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Grocery and large retail have been forced to adapt to the evolving landscape, accelerated by the coronavirus pandemic. Customer expectations have shifted with the influx of online shopping and brick-and-mortar retailers have been required to provide an omnichannel experience while improving a store’s operational efficiency.

Connected lighting in the retail market1The retail landscape has evolved in recent years with the growth of online shopping. The pandemic led to reduced opening hours, restrictions on the number of people allowed in brick-and-mortar stores, and concern over safety of indoor exposure to the virus. Although grocery stores have seen fewer disruptions than other retail, due to their essential nature, many have been required to modify their opening hours, leading consumers to experience grocery delivery or pick up rather than shopping in-store. In addition, shoppers have decreased their number of store visits overall, opting instead for weekly store purchases. The pandemic has also led to an increased amount of spending in a decreased amount of time. According to a study in Europe and the US, spending per minute increased by 49%. Similarly, another study found that European customers reduced shopping by an average of 5% while simultaneously increasing basket size by roughly 16%.

These shifts have created many challenges for the retail segment, especially brick-and-mortar retailers that have had to adapt quickly to handle the increase of purchases with an influx of online shopping combined with the need for pickup and delivery options. The importance of an omnichannel retail approach has become more apparent than ever before. Although this evolution in shopping trends has created challenges for the retail segment, it has also revealed opportunities. Through technology advancements, retailers can address many pain points, provide a more experiential and personalised experience with omnichannel shopping, reach sustainability goals, and achieve operational excellence through energy savings, staff efficiency, and improved store maintenance.

Connected lighting in the retail market2Retailers have massively adopted LED lighting and environmentally friendly refrigerators and are increasingly adopting self-checkout solutions and electronic shelf labels. Lighting controls have evolved, enabling new levels of energy savings, ambiance creation, and operational efficiency through advanced scene setting, sensor automation, and remote monitoring and lighting management. Adoption of indoor positioning systems (IPSs), utilising lighting solutions, has grown in recent years across many verticals, with retail seeing especially strong growth due to the benefits and use cases available within this sector. Although location-based services and mapping via GPS are commonplace in the outdoor environment, this functionality has not always been available indoors. IPSs can provide value to facility owners, managers, and corporations, as well as shoppers and employees within in a retail store.

Retail trends

Shifting customer expectations: With the increase of online shopping, to draw in customers, grocery retailers need to differentiate their store experience, shifting their store format from transactional to experiential. The influx of online shopping has provided consumers with a more personalised shopping experience, with store apps providing suggestions based on past purchases and highlighting sales or popular options. This experience has increased the efficiency of shopping and led to shifting customer expectations when shopping in a brick-and-mortar store.

Operational challenges: Retailers face a multitude of operational challenges from rising electricity bills, increased customer expectation for store experience, and staffing turnover to reduced budgets and a lack of in-store analytics. Labour shortages, increased wages, and the high estimated cost of replacing hourly workers increase the need for operational efficiency. By increasing automation through Internet of Things (IoT) technologies, retailers are able to reduce some manual labour.

Sustainability goals: Retail companies need to reduce operating costs, both to improve budgets as well as address customer sentiments over corporate environmental concerns. Increasingly, customers are choosing to support businesses that are addressing climate change, which has pushed many companies to set corporate sustainability goals and show customers how they plan to address climate concerns through environmental, social, and governance initiatives.

Connected lighting in the retail market3Connected lighting solutions for retail

Traditional lighting systems operate on a programmed scheduled or manually controlled switches and breakers. The brightness and colour temperature of these systems are not adjustable to daylight levels or occupant demands. Sensor lighting is a non-networked lighting system that includes sensors, such as motion or occupancy sensors. Although these systems use sensors, they are not networked, and the luminaires do not have the ability to communicate. Sensors for these lighting control systems enhance energy savings as well as occupant controllability. The third stage, networked lighting, came with the adoption of dimmable LED luminaires and lighting control systems that provided automated schedules and granular scene setting capabilities that helped retailers to reduce energy consumption and enhance store ambiance. In this stage, there is one-way communication to the luminaires. Grocery retailers frequently connect their lighting control system to their building management system (BMS). BMSs have primarily been used to monitor and manage store refrigeration and HVAC and alarm systems, and the centrally defined schedules trigger scenes in the lighting controls though a simple localised integration.

