The past few years have seen a rapid transformation in the retail industry as the sector has gradually expanded beyond the traditional brick- and -mortar stores and moved into the immersive world of e-commerce. With the emergence of a large internet-using population and the growing adoption of smart devices, retailers are increasingly using digital means to enhance their marketing and business strategies. As such, there have been rapid advancements in ICT and technology solutions deployed across retail chains.
As technology makes inroads into the retail sector, this trend is expected to continue in the near future. As per Invest India estimates, the overall Indian retail market is expected to grow from $0.79 trillion in 2018 to $1.75 trillion in 2026, growing at a CAGR of 9-11 per cent. Meanwhile, India’s e-commerce market is set to grow at a CAGR of 30 per cent for a gross merchandise value of $200 billion by 2026.
A look at some of the recent technology trends dominating the retail sector, the impact of Covid-19 and the way forward…
Key technology trends
AI and chatbots
One of the key applications of AI technology in the retail sector has been chatbots. There has been a rapid adoption of messaging-based customer service bots across retail enterprises. AI-based chatbots help enhance customer experience by providing support and assistance to customers throughout their shopping journey, right from the selection of the product up to its delivery and sometimes beyond that too with post-delivery support. This helps companies reduce the cart abandonment ratio, thereby improving the churn rate. As per a recent Forbes article, at least 50 per cent of the Fortune 500 companies have experimented with and tested bots.
According to a recent market study, the use of AI in the global retail market is expected to grow at a CAGR of 34.4 per cent during 2020-27 to reach $19.9 billion.
Augmented and virtual reality (AR and VR) technologies have given a whole new definition to customer experience by merging the physical and virtual worlds. Using AR/VR, customers can browse products and even try them virtually. AR/VR-enabled devices help in creating an immersive interface that provides lifelike experiences to show the utility of products and help customers make more informed choices. These systems could also be used for managing operations such as training, efficiency management and floor management. Further, retailers can use AR/VR for creating a digitally themed environment inside stores.
A thing that retailers have in abundance is the data of their users – their choice of products, buying habits, purchasing patterns, dislikes, etc. However, until recently, retailers were not able to derive any benefits from this data as they did not have the means to do so. This does not seem to be the case today as enterprises can now analyse consumer behaviour and trends by using big data. By deploying predictive analytics tools, retailers can better understand consumer purchasing behaviour. They can leverage this knowledge to provide a personalised shopping experience, better address consumer requirements and grievances and take pre-emptive measures to ensure that the entire shopping journey of the customer is smooth. Retailers are also using big data to derive valuable insights for optimising and personalising marketing and promotional campaigns. It enables them to better understand consumers in terms of branding and product management.
Big data brings in a host of benefits for enterprises on the operational side as well. For instance, it helps retailers reduce supply chain costs by making the whole process more agile. On the business side, the technology is being used to formulate models for determining the optimal product prices. By making use of interactive and self-service interfaces, retailers are able to make the right assumptions about product pricing and immediately see the impact on the volume and demand of their own products as well as those of their competitors.
The introduction of internet of things (IoT) in retail has completely altered the dynamics of the industry. It has helped retailers modernise operations in the fields of customer experience and supply chain management. It has also improved in-store marketing efforts of retailers and brands. For instance, IoT devices integrated with Bluetooth and Wi-Fi are facilitating in-store navigation by helping customers find the desired product. In grocery stores, IoT is being used for predictive equipment maintenance such as monitoring temperature fluctuations to ensure food safety. Meanwhile, some retailers are using IoT-based contactless checkout/self-checkout mechanisms, which enable automatic scanning of products when customers walk out of the store. Mobile-based checkouts, assisted checkouts, Q-busters and express counters make checkouts faster and easier by enabling online payments through wallets and payment gateways. Retailers are also using radio frequency identification technologies to improve the precision of inventory tracking. Going forward, as the cost of deploying IoT solutions decreases, IoT is likely to gain traction in warehouse and logistics operations.
Adjusting to the new normal
The global pandemic has delivered a big blow to the traditional retail set-ups as malls and shopping complexes were shut down amidst the lockdown. As the world enters a new normal, retail executives also need to rebuild their business and evolve their strategies according to the post-Covid world. According to a recent study by KPMG, the pandemic has accelerated some of the key underlying trends that were already influencing the sector. These include online sales, adoption of an omnichannel approach, deep analysis of customer data, etc. As per popular industry opinion, the following broad trends are expected to dominate the retail industry in the post Covid-19 era:
- Cashless transactions: As people become cautious and take precautionary measures to safeguard themselves from the virus, the provision of conducting cashless transactions at stores will play an important role and will impact a consumer’s decision to shop at a given store. As such, the pandemic could accelerate the adoption of a cashless transaction system across India. A contactless shopping experience will be key. According to a survey conducted in the US, 87 per cent of fashion buyers preferred shopping at places that offered contactless shopping and self-checkout options. Given the global spread of the pandemic, a similar trend is expected to exist in other countries too. There is a need for retailers in this sector to deploy key technology solutions that can enable them to provide a completely contactless shopping experience. In this regard, AR/VR is expected to play an important role.
- Omnichannel to become a norm: Analysts predict that although retailers have been adopting an omnichannel approach, the pandemic could accelerate this trend. While offline retail has suffered immensely amidst the lockdown, the e-commerce sector is witnessing a boom. People prefer to shop online rather than visiting physical stores. In such a scenario, it becomes imperative that retailers with no online presence take the necessary initiatives and the ones that already have an online presence work towards enhancing customer experience on their platforms.
- Demand variation between essential and non-essential goods: With a shift in consumption patterns, the trends across essential and non-essential items are varying. While the sales volume of essential items has more or less remained the same, the sale of non-essential products has not picked up much. In fact, mass merchandise stores like supermarkets have also been hit. These supermarkets are typically located in malls and during the time that malls remained shut, these stores could not carry out any sales. Sectors like FMCG, apparels and consumer durables are expected to see the largest drop in sales volumes and will have to deal with the problem of excess stocks, and outdated models and styles.
The way forward
The retail industry’s transition from being product-centric to becoming customer-centric has been supported by an increased uptake of next-generation technologies, which have facilitated digitalisation across the entire retail ecosystem. These technologies are helping retailers generate business intelligence and gain real-time insights into market trends and customer preferences. They are also helping retailers in building omnichannel retailing capabilities, which have become critical in the wake of the Covid-19 pandemic. According to Global Data, the pandemic will accelerate the growth of India’s e-commerce market, pushing it to Rs 7 trillion by 2023. Thus, retailers must expand their digital footprint, increase their online presence, fine-tune their digital strategies and step up investments in IT infrastructure to remain competitive amidst the changing industry dynamics.
By Diksha Sharma