Retail Venue Overview - Harbor Research...Routers, Gateways, Silicon and Wireless Sensor Networks Network Service Providers & Internet Service Providers Warehouse, T&L Software Big

1 Smart SystemsDesign Research

Retail Venue Overview

Market Dynamics Drive New Application OpportunitiesPrepared:

April 2018

Technology Research Business Strategy Services Design+ +


Retail Market Opportunity Brief

Market Trends & Forces

Customer Opportunities, Environment & Validation

Top Applications & Use Cases

About Harbor Research


The Retail Market is Changing Rapidly Due to New IoT Technologies

Socioeconomic Trends Competitive Trends

Technological TrendsCustomer Trends

The proliferation of smartphone and internet users in developed nations necessitates that retailers adopt comprehensive mobile and e-commerce platforms• Increased acceptance of online retail as a secure and convenient mode of

purchase• Social media ads becoming the origin of an increasing number of retail sales• Smartphones quickly becoming the preferred means for consumer

interaction, augmenting both the online and in-store shopping experience

The success of Amazon underlines both the importance of supply chain efficiency and of developing comprehensive offline/online consumer profiles • Companies that can most tightly integrate their supply chain and retail

operations will win• Combination of in-store/supply chain inventory tracking and analytics driving

differentiation• Observing consumer’s online/offline habits in order to develop a profile of that

consumer that facilitates more efficient target outreach

Recent technological advancements in supply chain processes and forecasting, AR/VR technologies and sensor efficiency have catalyzed retailers to modernize their retail and warehousing operations• End-users expect more insights from their data• Robots speed up fulfillment, picking and packaging capabilities• New in-store and online techniques to create engaging consumer experiences

created by AR/VR technologies• Beacons monitor consumer’s offline behaviors and provide greater awareness

of location, temperature, humidity, vibration, etc. across the supply chain and within/outside of the store

Equipped with a greater understanding of consumer behavior and preferences, retailers must now interact with consumers through multiple channels and offer fast-paced delivery services• Produce differentiated and interactive experiences for consumers• Greater demand for consumer convenience• Fast product delivery and multiple channel options

Consumer preferences for convenient and differentiated shopping experiences and retailers’ pressure to optimize operational processes inspire technological adoption by retailers


Rapid Change Leads to Increasingly Complex Market Structure

Supermarket

Specialty Retailer

E-Tailer

In-Store

Forklifts (Other Equipment) Material Handling Robotics Inventory Tracking Scanners

Smart Shelving & Mirrors

POS Hardware (Credit Card Processor, Cash Register, Kiosk)

Traffic Sensors, Proximity Beacons

HVAC

Refrigeration

Security

Inventory Management & Refrigeration Monitoring Sensors

Tracking of Goods in Transit

Warehouse Management SystemsGoods Track & Trace Systems

Retail Operations Software & Services

POS Systems

In-store Inventory Management Systems

CRM System

Digital Signage/AR Providers

Proximity Analytics and Marketing

Retail Marketing Software & Services

Digital Marketing Analytics

Financial Services

Software & Value-Added Services

Facilities Management Services

Transportation Services

3PL/4PL

Courier Express Parcel

Freight IntegratorsVending Machines & Micro Markets

Mom & Pop Stores

System Integrators

Unstaffed Retail

Facility Management Systems

Digital Signage

Endpoint Security

Convenience Store/Pharmacy

Lighting

Fire & Life Safety

ERP Systems

Routers, Gateways, Silicon and Wireless Sensor Networks

Network Service Providers & Internet Service Providers

Warehouse, T&L Software

Big Box Superstores Big Box Specialty

Chains Boutique Discount (Dollar) Stores

Convenience Stores Pharmacies

End-Customers (Retailers)

Big Box

OEMS

Network Services

Warehouse

Connectivity, Enablement &

Network Services Connectivity &

Network Hardware

New technologies and end-customer needs have led to changes in the retail market competitive structure


Emerging Technology is Blurring the Lines, Providing New Opportunities

Warehouse Retailer

Consumer

Auto-Checkout: With the wide-spread availability of low-cost sensors and scanners, retailers, like Tencent and Amazon, increasingly experiment with unstaffed stores

Inventory Management Analytics: Retailers leverage machine learning and predictive analytics to better forecast demand and manage inventory

