Everywhere, Embedded Commerce in 2023

EVERYWHERE, EMBEDDED COMMERCE IN 2023

FUTURES BY FRACTAL | GLOBAL RETAIL - MODULE 2 | JANUARY 2023

PRIMER

Everywhere commerce is an evolution of multi-channel commerce. Retailers are not only designing experiences for where consumers are present but further for products and services to fit seamlessly into the lives of people instead of the other way around. Many retailers are digitizing several aspects of the shopping journey, from front-end experiences such as discovery to back-end functions like supply chain management. Social media and entertainment platforms are improving their features to turn themselves into marketplaces. As a result, people are shopping while working out, working, driving, traveling.. just about anytime, anywhere. However, there have been speed-bumps with the adoption of E-commerce. E-commerce did not achieve the expected growth and revenue that was predicted during the pandemic. Retaining consumers has proven to be difficult, with ineffective, high-spend consumer acquisition and increased privacy regulations. Macroeconomic contexts of rising inflation and a recessionary environment are also impacting spending habits. Amidst these shifts, we envision an opportunity for Everywhere, Embedded Commerce; where buying and purchasing feel more organic to the consumer, as opposed to the intrusion or inconvenience ads can feel like today. With cohesive integration across channels and the presence of hybrid stores, the entire process can be experienced more naturally. In the following pages, retailers can learn about integrating Everywhere, Embedded Commerce into their everyday ops without the upheaval of their existing business model.

"Now, E-commerce sales are plateauing as shoppers return to physical stores. The share of total shopping that is represented by E-commerce grew from 11.1 percent in 2019 to 14.6 percent in 2020, where it's stayed"

-Excerpt from the Washington Post, 2022

Everyone kind of bought into the myth that E-commerce is going to permanently accelerate. But in order for that to happen, you have to have a fundamental change in behavior... -Andrew Lipsman, Insider Intelligence Analyst for Retail & E-commerce

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Everywhere, Embedded Commerce in 2023

KEY TRENDS

1 2 3 4 5

RETAIL STARTS IN ONE CHANNEL, ENDS IN ANOTHER

CONTENTS In this

PHYSICAL STORES AS HOTSPOTS FOR EXPERIENCE

TRANSPARENCY THROUGH INTER-CONNECTEDNESS

ENGAGEMENT TO GO HAND-IN-HAND WITH EMOTIONS

document:

MICRO-COMMUNITIES: CHANNEL FOR THE FUTURE

EVERYWHERE, EMBEDDED COMMERCE IN ACTION

BEHIND THE SCENES *

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Everywhere, Embedded Commerce in 2023

EVOLUTION OF E-COMMERCE

3.0: Everywhere, Embedded

Now is the time to go beyond everywhere to everywhere and embedded commerce . Here, products and services will be made discoverable and buyable directly from the source with embedded payment options. Retailers will be able to tap into first-party consumer data to personalize user experiences in the phy-gital world. Physical stores will become hotspots of experience with pop-up stores, digital fitting rooms, magic mirrors, and cashier-less checkouts.

2.0: Omni-Channel

With everywhere commerce , retailers reached out to consumers wherever they were through various channels: in person, through mobile applications, social media, and voice capabilities. Boundaries between brand outreach, user-generated content, social

1.0: Multi-Channel

The traditional brick-and-mortar gave way to electronic-commerce as retailers set up online businesses. Prominent among these became direct-to-consumer channels (DTC) where businesses could reach out to the consumers directly, removing any middlemen.

media platforms, retail stores, and E-commerce stores began to blur.

