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KEY POINTS

This report forms part of our Innovator Intelligence series, which focuses on emerging companies that are disrupting traditional retail and fueling innovation across the retail value chain.

Radius8 has created a platform that empowers retailers to dynamically merchandise online by using data on their physical stores and local market intelligence to provide contextual discovery for shoppers, which ultimately drives both online conversion and store foot traffic.

  • Mass store closures, soaring online sales and changing shopper expectations testify to the rapidly shifting nature of retail. At the same time, many traditional retailers are underleveraging their brick-and-mortar stores, despite the fact that physical stores still account for the majority (~80%) of sales and have lower customer acquisition costs and higher customer lifetime value than online stores.
  • The Radius8 localization cloud collects data on local browsing behaviors, weather, store inventories, events, geolocation, time of day, social trends and in-store sales trends, then leverages analytics on these data. The platform identifies differences between store locations and shoppers’ proximity to stores, providing retailers with insights on local in-store and online buying trends that enable them to offer more relevant and engaging experiences across physical and digital channels.
  • Radius8’s Pre-Shop and Smartbars tools enable retailers to provide dynamic, store-powered catalog pages on specific website pages, such as store search engine optimization (SEO) pages and store locator pages, to connect with shoppers during the pre-shopping experience. The tools allow consumers to view inventory available in local stores, reserve products for pickup and receive localized product recommendations.
  • National retailer Guess implemented Radius8’s Smartbars on its store SEO pages, and claims that it saw increased click-through rates and greater average order value (AOV), while recording a rapid ROI.
  • Radius8 provides two core feature sets: store-centric online experiences and digital-centric in-store experiences that are based on local digital demand. These experiences are rapidly becoming table stakes to meet rising consumer expectations.

Company Overview

Mass store closures, soaring online sales and changing shopper expectations testify to the rapidly shifting nature of retail. At the same time, many traditional retailers are underleveraging their brick-and-mortar stores, despite the fact that physical stores still account for the majority (~80%) of sales and have lower customer acquisition costs and higher customer lifetime value than online stores.

In today’s channel-rich environment, omnichannel capabilities drive core shopper engagement and, ultimately, draw shoppers to physical stores. In fact, according to Forrester Research, half of all in-store retail sales in the US are digitally influenced, meaning that the person making the purchase used a digital device before or during the shopping journey.

Traditional retailers must not only leverage the power of the online world, but also connect their physical and digital operations to provide shoppers with a seamless, tailored, multichannel experience that online pure plays simply cannot match. Today’s shoppers commonly expect retailers to continually improve their service offerings and deliver greater convenience than in the past. This demand extends beyond a desire for online personalization; shoppers expect higher-quality brick-and-mortar experiences, too. For example, they expect retailers to offer on-trend merchandise ranges in stores and to ensure that products are always in stock.

This report forms part of our Innovator Intelligence series, which focuses on emerging companies that are disrupting retail and fueling innovation across the retail value chain. Here, we examine retail software platform Radius8, which empowers retailers to dynamically merchandise online by using data on their physical stores and local market intelligence to provide contextual discovery for shoppers, which ultimately drives both online conversion and store foot traffic.

Radius8 enables retailers to localize the shopping experience by creating:

  • Store-centric online experiences powered by data that can be collected in and around store locations. This includes both information on physical elements, such as inventory, weather and events, and digital elements, such as browsing behaviors and online sales trends.
  • Digital-centric in-store experiences powered by in-store consumer browsing and buying data. Retailers can use this information to improve visual merchandising, inventory allocation, planning and more.

Over the past 12 months, Radius8 has signed contracts with leading retailers and brands that operate globally. The company’s current clients include Academy Sports + Outdoors, Guess, John Varvatos, Lucky Brand, Orvis and Zumiez.

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The Radius8 localization cloud collects and analyzes data on local e-commerce traffic around stores in a retailer’s chain, weather, store inventory, events, time of day, social trends, in-store sales trends and more. The cloud builds analytics and trends for each store location and provides retailers with tools to monetize the unique aspects of local markets. These data help retailers build context based on location and can be used to create tailored, localized experiences across digital and in-store channels. For example, retailers can create a localized online experience on any page of their website by integrating the Radius8 Smartbars shopping widget into their site. The tool allows shoppers to view available inventory in nearby stores and allows retailers to provide localized promotions based on events in the area or trending products.

Industry Overview

Localization, Differentiation and Digitalization

As retailers face heightened competition, it is more important than ever that they offer customers the right products, in the right place, at the right time. Successful localization requires clustering similar stores on the basis of sales and customer data, including buying patterns, demographics, local weather, store size and other information.

