For decades, retail has been built on a simple model: headquarters thinks, stores executes. This model has structured an entire industry. He is disappearing.
The reality of retail is played out neither in strategic plans nor in centralized dashboards. It plays out on the shelves, at every moment, where a stock shortage, a poorly executed promotion or an imperfect planogram (1) can be enough to cause a sale to change or lose a customer.
Globally, these failures represent nearly $1.75 trillion in lost sales each year (2), or approximately 8% of retail turnover. For some brands, this can represent up to 4% annual losses (3). Deadweight losses are now avoidable. These figures reveal a reality that has long been underestimated: retail performance is first and foremost a question of execution on the ground.
For years, distributors operated their stores late. Sales data, one-off audits, field feedback… all useful indicators, but fundamentally incomplete and above all retrospective. However, in a store, each department, each product, each customer interaction generates data. However, until recently, this data was invisible.
A profound transformation is already at work. Artificial intelligence, the Internet of Things and computer vision now make it possible to continuously capture what is really happening in stores: product availability, compliance of planograms, effectiveness of promotions, customer flows. The point of sale ceases to be a black box; it becomes observable, measurable, understandable. And above all, actionable as soon as possible.
Moving from centralized intelligence to distributed intelligence
But the real breakthrough is not technological. It is organizational and it profoundly redefines the way in which retail is thought about and managed. It is precisely on this shift that certain technological players are today taking a head start, by structuring the building blocks necessary for a new intelligence deployed at the heart of the physical store, on the tiles.
Tomorrow, thanks to the new tools available to retailers, action recommendations will emerge from the field, in real time. When a shortage is detected, an action is triggered immediately, when a promotion underperforms, it is adjusted, when a customer flow evolves, the store adapts.
The store becomes an autonomous entity capable of maximizing product availability: detecting anomalies and adapting offers to local demand; to optimize commercial execution and generate new sources of revenue, particularly via in-store retail media.
The point of sale is no longer a simple fulfillment relay. It becomes an autonomous decision-making unit.
In other words, retail is switching from a centralized model to a distributed model. In this model, intelligence no longer only comes down from headquarters to the field. It circulates. And it is enriched by contact with reality.
This development marks a breakthrough comparable to the introduction of cash register systems or e-commerce.
Orchestration capacity will be the new technological heart of retail
This transformation is embodied in the emergence of digital twins for each store, or Digital Twins. Dynamic digital replicas, powered in real time by point-of-sale data, allowing not only to see, but also to anticipate, simulate and optimize. Ultimately, each operational decision can be tested virtually before being physically deployed.
In a context where nearly a third of consumers change stores when a product is unavailable (4), control of execution becomes a decisive competitive advantage. Retailers capable of controlling their stores in real time will not only do better. They will act by knowing precisely which lever(s) to activate to respond to a given problem at any given moment.
This change is based on an essential condition: the interconnection of technologies present in stores and the interoperability of data. Electronic labels, sensors, cameras, robots, connected carts… taken in isolation, these tools provide value. But it is their orchestration that creates the rupture.
Some brands are already starting to manage product availability or promotional execution in real time using these technologies.
Physical commerce is not disappearing, it is transforming. And in this new paradigm, the store will no longer just be the place where we sell: it will be the place where we understand, where we act, and above all, where we decide.
It is at the heart of the departments that tomorrow’s retail performance will be played out.
Pierre Fosseux
Vice President Hanshow France
(1) A planogram refers to the precise organization of products on the shelves (location, quantity, visibility), designed to optimize sales and the customer experience.
(2) Study by IHL Group – Report: “Retailers and the Ghost Economy”
(3) Gruen & Corsten Studies (FMCG world reference)
(4) “Retail Out-of-Stock Reduction (GMA)” Report
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