The retail industry has been reshaped by a number of factors in the past few years. These include the rise of e-commerce and omnichannel, hyper-personalisation and changing customer behaviour, and growing supply chain complexity, all of which have been accelerated by the pandemic. Amid these shifts, a robust digital transformation strategy can give retailers the opportunity to improve performance and stay ahead of competitors.

A look at the key technology trends in the retail sector…

Extended reality

One of the most prominent technologies in the retail sector is extended reality, whi­ch is an umbrella term for augmented reality (AR), virtual reality (VR) and mixed re­ality. Extended reality provides an immersive experience by creating a digital world that mirrors reality. It is being leveraged by re­tail enterprises to offer enhanced product visualisation, and personalised and custo­mised experiences to consumers. Accor­ding to Accenture’s Business Futures report, a me­re 1 per cent increase in the use of AR/ VR in retail could unlock additional sales opportunities worth $66 billion.

While AR has been around for years, it has recently become a powerful tool for both brick-and-mortar businesses and di­rect-to-consumer brands. One of the most innovative applications of AR is the “try-before-you-buy” model, allowing custo­mers to virtually try a product online before buying it. For instance, Walmart introduced its “be your own model” concept last year to generate images that can demonstrate how clothing items will appear when worn. The feature delivers a highly personalised service to customers while also providing the retailer with valuable data about consumer preferences and sizes.

Like most VR applications, the tech­no­­­logy in retail operates through VR headsets. Buyers can wear a headset to immerse themselves in a three-dimensional virtual world, facilitating brand interactions. To enable this, retail brands must cr­eate VR content and applications such as 3D videos, 3D product designs and im­m­ersive audio clips, and incorporate th­em into a VR app that works with popular headsets such as Oculus Quest or HTC VIVE. Retailers are utilising these immersive technologies to enhance the shopping experience by allowing customers to virtually try on clothing, visualise furniture in their homes, or experience products in a virtual environment. A notable example is IKEA’s “IKEA Place” app, which enables customers to place virtual furniture in the­ir homes to see how it fits and looks before making a purchase. Sephora has also launched a virtual artist feature utilising AR, allowing customers to try on make-up virtually. The tool uses facial recognition to map a user’s facial features and then superimposes the desired makeup look on their face in real time.


The retail industry has opted for an omnichannel approach in the past decade, where brands are combining physical and digital retail. To bridge the gap between the two, enterprises are now venturing into the realm of the metaverse to deliver an immersive and multisensory experience that the current digital landscape lacks. Within the metaverse, retail brands can have standalone VR stores, where customers can virtually try and order the items available at real-world stores near them. With a combination of new technologies such as non-fungible tokens (NFTs), personalised digital avatars and AR/VR devices, metaverse will enable newer ways for consumers to interact with brands and retailers. Meta­verse could also open up new markets as customers from around the world can ex­plore brands and their products without any geographic constraints. Brands are le­veraging virtual concerts or digital events, virtual ambassadors and virtual merchandise to build engagement.

While tech giants such as Meta and Microsoft are making substantial investment in the metaverse, many brands and retailers have already bought spaces in the virtual realm. For instance, Walmart-backed Flipkart has launched a metaverse offering called “Flipverse” as it experiments with Web3 offerings to elevate its customer experience. In the realm of Fli­pverse, the company is offering gamified, interactive and immersive experiences to consumers, enabling them to collect the company’s loyalty points and ac­quire digital collectibles from partner brands while making purchases.

AI and related technologies

Artificial intelligence (AI) has permeated the retail industry to the extent that it is slowly transitioning from being a choice to being a necessity. The shift towards AI has been driven by the need to meet rising cu­stomer expectations for personalised, sea­mless and convenient shopping experien­ces. The technology has found several use cases within the industry. AI-enabled predictive analytics improves demand forecasting by mining insights from marketplace, consumer and competitor data, whi­ch can help in optimising the company’s me­rchandising, supply chain planning, pricing and marketing campaigns. Perso­nalisation plays a key role in modern retail. As per a report by Salesforce, 64 per cent of consumers expect personalised offers from retailers and 52 per cent are likely to switch brands if they do not receive personalised communication. AI can help retailers offer personalised customer service by analysing customer data and providing tailored recommendations. Machine learning (ML) and deep learning algorithms interpret customer purchasing data, feedback and sentiment to support next-generation product and service designs that effectively cater to customer preferences or address unmet needs in the marketplace.

Retailers are increasingly deploying AI-powered tools to leverage their benefits in terms of cost management and insights into customer interactions with their products. Levi Strauss & Co. recently announ­ced that it is deploying customised AI-generated models while American Eagle and Zara use AI for inventory management. Puma em­ploys AI for personalised custo­mer styling. Meanwhile, Sephora’s Skin­care IQ tool uses AI to analyse customers’ skin type and recommend products that would work best for them. The tool uses a questionnaire to gather information about customers’ skin concerns and then uses ML algorithms to recommend products based on their ingredients and effectiveness for similar skin types.

Further, AI-supported conversational assistants deploy natural language processing to help shoppers effortlessly navigate questions, FAQs, or troubleshooting, redirecting to human experts when needed. Th­is improves customer experience by offering on-demand, always-available support while streamlining staffing. Accor­ding to a report by Juniper Research, chatbots could help retailers save $439 billion annually by the end of 2023.


Internet of things (IoT), a network of physical devices embedded with Bluetooth beacons, sensors, GPS and radio frequency identification (RFID) technologies, empowers retailers with 360-degree visibility of their assets by connecting and exchanging data across devices. RFID and GPS technologies allow retailers to identify and inspect every object across warehouses, in transit and on the shelves. Co­n­nected sensors provide a consistent stream of real-time data from the floor to the store. Sensor-based lights, temperature controls and indoor air quality help retailers with compliance monitoring and sustainability targets.

Costa Coffee uses a smart vending ma­chine solution and remote temperature mo­nitoring sensors across its stores. Mea­nwhile, Kroger, a US-based supermarket chain, has installed over 2,000 edge shelves (RFID-equipped shelves) across its stores.


In the retail sector, blockchain offers four main benefits – lower costs, faster payments, improved security and transparency. It contributes to cost savings for retailers due to the decentralised automation of transactions and application interoperability, thus eliminating administrative costs. Similarly, blockchain facilitates faster payments by eliminating the need for a centralised infrastructure. The distributed nature of blockchain provides an unprecedented level of protection from cyberattacks, while also providing transparency in transactions. A key application of block­chain in retail is smart contracts, which allow retailers to form binding agreements with wholesalers and ensure compliance with the terms of the deal. In the event of a breach, the contract is frozen. Walmart is now using blockchain to create an automated process for handling invoices and payments of its 70 third-party freight carriers.

Challenges and future outlook

Despite the significant potential of new-age technologies, many organisations have not made substantial progress and, thus, are missing opportunities. This situation can be attributed to several challenges such as budget constraints, increased complexity, lack of a skilled workforce and se­curity risks. Nevertheless, digital initiatives are set to gradually pick up pace in the sector as companies compete for brand awareness and sales in a rapidly evolving and competitive market. By 2026, retailers’ global investments in technologies are expected to reach $388 billion, growing by 18 per cent year on year.

Sarah Khan