Connected goods will lead to 5 transformations in retail: digital shopping in brick-and-mortar stores, perfect trade promotions, optimal consumer engagement, drastic reductions in counterfeiting and food waste. All this by 2025? The biggest obstacle is the cost of change – technology is already mostly out there. Considering the current pace of digitization, it could be much earlier, showing the way to other markets. In China, some of these technologies are already widespread, for they were much needed.

On appearance, nothing has changed. And yet, a silent revolution for packaged goods has started: the connected products revolution – which is tagging a unique code on each product. All the products in the picture have something in common: they have a unique code, a different ID for every single product. We call them “connected products.” They are part of the “internet of things” for consumer goods.

Where is this unique code? It is integrated in the packaging via one or several of these technologies: RFID (“Radio-Frequency Identification”), QR-code (“Quick-Response Code”), Barcode, Data Matrix, NFC (“Near-Field Communication”) or just digits.

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Why should we have unique codes for every single product? So that consumers scan them to earn mileage points, verify authenticity, or access information, and so that professionals perform an inventory, track forward distribution or trace back during a recall.

This trend is gaining enormous momentum in China. And according to brands and experts, this is only the beginning of a retail revolution: within 10 years, the way we shop and consume could change drastically.

Prediction 1: Fully connected shopping in brick & mortar
Today’s business case – RFID at Decathlon. We already know that retailers use RFID  in anti-theft tags. Decathlon (one of the world’s largest retailers of sporting goods) does more: consumers place their basket at payment on the counter, which scans each RFID tag instantly and calculates the total cost within seconds. But there is much, much more happening behind the scenes.

The expert opinion – Thomas Frémaux (CEO – Embisphere): “RFID is the most significant innovation in retail since POS systems and the barcode standards. Many retailers today, such as Decathlon, have gone through the RFID revolution to deeply transform all of their operations: inventories, product returns, theft protection, cashier but also currently implementing logistic processes such as reception, picking and shipping from Distribution Center to stores or to customers for online orders. RFID is becoming a must-have to a successful omnichannel strategy. Still, many more transformations are yet to be developed, especially in the interaction with the consumer, who is increasingly equipped for connectivity. For example, we could imagine consumers interacting with products directly at the shelf for information, special discounts, advice & reviews. The limit is our imagination!”

Our prediction for 2025 – fully connected shopping. Smartphone payments are already becoming ubiquitous (Alipay in China, Apple pay elsewhere), and so are smartphone connectivity (QR-codes, Bluetooth, NFC) and connected stores (beacons). The shoppers’ smart devices could soon connect to the products that the consumer is considering, and display information and promotion deals. After that, the consumers could choose and pay their products as-they-go, and walk out the store without going through check-out & their waiting lines – as the anti-theft RFID detectors will know these IDs have been paid for.

Prediction 2: Perfect trade promotions
Today’s business case – Yili. Yili is China’s leading dairy product corporation. In 2011, they deployed supply chain traceability: products are tagged with a unique ID, and scanned in real time to track each transaction (from manufacturer to wholesalers to retailers). The purpose is to prevent wholesalers & retailers with preferential discounts to abuse the terms of their contract and resell their discounted products to non-discounted channels. Yili estimates that fraud cases have reduced drastically to less than 100 fraud cases per month and, that that they are able to resolve 75% of them (versus a much larger number of mostly unsolved fraud cases). The savings in the first year of implementation were already in USD millions.

The expert opinion – Julien Bourdiniere (CEO – Cap Gemini Consulting Asia): “Control of distributors in China today is still a major challenge: CPGs typically rely on hundreds of wholesalers, with complex incentive schemes that vary by channel, seasonality, and geography. Wholesalers excel at misreporting their sales to cheat those schemes, and individual product tracking becomes a key solution to provide a more accurate picture of the distribution and improve the efficiency of trade expenses. While most initiatives today are independent and disconnected, standardization of item identification and of tracking systems is a natural next step to fully integrate retailer and consumer operations. In other words, brands would know about every single transaction in real time: who buys, from whom, where and at what price. They could plan outlet-specific promotions with their retail partners in real time. In China, the most advanced players are already doing this, leveraging the stunning success of the QR code with Chinese consumers.”

Our prediction for 2025 – perfect trade promotions mean that every dollar of discount to distributors and retailers is optimized. This is mostly transparent for the end consumer but revolutionary for the commercial teams. For example, they may want to gain market share in a new booming retail chain and provide a 10% incentive for each product that distributors sell there. Or incentivize outlet universe expansions and provide discounts for products sold to a new account within the first three months. Or focus on consumer recruitment and provide a 15% rebate for the retailer if they successfully enroll a new consumer in their mileage program. Every combination becomes possible! Just like airlines are optimizing revenue management for every single seat, regular businesses will design discounts at item-level granularity.

Prediction 3: consumer engagement everywhere
Today’s business case – mileage programs are a staple of the marketing toolkit. The average American household is an active member in 9 different loyalty programs. They regained momentum in recent years thanks to dematerialization: consumers at check-out only need to identify themselves or show their Apple wallet. And yet, many large consumer businesses were completely out of the mileage program game because they do not sell directly to the consumers. This is changing thanks to unique codes: brands let consumers scan their products to join a consumer program and accumulate points for rewards, without ever facing them in person.