Localization is even more critical in huge countries such as China, where weather trends and culture can differ significantly across regions and provinces. Metersbonwe, one of China’s leading casualwear apparel companies, is among the Chinese retailers that have applied a more local approach to merchandising. The brand has divided China into 30 markets, and it runs 30 subsidiaries that separately analyze which products are selling well in their particular area.

Clothing retailer Etam is another brand that deftly uses different channels, brands and product mixes to appeal to local consumers in China. Etam, which began as a lingerie brand, utilizes department stores, physical stores and e-commerce platforms such as Tmall and JD.com to reach Chinese consumers wherever they are located and whichever channel they are shopping.

Stores Must Fill in the Gaps Around E-Commerce

We expect e-commerce to continue to grow its share of retail sales in the coming years and predict that it could realistically capture 40% or more of all clothing and footwear sales in both the US and the UK in the 2030s. This leaves physical stores to fill in the gaps for consumers whose shopping mission would not be best served by e-commerce. Specifically, we see opportunities for physical stores that focus on one or more of the following propositions: convenience, collection, discount or destination.

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With more shoppers now beginning their shopping journeys online, digital channels are having a greater impact on purchase decisions. More than 50% of shopping journeys now start online, the growing majority of them on mobile devices, and that figure will rise to 58% by 2022, according to Forrester Research. However, store associates often have no insight into what consumers near their stores are looking for online.

As web-influenced in-store retail sales continue to increase, traditional retailers will need to leverage modern customer analytics solutions to collect data that they can use to provide more engaging, relevant and differentiated experiences. These data show retailers who their customers are, where they are in the buying journey, what they want and which marketing strategies affect them most.

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Traditional retailers have a huge, and often unexploited, local asset advantage versus the likes of Amazon, in that they can provide customers the opportunity to touch and feel products and truly experience their brand in a physical store. Providing localized and actionable insights to store associates and managers, as well as to digital marketers, can help retailers generate new conversions in stores and drive online-to-offline retail experiences.

In addition, the more channels customers shop, the more valuable they are. According to the International Council of Shopping Centers (ICSC), multichannel shoppers, on average, spend 3.5 times more, shop three times as often and have higher retention rates than single-channel shoppers.

The Role of Retail Stores for Fulfillment

Traditional retailers are continuing to invest in growing their digital capabilities to compete with Internet-only companies, but the substantial capital and operating costs required to implement and improve online capabilities impact profitability. These include costs associated with supply chain upgrades, digital marketing and IT as well as the rising costs of e-commerce fulfillment. 

To become more efficient omnichannel operators and reduce losses due to high online fulfillment costs, retailers must reexamine the cost structures of their physical stores and infrastructure. Those that can effectively engage customers and meet their heightened expectations no matter where, when or how they shop, while offering complete visibility into inventory availability, can improve inventory productivity and reduce markdowns.

There are a number of ways retailers can mitigate and, ultimately, offset the negative impact of e-commerce costs. For example, they can improve inventory productivity by fulfilling online orders from stores. A 2015 survey conducted by the National Retail Federation (NRF) found that 76% of retailers surveyed were using store inventory to fulfill online orders. And 86% said that they planned to implement buy-online, pick-up-in-store service in the next year. As engagement picks up, optimizing inventory and inventory visibility will be increasingly important for retailers.

Brick-and-mortar retailers continue to report strong—and, in many cases, strengthening—demand for in-store collection of online orders. A JDA consumer survey published in July 2017 found that 50% of US consumers had used buy-online, collect-in-store services in the previous 12 months, up from 46% in 2016 and 35% in 2015.

Kohl’s and other retailers are reporting uplifts in the proportion of online orders that shoppers are choosing to collect in-store, and Macy’s has noted the benefit of incremental in-store purchases by shoppers coming in to collect online orders. In August 2017, JCPenney noted that its in-store pickup service was driving 600,000 visits to its stores each week. Anticipating sustained growth in demand for in-store collection, US retailers such as Walmart and Kroger are building capacity.

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Shoppers Are Impatient and Impulsive

Connectivity has brought shoppers nearly unlimited product choice and access to on-demand services, often from Internet-only retailers for whom turning a profit is secondary to growing market share. As a result, shoppers are less patient and more impulsive than ever. When they decide they want something, they want it now, and they expect it to be in stock.

