There’s no easy way to truly know how the future will pan out. We anticipate certain outcomes from what we know—like the fact the Patriots won over five Super Bowl championships or that your women's cold-shoulder sweaters sold 500 units last season.
With this historical data at hand, it would seem logical to place our bets on past performance.
And, as you know, merchants are constantly making bets.
Yet, while placing our bets for another New England Super Bowl win isn’t entirely a gamble (what can I say, we’re Boston-based ¯\_(ツ)_/¯), anticipating consumer demand for the fall or spring season six to eight months in advance is.
If we learned anything within the retail industry over the past few years, it’s that the consumer is ♕ king and unpredictable. The one thing we can safely bet on is change—which is inevitable with the king behind the wheel.
Even though we can’t predict the future, according to a recent Fung Global Retail & Technology report, there are certain consumer demands underpinning such change in the retail industry, like:
- People want to shop on their own terms—the more choices, the better.
- Shoppers are attracted to services that will make their life better.
- Consumers value experiences.
- The retail market can change quickly, so retailers must adapt faster to keep up with the competition.
How are retailers tackling these demands?
Two words: technology and data.
For this reason, we continue to see retailers incorporating new technologies to differentiate themselves in a crowded, competitive space where everyone’s fighting for the consumer’s attention. Whether it’s leveraging data to make each customer touchpoint count (aka, fostering personalized interactions for each shopper) or using technology to address problems directly impacting revenue (i.e., inventory), retailers are tapping into their data to ensure they stay in the game.
It’s technology and data fueling Amazon’s success, one of the biggest disruptors in the industry, bar none. However, traditional retailers still have a few tricks left in their playbook:
“…what legacy retailers forget is that they're sitting on a gold mine of data from their stores, seasoned employees, and customer interactions. I've sat in many meetings about this precise topic and I’ve had to remind these legacy retailers why they can still win — through their physical scale and human connection.” – My Total Retail
Related to the technology and data retailers are making use of today, here are three noteworthy trends fueled by consumer demands from Fung’s recent report:
1. Heightened Adoption of Technology Set to Drive Up Supply Chain Productivity
AI is going to yield BIG benefits for retailers in terms of inventory management.
This means more collaborations between traditional retailers with third-party vendors offering services within advanced analytics and machine learning.
What this means for retailers is the ability to optimize inventory through AI technology –essentially ensuring the bets they’re making on what to buy, how much to buy, and where to allocate sell BIG. As such, many conventional retailers will be looking more and more towards demand-based predictive merchandising, automated replenishment and price optimization services in 2018.
With these capabilities, legacy retailers can commit to far less inventory and maximize full price sales, while avoiding fewer overstocks and markdowns.
Point blank: intelligent inventory management = more revenue.
2. Online Platforms to Accelerate Luxury E-Commerce Penetration and Steal Market Share
Another interesting trend from the report points to how an increase in online shopping among the luxury retail sector is affecting the market. New platforms within this space are evidently expanding (such as LVMH’s 24 Sevres site or Alibaba’s Luxury Pavilion) and placing even more pressures on online department stores and mono-brand websites.
Plus, 2017 witnessed a ton of growth within e-commerce sales, a clear testament to the fact that people are shopping more and more online. That being said, there’s a whole other layer of expectations paired with online shopping, primarily around delivery (such as cost and speed).
As a result, traditional players are rolling out a variety of digital initiatives (like ship-from-store, BOPIS, etc.) to compete in a market where demand continues to increase online. Retailers are introducing technologies (i.e., AI and machine learning) to help placate these concerns and anticipate the demands associated with online orders in the most efficient way possible.
3. Using AI to Create Tailored Retail Interactions
Relevance adds value.
Retailers can no longer group consumers into various segments. Retailers must cater to the individual customer in a unique, personalized manner – offering relevant products and services for each shopper during every interaction.
How will retailers do this?
By leveraging their “gold mine of data” and using AI to surface unique offerings. Fung believes AI will be the tool legacy retailers and department stores need to secure a competitive edge:
“AI is set to gift early adopters competitive advantages in their customer offering, and it will provide opportunities for large-store retailers to sidestep their generalist positioning and communicate to a consumer segment of one.” – Fung Global Retail & Technology
This technology has the potential to provide a highly accurate, localized forward-looking view of retail demand to help recognize relevant products and optimize retail inventory portfolios in stores, online, and across the supply chain.
Your Data is KEY
These trends illustrate how technology and data will enable retailers to address the various challenges the fickle consumer throws at us.
Funny enough, the latest news of Amazon’s new AI-powered grocery store couldn’t be any more relevant to how data and technology deliver on the modern consumer’s shopping habits.
Retailers can make use of this innovative technology too:
“Enter artificial intelligence, a gleaming machine that can solve all that ails retail. The hype around AI is palpable and so is the mystery associated with it. AI is not a silver bullet, but the technologies that typically comprise it should be part of the retail roadmap toward digitalization.” – Robert Hetu, Gartner
It will help retailers adapt and react quickly to change; the one certainty within the retail industry.
*I only listed off a few trends (out of eighteen!) from FGRT’s report—it’s definitely worth the read. You can access the original report below!