The future of retail

Retailing is undergoing a revolutionary change. The combination of evolving customer needs enabled by emerging technology is causing existing players to rethink their model and bringing new players to this highly contestable market.

This is the first of a series where I’ll explore the impact technology has had and will have on the retail space.  To begin let’s shine the spotlight on the revolution that is the Internet of Things (IoT).

What is IoT and why should we care?

IoT a network of connections linking the physical and digital worlds in an ecosystem of computers, smartphones, wearables and nearables.  In the case of retail the ‘things’ can include inventory, tracking chips, traditional in-store infrared foot-traffic counters, cellular and Wi-Fi tracking systems, digital signage or even a customer’s mobile device.

Analysts estimate by 2027 there will be over 100 billion devices gathering and exchanging data through IoT.

IoT technology is already re-shaping and revolutionising the retail industry, improving and creating new opportunities in customer service, throughout the supply chain and in brick-and-mortar stores as well as other channels.

Forward –thinking retailer Amazon recently unveiled in a video it’s new physical store, showcasing it’s mix of “grocery essentials” and ready-made meals. But the real game changer was what it didn’t have: checkout lines. Customers simply checked in at the entrance of the store with a new app called Amazon Go, picked up the items they needed, however when finishing their shop they simply walk out without having to wait in a queue. Amazon can track the items automatically through a combination of smart sensors connected to the internet and artificial intelligence.

Not only does this improve the customers shopping experience, Amazon also benefits through reduced operational costs: eliminating much of the staff needed to operate a store. This new technology also enables Amazon to collate data on its customers shopping habits online and offline to provide more informed recommendations.

The Opportunities for Retailers

To capitalise on IoT opportunities retailers and players in the retailing eco-system must act on the following key areas:

  • Customer Experience (e.g. customers use their smartphone or wearable devices to quickly scan an item and call up product information, reviews or social media commentary; Customers get personalised digital coupons upon entering the store).
  • Supply Chain (e.g. Smart shelves in store that detect when inventory is low; smart robots will aid in areas ranging from stock replenishment to product assembly to hazardous materials handling; smart packaging monitoring the freshness or age of perishable goods).
  • New Channels and revenue streams: (e.g. smart price tags that can be changed in real time based on demand or other trends; connected pantry basic groceries arrive when needed).

Retailers that resist or a slow to adopt IoT will not survive, so the question for retailers is whether they will choose to be disruptive or be disrupted #IoT is coming.

Article written by Aneta Ramos, Consultant, HillPDA Retail Economics team.