Blockchain: Blockchain technologies to provide consumers with supply chain transparency and additional security

Automation: Use of and investment in automated material handling equipment to expedite warehousing processes

Fulfillment: Retailers, like Amazon, look to improve fulfilment efficiency through investing in and/or acquiring new technologies (Ex. drones; Ring)

Consumer Behavioral Analytics: Advanced analytics companies supply retailers with comprehensive analysis of consumer’s offline/online behaviors to facilitate target outreach

3D Printing: As 3D printing technologies become more affordable for consumers, retailers/brands will look to sell product blueprints directly to consumers’ homes

VR, AR, and Merged Digital + Physical Displays: Virtual reality, augmented reality, and merged digital/physical displays are specifically designed to enhance the consumer’s in-store experience

Merged Warehouse/Retail Stores: To better deliver across all channels, retailers look to leverage retail stores as fulfilment centers

Emergent technologies that enable $137 billion Smart Systems Opportunity

New technologies and innovative solutions fuel the growth and development of the omni-channel retail model


Retail & Supply Chain Smart Systems Revenue OpportunityBy 2022, Value-Added Services and System Applications will represent about eighty percent of worldwide smart systems revenue. Asia occupies the largest market share of the $136 billion smart systems revenue opportunity

Worldwide Smart Systems Revenue ($ million)

2017 2018 2019 2020 2021 2022 2017-2022CAGR

Value-Added Application Services $38,495 $44,827 $52,704 $62,945 $76,080 $93,886 19.5%

System Applications $7,614 $8,560 $9,723 $11,210 $13,067 $15,527 15.3%

Network Services $10,796 $12,020 $13,525 $15,462 $18,009 $21,403 14.7%

Enablement $2,823 $3,082 $3,547 $4,132 $4,812 $5,691 15.1%

Total $59,728 $68,490 $79,499 $93,749 $111,968 $136,506 18.0%

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

2017 2018 2019 2020 2021 2022

Retail & Supply Chain by Technology Type

Value-Added Application Services System Applications Network Services Enablement

Retail & Supply Chain Market by Region

North America Asia Europe RoW


Retailers Must Incorporate both Customer-Facing and Back-End SolutionsTo cut costs and better connect with consumers, retailers must integrate smart systems and new technologies into their physical stores

Emerging Technologies In Retail Environments

Front-End Operations: Retailers leverage new technologies to better engage consumers and to better provide those consumers with more convenient shopping experiences

Back-End Operations: New technologies and integrated systems reduce retailer’s operational costs by either supplying asset, resource, or identity management

People Tracking & Wayfinding:

Asset Management & Uptime:

Supply Chain & Logistics:

Customer Engagement:

Operations Visibility & Optimization:

Resource & Energy Usage Tracking:

2017

2022

Use Case Revenue Opportunity

$5.24bn

$10.06bn

2017

2022


$6.36bn

$15.55bn

2017

2022


$3.84bn

$8.34bn

Access & Identity Management:

2017

2022


$4.02bn

$10.39bn

2017

2022


$4.49bn

$10.66bn

2017

2022


$2.82bn

$5.19bn

2017

2022


$3.80bn

$8.84bn


The Retailer Technology Arms RaceDespite earning $.44 of every dollar spent on e-commerce in the U.S. and solidifying itself as central to the emergent omni-channel retail model, Amazon looks to expand into new markets and to better connect with consumers both in-store and at home. Retailers heavilyinvest in technology to stave off the great 'Amazon threat.

2017 Q1 2017 Q2 2017 Q3 2018 Q1

Front-End Operations

Key:

Supply Chain & Distribution

2017 Q4 Present

Walmart Announces Store No. 8(A startup incubator)3/22/2018

Walmart Announces $11BInvestment Strategy Through FY194/31/2017

Williams-Sonoma AcquiresOutward(AR-Start-Up)

