industry leadership. But Amazon has not lowered its operating costs with “Just Walk Out.” This is just one example, but there are many out there.

Online shopping will not eliminate brick-and-mortar shopping. If the pandemic has taught us anything, online shopping is here to stay – and convenience is extremely attractive to consumers. But I think people will never stop going to stores because people love shopping. The experience you get by tangibly picking something up and engaging with employees in a store location will always be around, even with the advent of the Metaverse.

What are some brands that excite you right now because of how they use technology?

Amazon. What they have been doing with Just Walk Out technology, dash carts, smart shelves, and other IoT technology puts Amazon at the front of the innovation pack. Let’s not forget that they’ve led the way in same or next-day delivery by innovating with their automated fulfillment centers! They have the desire, the resources, and the talent to be the frontrunner for years to come.

Alibaba. This Chinese company is another retailer that uses technology in incredible ways. Their HEMA retail grocery stores are packed with innovation and technology. They have IoT sensors across the stores, electronic shelf labels, facial recognition cameras so you can check out with your face, and robotic kitchens where your order is made and delivered on conveyor belts. They also have conveyors throughout the store, so a personal shopper can shop by zone, then hook bags to be carried to the wareroom for sortation and delivery prep – it’s impressive.

Walmart and Kroger. Both brands’ use of automated fulfillment centers (AFCs) and drone technology (among many others) are pushing the boundaries of grocery retail today. Their AFCs cast a much wider net and have expanded their existing markets, so, for example, we may see Kroger trucks in neighborhoods that don’t have a store in sight.

Home Depot. They have a smart app with 3D augmented reality and robust in-store mapping/wayfinding. Their use of machine learning is also impressive. For example, it helps them better understand what type of projects a customer might be working on based on their browsing and shopping habits.

Sephora. They use beacon technology to bring people with the Sephora app into the store and engage them. They have smart mirrors that help customers pick the right makeup for their skin tone and provide tutorials. Customers can shop directly through smart mirrors or work with an in-store makeup artist.

What advice do you have for retailers that want to invest in technology innovation?

My first piece of advice is to include change management in the project planning from the start.

There are inherent challenges in retail innovation, often due to change management issues. When a company has been around for decades or even more than a century, they operate with well-known, trusted, and often outdated infrastructure. While that infrastructure can’t uphold the company for the next several decades or centuries, there can be a fear of significant change and a deeply rooted preference for existing systems. There can be a fear of job loss because of the misconception that technology will replace people in retail.

Bring those change-resistant people into the innovation process early and often and invite them to be part of the idea generation. Any technology solution needs to be designed with the user’s needs in mind, and this audience is a core user group. Think “lean startup” approach.

My second piece of advice is to devote enough resources to innovation and give the innovation team the power to make decisions. The innovation team should still operate with lean resources, focusing on minimum viable products and proofs of concept, so failures aren’t cost-prohibitive. The innovation team performs best when it has the autonomy to test, learn, and fail as they explore innovative solutions. Then, it reports its findings and recommendations to higher-ups to calibrate and pivot where needed.

In closing, I’d say the key to innovation success is embracing the notion of failure. Failure has value! Put another way; failure is the fast track to learning. Learning what not to do and what to try next can help a retail company to accelerate faster than the competition. Think MVP, stay lean, get validated feedback quickly, and iterate until you have a breakthrough. And always maintain a growth mindset – never stop learning and growing.

Additional resources:

Driving Your Retail Digital Transformation

Driving Your Retail Digital Transformation

Technology holds massive promise for the retail industry, and retail brands are each in their own stage of the digital journey. In this post, we look at how to drive a digital retail transformation.

As I look back at all the connections we’ve made, partnerships we’ve formalized, and solutions we’ve launched during Valence’s month of retail, it’s apparent that this industry – which is no stranger to change – faces a large crossroad. There are major threats as well as exciting opportunities as the retail landscape gets more competitive, more personal, and more connected.

Throughout the month, we’ve covered a lot. I started by asserting that experiential retail is not new, but rather an ever-evolving paradigm. I then announced our Retail Innovation Accelerator, which will help incubate transformative solutions for our customers across voice, data, and blockchain. And finally, I recapped the 5 most important trends and insights we gleaned at NRF’s Big Show.

