New Technologies Bring Extreme Digital Disruption to Retail

«Customers are demanding greater levels of contextualization of products and services. Retail CIOs can leverage intelligence to capture deeper insights, anticipate customer needs and proactively deliver across every touchpoint.» – Gartner, Inc. in Predicts 2020: Consumers Determine Retail Success Well Before the Sale 

The retail industry is evolving at an unprecedented rate as the customer experience becomes the number one priority. New technologies have brought about total digital disruption alongside the shift of consumer demands. Traditional retail models aren’t working anymore, and a new retail landscape is manifesting as technology continues to develop.

The new retail operational model is a human-machine hybrid, built upon automation and IT technologies with the intention of supporting human workers in their daily work tasks from customer service to inventory management and warehouse picking – all with the goal of enhancing productivity.

Current challenges in retail:

• Digital transformation investments are increasing rapidly. As a result, retailers must find additional sources of funding beyond simple cost optimization efforts.

• Retailers are grappling with the obstacle of predicting demand and adjusting local inventory to meet customer needs for same-day in-store pickup or delivery options.

• The growing requirements of online shoppers are creating the need for retailers to evaluate new models to deliver against customer demands and ensure physical stores aren’t a financial constraint.

• Customers are more sustainable and ethically minded. Thus, retailers must be more transparent in all aspects of business with emphasis on effective solutions for excess and returned merchandise.

Though retail is currently undergoing a myriad of disruptive technology-related challenges, AI and data analytics are two solutions that can help ease the difficulties through store optimization and product recommendations, consumer personalization and sales predictions. Through prescriptive analytics, retailers can evaluate AI for better anticipating customer expectations for experiences, services and products tailored to personal preferences and always available.

5 Strategic Planning Assumptions For Retail and What You Need to Know About Them

1. By 2025, at least two of the top 10 global retailers will establish robot resource organizations to manage nonhuman workers.

   By 2021, 77% of retailers will survey plans to have AI in place; of those responding positively, 87% indicate robotics for warehouse picking as the No. 1 use case. Given the advanced sensory capabilities of robots today, it is likely smart robots will be working with or alongside human workers. In fact, retail workers say that they want to use technology to reduce errors and alleviate the burdens of physical labor.

   “2018 Digital Workplace Survey findings show that retailer workers want technology to help reduce mistakes, as well as help with physical work. They would like to leverage AI specifically as an on-demand or predictive assistant.» -Gartner, Inc. in Predicts 2020: Consumers Determine Retail Success Well Before the Sale

2. By 2024, Tier 1 retailers in North America and Europe will reduce inventory carrying costs by 30%, dramatically improving free cash flow for digital investment, while revamping balance sheets.

   Cost optimization isn’t enough to drive growth. Automation is well poised to generate savings, but retailers will still need to find other source of funds to proceed with digitalization. Reducing inventory carrying costs is one way to enhance productivity and cash flow, allowing for OPEX digital investments such as SaaS and cloud.

   By leveraging AI, retailers can forecast demand more accurately and maintain inventory flexibility more effectively. Today, many retailers have already, or plan to implement AI across five merchandising processes: product development and selection, planning, buying, demand forecasting, and allocation and replenishment.

   “Estimates indicate that dead inventory (that is, inventory of products no longer part of the desired assortment) is costing the U.S. retail industry as much as $50 billion a year. In 2018, H&M was grappling with £4 billion in excess clothing. Creating faster turnover of active inventory can generate ongoing benefits.”- Gartner, Inc. in Predicts 2020: Consumers Determine Retail Success Well Before the Sale

3. By 2025, at least two of the top 10 global retailers will create a sharing economy service for store-level associates to address workforce challenges.

   Today’s retail stores are supporting diverse flexible models for meeting customer expectations, including fulfilling about half of online orders in stores. The retail workforce is already overextended, and new demands add pressure. With innovation happening all the time, optimizing and scaling store labor are pressing priorities.

   Concurrently, workers want more flexibility, options and technology enablement. Retailers are going to have to keep up to attract and keep the right talent.

   “Being much more adept at predicting labor needs to match customer demand is no longer a nice to have.” – Gartner, Inc. in Predicts 2020: Consumers Determine Retail Success Well Before the Sale

4. By 2025, at least four of the top 10 global nonfood retailers will establish a recommerce program as part of their global targets for zero carbon and sustainability.

   Recommercing focuses on selling used products, driven by increasing ecological awareness. Consumers are basing purchase decisions on retailers’ sustainability efforts, making reverse commerce a priority for retailers. It also results in an easy introduction to a brand at a lower cost. Recommerce also extends the life of a product, reducing the volume of items discarded in landfills.

   “Consumers around the globe have become more deliberate in rewarding retailers with sustainability initiatives that align with their own.»  – Gartner, Inc. in Predicts 2020: Consumers Determine Retail Success Well Before the Sale

5. By 2025, the top 10 retailers globally will leverage AI to facilitate prescriptive product recommendations, transactions and forward deployment of inventory for immediate delivery to consumers.

   There are 650 million members of Gen AI from ages five through nine. They witness and listen to AI-driven marketing and haven’t been without the influence of AI in their lifetimes. To extrapolate, in 10 years, the same consumers will be able to spend their own income in the market place, and as a result of the influence of AI in their lives, they’ll expect products to be catered and available – where and when they want them.

   «Ever-expanding digital footprints are mapping a path to unprecedented knowledge about consumers that can be used by marketers, retailers and manufacturers to customize offerings. This knowledge is creating an expectation that offerings will always be relevant to the context of customers.”- Gartner, Inc. in Predicts 2020: Consumers Determine Retail Success Well Before the Sale

The retail industry will continue to experience major evolutionary changes as digitalization unfolds. To learn the ins and outs of how retail is expected to change in the next five years, get access to the complete Gartner report. You’ll learn about:

• Key findings of recent Gartner retail research
• How retail CIOs who are evolving into unified retail commerce should collaborate with business leader
• Strategic planning assumptions, including key findings, near-term flags, market implications, recommendations and related research