Benedict Clark, a content editor at Acquire, shares insight on the seven technology advancements driving retail's phygital future. (via retailcustomerexperience.com)
Shopping has always been seriously big business — with total global retail sales reaching $26.29 trillion in 2019. Yet, the actual retail experience has changed radically from just a generation ago. The only option then was to walk into a store, or if you were feeling particularly adventurous, perhaps buy from a mail order catalogue. Fast forward to today, however, and technological advancements in the retail industry have opened up a whole new world of possibilities.
Technology is taking retail phygital
The holy grail for retailers in recent years has been omnichannel. And with good reason. According to Aberdeen Group, companies that provide a consistent service quality across multiple channels retain 89% of their customers — companies that don't are only able to retain 33%.
But, despite the largely unified experience an omnichannel approach provides, it has still been possible to clearly delineate between these channels and touchpoints (e.g. e-commerce vs. in-store). Now, technology has started to blur these boundaries, bringing the online and offline world ever closer together and augmenting our everyday reality.
This new phenomenon is known as phygital: a shopping journey in which physical experiences and digital technologies intertwine to enhance one another. Physical channels are enriched by digital technology, while digital channels become more human. The net result is a more personalized and engaging experience.
This march toward a phygital future is only possible thanks to unprecedented technological innovation. If you're intrigued, here are seven technological advancements in the retail industry that will make you say wow.
1. Internet of Things Internet of Things is a network of literally billions of physical devices communicating with each other and sharing data. IoT has massive potential for the retail industry, providing a way to create even more engaging and innovative shopping experiences — one of the reasons why Juniper Research predicted retail spending on IoT technologies would reach $2.5 billion by 2020.
In fact, IoT is already being put to good use in many areas. One of these applications is beacons — small wireless devices powered by Bluetooth Low Energy that transmit a continuous signal. Smartphones are able to pick up on the signal, which they pass into a cloud server. The cloud server can then push out targeted content to a specific smartphone. Microlocation can even drill down to particular aisles within a single store. The potential for data gathering is simply immense, allowing more granular customer segmentation and personalization than ever before.
US retailer Macy's uses these beacons. When a customer opens the Macy's app in-store, the app registers their exact location. Say, for example, the customer is in the beauty products section. The app can remind the customer of particular beauty brands or products they have previously liked online and help move the customer towards purchasing them in-store, perhaps through a tailored offer.
Another practical application of this technology comes in the form of RFID tags. These smart barcodes give you total visibility for products all the way through the purchasing process. Athletic apparel supplier Lululemon uses RFID tags to update and keep track of inventory levels in stores all over the world, improving inventory accuracy to 98 percent.
2. Facial recognition Identifying customers at the point of sale — by using loyalty cards, for example – is no longer good enough for retailers. They want to know who the people in-store are before they buy so they can deliver a personalized shopping experience. Yet, most stores don't have the luxury of recognizing every single face that comes through the door.
This is where facial recognition software can step into the breach, scanning thousands of reference points across a person's face to identify their unique 'face-print' (much like we all have our own unique fingerprints).
Identifying customers this way gives your staff visibility into the types of products customers might purchase, and how much they are likely to spend — so they can roll out the VIP treatment for those high value shoppers.
Facial recognition technology can even help your sales staff better respond to customers' needs, deciphering any changes in your customers' emotion and then notifying your staff so they can attend to distressed or confused shoppers right away.
Another obvious implication of this technology is around loss prevention — especially useful given American retailers lose almost $50 billion annually to theft (shoplifting accounts for 36.5% of those losses). Your security staff might not spot a shoplifter sneaking in again, but the software certainly can. It can even compare faces against a database of known shoplifters to provide proactive theft prevention. Facial recognition in retail decreases shoplifting by 34%. That means better value for your customers and more money in your pocket.
This may all seem rather Orwelian. Despite facial recognition being a way to provide people with the personalized experience they want (e.g. 41% of consumers expect representatives in a brand's physical store to know what they have purchased online), there will also be shoppers who would see it as a gross violation of their privacy. So, to address any ethical concerns, facial recognition must only be used where someone has explicitly opted-in (rather than using assumed consent, for example).
Shoppers could sign themselves up to the scheme and use their smartphone to perform the facial scan, or potentially even visit a dedicated booth in-store. Whatever the mechanism, it's vital retailers retain trust by placing shoppers in control of the experience.
3. Autonomous delivery robots and store assistants
Sci fi has long painted a picture of a world where robots are commonplace in our daily interactions. That vision has never really become a reality. But, in retail at least, that might be about to change.
According to Boston Consulting Group, the global robotics market is estimated to reach $87 billion by 2025 — more than half is likely to go to the retail market. The size of the global customer service robots market, meanwhile, is projected to increase from the estimated $53.77 million in 2016 to $87.97 million by the end of 2022, according to market intelligence firm Tractica.
Imagine robotic store assistants, with built-in 3D scanners that help them recognize products and even lead your customers to products by navigating through the store. What happens if the customer has a question the robot can't answer? No problem. The robot simply starts up a video conference with a human staff member who can assist them as required.