6. SHOPPING ON TIK-TOK

1.WARBY PARKER

4. BED BATH AND BEYOND ADOPTS CURB-SIDE PICK-UP

Where we're headed

7. BURBERRY X MINESCRAFT

In the last ~5 years

2. DOLLAR SHAVE CLUB

8. AMAZON STYLE'S REIMAGINED FITTING ROOMS

5. GUCCI UNVEILDS IN-APP AR TOOL

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Everywhere, Embedded Commerce in 2023

WE STUDIED AND ANALYZED:

Across 3 continents,

800 participants in a behavioral survey

15 interviews with industry experts

6 interdisciplinary workshops mapping the future of Retail

10 in-depth interviews with shoppers

20 store visits & 12 brand audits

TO DERIVE INSIGHTS, FRAMEWORKS, AND RECOMMENDATIONS FOR RETAIL 2023 & BEYOND

Click for process details

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Everywhere, Embedded Commerce In 2023

01 02 03 04 05

RETAIL STARTS IN ONE CHANNEL, ENDS IN ANOTHER

How might retailers accurately identify where an individual is physically & cognitively to create cohesive, contextual experiences?

PHYSICAL STORES AS HOTSPOTS FOR EXPERIENCE

How might retailers reimagine physical spaces to be experiential, functional, brand-reinforcing and purposeful?

TRANSPARENCY THROUGH INTER-CONNECTEDNESS

How might retailers build visibility, assurance and accountability across touchpoints?

ENGAGEMENT TO GO HAND- IN-HAND WITH EMOTIONS

How might retailers trace and leverage behavioral markers to create omni-channel presence that maps to dynamic purchase journeys?

TRENDS TO OPPORTUNITIES

MICRO-COMMUNITIES: CHANNEL FOR THE FUTURE

How might retailers identify, integrate and innovate with core communities?

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Everywhere, Embedded Commerce in 2023

KEY TRENDS TO WATCH FOR

Drivers of growth in the world of embedded & experience-led commerce

Back to contents

Everywhere, Embedded Commerce In 2023

TREND 1

RETAIL STARTS IN ONE CHANNEL, ENDS IN ANOTHER

physical and digital *

Fig 1.A

Blurred lines between

DESCRIPTION

Immersive and embedded experiences are growingly attractive to shoppers; reimagining the physical store can provide a clear path for consumers to smoothly transition from the store to digital channels, and back to their present setting. A compelling omni-channel offering is a requirement for survival but just being present isn't enough. Retailers will need to match the expectation consumers have for novel experiences. Novelty can come in the form of high-tech immersion, high-functionality and/or high-connectivity.

out experience *

Frictionless dip-in-dip

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Everywhere, Embedded Commerce In 2023

STORIES IN FOCUS

Fig 1.D

Starbucks Rakes in $2.1 Billion in Reward Revenue -Motley Fool (2022)

Starbucks

Fig 1.B

Nordstrom

Consumers accumulate points when they make purchases with a Starbucks card. Their recent integration with Spotify allows shoppers to view the songs played at Starbucks and to add them to their playlist on their devices. Direct & indirect rewards as a mechanism of relevance.

Nordstrom integrated physical and digital with the launch of online order & pick-up at their stores. They expanded their store fulfillment capability to meet the rising demand for BOPIS* and curbside pick-up. The company's revenue grew further as it integrated its store, fulfillment centres, and online inventory to create a cohesive experience.

My Disney Experience aims to be used for bookings and itineraries; the MagicBand (RFID chip-enabled wristbands) connects functional aspects such as access to theme parks, hotel rooms, fast pass lanes but also for moments of delight while makes purchases. Disney

Fig 1.E

Fig 1.C

Nearly 1 out of 5 online merchandise orders placed this holiday season globally were by customers using BOPIS* -Salesforce (2022)

* Buy Online, Pick Up In-Store

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Everywhere, Embedded Commerce In 2023

PHYSICAL STORES AS HOTSPOTS FOR EXPERIENCE TREND 2

Fig 2.A

only stores *

DESCRIPTION

No more retail-

Instead of just purchasing products, hybrid retail stores can provide consumers with a comprehensive, all-in-one experience.

It's important for Retailers to identify and own a strength (read differentiator) rather than trying to do a little of everything. Different consumers would look at a store from different perspectives based on the intention they shop with. Some would want a functional store where they can quickly finish shopping while others might look for embedded experiences.

Identify and reinforce reason for existence! *

When in doubt, dominantly functional with a hint of novel is a sound strategy that connects with several consumer segments across categories today.

