Retail Innovation Club Annual Event: Start-Ups are Central to Consumer-Driven Innovation

On June 3, 2019, Israel’s Retail Innovation Club hosted its annual event in Netanya, Israel, connecting senior members of the retail industry with Israeli retail-tech start-ups. The consortium of leading Israeli retail and commercial real estate groups hosted more than 100 leading start-ups covering the latest developments in logistics, location data, in-store, artificial intelligence (AI), augmented reality (AR), virtual reality (VR), business intelligence (BI), e-commerce and more. Various industry leaders spoke, providing a deeper look into some of the main challenges and opportunities retail faces – and which start-ups are working hard to address. 

Stefan Laban, global head of URBN International, parent company of Urban Outfitters, Anthropologie and Free People, was one of the first presenters to address the audience with a special focus on the consumer experience. These are some of the highlights:

• The consumer experience is the new battleground, replacing price and product. Consumers don’t have to go to stores any more – they have to want to go. There is an important distinction between buying, which could easily be done online, and “shopping.” 
• To properly address the market, micro-segmentation is a must, targeting individual age-groups. But retailers must also remain relevant to the main age bracket they are targeting.
• Payment is still very functional and should be made fun and easy. Urban Outfitters says 75% of customers ask for self-service, including self-checkout, making it the top technology they request.
• Change is here and will accelerate – retailers must not fight it. Yesterday’s amazing is today’s expected – stores are not dead and never will be. 

Taking a more industry-based perspective, Rani Argov, head of retail sector consulting with Deloitte, looked at how different players in retail need to adapt to the changing environment, and how start-ups play a central role in the process. 

• The retail market is experiencing change from many directions. Retailers need to pay particular attention to consumer habits. The changes happening now include: fragmented consumer attention, demand for personalized experience, and the rise in channel over brand.
• Retailers need to follow a completely new set of assets and approaches. A successful player must be focused on data and consumer engagement, take a more collaborative approach, be consumer-centric and be lean and agile. 
• The pace of change and innovation is being driven by four main players, each with their own strengths and challenges: 1. Established manufacturers, 2. Established retailers, 3. Start-ups, and 4. Big high-tech companies. Large manufacturers stand to lose margin and control unless they adjust. Established retailers may lose customers or become redundant if they don’t engage assets. Start-ups have no choice but to succeed or lose it all. And big tech companies must own their category or move on. Each player approaches retail with different agendas and levels of risk. Big tech poses a risk to the other three players, unless they combine assets. 

Start-ups fill an important role as they offer innovative technology, agility, and new business models, which both established manufacturers and retailers sorely need. Deloitte Digital noted four main areas in which start-ups offer a much-needed disruptive approach: 

• Marketing: They know how to tailor products, offerings, and services in an increasingly fragmented market, while also providing a better understanding of the big picture.
• Sales: Start-ups help customers find what they are looking for and provide the information customers need pre-purchase. 
• Automation and efficiency: By picking, packing and tracking products efficiently and transparently, while also cutting waste and saving employee time. 
• Check-out: By removing the pain of paying start-up technology can ease payments, creating a more secure environment and protecting customer privacy.

Industry panels echoed some of the main concerns facing the retail space: Improving the ease of the check-out process and the shopping experience in general; facing the online pure-play challenge head-on with a blended solution; protecting consumer information through improved cyber security; and, most importantly, being in tune with the customer. The customer drives everything.

The figure below covers Israel’s leading innovators in the retail tech space, and includes most of the companies featured at the Retail Innovation Club event on June 3.