How The Internet of Things is Revolutionizing Retail: Interview with Craig Cotton

 
Glenn: Hi, everyone. I’m Glenn Gow, Founder & Advisor of Crimson Marketing. Welcome to Moneyball for Marketing where we talk about the incredible changes happening in marketing organizations around big data and marketing technology. We feature marketing technology insights from the top marketers in the world. The reference to Moneyball is from the story of how the Oakland A’s baseball team were able to win and win and win because they figured out how to use data and technology to their advantage. If you’d like to learn about how to use big data and marketing technology and marketing to help you win visit us at CrimsonMarketing.com or email us at info@CrimsonMarketing.com. And now on to our podcast.
Today I am very pleased to welcome Craig Cotton, Vice-President of Marketing and Product Management at Impinj. So what does Craig do? He leads the marketing and product management teams at Impinj. He’s responsible for corporate, brand, and product marketing as well as leading the strategic direction on market interest and requirements to inform product development. So what does Impinj do? This is how Impinj describes themselves. “We work at the intersection of big data and the Internet of things to identify, locate, and authentic billions of items. Impinj’s mission is to deliver intelligence about items by wirelessly connecting everyday items.” So Impinj captures real-time information to help organizations make better decisions and enhance consumer experiences. Craig, it’s a pleasure to have you here.

Craig: Thanks, Glenn. I’m happy to be here.

Glenn: We were talking earlier about a topic I found fascinating which is how online retailers can learn so much about the buyer and how they think and what they buy and why they buy it because they have digital information about those buyers and how brick and mortar stores have unique opportunities to do different data collection and learn different information about consumers. So I’m very interested in hearing what’s happening in this world of brick and mortar stores and what they’re doing with their data.

Craig: Yeah, well most brick and mortar stores also have an online presence these days. You have to, for the most part, to be in business. So they can see what data they get from their online shoppers. They get a little taste of it. You alluded to it, they know every move I make, every item I look at. They know my size and all of my preferences and, in fact, they use that to make recommendations to me using advanced analytics tools that will help increase the revenue and the sales for somebody online.

Glenn: And I think most buyers appreciate that.

Craig: We do. Yeah, we like to talk about privacy, this and that, but we’re also willing to—if we can provide information or get an app that will save us money most consumers want to do that as well. But that same brick and mortar retailer for their store presence they don’t even know when their shoppers are in their store. Right.

Glenn: Right.

Craig: Pick your favorite retailer, they have no idea that you’re even there. They don’t know what your preferences are, they can’t recommend anything to you until you or if you engage a sales associate and then it’s still, unless you’re a regular and you come back all the time, it’s still starts out as a very generic relationship.

Glenn: I was going to say, Craig, sometimes you’re in the store and you wish there was a sales representative around to help you. So they really don’t know you’re in the store.

Craig: I don’t know. I don’t want to speak for most males, but if I’m shopping for clothes I would love them to have the data they have online and have somebody walk up to me with the item that I’m most likely to buy. How nice would that be?

Glenn: Right.

Craig: So they want to do that moving forward and get that intimacy when you’re in the store, but the news is help is on the way and there’s technology to start to do those things and I think there’s an appetite on both the part of the retailer as well as the consumer for those solutions.

Glenn: Well tell us a little bit about this world of RFID and how that plays into data that’s relevant for the retailer.

Craig: Yeah, so I don’t think we’ve talked about RFID on this call yet, but it stands for Radio Frequency Identification and it’s a little integrated circuit tag that’s smaller than a grain of sand. I mean these chips these days are really tiny, they’re very low cost, and they have the ability to store information about items. It could be healthcare items, it could be manufacturing parts on an assembly line. If we’re going to stay in a retail context it’s the—if it’s an apparel item it’s the size, it’s the price, and it’s the SKU or what’s called UPC number and things like that. If it’s something that’s more of a food item or a drug or something it could include things like expiration dates. If it’s electronics it could be when something has sold, the end of warranty date. So if an item comes back a year later I can tell if it’s under warranty or not. And on the front end of the process it helps retailers manage their inventory and their supply chains. It surprises a lot of people that we speak to that the average retailer—we’ve all been in a store and we’re looking for the shirts in a size large and they go to the computer and they say, “The computer says we have two of them in stock.” What’s surprising to most people is that the average retailer that is only 60 to 70 percent accurate.

