In the ever-evolving retail landscape, technology has swiftly moved from being a novelty to becoming the linchpin of both operational and customer-centric strategies. As retailers enter this new era, they find themselves on the cusp of a ‘phygital’ revolution – a symbiotic blend of physical and digital experiences that is redefining the conventional playbook. This is not just a transient trend but a robust response to the changing consumer, who now craves the tactile satisfaction of
of in-store shopping along with the personalisation and convenience of online commerce. The term ‘phygital’ encapsulates this amalgam, describing a reality where online and offline retail not only coexist but intertwine to create a seamless, enriched shopping journey. Today’s consumers might browse products online and then feel, try and buy them in physical stores. Conversely, they might spot an item in a store, compare prices on their smartphone, and choose either to take it to the checkout or order it online for home delivery. The crux of this phygital evolution lies in its ability to harness data and advanced tech tools to create a retail ecosystem that is intuitive, responsive and engaging. As we edge closer to 2024, this phygital wave is being propelled by a raft of emerging technologies that promise to redefine the contours of retail operations, marketing strategies and customer engagement paradigms. From AI-powered inventory systems to smart carts that personalise in-store shopping, the technological innovations are not only reshaping how retailers operate but also how they interact and engage with their customers. The journey towards this tech-augmented retail reality is exhilarating, filled with opportunities to craft unforgettable customer experiences, optimise operations and carve out a competitive edge in a bustling market. Here, we delve deeper into some of the key technologies already steering this change. 1. AI-powered inventory management and demand forecasting Harnessing the power of artificial intelligence (AI) and machine learning (ML) has become an operational reality for retailers, especially in the realm of inventory management and demand forecasting. Traditionally reliant on historical sales data and manual inputs, these activities are now being transformed by AI’s ability to analyse vast datasets, discern patterns, and predict future demand with heightened accuracy. At the heart of this transformation is AI’s capacity to sift through not only past sales data but also real-time analytics, customer behaviours, market trends, and even external factors like weather conditions or local events that might impact demand. By doing so, it enables retailers to maintain an optimal stock level. This precise synchronisation between demand and supply curtails overstocking and stockouts, which have long been a bane for retail profitability and customer satisfaction. An example of this technology in practice is Walmart’s use of machine vision technology in its stores. By leveraging AI-powered machine vision technology and real-time analytics, Walmart has been able to accelerate its stocking speed by a staggering 90 per cent, which in turn boosted sales by 30 per cent in its Long Island store in New York. This exemplifies how AI and ML, when deployed effectively, can not only streamline inventory management but also drive a tangible increase in sales, creating a win-win scenario for both retailers and customers. Furthermore, AI’s predictive analytics capabilities enable retailers to anticipate demand surges or dips and adjust their inventory accordingly. This is especially crucial in managing seasonal or event-driven merchandise. As we tread deeper into the phygital era, the fusion of AI with inventory management and demand forecasting is poised to become a cornerstone for retail operational excellence, setting a high bar for what technology can achieve in bridging the gap between customer expectations and retail capabilities. The journey of Walmart and many other retail behemoths underscores the colossal potential and the burgeoning significance of AI and ML in creating a more efficient, responsive, and customer-centric retail operation. 2. Generative AI for personalised marketing and product recommendations In an era when the consumer is king, personalisation isn’t merely a fancy feature but an expectation. The modern shopper seeks a tailored shopping experience, and generative AI emerges as a powerful tool in the retailer’s arsenal to meet this demand. By harnessing generative AI, retailers can craft personalised marketing content and product recommendations that resonate with individual consumer preferences and shopping behaviour. Generative AI takes a deep dive into the sea of data, extracting valuable insights from a consumer’s past purchases, browsing history, even their social media activity. By analysing these data points, it can generate personalised suggestions that are more likely to capture the consumer’s attention and propel them towards a purchase. This highly personalised interaction mimics the attentiveness of a personal shopper, fostering a connection between the brand and the consumer. Amazon has been at the forefront of personalised shopping experiences. By employing ML algorithms like collaborative filtering and variational autoencoders, Amazon has crafted a recommendation system that suggests products based on a user’s browsing and purchasing patterns. This has not only enhanced the customer’s shopping experience, but has also boosted Amazon’s cross-selling and up-selling opportunities. Moreover, this technology extends its utility beyond mere product recommendations. Generative AI helps create dynamic and personalised marketing content, which is essential in today’s retail landscape flooded with generic advertising. For instance, brands like Nestle and Unilever have used AI tools like DALL-E and ChatGPT to generate creative ad copy that resonates well with their target audience. Furthermore, generative AI’s ability to make photorealistic images from text prompts presents a unique opportunity for marketers to create custom visuals that appeal to different customer segments. This feature can be particularly beneficial in online retail, where visual appeal greatly impacts consumer buying decisions. In a nutshell, generative AI is elevating the way retailers interact with their customers. As this technology continues to mature, the retail industry is on the verge of experiencing a monumental shift towards a more personalised and customer-centric approach, fostering loyalty and driving sales. 