Vinit Doshi, senior expert at Periscope By McKinsey
The 2020 event season kicked off with NRF’s The Big Show earlier this month. This year’s event marked an increase in attendance over last year, with more than 38,000 participants. As attendees – and most in the retail space – know, the show brings together the retail sectors’ varied brands and the vendors that help them deliver great experiences to learn, share and talk about current market conditions and how the industry is evolving.
What made this past show different from recent years’ events, in my opinion, is that the overall mood seemed more positive than it had been previously. Before, many retailers had felt more threatened – and some might say paralysed – by issues like economic uncertainty or what ‘to do about the growth of online competition’. As such, they were cautious regarding how much to invest, when to do so, and what they should invest in to grow and transform their businesses.
However, this year the attitude appeared to be one of action. The retail sector now seems to have accepted that a certain amount of uncertainty is part of the game. That is removing paralysis, revealing a desire to start securing the competitive advantages needed to ensure a strong and growth-focused future.
At the core of this desired competitive advantage is technology, as technology is disrupting every interaction in the consumer-retailer-manufacturer chain. And retail is realizing it must accelerate investment in and experimenting with technology to create impact at scale. Not everything will work, so an agile test-and-learn approach is essential, and the retailers that resolve how to scale new technology will be the winners.
Leveraging data — sharing it, analysing it, and using insights gained from it to inform better and faster decision making — has been a central tenet of how the consumer-retailer-manufacturer chain has evolved over the last decade. Automation, also, has been critical to the evolution of retail, including for ordering in supply chains, analysing data to develop assortment strategies and presenting real-time recommendations to consumers. But as was evident at The Big Show, there are more creative and unexpected ways that both retailers and shoppers are stepping up their game and taking more advantage of technology:
- In China, a company has developed a consumer app that allows people to group their purchases together as a way to encourage retailers to offer bulk discounts.
- New AI visual technologies are allowing retailers to passively observe, track and analyse where shoppers are looking in-store (e.g., which aisles), what products they look at, how much time they look at them, etc.
- Consumers will be increasingly able to shop online and simply pick up groceries in their cars, with machines bringing products together and making automated substitution recommendations when products are not available.
- There are cash registers now available that can scan groups of products visually and in automated ways (without barcodes), even produce in plastic bags.
- Electronic shelf labels continue to evolve, allowing prices to be changed instantly and additional product information to be presented to shoppers. We can certainly expect to see retailers using this technology with its performance and design flexibility advantages.
And, as many of us have seen, innovative AR/VR technology can allow people to visualize apparel on and measure themselves, and consumers can personalize products like shoes and electronics with their own “skins.” There are seemingly endless ways that technology can help drive competitive differentiators and the retail experience of the future.
With technology it’s clear that the traditional retail models are being disrupted. However, the right way to think about this is as an opportunity, in exactly the same way the Internet proved to be. However, technology is not the only substantial force disrupting retail: social fears, economic anxiety, financial worries, and social disconnection are all changing the behaviour of shoppers and expectations being placed on retailers.
The key word above is behaviour. Understanding the behaviour and needs of customers has been at the heart of successful retail for hundreds of years. But now we have more information about customers than ever before, as well as of the wider market environment. The challenge is how to understand and capitalize on all of that information. And this goes both ways — customers have much greater access to data that informs their buying decisions, too.
Data is the key to turning disruptive technology to the advantage of retailers. Behaviour evolves quickly, and data signposts those changes. With regular analysis, retailers have the opportunity to observe those changes to avoid being blindsided by perceived ‘sudden changes’ and feeling compelled to make knee-jerk decisions.
Retailers must see themselves as in a state of continuous evolution, looking for the next tweak that needs to be made to their offering, testing new ideas and learning from them. At The Big Show, we saw retailers no longer frozen in the headlights of uncertainty but looking to how they can evolve to meet the challenges and opportunities that lie ahead, setting themselves on a growth trajectory and acting to achieve. And the future looks very bright.