Glenn: Wow.

Craig: I think before I was involved in this technology my assumption, which was incorrect was that it was 99.9 percent accurate, but it’s not and the reason being is that they don’t have the data, the wherewithal, the technology to do that, but now with our RFID tagged items it’s cost-effective enough maybe 10 or 15 cents per item is a general ballpark they can now have these tags hanging that can allow me to take real-time inventory on a regular basis and that unlocks something they like to call Omni Channel Inventory Management which is simply if you go in and you’re looking for that shirt in a size large they can be searching their warehouse and simultaneously every single store within their global operations looking for that and if you happen to be looking for the very last size large and if it’s in a store in Des Moines, Iowa they want to be able to sell it to you. In fact, the last item, according to Macy’s they recently stated that at any given point in time 15 to as much as 20 percent of the global inventory are these last individual items which was—I agree with you, Glenn, the 60 – 70 percent accuracy is pretty staggering for the average consumer that isn’t familiar and then this 15 – 20 percent unique items the point that they made was the buyer for that item—and often they’re not a size medium or large, it’s the extra-extra-small or the XX kind of odd sizes. They might not have a buy for that extra-extra-small shirt in Des Moines, Iowa, but they certainly do around the globe or around the country and they really need to be able to sell that to you to keep up with the likes of Amazon and these other kind of shopping experiences which are much more sophisticated.

Glenn: Well, it’s interesting because I have an asset. I have this huge inventory, but I have to be at the right place at the right time when a buyer shows up. And I can do that digitally, and now that capability is starting to become available in brick and mortar. Now granted you have to ship it, but nonetheless you can say, “I have that extra small and I can get it to you quickly.”

Craig: That’s right and shipping is just becoming a cost of doing business. Most places do it very low cost or for free these days and it’s just kind of built into the pricing structure, but it really kind of opens up the whole IOT thing, our element of this–
Glenn: That’s Internet of Things for our listeners.

Craig: Yeah, Internet of Things and I’ve been told that got started in the late ’90s at Proctor & Gamble and they were talking about let’s say a bottle of Tide literally being attached to the network to do some of the things that we’ve just been speaking about and what’s really happening out there, it’s wonderful and fantastic and there’s 10 billion devices connected to the Internet, but they’re not everyday things they’re generally speaking expensive powered devices.

Glenn: Right.

Craig: So with these kinds of we call them item intelligence technologies built on RFID it gives me the ability for the first time to really attach everyday low cost items, just about anything to the network.

Glenn: Tell me a little bit about how accurate I can get. Can I tell where things are inside a store?

Craig: You can. So that would be—the technology can generally give you the identity or is it in the store and that’s very simple and then a little bit more sophisticated but absolutely possible are what are the actual X and Y coordinates of that item and the state of the technology today is we can give you the location of an item within about a meter and a half, within about five feet as a worst case and often a little bit better. So you know, kind of extend out your arms and for most people that’s about a five-foot span and that’s the distance at which we can identify items.
Glenn: Wow, that’s much better than, “It’s on aisle 13, go find it.”

Craig: Or that’s much better than, “The computer says I have two in stock I have no idea where they’re at.” ‘Cause now I can grab a tablet or a smartphone with a little map kind of application and I can kind of Geiger counter my way directly to that item that you might want to buy. It might be in the wrong department. It might be you’re looking for Polo and it got stashed in the Tommy Hilfiger section and without this technology if it’s that last item you would never find it that way.

Glenn: Very interesting. Now, you also told me a story about something I never really imagined before which is about let’s call it the usage of an item even before it’s purchased and what retailers are learning by what people do with an item.