For the fourth stage in the evolution of lighting controls, connected lighting, Guidehouse Insights uses the U.S. Department of Energy definition, which is an “LED-based lighting system with integrated sensors and controllers that are networked, which can be either wired or wireless, enabling lighting products within the system to communication with each other and transmit data.” This stage includes bi-directional communication within the system, and the lighting system has the ability to collect and process data for enhanced insight. The fourth stage is facilitated by the advent of intelligent LED luminaires that are able to generate data on energy consumption and failures, lighting controls that are able to gather these insights and securely transmit them to a cloud-based solution that can store and process the data with advanced analytics to deliver deep insights and benchmarking on energy consumption, lighting failures, and compliance with centrally defined lighting scenes. These insights can be used at a corporate level to define further energy reduction optimalisation, as input for sustainability reporting, and fed back to the store for the store manager to gain insight in-store performance. Such intelligent LED luminaires may also be outfitted with advanced sensors that, for example, enable people counting, and register temperature, humidity and noise levels. Such features could be useful for applications beyond illumination.

Connected lighting in the retail market4With the advent of LED lighting, lighting companies have found that the capabilities of LED also enable the pursuit of opportunities beyond illumination. For retail, the most notable is the use of LED lighting as an IPS. The two most prominent communication protocols that enable IPS are Visible Lighting Communication (VLC) and Bluetooth Low Energy (BLE). Bluetooth is an open wireless technology developed by Ericsson in 1994 specifically for sending and receiving data over short distances. Often, lighting vendors install luminaires with embedded Bluetooth beacons, which allows for the ability to use these capabilities later without the need for additional hardware. VLC is the combination of illumination and communications. It is an advanced communications technology using visible light roughly between 375 nm and 780 nm. Data is communicated wirelessly through minor non-visible variations in the light and received by a device with a front-facing camera. VLC technology is typically integrated in digital drivers (i.e., drivers that support the digital addressable lighting interface lighting control protocol), making it easy for a luminaire manufacturer to implement.

The most notable use of VLC is for indoor positioning in the retail segment, as VLC offers the higher positioning accuracy that is required in retail, and LED luminaires are not subject to the mounting height restrictions of BLE beacons. VLC can also work in conjunction with BLE, whereby BLE could be used for in-pocket notifications and VLC for indoor navigation. Indoor positioning using VLC or BLE is obtained by a building owner or manager using LED lighting that is VLC enabled or that incorporates a BLE beacon. A retail customer downloads an app that allows the VLC software to connect to the user’s smartphone camera to access their location. In the case that only BLE is used, permission to connect to the user’s Bluetooth function to access their location is required. The ability to pinpoint the exact location of a customer and provide them with targeted coupons, product information, reviews, or in-store help by a sales associate offers an improved shopping experience. This experience is comparable to online shopping, where additional product information and discounts are a click away.

Connected lighting in the retail market5Connected lighting enabled market trends

Connected lighting solutions allow retailers to cut energy use through the use of LEDs and controls as well as integrate into BMSs. Connected lighting solutions are uniquely positioned to address these key areas, and control strategies that are implemented with connected lighting systems result in additional energy savings.

These strategies include occupancy sensors to adjust lighting when they sense a presence (or lack) of people and daylighting to allow lighting to be adjusted based on the amount of natural light. Luminaire-level lighting controls use 25%-75% less energy than non-controlled fixtures. Energy savings make an ROI for a retrofit of LEDs and lighting controls within the capital budget for companies. IPS can provide customers an experience more akin to an online experience, which can alleviate some frustrations around finding items easily. Many retailers offer their own mobile app, which allows a customer to create a shopping list and, upon arriving at the retailer’s brick-and-mortar store, the customer can then gain access to real-time inventory information and assistance in finding specific products.

