Critical Technologies for Digital Transformation in the Retail and Consumer Industry

Retail Apr 07, 2020

Digital interaction is already rooted in our daily routine. Consumers in our new digitized world expect better, more personalized experiences and almost instantaneous responsiveness from brands. To match such high expectations, retailers must shy away from handling their business as usual. In this article, we’ll explain what technologies and trends can enable your retail digital transformation.

What Does Digital Transformation Mean?

Digital transformation (DT) is a complex reinvention of your business culture, processes, and operations, your employees’ workflow and the entire organizational model. Many companies choose the wrong focus, buying into promises that a new tech stack and tools will sustain their digital transformation strategy.

IDC predicts that in 2020, companies will spend over $5 trillion on the cloud, big data, BI analytics, mobile apps and such innovative tech as AI, robotics, AR/VR, etc. However, technology is just the tip of the iceberg as the DT process requires a shift in the entire business paradigm.

So, what is digital transformation, and how can you avoid breaking your budget while heading towards it?

First of all, you should consider objectives you set for the digital transformation and what approach will be the most efficient for your business. For this task, you should understand key DT concepts and areas for improvement:

  • Establishing change management to optimize your business processes, workforce performance and flexibility to quickly adapt to market changes;
  • Enabling simplified data accessibility and self-service experience across the organization;
  • Defining priorities and evaluating all the weak points to gauge your business’s readiness for such an upheaval;
  • Digitizing and automating routine processes to focus more on strategic tasks;
  • Initiating a collaboration between different departments to eliminate organizational silos;
  • Finding tech-savvy executive managers responsible for implementation of new technologies per your business goals.

Why does digital transformation matter in the retail and consumer sector?

Why should retailers put themselves through such major changes? The first and most obvious reason is the fierce competition dictated by e-commerce leaders such as Amazon, Walmart, Costco, Kroger, etc. They set the pace in implementing the newest technologies and experimenting with eCommerce digital transformation trends.

Competition and the upsurge of online shopping made famous clothing and fashion retailers (GAP, Forever 21, Lord & Taylor and others) close many or all of their US-based stores - over 9000 in 2019! The idea of a conventional store can no longer match those high demands of consumers who want personalized interactive experiences.

More and more brands (Target, Walmart, Best Buy, Home Depot, etc.) recognize the importance of augmenting the real-life shopping experience with digital features. They establish eCommerce platforms and turn physical stores into eCommerce fulfillment (aka mini distribution centers) and experiential spaces (galleries, showrooms, playground for kids and adults, etc.) Here are some of the brightest retail transformation examples:

  • STORY - now a part of Macy’s stores, has 7 years of changing themes to match the shifting demands of customers.
  • Burrow House - a furniture brand creates a home-like environment for its customers to test out furniture while watching Netflix movies, enjoying a Happy Hour, or working in a cozy, quiet place.
  • CAMP - a family or playground experience store allows parents to choose new toys for kids or simply spend fantastic time with them building a rocket or creating a musical instrument from unusual materials.

How Technology is Revolutionizing the Retail and Consumer Sector

Our generation is more technology-driven than ever before. The mainstream use of digital devices has unplugged a myriad of options for consumers - from browsing and comparing the best deals to online purchasing. At the same time, information availability and the arrival of disruptive technologies (IoT, AI, cloud, AR, etc.) leveled up consumers’ expectations of brands, such as how they position themselves and how fast they deliver products and services.

So, how to implement digital transformation by selecting the most relevant tech for your business?

Gartner forecasted that in 2020 and next year as well, retailers globally would spend over $210 billion on their IT needs. Primarily investing in new software, IT services, data centers and devices allows retailers to modernize their IT infrastructure. And this will be vital for retailers and wholesalers who prepare for the adoption of innovative technologies - such as RPA (Robotic Process Automation), AI-powered stores and supply chains, and more.

With eCommerce catalysts such as Amazon, Walmart, and Alibaba, retailers are already challenged by the implementation of AI-powered stores without checkouts (AmazonGo), Alexa-based voice commerce (Amazon Echo), “smart cart” technology (Walmart’s Jet ecommerce platform), and the Hema grocery app powered by AI and big data analytics to study customers’ tastes and create personalized offers (Alibaba).

As much as revolutionary technologies (cloud, big data, AI, etc.) have taken root in the retail and consumer industry, they also prompt the formation of many digital transformation trends. Let’s have a quick look at how each trend impacts the retail business.

Connecting the Consumer Experience

Connected retail leverages the Internet of Things (IoT), cloud, computer vision, and data analytics to strike a balance between the digital and physical shopping experience. Connectivity in retail transformation should embrace three key concepts: connected store, connected consumer and connected warehouse. However, connected retail extends beyond this framework, as it should also embrace connected supply chain, logistics, and workforce to build an efficient, connected business network. As per Oracle, over 60% of organizations already use IoT to enhance their customer experience in the following use cases:

Popularity of CX use cases for IoT

Today physical stores and warehouses are equipped with sensor RFID tracking tags or chips to track their stock, optimize their demand and supply planning based on data about the most wanted items. The RFID technology is also behind Kroger's smart digital shelves showing not only an item’s price tag but also details, discounts or coupons customers can apply in the dedicated application. RFID, together with sensors, also allows monitoring the inventory of  products in real-time. At the same time, IoT sensors can be used to offer buyers who are interested in specific items, personalized discounts, or to upsell/cross-sell additional products/services perfectly matching already chosen items.

