Retail Technology Trends & the Future of Physical Stores
Over the past year, the rules of retail are experiencing fundamental shifts. While popularity on a local level used to be the winning factor, today, it is no longer enough for retail stores to remain relevant.
Today, brands have to be great at fast innovation; they have to continuously change their strategies by leveraging data. Growth comes with flexibility and adaptation rather than rigidity.
To remain flexible, you need to keep up with retail technology trends. By this, we refer to (a) the tendencies in consumer behavior and (b) the changes in operational practises. Both are undergoing massive changes at the moment, forcing many retailers to pay the ultimate price.
In this article, we take an objective look at the world of retail in the post-COVID19 era and point out some of the upcoming retail trends. After reading this post, you will understand what will help you satisfy customers, reduce costs, and scale your business in the years ahead.
Retail reinvention - What COVID-19 taught us
Through the temporary lockdown measures, retailers were forced to look at their outdated practises and methodologies. While many had to learn the hard way, most realized the following:
- Building an online presence is not just good for sales but essential for the survival of your business.
- Online stores are in many ways superior to physical stores. This includes their MoM costs, traffic potential, data collection opportunities, and convenience.
- What people say is often different than what people do. Therefore, (at least for the next year) observation is the main research method you should be utilizing when constructing new promotion plans.
- The strategies brands use to connect to their audience shouldn’t be set in stone, neither follow a “cookie-cutter” approach. It is important to have alternative plans, depending on the societal changes that may occur.
Pepsi is a great example of this. With a few quick and decisive moves, the company managed to adjust its marketing strategy to better accommodate the feelings of its customers during the lockdown season. Check what the VP of Marketing at Pepsi had to say in a recent GaryVee podcast.
The main takeaway here is the importance of speed when it comes to strategy adaptations. It’s important to take action based on a plan, but make sure you always leave a little window open - a margin of error if you may - to adjust if necessary.
Retail technology trends - How does the future look like?
Most brands use data-driven decisions to build out their strategies. While this is still very important, it is no longer enough. Nowadays, there is a dire need for creatives and futurists. These will predict retail technology trends and translate them in personalized marketing strategies.
Those who already do this grab a huge market share and data (Amazon, Alibaba, etc.). This, in turn, puts them in a favourable position for the future. Those who don’t will eventually be left behind.
To make sure that your business is also well-positioned in the next few years, it is important to understand where the industry is headed. Therefore, and to break things down in easily digestible information, we decided to split retail technology trends into:
- Trends for brick and mortar stores
- Online shopping trends
- Retail technology & digital communication trends
- Retail marketing trends
Lets have a look and discuss each option separately.
1. The future of brick and mortar retailing
Due to the pandemic-related lockdowns, many self-starters are now doubting their plans. No one is certain as to how the world will look like once everything returns to normal. In the midst of this crisis, we can observe several trends related to the future of brick and mortar retailing:
- Brick and mortar will not go away, but it will be forced to adapt. The only physical stores that will most likely bankrupt are those will very high leases and no online presence.
- Leases will most likely restructure due to low demand and high supply. Since dot.com infrastructure is so much cheaper and rewarding for brands, there will be a tendency to focus on digital-first.
- Retailers that choose to maintain a physical presence will be forced to innovate. This means doing more than just having products on shelves. We will see an acceleration towards in-store experiences, on-the-spot services, and entertainment opportunities.
For example, a Nike store may place a basketball hoop in the middle of their store, allowing people to take free throws in hopes of receiving a discount or a bonus item. Or, they might bring popular athletes for product signings on a regular basis. The experiences will be closely linked to the audience they wish to attract.
- Location-based personalized experiences. We will see geolocated data being leveraged to create in-store shopping opportunities. For example, if you belong to particular loyalty program, you may receive a special sms the moment you enter a partner store.
- Physical retail stores = experiential platforms. We are still too early when it comes to fully digital, VR-type experiences. This is good for physical retail, as it remains relevant. However, we have hardly seen any progress occur in existing retail concepts over the last few decades. In an experience-based economy, there is an immediate need to do so.
2. Banking on the future trends of online shopping
So how does one get ready for this eventual shift towards experiential purchases? What are some future shopping trends that retailers can prepare for right now? Here are few things you can do:
- Find the next big platform and get ready. Check why certain social media platforms work well (e.g. Instagram). Understand why your audience is using these platforms and get ready for the moment new platforms emerge. If you play your cards right, you could quickly become a business leader in the space.