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Everywhere, Embedded Commerce In 2023

STORIES IN FOCUS

Having faced setbacks and losses in response to competition from the likes of Amazon, it is preparing for a comeback as more people gravitate towards physical stores, this time bringing the familiar with more contemporary offerings of community spaces & coffeeshops; and leaning into the identity of "the third space". Barnes and Noble

A store boom: Retailers in the US have announced 4,432 store openings versus 1,954 closings - Insider Intelligence (2022)

Fig 2.B

Story is a 2,000 sq. ft pop store in Chelsea, New York that reinvents itself every 4-6 weeks. It blends the format of a magazine, exhibition, museum, and retail store with storytelling. Artifacts are selectively hand- picked to create an ever-changing, high social currency experience. Story

Paper Source

Fig 2.E

Fig 2.C

Walking into this stationery store is like walking into Pinterest. I love stores like Paper Source, and also Christmas markets Christkind Market such as pottery markets and farmers markets. One wants to buy from such pretty places for it feels so intimate and beautiful – 27 years, Female

Fig 2.D

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Everywhere, Embedded Commerce In 2023

Single source of truth for inventory and orders * Making intangible, behind the scenes touchpoints more visible * TRANSPARENCY THROUGH INTER-CONNECTEDNESS ACROSS THE VALUE CHAIN TREND 3

Fig 3.A

DESCRIPTION

Retailers will be able to provide transparency and clear communication across all channels by providing information about all inventories on online and physical platforms. Data-driven fulfillment ensures that products are well merchandised, of quality, and ready to meet shopper demand, with relevant, contextual tracking details. All consumers understand that friction is natural, but don't want their loyalty to be taken for granted. The time between negative experiences and negative media is small. Accountability means owning up to past mistakes and being proactive with ongoing experiences to prevent surface-level customer/employee complaints becoming public trust & reputation crises.

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Everywhere, Embedded Commerce In 2023

STORIES IN FOCUS

Unilever was one of the first to commit to greater transparency and transformation. As early as 2018, Unilever announced its push for transparency in influencer marketing, in the larger digital space and its increased capabilities in measuring impact. They publicly provided a list of palm oil suppliers and grievance reports. Unilever

Fig 3.E

LVMH LVMH has developed blockchain technology to track luxury goods and fight counterfeit sales. Louis Vuitton and Parfums Christian Dior are the amongst the first brands to use LVMH’s blockchain platform - ‘Aura.’

Consumers are not shying away, in fact are incentivized and validated to post grievances, big and small on social platforms (Linkedin as the latest platform of choice despite being a professional network!). Bitter experiences with businesses while often short-lived, are placed in high visibility spaces with the potential for bad PR and lasting collective- digital memory. Airing grievances on any & all public platforms Fig 3.B

Fig 3.C

Aura, a blockchain consortium has now created more than 15 million digital tokens that connect luxury products to a data portal.

- Euro News (2022)

Globally, 54% of people had a more favourable view of brands that responded to customer service questions or complaints on social media. -Ledgeview Partners (2021)

Fig 3.D

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Everywhere, Embedded Commerce In 2023

ENGAGEMENT TO GO HAND-IN-HAND WITH EMOTIONS TREND 4

Fig 4.A

* *

Purchase decisions driven by context, values & identity Hidden moments of connection emerge inter-channel

DESCRIPTION

Consumer purchases are driven by context and mental models, behavioral analytics can be used to decode emerging consumer micro-moments. The consumer journey will differ for each category and will be based on not just demographics but psychographics and shifting situational factors. If retailers aim to stay relevant in the fast-changing lives of their consumers, they could start by identifying inter-channel moments that matter, as consumers growingly experience physical & digital interchangeably and all at once.