As more shoppers choose to use collection services, it will become increasingly important for retailers to have inventory available, and even go a step further by providing alternative locations where shoppers can pick up items that are not available at their nearest store. Providing engaging and relevant promotions can help retailers capitalize on the in-store collection trend.

Below, we chart the Prosper Impulsivity Score from Prosper Insights & Analytics, which indicates how much, or how little, consumers are living in the moment when it comes to their spending habits. This measure of shopper impulsivity is based on monthly surveys that ask consumers to what extent they agree with the statement “Live for today because tomorrow is so uncertain.”

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Radius8’s Solutions for Retailers

Radius8’s platform helps identify the differences between store locations and shoppers’ proximity to those locations. The platform provides insights on local in-store and online buying trends, enabling retailers to create more relevant and engaging experiences across physical stores and digital channels such as e-commerce websites, social media platforms, mobile apps and email.

Radius8 offers services to its clients in three key areas:

1. Locally Influenced E-Commerce 

The company’s locally influenced e-commerce solution provides hyperlocalized merchandising that can be implemented across channels.

  • Radius8 Smartbars enable retailers to monetize low-performing or non-revenue-generating pages—such as store locator or store SEO pages—based on signals local to each store, such as location-specific trends, weather, sporting events, store sales data and inventory.

Ways to implement Radius8’s locally influenced e-commerce solution:

  • Website: enhance store locator page with dynamic, store-powered catalog.
  • Website: enhance product-listing pages with PDP Store Widget.
  • Social media: enhance social media presence with a Facebook page integration.

2. Enable Consumers to Shop Their Local Store Online with Pre-Shopping

Radius8 Pre-shop is a tool that offers consumers a digitally connected pre-shopping experience. It allows shoppers to view inventory available in local stores, reserve products for pickup and receive localized product recommendations. In turn, the tool allows retailers to capture valuable customer data to identify local trends, engagement trends and more.

By enabling customers to pre-shop before they visit a store, retailers can drive more store traffic and monetize the intent to visit stores. Retailers and brands can dynamically merchandise based on what’s happening in-store and within the local market. This allows customers to shop a store-first experience digitally and establishes a direct and meaningful connection between the physical store and the customer.

Radius8 Smartbars create locally relevant shopping experiences across multiple digital touch points. The tool leverages local signals—weather, hyperlocal sales data and browsing behavior, local events, and social trends—to provide consumers with more relevant and engaging digital experiences. For example, a sporting goods retailer can merchandise based on today’s weather or when a local team is set to play a big game. Smartbars are powered by the Radius8 cloud and everything is dynamically rendered, which allows companies to configure and deploy the tool without needing to touch the customer’s existing website code.

Way to implement Smartbars:

  • Store pages: retailers can control localized product placement on any digital channel.
  • Email: retailers can embed products in email communications that are specific to local store trends and inventory.
  • Website: retailers can leverage customers’ location to better engage anonymous e-commerce traffic, providing site visitors with more relevant experiences prior to personalization.

3. Insights and Analytics to Improve the Store Experience

R8 Insights enables retailers to combine external localized data inputs with shopper data to provide actionable insights for visual merchandising, in-store recommendations and inventory allocation. For example, the solution can help retailers see what is trending in a local area and provide store associates with insight into what consumers are looking at online near their store.

As mentioned earlier, Forrester found that more than 50% of customers begin their search and pre-shopping discovery online before entering a brick-and-mortar store, yet store managers and sales employees previously had no insights into what those shoppers were seeking. This tool enables retailers to execute an in-store experience that matches digital demand by displaying trending visual-merchandising and inventory gaps on a store-by-store basis.

Ways to implement R8 Insights:

  • Embed relevant, real-time, locally trending data in clienteling and store associate reports.
  • Enable managers to make better visual-merchandising decisions based on real-time data on a store-by-store basis.
  • Add a new dimension to planning and allocation monthly post-mortem sessions based on localized e-commerce trends and data.
  • Empower more proactive planning and allocation and clearer communication of selling opportunities on a store-by-store basis to help mitigate inventory liability and better sell what has been allocated to each store.

Radius8 Partners with Others to Optimize Solutions

Radius8’s partnerships with various platforms enable companies to leverage and optimize its solutions. For example, Radius8 partnered with Yext, a digital data management provider and marketplace, to enable Yext’s retail clients to integrate Radius8’s local store feature into the platform. The partnership allows clients to connect the Yext App Directory, which provides tools to leverage and manage inventory and other information on store pages, with Radius8’s local knowledge platform. The combination extends the power of brands’ digital knowledge, enabling them to drive foot traffic and increase sales.

