With another calendar year in the books, retailers have their eyes fixed on 2019 — a year of transformation that could finally rewrite the “apocalypse” storyline. And one way they’ll accomplish that goal is with technology and innovation applied thoughtfully throughout their businesses. Here’s a preview of the developments to expect as the calendar flips forward.
The stereotypical association that artificial intelligence will result in “Terminator”-like destruction of civilization as we know it can be hard to shake for some people. In the near term, however, AI will help retailers make smarter decisions — which means less waste and inefficiency coupled with stronger margins and healthier profits.
“AI and prescriptive analytics will curtail overstock and overdiscounting. Brands and retailers will improve how they dictate product replenishment and will automate key merchandising decisions to react quickly to, and predict, demand changes,” said Joaquin Villalba, co-founder and CEO of Nextail. “Retail has long been lumbered with excess stock dragging down business and eroding customer loyalty, leading to discounting, which also diminishes profit margins and sales performance.”
Watch on FN
Matt Field, president and co-founder of merchandise optimization platform MakerSights, believes AI-powered product recommendations are set to “get in the fast lane” in the year ahead. “2019 will see the continued explosion of AI across retail, particularly as it relates to informing consumer product recommendations,” he explained. “Amazon appears poised to invest heavily in moving Alexa beyond being just a cool gadget towards a personal guide, predicting your grocery and pantry needs, and offering up tips on what to wear and buy.”
Product creation also will benefit from artificial intelligence, Field added. “2019 should see more brands leverage predictive modeling to translate their troves of product and purchase data into trend and styling recommendations,” he continued. “Stitch Fix, for example, has developed its own ‘Hybrid Designs’ based on sales and attribute feedback from customers. These machine-inspired concepts are shared with human designers to vet, and the winning products, born out of this human-machine partnership, are put into production.”
Vidyuth Srinivasan, CEO of Entrupy, a technology-driven authentication solution for luxury handbags including Chanel, Hermès, Goyard, Louis Vuitton, Gucci, Dior and Fendi, believes AI is poised to become a real differentiator in the high-end sector. “Traditionally, artificial intelligence in luxury retail has been more buzzword than benefit. But that’s set to change,” Srinivasan said. “Specific applications of AI, along with best practices — especially in the areas of supply chain management and product authentication — are finally emerging as retailers and brands have come to realize the value of the technology. We’re moving into a new phase of adoption, which was largely experimental previously.
“AI technology has improved in terms of usability and accuracy, and organizations have invested in the talent and infrastructure necessary to take advantage,” Srinivasan continued. “2019 will be the year we see these moves finally pay off and deliver tangible ROI.”
What’s more, data quality and transparency will become top of mind for retailers and brands planning AI projects. “AI is only as good as the data powering it. Customers are also more aware of the possibilities of the data they possess, which will increase the quality of output with AI applications,” Srinivasan noted. “And as AI becomes more widespread and invested in, more organizations will have conversations about first-party consumer data — from collection methods to training.”
The Entrupy executive pointed to a pair of changes in the market that will be instrumental in influencing how brands and retailers use the data they have at their disposal. “First, GDPR will tighten data volume, limiting scale; however, it will also increase data quality given opt-in requirements,” Srinivasan said. “Second, and at the same time, consumers are more understanding and accepting of exchanging their data for a more personalized, affordable or convenient experience. These developments are changing the way the industry thinks about data.”
They’re not exactly new on the scene, but experts believe robots will be playing a larger role in retail in the coming year.
“Robots are everyone’s new co-workers. Fear not the robot apocalypse,” said Field of MakerSights. “Onboarding robots to the workforce has become more common over the past year, but the science fiction movie plot many fear is far from reality. Rather, robots will augment the work of their human counterparts — some back-of-house and front-of-house jobs will be augmented by robots as early as 2019.”
Field points to megaretailers and big-box merchants as leading the way with robotics deployments. “Amazon, for example, continues to make huge investments in robots to make warehousing more efficient,” he explained. “Walmart is getting in on the robot action with shelf-scanning robots to assess in-stock and out-of-stock items along with testing a new robotics system, Alphabot, to speed up the fulfillment of customers’ online grocery orders.
“In 2019, more retailers will take a test-and-learn approach to robotics as they look to lower costs, increase operational efficiencies, and gain a competitive edge in the market,” Field said.
Agile inventory for new retail: pop-ups
Temporary retail is here to stay. Pop-ups are set to become a permanent fixture on the retail scene as merchants understand the role of these now-you-see-it-now-you-don’t experiences in attracting consumers and promoting inventory.