- Observe the customer journey through relevant software tools and try to understand how you can improve the experience. For example, you might notice that your customers abandon their cart when they notice that shipping isn’t free. In this case, you might have to sacrifice a part of your profit margins to increase your sales.
- Explore the concept of packaging and improve the customer experience based your customers’ motivations and the emotions you wish to associate with the purchase. This includes physical packaging of shipped goods as well as digital packaging experiences.
- Work on your cultural and ethical proposition. Co-integrating your business with the society that surrounds it creates meaningful relationships and an improved customer journey. Once again, understanding your audience is imperative for this to work.
3. Retail technology industry trends & digital communication
When looking at the technologies that are leading the rapid shift towards online-first retail, we can observe the following:
- Direct-To-Consumer (DTC) infrastructure brands are experiencing massive success. These are all the technologies surrounding the customer journey, e.g. delivery mechanisms, retailer apps, loyalty program software, and other software that strengthens the digital ecosystem.
- Companies and brands in the e-commerce infrastructure space (e.g. Shopify, Magento) have also benefited greatly.
- Social media communication and promotion is becoming more important for retailers; even for those that were initially resistant to change.
But are these changes permanent or just a temporary measure?
Our best guess is that this temporary shift will leave lasting effects. Naturally, the interest of building an online presence will slightly taper down once the lockdown periods come to an end. However, the main job is already done!
Most business owners have come to understand the importance of digital communication. They have also realized the importance of an omnichannel approach. Slowly but surely, they will factor in the importance of an online presence and capitalize on the opportunities that arise through it.
How will this affect consumer engagement in the future?
The pandemic didn’t just force retailers to rethink their strategies; it also helped consumers discover the convenience of online purchases.
Buyers are now aware of (new) social media platforms, methods to interact with and buy from brands, as well as the benefits of doing so.
Since most people were forced to stay at home for a significant period of time, they spent a considerable amount of time in front of screens (phones, desktops, tablets). This helped them discover new brands through the feeds of their social media channels. It is a lot easier and more comfortable to connect with your favorite brands online, and we expect more brands to understand this in the future.
4. Retail marketing trends
We have previously discussed the importance of personalization and continuous testing of engagement strategies. We don’t see these trends changing any time soon. In fact, we expect them to increase in importance in the next few years, as retails battle for consumer attention. This goes hand in hand with more demanding customers, who are by now expecting more from the brands they follow.
If you want to better understand the objectives of a marketing strategy and the steps you need to follow to get started, make sure you check out this article.
What about retail technology trends in the long term?
While its hard to make predictions for decades down the line, we already start to observe a tendency towards umbrella solutions (a.k.a. Placing everything under one roof through strategic acquisitions).
This is exactly why Amazon is one of the biggest and most successful companies at the moment. They have successfully merged retail and digital markets under one brand. You can buy physical things on their website, watch TV from their streaming service, listen to songs from their music service, and more. Eventually, other digital services will need to catch up.
How would that look like?
Large digital companies like Facebook and Spotify have the digital side of things covered, but we expect to see them integrate into the physical retail side of businesses as well. We may, for example, see Facebook acquiring retailers like Walmart to strengthen their physical presense.
When looking at other industries we can see the same trend building up as well. Chinese EV brand NIO is currently building an ecosystem of smart tech that aims to completely redesign the way we drive and live. They do this by creating umbrella solutions that cover both their “smart” vehicles, their “smart” living spaces, and the subscription-based power stations they depend on. Due to their innovative thinking, the company has managed to grow exponentially over the past year.
Retail is certainly a lot more confusing and challenging than it once was. We find ourselves in unprecedented situations that call for new strategies and continuous adaptation. Here are the two main takeaways we’d like to leave you with:
- Growth comes with flexibility and adaptation in strategic planning. Agile companies will be the ones to lead the next wave of innovation.
- Physical stores will slowly turn into experiential platforms. As a result, it will be a lot more important to understand your audience through data and hire creatives to analyse them.
Overall, the retail leaders of the future will need to use customer data on one hand, and retail technology trends on the other, merging them into creative strategies to capture the attention of consumers.
It’s still a very exciting time to be in the retail industry. While it is more complex and data-driven than it once was, the opportunity to make an impact is huge.