The Radius8 app for Yext ingests Yext location data automatically, so that a location’s lists and attributes are more contextual. Whenever a store location is added or closed, or core location data change, Radius8 updates the data.

Radius8 also partners with enterprise software platform Narvar to drive conversion through localized product discovery. Narvar’s solution provides retailers with tools to retain and engage customers post-purchase. The platform offers order tracking, proactive communication and return solutions. The company serves more than 450 retailers, including Gap, Home Depot, Patagonia and Sephora.

In addition, Radius8 has partnered with Tulip, a cloud-based software provider focused on mobile solutions for brick-and-mortar stores. Tulip provides mobile apps for store associates to look up products, manage customer information, ring up shoppers’ purchases, and communicate with customers and store managers to elevate service and improve the customer experience. Retailers such as Bonobos, Coach, Kate Spade, Michael Kors and Saks Fifth Avenue use Tulip. The integration of Radius8’s local trend data into Tulip’s platform enables store associates to view trends based on local browsing behaviors, online and in-store sales, weather and more in each local market.

Radius8 also partners with Rio SEO, which simplifies complex local search marketing by optimizing local listings and content across search engines and mobile devices. Rio SEO partners with more than 100 retailers and service providers. Radius8’s partnership with Rio SEO allows all Rio SEO clients to seamlessly sync their location data between platforms and deploy local merchandising on their Rio SEO–powered store pages to drive conversion and foot traffic.

In 2017, Radius8 joined the Salesforce Partner Program in support of Salesforce Commerce Cloud. A technical integration (LINK Cartridge) in Commerce Cloud allows Salesforce clients to combine functions of the Commerce Cloud—such as predictive intelligence tools—with Radius8’s local data and brick-and-mortar stores to create a more unified and personalized customer experience across web, mobile, social media and brick-and-mortar channels.

This integration allows retailers whose e-commerce websites are powered by Commerce Cloud to rapidly and easily deploy Radius8’s localization platform on their sites. The integration allows retailers to leverage Commerce Cloud to drive in-store foot traffic, conversion and engagement.

Snapshots of National Retailers’ Use of Radius8’s Solutions

National retailer Guess implemented Radius8’s Smartbars on its store SEO pages, and claims that it saw increased click-through rates and greater AOV, while recording a rapid and measurable ROI.

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A large retailer of luxury handbags implemented Radius8’s Store Insights and Analytics tool to help monitor local digital demand in more than 500 markets. According to Radius8, the retailer was able to identify trends on what products consumers in specific areas around its stores were viewing and purchasing online. The tool allows retailers to adjust such product and sales insights by brand and by store radius.

Competitive Advantages

Radius8 believes that it benefits from the following competitive advantages:

  • A true blend of channels: Radius8 says that this is one of the most important aspects of its offering, as its platform leverages data to create both store-centric online experiences and digital-centric in-store experiences.
  • Its platform network support: Radius8’s partnerships with Salesforce, Tulip and other SaaS platform networks help clients better leverage their existing data and technology.
  • Its services are easy to deploy: Radius8 can be implemented in less than 30 days, without the need to train store associates or invest in new infrastructure.
  • Real-time localized sales and consumer data: These data enable retailers to optimally expose local products to shoppers, based on knowledge of what is happening in and around a particular local market. The data allow companies to capture consumers and drive them into stores.
  • Drive in-store sales and customer traffic: Managers can leverage local consumer browsing data across digital channels to make more informed in-store merchandising decisions, properly allocate inventory and create customer action workflow tools.
  • Provide online shoppers with localized/personalized experiences: To meet the expectations of today’s consumers, retailers must provide inventory data and product-reserve functionality as part of the pre-shopping experience, ensuring that customers can browse and reserve items that are available at their nearest store. Shoppers are then able to visit a store with the understanding that the product they want, in the size they want, is in stock and on hold. After a shopper reserves products online, store associates begin preparing the merchandise for the customer’s arrival. With apparel and accessories, employees can also curate additional pieces for the customer to try on to complete their look.
  • Improve the in-store customer service experience: Providing store associates with information on what consumers are looking at online near their store helps associates provide a better shopping experience.

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Business Model

Radius8’s revenue model consists of two components: onetime setup fees and annual subscriptions based on the number of stores and product modules deployed.

  • Retailers pay SaaS subscription fees based on the number of applications selected (for example, Store Pages, Store Locator Replacement, Facebook pages, Shop Local, Analytics, Smartbars) and the number of physical store locations that the platform will power.
  • Clients pay Radius8 a fee to onboard the software to their e-commerce platforms.

