TECHNOLOGY DRIVEN EVOLUTION IN RETAIL :
Originally Posted: Analyticsinsight
The traditional retailers have been forced to improvise and be cautious of customers choices. From observing, learning and adapting new technologies to stave off competition from their digital counterparts, the journey has been steep, to say the least.
Before we start talking about the technologies, driving modern retail, I would just ask you to take a moment and picture your nearest retail store 10 years back. Think about the changes it has undergone (if it still exists).
Earlier the retail stores were the only destination for customers to ‘shop’, the products were placed on display and customers had to choose from the available assortment. The strategy at the fore was to showcase the right product to a customer out of the limited inventory. As time went by, the retail industry saw the emergence of hypermarkets that had a huge assortment of products on display. To pull more customers they would occasionally launch some mass media advertisements.
Offers and coupons were not the norms and loyalty discounts (if any) were handed out to a few long-time customers personally by the owner or the salesperson. It was based partly on the personal relationship of customers with the salesman and the information gathered from their cash registers where they were recording every transaction.
As you can see, these practices were marred with some clearly evident inefficiencies like limited stock to choose from, insignificant price differentiation and manual processing of information.
Computer, Internet adoption and the Emergence of E-commerce
Commoditization of computers came as a dawn of a new era for retailers. The cash registers got replaced with computerised automated systems that present information precisely. It became easier to get a hold on inventory levels, compare sales with respect to some past time and forecast demands. Little did the Mom & Pop stores realize that this was just a setting stone for an era that would pull curtains over many of them.
The adoption of the internet completely disrupted the market with the emergence of online commerce or e-commerce. Customers are drawn to the convenience offered by e-commerce players. It has helped customers tackle most, if not all, of the challenges posed by traditional commerce. On single tap, they get access to endless aisles of products, review from other buyers and liberty to compare prices.
Back in November 2016, online sales surpassed the brick & mortar sales during the Black Friday Weekend for the first time. It shows e-commerce has definitely come off age. But as per a Euromonitor report in 2017 e-commerce accounted for only 8.5% of the total retail trade worldwide and in emerging economies like India, it is still hovering at around 5%. It indicates the majority of sale is still happening in-stores. What is still driving the customers to these stores?
Omni-channel and technologies improving user experience
It has much to do with the customer experience and their behaviour. For these customers, convenience has become a key factor now. Increasingly, customers are blending online and offline, most of the times they research the product online and ultimately buy it from offline stores, vice-versa is also true.
The legacy stores like Walmart, Costco and Starbucks have opted for designing a cohesive customer experience at every touch point. The e-commerce giants have equally felt this need. Vice president of Amazon Pop-Up stores, Cameron Janes said, “We have a great website, but sometimes, people want to test our products out themselves and talk to a real human,”
It validates omnichannel as just not a buzzword rather business critical too. However, it is easier said than done. Not having a consistent approach across channels will again hurt the business. The Walmart CEO Doug McMillon emphasised its importance while addressing the shareholders, he said, “I want us to stop talking about digital and physical retail as if they’re two separate things. The customer doesn’t think of it that way, and we can’t either.”
To improve the user experience, physical stores are offering digital kiosks in the store which again gives an impression of endless aisles as customers can place an order for out-of-stock goods and can even choose to get them delivered. They are also solving another issue of the millennials. As per a Deloitte report, 70% of Indian shoppers prefer digital devices over sales associates for in-store activities like product pricing, product information, etc.
Through online interactions, the customers are leaving digital footprints and having an omnichannel presence helps retailers to formulate a holistic approach to target them. Retail analytics has proved out be very decisive in taking these decisions. For example, a customer, who spent weeks parsing smartwatch reviews, adding, then abandoning items in his/her cart, both on mobile and desktop, finally purchased because of an enticing email offer.
We asked Mr. Binoy Subba, Head – Sales Operation and Planning at Orient Electric, for comment on technologies that would have the biggest impact on retail, he remarked:
“Intriguing, comprehensive and precise! I concur that the value generating consumer interaction is the essence of retail business; and the technology to capture and analyse these interactions will be as important as the consumers themselves.”
Retail analytics is also changing the way retailers are managing the supply chain, empowering vendors and incorporating the insights received from the customer-facing employees in providing a better experience. The traditional supply chains lacked transparency, which used to infuse inefficiencies at each stage of the value chain. The modern supply chain is agile, transparent and connected. Smart devices like RFID tags and sensors feed information like product location and description automatically into systems. This information is stored centrally, so everyone is on the same page. It is then used for data analytics and predictive insights that help in decision making.
Emerging Technologies & Future of Retail
Retailers are continually looking for ways to add new value proposition both to acquire new customers as well as to retain the older ones. The potential of these technologies has been recognised for a while now, but they haven’t gone mainstream yet. For example, Amazon used AI for its Amazon Go stores in the US, where customers can walk into the stores, pick the products they want and then walk out without waiting in queues or checking out. The customer’s Amazon accounts are automatically charged for the purchase. AI has been the buzzword for quite some time now, but as per an Adobe report, only 15% of enterprises are using it.
Same is the case with technologies like Augmented Reality (AR) and Virtual Reality (VR), they have been around for some time now and many retailers have been using them in a different capacity. E-commerce players are using it to provide a store like an experience whereas Brick & Mortar shops are using to eliminate the hassles of trial rooms.
To further this experience, retailers are recreating the interactive shopping experience with conversational commerce technologies. They are leveraging them to provide a human touch as well as to develop an understanding at a deeper level. The voice-controlled devices like – Amazon Alexa, Google Home, Facebook Messenger present an exciting prospect for this industry.
There are many technologies that are lurking to jump into the big arena. On supply chain side the technological innovations like drone delivery and autonomous trucks are blurring the gap between digital and physical. Whereas blockchain technology is pegged to be the next big thing to optimize the business transaction part. As per IBM CEO Ginni Rometty, “Blockchain will do for transactions what the internet did for information.”
Internet of Things (IoT) and the combination of these technologies canvas a picture that takes this industry realistically close to our science-fiction movies. These technologies have found an application in ‘beacons. Beacons can be installed at various places in retail stores like at different sections, entrances and exit doors. When a customer with an app passes by these beacons, their location is captured in a server, then the server can identify customer’s preferences and location in real-time based on his/her purchase history. It can then act and send customize offers with a higher conversion probability. Retailers like Virtuous Retail in Bangalore and French supermarket chain Carrefour are already experimenting with beacons.
The fast-paced changes demand retailers to be more dynamic and adaptable, so they can understand all the customer touchpoints and customer data and use it across platforms. Customer behaviour and trends are in constant flux, and retailers must arm themselves with useful data that can help understand and even predict what might come next. We at Polestar Solutions, have partnered with major analytics OEMs like Microsoft, Qlik and SAS to help retail clients leverage analytics to transform their business and stay ahead of the curve.