UK retail has been in the wars recently. The sector has not only suffered in 2017 but over the course of the last few years it’s fair to say it’s been quite a turbulent time for the industry.
Consumer spending habits are becoming increasingly difficult to predict, the overlap between online and physical marketplaces continues to blur, competition has become more intense and the overall complexion of the industry is now more unpredictable and volatile than ever before.
However, in 2018, there is at last greater cause for optimism. As of November last year, figures from the Office for National Statistics revealed that Black Friday was responsible for boosting retail sales by 1.6 per cent when compared with 2016.
Over the Christmas period retailers were apprehensive, and they had good reason to be. Last year saw consumers tighten their purse strings and exhibit previously unseen levels of caution than in recent times.
Given that consumers are the driving force behind technological innovation in the British retail sector, it is interesting to see this level of caution characterising spending habits more than ever before; despite the scale of technological advancements.
To deliver a more personalised and tailored experience for consumers, as well as establish distinctive brands and greater competition, retailers need to embrace the kind of technological change that is transforming companies and entire industries.
What does this mean then for the way technology will be shaping the retail sector in the coming year?
The customer is always right
The shift from segmentation to tapping into the individual buying behaviour has never been more quantifiable. This however hasn’t stifled advances in conversational commerce with ongoing advances being made in areas like chatbots, voice and image recognition.
Investment too has shown no signs of stopping as millions of pounds continue to be ploughed into better understanding the consumer path to purchase by integrating insights and data across multiple channels. And, soon the uniform integration across all devices, platforms, channels and services will become commonplace.
Customers will be at the centre of any and all of the most important developments in technology in the retail sector. However, in order to succeed, retailers will need to ensure the integration of customer insights with the modern retail experience, capturing the consumer attention and providing an experience they won’t forget in a hurry.
Changing the face of physical stores
Re-engineering the concept of the high street store has become the new norm, as opposed to any attempt to replace it.
But what does this actually mean in practice? Disruption is manifesting itself in the unification of online and physical retailers across the marketplace. Merging the Internet of Things (IoT) and artificial intelligence (AI) or machine learning technology, will generate new levels of intelligence and insight for retailers to capitalise on.
The next generation of customer engagement will be characterised by the deployment of a host of technologies, which can be used to leverage patterns and trends in consumer behaviour.
Why do consumers make certain purchasing decisions? What motivates them to do so? How can retailers tap into their rationale? By gleaning answers to questions like these, retailers will be able to respond accordingly to sensitivity in pricing, display and service levels in the physical stores themselves.
Differentiation between multiple store formats will also be primarily determined through the use of said digital and innovative technologies.
AI will become a reality
The general sentiment of global media coverage of AI in 2017 frequently painted very much what is deemed to be a worst case scenario picture of what the future holds for the technology. Job losses, a lack of human control and even killer robots continued to dominate the headlines in the year just gone. This year however, we can all expect to see the technology applied more widely, and more practically than ever before.
Digital transformation will then be experienced through the mainstream application of AI to business operations, coupled with greater adoption of cloud and growth in the scale and degree of AI implementations.
Not only will the technology revolutionise areas like the supply chain, in-store operations and merchandise execution but also dependency on AI will become a more prominent means of pursuing new business avenues across the retail sector.
AI has three diverse elements which comprise of the brain (the algorithms), the body and the host (the big data platforms) and the legs (the cloud) which, when combined, allow businesses to be more agile, move significantly faster, at a cost that is reduced.
Overhauling the value chain
The survival and success of the retail sector is predicated on understanding the needs and desires of every consumer. Therefore delivering on promises must ultimately be the thread that runs through everything the industry does.
Digital demands and the evolution of the role of digital in the retail sector will result in the transformation of the entire, or at least significant parts of the value chain. In practice, this means that the supply chain will transition towards the concept of Network Based Planning, particularly with all nodes of the supply chain sitting on one physical network.
To react in real time, become more agile and reduce costs across the supply chain, it is crucial that retailers are able to gain end-to-end visibility of their Supply Chain. Amazon, for example, is currently making foundational changes to its business model (in its Grocery section, for instance), thus requiring retailers to restructure physical networks and limit the flow through distribution centres to compete with its own same day delivery promise.
Above all, at the core of this approach will be an overhaul of structural processes, greater investment in new technologies and physical assets, along with the widespread adoption of cloud technology.
What we are starting to witness, therefore, is the creation and growth of what one could call retail 3.0. Not only, will this new era for this sector be essentially empowered by technology; but, we will also experience innovations and revolutionary leaps in customer engagement, business models, process and technology.
Ronojoy Guha, Global Head of Retail, Mindtree
Image source: Shutterstock/Maxx-Studio