Go-to-Market Strategy

Radius8 is reaching its target market through three avenues:

  • Direct-to-merchant execution through enterprise sales processes.
  • Channel partnerships with Narvar, Rio SEO, Salesforce (Commerce Cloud), Tulip and Yext allow clients to integrate Radius8’s data into their platforms.
  • Radius8 has an advisory network of roughly 100 retail and brand executives.

According to Radius8, in the US, more than 4,500 retailers operate more than 1 million brick-and-mortar store locations combined. This presents a $1.3 billion total addressable market for the company. Radius8 has focused its growth on the specialty apparel, footwear and sporting goods subverticals, which represent an immediate market opportunity of more than $200 million.

Competitive Landscape

Radius8 believes its offering is unique because its platform both collects customer insights and converts the data into localized engagement tools to drive traffic to stores and personalize digital engagement. Many other companies simply collect data. Radius8 also thinks its flexibility to scale and the ease with which retailers can integrate its platform into their existing platforms help it stand apart from the competition. While some of its competitors provide personalized engagement tools, they do not have the ability to integrate customer data and merchandising/promotions services in the same way that Radius8 does.

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Key Management

CEO and Cofounder Sandeep Bhanote has more than 20 years of experience building and running Internet and e-commerce businesses, focusing on mobile and cross-channel retail technology. He previously founded Global Bay Mobile, which was acquired by Verifone in 2011.

VP of Strategy and Cofounder Brendan Phelan focuses on marketing initiatives, data and analytics, and corporate strategy. Phelan holds a PhD in Chemistry and Materials Science from Princeton University.

SVP of Operations Donny Askin has more than 40 years of experience founding, acquiring and managing, and buying and selling retail-focused technology companies. Prior to joining Radius8, Askin served as SVP and General Manager for Yunique Solutions at Gerber Technology.

Chief Revenue Officer Jenna Posner has more than a decade of experience managing sales and partnerships for technology and retail startups. Prior to joining Radius8, Posner led strategic partnerships at loyalty technology firm Clutch.

Upcoming Announcements

In the third quarter of 2018, Radius8 plans to announce a Salesforce Marketing Cloud integration and a partnership with Lucky Brand. In the fourth quarter, the company plans to announce a new product feature set that enables retailers to leverage localization data seamlessly across any of their core systems.

Coresight Research’s View

E-commerce’s share of retail continues to increase, but a majority of sales are still made in physical stores. Retailers and brands need to use creative methods to increase traffic and drive revenue. To help them rethink their approach to physical retail, we have outlined the BEST (brand building, experiences, services and technology) framework, which is shown below.

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Brand building: In order to maximize the value of store assets, retailers must use them not only as distribution points, but also as a marketing channel. Many retailers note that online sales increase in a particular geographic area when they open a physical store in that area, indicating that physical stores serve a marketing purpose that delivers ROI. By connecting online and in-store retail, brands and retailers will be better positioned to drive customer loyalty. Retailers can dynamically merchandise online by using data on their physical stores and local market intelligence to provide contextual discovery for shoppers.

Experiences: More store-based retailers must provide experiences, such as more personalized customer services, in their stores in order to deepen customer engagement. Also, because an increasing number of consumers are researching online to qualify buying decisions prior to making in-store purchases, marketers must engage with and influence shoppers in different ways. This research-online, buy-offline trend highlights a paradigm shift in the way consumers shop in-store and online.

Services: Store-based retailers must use services as a weapon in their fight against online-only rivals. A collection of service-based offerings can draw shoppers to a particular retailer and drive traffic and frequency of store visits. Specifically, we see opportunities for physical stores that focus on one or more of the following propositions: convenience, collection, discount or destination.

Technology: There is an evident data deficit in physical retail that technology can help correct. Online, software is able to track a customer’s journey from the research stage to purchase, and it can even provide details on the research path the customer takes. But offline, too, retailers can use tools to better understand and cater to their customers. Providing insights to store associates and managers, as well as to digital marketers, can help retailers generate new conversions in stores and drive online-to-offline retail experiences.

Outlook

Radius8’s offering can help retailers build capabilities in the experiences and technology quadrants of the BEST framework. In the coming months and years, we expect more retailers and brands will seek to close the gap between the insights they are able to gather from consumers’ online behavior and those they are able to gather from consumers’ in-store behavior. The company’s platform helps its retailer clients increase customer engagement, which drives traffic and sales and connects the digital and online experiences.

 

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