The development of e-commerce is progressively threatening the future of traditional retail stores, and the impact of the COVID-19 pandemic is depleting store traffic. In this context, more and more brands are realizing that necessity for their retail strategy to be transformed to a refined and personalized online–offline omnichannel model. With the development of 5G, cloud computing, IoT, big data and AI, digitalization is bringing more opportunities to reshape the retail industry, from omnichannel fulfillment, store digitalization to new business models and ecosystems, allowing companies to communicate with consumers in a more diverse way.

By improving store payment terminals, touchpoints and operational processes using digital technology, brands can innovate with diverse and precise consumer experience settings to provide consumers with a convenient, seamless and smart interactive shopping experience. Consumers are demanding increasingly more from their shopping experience, and retailers are focusing more on digitally meeting these various consumer needs.

Smart stores present a business model for unmanned retail.

Over the last few years, several retailers have seized the business opportunity presented by smart stores: Hema (Freshippo) created a fully-digitalized O2O business model; Uniqlo deployed a shopping experience where physical and virtual worlds converge, showcasing its technological recognition capabilities; physical and virtual shopping experience leveraging technological recognition capabilities; Bingo Box launched a scalable model of 24-hour autonomous convenience stores. Digitization not only saves consumers time at checkout, it provides a comprehensive multi-touchpoint experience.

Considerations for retailers as they digitize their stores and consumer experience:
1. What does the smart store experience bring to consumers?
2. What type of changes can digitalization bring smart stores?
3. How can digitalization facilitate communication between brands and consumers and generate growth?

We have identified 3 key trends and their impact for brands:
1. Digitalization facilitates insight collection and improves consumer satisfaction.
2. Digitalization effectively enhances the autonomy of smart stores.
3. Digital tools should be deeply integrated within the consumer shopping experience.

Let's dive deeper into each of these below.

Viewpoint 1:  Digitalization facilitates insight collection and improves consumer satisfaction

The unmanned new retail model offers a new service framework characterized by increased efficiency and lower costs. In traditional retail, Self-checkout tools help reduce the average duration consumers spend queuing; the proliferation of automatic vending machines allows consumers to buy whenever they want. Modern retail uses highly automated and intelligent technology to reduce labor costs and improve retailers' operational efficiency, and digital technology helps develop new business models for smart stores. Digitalization enables retail upgrades and iterations as the industry embarks on an innovation and integration journey.

As retailers transition towards new retail, they need to consider the following:

• New retail does not prioritize any of the 3P (People, Product, Place) – all must be considered simultaneously and call for standardized, replicable and scalable operation systems.
• How well a business understands consumers, how smart their product operations are, and how interactive can it the connection between online and offline channels all depend on whether the development of its digital capabilities can match changing business needs.

Viewpoint 2:  Digitalization effectively enhances the autonomy of smart stores

Facilitated by the fast development of AI, the use of various unmanned technology and digital tools within smart stores has become the norm in China, with a few notable cases of unmanned convenience stores using computer vision technology as part of their operations. While there is still room for improvement in terms of technology architecture, scenario design and visual recognition accuracy, the development of smart stores continues to transform the traditional customer experience and operations through innovative technology.

Unmanned retail is focuses on replacing manual labor with technology, treating the smart store as a smart business system, and sensing consumer needs through unmanned technology.

When trying to build smart stores, retail companies often wonder where to start, how much technology is required and how it should be deployed. We believe smart stores can be classified into different levels based on how autonomous they are. Below we have divided the autonomous capabilities of smart stores into 5 levels:

The classification of smart stores can help retailers understand more clearly the degree of integration of digital tools within smart stores and serve as a reference tool to assess how advanced and mature is their current smart store.

In 2018, Amazon launched Amazon Go, a cashier-less store concept that overturned the traditional convenience store operating model. It combines machine learning, computer vision, AI and sensor fusion technologies to offer customers a fluid shopping experience. Consumers only need to download the Amazon Go app and scan the code at the store's entry gate to start their shopping. Sensors will analyze the user's shopping behavior and deduce the transaction amount automatically off their Amazon account, thanks to the retailer's "just walk out" technology. In November 2021, Starbucks opened a new Pickup store in partnership with Amazon Go, providing customers with a convenient shopping experience through mobile ordering and contactless pay.

The shift from store digitalization to smart store should take into consideration the integrated development of consumer experience and merchandise operations:

• The smart store of the future should be seen as a smart business system
• Interactions at every touchpoint of the consumer journey should be defined by a memorable brand experience that leads to transaction.
• Investment in digital tools should be assessed in terms of value-added brought to consumers and not just in terms of operational cost savings

Viewpoint 3:  Digital tools should be deeply integrated within the consumer shopping experience

The innovation demonstrated within smart stores reflects retailers' technological capabilities, which drive business growth and value.

We see a dichotomy betweent the human-based experience, which typically includes: warm welcome and greetings when entering the store and personalized albeit subjective assessment of consumers' purchasing power and relevant discounts based on past experience, and the tech-based experience, which involves quick and easy shopping process, objective and consistent product information, and assessment of consumer characteristics and purchasing power based on past data.

When consumers shop in-store, the salesperson's presence helps improve consumers' understanding of the product and increase their willingness to buy at every touchpoint (entering the store, selecting products, paying for the items).

Digital tools in smart stores enable self-service, making the shopping journey more convenient for consumers and allowing retailers to improve the efficiency of their operations.

Smart stores are a new retail model that use technological innovation and connect brands and consumers through digitalization.

Smart stores provide services that make shopping more convenient for consumers, but other aspects of the experience still need to be considered:

• Businesses leverage digital tools to communicate with consumers and improve the shopping experience; sales and consumer satisfaction should be aligned with business goals.
• Designing scenarios around the consumer experience is a critical strategic component of effective communication between the brand and consumers。
• The innovative design of brand digitization is reflected in the communication and interactions across various touchpoints along the consumer journey, and ultimately leads to sales growth