Adopting a Digital Transformation Strategy
No matter how established an industry is, it cannot escape the profound impact of technological progress. Even those sectors which are traditionally less reliant on technology, such as the retail industry, are feeling the effects of technological development. By investing in the latest technology, successful retailers are able to optimise the services they provide to their customers, gain insight into what their consumers are looking for, and develop an understanding of their spending habits.
A recent joint survey conducted by JDA and PwC revealed that digital transformation is the foremost investment priority for retail CEOs. It appears that Chinese merchants have taken the lead in this regard, with 58% of them having already commenced their digital transformations. However, American retailers are not far behind, with 40% of them having initiated their planned digital transformations.
The retail sector is embracing the potential of big data, artificial intelligence (AI), and the Internet of Things (IoT) to drive innovation and compete more effectively. Predictive analytics, which uses past and current data to anticipate future trends, is a particularly effective tool for working with large data sets. Additionally, AI and IoT technologies are quickly becoming integral components of the retail industry. Together, these three elements are likely to bring about a new era of retail in the near future.
Predictive Analytics and Big Data in the Retail Industry
The demand for software utilising predictive analytics is increasing dramatically. According to recent estimates, the market is expected to reach a value of USD 10.95 billion by 2023, with a compound annual growth rate of 21%. Predictive analytics present a number of advantages to retail businesses, enabling them to gain a competitive edge.
Learn your audience and cater to them.
When working in the retail sector, it is essential to have a comprehensive understanding of the customer base in order to develop effective marketing strategies. In order to meet the expectations of consumers, who are increasingly wanting personalised recommendations, retailers need to make use of data. Whilst self-reporting can be unreliable, retailers need access to customer data in order to gain the necessary insights. Fortunately, with the help of big data, stores can now obtain the information they require.
Retailers can access a wealth of consumer data, including transaction data, interaction data, and external data, to inform their marketing strategies. Transaction data refers to details of a single purchase, such as the date, item(s), and payment method. Interaction data, on the other hand, includes data on what a user clicks on while navigating a website or social media channel. External data, meanwhile, encompasses any and all information not directly related to the purchasing decision but relevant to the process, such as seasonal trends or traffic patterns. By gathering and analysing this data, retailers can refine their marketing efforts to better meet the needs of their customers.
Merchants can use predictive analytics to anticipate which customers may become regular shoppers and target them with personalised promotions. According to a survey, 59% of online customers found it easier to identify unique items on curated online stores. To encourage these customers to return, merchants may offer them discounts or free delivery.
In the coming years, data scientists will be making considerable advances in utilising big data to predict consumer churn. Businesses will be able to anticipate when a customer is likely to switch to a competitor and take appropriate action, such as offering a discount to retain their loyalty. Moreover, although predictive analytics are currently beneficial in helping retailers to anticipate the behaviour of certain demographic groups, in the near future, businesses will have a deep insight into the behaviour and potential actions of individual customers.
If a business is serious about maximising its profits, it is essential that they set prices that are fair to both the customer and the company. Prices should be neither too low to cause a financial loss, nor too high to cause customers to look elsewhere. Predictive price analytics can be used to determine the optimal price point for a product, taking into account a range of factors such as past prices, customer interest, supply and demand, competitive pricing, and profit margins. This will help to ensure that the shop can generate maximum profits whilst still managing to make sales.
It is essential for stores to be aware of the prices their competitors are charging, as this is a key factor in determining their own pricing strategies. Predictive analytics can provide invaluable guidance to merchants, enabling them to ascertain when they can reduce their prices in order to undercut their rivals, and when they should not. Predictive analytics not only provide insights into pricing modifications, but also monitor competitors in real-time, making it possible to implement the necessary changes swiftly and effectively.
The Art of Managing Stock
Many retail business owners, particularly those with multiple outlets, encounter difficulty when it comes to keeping track of their inventory. It can be difficult to determine which storage areas need what, and without reliable data, it is often a case of guesswork. During the festive season, companies do not want to risk having an excessive amount of stock of certain items. When this happens, they often have to drastically reduce the prices of their merchandise afterwards, which can have a detrimental effect on their profits. On the other hand, if stocks of a popular product are insufficient, customers may be persuaded to shop elsewhere.
Predictive analytics can be an invaluable tool for retailers, helping them to anticipate what products they are likely to require for their inventories and prevent stock shortages. Smart inventory management is an effective strategy for ensuring that the right amount of product is purchased, taking into account factors such as existing stock levels, future demand, promotional activity, pricing and more. This approach to stock control is key for businesses to ensure that they have sufficient product to meet consumer demand, without having unnecessary stockpiles.