Additionally, through the app, retailers are able to offer personalised promotions based on past purchases and send location-based reminders of these promotions when a shopper is in-store. Likewise, a grocery retailer could offer coupons based on overall purchase spend, or another metric, to help increase customers’ overall spend, either in-store or online. Beyond providing reduced energy use, an omnichannel experience, and overall enhanced experience to customers, an IPS that is made possible through connected lighting solutions can enable handheld store navigation, which allows employees to instantly locate any item a customer needs assistance with as well as save time for employees fulfilling online orders. Store data that employees can easily access can allow them to search for a product and identify not only where it is located within the store but also if the item is in stock, without having department-specific knowledge. The increase of online shopping has created a major benefit to retailers: the ability to gather significantly more data and insights into customer buying behaviour.

Historically, for in-store customers, retailers’ loyalty programs provide the cornerstone for shopper purchasing behaviour. By combining this program with an IPS, retailers can gain increased analytics beyond sales figures to customer behaviour in stores. Gaining improved insights into customers, products, and employees can provide a retailer with a competitive advantage over their peers. Analytics gained from an IPS can include the average time a customer spends in a specific department, a more accurate view of the average time spent in-store, the number of departments visited, and the average time spent in front of an advertised product, among others.

Signify’s Interact offering is one example of a connected lighting system that provides a flexible solution that delivers lighting IoT capabilities in a number of professional application areas, include grocery and large retail. Signify’s offerings include the connected lighting system, such as the luminaires, sensors, and controls, as well as software. Signify’s Interact software application integrates data from a connected lighting system with other smart retail solutions. The company’s Interact offering focuses on scene management, energy optimisation, lighting management, and indoor navigation. These four core areas address the key retail trends discussed earlier. Signify’s indoor navigation and location analytics support personalised shopping and provide staff efficiencies, such as improved workflows and improved store layout and operations. Additionally, Signify’s offerings provide multisite management, which allows for effectively managing and monitoring the connected lighting in large groups of stores, whether these are super- or hypermarkets or express stores or a combination of the three.

Conclusions and recommendations

To gain and sustain a competitive advantage, retail market stakeholders should consider the following recommendations:

  • Retailers need to strive for operational excellence. To effectively compete in the evolving market, retailers need to work smarter in the face of increasing energy bills and labour shortages. By implementing connected lighting solutions, retailers are able to monitor and manage their store lighting remotely, saving maintenance visits and driving down energy consumption.
  • Retailers should prioritise sustainability goals. For many retailers, reducing their carbon footprint is already top of mind. Prioritising this goal not only helps retailers reduce their energy spending but also allows them to address customer sentiment over corporate environmental concern. Investing in a connected lighting solution provides one option to prioritise this focus through energy savings from LED lighting and lighting controls while providing the other non-energy benefits discussed here.
  • Retailers must enhance their omnichannel shopping experience. Even before the coronavirus pandemic, the growth of digitalisation was pushing the retail market toward providing an omnichannel shopping experience. Although this trend was not as common among grocery retailers, it had already started and has grown exponentially since the beginning of the pandemic. Retailers were forced to adapt quickly and many now offer some type of omnichannel experience with options for online ordering and delivering or online ordering and pickup at a physical store location. However, providing an omnichannel experience is not be enough to maintain a competitive advantage, and retailers need to work on enhancing this experience.
  • Retailers must gain improved insights into customers, products, and employees. Online retailers are easily granted access to customers’ shopping trends and popular products; gaining these insights for brick-and-mortar retailers is more cumbersome. However, connected lighting solutions can enable these insights for retailers to improve customer loyalty and provide experience more akin to an online shopping experience.
  • Retailers need to understand their options for connected lighting. Through LED upgrades, some retailers have purchased connected lighting systems with the availability to begin using the software capabilities later by upgrading for those capabilities, such as through connecting the stores to Interact Multisite management from which the entire chain can be managed and monitored. Or by adding in Interact indoor navigation. In this way, retailers have worked to future-proof their brick-and-mortar stores, but as store and facility management turns over, the availability of this functionality might not be clearly understood by new stakeholders. The benefits of connected lighting extend beyond a single store location. For retailers to fully realise the benefits of these solutions, they should prioritise expanding to multiple sites. Doing so not only provides the retailer with reduced energy savings, improved operational efficiencies, and expanded insight into their portfolio of stores, but also an enhanced omnichannel experience for their customers.

Guidehouse Insights prepared this white paper, commissioned by Signify, to provide insight into connected lighting solutions and IPSs within the grocery and large retail market. Visit www.guidehouseinsights.com

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Gregg Cocking
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