Following my 3-part series on being ‘Inside CES 2022’ over the last 3 weeks, a few of my subscribers, readers (who don’t subscribe but read every post – please subscribe and let me get to know you :)) and non-regular readers (tell me what’s happening in Retail man!) asked me for deeper coverage of emerging technologies in the Retail Industry. Outside In figured out the best place to explore this topic would be to visit (virtually, of course) the hotspot of emerging (global) new technologies – the Start-Up Nation – Israel.
Thanks to a popular book by Dan Senor and Saul Singer (https://en.wikipedia.org/wiki/Start-up_Nation) for the title inspiration and a fantastic report by Deloitte Digital on the Retail Tech Evolution driven by Tech Cos in Israel, we have some really compelling stuff covered in this post. Happy Reading…
Retail Ecosystem Developments
a) Need for Flexible Supply Chains: With consumer demand fluctuating dramatically with lockdown & regular consumption patterns and disruption in manufacturing and shipping, supply chains will need to become more flexible
b) Acceleration to New Digital Technologies/Channels: There is an opportunity to connect with consumers through new digital channels in E-commerce and hybrid offline-online journeys with use of AR/VR/Social enablers
c) Pressure on Product Mix and Pricing: Product Category shift towards basics and essentials from the pandemic days will remain as long as consumers are worried about their financial situations. Also, people will be willing to spend more for flexible payment options
d) Home Delivery in Focus: With new options available at home – work, learning, eating, entertainment, shopping – there could be less traffic to retail malls and high streets. In this event, consumers will be less likely to discover brands and retailers accidentally. The battle for exposure and loyalty will intensify efforts towards digital and CRM-led marketing programs
e) Health & Hygiene is Priority: There’s an increased emphasis on quality and trust in brands that are transparent about the product origins & ingredients. Possibly, even more expensive but locally produced products may be preferred over generic products and imports
f) Social Change towards a stronger Community: Value of human interaction at the point of sale has eroded, while family & community feelings have strengthened. It is now more important to focus on building consumer engagement and loyalty
Emerging Technology Initiatives for Retail Evolution
1) Dealing with Commoditization & Premiumization
Retail Evolution
Technology has removed many barriers to entry and made it easier for smaller players to reach consumers, leading to a proliferation of new brands and products. For example, focused niche brands can now build a brand from scratch by reaching out to consumers via social networks, selling via D2C e-commerce, or selling through marketplaces which requires a limited investment. As number & variety of product options expands, consumer preferences shift from brand to shopping and purchase channel, making variety & experience offered in physical & online retailers key. As more brand options become available, brand loyalty is lessening in some areas leading to increased commoditization
Commoditization of products has a few different impacts. First, it causes downward pressure on prices, leading to growth in off-price and discount options. Second, this pressure on pricing and consumers' ambivalence toward brand has led many retailers to choose to offer private label options. Third, to differentiate those private label products, and to make them even more profitable, many retailers have added premium private-label lines
Focus Technology Initiatives
Differentiate by creating a unique shopping experience
Connect to consumer through loyalty programs
Utilize data to predict shoppers’ product, price, and service demands
Case Study – Yotpo Loyalty for Tweezerman
2) Digital Costs and Success
Retail Evolution
Digital Sales have soared in the past months and will probably stay high. Within digital sales, mobile is making up an increasing portion of growth. Often, this shift to e-commerce and mobile comes at the expense of retailers’ conversion rates and profit margins. Managing growing e-commerce channels requires scaled logistics and experience that many retailers and brands lack. Further affecting margins, spending on digital advertising is growing at a faster rate than overall retail and consumer products industry sales. With rising cost-per-click for online campaigns, the ability to retain decent ROIs becomes more difficult
Focus Technology Initiatives
Increase conversions by improving shopping experience on online and mobile assets
Invest in advertising technologies for more efficiency and creativity as a major differentiator
Case Study – Virtual Pop-Ups by BYOND for a Luxury Retailer
3) Smaller and Closer
Retail Evolution
The format and role of stores is changing. Stores are getting smaller, they are functioning as part of the ecommerce value chain, and they are offering new services or experiences. The physical store can play different roles. It can become part of the e-commerce supply chain by functioning partially as a fulfillment center, or part of an omnichannel shopping journey by showrooming products. New experiential activities can increase shopper engagement and connection to the brand. For example, virtual assistants can help shoppers find the right sizes, while interactive product education apps or activities (like a treadmill inside a sneaker store) can help them learn more about the technical or functional qualities of a product
Focus Technology Initiatives
Improve in-store fulfillment capabilities to use the store as part of the supply chain
Improve store and employee management
Use the store as a marketing hub (this one is so profound that I think I might have found an idea for my next long piece for 2022!)
