In this update we look at the future of retail, The steps apply to businesses more generally and are not confined to retail. Online and into the cloud, the shift on line is permanent. Digitally enhanced multi channel marketing is essential. User experience [UX] and user journey [UJ] must be continually tried and tested under the process of Kaizen, constant improvement. Amazon is setting the standards with one click and next day delivery, by which all others will be judged.
Interaction, including payment must be safe and contactless. The business ethos, practise and operations must be ethical and sustainable. Online and into the cloud, the mantra is cloudy with a chance of brain. AI will feature in the constant improvement of performance.
1. The shift on line is permanent …
Online, digital together with home delivered products and experiences are here to stay. Social distancing, working from home and homeschooling have had an impact on what people buy, how they browse and shop for items. It has changed the way buyers want to get products and information. Digital transformation will continue to accelerate to keep up with changing lifestyles.
In the UK in January 2020, 19% of sales were made online. Online food sales were limited to just 5% of total sales. In March 2021, online sales accounted for 35% of all transactions. The proportion of food sales online had more than doubled to almost 12%.
The shift to online shopping is permanent. Investment in a functional eCommerce strategy is essential. Businesses need an eCommerce platform that customers can rely on when they need it, providing data for all stakeholders that is both trustworthy and timely.
Multi channel is key, connecting channels to manage orders that start online but may be fulfilled at the store. As is the case with both click and collect and curb side pick up, seamless communication is needed between online channels and stores. That requires a unified commerce approach which also links to the supply base.
It’s all about user experience and user journey. Amazon is setting the standards by which all others will be judged. One click and next day delivery, tough to beat.
2. Interaction must be Safe and Contactless …
Yesterday, consumers longed for engaging, all-encompassing, made-just-for-me retail experiences. Today, the best in-store experience is still personalised and engaging but happens at a safe distance.
Mobile point of sale terminals, self check outs, scan and go technology, Amazon Go, cashier less stores will feature. Contactless payments are becoming much more important with the adoption of low touch and no touch payments.
Cash is trash, the use of mobile wallets and contactless cards, accelerated swiftly during the pandemic. 2020 was the year of acceleration in digital payment. Jamie Dimon of JP Morgan would say "cash is trash". It was a reference to the meagre returns on cash investment. In 2019 cash accounted for almost 30% of total transactions.
By the end of 2021, just 10% of transactions are cash based. The proportion will fall to less than 5% within two years. Visa, Mastercard, Paypal, Stripe and Square will continue to reap the harvest of a lower cash yield.
3. Physical retail finds new footing and role …
Although eCommerce can’t (yet) replace real-life shopping, the equilibrium has changed. While visiting a store used to be a form of leisure, fear of contagion has tipped the scale towards less frequent, shorter, more intentional shopping trips. Stores have transformed to respond to the new demands.
The narrow store with winding aisles packed with products has quickly gone from looking quirky to a health hazard. In the upcoming months stores are expected to change their interiors with a focus on cleanliness, openness and empty space.
Many retailers have implemented solutions to simplify contactless pick-up of orders in store. In the Holland & Barrett stores in the UK there are now automated contactless click & collect drawers. Customers can place an order online and pick it up in-store, using a barcode or QR code on their phone. No need to interact with employees, or stand in line.
Other locations are becoming “dark stores,” small-size warehouses where online orders are packed for delivery and pickup. Dark stores can be a smart way to use low-traffic store locations, transforming them into fulfillment centres to improve product distribution and speed of delivery of online orders.
4. Business models must be ethical and sustainable …
Sustainability has been one of the past years’ most dynamic and fast-growing retail trends. While health and safety concerns temporarily stalled the positive momentum, as soon as the situation evolved, environmental concerns quickly returned on consumers’ agendas. They are once again playing a big role when it comes to how and what people choose to consume.
According to research by Accenture, consumers are shopping more mindfully than before the crisis. 64% of consumers polled say they are limiting food waste, 49% are making more sustainable buying choices. 40% are shopping local (both in terms of visiting neighbourhood stores and of buying locally sourced products) more often than before.
A study by McKinsey on fashion shopping shows consumers are planning to purchase more durable items, to keep the items they already have for longer, and to repair them if needed to prolong use.
[See also our updates in the series Code Red for Humanity and ESG.]
5. Businesses Move Online and into the cloud …
The cloud, already on most retailers’ radars and budgets, has quickly become a crucial piece for operational resiliency and business continuity. By moving to a cloud model, retailers can better support the needs of remote workers.
Businesses can quickly implement innovative technology. They can use the immense intelligence and analytical capabilities of the cloud to see patterns and predict the future.
IT in the cloud, supports collaboration, speeds up decision making, enables actionable insights, simplifies innovation, increases scalability for demand changes and reduces risk of data loss.
6 AI features … Cloudy with a chance of Brain …
The cloud has democratised Artificial Intelligence tools (including Machine Learning), making them available to most businesses. Today, you don’t need very deep pockets and an army of analysts to take advantage of AI. As a result intelligence is now shaping the retail experience. On the operations side, AI can help optimise complex logistics issues, from replenishment to staffing, to distribution and fulfilment, increasing access and availability while reducing manual work.
It is the interaction with consumers in which the most interesting AI use cases can be seen. Stitch Fix, a fashion rental service, has been using machine learning to analyse each of their customers’ preferences. The algorithm then makes product suggestions, which a (human) stylist double-checks and uses as an inspiration to create a box of highly personalised pieces.
When items are returned to Stitch Fix, customers review each piece in terms of size, fit, quality, value, style, and more. This information is then used to enhance the recommendation algorithm, improving both service to the individual customer and general inventory in a continuously effective feedback loop.
This combination of learning algorithms, human supervision and actual customer feedback may well become a paradigm of tomorrow’s retail, with personalisation resulting from the collaborative work of experts, machines and consumers.
7. Google Tech and Retail …
One of the most promising avenues of future disruption for Alphabet may be retail. The company partnered with a collection of major retailers in 2017, allowing consumers to use a Google Express front-end to shop from stores like Costco, Walmart, and Target.
Shopping Actions, which launched in 2018, bridged the gap between the mobile, desktop, and voice versions of the company’s shopping platform, which the company says led to as much as 30% higher cart totals in early tests.
Today, Google’s shopping service still can’t beat Amazon on logistics. But the success of one of Alphabet’s other in-progress experiments, the autonomous delivery drone service Wing, could one day be the last-mile solution that connects Google’s online storefront directly to customers and reconfigures the entire retail landscape in the process. [From our update on Alphabet’s next billion dollar businesses]
#DigitalDisruption #DigitalAcceleration #DigitalAccommodation #DimensionsofStrategy #TheSaturdayEconomist #JohnAshcroft
The update is based on the report by LS Retail, Retail of the future five trends that will redefine the industry. Five emerging trends and technologies that we expect will offer new challenges and opportunities in the months ahead.
Who’s afraid of the next retail disruption? In the past few months, retailers have gone through furious, and exceptionally fast, transformation. We have seen well established names in the industry crumble and fall, while more agile players moved swiftly into their space. We have seen light-speed change in consumer behavior, and in the way businesses present, sell, and deliver products.
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