Top Tech Trends Redefining the Retail Industry

The retail industry is changing at a rate never seen before, largely due to growing digital interconnectedness around the globe. This shift is also being driven by a myriad of cutting-edge tech like the Internet of Things (IoT), augmented reality (AR), and artificial intelligence (AI).

What does the future hold for the retail industry?

The retail industry is expected to grow significantly. In the US alone, retail sales are expected to hit US$5.5 trillion by 2027, with online sales making up 30% of the market, as reported by Forrester Research.

At the same time, the industry is facing unexpected challenges because of increased labor costs and rising inflation. That’s why the retail sector as a whole is relying on technology to guide it through these turbulent times.

However, it is up to the companies themselves to forecast and identify technology trends that will shape retail’s future. Having said that, there are the major technological developments that are influencing modern retail that we have identified, ranging from personalization to the incorporation of IoT devices for a smooth in-store consumer experience. In this digital era, these developments will completely change the way that retailers operate.

1. Embracing the Digital Revolution

For makers and sellers of consumer-packaged goods (CPG), digital transformation is a top priority. CPG businesses are expected to invest US$24 billion in digital transformation by the end of the decade, according to a 2021 study. A substantial amount of this investment will go into integrating cutting-edge technology, such as AI, that is intended to increase automation and operational efficiency.

The digital revolution has many real-world implications, such as improving inventory control, enhancing in-store product visibility, simplifying checkout procedures, refining retail operations, and streamlining the supply chain and logistics operations, among other game-changing initiatives.

Warby Parker, a popular American retailer that focuses on prescription glasses, contact lenses, and sunglasses, makes use of customer data to create customized email campaigns that showcase frames that are comparable to those that the user has already bought. The company also uses the collected data to identify clients who would benefit from a new pair of glasses and direct marketing campaigns toward them.

2. Machine Learning for Prediction of Retail Demand

Demand forecasting is one area where machine learning is changing the retail scene. Retailers can predict future fluctuations in client demand with amazing accuracy by utilizing sophisticated AI algorithms. Numerous data sources, including point-of-sale data, market information, economic indicators, and seasonality, are used to generate these projections.

With such a data-driven approach, retailers are also able to create responsive future marketing strategies that encourage higher consumer spending.

Walmart, one of the biggest retailers globally, has been among the first to employ AI technology for demand forecasting. It has put in place a machine learning system called Eden which aims to decrease food waste by estimating with high precision the shelf life of fresh produce. Amazon began this trend more than 20 years ago by using AI algorithms to recommend items to buy.

3. The Ascendance of Direct-to-Consumer Brands

Direct-to-consumer (D2C) brands, characterized by their innovative marketing strategies, have proven to be exceptionally adept at capturing the attention of millennials and Gen Z. By capitalizing on the extensive presence of these demographics on platforms like Instagram and TikTok, D2C brands have effectively converted engagement into substantial revenue streams.

In the US, D2C e-commerce sales exceeded US$128 billion in 2021 and are expected to reach about US$213 billion by 2024. This market is also growing in Asia. In 2021, D2C platforms in Hong Kong made over US$2 billion in e-commerce sales, and, according to projections, this will almost double by 2026.

The data provided by Statista shows that India, with its 600 million users and over 185 million online shoppers, is among the D2C markets with the quickest growth rates worldwide, with sales of more than US$66 billion in 2023.

4. Voice Shopping

With the help of voice recognition technology, users can make online purchases of goods and services - this is called voice commerce. Using easy voice commands instead of physically inputting information on a computer or mobile device, this technology enables customers to browse and shop online using a virtual digital assistant (VDA) such as Siri, Google Assistant, or Amazon Alexa.

This speeds up and simplifies everything considerably. This is how it works:

If a purchaser said, "Hey Google, buy a bottle of water," Google would then react instantly by recommending a brand, potentially one that the person had previously purchased, and offer the option to authorize the transaction or select an alternative.

Sales via voice shopping technology increased from just US$2 billion in 2018 to roughly US$40 billion in 2022, according to data from Statista.

With an increasing number of people implementing smart technology in their homes, as speech recognition technology advances, retailers can benefit from a new source of income and a new way to interact with customers.

The flexibility of e-commerce in terms of introducing a new payment method, voice payments, is one of its distinguishing characteristics. With more payment alternatives, people are more interested in using them.

5. Internet of Things for a Smooth In-Store Customer Experience

By linking commonplace items to the Internet, the Internet of Things (IoT) builds a network of intelligent devices. With a compound annual growth rate (CAGR) of 19.6%, the worldwide retail IoT market is expected to reach US$35.5 billion by 2025.

The use of IoT technology in the retail industry has a wide range of useful applications:

1. RFID tags, a tracking system that recognizes goods using smart barcodes, and GPS sensors allow companies to obtain detailed information regarding the movement of goods from the factory to the store shelves and to buyers.
2. IoT allows retailers to evaluate real-time data regarding the transport time and storage temperature of a product.
3. IoT has proven to be particularly helpful in the transportation of perishable goods, making it possible for retailers to take rapid action when temperature fluctuations and food spoilage occur, thus being able to prevent significant losses.
4. Smart shelves equipped with sensors collect data on how customers interact, particularly which products they select and return. The collected information allows for personalized discounts, promotions, and suggestions, which in turn boost customer engagement and foster customer loyalty.

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Final word

The global landscape's rapid digital interconnectedness is driving an unprecedented change in the retail sector. Machine learning, voice shopping, and IoT are all part of that change. The trends outlined in this article can open up a plethora of new business use cases and the opportunity for technology organizations and startups to propel growth and possibly even become a force that will transform the entire industry.