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Retail industry, one of the most fundamental industries of any economy was at cross-roads in 2019. 2017 had seen bankruptcy of household names like Toys R Us, while the same year Walmart posted record sales. During the same time, Amazon was becoming a bigger behemoth with each passing year, while traditional retail was still the leader in market. Digital transformation of the industry was inevitable in all aspects, but there were retail firms dwelling on it.
In early 2020, COVID-19 virus infection spread across the world and entire world was caught in a never experienced before lockdown. Retail emerged as both one of the biggest victims and at the same time one of the winners in the ensuing 2 years. As the world is still trying to adapt to the post-pandemic new normal, the crossroads of retail is no more there. The writing is on the wall — “Digitalize the Supply Chain or Perish”. It is clear in 2022, that for retail business to go into the next era, have to leverage technology and rethink their business model.
Primary learnings in retail digitalization:
Technology adoption speed: Retailers with a system to quickly experiment with new technology and adopt it across the value chain are more likely to succeed in the digitalization journey. The two areas which have emerged as critical for the next decade are following:
Adoption of Artificial Intelligence (AI): Even though digital transformation of retail has been ongoing for the past 3 decades, the almost infinite ability of AI and Machine Learning in predicting demand, inventory management and customer behavior analysis has enabled the digitalization possibilities tremendously.
Adoption of cloud servers and technologies: Cloud based technology allows retailers to achieve scalability and flexibility of operations without the costs and responsibilities of local infrastructure
Consumer experience: Consumer experience, both in online and offline retail is greatly enriched with new technologies. Technologies like Internet of Things (IoT), Beacons, High Speed Connectivity, Robotics etc. are giving consumers improved check out experience, browsing experience, personalized sales and marketing offers and compressing delivery mediums.
Better asset and security management: Technology like IoT using RFID and sensors can help in locating assets and inventory management. AI and ML based behavioral analysis combined with sensor technologies at the exit and checkout counters can effectively put an end to theft or suspicious activities.
Key technologies leading digital transformation in retail:
Sales & Marketing improvements:
1. Enabling Multi-channel strategies
Customer expectations fuelled by internet, are changing at a very fast pace. They do not care about the source and process involved in the back end. They are also likely to use multiple channels for shopping and it is imperative for a true retail player to be present in multiple channels and look at delivering high quality customer experience at each level. However, the experience in each channel has to be backed by central promise and consistent across channels. Multi-channel digital strategy must focus on data insights generated using ML to build a cohesive view of customer’s buying behavior. Harvard Business Review, has analyzed customer spends and come to a conclusion that shoppers using 4 or more channels for purchase are likely to spend more than customers who use 1 channel.
2. AI powered customer service
Customer service has seen a sea change in recent years with the advent of 24/7 chatbots. What we have seen actually delivering the best results is a hybrid combination of chatbots and human intervention if the chatbots are not able to solve customer query. Hybrid combination has improved resolution time and decrease cost significantly. Chatbots are AI powered, which means that with time and more data, they will be solve more customer queries in future and in faster time.
3. Beacons
Apple introduced beacons in 2013 and since been a leader in beacon technology use in retail. As per beacon technology, the customers will have beacon enabled wearables or mobile phones and upon agreeing to marketing offers will receive personalized marketing and promotional offers. Retail outlets have beacon sensors which identify customers using beacons and provide personalized offers as per the analytics of each customer. Beacons are expected to reach a market size of $25bn by 2024.
Assets and logistics management:
1. Use of IoT in inventory management
RFID tag enabled smart shelves have been developed by Amazon which directly interact with AI applications based on the cloud. This enables real-time analysis and predictive inventory management
2. Use of Blockchain in better visibility and security of the logistics chain
Blockchain enables visibility of the supply chain without compromising on the security. As Blockchain Technology is almost impossible to be breached, it will also provide better clarity and transparency of processes.
3. Cloud computing networks to provide flexibility, scalability and sustainability
High speed data connectivity has enabled Cloud Computing to become the choice for all future application development. Logistics in supply chain requires remote access and seamless data flow. Cloud computing is the best and cheapest way to achieve that. It also reduces fixed cost by eliminating server investments. Cloud computing also reduces retail industry’s carbon footprint as the industry tries to score better on rising consumer demands of sustainable growth.
Process improvements using power of data analytics:
1. Machine learning powered retail analytics
High number of transactions in a retail environment also generate massive amounts of data at all levels of the value chain. Data analytics has shown to directly improve revenue by an estimated of 8–9%. Machine learning allows much faster processing of big data and throw insights which can be directly implemented. In combination with AI models, the insights generated from data analytics using ML, performance can be tested across processes in logistics, marketing, design etc. and implemented.
2. Process mining
Process mining is used when a deep dive is required to understand any particular process and make improvements. The data and insights churned by ML is used in various algorithms and applied to processes and simulations are conducted. Then the conditions are tested in real time against test parameters provide process improvement actionable strategies. Process mining is best used in measurement of value creation using digitization actions as it identifies root causes and provides potential solution, even in real-time environment.
Operational Automation
3. Automation at an enterprise level
Any process or system that can reduce human impact and at the same time increases overall productivity of the system can be considered as automation. Automation helps inf reduction of operational costs, errors and processing time. Primary enterprise level automation in the retail industry are as follows:
a. Inventory/supply chain management using IoT and cloud technology
b. Cloud based ERP technology
4. Automation at store level
Application of robotics in combination with IoT, cloud-based applications and robotics has enabled Self-checkout systems to make rapid progress in the last few years. Apple, Amazon, Walmart and Microsoft are betting big on the self-checkout automation process. Consumers can use RFID or tag readers and their payment details can be stored on a Blockchain enabled secure cloud location. The checkout is largely automated due to smart tagging using RFID and payment is settled at the click of a button by the consumer. This has resulted in higher revenue per session, shorter cues and improved checkout experience
In Conclusion:
Retail industry is poised to get on a new journey of digital transformation starting in 2022. Along with the exponential growth expected in e-commerce, conventional retail is also expected to continue to exist in somewhat of a hybrid format. It is an imperative for the industry to not only adopt digital technology but also work with IT firms to develop innovative digital solutions.
Supply chain innovations like AI powered smart transportation, robotics to eliminate human error and predictive analysis of demand are all going to grow at an explosive pace. Retail players are needed to be more agile and updated now than ever before in the fast-changing post COVID-19 pandemic world.
Like other businesses, if you too are looking to develop retail solutions, Mindfire Solutions can be your partner of choice. We have a team of highly skilled and certified software professionals, that have developed many custom solutions for our global clients over the years.
Here are a few interesting projects we have done in Retail Industry.
Content Source: Medium
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