If there's one thing that remains constant in the retail sector, it's changed. New stores open, and others go out of business. Market leaders experiment with smaller or larger stores. They change the layout of their stores and come up with new private brands on their shelves. Loyalty programs are tweaked, affinity programs and new offers are designed. Supply chains become more efficient and automated, resulting in increased product improvements and availability in inventory management. But when we talk about reality, there are really big innovations in the retail industry.
Most of the changes we see year after year are relatively incremental. Real transformation in this sector comes along only once every few decades. And when these transformational events happen, they nearly always create new winners and leave a trail of casualties in their wake.
To understand whether today's innovations represent seismic industry shifts, it's helpful to recognize the three preceding "ages of modern retail." This blog focuses on the retail sector, and we draw on the experiences of leading retailers. We'll peg the birth of modern retailing to the 20th century and begin with: -
Retail 1.0 : The Supermarkets
The idea of self-service was born. In a modern supermarket, the consumer takes the product from food shelves and refrigerated counters himself. Product range and retail space increase. Control and transparency about the assortment and product data become very important. The act of purchasing becomes more anonymous.
At that point in time, in the grocery business, Piggly Wiggly was one of the earliest and most influential innovators, offering the first self-service grocery store experience in the US. In 1916, when grocery shoppers presented their orders to executives at a desk who then collated the goods from the store shelves, hidden from view, they had formulated a way for shoppers to serve themselves, instantly making packaging and brand recognition crucial for manufacturers. Piggly Wiggly became the first modern grocery retailer to provide open shelves and checkout stands and price-mark every item in the store.
Retail 2.0 : The Big Box Store
The supermarket becomes a hypermarket. IT structures came into existence, and the Internet accelerated. Carrefour opened in the Paris suburbs around the same time, and the key idea here was "everything under one roof." The modern hypermarket was a vital step ahead in space usage, efficiency, productivity, and cost management.
The value for consumers increased drastically through greater choice and lower prices. The format took over the grocery sector in Spain and France and has eventually spread across the world, including emerging markets such as China, Brazil, and Thailand during the 1990s and 2000s from giant hypermarkets into the Supercenter. Here we can witness a transformational event in modern retail that led to countless innovations – from private label products, multi-format offerings, and ever more complex retail supply chains.
Retail 3.0 : The E-Store
Leap ahead another few decades, IT and Internet blend; the online trade is born. In 1995, the first modern Ecommerce transaction was executed. Jeff Bezos decides that the internet is a robust channel to sell items like books. He had the foresight to curate a much broader e-commerce universe. To get repeat traffic and differentiate his online bookseller from brick and mortar competitors, he added the option for buyers to write their book reviews.
He built the now-famous recommendation engine, as important to Amazon.com's success as anything. At the same time, Bezos took a significant risk by handling the biggest hurdle to online shopping – delivery costs – by essentially terminating them and treating them more as a marketing expense.
By 1997, Amazon's revenue in e-commerce had become a buzzword that ushered in a new era of retail. In this era, creations like e-auctions (eBay) and big data analytics continued to add to the evolution of Retail 3.0. Only a decade after e-commerce went mainstream, the global availability of merchandise and information began as these business models began to stabilize, and major players started implementing strategies that lead us to believe that we're entering the next transformational change in retail – the dawn of Retail 4.0.
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Retail 4.0: A New Kind of Store
The emergence of Industry 4.0 has led to a steep shift towards the adoption of digitization. Advanced technologies have revolutionized the retail industry bringing forth its new avatar - Retail 4.0. From operational process to automation to churning of digital data encompassing buyer's journey that is proving instrumental in retail business strategies, retail is surely undergoing a renaissance of sorts.
The changing profiles of customers are forcing the retail industry to rethink everything from store formats and payment methods to harnessing the power of data to transform retail operations. As the shift from brick-and-mortar to omnichannel grips pace, consumers are leveraging the convenience of shopping anytime, anywhere, and, in turn, expecting retailers to deliver differentiated experiences. The new retail landscape implies that retailers are required to become nimbler and more adaptive to customer trends while delivering a seamless omnichannel consumer experience.
How technologies are driving Retail 4.0
Nowadays, competition is getting ever fiercer in omnichannel commerce. So, companies have to develop capabilities to compete with their rivals on a global scale. Access to technology enables retailers of any size to pave the way for better shopping experiences. Helping the segment integrate, evolve, and adapt to the omnichannel way of retail is the amalgamation of the Internet of Things and relevant digital and physical technologies.
These include robotics, analytics, artificial intelligence, and augmented reality to integrate digital information from various sources across different locations to drive the physical act of manufacturing further. These tech innovations will be utilized increasingly in the retail segment, especially in the stores, to offer an experience akin to the virtual world.
But, what's required to bring about this change is to redefine and consolidate the entire business strategy so as to make the most of this digitally empowered revolution. Making humongous utilization of retail intelligence to give the consumers an enriching experience that is strengthened by utilizing digital tools will go a long way in keeping brand loyalty alive. Improving quality using responsiveness, innovation, and delivery quality will be the foremost targets to be achieved by the organizations to make their presence felt in this competitive market.
Roadmap for adapting Retail 4.0
Retail 4.0 has led to the curation of more productive and efficient business practices with the assistance of advanced technologies. Big organizations are already using cost-effective alternatives to traditional methods. Organizations are now focusing on data-driven and creating seamlessly integrated business models.
Such business models prioritize communication and end-to-end transparency to fulfil customer demands and manage inventories. But, the implementation and planning of such business practices along with the deployment of the requisite technologies is a tough task. Therefore, companies need a roadmap to approach retail 4.0 in the most effective way. The roadmap includes the following steps:
- Numerous technologies (AI, ML, and IoT) and business models are needed for adapting to retail 4.0, and and hiring experienced professionals with excellent skills is significant.
- Creating effective strategies and allocating a sufficient budget for infrastructure.
- Updating existing systems to integrate new technologies.
- Generating analytics to understand the transforming industry trends and the companies' performance in the market.
- Promoting the development of applications that ensure a better consumer experience.
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Henceforth, technological advancements will be a part of the global retail market where investments, supply chain management, and purchases will be handled with the assistance of a transparent ledger. Hence, the possibilities for retail 4.0 are countless. Therefore, retail organizations need to stay updated about new technologies and business practices and adopt a holistic retail 4.0.
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