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Everywhere, Embedded Commerce In 2023

Lululemon has a strong social media presence and is one of the pioneers of the athleisure industry. They have an experiential store in Chicago that boasts of many fitness studios and a fuel bar with healthy food and smoothies. There is also space for their consumers to try out gear at different classes (in-context). Lululemon "In stores, traffic increased nearly 25%. The digital business, traffic to our E-commerce sites and apps globally increased by nearly 50%. This speaks to the strength of our Omni operating model." Lululemon CFO Meghan Frank

STORIES IN FOCUS

Fig 4.C

Ikea

Fig 4.D

A visit to the IKEA store is deeply immersive with so much for all age groups to see, touch, feel, and experience throughout the store. A cafeteria is intentionally placed in the middle of the shopping journey to give pause. Their planning studios allow shoppers to explore and make informed purchases with consultation, curation and visualization.

Trader Joe's

Eager-to-help employees in colorful shirts, handwritten signage, limited-run experimental products, glo-cal flavor combinations and curation of products to resemble that of a boutique store among others are some of the ways Trader Joe's remains a shopper favorite.

E-commerce share of sales increased from 18% to 30% as IKEA transformed its stores to also serve as fulfillment points, revamped its website, and continued its rollout of the Ikea app -Retail Dive (2021)

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Everywhere, Embedded Commerce In 2023

Authenticity and Relatability as levers * Go-to-community over Go-to-market * MICRO- COMMUNITIES: CHANNEL FOR THE FUTURE TREND 5

Fig 5.A

DESCRIPTION

Look for opportunities to redefine marketing by identifying, integrating and innovating with niche communities and superfans. Consumers want brands to feel authentic and relatable; to address not just a sense of value but a sense of belonging. By curating strong communities with existing consumer sets based on shared identity or interests, retailers will be able to emerge stronger than ever. Creator communities or fan communities foster bonds and have a deep-rooted impact as consumers do for eachother what no marketing campaign could - they teach, learn, exchange, empathize and in doing so, create new meaning & utility for products.

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Everywhere, Embedded Commerce In 2023

STORIES IN FOCUS

Airbnb has roughly 5.6 million active listings in 220 countries, and 60% of its users are millennials.

Fig 5.D

- The Zebra (2023)

Airbnb

Airbnb has created successful and strong communities by virtue of converting homes into luxury stays with a personal touch, building relationships and learning about different cultures. The company also started 'Airbnb Experiences' which are activities designed and hosted by locals.

Fig 5.E

Lego

Fig 5.B

Harley Davidson launched the Harley Club which gave exclusive benefits to members such as special insurance coverage, access to events and other riding perks along the way. Harley Davidson

Lego nurtures a product community. Through its Lego Ideas project, it asks fans to submit construction ideas and the selected ones can be found on the shelves. Consumers are not just participants but also co-creators of Lego designs. Lego Ideas has approximately 1.5 million members who have submitted more than 33,000 project concepts. 30 co-created kits have been brought to the shelf so far!

Fig 5.C

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Everywhere, Embedded Commerce in 2023

ILLUSTRATIVE DIRECTIONS TO WIN IN 2023 & BEYOND

OPPORTUNITIES

1 2 3 4 5

How might retailers accurately identify where an individual is physically & cognitively, to create cohesive, contextual experiences? How might retailers reimagine physical spaces to be experiential, functional, brand- reinforcing and purposeful?

NOW (~1 YEAR) Shelf analytics 2.0 using synthetic data Behavioral segmentation to decode the purchase journey Optimized search engines and user interface NEAR (1 TO 3 YEARS) Two-way digital communication using AR-VR, 3D techniques Contactless transactions & checkout- free stores

KEY TRENDS Trends that go un-leveraged can become threats, turn them into opportunity instead.

How might retailers build visibility, assurance and accountability across touchpoints?

How might retailers trace and leverage behavioral markers to create omni-channel presence that maps to dynamic purchase journeys?

NEXT (3 TO 5 YEARS)

How might retailers identify, integrate and innovate with core communities?

