The market transformation happening right now in retail is faster, more sweeping and more profound than the many changes that have come before. Mobile, social and digital has dramatically amped up consumer expectations and options for how, where and why they buy. As a result, venerable brands that successfully navigated past periods of social and economic turmoil are suddenly struggling. Continuing on as middle-of-the-pack or laggards when it comes to technology adoption is proving to be a recipe for fast decline.
Witness the current fortunes of long-standing UK brands such as Debenhams and House of Fraser. Continuing to rely on reputation, brand recognition and long-held practices has led to declining profits and customer disinterest.
According to analyst firm RSR, 59% of retail “winners” – those with average comparable store/channel sales growth above 4.5% — say they are more innovative than their vertical market, and 51% are more innovative than those with similar revenue. Winners are much more likely than non-winners (66% vs. 49%) to measure innovation by return on investment. These successful brands are embracing practices such as innovation labs and fail-fast processes to try, learn and refine, moving ahead with ideas that boost the bottom line.
4 Technologies To Try
In today’s market, it’s no longer enough to sit back and watch what other retailers do with new technologies. When digital capabilities are what differentiates the customer experience, retailers of all sizes must jump in and try things much more quickly than ever before. Here are four techs where retailers should already be active:
- Artificial Intelligence/Machine Learning: Consultancy Capgemini calculates that retailers could save as much as £235 billion by scaling AI across their entire value chains. UK retailers are leading in overall use of AI technology, with 39% currently deploying AI initiatives, according to the report.
Winners are much more likely than non-winners (66% vs. 49%) to measure innovation by return on investment. Click To Tweet
Currently, sales and marketing applications dominate. Shop Direct, for example, uses AI to determine individual preferences and behaviours around customer communication, then predicts why and when a customer will stop shopping with them so the retailer can take preventive action. That has delivered conversion rates of 4%, well over the retail average 2.8%. Among Tesco’s AI applications is one helping shoppers with special dietary needs better identify relevant products online.
But Capgemini says supply chain AI is ripe with untapped, fast-ROI opportunities, including using AI for procurement tasks (averaging 7.9% ROI), applying image detection-led algorithms for detecting in-store shrinkage (7.9%) and optimizing supply chain route plans (7.6%).
- Blockchain: Blockchain also is proving useful across retail organizations. While a growing number of retailers are accepting blockchain-based payments such as Bitcoin, blockchain is really beginning to shine for traceability and sustainability in the supply chain:
- Carrefour SA is using blockchain to track and trace chicken, eggs and tomatoes from farms to stores, and will expand to 300 fresh products worldwide by 2022.
- Signet Jewelers, operator of Samuel, Ernest Jones and several North American jewellery chains, is piloting the use of blockchain to trace high-value diamonds through the value chain with a tamper-proof, immutable record.
- British grocer Co-op Food is piloting a sustainability application for blockchain, tracing tuna products from Indonesia through the supply chain. Walmart’s version, tracking US produce and Chinese pork, will enable visibility to information about the location and practices at the farm of origin.
- Augmented/Virtual Reality: AR and VR are injecting excitement into shopping by immersing the consumer into another space — or imposing virtual images over real ones. UK-based paint brand Dulux, for example, developed its Dulux Visualizer app to enable customers to “see” different colours on their walls and share images with friends and family. AR-enabled mirrors at TopShop and Uniqlo allow shoppers to see accessories or different colours of an item they are wearing without leaving the dressing room. And via its IKEA Place app, IKEA allows shoppers to virtually place furniture within their homes with 98% sizing accuracy, building confidence that the colour, look and size will work.
According to Retail Perceptions, 55% of shoppers agree that AR makes shopping more fun and exciting, and 61% prefer to shop at stores that offer AR over ones that don’t.
- Unified Communications: Moving at 21st-century speeds requires instant, cross-channel unified communications. Tech-forward UK retailers have learned that old school methods like email are too slow and asynchronous, whether it’s answering the question of a customer poised to buy or working with a supplier to speed up replenishment after an influencer unexpectedly triggers a spike in demand.
Online grocery delivery company Ocado, for example, relies on an internal chat platform to enable instant, direct communication within its workforce. Far-flung developers now collaborate in real time for better quality interactions, increased productivity and a sharp reduction in the use of email.
Consumers increasingly expect to be able to engage one-on-one with retailers on whatever platform they’re using at that moment — and then pick up that conversation via a different channel. A survey of 1,000+ UK consumers found 62% want companies to focus on launching, “simpler, flexible and more affordable customer service options.”
Simply waiting to see how these technologies work out for these retailers is not enough. To stand out, retailers must leverage emerging technologies while they are still emerging. That means adopting an experimental mindset, devoting resources to innovation and being willing to fail fast and move on.