The digital retail revolution

The ways in which technology has influenced the retail operation over the course of the past 50 years is incredible. However, what’s happening today is set to revolutionize the industry entirely, from planning to the in-store customer experience, and all connecting points in between. // By Sean Tarry

The evolution of retail really is something to behold. From the earliest bazaars and markets to the very latest innovations and advancements, and everything in between, the industry is one that is ever adjusting and recalibrating in ongoing efforts to continue to serve the customer, providing them with the product and exceptional experience that they seek. Supporting much of the adjustments and recalibrations today, allowing for a consistent reimagination and enhancement of the consumer shopping journey, is an array of digital technologies. Ranging from the use of machine learning and artificial intelligence that ensure greater accuracy and predictiveness, to in-store technologies that help remove points of friction and frustration from the process of engagement, technology is being leveraged throughout the entire retail ecosystem. But what is the technology being used for? How is it being deployed? And, in what ways is it enabling retailers to find efficiencies and elevate the retail experience?

Focus on the customer

Despite any disruptions and disturbances that might be occurring, the focus of retailers must always be firmly on the customer and finding ways to continue servicing their ever-shifting needs and preferences. As a result, many merchants within the industry have recently been turning increasingly toward technology as a means to help create a more seamless in-store experience. And, according to Marty Weintraub, Partner, National Retail Leader, Deloitte Canada, it’s an investment by those operating within the industry that is likely set to continue as we foray further into an age of accelerated digitization.

“Technology is being used in a number of different ways in today’s retail store environment,” he explains. “However, the majority of it is naturally being leveraged to remove friction from the customer experience. This includes new and improved self-checkouts that are helping to create a better, faster and more efficient checkout experience, and a renewed interest in the ‘just walk out’ type of experience which allows the customer to avoid the checkout altogether using sensors and cameras. This type of technology is gaining the most traction in smaller format stores, such as convenience stores, but is likely to continue to permeate through to bigger, higher sku intensity retail formats. In addition, things like digital navigation, shelf and promotional signage, and how price and value is communicated to customers who are investing in the store and digital experience it offers, will continue to be leveraged with greater frequency and effect.”

It’s an increase in investment that’s also recognized by Michelle Zorn, Industry Account Executive, Retail, SAP. And, she suggests that it’s not only going toward improving the experience for customers in the way of increased speed and convenience, it’s also aiding in the creation of a more immersive retail environment - one that is poised to pay dividends for the industry going forward.

“The customer is at the center of all decisions and there is a demand to provide a faster, transparent, and flexible experience that offers options,” she asserts. “Leveraging data analytics allows retailers to create fully personalized customer interactions through real-time data and demand forecasting. Technology and digitization are allowing retailers to provide customers with an authentic and customized experience whether it is online or in-store. The pandemic forced retailers to re-evaluate their digital experiences and customers continue to want the ability to have an integrated and omnichannel approach. For example, fashion retailers are using technically advanced features such as full-fledge 3D immersion to allow customers to experience products through augmented reality which puts the customer in control of their experience and purchases. It also allows retailers to develop new opportunities for their brands. For example, Spin Master’s Paw Patrol brand has developed a complete customer experience offering multi-revenue streams such as toys, stuffies, games, clothing, movies, television shows, and more. There is something for everyone.”

Augmented reality

Considering the immersive environment that Zorn refers to, the role that augmented reality has to play in its creation and proliferation is extensive. And, according to Matt Bolivar, Retail Vertical Lead, Canada, Snap Inc., perception of the technology and its capabilities are changing rapidly among consumers who are beginning to grasp the true benefits of its functions. And retailers are increasingly deploying it in a bid to start tapping into its true potential within the retail offering.

“Research has found that consumers are looking more and more to technology for utility and convenience, not just entertainment or play,” he points out. “For Snap, it’s been interesting to see the significant role that augmented reality plays in people’s lives beyond just silly or fun lenses and filters. For example, in Canada, 90 per cent of brands think AR is primarily for fun, meanwhile, only 55 per cent of Canadian consumers feel this way, with consumers now most interested in using AR for utility, for things like AR try-on, learning how to use a product, or seeing what a product looks like in their space, and learning more about brands.”

