Digital Era

A long time ago, in a galaxy far away, the word retail was associated solely with the physical store. Today it means much more, thanks to the emergence of new technologies.

Digital transformation in retail continues to gain momentum, and retailers should strive to keep up with what is arriving in order to satisfy modern customers. Despite the noise, the physical shopping experience remains a huge economic driver. The secret to success — as Zara and Starbucks have demonstrated — lies in adopting customer-centric technology.

Machine learning

Machine learning uses algorithms to make decisions from data patterns, and it has given retailers a powerful engagement tool. Through historical analysis, brands can track individual preferences and pre-empt future choices.

Cameras embedded with machine learning can detect where customers look and pick up on their walking patterns, producing a better understanding of the in-store experience. Those insights can target individuals with personalised offers, or change how products are displayed at particular times of day.

Human intelligence can be replicated to analyse big data and automate processes. By discovering patterns, companies can build consumer-focused applications that predict and recommend products and services in real time. Forecasting new demand is essential: by analysing demographic information, socioeconomic factors and previous purchases, retailers can estimate spending habits and make recommendations — which lets them optimise pricing and anticipate needs, keeping them relevant and competitive.

Personalisation with artificial intelligence

AI is set to change the retail industry. Between 2013 and 2018, AI start-ups raised US$1.8 billion across 374 deals, according to CB Insights.

Virtual assistants are software solutions designed to automate and enhance sales processes by identifying and converting leads faster. The ability to customise products and services in real time and cross-sell increases both engagement rates and customer loyalty.

AI has become a key element in the digitalisation of in-store retail — personalising the customer experience and creating a more engaged business-to-consumer interaction. At its core, AI focuses on making machines capable of solving problems as well as people can: learning from experience, adjusting to new inputs, and performing human-like tasks. It combines large data sets with fast, iterative processing and detailed algorithms, which lets the program learn automatically from patterns in the data.

AI allows for an integrated supply chain that starts from customers’ decisions and goes all the way to operational, strategy and tactical decisions — and could mean lower operational costs, lower lost sales and better planning. Ehsan Ardjmand · Assistant Professor of Analytics Systems, Ohio University

Retail use of AI grew 600% in two years

AI adoption by retail sector

What customer-facing AI moves

• 9% improvement in customer satisfaction
• 8% reduction in complaints
• 5% lower customer churn

Where AI is actually used

Only 26% of applications face the customer. 74% are operations. If you are only focused on customer-facing AI, you are missing the smart money.

73% of consumers prefer personal-data-customised shopping. By 2021, customer service interactions handled by AI were projected to grow 400%.

At McDonald’s, outdoor drive-thru menus vary based on time of day, weather, current restaurant traffic, and trending menu items — predictive, not reactive.

Augmented reality

AR is a technology that will change the shopping experience once and for all: it merges the real world with the digital one. Plenty of applications already use it, often to put filters on live selfies.

In retail it becomes far more valuable. It lets customers digitally try on clothes, or see how a piece of furniture would look in their living room. IKEA and Anthropologie have already implemented this; their apps, built on Apple’s ARKit, give consumers a visual representation of how an item would look at home. That makes customers more confident about their choice and lifts the sales rate.

Virtual reality

Where AR changes the consumer’s experience, VR is transforming the business side. It is extremely helpful for visualisation when redesigning stores — layouts can be tested before anything is rebuilt. VR offers designers vast room to experiment and create a product that promotes the efficacy of the business.

Retailers can also use VR to present products. Audi has adopted this in its dealerships: consumers put on a headset and experience being in the car, customise features, and instantly see whether they like the result. It is a new experience that attracts customers, and it lets dealerships go digital. Eventually there would be no need to keep physical cars inside showrooms — more flexible, more opportunity, and a great deal of money saved.

Facial recognition

Facial recognition promotes an understanding of customer preferences. In-store sensors can determine the demographic characteristics of consumers and track where customers gravitate within a store. That lets retailers see where consumers go first and develop the layout accordingly. It also helps identify loyal and lucrative customers, so assistance and discounts can be offered in time to establish a relationship.

Self-checkout

Automation of retail processes aims to make shopping easier. Self-checkouts remove the long lines that cause customer dissatisfaction, and let customers make purchases entirely by themselves. They provide a new experience and change the usual appearance of retail stores, making them more futuristic.

Location-based services

Location-based services do not only provide incentives for consumers to set foot in physical stores — they streamline the experience once inside. Retailers can incorporate the technology into specialised apps that tap into customers’ location, show them relevant information, and give directions in-store.

Operations management platforms

Customer satisfaction plays a critical role in retail, and it is vital to conduct market research and collect market-related data. The research process usually includes phone interviews, email and exit surveys, mystery shopping and shelf studies. Historically there was no single tool that could report all results to the research’s consumers; each operation was separated by a different tool, which led to a management mess and low profitability.

Be more than a store

The retail sector will become more competitive both online and in-store. Grocers are trialling cashless supermarkets, fashion vendors are experimenting with smart apps, and retailers are investing heavily in the offline experience. Selling online in-store — replicating the online experience inside the shop with new digital technologies — is another concept that keeps customers coming back.

Driving customer engagement

Meeting consumer demand in a fast-paced, digital world is only going to get harder. That said, there is a wealth of technology available to help retailers get closer than ever to their customers and make real-time decisions based on previously untapped data. By working out when and why shops are more effective, technology lets retailers make gradual adjustments based on evidence.

Amidst cries of “the death of the high street,” the most innovative brands are integrating digital technology into physical stores and building a hybrid experience that ultimately drives engagement.