“Pop-up shops are nothing new to consumers, but they are becoming more common and popular. This is because shoppers — and younger shoppers, in particular — are often ‘turned off’ by traditional marketing and instead look toward brands and retailers who offer unique experiences,” Srinivasan explained. “This drive toward the different has made in-person events and initiatives like pop-up shops into table stakes for engagement, and we expect this to continue in the new year.”
Srinivasan stressed that consumers aren’t the only ones who stand to gain from the pop-up experience, noting that “pop-ups aren’t just for shoppers anymore.”
“In fact,” he explained, “with a growing quantity of high-quality counterfeits flooding the market, they’re an excellent way to control inventory and reduce risks inherent in today’s global supply chains.”
The only way that retailers can serve their customers, and especially with experiences like pop-ups, will be through implementing agile inventory processes, said Villalba. “As retailers diversify their products to become more inclusive across their audiences, they will need to have dynamic inventory operations. It will be crucial for retailers to establish the right inventory processes and gain real-time visibility on demand levels of each product to ensure it is available to consumers at any point, across all channels.”
Villalba continued, “More accurate forecasting on buying and merchandising decisions will prevent overstock, enable streamlined distribution and maximize sales potential throughout the entire life cycle of the product.”
Sold on social?
We’ve been talking about it for years, but could 2019 at least bring a breakthrough in social commerce?
Columbus Consulting’s Beck believes social selling on the major sites like Facebook and Instagram is on the verge of becoming the “new norm.”
“In 2019, social media as a sales channel will not only become commonly accepted but will be a requirement for retailers going to market,” Beck explained. “Retailers must build a social media department within their business to not only make these sales, but also provide measurable customer engagement results. This will no longer be a ‘nice to have’ but rather the ‘price of admission’ for successful retailers.”
In the luxury arena, social presents a lucrative opportunity — but comes at a cost. “Instagram is probably the most popular mobile-first reseller and shopping platform for luxury apparel and fashion, and in 2019, they’re going to have to ramp up their fight against the sale of counterfeits on the platform,” Srinivasan noted.
“As brands spotlight fraud and ramp up their fight against it in 2019, Instagram will similarly have to step up their game. Otherwise, they risk backlash that would make Facebook’s ‘Fake News’ problem look minor in comparison. There’s a lot of work to be done, but the onus to clean up and eliminate bad actors is squarely on Instagram,” he added.
From clicks to bricks, the retail evolution continues
In the year ahead, expect retailers to double down on facilitating consumer-friendly experiences — assuming they were still standing as 2018 drew to a close.
“The current holiday season will be make-or-break for some brands,” Beck noted. “In early 2019, brands who didn’t win this holiday season may disappear altogether or find themselves making a last-ditch effort to survive by declaring bankruptcy or the like. Heavy markdowns, financial restructuring and store closures will likely be in play in Q1 and Q2 of 2019.
“Others will be consolidated through acquisitions by bigger industry players,” he continued. “On the other hand, we’ll see more innovative retail startups go mainstream as they challenge the boundaries of traditional retail.”
Leading merchants will bring more tech into stores with an eye toward simulating the ease of Amazon Go.
“Retailers will reduce friction in-store to improve the customer experience,” Villalba said. “In 2018, Amazon Go made waves for eliminating cashiers through the use of facial recognition to authenticate shoppers and self checkout. Now 7-Eleven and Zara are two retailers at the forefront of piloting and offering automated store pickups and purchases. Next year, we can expect a burst of other brands to adopt the technology to streamline the shopping experience, combat long store lines and switch the focus of in-store staff to experiential priorities.”
If retailers are struggling to keep up with the pace of change in the industry, they should understand that moving at the speed of the consumer simply is how things have to be going forward. “The retail industry certainly isn’t slowing down in 2019,” Beck said. “Consumers continue to demand higher and higher levels of service and a seamless experience, whether online, in-store or on devices, and retailers must rapidly, and continuously, innovate to stay up to speed.”
If there’s one area where this mantra rings especially true, Beck added, it’s in fulfillment. “One-day delivery is now less of a differentiator and is becoming the basic entry level,” he continued. “Retailers need to get product out of their stores and DCs and into the hands of customers faster than ever before.”
As part of retail’s evolution, Field sees “David and Goliath” partnerships and collaborations taking a starring role in how merchants will keep things fresh. “In 2019, consumers will continue to be surprised and delighted by unique collaborations between small, fast-growing brands and more traditional, large retailers,” he said.
“As smaller brands look to reach new customers and traditional retailers seek to bring innovation and newness to their existing customers, we can expect many more David and Goliath partnerships in 2019,” Field continued. “Partnerships such as Target and Harry’s have created excitement around commodity purchases. Nordstrom’s Pop-In@Nordstrom concept, featuring temporary shops for digitally native brands like Everlane, goop and Casper, delivers the cool factor while driving urgency among consumers.”