Robots can also be used in the supply chain — checking stock, identifying errors in pricing, and locating misplaced items, for example. The data they gather helps to improve the customer experience by optimizing store layouts and processes.
Robotics has already transformed distribution center operations, with retail giant Amazon reportedly using more than 100,000 robots to move stock around warehouses and group items for order fulfillment, leading to a 20% drop in operating costs. Now, technological advancements in the retail industry are starting to robotize last-mile delivery, too. Amazon has famously been trialing drones in preparation of launching an Amazon Prime Air, a service that promises to get items from order to delivery in 30 minutes or less — provided they are under 5 pounds in weight that is.
Not to be outdone, Alibaba announced a last-mile delivery robot called the G Plus, with plans to use it for delivering parcels, groceries, and food within residential areas. Customers won't be left twiddling their thumbs as they wait either — they can monitor the entire journey via smartphone.
4. Cashierless stores
The idea of queue-busting cashierless stores has been given extra impetus by social distancing measures imposed on the back of COVID-19. One survey looking at shifts in shopping habits due to the pandemic found that 87% of customers would likely choose stores with contactless or self-checkout options.
The ability for customers to simply walk out of the store with their items being scanned automatically and the total debited from their account will likely soon become widespread. Amazon originally pioneered this approach through the Just Walk Out system, put into practice through Amazon Go stores.
Taking this approach even further, it's also possible to develop an almost entirely touch-free shopping system. With COVID-19 concerns likely to stick around for a while, we may start to see customers scanning barcodes and QR codes, not only to pay for products, but to receive information about those products right into their smartphones, too. This will both cut down on direct product handling and address sustainability and accountability concerns by being more transparent around production methods.
5. Augmented shopping
Perhaps the flagship technology for creating a phygital future comes in the form of AR/VR. And, it seems customers are on board with it. According to one report, nearly two-thirds (61%) of U.S adults surveyed said that augmented reality has influenced where they shop.
COVID-19 measures have played a huge role in increasing the demand for AR systems, allowing customers to adopt a "try-before-you-buy" approach in absentia, and helping replicate, and even build on, the in-store experience online.
Ikea, for example, created the "Ikea's Place" app, allowing shoppers to access 3,200 items from Ikea's inventory via a live view function on their smartphone, and use AR functionality to see how specific items would look, positioning them virtually within rooms in their home, before committing to purchase.
AR promises to radically change the in-store experience, too. In fashion retail, smart mirrors will bring previously unthinkable levels of interactivity. Customers won't even need to get undressed to try out a whole new wardrobe, with virtual changing rooms allowing them to superimpose items and outfits and gather the opinions of friends by sharing images to social media.
Oak labs use similar technology to create interactive changing rooms. The smart mirrors recommend other items customers often pair with the products customers are trying, helping complete their outfits, and bringing the convenience of online shopping in store. The process produces a wealth of rich data, too. For example, you can see what the conversion rates for particular items are from the dressing room to checkout and adjust the products and product range accordingly.
6. Voice commerce
Voice commerce sales are set to reach $5 billion in U.K .and $40 billion in US by 2022.
Ever since Apple's Siri came on the scene, voice assistant technology has exploded in popularity, and has now even started to break free of smartphones and spread into other devices. One survey showed that 60 million people now have at least one smart speaker system at home. For many, product research, price comparison, and now even product purchases, are all just a few utterances away.
Walmart has capitalized on this development by creating the Walmart Voice Ordering service. Customers can use any device powered by Google Assistant or Siri to add products to the cart. Shoppers simply need to say "Hey Siri/Google, add to Walmart" and name the product. The items are then packed and delivered by the customer's chosen method.
7-Eleven Inc. also launched a voice ordering within its 7NOW Delivery app. Customers can open a 7NOW app by saying "Hey, Alexa! / OK, Google! Open 7NOW" and similarly place goods into their basket purely using voice commands. Once it's paid for, the shopping is delivered to customers within 30 minutes.
7. And of course, it's all underpinned by AI
It's impossible to talk about technological advancements in the retail industry without bringing artificial intelligence into the conversation. And rightly so. AI powers so much of the change happening in the retail sector. In fact, Servion Global Solutions has predicted that by 2025, 95% of customer interactions will be powered by AI.
Perhaps the most common way shoppers encounter AI at the moment is through product recommendations — something we have almost come to take for granted. Now, AI technology is driving further change by allowing other technologies to reach their full potential. Scan-and-go shopping, facial recognition, and so many other advancements all rely on AI.
Technology is at the very heart of the future of retail. And, as this technology continues to push the boundaries of what's possible, shoppers' expectations rise in tandem. They want retailers to deliver the kind of ground-breaking, phygital, and personalized experiences that make them say wow. Do that and you'll be more likely to stay relevant well into the future.
Benedict Clark is a writer and psychologist with over ten years marketing experience in a range of different roles. He believes avidly in the power of words to connect people and ideas.