For my final blog post in this series, I’d like to provide some color on how you can help drive digital transformation in your retail business. Whether you’re a c-level executive, technology director, or store manager, there’s no doubt that you’ve been exposed to changes brought by a digitizing world. Just the fact that your customer carries a smartphone in their pocket should be seen as a major disrupter. In this post, I hope to illuminate how you can drive your organization to embrace these disruptions rather than fight them, and lead the right investments that yield future growth.

Embracing Change for Operational Efficiency

What does the term “digital transformation” make you think of? It more than likely conjures thoughts of big, flagship-style customer experiences: wow moments that are high-touch, highly-personalized, and focused on making a brand memory. While these kinds of experiences are important to engaging fans, they won’t drive lasting momentum unless coupled with internal and operational digital transformation.

Retail strategy can be mapped on a pyramid, similar to Maslow’s hierarchy of needs. While there are exciting opportunities around customer experiences at the top of the pyramid, retailers will have more success along their digital transformation if they consider basic and operational needs first to build a strong internal foundation. The best way to secure budget for transformative customer experiences is to save money through operational efficiency. Can you utilize AI to predict stocking needs? Can you better analyze sales data to inform your buyers’ decisions? How about use sensors to understand traffic patterns to more efficiently staff your store? By establishing transformation from the ground up, you’ll unlock more business opportunities and free up budget.

Justifying Your Digital Transformation Investment

Embracing any kind of transformative business practice takes an up-front investment. However, all too often this fact leads retailers to think that digital transformation is only for the risk-takers. I’ve heard it before: “we want to build a proof of concept and deploy a pilot experience, but don’t know how to justify it to our CEO”. The truth is, if you’re trying to paint the picture of a 1:1 connection between a transformative PoC/pilot and immediate profits, you’ve probably already lost the battle. Investing in the future takes a jostling of resources in the near-term, and I could write an entire thesis on the intricacies of reorganizing and reallocating your investments to drive change. However, justifying your investment in digital transformation can be a whole lot easier.

Simply put: learning about your customer is the most important investment you can make. A good digital transformation strategy always unlocks more data points – whether from IoT sensors, mobile traffic analysis, or AI services – about how your customers interact with your brand. The key to driving digital transformation investments with internal stakeholders is to communicate the ROI of enhancing your understanding of customers’ needs and desires. Furthermore, digital implementations can often act as a mirror: by learning more about your customer, you in turn learn more about your company.

Thanks again for following this retail series, and don’t forget to check back for future posts. If you want to chat more about how we can help you on your digital transformation journey, contact us.

Additional Resources:

The Future of Retail — Trends From NRF

The Future of Retail — Trends From NRF

After a great week at NRF talking tech with industry leaders about the future of retail, experiencing cutting-edge demos, and learning about retail’s biggest challenges and opportunities, we’re back in the office with a heightened appreciation for the exciting possibilities ahead.

In my last post, I announced our Retail Innovation Accelerator, which is focused on harnessing emergent technologies to develop customer solutions in an agile way. This retail solutions incubator — which is powered by internal innovation projects and strategic partnerships across voice & chat, telemetry & insights, and modern supply chain — provides a framework for our customers to more easily identify the technologies best suited to digitally transform their businesses.

This week, I’d like to switch gears a bit and discuss some of the trends we saw at NRF. While by no means an exhaustive list, I hope this helps paint the picture of how retailers should think about digital transformation efforts over the next year and beyond.

1. The whole is greater than the sum of its parts. One thing that stood out compared to past NRF Big Show’s is how technology companies are thinking about the power of multi-platform solutions. To unpack that, it’s becoming more and more evident that there isn’t one technology that can truly transform your retail and brand experience. Rather, a suite of technologies must be integrated into a cohesive, omni-channel strategy to really move the needle. If you are considering RFID sensors to make your dressing room “smart”, pair this with digital signage powered by a recommendation engine to help complete your customers’ outfit. Or how about taking that a step further with an AR-powered selfie app that shows customers what those boots would look like with their new dress? Individual technologies may generate some buzz, but the right suite of technologies can truly transform a retail business.

2. The year of the edge: connected everything. The best brands react to their customers in real-time, and the only way to do that is by listening smartly. The collection — and more importantly analysis — of data will continue to be one of the primary differentiators between successful and unsuccessful retailers. But how do you capture the kind of meaningful data that yields actionable insights? At Valence, we’ve been working in the IoT space for many years. However it was still eye-opening to see such a strong focus on the “connected everything” store. Edge devices and sensors are seeing exponential advancements in on-board compute power, connectivity, and battery life, while AI-powered cloud services continue to evolve. With technologies like computer vision, it’s amazing how much you can learn about yourself and your customers.