The expert opinion – Pierre Delfosse (Consumer Intelligence Director – Pernod Ricard China): “Direct connection to the consumer is a must-win battleground for brands in the increasingly competitive & sophisticated market. Those that do not sell directly to consumers can now leverage connected products as a workaround to offer digital marketing, mileage programs, last-three-feet promotions. This is a great fit with the Chinese consumers who are technology-savvy and engage very willingly in programs that are fun and create value. The digital landscape is increasingly integrated, easy to use and powerful. We can envision that in a few years, every interaction between a consumer and its product in the real world could extend in the digital world.”

Our prediction for 2025 – the end of mileage programs as we know them. Tools like WeChat and Taobao are all-in-one platforms where consumers can already pay, scan their products for information, and join brand mileage programs. It is only natural that engaging in a brand consumer program will become completely integrated with the shopping & consuming process. Effortless for the consumer, loyalty will be less and less about spam in your mailbox and more about targeted digital service in each experience with the product.

Prediction 4: The end of fear
Today’s situation – Chinese consumers are highly distrustful – when considering purchasing a product they fear quality problems, counterfeits, and look-a-likes. Although these are serious problems in China, in most cases, the level of concern is disproportionately larger than the real risk. That is a huge issue for the brand: doubt & mistrust will often stop a consumer from purchasing a product that is completely safe. This is why many brands offer consumers the capability to verify their products: a unique ID, a QR-code that can be scanned, hidden codes under scratch / after opening the package.

The expert opinion – Stéphane Monsallier (CEO – System in Motion): “In China, 20 years ago, we started to see stickers on products with which a consumer could call a hotline to verify a unique ID. Today they are relatively inefficient against counterfeiters duplicating an ID across thousands of fakes. Only relying on consumer calls, the system is not strong at quickly detecting and blacklisting these duplicated IDs. As a result, consumers lose trust in the solution and scan less, making the solution even less robust – a vicious cycle. Solutions that work today have two characteristics: 1) they rely on QR-code and 2) there are multiple scans in the supply chain for various purposes by distributors, retailers, and internal staff. It makes the supply chain transparent. Duplicated IDs are detected extremely quickly, often before the first encounter with a real consumer, creating a virtuous cycle of growing consumer trust, increased number of scans, leading to higher consumer engagement.”

Our prediction for 2025 – the unique IDs will be used for more and more features in supply chain, promotion, consumer program, transaction – and duplicated IDs will become detected more and more quickly, to the point that it will be virtually impossible to let counterfeit goods enter the system. Furthermore, checking the validity of the products’ codes will be integrated at each step, during which counterfeit IDs will be flagged, and so consumers will not need to proactively check their products – it will be part of the process. Counterfeiting will become an anomaly, and sometime after that, Chinese consumers’ fear will finally disappear.

Prediction 5: The end of waste
Today’s business case- Biedronka is one of the leading grocery retailers in Poland; they have applied the GS1 2D Databar on their own brands’ fresh produce. This special barcode contains information such as the expiry date, meaning that the Point of Sales keeps track of what goes out in real time – and by deduction what are the expiry dates of the remaining inventory. This allows better management of fresh produce inventory management, dynamic pricing to reduced waste, and superior consumer service & experience.

The expert opinion – John Keogh (President & Principal Advisor – at Shantalla Inc.): “An astonishing 15% of the global food supply is wasted at the distribution, market and consumption stages. This is why supply chain standards and, in particular, the GS1 Databar on individual items of fresh fruit and produce is invaluable.  Regardless of technologies deployed, using a common language such as GS1 standards, allows for seamless traceability and interoperability of products through the entire supply chain – enabling vital food chain transparency, which is an enabler of trust for consumers. The possibilities are vast: for example, we could imagine that in a few years many grocery stores using dynamic pricing for each perishable product to reduce waste. Apart from this, a novel approach is every shop that sells fruit and vegetables as well as every restaurant and home should have a blender or a mixer to make nourishing drinks; the last resort should be using fresh fruit and produce waste as compost!”

Our prediction for 2025 – the end of fresh produce waste in retail. Waste is an economic anomaly that can be avoided with better technology and process. Imagine all fresh produce uniquely identified and scanned during its distribution to manage freshness, quality, and value. Based on the expected shelf-life, the price of produce can be adjusted daily until each product finds a customer. Beyond freshness, size, quality we could factor many other characteristics that consumers care about (use of pesticides, fossil energy burnt during transportation, time spent ripening on the tree rather than during transportation, etc.). The market will demand safer food and traceability will accelerate change in the supply accordingly.

Note from the editors. This article was originally published in our Chinese edition, developed with Shanghai Jiao Tong University, SJTU ParisTech Review. We wish to thank the experts mentioned in the article:
Thomas Fremaux is the CEO of Embisphere. Embisphere helps customers deliver successful RFID projects thanks to its expertise in product design, consulting and tag offer.
Julien Bourdiniere is the CEO of CapGemini Consulting Asia, the Global Strategy and Transformation Consulting brand of the Capgemini Group in Asia.
Stephane Monsallier is the CEO of System in Motion, which provides IT solutions for growing businesses since 2004.
Pierre Delfosse is the Associate Director for Consumer intelligence at Pernod RicardChina. Pernod Ricard is the world’s leader in the premium spirits industry.
John Keogh is President and principal advisor at Shantalla, providing advisory services in private-public partnerships, traceability, food safety, global standards, and innovation.

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