Retail’s new normal has arrived. We’re in the depths of disruption and intense competition, and while many have pegged it as the “retail apocalypse,” that thesis has been debunked. Retail is simply going through a period of disruption and change similar to a renaissance – not an apocalypse – as I explained in a recent article on Robin Report.
In essence, retail’s death has been greatly exaggerated. While the number of retailers closing shop in 2017 seems shocking, store closings aren’t unique to 2017. Forrester reports that in 2016, 2,000 U.S. stores were closed, as well as 5,000 in 2015, and 3,000 in 2014. This may sound like a lot, but combined over three years, it’s only 0.7 percent of the 1.44 million U.S. retail locations.
Retail is stronger than ever, and in fact, growing. The National Retail Federation reports that for each company closing a store, 2.7 are opening shops. This data also shows that there has been a net increase of more than 4,000 retail stores in 2017.
In light of this, below are a few trends we can expect to see in the coming year.
1. Consumers Will Be Best Reached “In the Moment”
With shoppers becoming more digitally savvy than ever before, retailers must innovate new ways to reach consumers in their exact moment of need or impulse. Many retailers are reawakening to the ideals of personalized, yet highly scalable, retailing by leveraging digital technology and unparalleled consumer insights.
Technology can be used to deliver a just-in-time outcome that previously would have been impossible. For example, 33 percent of consumers have purchased from a company or brand other than the one he or she intended because of information received in a micro-moment. In addition, 82 percent of smartphone users say they consult their phones on purchases they’re about to make while in a store. The opportunity is immense, especially as technology like in-store sensors, robotics, 3D printing and artificial intelligence are the new normal, enabling the ability to sense, analyze, optimize, and act in real time. With these tools, retailers can deliver on moments of customer and market need.
2. Creating New, Unique Experiences With Technology Will Be Non-Negotiable
Two technologies that play a major role in creating unique experiences are artificial intelligence (AI) and augmented reality (AR), which are both receiving heavy attention in the current news cycle. Neither will wane in 2018 – in fact, we can only expect further hype as more use cases are built and tested, and as these technologies evolve.
There are so many possibilities for brands and retailers with AI, especially with a faction of AI called machine learning. This technology can help the $2.4 trillion fashion industry with a more personalized consumer experience, creating the ability to provide personalized product recommendations based on each consumer’s purchase history and interests. This is an important tool, since according to Accenture, 65 percent of consumers are more likely to shop with a retailer that knows their purchase history and offers relevant recommendations. In addition, retail stores of the future will be able to create smart window displays to detect what someone’s wearing, their gender, approximate age and mood. Leveraging machine learning, the display can offer shoes, clothing, accessories and more, factoring in ideal colors, personal style and the latest trends.
Further examples include using Chatbots to drive intelligent conversations with existing and potential customers, and leveraging pricing engines to offer tailored pricing options and discounts. I expect we’ll see even more innovative ways to leverage AI over the next year.
With AR shoppers can virtually try on products quickly and easily through a mobile or AR device, such as a smart mirror. In the case of IKEA, customers can view how furniture would look in their home via a smartphone.
By converging physical and digital, brands and retailers can leverage AR to monitor and detect out-of-stock items and shelf misplacements as well as creating novel ways of interacting with consumers. SAP Hybris Labs is expanding the boundaries of AR and IoT with in-store assistants that can find the products consumers are looking for and smart shelves that recommend products based on consumer preferences.
3. Analytics Will Shape the Future of Retail
AI will become pervasive across consumer journeys, supply networks, merchandising, marketing and commerce, providing better insights for optimized retail execution – leading to the reign of analytics.
According to IDC, in the next two years, 30 percent of major retailers will adopt a retail omnichannel commerce platform, integrating a data analytics layer for centrally orchestrating omnichannel capabilities. In addition, 40 percent of digital transformation initiatives will be supported by cognitive/AI capabilities, providing critical on-time insights for new operating and monetization models.
ULTA Beauty is a great example of a retailer currently leveraging analytics. Their mobile app captures purchase history and enables customers to easily replenish items when they’re running low, encouraging loyalty. It also helps to educate associates in store, allowing for insight on what a particular shopper typically buys and what opportunities there are to upsell or cross-sell. Ultimately, the layer of analytics built into their technologies is enabling real-time insights to reach consumers in the critical micro-moment of need.
Welcome to Retail’s New Normal
To adapt, lead and thrive in retail’s new normal, we all must learn to navigate a digital atmosphere that moves at a demanding speed. Brands and retailers that incorporate technology to reach consumers at their exact moment of need, create unique experiences with innovative approaches, and use analytics to capture and act upon consumer insights in real time, will lead the pack in 2018.
By its nature, rapid change disrupts the status quo leaving clear winners and losers. Yet, as retailers face significant disruption, the prospect of unprecedented potential is very real and achievable. The truth is that with the right digital strategy, they can usher in a retail renaissance and be more successful than ever.