And, he adds, as adoption among the general public increases and their use of augmented reality enhances, so too does the business case for retailers to implement the tool into their operations, elevating engagement and the customer experience.

“AR is really improving and enriching the shopping experience for Canadian consumers,” he says. “And, in turn, it’s enabling retailers to see ROI through significant conversion. Consumers partake in a retail experience that’s more personalized or customized in that very moment, from the comfort of their own home or even in store, allowing them to feel a deeper connection with a brand and its products. We’ve seen great success, and 87 per cent of brands who use AR say it helps to drive sales, acquire new customers, and drive performance metrics. It’s being used to enable shopping moments in the now, while also enhancing the scheduled, in-store experience. In fact, more than half of consumers identified shopping as a top reason for using AR – and we think that’s something that retailers and brands should be excited about.”

A personalized experience

In addition to the use of augmented reality and other technologies meant to engage, inspire and convert customers, an understanding of their behaviours and preferences is critical in supporting the experience that’s offered to them. And, in order to gain the deep knowledge of today’s consumer, Shanu Kurien, National Executive, Retail, SAS, says that the savviest within the industry are increasing their use of data to create much more personalized engagement, benefitting both the customer and business.

“For many of the retailers that have survived and perhaps even thrived through the pandemic and all of the resulting disruption, there is a renewed focus on improving the customer experience,” he says. “And, because there has been an explosion over the past couple of years concerning the maturity of a number of channels, including click-and-collect, curbside pickup and online growth in general, engagement has become incredibly data rich. Retailers that are thinking three or four years out are already working hard to figure out how they can use all of that data to understand the customer better and enhance the experience that they offer them, as well as improving the ways by which they market to the consumer. This developing understanding of the customer is allowing retailers to personalize flyers and offers, extrapolating from hundreds of offers to present the right ones to individual consumers.”

Solving supply chain challenges

It’s likely understood without too much elaboration that the supply chain is one of the areas within the retail operation that’s receiving the most attention when it comes to technological investments in efforts to overcome some of the more significant hurdles caused by recent port closures and delays. It’s investment that, according to Deloitte’s Weintraub, is robust and pointed. However, he suggests that it’s being leveraged in concert with an increased focus on removing some of the silos that exist within the retail operation, connecting the entire chain.

“There’s increased energy being paid toward getting data right and integrating it properly within the supply chain in order to enhance connectivity between the supply chain and the stores and their merchandising efforts,” he says. “Technology is being deployed to ensure that the entire organization is on the same page and speaking the same language when it comes to planning and demand in order to better execute against the business’ goals. There are more intense discussions around setting up control towers to increase visibility into the entire integrated business, not just into a specific function, team or vendor. It’s a way in which retailers will be enabled to connect dots throughout the organization, integrating data and technology, allowing them to flow and plan product in a much more intelligent way.”

It’s an analysis that’s shared by SAP’s Zorn, who notes that it’s all part of retailers’ quest to get ahead of demand and ensure that they are able to make the right products available to consumers when they want them.

“Supply chain management is one of the main challenges facing retailers,” she asserts. “A company’s bottom line is directly impacted by having the right inventory, with the right amounts, at the right time to meet customer demands. This means digitizing operations and creating a circular supply chain from the supplier to the consumers’ homes and back again, using real-time data. This will enable fast response to changes in supply and demand, design out waste and optimize every stage of the supply chain. It is essential for retailers to have full insight into their supply chain as this goes hand-in-hand with customer-centricity. The supply chain needs to be ahead of tomorrow’s demand for products that are easily accessible. Retailers can’t advertise products if they don’t have direct and easy access. This is achieved by embracing predictive data insights to see what customers want.”

AI and Data

The use of data and machine learned, artificial intelligence-driven analytics is, of course, being applied across the entire retail ecosystem. However, it’s capabilities seem to be most aggressively applied to the retail supply chain. It’s where SAP’s Zorn suggests every successful supply chain starts, adding that properly informed demand forecasting and predictive analytics can be the biggest differentiator when it comes to customer loyalty.