3. Smart carts and checkouts for enhanced customer experience The retail checkout process, often regarded as a point of friction, is undergoing a remarkable transformation, thanks to the advent of smart-cart technologies and cashier-less checkouts. These innovations aim to streamline the shopping journey, making it quicker, smoother and more enjoyable. In the emergence of smart carts, Shopic’s clip-on device leads the pack. This ingenious device, when placed on a shopping cart, employs cameras and AI to identify products added or removed from the cart, tally up the prices and apply in-store deals. The checkout process becomes a breeze, as customers can pay directly through the device, minimising the time spent waiting in line. By cutting down on the traditional checkout time, retailers are not only enhancing customer satisfaction but also are freeing up staff to focus on other areas of customer service and store operations. Walmart’s scan-and-pay app is another step towards cashier-less stores, empowering customers to scan and pay for items using their smartphones. This self-service model is an exemplary fusion of digital convenience with physical shopping, making in-store shopping a more attractive proposition for time-pressed consumers. Moreover, every interaction with the smart cart or app provides retailers with data points that can be analysed to understand shopping behaviours, preferences and patterns. This real-time data is a treasure trove for retailers aiming to refine their marketing strategies, personalise offers, and optimise store layouts to better cater to customer needs. The blend of smart carts and cashier-less checkouts is a reality unfolding in stores, ushering in a new era of retail marked by heightened efficiency and customer-centricity. By embracing these tech-driven solutions, retailers are not just keeping pace with evolving consumer expectations but are setting new standards for delivering exceptional in-store experiences. The ripple effects of these technologies extend beyond the individual stores to the broader retail landscape, showcasing a way forward that is technologically savvy, data-driven, and relentlessly focused on enhancing the customer experience. With further advancements on the horizon, smart carts and cashier-less checkouts are poised to be integral components of the retail industry’s tech-enabled evolution, marking a major stride towards a seamless and enjoyable shopping journey. 4. Virtual try-ons and augmented reality As digital continually melds with the physical world, augmented reality (AR) and virtual try-ons stand at the forefront of retail innovation, redefining the way consumers interact with products before making a purchasing decision. These technologies are blurring the lines between online and in-store shopping, providing a digitally enhanced, immersive shopping experience that is both engaging and informative. Virtual try-ons, as the name suggests, allow customers to try on a product virtually – be it clothing, eyewear, or even furniture – from the comfort of their homes or even within a physical store. This virtual interaction provides a tangible sense of the product, aiding customers in making more informed purchasing decisions. It also adds a fun, interactive element to online shopping, which can enhance brand engagement and customer satisfaction. A shining example of this technology in action is Google’s AI shopping feature, launched in June. It enables users to try on clothes virtually. Using sophisticated AR technology, customers can see how apparel looks on them through their device screens, adding a new dimension to online apparel shopping. This feature not only enhances the online shopping experience but also helps reduce the rate of product returns, a notorious challenge in the online retail sector. AR takes the virtual try-on concept a step further by overlaying digital information onto the real world, providing additional product details, reviews or even virtual tutorials as customers shop in-store or browse online. AR can transform a simple product label into a dynamic source of information, accessible through a customer’s smartphone. Retailers adopting AR and virtual try-on technologies are well-positioned to provide a more enriched, interactive shopping experience. They are also likely to gain better insights into customer preferences and behaviours, which can be used to tailor marketing strategies and improve product offerings. Furthermore, as these technologies continue to mature and become more integrated into the retail ecosystem, they will play a pivotal role in forming a ‘phygital’ retail landscape where the delineation between digital and physical shopping becomes increasingly fluid. By embracing AR and virtual try-ons, retailers are not only meeting the evolving expectations of the modern consumer but also laying a foundation for a more interactive, informed and enjoyable shopping future. 