Kroger Company, a large grocery retailer, went even further and partnered with Microsoft to set up connected experience stores powered by MS Azure Artificial Intelligence.

AI and Machine Learning

In the retail and consumer industry, these key digital transformation technologies are mostly used for reimagining the eCommerce customer experience and optimizing the entire supply chain and logistics together with IoT, Big Data, and Predictive Analytics. However, both AI and ML have multiple use cases as they can be applied to almost at any stage of the retail value chain.

Machine Learning Use Cases In Retail

Walmart, for example, created a dedicated laboratory (Intelligent Retail Lab) to track the availability and quality of products in their stores’ huge pavilions. To collect and rapidly process real-time data, the lab exploits numerous cameras and IoT sensors installed around the store.

Multi-cloud Computing

Hybrid cloud has been considered one of the most reasonable approaches to digital transformation, combining both on-premise, and public and private cloud options. However, in recent years, multi-cloud computing (the use of two or more public clouds from different service vendors) has also become well-liked among retailers for higher scalability, costs reduction, and agility for the organizations’ IT infrastructure. More than 80% of organizations have already partnered with a second cloud provider to ensure reliability of their core application, independence from a single cloud vendor, and the flexibility of having more customization options from another provider.

Omnichannel Improvements

For optimizing the omnichannel experience, recently valued by over 70% of consumers, retailers should first think about how well they integrate different channels to create a genuinely seamless experience. The key point is that the omnichannel approach no longer involves the provision of items or services across different devices. An improved omnichannel strategy should be focused on the integration of all of a consumer’s interactions - from browsing in the mobile app and visiting a social media store or physical store to making a purchase. Seamless customer experience transformation covers the client’s entire journey. Among the brands that have created omnichannel experiences are:

  • Nike – its app environment complements the physical store, allowing customers to have the latest store layouts or discounts when they are in close proximity,
  • IKEA – provides an intuitive interface with an e-commerce AR visualization app, and in-store navigation assistance,
  • Neiman Marcus – its in-store smart mirrors recreate the app experience and allow consumers to connect to their social media channels.

Cognitive Computing

Cognitive computing, as one of the most transformative technologies for the retail sector, will enable making human-to-machine interaction more natural and productive. At the moment, most customers deal with cognitive systems when they text an eСommerce chatbot, use self-checkout apps, or information kiosks. Yet for retailers, cognitive computing is still an area to develop to tap into multiple benefits for both customer engagement and retention.

Smart Beacons

These are small Bluetooth-enabled wireless transmitters sending signals to other BLE devices such as mobile phones. Referred to mostly as location technology, in retail, beacons are often used for out-of-store marketing to attract the potential buyer’s attention with a unique personalized offer. Another compelling use case is helping a customer to navigate a hypermarket. Auchan, an international retailer, provides customers with a guidance map in their app, helping them find their way faster.

Cashless/Cardless Checkouts

AmazonGo’s trailblazing cashless checkout has obviously established a new trend that’s already been  adopted by such retailers as Sainsbury’s (the UK), Decathlon (the US),  7-Eleven (Australia). The trend is based on “Just Walk Out” technology, driven by computer vision, sensor fusion, deep learning and RFID tags. The technology has many benefits of digital transformation inside the store, one of which is access to consumers’ preferences.

Logistics Transformation

Technology that will impact the logistics of the future is robotics process automation. One research study confirms that the market share of collaborative bots and robots will grow at 44% CAGR by 2025. At warehouses, robots and cobots are used to assist or completely automate routine processes. Regarding transportation, predictive analytics coupled with IoT, cloud and machine learning will help track a company’s assets and avoid delivery delays.

Personalization

The personalized shopping experience is a retailer’s biggest concern and advantage at the same time. However, it is a trend that drives consumer digital transformation. Equipped with deep learning, big data and predictive analytics, retailers will be able to discover how to tailor their products to specific customers’ needs.

Data as a Competitive Advantage

In light of the personalization trend, data analytics should become a primary step in your digital transformation strategy. Your workforce most likely will need self-service tools allowing employees to quickly extract the necessary insights from vast volumes of consumer data and craft visually-rich market reports.

Conclusion

When creating a digital strategy based on innovative technologies, retailers and wholesalers should take a sensible approach to their digital transformation.

Usually, retailers who still rely on their legacy systems simply lack enough know-how to start a transformation correctly. In fact, a staggering 70% of market leaders' investments have been wasted already on unrealized digital transformation initiatives.

Professional support from Zoolatech experts can help you develop a digital transformation roadmap that ideally fits your business needs.

Zoolatech Team

We are a team of technology addicts eager to transform our clients’ needs into efficient and innovative solutions through high-quality service and reliable customer support.

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