3. Retail robotics is maturing, but not there yet. We all know robotics in the warehouse is already here, but when will robots be roaming the sales floor? Can a robot re-stock shelves? How about provide wayfinding to a lost customer? We saw some compelling “front-of-house” demos from hardware and software companies alike, but at this time robotics still resonate best when tackling “back-of-house” challenges. However — as with all promising technologies — it’s only a matter of time until the cost-benefit ratio leads retailers to use robotics for more purposes.

4. Your platform is your product. While we used to only think of your platform — whether web site or store front — as the place to showcase your product, today’s competitive landscape means that your platform might just be your most important product. There are so many ways to buy, it’s important that yours is the easiest, fastest, and has a little extra flavor than the competitor. Improving your platform can be as simple as re-writing your web site copy to better match your brand’s voice, or can be as complex as restructuring your inventory management system and releasing a “buy online, pick up in-store” app. Whatever the approach may be, it’s important to understand how vital your platforms are in differentiating your brand.

5. Amplify your voice with…voice! It seems obvious, but in order to stay relevant brands must operate at the pace of consumers. And with the exponential evolution cycle in consumer technology, this is getting harder and harder to do. Voice may one day usurp touch as the primary user interface, and it’s important to consider the user flow for customers interacting with your brand on services like Amazon Alexa. We didn’t see as many voice-based demos at NRF as we expected…all the more reason to start investing in this space before your competitors do.

Next week, I’ll be providing a recap of everything we’ve learned and announced throughout our month of retail. I’m excited to share the opportunities on the horizon for all retailers who are ready to adopt emergent technologies.

What is Experiential Retail?

What is Experiential Retail?

Experiential retail or experiential commerce is a type of retail marketing whereby customers come into a physical retail space and are offered experiences beyond the traditional ones such as browsing merchandise, talking to salespeople, touching products, and checking out. Experiential retail amenities may include interactive art, live music, virtual reality, cafés and lounges, and video display walls.

There’s a short, often-overlooked scene in Alfred Hitchcock’s Vertigo that’s always fascinated the retailer in me. I’m going to avoid spoilers and simply say that Scotty (Jimmy Stewart) takes his new fling Madeline (Kim Novak) shopping, in search of the exact suit worn by his previous love earlier in the film.

There are a lot of complex psychological layers at play here, and — aside from the painfully-dated line “the gentleman seems to know what he wants” — it’s not typically considered a comedic moment. However, as someone who’s spent the first 10 years of their career in Retail Experiences, this scene cracks me up.

While Scotty and Madeline sit in the store — attended to by two sales reps — a woman comes in and out of the dressing room wearing various suits like an animatronic mannequin. She’s modeling clothes for the very customer sitting in front of her. As in don’t experience our product, experience someone else experiencing our product! This has always been both interesting and absurd to me, made all-the-more comical by Scotty’s response once the model comes out in the right suit: “We’ll take it. Uh, will the thing fit?” 

Okay, that was a whole lot on Hitchcock’s 1958 masterpiece. But this is a Retail Transformation blog, so, what’s my point? Well, there are a few:

1. Experiential retail is not new. So much of what I see and read on modern retail transformation makes it seem like all anyone thought about prior to 2010 was merchandising. I hope this scene in Vertigo showcases how wrong that thinking is. While Madeline is distant from the product itself, the retail interaction is purely experiential: she experiences the outfit while hardly lifting a finger. Sound familiar? It really is the analog version of those 360-degree image galleries that retailers use on digital storefronts. The means of implementation have changed, but the concept of curated experiences is as old as retail itself.

2. If you listen, they will come. What’s evident in this scene — and would be clear if you were to walk into any major department store in the 1950s or 60s — is that customers were expected to listen to brands, not the other way around. Purchase decisions were based on wanting to be rugged like the Marlboro man, or elegant like the model standing in front of you. Brands put their version of perfection in an advertisement or experience, and customers aspired to it. In today’s world, retailers actually need to aspire to their customers. Think of Apple’s original iPod commercials. Instead of featuring cool, beautiful people with iPods, it featured silhouettes. The message being: you are already the cool, beautiful person, we’ll just help you find your groove. The script flipped even more dramatically with social media, where brands must constantly listen and adapt to their fans to stay relevant.

