We’re at the end of the year already, and in retail, it’s been a very significant one. 2017 has been the year when many a brand has finally had its moment of reckoning with the new consumer and digital realities, despite these changes having been underway for many years. So why has it taken so long to hit home?
We think that this is, to no small degree, due to retail technology suffering from a case of mistaken identity. Listen closely and you’ll overhear debate in retail boardrooms around identity. ‘Are we a retail company? Or are we a technology company?’ We hate to break it to you, but that’s a fruitless discussion because every single step of the customer journey is powered and enhanced by technology. But let’s dial this back for a second to understand why this discussion is happening in the first place. At some point there was a polarization between technology and retail; the nerds got custody of the technology, and the creatives and merchants focused on the retail part. (This rings particularly true for those in the fashion industry.) In a historical context, this made sense, considering retail technology was a way of keeping track of inventory (barcodes) and processing payments (credit cards), but the evolution of technology means this binary view of the retail business model is now defunct.
All this being said, if you’re still discussing this point, you’ve missed it entirely. The question is how willing you are as a retailer and brand, to invest in the tools that will seamlessly guide the customer from discovery to delivery. And organizing your teams so that these business functions aren’t siloed is integral to ensuring positive, recurring customer experiences.
But if the end of the year is anything, it’s the perfect moment to reflect. So let’s take this opportunity to talk about retail technology and the key themes of the year. Where have the biggest changes taken place? And where will retail technology take us in 2018?
A Nod to the IoT (or Alexa, more specifically)
The attraction is mutual. And signaling how serious this relationship has become, look no further than the extent to which we’ve let connected devices into our lives this past year. To what degree, you may be wondering? Well, in yet another inescapable Amazon reference, there are more than 20 million Alexa devices (most in the form of Echos) in circulation out there. And while that’s a boon to Amazon’s sales, specifically 10% more spending from an Alexa owner and 6% higher frequency of purchase, the more important thing is that, as consumers at least, we’ve made a complicit arrangement to give over some amount of privacy to make life, well, just a bit easier and more convenient.
But as much as the IoT to consumers is about the ‘thing’ itself, to retailers, it’s so much more. The amount of data that can be mined to understand patterns of behavior and predict future tendencies has the power to redirect resources from supply chain, marketing, and existing inventory to its most profitable destinations. So while you may not have the massive infrastructure of an Amazon to manufacture the hardware and create a cross-category data ecosystem, as retailers, you do still have your existing customer base and from which, a treasure trove of data to mine insights that can drive the bottom line and deepen customer stickiness.
While retailers have been increasingly investing in mobile technology – in particular, their mobile shopping apps’ capabilities – 2017 was the year where the data really started to show how much consumers have taken to mobile commerce. On Cyber Monday alone, Adobe data showed that 47% of visits and 33% of purchases were made on mobile, which represented an increase of 12% over the previous year. Looking ahead, research shows that mobile transactions will hit $930B in the US alone by the end of next year.
Numbers like this really drive home the notion that investing in technology, ahead of the consumer shift, can really pay off. Without a doubt, and we see this in particular in Asia, mobile is not a percentage, rather, it’s the majority of e-commerce transactions. Take China’s blockbuster Single’s Day shopping event; a record-breaking 90% of payments were done on mobile. So whether it’s Bitcoin or increasingly integrated mobile payments, we can only look eastward if we want to see which direction mobile commerce and the infrastructure supporting it will be speeding towards over the next few years. And Amazon’s already gone there with its Go store concept, where customers don’t even need to interact with a checkout system or person to walk out the door with their merchandise. And if we know anything, it’s that where Amazon is investing, we should all be paying very close attention.
AR Finally Makes Business Sense
In retail we love things with buzz just as much as the next person, but business is business. And in business, without practical, needle-moving implications (and we’re talking about the latest, greatest technologies that everyone talks about but only vaguely understands), these get set aside for what’s more immediate and measurable in impact. We say all this, because it’s certainly been a question raised previously by many with regards to augmented reality, both from a consumer and business perspective. It’s cool, and sure, we all loved Pokemon Go, but how does it transform retail experiences?
Well, in 2017, we saw meaningful movements in AR adoption which signal it does indeed have a place in our retail present and future. While head-mounted displays (HMDs) still haven’t gotten market traction and are (debatably) still considered pretty uncool, the release of the latest iPhones – the 8, 8S, and X – was major in terms of bringing retail AR mainstream. The new phones – which have AR capabilities built in – enable consumers to take products from online and virtually try them on or out. Already Amazon, Sephora, IKEA, Anthropologie, and Wayfair are developing AR capabilities, and this is only set to increase in uptake on both the retailer and consumer end, as it’s estimated there will be more than 900 million AR-enabled smart devices operating globally by the end of next year.
In 2018, We Collaborate
We’ve talked about where we’ve seen the biggest movements this year in retail technology, but what does this look like as we peer into a rapidly approaching 2018? We know that there will always be fits and starts when it comes to the investment in, and adoption of, technology but we have one idea we think worth sharing, and retail technology could and should be the thing underpinning this notion.
With that in mind, let’s talk about sharing. We share a lot more with each other these days than we used do. As a consumer I let you, as the retailer, have some information on me so that you can offer me the right product and promotion, and as brands and retailers, you are working more closely with your vendors and industry complements than ever before, because, well, it’s tough out there. But there’s more ground to be covered. Today’s new digital world order means you should be looking at “those guys” differently. Any thought piece on retail technology must mention Amazon and its continued strides towards world domination, and there are basically two ways in which we’re seeing brands and retailers react to their ongoing consolidation of power. They’ve either joined up, as brands such as Nike have done this year, or as incumbents, formed alliances with other players in their space. All we need to do is examine Wal-mart’s moves over the past few years, as it’s acquired a variety of digitally native retailers and established previously inconceivable partnerships. Why are they doing this? Well, they’ve decided that their survival depends on reaching customers who aren’t necessarily theirs right now – the younger, more urban, and affluent shopper – and those virtual fences weren’t doing any them any favors.
But what if we take competitive collaboration one step further? At this year’s NRF Big Show, Steven Lowy, co-CEO of Westfield Properties, challenged retailers to start sharing, for real, “That (the state of the retail industry) leaves us with a choice – are we going to continue to be driven by narrow-minded institutional and historical thinking, and watch our revenue suffer? Or are we going to free our data from its silos, leverage the power of our collective knowledge, and create more value for the customer?” It was an idea that many in the audience found to be contentious, but we believe this idea deserves closer examination. As we watch organizations struggle to not only find the resources to analyze and strategically digest the data that streams through their organizations, couldn’t sharing both that information and the best practices of its collection equally benefit the respective parties? To Lowy’s point that we’re often caught up in our old ways of doing things – what if instead of turning to consultants and those deeply entrenched in the organization to fix things – we look to those who also cater to the same customers, have faced similar challenges, and are also working to address their problems? We get that there is trepidation around sharing information, but start small, identify shared outcomes, and commit (and we mean really commit) resources to making this work.
Retail technology has never been more important, and its transformative power is increasingly evidenced in the bottom line. So here’s to you and a new year of customer value driven by retail tech.