11/16/2017

Nike Acquires Zodiac(Consumer Data Analytics)3/22/2018

L'Oréal Acquires Modiface(AR & AI Makeup Specialist)3/18/2018

Walmart Acquires Spatialand(VR Platform & Content Studio)2/6/2018

Target Acquires Shipt(Grocery delivery start-up)12/13/2017

Target Acquires Grand Junction(Transportation technology company))8/14/2018

Albertsons’ Acquires Plated(Meal-kit delivery start-up)9/13/2017

Amazon Acquires Ring($1 billion acquisition)2/27/2018

Amazon Acquires Blink(~$90 million)12/19/2017

Amazon Acquires Whole Foods($13.7 billion acquisition)8/28/2017

Amazon Acquires Body Labs($100 million Acquisition)10/4/2017

Amazon LaunchesEcho Look4/26/2017

Amazon LaunchesPrime Wardrobe6/6/2017

Amazon Invests in Trackr(~$50 million)8/2/2017

Amazon Announces Amazon Key10/25/2017

Amazon Opens Amazon Go1/22/2018

Company Activity

Company Activity








Retail Market Value Chain Overview

Connectivity, Enablement &

Network Services

Connectivity & Network Hardware

• Routers & Gateways• Wireless Access Points• Silicon & Processors

Network Services

• Network Service Providers• Internet Service Providers

Warehouse

• Material Handling Equipment• Inventory Tracking Scanners

In-Transit

• Beacons• Cold Chain Sensors

In-Store

• Operational OEMs (Lighting, HVAC, Security, Refrigeration and Fire & Life Safety)

• Consumer OEMs (POS Hardware, Traffic Sensors, Smart Shelving, Smart Mirrors and Digital Signage)

• Inventory Management Sensors• Vending Machines and Micro Markets

• ERP Systems• POS Systems• Facility Management Systems• Cyber Security Systems• In-Store Inventory Analytics

• Marketing Analytics• Digital Marketing Software• CRM Systems

System Integrators

• Consulting & Strategy Planning

Financial Services

• 3PL/4PL• Courier Express Parcel• Freight Integrators

Facilities Management Services

• Building Operations Support & Management

• Financial Supporter

Transportation Services

Warehouse, T&L SoftwareRetail Operations Software & Services

Retail Marketing Software & Services

• WMS Systems

Big Box

• Superstores• Specialty

Specialty Retailer

• Chains• Boutiques• Discount

SupermarketConvenience Store /

Pharmacy

• Grocery Store• Convenience Store• Pharmacy

Unstaffed Retailer E-Tailer

• E-Commerce Focused• Automated Check-Out

OEMs Software & Value-Added Services End-Customers (Retailers)

The value chain for technology in the retail market is organized broadly into four main categories, each with a number of sub-segments


E-Tailer/Innovators

Similar Issues, Different Priorities

• Creating a unique, interactive shopping experience

• Creating a unified, multi-channel shopping platform

• Inventory visibility & availability

• Enabling frictionless shopping experiences

• Monitoring perishable goods

• Ensuring refrigeration uptime

• Build comprehensive consumer profiles for target outreach purposes

• Invest in customer engagement technologies

• Enabling auto-checkout and same-day delivery services

• Inventory visibility & availability

• Securing brand-funded customer engagement tech

Pain Points

Specialty UnstaffedBig Box Convenience/Drug

• Ensuring that medication arrives as scheduled

• Securing outdated endpoints

• Monitoring medications

• Ensuring inventory availability

• Gaining the confidence and trust of consumers

• Ensuring asset uptime

Supermarket

• Connecting to consumers and differentiating products from competitors’

• Delivering products to consumers with rapidity

• Build comprehensive online consumer profiles for target outreach purposes

• Partner with fulfillment-focused companies to ensure rapid product delivery

• Invest in endpoint security systems to maintain consumers’ trust

• Ensure perishable goods remain compliant

• Invest in energy usage tracking technologies to reduce operational costs

• Invest in temperature sensors for both in-store refrigeration and cold chain

• Invest in energy usage tracking technologies to reduce operational costs

• Invest in endpoint security systems

• Partner and/or develop advanced predictive and preventative maintenance capabilities

• Invest in endpoint security systems to ensure protection of medical information

• Invest in temperature sensors for both in-store refrigeration and cold chain

Priorities

There are many diverse users with widely varying buying behaviors – priorities are based more on individual accounts and distinct buying behaviors than on general industry characteristics

12 Smart SystemsDesign Research 12

Pain Points, Barriers & Drivers of Adoption

Pain Points

• Retailers struggle to supply frictionless shopping experiences to consumers that match the convenience offered through e-commerce (auto-checkout, inventory wayfinding, readily available product information)

• Retailers currently lack the infrastructure to provide complete transparency across the supply chain