Predictive analytics has considerable scope for expansion within inventory management. Currently, big data is being used to assist retailers in managing their stock levels to ensure that neither too much nor too little inventory is held. However, in the next five years, data scientists will create programmes which can forecast the areas in which businesses could make more money. By analysing consumer behaviour and making market predictions, stores will soon be able to identify which of their product lines, such as accessories or shoes, is most likely to generate the highest profits.
Predictions by the firm
By harnessing the power of predictive analytics, stores can more accurately predict their annual sales figures. The potential variability of quiet and busy trading periods throughout the year can be largely eliminated, allowing organisations to make informed decisions based on reliable predictions of future performance. This can give businesses a significant edge when it comes to planning for the future and staying one step ahead of their competitors.
The retail industry is being revolutionised by the introduction of Artificial Intelligence (AI). This technology, which is heavily reliant on large datasets, is transforming the way we shop and is having a significant impact on the industry. AI is enabling retailers to gain a greater understanding of their customers and tailor their services to them, leading to a more personalised and efficient shopping experience.
Using AI to Enhance Retail
By 2023, analysts anticipate that the annual global investment in artificial intelligence (AI) for the retail sector will reach an estimated $7.3 billion. This investment is forecasted to be directed into three areas of AI technology which are set to become increasingly significant: automated marketing using AI will grow by 30%, demand forecasting will experience a 16% rise, and customer service and sentiment analytics will expand by 54%. AI has numerous potential applications in the retail sector, and this article will explore the currently utilised methods, as well as the possible future developments that may arise due to these technological advancements.
Technology for creating synthetic environments, such as augmented reality (AR) and virtual reality (VR) (VR)
Augmented Reality (AR) and Virtual Reality (VR) have a wide range of applications in the retail sector, as both of these technologies utilise Artificial Intelligence (AI) in order to modify a user’s perception. By using AR and VR, retailers are able to provide a more immersive and engaging experience to their customers.
IKEA have recently released an app, ‘IKEA Place’, which utilises augmented reality technology to give customers the opportunity to virtually preview how furniture from the IKEA catalogue would look in their home. By using their webcam, users can see how various products would fit and look in the space, helping to ensure that customers are satisfied with their purchase and reducing the amount of items that are returned to IKEA due to size or regret.
CONVERSE’s Sampler app is a widely popular augmented reality tool that allows customers to experience the process of trying on shoes without leaving their homes. Through the app, users can select the style of shoe they wish to try on, point their iPhone camera at their feet and then make a purchase decision based on the virtual result.
It is highly likely that retailers will utilise augmented reality (AR) features in their marketing strategies in the near future. This could enable customers to use an AR app to view how a particular item of furniture, such as a couch, would look in their home. Not only would this provide a realistic visualisation, but it could also provide additional details, such as price and delivery information, directly on the screen.
Within the next five years, there is expected to be a significant rise in the utilisation of immersive visualisation for product catalogues. Customers will be able to interact with items before making a purchase, for instance by electronically testing them on or displaying them in their own personal surroundings.
The Realms of VR
Come and join me on an exploration of the virtual reality sphere. Lowe’s provides a Holoroom software which allows users to create a virtual version of a room in their home and convert it into a YouTube 360° movie. Customers can experience their virtual space using either Oculus Rift or Google Cardboard, depending on the store.
The TOMS shoe shop has gone the extra mile by offering customers an exclusive virtual reality experience. A four-minute, 360-degree virtual video transports viewers to Peru alongside TOMS on one of their charitable trips. Blake Mycoskie, the CEO of TOMS, stated:
Virtual Reality (VR) is undoubtedly one of the most effective tools for creating an emotional connection between users. By allowing people to experience the world from someone else’s perspective, VR can help to foster empathy and understanding of another’s life and struggles. This cutting-edge technology is now accessible virtually anywhere thanks to the dependable AT&T network. VR enables users to experience stories they would otherwise not have access to, and therefore provides an invaluable resource for those looking to gain a better understanding of diverse perspectives.
According to a study, 62% of consumers are interested in trying out virtual reality shopping and 35% of them have indicated that they would be more likely to use digital product try-ons when shopping online. Furthermore, 63% of buyers are expecting virtual reality to be part of their purchasing experience in the future. It is anticipated that augmented and virtual reality will increasingly be used to bridge the gap between physical and online shopping experiences for consumers in the years to come.
With the rise of augmented and virtual reality experiences in-store, retailers have seen a surge in customers returning to physical and mortar establishments. However, this tendency is likely to be short-lived. Alibaba have already created a digital shopping mall in China, which allows people to do their shopping without leaving the comfort of their own homes. Considering how rapidly consumers have adopted internet shopping, it is not unlikely that shoppers will also accept virtual reality shopping.
