The Evolution of Retail: How Technology is Transforming the Industry

Like many other industries, the retail industry has gone through a significant transformation in recent years, largely driven by advances in technology and artificial intelligence (AI), as well as shifting customer preferences and behaviors. 

For the retail industry, consumers have always been a top priority. Any innovation, strategic move, or new product has to be consumer-centric—either designed to fulfill consumers’ existing expectations and desires, or delight them with a product or experience that shapes their expectations thereafter. That is why digital transformation has been so impactful for this particular industry. 

Technologies like AI have opened up new avenues for retail companies to improve their operational efficiency, as well as the products and experiences they can offer their customers. On the other end, consumers have quickly adjusted to a tech-driven world—one where most tasks can be accomplished with a swipe of a finger on a screen, and where individuality is expressed through purchases and brand affinity.

Today, technology is paving the way for transformation in every facet of the retail sector, from supply chain optimization and customer service to in-store shopping and e-commerce. Below, we cover these and other key tech-driven trends that are currently transforming the industry, as well as how you can succeed in this new age of retail.

Technology-Driven In-Store Experiences

Overall, technology has made its way into most brick-and-mortar retail stores. With the COVID-19 pandemic serving as a catalyst for innovation, technologies like buy-online-pick-up-in-store and self-checkout have become commonplace. And these shifts have opened retailers up to new possibilities with AI for elevating the in-store experience. 

For example, retailers can leverage AI-driven data analytics to monitor stock levels, as well as strategically improve design, layout, and product placement—resulting in better sales and improved efficiency. 

Additionally, some retailers are creating intelligent retail spaces that recognize shoppers and adapt in-store product displays, pricing, and service using biometric recognition—creating a personalized shopping experience for each customer. Many are also experimenting with augmented reality (AR) and virtual reality (VR) to facilitate product interactions or virtual try-ons.

Technology is helping retailers do much more with their physical stores than simply sell products—it’s facilitating unforgettable experiences for customers that lead to more trust, engagement, and ultimately, brand loyalty. 

Continued Growth of E-Commerce and Omnichannel

While e-commerce still makes up only about 13% of all retail sales, there is no question that both in terms of consumer expectations and competitive strategy, retailers have much to gain from integrating e-commerce into their commercial strategy. 

With 87.6% of Gen Z shoppers reporting that they prefer online shopping, establishing an e-commerce presence is becoming increasingly crucial to sustained success in the retail industry. A large contributor to the e-commerce frenzy, particularly among younger generations, is social media. Platforms like Instagram and TikTok are increasingly used by retailers to market and directly sell their products to app users—and customers are quickly becoming more used to the ability to purchase an item they see and like in seconds, without ever having to leave the social media app they are scrolling on.

With that said, e-commerce is unlikely to ever replace brick-and-mortar stores completely. Rather, we are likely to see increased integration between the two, facilitating a smoother and more seamless shopping experience for consumers, as well as improved business outcomes for retailers.

The demand for omnichannel is omnipresent—even outside Gen Z, 86% of all shoppers are now combining online and in-store shopping, according to Nielsen IQ data. Meanwhile, brands that offer robust omnichannel experiences have been shown to boost their revenue by 19%, and brands that use at least three channels see a 287% higher purchase rate compared to single channel brands. Aside from increased revenue, retailers that do this successfully can also dramatically increase their brand affinity and customer loyalty—because they are giving customers exactly what they want—all while casting a larger net.

More Personalization

In today’s world, personalization is one of the top preferences consumers have for their shopping experience, with 71% of consumers expecting the businesses they purchase from to get to know their individual interests. And if that’s not enough incentive for retailers, 60% of consumers have stated that they will become repeat customers after a personalized shopping experience. 

Thanks to AI, personalized experiences are much easier to create. AI algorithms can be used to create personalized product recommendations or social media ads, based on prior purchasing behavior. Retailers are also using AI to tailor content in email and text marketing campaigns to appeal to specific groups of consumers. 