• Retailers unable to connect with consumers that have access to perfect product information online

• Outdated endpoints vulnerable to exploitation

Barriers To Adoption

• Most advanced software and analytics carry prohibitive subscription fees

• Thin profit margins, so can only invest in targeted areas and address short-term concerns

• Lack of interoperability between software systems

• Unclear ROI of software solutions in targeted areas

• Unclear view of how the software provider’s IoT strategy matches consumer needs

Drivers of Adoption

• Uptime, efficiency and overall equipment effectiveness

• Ability to create new revenue streams from brand-funded digital advertisements

• Reduced costs of sensor/beacon technologies

• Ability to rectify costly inventory management problems

• Intense pressure to develop omni-channel platform to stave off ecommerce-centric competition

• Healthy ecosystem of disruptive 3rd

party startups target retailers’ most acute problems

While the threat of ecommerce-centric competition motivates every traditional retail type, adoption of new smart systems technologies occurs at varying degrees and is oriented to target and solve each retailer’s most acute needs


Retail’s Evolution to an Omni-Channel Model

The Traditional Retail Model: Before e-commerce, goods flowed in a very direct and linear path from warehouse to retailer to consumer. Integrative IoT applications amongst retail market participants were very simple.

The Emerging Omni-Channel Retail Model: The retail environment has become very complex and integrated. Now, consumers interact with retailers through multiple channels and can receive goods directly from the retailer’s warehouse.

1 2 32

2

3

Application

1

2

3

4

4Predictive & Preventative Maintenance

5

6

6 Autonomous Optimization7

7 Predictive Personalization & Analytics

8

Point of Sale

8

Product Quality & Compliance Control

9

9 People Tracking & Wayfinding

Resource Utilization Management5 10

10 Access & Identity Management

Supply Chain & Logistics

Equipment Usage & Behavior

Warehouse Retailer Consumer Warehouse

Retailer

Consumer

54 6

1

Changing customer habits and digitization have made retail environments more complex today than ever before








Top Use Cases

Cold Chain Monitoring

• Definition: Use of sensors and analytics to track and to monitor the condition of perishable goods for compliance purposes

• Value Proposition: Ensures proper management of perishable goods for retailers so that retailers can fulfill regulatory requirements

Operations & Supply Chain Visibility

• Definition: The capture, analysis, and integration of supply chain analytics data with warehousing and inventory management systems and the automation of supply chain processes

• Value Proposition: Provides a more effective and visible supply chain that allows for faster delivery services

Product Quality & Compliance Control


Monitoring Asset Up-Time

• Definition: Monitoring high-value equipment and inventory with smart sensors to avoid costs associated with maintenance, labor, and downtime

• Value Proposition: Reduces operational expenses and increases asset uptime through active equipment monitoring

Predictive & Preventative Maintenance

• Definition: Use of data and analytics to monitor and to better understand customer interaction with equipment/products and services to inform predictive and customized outreach

• Value Proposition: Allows retailers to understand customer buying behaviors and trends

Predictive Personalization & Consumer Preferences

Customer Engagement

Access & Identity Management

Identity Protection Energy Consumption Optimization

Resource & Energy Usage Tracking

• Definition: The monitoring and analysis of resource and energy usage data to support energy optimization and to provide retailers with energy consumption profiles

• Value Proposition: Reduces operational expenses by monitoring energy consumption

• Definition: Technologies that allow organizations to control the flow of sensitive data and provide secure access to this data

• Value Proposition: Ensures that payments are transferred securely and consumers’ information remains protected

Illustrative Players: Illustrative Players: Illustrative Players: Illustrative Players: Illustrative Players: Illustrative Players:

To fend off disruption, retailers look to adopt solutions with the greatest ROI and most beneficial outcomes


Application-Specific Expertise Required to Address End-Customer Needs

PlayerFocus

Value Prop: Combines sensors and blockchain to ensure the quality, origin and safety of food

PlayerFocus

PlayerFocus

PlayerFocus

Value Prop: Transforms shopping experience through interactive smart mirrors that act as personal shopping assistants

Value Prop: Combines digital displays with optical sensors to manage inventory levels, collect demographic data and directly engage consumers through targeted marketing

Value Prop: Provides instant digital identity verification for mobile, PC, and voice