5. Robotics in store operations In recent years, robotics has moved from the fringes to the forefront of retail operations. Aided by advancements in AI and machine learning, robots are now capable of performing myriad tasks that were traditionally labour-intensive and time-consuming. Their deployment in store operations has proven to be a game-changer, ensuring operational efficiency, safety, and a higher level of customer satisfaction. One of the primary areas where robots are making a big impact is in restocking shelves. Automated robots equipped with sensors and real-time inventory tracking systems are able to navigate the aisles, identify stock levels, and replenish shelves with precision. This not only ensures that products are readily available for customers but also frees up human resources for more strategic, customer-facing roles. For instance, Walmart has employed robots to traverse the aisles, scanning shelves for out-of-stock items and incorrect pricing, thereby maintaining inventory accuracy and pricing integrity. Additionally, robots are proving to be indispensable in maintaining cleanliness and safety within retail spaces. Automated cleaning robots can be deployed during off-hours to sanitise floors, ensuring a clean and safe shopping environment. During the global Covid-19 pandemic, the role of cleaning robots was underscored, as retailers sought to uphold stringent hygiene standards to protect both customers and staff. Robots are also being used for in-store deliveries and curbside pickups, providing a contactless shopping experience, which has become increasingly preferred by customers. By automating these processes, retailers are meeting the customers at their point of need while minimising human contact. Also in the realm of customer service, robots equipped with AI and machine learning algorithms can assist customers in locating products within the store, providing information on promotions and even offering product recommendations based on past purchases or browsing behaviour. Robotics is not merely a futuristic concept but a present-day reality that is reshaping the operational dynamics of retail stores. The integration of robotics within store operations represents a substantial stride towards a more efficient, safe, and customer-centric retail environment. 6. Phygital loyalty programs The rise of phygital extends into the realm of loyalty programs, redefining how retailers foster a culture of customer loyalty and brand engagement. In a world where customers seamlessly transition between online and offline shopping, loyalty programs, too, have evolved to offer a cohesive experience. Smart loyalty programs are at the heart of this transformation. By integrating online data with in-store experiences, these programs are capable of offering highly personalised offers and discounts. When a customer logs into their loyalty account in-store via a smart cart touchscreen or a mobile app, retailers have the opportunity to provide real-time, personalised offers based on the customer’s past online and offline shopping behaviour. This level of personalisation not only enhances the shopping experience but also fosters a deeper connection between the brand and the customer. For instance, Target and Anthropologie have leveraged mobile apps to offer real-time promotions and product recommendations to in-store shoppers. These initiatives serve dual purposes: enhancing the in-store shopping experience while also gathering valuable data that can be used to further personalise future interactions. Moreover, phygital loyalty programs offer a platform for continuous communication and engagement. The data derived from these programs can be channelled into optimising brand messaging, customer service and product offerings, creating a feedback loop that continually enhances the customer experience. The success of such loyalty programs hinges on robust data analytics and the ability to translate insights into actionable in-store interventions. Advanced analytics tools, powered by AI and machine learning, are instrumental in sifting through vast amounts of data to derive meaningful insights that can be used to tailor offers, promotions, and interactions to individual customer preferences and behaviours. These phygital loyalty programs play a crucial role in driving traffic to physical stores. By offering exclusive in-store promotions or events to loyalty program members, retailers can incentivise online shoppers to visit physical outlets, thus creating a holistic shopping experience. Technology-powered loyalty programs signify the move towards a more interconnected retail landscape, where every interaction, whether online or offline, is an opportunity to enhance customer loyalty and drive brand engagement. Bridging the digital and physical The evolution of tech in retail is a journey of discovering enhanced operational efficiencies, personalised customer engagements and, ultimately, a competitive edge in an ever-evolving market. With each advancement, retailers become equipped with better tools to understand their customers and deliver value in ways previously unimagined. Embracing these technologies is not about hopping onto the bandwagon of the latest trends; it’s about foreseeing the potential of a retail ecosystem that’s interconnected, intelligent and immersive. It’s about building a retail environment where technology serves as a bridge between the digital desires and physical needs of the customers. Retailers that are proactive in adopting and integrating these technologies are not only setting themselves apart in the present but also are positioning themselves favourably for the future. They are the trailblazers that will define the retail narratives of 2024 and beyond. This story first appeared in the November issue of Inside Retail Australia Magazine.