Craig: Yes, so there are increasing companies in the market that are providing retailers all kinds of store analytics, traffic patterns, the number of customers coming in, and things like that. It gets into some of the plan-o-gram things how many people stop to look at this end cap which is this valuable space, but what they’ve been missing—we’ve met with several of these companies, what they’re missing is they don’t know which items the shoppers have in their hand or in their baskets or in their carts, so the ability to kind of track that level of information is quite powerful as well and there’s many use cases for it. One is a brand owner or a retailer when it comes to jeans it might be nice to know every manufacturer or brand owner of jeans has five or ten different styles of jeans and nobody knows—they all know how many of each are sold, but nobody really knows how many of each are tried on and if I knew how many time a pair of jeans let’s say were tried on versus how many time they were purchased that could lead to a new metric of a conversion rate of purchases based on the number of try ons and I might have two models of jeans they sell the same amount, but one of them takes 40 percent more try ons to reach that level. So what could retailers or brand owners do with that type of data?
Another quick example is in the plan-o-gram example is that–

Glenn: I’m sorry, Craig, for our audience could you tell us what a plan-o-gram is, please?

Craig: Yeah, it’s just the map of the store and where the items are located and often let’s say in a grocery store next time you’re in a grocery store look at the items that are at the eye level and look at the ones that are at the bottom towards the floor and there’s a very definitive kind of rules and methods and procedures that figure that out including the ones at eye level that brand has paid some kind of renumeration to that store to be at eye level, that’s the choice position.

Glenn: Right.

Craig: That’s kind of plan-o-gram type of stuff and the end caps are coveted. So imagine a Walmart or a Target type of store and the end caps often those are rented space or some other types of ways to get my items placed there and then when items are sold though I don’t really know the efficacy of that. Usually those items are duplicated in their standard place in the store as well and all I see at the end of the day is the sales data, but with this kind of intelligent inventory tracking technology, based on RFID, I can see—I didn’t mention, these 10 – 15 cent tags every single one of them has a unique number that’s never repeated. So I could quite easily see when the item is sold and then based on the unique item of the item and the technology that tells me where the item was within a meter, a meter-and-a-half I can now know as the brand owner or the retailer what percentage of the items were sold from that coveted end cap space versus the standard and if I were the brand owner and if 90 percent of my items were sold from the standard aisle in the store it might not be worth it for me to spend extra money or do promotions to gain access to that.
Or conversely, for the retailer they might be—you could imagine where they could tell them some kind of ABCDE or some other kind of a 1 through 10 ranking system based on these end caps and they could say, “Oh, if you want this end cap you have to pay us this amount. And if you want this one we’ve got historical data to show the efficacy of that one. That’s our most coveted one and it’s going to cost you more.” And today they’re largely flying blind or they’re using clipboards or video cameras to kind of monitor that traffic. So nowhere near the data that they could gather or the trending analysis they could do with that data over time.

Glenn: Fascinating. You also told me a story about smart fitting rooms. Tell us about that.
Craig: Yeah so we’re starting to see these come to fruition and the concept is based on the items that I bring into a fitting room. There are several things that can happen. Number one, I can on a simple display in the fitting room I can show you information about those particular items and in our demos that we’ve done we just cycle through them. So we do two monitors, we show all of the items on the bottom and then we cycle through the items on the top.
So you’re no longer, as a brand owner–when I say a brand owner for those that might not know I’m talking about let’s say Levi’s is the brand owner that might get sold at Sears or Macy’s or something like that. So now if I’m Levi’s I can control the messaging. I’ve got a captive audience in the fitting room and I could be better selling you the attributes of the items that you might be trying on and I’m not reliant on the store associates that may or may not be able to represent my brand. So that’s one key aspect. That can easily be a touchscreen and with intelligent inventory it could have a little icon that says, “Click here for more sizes.” So I was a little bit ambitious and I need a larger size jean than I brought into the fitting room and I can see what’s available and I can click on that and then that could send a message, in real time, to an associate with a smartphone app or a tablet or something and they I go get those jeans and go bring them to you to provide better customer service.
Also the stores are quite interested based on, let’s say I brought seven items in. I can’t guarantee that I can sell you an item that you didn’t bring in, but I can guarantee that I can identify the item that has the best chance of that buyer purchasing that item based on the other seven items that they brought in with them, based on trend and analysis. It’s pretty straightforward stuff these days. So the ability to make some suggestive selling ideas and it might be a hat that matches the coat or it might be something completely random that they just have the trending data that says, “I know that since you brought in these seven items that there’s a 36 percent chance that if I show you this item then you’re going to buy it as well.” And that’s–
Glenn: I’m sorry, I just wanted to say that’s probably something very familiar to our audience who uses Amazon. Right? Because they are very effective at saying, “People who purchased this or looked at this item also purchased this,” and now you’re saying in a brick and mortar environment I have an opportunity to do the same thing.