Product Quality & Compliance Controls



Customer Engagement

PlayerFocus

Value Prop: Actively monitors temperature, humidity and other conditions to prevent costly refrigeration down-time


PlayerFocus

Value Prop: Leverages data collected from sensors to provide advanced analytics on energy efficiency and productivity

Resource & Energy Usage Tracking

More focused players with application-specific expertise are emerging to target retailer’s needs


Market Profile: Big Box

• Big box retail stores occupy more than 50,000 square feet and offer a variety of products to its customers, ranging from consumer packaged goods, to electronics, to perishable goods

• Threatened by e-commerce-centric competition, traditional big box retailers are developing and/or acquiring rapid-delivery capabilities and comprehensive omni-channel platforms

Market Overview

• Consumers demand differentiated shopping experiences. To stay relevant, big box retailers must create a differentiated and interactive in-store shopping experience for consumers through brand-funded marketing strategies

• Consumers demand convenient shopping experiences. Big box retailers must create a unified, multi-channel shopping platform that offers consumers inventory visibility and availability, quick check-outs, and same-day delivery services

Pain Points

Companies Date Deal Type Key Takeaways

3/19/18 Partnership Macy’s partners with Marxent, a furniture-focused VR and AR start-up, to enable customers to virtually test out home furnishings prior to purchase

3/19/18 Partnership Walmart partners with Handy, a successful on-demand service start-up, to offer its customers in-home furniture and appliance set up

2/6/18 Acquisition Walmart’s innovation lab, Store No. 8, acquires Spatialand, a small VR platform and content studio

12/13/17 Acquisition Target acquires grocery-delivery start-up, Shipt, to speed up the roll-out of same-day shipping

10/17/17 Partnership Target partners with Inspectorio, a supplier compliance verification platform, to speed up supply chain processes by rolling out Inspectorio’splatform to 50 of Target’s vendors across South East Asia

Priorities

• To maintain the trust of their consumers, big box retailers must invest in endpoint security systems and secure payment technologies

• Big box retailers must provide shoppers with more convenient shopping experiences and same-day delivery services

• As many big box retailers offer perishable goods, they must heavily invest in temperature monitoring solutions to ensure regulatory compliance

• Big box retailers must invest in energy usage tracking technologies to reduce operational costs

Recent Partnerships & Acquisitions

Big Box Market Size & Smart System Revenue Potential Opportunity Size

Big Box Smart Systems Revenue, Worldwide ($ million)

2017 2018 2019 2020 2021 2022

2017-2022

CAGRValue-Added Application Services $9,810 $11,687 $14,166 $17,513 $21,974 $28,219 23.5%System Applications $1,877 $2,163 $2,539 $3,041 $3,696 $4,594 19.6%Network Services $2,622 $3,003 $3,493 $4,146 $5,032 $6,245 19.0%Enablement $770 $873 $1,053 $1,278 $1,552 $1,912 20.0%

Total $15,078 $17,725 $21,251 $25,979 $32,254 $40,970 22.1% $0$5,000

$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000

2017 2018 2019 2020 2021 2022

Big Box, Smart Systems Revenue($ Million)

Enablement Network Services System Applications Value-Added Application Services


Big Box Top Use Cases & Smart Systems Revenue Opportunity

$1.6B


$3.7B CAGR: 18.2%

2017 2022

$1.2B

Resource Utilization Management

$3.2B CAGR: 22.8%

2017 2022

$1.2B


$3.8B CAGR: 25.4%

2017 2022

• Key Challenges: Big box superstores sell a significant portion of the world’s food to consumers. These retailers must ensure that faults in refrigerators and freezers are predicted ahead of time to prevent downtime and significant losses

• Players Addressing Key Challenges:

• Key Challenges: Big box retail stores occupy huge physical footprints that carry high energy costs. Big box retailers must adopt new software analytics technologies to optimize their energy consumption


• Key Challenges: Big box retailers operate globally and sell their products to billions of consumers. These retailers must actively protect and secure the information they have collected about consumers


In 2016, Walmart represented 14.5% of all U.S. food and beverage sales. Superstores, like Walmart, depend on refrigeration uptime provided by predictive and preventative maintenance solutions








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Retail Venue Overview - Harbor Research...Routers, Gateways, Silicon and Wireless Sensor Networks Network Service Providers & Internet Service Providers Warehouse, T&L Software Big