Technology and the Rapidly Changing Retail Environment
The world of consumerism that we currently live in has drastically changed than what it used to be in the past few decades. With the current state of our data driven economy that has grown substantially by technological progress, consumers have shifted the way they make decisions and the way they spend their hard earned dollars. Many trends have begun to unfold rapidly that create opportunities but also challenges for consumers and businesses. Some of these trends include the rise of online shopping, multi-channel customer engagement, and the use of data to name a few.
Trends, challenges, and opportunities
Online shopping provides many benefits to consumers such as access to lower prices and the convenience of not having to leave the house, saving consumers time and money. Additionally, mobile devices have essentially made it possible to purchase anything, anywhere. While consumers demand a great online shopping experience, this creates many challenges, but also opportunities for retailers. One of the biggest trends affecting retail is declining mall traffic. Specifically, many big-box retailers such as Macy’s and JC Penney have seen declines in in-store sales which has led to a record pace of brick and mortar shut downs all across the retail industry. One extreme example this is Bebe, a women’s apparel chain, which has announced the closing of all of its 170 of its stores to focus on online sales. While following the online trend, retailers must keep in mind the costs relating to shipping, returns, and exchanges, which can become expensive and time consuming for the consumer or the retailer, both of which can adversely affect the business.
With these challenges, there have also plenty of opportunities for both large corporations as well as smaller retailers. Take for example Wal-Mart, which has made a string of acquisition such as Jet.com to offer diversified product selections on their eCommerce platform. Many smaller e-retailers have also been able to exit via sales to Wal-Mart including Shoebuy.com ($70m), fashion retailer ModCloth ($45m), and an outdoor apparel seller MooseJaw ($51m). Retailers that are able to build competitive advantages in niche markets through the use of e-commerce and other technologies fare very well in disrupting a market and can become extremely valuable to larger players such as Wal-Mart. In such acquisitions, Wal-Mart has strategically acquired skilled entrepreneurs that lead different e-commerce operators to strengthen their online channel. While Amazon leads the online retail space in many areas, Wal-Mart is creating a competitive advantages by capitalizing on their core assets which include their cost efficiency produced by its many stores, distribution centers and trucks.
The use of data and multi-channel customer engagement
These next two trends go hand in hand. Companies, through the use of data, are becoming more knowledgeable about who their customers are and how to strategically target them. They are able to do this is by collecting and analyzing variables such as social media posts and web browsing habits in order to gain insights on customers and the types of products they desire. Based on a customer’s social media and web browsing habits, marketing firms are able to accurately determine where to place ads that work effectively. Gaining insight on customer habits can strengthen firm’s ability to engage with consumers like never before. There is a focus on having a personalized approach and creating a one-to-one shopping experience, ultimately winning the customer’s business through various channels such as social media, newsletters, and other marketing campaigns.
Big data also plays a role into optimizing prices for goods. Through the monitoring millions of transactions per day, algorithms track demand, inventory levels and competitor activity in order to respond to market changes in real time. These highly sophisticated algorithms are most commonly used by larger retailers such as Wal-Mart and Amazon. However, even smaller businesses can benefit from big data, as there are a growing number of intermediaries that provide Big Data as a Service (BDaaS). This is an alternative method that enables smaller businesses to take advantage of the robust data driven approach to sales and marketing without any overly expensive costs. Two targeted advertising platforms that you may be familiar with are Google and Facebook, which offer businesses of all sizes a data-driven marketing strategy through social media.
What does future of the retail industry look like?
The reality is that retailing industry will continue to undergo many drastic changes in the years to come — we are just getting started! The future holds much more promising and advanced new technologies that will continually change the landscape for retailers. Some highly notable trends, which will be expanded on in future posts, consist of supply chain efficiency through the Internet of Things (IoT), drone delivery, Artificial Intelligence (AI) powered chatbots that create meaningful connections with consumers, Virtual Retail (VR) and more seamless payment options. With all these fascinating advancements in technology we have seen tremendous improvements in many retailers, but we’ve also seen many widespread challenges. Therefore, retailers must be very thoughtful about how they adapt to trends, and one of the best way to do this is by continually investing in technology that ultimately adds value to the consumers. Adapting, given the low profit margin environment that retailers face, can be an arduous process. However, not adapting can become extremely costly in this rapidly changing environment.