The new identity and technology of future Retail

20 Mar 2018

Technology as a necessity through constant change. There is nothing shocking or new here: the same concept could be used to tell the story of any human activity. However, over the last few years, Retail has almost made technology its precondition. The innovation of worldwide distribution has been imposed by a difficult contingency that has suffered many victims and created new leaders; above all, it has seen a revolution in the relationship between the customer and the Retailer, to the advantage of the former. Technology is the primary factor in innovation, responsible for mediation between the two parties: it allows for an increasingly changing and sophisticated demand and provides a way to satisfy this.

The true identity

Perhaps it is still difficult to think of retail companies as technology companies, but it is no exaggeration to talk about them in this way. Just look at the two top competitors in the global market, Walmart and Amazon. They marked 2017 with innovations related to IoT, virtual reality, voice assistance and the increasingly advanced automation of delivery. While Amazon finds its origins in technology, that is not the case for Walmart but despite this Walmart has taken the most significant step of the year with Store No.8, an "incubator" for technology startups in Silicon Valley. The purpose of Store No.8 is to govern the changes in the future of Retail, coordinating operations and partnerships with startups, venture capital firms and universities for investments in robotics and artificial intelligence. Immediate objectives are in virtual reality, the personalisation of the shopping experience, and drone delivery. Technology is no longer just means of improvement and staying competitive, but a part of planning and strategy; therefore it is a fundamental part of the new identity of Retail.

What's on the agenda

So, let's try to make some sense of the dense network of innovation planned for the sector, limiting ourselves, for now, to the evolution of the relationship between Retail and the consumer. In stores, this will be characterised by the use of technology as a primary means of data collection and analysis of customer behaviour, but innovation will touch upon further aspects:

Mobile Transformation. Even only looking at Italy, according to data collected by the Milan Polytechnic University, there are now more than 25 million Italians who connect to the web with their smartphones, and out of every 10 minutes connected to the internet 6 are on mobile. About 80% of users make purchase decisions or engage with their favourite brands, and 34% use the medium to make and complete purchases. Selling apps are becoming popular: those who do not adapt will end up on the sidelines (and will find it difficult to get back into the game).

Virtual and Augmented Reality. Looking forward, this is one of the favourite weapons for those who want to increase walk-by footfall in stores. According to Goldman Sachs, global consumer spending supported by VR and AR will hit $158 billion by 2025. From virtual make-up to environment simulation (North Face "transported" their customers to Yosemite National Park during visits to their store), in the various infinite VR and AR apps seem to be positioned to become a "must" for sales and to strengthen brand identity.

Facial recognition. This will become increasingly widespread in the Retail sector. In China, KFC customers can already pay for their food using this method. Union Pay will use it for payments and Walmart will use it to measure customer satisfaction.

Contactless payments. China is the leader in the world of mobile payments and could become the first cashless society led by WeChat Pay and its competitors. In Europe, all POS terminals will have to accept contactless and smartphone card payments by 2020.

Artificial intelligence apps are perhaps the highest level of client relationship personalisation, and are also a powerful management tool. For the front end, the common goal of a potentially infinite number of apps is to offer a unique shopping experience, through analysis and an inventory optimised for each consumer and taking advantage of the digital treatment of natural language.

IoT. According to the McKinsey Global Institute, in 2025 the IoT market could reach a global value measured in percentage points of global GDP. In terms of physical distribution, technology is probably the most effective competitive weapon for "pure online" Retailers. IoT applications improve in-store operations, reduce theft risks, and boost cross-selling; Bluetooth beacons provide customers with a tailor-made mobile shopping experience, set up digital signage in the store to attract visitors and guide them along a path of products, discounts and loyalty programs.

Voice Assistant. Ever since Domino's Pizza brought out voice-ordering on its mobile app, consumers between 33 and 45 years of age have been the consolidated as the target market, as they feel perfectly at home with colloquial business. For this reason, voice assistants and PDAs for shopping will soon appear in stores in the form of interactive displays. The limits that will need to be overcome in order for the medium to spread will be fears related to data protection and integration with mobile devices.