By Alexandr Galkin, Competera
The COVID-19 pandemic has turned the whole world upside down. But taking a closer look, you will see that many things that we now mark as a ‘New Normal’ are not new. The pandemic has accelerated many trends dominating in the last decades. That’s why things we marked yesterday as the first signs of the future are now becoming essential.
The use of technology is probably the most illustrative example showing how quickly the retail future has come. The rapid growth of online shopping, augmented reality (AR) features for customers, AI-driven pricing solutions, robotic delivery, and warehouse assistants, as well as automated checkout stores, — all these innovations mark the same idea: the future is here. Let’s dive into some details!
1. Online Shopping Is Thriving
Not so long ago, many retailers considered online stores as a rather supplementing but hardly self-sufficient sales channel. But everything is different now. According to Statista, in the first quarter of 2020, US e-commerce accounted for 11.8 percent of total retail sales while, after the pandemic hit the United States, a 4.3-point jump in online sales occurred. Eventually, online sales reached the point of 16.1 percent of total retail sales.
Before the crisis, launching an online storefront was taking up to 2 months. Now, after the COVID-19 outbreak, this timeline has dramatically compressed to weeks and even days. That’s how retailers are trying to mitigate the financial losses in a time when the offline-only model works no longer.
2. Augmented Reality (AR) Features As A Part Of Customer Experience
Earlier on, many customers denied switching to online shopping because they considered this type of experience inferior compared to offline store visits. This trend was especially relevant for the apparel industry as customers are always eager to try on the cloth items before buying them. And advanced AR technology made it possible even while shopping online.
In the post-pandemic reality, AR has quickly become an essential technology for retailers. Virtual try-on experiences are an excellent use case for AR in retail. Now, consumers can preview products in their own homes, on their bodies, and then instantly purchase what they like. According to Shopify, interactions with products having AR content showed a 94% higher conversion rate than products without AR. The AR-powered “try-before-you-buy” experiences are a great illustration of the retail future being here.
3. Third-Wave Pricing Solutions Powered By AI
According to McKinsey, 40 percent of US buyers switched to other brands or retailers during the past few months. Lower prices and a better price/value ratio are the two major reasons behind the trend. What it means practically is that customers become more sensitive to price changes. That’s why price, which has always been a crucial factor considered by customers, has become even more important in the post-pandemic world.
Investing in pricing technology helps retailers not only to keep the customers loyal but also to boost key financial metrics. The advanced third-wave pricing solutions can analyze historical and current sales data along with dozens of other pricing and non-pricing factors to reveal even the most implicit cross-dependencies between different products’ sales.
Retailers can set the parameters of a future pricing campaign, select goals, choose metrics they want to increase and the ones to be protected, and then the rest is done by AI. Here is an example of how a large European electronics retailer managed to gain a 13% revenue increase by using such an AI-driven price optimization software. 10 years ago, nobody could imagine that AI will help to set the best possible prices for all products in the portfolio, and now it is happening already.
4. Increasing Use Of Robotic Delivery And Warehouse Assistants
If a decade ago, one would say that products will be delivered right to the customers’ homes by flying drones, you’d probably think that the speaker watched too many sci-fi movies. But today it no longer seems odd. In August 2020, Amazon’s Prime Air, a pioneering drone delivery project, received an FAA agreement to operate in the US. And it means that the delivery drones are already on their way to become an ordinary part of the urban landscape.
Before that, Amazon was also the first retail giant to start extensively using robotic assistants in warehouses. Automating warehouse operations has already become commonplace. And most of the big players, like Coca-Cola, Ikea, Nike, Walmart, are already using advanced supply chain automation tools.
5. Automated Checkout Stores Become Commonplace
Speaking of automated checkout stores, Amazon is also worth being mentioned primarily. In 2018, the Amazon Go project was launched. The project’s goal implied opening stores where customers would be able to make purchases with no need to be checked out by a cashier or self-checkout station. In 2020, two years after the project was started, the company runs 27 automated stores across the US.
There are good reasons to believe that the post-pandemic reality will force more and more players to invest in automated checkout stores. And the core reason behind the trend is safety. The responsible businesses make their best to ensure the safety and health protection of their employees. But even the strictest health measures cannot fully reduce the health risks in brick-and-mortar stores. And, in this case, automated checkout stores appear to be a perfect solution.
The innovations outlined above may serve as undoubted signs that the next-gen era of retail has come. And the question is whether retailers are flexible enough to respond to the current challenges in an agile way. The latter is not possible without investing in technology. Technological transformation becomes a matter of survival but, in case it is done wisely, it also becomes the source of competitive advantage.
About The Author
Alexandr Galkin is CEO and Co-Founder of Competera, price optimization software for enterprise retailers looking to increase revenue and stay competitive. He is a Forbes contributor, speaker at IRX, e-Commerce, and RBTE conferences.