For physical stores, this situation implies that they must either embrace change or risk failure. Over the next five years, we can expect to see a large number of non-technology based stores close down. If these establishments are unable to provide customers with a new and exciting experience using virtual or augmented reality, they will almost certainly lose out to those who do. Wouldn’t it be great if you could try on clothes and compare prices without having to leave your home, queue up, and battle through the crowds? In order to ensure consumer satisfaction and participation, retailers should make it a priority to incorporate this technology into their stores.
As Artificial Intelligence (AI) technologies continue to advance, so too does the prevalence of chatbots. By 2023, it is predicted that AI-powered chatbots will be responsible for 85% of customer service interactions. Already, leading organisations have taken the lead in this field, and Small and Medium-sized Enterprises (SMEs) are also beginning to take advantage of this trend. As a notable example, Taco Bell’s introduction of TacoBot in 2023 has enabled customers to order from the restaurant without ever leaving the app. AI bots are also capable of providing tailored recommendations to larger groups, making them a valuable asset in the retail sector, where maintaining direct communication with customers is integral.
The IBM Watson Artificial Intelligence system is widely adopted by stores, such as 1-800-FLOWERS.COM, who have implemented the online gift concierge GWYN (Gifts When You Need). This AI-driven service communicates with web users in a highly natural manner, and has the potential to act as a guide for customers when making online purchases, offering tailored suggestions.
By 2023, it is likely that we will observe a rise in the use of vocal bots. 2018 is predicted to be a year of convergence between voice and chatbot technologies, as both have seen impressive progress during this year.
Artificial Intelligence (AI) is increasingly being utilised by companies across the globe to introduce chatbot technology as a means of communicating with their customers and providing tailored advice and help across all digital platforms. Many of these bots are powered by Machine Learning (ML) algorithms, which are designed to grow and develop over time. By leveraging ML, companies may gain access to invaluable data which can be used to offer an improved customer service experience.
Retail and the Internet of Things
The Internet of Things (IoT) is revolutionising many different industries, with retailers particularly benefiting from its implementation. Research has shown that an overwhelming majority (77%) of retailers agree that IoT solutions are providing customers with an enhanced shopping experience, enabling businesses to provide a ‘smart shop’ environment. Furthermore, the use of ‘smart signage’ and digital displays is increasing the potential for retailers to expand their operations.
Smart shelving solutions are highly beneficial for supermarkets and other large retailers. The system consists of RFID tags, which are attached to each item and scanned by an RFID reader. This allows managers to easily check if a certain product is running low or nearing its expiry date. As well as monitoring customer behaviour, smart shelves can also provide store managers with information about which products are selling quickly. Furthermore, tracking each item helps to reduce the risk of theft.
The integration of Internet of Things (IoT) technology and predictive analytics software has the potential to completely transform the shopping experience for customers. For example, IoT smart shelves can send notifications when stock of a particular product is running low. Predictive analytics can be used to identify regular purchasers of the product on a weekly basis. Then, if the item is no longer available, the system can send them a text message to inform them that a nearby store has it in stock.
It is likely that, within the next five years, we will see the emergence of speech technology which enables customers to make purchases while in a connected automobile that is passing a store which has the item in stock. This technology has the potential to revolutionise retail in the near future.
Beacons are increasingly being used by businesses as a way to draw in customers. These beacons are Bluetooth-enabled devices that can detect when a person’s smartphone is in close proximity to a shop, prompting the customer to receive a push notification. This technology is being used by many stores in order to entice potential customers by providing them with coupons and other attractive incentives to get them to come inside.
The Use of “Smart” Displays
As more cities become ever more technologically advanced, an increasing number of them are introducing digital billboards. These signs use a variety of electronic methods, such as LCD and LED displays, to show video, images, text, and other digital content. Businesses are also increasingly taking advantage of this technology with its ability to conduct hyper-targeted marketing, which allows them to present advertisements tailored to particular individuals or groups. For example, a mother and child passing by a billboard may receive a discount offer from a children’s store. Moreover, intelligent displays in stores can monitor customer data and adjust prices accordingly.
The Future of Retail Is in New Technology.
In order to stay ahead of the game, retailers must meet the escalating demands of increasingly tech-adept customers. Whilst only the most established retail names are likely to have adopted all three of the major technologies (big data, artificial intelligence, and the Internet of Things), smaller companies are beginning to utilise similar tools in order to boost the quality of their customer service.
Customers now expect more than just a mobile experience when making any purchase, whether in store or online. Augmented reality and internet connectivity are now commonplace, so retailers must harness the power of big data in order to create a memorable experience for their consumers. By utilising big data, stores can make informed decisions on which technologies to invest in, as opposed to taking risks and wasting money. Those retailers who invest in these innovations are likely to see an increase in both sales and customer loyalty, resulting in an improvement in both revenue and brand recognition.