3. Customer satisfaction is simple, consumer behavior is complex. This one is all about that last line from Scotty: “We’ll take it. Uh, will the thing fit?” I don’t know, Scotty, maybe Madeline should try it on? Every time I watch this film, I half-expect the sales rep to have an epiphany: we’re doing this all wrong…the customer should be going into the dressing room! But more importantly, what does this say about consumer behavior? Working backwards it’s easy: customers will be satisfied if they wind up with the right product at the right price with the greatest convenience. But what gets them to your store instead of your competitor? What influences their behavior in defining the right price, or the acceptable amount of friction? The exciting thing is that an agile digital team armed with analytics can demystify these questions.

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Robotics: Cue the Pizza Drones?

Robotics: Cue the Pizza Drones?

Drones and robots are going to solve all of our delivery woes!

Well…. not so fast. It was definitely fun to see Domino’s deliver its first pizza by autonomous drone in New Zealand a bit over a year ago. But the truth is we’re not going to see fleets of airborne delivery bots anytime soon, no matter how much Domino’s, Amazon, or UPS invest in drone technology (plus the critical AI needed to make the devices smarter than flying Tinkertoys).

First, let’s look at what was behind the scenes of that first pizza delivery. As Business Insider put it, “A team of drone experts and a pilot autonomously controlled Flirtey’s DRU Drone through GPS navigation to drop off the pizzas.” Even if it were a small team of drone experts, say three at most, that still requires four people to deliver a pizza. A great stunt. Something to spark the imagination. But not a realistic business model for getting hot pizza to the masses any time soon.

Part of the hold-up is FAA regulations protecting the public (and our collective airspace) from errant pies or inept drone operators, not to mention high-tech electronics falling out of the sky. At the moment there is a “line-of-sight” rule, generally requiring all drones to be directly visible to their operators. So for now, drone flight is all pretty manual and pretty complicated. The other part of the hold-up is technical. As in, there’s work to be done before drones are safe and reliable enough to deliver pizzas (or other packages, for that matter) in the real world. Once these barriers are resolved, we expect to see rapid adoption.

The field of robotics is actually fascinating right now. On the one hand, there’s a bunch of tech that’s exciting to watch but not quite ready for Prime Time. (Here’s where drone pizza delivery fits in.) And on the other hand, there’s old technology that’s been in widespread use since the ’80s. Massive industrial robots that perform repetitive tasks with perfect precision in automotive factories, for example. But those robots are extremely expensive, not adaptive, and they must be precisely programmed to perform incredibly specific tasks.

So, what’s in the middle? Are modern robots being deployed in the real world? Of course, there’s the famous example of the 45,000-strong workforce of Kiva robots powering Amazon’s warehouses around the world. And some retailers are currently conducting trials in big box stores. Lowes, for example, which is experimenting with a “Lowebot” to help people find products. Or Target, where a Simbe Robotics model called Tally monitors the stock on shelves, freeing up sales associates to focus on clients.

Plus watch out for anyone planning mischief at a mall or stadium parking lot. Robots are starting to supplement security guards to identify suspicious activity in public parks, at sporting events, and in enormous indoor shopping venues.

As it happens, the drone world is also an area of exciting innovation in robotics, despite the stunt with the pizza boxes. Already, advanced drones fitted with navigation systems, sensors, and AI are able to inspect thousands of miles of track for railroad companies; assess the safety of offshore oil rigs; fly over wind turbines to check for maintenance issues; and examine miles of overhead power lines searching for damage. When equipped with computer vision, navigation, and other AI capabilities, autonomous drones are cheaper, safer, and faster than humans conducting the same kind of industrial inspections.

Although this technology is not mainstream at the moment, it is developing rapidly and more cheaply than ever before. Where drones once cost millions and were affordable only to military forces and the like, today they are available for hundreds (at most thousands) of dollars. Plus, open source platforms that offer AI and other advanced functionality are cheaper and more widely available than ever before.

So while it’s not likely for your pizza to drop out of the sky thanks to drones and robots anytime soon, there are real applications for drones and robots at industrial scale that can transform your business. Particularly when paired with advanced sensors, AI, cloud computing, and IoT technology.

Wonder if drones or robots could advance your enterprise? At Valence we help our clients separate fact from fiction and incorporate leading-edge technology that drives real results. We’d love to show you the way. Interested? Contact us, and we’ll help you get started!