Implementation of Holograms and Web3 Gamified research or simulations in the metaverse Experience stores & immersive purchase made more commonplace

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Everywhere, Embedded Commerce in 2023

EVERYWHERE, EMBEDDED COMMERCE: PLAYBOOK SNAPSHOT

Fractal Futures Toolkit that leverages AI with Engineering & Design

Back to contents

Fractal Futures Toolkit

Everywhere, Embedded Commerce in 2023

02 ROLE OF DATA AND AI EMBEDDED COMMERCE IN 01 CONVERSATIONAL AI IN OMNI- CHANNEL ENGAGEMENT 03 RELEVANT AND DEEPLY CURATED CONTENT TRANSPARENCY THROUGH SINGLE SOURCE OF TRUTH

04 Efficient search engines on brand websites and a smooth click experience from app to website to aggregator platform is key to creating seamless integration Pick-up, exchange and return processed can be further streamlined across channels to reduce friction even after a sale is done INTER-CONNECTEDNESS BETWEEN ONLINE AND OFFLINE CHANNELS

Seamless engagement can be created across channels by leveraging AI chatbots, reducing human effort Ex. A consumer who is looking for a product on an app can be easily directed to physical stores by communicating availability and offers through a chatbot

Data orchestration across retail functions should represent one cohesive experience that aims at building consumer trust

Personalization beyond demographics can help retailers use relevant and appropriate engagement tactics Other data points beyond consumer data remain under- leveraged; opportunity to drive communication that is hyper- curated without feeling creepy or intrusive

via transparency

Robust data strategy and governance can help ensure a smart and efficient supply chain with the implementation of Responsible AI

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Fractal Futures Toolkit

Everywhere, Embedded Commerce in 2023

DRIVING TRANSPARENCY & VISIBILITY WITH AN ALIGNED SOURCE OF TRUTH Data centralization and AI predictions should represent a cohesive business strateg; can help comply with Responsible AI guidelines

Cross-functional ownership and KPIs • Cost to serve • Perfect order • Net promoter score • Environmental, social, and governance (ESG) performance • Order cycle times 02 Integrate predictive modeling with operational execution AI/Robots Human Adaptive

Use Case-Driven Capabilities Visibility and performance management • KPI dashboards

• Near real-time data • Search and report Predictive alerts

• Business rules-based logic • Alerts with severity levels • Key performance “predictors” Rapid response • Optimization analytics • Simulations & What If scenario planning • Root cause analysis Optimization and E2E orchestration • Deploying information and action plans

outside a company 03

Robust data strategy and governance Ingest a wide range of structured and non-structured data within and

• Execution compliance • Collaborative execution

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Fractal Futures Toolkit

Everywhere, Embedded Commerce in 2023

BEHAVIORAL MARKERS TO CAPTURE DYNAMIC PATHS OF PURCHASE FOR FLUID SEGMENTS IN THE MOMENT

IMPLICATIONS

What matters to people changes dynamically; locking them into a wrong path will lead to friction and missed opportunities Consumers from the same demographic group can fall into different behavioral segments; the same consumer can operate with different purchase rules Path to purchase is driven by Context X Category

RECOMMENDATIONS

Run experience audits (ex. video analytics, in-store walk throughs) to unlock hidden moments of delight, discovery and evaluation Play to strengths. Leverage a data-driven strategy to decide which channels to own, instead of trying to be present in all Step away from traditional routes, cater marketing to merchandising in the naturally primed shopping environments the person is in Leave breadcrumbs between the digital Assess behavioral indicators at each step in the journey, leverage data to capture emotional markers, decode micro-moments, and adapt offerings and physical

Illustrative Snapshot of:

2 consumers from the same target segment with distinct purchase journeys. Context x category -> Active Mindset

The same person has a different journey with a different context Two people in the same context have a different journey

Physical & digital co-exist in a messy overlapping way, they are not distinct for consumers anymore

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Everywhere, Embedded Commerce in 2023

GET IN TOUCH

As you craft your way ahead, we would love to engage more deeply in a conversation with you to discuss: Building resilient Retail organizations by powering every human decision in the enterprise Leveraging customer analytics spanning across acquisition, engagement, retention, and growth Improving the Inventory ROI and profitability by enabling intelligent merchandising decisions across Plan to Sell cycle Enabling an insight and demand-driven supply chain by leveraging advanced analytics and intelligent automation Helping boost sales, and productivity to reduce costs across every facet of store operations Operating in today’s ‘Data Economy’ using a Modern Data Estate

Questions, thoughts, ideas?

