Digital technologies are quickly evolving, causing changes in a variety of businesses, including retail. From inventory management to in-store service, retail technology involves innovation and digitalization in both eCommerce and brick-and-mortar retail processes.
Retail technology helps eCommerce companies manage their inventory using cloud-based software solutions, manage their client base, and provide a consistent customer experience across numerous platforms. Artificial intelligence technologies like self-checkout systems and smart mirrors, on the other hand, are among the in-store retail technology tools.
In fact, technology is not just changing retail; it has fundamentally transformed the way people shop, forcing the sector to rethink its business strategy.
In this post, we’re discussing how technology is changing retail, the retail technology trends that are transforming the industry, and the possibilities that are opening up with their usage.
What is retail technology?
Digital tools and innovations used by eCommerce businesses and brick-and-mortar retailers in both their supply chain and in-store operations are referred to as retail technology.
Retail technology is critical for mainstream enterprises, online marketplaces, as well as B2C and B2B eCommerce companies. In recent years, funding for these divisions has increased significantly, driving businesses to digitize their operations. In 2020, roughly $40.2 billion in investments and funds were committed toward retail technology deals.
In the same year, the value of the retail digital transformation market on a global level was $143.55 billion and by 2026, it is expected to increase to $388.51 billion, growing at a CAGR of 18.2%. The majority of investments and funding in retail technology are centered in Asia, which is unsurprising given that the region now has the highest number of eCommerce customers and the largest online revenues. North America is a close second, receiving approximately 34% of global retail tech funding in 2020. In terms of retail technology investments, Europe lags behind the two main retail tech trailblazers.
What technologies have impacted retail the most?
Let’s take a look at how technology is changing retail in practice, along with the major game changers that are shaping the future of this sector.
1. Apparel management software
Poorly managed inventory results in excess supplies and loss of sales, increasing costs and reducing revenue. For retail businesses, manual processes are insufficient, especially given the volume and variety of clothing items, sales, orders, and overall operations, which is why they’re increasingly implementing retail software.
But what is retail software and how can it help apparel companies? An apparel software system is crucial to streamline and operate the most complicated and costly procedures and inventory management is only one function. A good apparel management software solution can help apparel retailers manage every part of their business, from bookkeeping to pattern management for each piece of apparel.
Non-fungible tokens, or NFTs, are ushering in a new era for brands. NFTs have been around since 2014, but their popularity exploded in 2021 when trading reached $10.7 billion. Premium brands that have already established success based on scarcity, such as Louis Vuitton and Gucci, benefit the most from NFTs. Luxury businesses have previously embraced digital fashion skins, so think of NFTs as the next step in this fashion technology evolution.
In fact, NFTs are set to become mainstream for retailers this year, according to the State of Fashion 2022 Report by McKinsey. It’s evident that digital assets will become a cornerstone in the future of retail, given the market’s rapid growth and the branding and profit opportunities presented by their selling. In reality, the luxury NFT market is expected to increase to $56 billion by 2030, and although luxury non-fungible tokens will still account for a small percentage of the industry, the metaverse will enhance demand for them.
3. Digital showrooms
Retail innovations such as virtual reality (VR), augmented reality (AR), artificial intelligence (AI), and machine learning are here to stay. While augmented reality is not new to retailers, it has evolved from a simple concept to a key component of their eCommerce strategies. Because so many people continued to purchase online during the pandemic, merchants are leveraging augmented reality technology to bridge the digital and physical worlds and create digital showrooms.
Rather than simply skimming through photos, digital showrooms allow internet consumers to engage with each item of clothing virtually. Customers drag and drop things onto virtual fixtures that provide 360-degree views or video-led fittings. During the fitting, they can also zoom in to inspect every element of the goods closer. A product description and specific information such as color options and sizing availability are included with each product. Digital showrooms are the best way to reproduce the experience of traditional in-store purchasing. Except for the fact that you won’t have to wait in line for a fitting room, you’ll almost forget you’re not trying items on in a physical store.
Chatbots and personal assistants are increasingly being used by businesses to meet clients where they are. The technology has already been employed in retail, banking, and healthcare prior to the pandemic and by 2020, around 54% of consumers have interacted with AI companies on a daily basis. Chatbots are a perfect solution for merchants looking to increase brand loyalty, customer satisfaction, and brand loyalty since they answer frequently asked questions, provide 24/7 help, and can even give rewards to customers depending on their intents.
While personal connections definitely have their upsides, chatbots provide organizations and individuals with numerous advantages, including decreased latency and availability around the clock. So, it comes as no surprise that over 70% of chatbot discussions are expected to be handled by AI-powered retail conversations by 2023.
5. Social commerce
Consumers can shop online more easily with social commerce, which is a natural shopping experience on a social networking platform. Users can make purchases directly from an app or social networking site rather than traveling to a third-party website. On Instagram and Facebook, shops are specialized showcases for retail companies. Sellers can build featured product collections and customize the appearance of their Stores using colors, photos, banners, and buttons. Because the same store is accessible from both Instagram and Facebook, merchants are able to reach a worldwide audience on both platforms.
This year, social commerce sales in the United States are predicted to increase by 24.9% to $45.74 billion, with fashion categories such as clothes and accessories continuing to be the most popular.
6. IoT devices
IoT devices allow retailers to streamline operations and reduce manual labor with warehouse and supply chain automation, robot employees, smart shelves, automated checkouts, etc. IoT technology helps retail management by enabling faster service, better customer experience, proactive equipment maintenance, optimal product placement, and other benefits.
By 2025, the global IoT in retail is expected to grow from $14.5 billion to $35.5 billion, at a CAGR of 19.6%.
7. Digital payments
Digital payments can be viewed as the next evolutionary step in offering value-added financial services and replacing traditional payment methods such as cash and credit/debit cards.
The various forms of digital payment include websites and mobile apps that store customers’ bank account or card information in order to process payments in the background, smartphone-based contactless payments made by phone (Apple Pay for example), and QR code payments scanned with a mobile camera.
What are the benefits of technology in retail?
Whether you use apparel management software or embrace digital technology innovation to improve your in-store experience, technology can provide various benefits to retailers. Here are some of the most important ones:
- Improved inventory management. Retail technology can help with everything from inventory management to shrinkage reduction, which contributes to enhanced efficiency and increased profits.
- More efficient supply chain processes. Inventory process automation improves efficiency throughout your supply chain, freeing up capital for business expansion.
- Reduced costs. Retailers decrease expenses and boost profitability by leveraging big data and forecasting tools to minimize the time between delivery and sale.
- Improved consumer satisfaction. You can boost customer satisfaction before, during, and after the transaction by delivering a superior technological experience in your store.
To sum up: How technology is changing retail
Technology is becoming an indelible part of the fast-growing retail industry. Forward-thinking retailers follow industry best practices all while keeping an eye on new technology advancements. This helps retailers ensure a pleasant shopping experience, increase consumer satisfaction, and grow their business while spending less money.
Keep in mind that the most important aspect of successfully introducing new technologies into the retail space is the partnership between the business and the vendor producing the technology. The success of the product is determined by how they collaborate to develop and maintain it, regardless of whether the technological solution is intended to aid the company’s tasks or for the consumer directly.