The Next Frontier of Digital In-Store Innovation Is the Retailer App

Jordan Berke, founder and CEO of Tomorrow Retail Consulting, kicked off the final day of the Path to Purchase Institute’s Future Forward event in Philadelphia with a keynote exploring digital in-store engagement (DISE) and what he calls “the immersive journey of retail.”

An example of this, Berke said, is having customers engage with a retailer’s app as they’re shopping in the store. “It’s the next frontier of innovation and growth for retail and also for retail media.” (More on this later).

Berke — who, prior to starting Tomorrow, spent 15 years at Walmart primarily leading its digital efforts in China — said DISE was a game changer for Walmart and Sam’s Club’s business in China and is continuing to change the game for retailers around the world.

Berke echoed the widely acknowledged sentiment that retail media is one of the most transformative changes to retail in the last 5-10 years. However, he said while growth in the sector remains strong, growth among the largest and leading retailer media networks is slowing and a saturation point is looming, “unless something changes.”

One factor driving this saturation is the fact that retail media has been predominantly a digital-only offering to date — less than 1% is specific to in-store. Meanwhile, 85% of retail sales in the U.S. still happen in-store. Retail media is only activating against a small share of the customer traffic/sales it has the potential to influence. 

Plus, in-store customers are there specifically to convert and make purchase decisions, which differs slightly from shopping online when most people are multi-tasking (e.g., scrolling on social media, watching TV). 

“The whole concept of impulse buying was invented because of how customers shop in-store,” Berke said. “And unplanned purchases end up being inspired by a promotion at the next level. So, we [at Tomorrow] actually think the opportunity isn't just the 85%, but it's a more engaged, focused and present 85%, which is why we call the in-store moment, the immersive journey.”

However, stores are still underdeveloped, according to Berke, and almost half of consumers are frustrated with the digital in-store experience. 

DISE combines benefits of online digital media with in-store reach, though it is still a minority (and still limited to only 1-2 features, such as checkout), but it is on the rise, Berke said. Stores also don’t offer the same level of targeting and tracking retail media does with digital. But the potential and opportunity is there.

Berke believes the key to maximizing DISE is leveraging retailer mobile apps. Analysis from Tomorrow determined that the best in-store apps must reduce friction, provide value, empower community and be fun. 

Reduce friction
The No. 1 pain point for in-store shoppers is checkout, Berke said. Sam’s Club’s Scan & Go’s app functionality is a leader in resolving this. As of now, 35% of Sam’s Club’s members are using the app, and with the rollout of Sam's new computer vision walk-out aisle, that number is forecasted to reach 50% across all clubs. Another common way to reduce friction is using the app to help shoppers find items. The Lowe’s app is a good example of this by leveraging GPS mapping. 

Provide value
Grocery retailers in the U.S. are particularly leading in this department by leveraging their retail media infrastructure to drive in-store app promotional activity and boost spend for those customers. These top grocers are putting 20% of their promotional spending in digital-only value. “Whether it's a weekly digital deal or daily digital unlock, this is the fastest growing area of promotional investment,” Berke said.

Empower community 
This is how retailers help customers connect with each other and with educational or inspirational content. Berke thinks this is best captured by Sephora and its highly engaged Beauty Insider loyalty community, which drives engagement and multi-channel sales increases.

“What's so cool is how Sephora in many ways gamifies the experience of being a Beauty Insider,” he said. “The more customers engage, the faster they become a ‘boss.’ And as a boss in the beauty and cyber community, they’re unlocking more benefits.”

Be fun
This is a powerful element because gaming is not just fun, it’s actually a behavior modifier. Game mechanics and design are based on a psychological concept called the compulsion loop that basically means repetitive activities that unlock value and experience have a neural chemical effect like a dopamine hit.

Incorporating gamification is happening and growing in retail. Berke mentioned a cool program Dollar General ran last year where they created a Wordle-type unlock where every time you shopped at Dollar General, customers got a chance to play the game.

“What’s most important is for retailers to think up broadly about the functions that can benefit from this engagement,” Berke said. “But as I said at the start, one of the most incredible phenomena we saw in [his journey working at Walmart] was how our brand partners played such an important role in inspiring innovation.”