Craig: That’s right. So there’s this desperate desire to bring that kind of level of customer service and intimacy and knowing your customer and then at the same time increasing some top line sales as a result is starting to come to fruition.

Glenn: So, Craig, I want to ask you one more question because we’re almost out of time and it has to do with the future and you told me a story about where this is going in terms of what if I had an RFID tag on my keychain with my preferences on it? What might that world look like?
Craig: I think there’s all kinds of things. Many of us have, the supermarkets many of them use these customer loyalty cards and others are as well. So you might imagine this little plastic thing key fob. So the first you would do earlier we mentioned how when you walk in the store they have no idea that you’re there, but with a very low cost passive device, it’s got no batteries in it or anything like that that you choose to put on your keychain they’ll know you’re there and if you happen to be a very good customer and they know you’re there they might do things quite differently.
If I can shift for a moment. I can imagine certain retailers where men or women spend a lot of money they would have their personal shopper come out and greet them and in the background they might have other folks going and grabbing some new items that they know based on past histories that they might be interested in. More maybe not so retail or fashion or apparel, imagine you’re walking down the aisle at your favorite supermarket or general goods store and let’s just say that I am Proctor & Gamble, I think they do Tide I’m pretty sure–

Glenn: They do.

Craig: And I could pay the retailer a small amount to put marker tags on all of the merchandise and then when you walk down the aisle they could be detecting that I’m in that aisle either through that low cost tag, a little preview of the future is your mobile phone in a few years not right now, will probably read these types of tags, and it could do a really quick query and analysis to say, “Hey, Craig, you used to buy Tide a lot. Craig hasn’t bought Tide for more than six months.” So Proctor & Gamble could very quickly in real time pay let’s say that retailer 50 cents to put a $1 off coupon on my mobile phone.

Well, how does it know to do that? Well, let’s say this example is Target and I’ve got the Target app running on my phone and I’ve opted in because I get coupons and people like to save a couple bucks here and there so if I don’t want that and I want to maintain my privacy then I don’t have to have this key fob, but I don’t have to my target app up and running, but if I do opt in then I see a $1 off coupon and then if I do buy that Tide maybe they pay Target another 50 cents. So Proctor & Gamble’s happy they’ve got me back on the Tide bandwagon, Target is happy they just got an extra dollar, and I’m happy because I saved a dollar on Tide so I’m going to come back again to Target next week for my shopping. And then I’m happy because I just saved a dollar. There’s just no losers in this Glenn. It’s just a beautiful thing.

Glenn: I’m loving the future, Craig. I’m loving it. Hey listen, we are out of time. Thank you so much for sharing those examples with us, both the current state and where we’re going with this. It’s fascinating that with data we can do so many things to help both, like you said, the consumer, the brand, and the eventual seller of that product. So thank you so much for sharing this with us.

Craig: My pleasure.

Glenn: If you like this podcast please subscribe and rate us on iTunes and tell your friends about us. You can also go to our website, CrimsonMarketing.com, and sign up for our free monthly newsletter featuring the very best of our marketing insights, featured Moneyball for Marketing podcasts, and one of our favorite features called, “Bad Marketing,” or email me at info@CrimsonMarketing.com. Thanks for listening to Moneyball for Marketing from Crimson Marketing. Have a great week and let us know if we can help you in any way.