“Once a retailer can learn to capture, manage, and use its data in real-time, it can properly plan,” she says. “Leveraging accurate demand forecasting is a top priority for retailers and brands who are looking to improve their supply chains and efficiencies. Once they understand their customer demand cycles, retailers can make sure they have the proper inventory where they can effectively push the products out to customers in a timely manner and ensure they are not out-of-stock. A McKinsey report showed that when shoppers are faced with out-of-stock items, only 13 per cent waited for the item to come back in stock versus 39 per cent who switched brand or products and 32 per cent who even switched retailers. Take a grocery store for example, customers demand fresh produce. However, from a supply chain perspective, grocers need to know what is coming in, when it arrives and have a plan to get it to the customer while it is still fresh.”

Challenges within the supply chain and the trend leading retailers toward the use of data to help improve efficiencies and reduce cost is not a topic that SAS’s Kurien is unfamiliar with. Being better informed, he says, simply enables better decisions. As a result, he adds that many retailers throughout the industry are considering implementing a further layer of predictiveness to bolster analytics and improve preparation within the supply.

“There’s been so much disruption within the supply chain recently that retailers suddenly realized that they had taken for granted the importance of getting the right product to the right place at the right time,” he says. “Everyone is running just-intime inventory, which is incredibly lean. But many are beginning to recognize the ways in which even greater predictiveness can help their businesses, enabling them to identify possible disruptions and impediments to growth and react to them in a much more proactive manner. In order to achieve this, some within the industry are moving away from traditional demand planning and adding components to it like demand sensing, allowing them to slice and dice data and use artificial intelligence and modeling to create a holistic view of supply, while honing in on individual pieces of the chain looking forward. It’s ultimately providing retailers with the means to become more agile and dynamic in their strategy and decision-making.”

Sustainability

Interestingly, an area of the retail business that’s receiving some attention as a result of supply chain technological investment is sustainability, becoming a benefactor by proxy of the ways in which technology helps to create efficiencies and eliminate redundancies within the supply of products. And, according to Lloyd Adams, President, SAP North America, they are green benefits that are not lost on most retail leaders throughout the country.

“We’re seeing many retailers redoubling their focus on managing their social and environmental outcomes – their “green lines” – with the same level of priority and precision that they manage their top and bottom lines,” he asserts. “Considering that on average 90 per cent of a business’ carbon footprint lies within its supply chain, the inability to track, manage, and gain insights from live data and embed it into core business processes can cripple even the best-intentioned sustainability efforts. Technology allows a business to perform accurate and responsive planning, optimizing the flow of goods while reducing emissions, overstock and waste.”

He goes on to explain that the intersect between greater efficiencies, reduced costs and improved impact on the environment are driving many within the industry to ramp up their efforts with respect to the application of technology. It’s allowing them to not only enhance their supply chain accuracy, he says, but to improve their sustainability initiatives and outcomes as well.

“Not having a good hold on your stock directly impacts your sustainability efforts,” he asserts. “You could be facing higher warehousing and transportation costs, and not optimizing your replenishment process, resulting in waste. Business leaders must move beyond disconnected, piecemeal approaches and use the power of technology to build inclusive, sustainable, and resilient value chains. And this isn’t just because it’s “the right thing to do” or because of increasing regulation in how companies have to report and manage environmental, social and governance metrics. It’s also because we’re seeing many consumers demand that their favourite retailers step up to the challenge to reduce carbon footprints, minimize waste and create fair and just working environments for employees. Sustainability means good business.”

A bright future ahead

As we continue to forge ahead, deeper into the digital age, the power inherent in much of today’s technological advancements is clear. However, despite their capabilities, it’s incumbent upon the retailer to deliberate thoughtfully about the tools that they employ in order to maximize their impact and realize some of the positive results that can be enabled through their use. And, as Deloitte’s Weintraub suggests, it’s imperative for the industry to stay its course with respect to investment and improvements that are being made in order to ensure the long-term health and viability of the retail business going forward.

“Retailers shouldn’t let a good crisis get in the way of progress. There have been a lot of challenges recently, and there are some more that are on the horizon. However, the industry shouldn’t back away from their commitment to invest in technology and some of the great momentum that’s been building throughout the pandemic. Inflation and interest rates will come down – it’s just a matter of time. And, if retailers adhere to their digital strategies and maintain their investment in improvements that will allow them to continue to increase operational efficiencies and enhance the customer experience, they’ll position themselves incredibly well to capture the attention, share of wallet and loyalty of the Canadian consumer.”