Let's talk: Retail@fractal.ai

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Everywhere, Embedded Commerce in 2023

You just finished Module 2: Everywhere, Embedded Commerce Thank you for reading!

Module 1: Navigating to Win in 2023

UPCOMING MODULES......

WHAT'S IN STORE

Module 3: Retail Health

Module 4: Environmental, Social and Governance (ESG) in Retail

Module 5: Emerging Shopping Missions, Mindsets & Moments

For more information Contact Retail@fractal.ai

Module 6: Role of Data, AI & Automation in Retail

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Everywhere, Embedded Commerce in 2023

BEHIND THE SCENES PROCESS, TEAM AND REFERENCES

Back to contents

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Everywhere, Embedded Commerce in 2023

BEHIND THE SCENES

PROCESS OVERVIEW AI meets human insight for Applied Foresight

800 participants Literature review Appraisal framework Cross-cultural behavioral study

Study of shelves Check-out experiences Packaging trends Inventory management tools Shop-along(s), store-visits & walkthroughs Signal validation Measuring direction Magnitude of trends NLP based exploratory analysis Macro-trends Strong signals Weak signals Signal scan with PESTLE framework

Hypothesis capture Trend prioritization Horizon mapping SME interviews & workshops

Digital experience audits Tech investments Case studies Dominating, disrupted, disruptors Brand audits

Click to see what we studied

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Everywhere, Embedded Commerce in 2023

SIGNAL SCAN, TREND WORKSHOPS AND EMOTIONS UNCOVERED IN A CONSUMER DIPSTICK

AI models

Measurement model

Hybrid workshops & hackathon

PESTLE Scan

In-person store visits

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Everywhere, Embedded Commerce in 2023

BEHIND THE SCENES

MEET THE TEAM

Sangeetha Chandru: Chief Practice Officer Retail | Analytics & AI Ann Hintzman: Chief Design Officer | Fractal Experience Satish Kumar: Principal Consultant | Retail Advisory Sharada Karmakar: Engagement Manager | Retail AI Strategy & Enablement Shivani Gupta: Lead Behavior Architect | Fractal Dimension Ashna Taneja: Decision Science Consultant | Fractal Dimension Lavanya Julaniya: Senior Design Consultant | Fractal Experience Gurjyotkaur Bindra: Design Consultant | Fractal Experience Shagun Parab: Design Consultant | Fractal Dimension

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Everywhere, Embedded Commerce in 2023

BEHIND THE SCENES

1. 2. 3. 4. 5. 6. 7. 8. REFERENCES Warby Parker: Company Website Dollar Shave Image: DesertCart TJ Max Headline: Wall Street Journal Bed Bath and Beyond: Rise News Gucci unveils in-app AR tool: WWD TikTok shopping: Search Engine Journal Burberry X Minecraft: Burberry Website Amazon's Fitting Room: The Verge

2.A 2.B 2.C 2.D 2.E

Story Pop-up store: SEGD Barnes and Noble Headline: Bisnow Barnes and Noble image: Fortune Paper Source: Official Website Midjourney

1.A 1.B 1.C 1.D 1.E

Nordstrom curbside pickup: Rise News Starbucks scanner: Starbucks Stories and News Disney Headline: The AI Blog Disney's magic band: IBS Intelligence Midjourney

5.A 5.B 5.C 5.D 5.E

3.A 3.B 3.C 3.D 3.E LVHM blockchain image: LVHM Unilever headline: Supertrace Screenshot of a consumer complaint on Linkedin Unilever image: Supertrace Midjourney

4.A 4.B 4.C 4.D

Harley Davidson's Women's Group: Teahub Airbnb app + Airbnb Home: Hoterlier India Lego Headline: Crowd Sourcing Week Lego contest and co-creation: The Brother's Brick Midjourney

Trader Joe's friendly employees: Insider Lululemon's Twitter image IKEA Image: Unsplash website Midjourney

This icon in the module is a link to the source of the respective statistics

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