Case Study – Store App Way-finder for UK-Retail Chain by Oriient
4) New Models
Retail Evolution
Across product categories, the direct to consumer (D2C) and subscription models are growing. These new business models are gaining market dominance and helping retailers and consumer products brands across product categories to expand beyond their traditional revenue models. In food services, non-traditional models, such as ghost kitchens (locations that do not take in-person customers) and virtual restaurants, support increased demand for delivery. In the apparel sectors, subscriptions, second-hand resale, rental, and flash sales are growing. The lines between e-commerce and in-store shopping blur as omnichannel and flexible fulfillment options become more popular
Focus Technology Initiatives
Alternative shopping, purchase and fulfillment models, such as social shopping, delivery lockers, subscription models, rentals, and easy returns
Integration between different purchasing channels
Flexible fulfillment and delivery options
Case Study – Automated Dispatch & Delivery Solution by BRINGG for a Top Telco
5) Convenience
Retail Evolution
Retailers can win by providing consumers access to what they want, when they want it, quickly and conveniently. In physical points of sale this can mean reconfiguring the store and keeping shelves stocked for speedier shopping and check-out. For digital channels, this can mean better search and filtering tools and more flexible delivery options
Focus Technology Initiatives
Make online shopping quick and seamless
Maximize in-store convenience
Case Study – Syte AR Solution for Offline Personalization extension to Online for Rinascimento
6) Health & Sustainability
Retail Evolution
Beyond simply producing healthier products, brands can address consumer demands for heath and sustainability by finding solutions to make manufacturing and the value chain more sustainable, and then share this information with their customers
Focus Technology Initiatives
Becoming a more sustainable methods and communicating the efforts with the consumers
Case Study – Made2Flow Solution implemented by Zalando
German fashion e-tailer Zalando has raised its target of GMV generated by more sustainable products from 20% to 25% by 2023, following significant progress on its sustainability targets in 2020
7) Consolidation & Fragmentation
Retail Evolution
The Covid crisis intensified this trend and one-stop shop mega retailers became popular sources for consumers to buy all basic goods in order to avoid shopping in multiple physical locations. On the other hand, the number of consumer products brands has grown significantly and new, smaller companies are able to eat away at the market share of bigger players. Global digital platforms, whether they began with retail focus like Amazon, or have become active in retail later, like Google or Facebook, has contributed to the trend of big players consolidating power in the retail market. Most of these platforms are focused on consumer engagement and loyalty and invest heavily in tech innovation. Their entry into product sales is sure to make an impact
Focus Technology Initiatives
Get your brand on winning e-commerce platforms
Set up Direct to Consumer Channels
Case Study – Cymbio Marketplace Dropship Automation Solution for Camper
In Conclusion
To summarize our piece now, this is the snapshot of the Retail Tech Landscape that we covered today. If you weren’t impressed so far… You will be now...
As consumers have adjusted to new ways of living, working, and consuming, some aspects of the Retail market have stabilized while new long-term trends are beginning to emerge. While the business environment continues to rapidly change, organizations must leverage different assets to maintain and increase competitive relevancy. Many of the most successful players are using digital technology & tools as a key lever, now more than ever
Consumer preferences for personalization, convenience, and service have grown as channels such as e-commerce, mobile shopping, streaming content, and social media have addressed these new necessities. These new consumer behaviors and new technologies have caused the entire market to shift. Internet giants like Amazon continue to grow, while brick-and mortar incumbents and niche retailers must re-evaluate once successful models…
References and Sources:
1. Start-Up Nation Book: https://en.wikipedia.org/wiki/Start-up_Nation
2. Deloitte Digital Report on Future of Retail Tech – Emerging Landscape, Published in 2021
3. Made2Flow and Zalando Case Study: https://www.just-style.com/news/zalando-accelerates-sustainability-efforts/