Even on the retailer’s online website, the shopping experience could appear entirely different for two separate customers. With the help of AI’s advanced algorithms and deep learning capabilities, each customer’s data can be used to customize the web page, from the specific products displayed and the deals being offered all the way to the messaging on the page—all of which leads to a more individualized and satisfying customer experience.

Greater Focus on Sustainability

Sustainability is fast becoming a top priority for companies across various industries and geographies—not just because of imminent climate concerns and ESG regulations, but because consumers are becoming increasingly discerning about the companies they choose to purchase from, in terms of their impact on the environment. 

Retail companies are finding ways to be more innovative in their approach to sustainability, with the help of technology and AI. For example, they are using IoT (Internet of Things) to deploy interconnected devices and sensors throughout stores, warehouses, and logistics networks. That way, they can gather real-time data on customer behavior, supply chain management, and store operations, as well as find opportunities for sustainable optimizations. 

AI systems can be used to enhance energy efficiency, predict and prevent factory breakdowns, and also increase overall transparency about the company’s commitment to sustainability—which in turn helps them earn consumers’ trust. 

Supply Chain Optimization

AI and technology have revolutionized supply chain and logistics management in retail. AI-powered analytics provide retailers with much deeper visibility into their supply chain, allowing them to identify inefficiencies, track inventory levels, monitor supplier performance, and identify potential disruptions proactively. 

From there, companies can improve the accuracy of their demand forecasting and production planning, which results in reduced costs, fewer stockouts, and improved operational efficiency. With more and more retail companies embracing technology as a way to optimize their supply chains, it is now becoming an industry standard and a must for maintaining a competitive advantage. 

Enhanced Customer Service

One of the most underrated, yet critically important, elements of retail is customer service. A 2023 Customer Service Relevance Report found that customers will leave a brand after only two or three negative experiences. Regardless of how smoothly a retail company’s supply chain works, how sustainable it is, or how many technological features it offers in its various channels—none of it matters if the customer service is lackluster. 

When people shop at a store, whether online or in-person, they want to feel supported and heard. This means their questions get answered and their specific needs are listened to and addressed, to the best of the company’s ability and always in a timely and respectful manner. If these things are not present, a customer is likely to take their business elsewhere, simply to feel that their patronage is appreciated. 

But with AI, retailers have the opportunity to completely overhaul and vastly improve their customer service. Retailers are currently spending billions of dollars on chatbots powered by machine learning and natural language processing. These bots automate the process of answering customer questions and ensure that customers can always get timely, relevant answers to their queries or requests, at all hours of the day. And with generative AI, these chatbots can become well-trained on each retail’s specific brand and products, as well as the potential questions customers may have, consistently improving their ability to provide specific and accurate answers. 

In addition to boosting customer satisfaction, these chatbots also collect helpful customer data for the retailer, which can be used to inform future decision-making. 

Stay on Top of Retail Industry Developments with AlphaSense

In an age where new technology developments are emerging daily and trends shift at a moment’s notice, it’s important to be equipped with a market intelligence tool that helps you dial into the most critical insights, while cutting through irrelevant noise. 

AlphaSense is a leading provider of market intelligence, trusted by top corporations, financial services firms, and consultancies. Clients receive access to 10,000+ premium, proprietary, public, and private content sources from more than 1,500 leading research providers—all in a single platform. 

With AlphaSense, analysts, researchers, and decision-makers in the retail space can conduct comprehensive research faster than ever before, and make smarter, more confident decisions that move the needle. 

Specific types of content you’ll find on the AlphaSense platform include:

• News, company reports, global and SEC filings, ESG reports, earnings call transcripts, industry reports, government and trade publications, and press releases
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The AlphaSense platform also delivers unmatched AI search capabilities and features for analyzing qualitative and quantitative research, and can mine unstructured data for the most critical insights, including:

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Don’t miss our State of Generative AI & Market Intelligence Report 2023.

Stay ahead of the rapidly evolving retail landscape and get your competitive edge with AlphaSense. Start your free trial today.