With investment continuing to rise, the retail sector is being reshaped by technological innovation.
That much is evident from the investment trends. A recent report from technology adviser Ensono found that 63% IT decision-makers in UK retail were planning to increase spending on technology, in part to offset many of the challenges faced by the industry. A separate report by IBM paints a similar picture, with respondents reporting plans for a 34 per cent rise in tech spending in 2023.
If you step away from the statistics and instead take a walk down just about any local high street, it becomes immediately apparent that retailers have not been slow to adopt new technologies. The proliferation of self-checkout systems is just one high-profile example.
The upturn in investment comes at a time when retailers are facing significant economic challenges. Inflation remains high and in addition to pushing up costs, there is increasing evidence that consumers are beginning to cut back on spending. According reports, Britain’s biggest retailers expect to lose 29% of their collective customer base as a result of the cost of living crisis. Meanwhile, the Confederation of British Industry says its retail sector members are cutting orders placed with suppliers.
Against this backdrop, you might expect retailers to reduce investment. The opposite is true. The fact that spending on technology is rising suggests not only a willingness to innovate but also an acknowledgement that the sector has to change in order to address today’s economic challenges and satisfy the longer-term requirements of customers.
There are a number of investment priorities, including improved customer engagement and service, cost reduction and measures to create more sustainable operations.
Kings of Convenience
One important theme will be increased choice for consumers around payment and the fulfilment of orders.
We’re all getting used to self-checkouts in supermarkets and convenience stores but that’s just one of a menu of solutions offering customers more choice when it comes to paying for goods. According to Forbes, the trends for 2023 include: buy online pickup in-store; buy online return in-store; and autonomous delivery. Arguably it’s the autonomous bots that will attract most attention. European operator Starship has logged more than 100,000 deliveries to date and other retailers such as China’s JD.com are growing their fleets.
These services – which represent an evolution of omnichannel retailing – rely on sophisticated investor management solutions driven by AI.
Personalisation
Personalisation – a pillar of online shopping – is increasingly playing a part in the offline shopping experience. For instance, US retailer Macey’s has developed an AI-driven personal shopper. Using data on customers – and utilising Google Cloud analytics – the app can provide recommendations for instore customers. Of course some major stores employ personal shoppers to help customers make choices. AI enables the same service in what some would see as a more user-friendly package.
Customer engagement can take many forms. In its review of retail trends in 2023, professional services firm Deloitte predicts that retailers will invest more in immersive technologies, such as Virtual and Augmented Reality, to engage with shoppers both in-store and elsewhere. Equally, retailers will increasingly use social media and gaming as a means to build brand connection with consumers and sell products.
The Supply Chain Revolution
Behind the scenes, a supply chain revolution is being played out. Figures from ABI research suggest that by 2030 Consumer Packaged Goods Manufacturers will be spending $28 billion per year on AI-driven technologies designed to anticipate consumer demand and optimise the management of supply chains. This is potentially important for retailers on two fronts. Firstly, better supply management will help to keep a check on costs. And from an Environmental and Social governance standpoint, greater efficiency feeds into more sustainable supply chains.
The bigger picture here is that consumers are increasingly seeking evidence that retailers are taking their net zero and sustainability responsibilities seriously, another trend identified by Deloitte.
The Internet of Things
A common factor running through all of the above trends is the growing importance of the Internet of Things. In terms of customer experience, proximity sensors can trigger in-store displays or promotions delivered through phones or watches.
Meanwhile, tags on products play an important role in the kind of inventory management that enables customer-facing services such as buy-online/pick-up in-store while also helping to optimise supply chains and maintain stocks.
Generative AI – The New Kid on the Block
Thanks to the publicity surrounding Chat GPT, 2023 may also be the year in which Generative AI comes into its own in the retail sector. We tend to think of this technology in terms of its ability to create content in the form of text, photographs and videos. That facility is certainly useful for retailers in terms of creating marketing content and recommendations for customers but as Forbes.com has highlighted, its uses potentially extend much further. In a 2023 post, Sanjeev Sularia notes that Generative AI can be used across a range of functions, including inventory management, price optimisation, marketing optimisation and customer chatbots. According to Sularia, it can even be used to detect fraudulent activity, such as fake returns.
Retail, whether bricks and mortar, online only or omnichannel, is continuing to evolve. Retailers are certainly under pressure to maintain margins while surprising and delighting customers. Technology is playing a key role.
Transparency is key.
