By Karmesh Vaswani, Infosys EVP – Head of consumer, retail and logistics
Many analysts are now calling a recession “inevitable.” A massive 85% of Americans faced with rising costs are either buying less or looking for deals and discounts. US Census Bureau data shows the turbulent time the retail industry is facing as 2023 retail trade sales were up 3% whereas December 2022 retail trade sales were down 1.2%. In these complex and uncertain times, smart retailers have found interesting ways to outsmart the competition. Ulta Beauty winning with loyalty, Kroger leading with Fresh and Walmart succeeding with essentials among higher income shoppers are some of the recent successes we have seen.
In these uncertain and complex times, retailers should capitalize on five important trends to secure their future and compete with competition by leveraging technology:
1. Conscious Consumer and Personalization
Today’s consumers have become more conscious of their spending habits than ever due to a variety of current events and trends like inflation, labor market, ESG (environmental, social, governance) policies, and security threats. Retailers now face steeper challenges to attract and retain customers. This includes taking a stand on hot-button issues of the day and even making political statements using their brand. Younger consumers are especially swayed by eco-conscious brands that decide to take a stand for current issues facing society.
Additionally, retailers are expected to compete amidst the rising costs of living nationwide with various discounting strategies and predictable pricing models. By offering predictable and transparent pricing, retailers help consumers plan for upcoming purchases, avoid costly trips, and determine when – or if – they can splurge on the products or services of their choice. Retailers can deploy strategies that cater to the conscious consumer by creating tailored, digital experiences that tap into individuals’ preferences and needs, and the most successful strategies are often driven by data.
Online marketplaces are expected to contribute $7 trillion to the world economy by 2024. With online/digital almost becoming the default mode of shopping, even physical stores are offering direct to consumer e-commerce experiences, allowing consumers to shop anywhere and everywhere. Walmart is a notable example, with its online marketplace becoming a significant player in the United States e-commerce market. Further, virtual platforms like the metaverse and social channels like Facebook and Tik Tok are offering shopping experiences, in addition to tech products like Alexa and Siri entering the conversational commerce space.
As online marketplaces offer quick commerce (e.g., delivery within days, or even hours), consumers are opting for instant gratification. Since online marketplaces show no signs of slowing, retailers should seriously consider adopting this trend as an opportunity for creating a seamless cross-category customer experience without disrupting the existing shopping journey customers are familiar with today. And retailers can now extend the assortment mix in current categories and quickly enter new categories to test the market without taking on new inventory. Retailers should be ready with commerce capabilities that can transcend boundaries into everywhere the customer is willing to shop. MACH architecture – Microservices, API-first, Cloud-native and Headless – is the way forward for everywhere commerce.
3. Frictionless everything
Retailers entering new categories and extending their assortment mix in current ones are doing so with one goal in mind – a frictionless consumer experience. Retailers are leaning on AI, ML, robotics, and drones – among other enabling technologies – to deliver smooth experiences via cashier-less stores, cardless payments, driverless delivery, and product-less shopping.
Another part of the frictionless experience – and in many ways the driving factor – is supply chains, which became a priority worldwide when they were disrupted by the pandemic. Changes in consumer buying habits are leading to accelerated switching to value and online channels. This demand churn combined with supply uncertainty is leading to an unprecedented level of supply chain volatility. With climate change events also creating havoc at regular intervals, building agile and resilient supply chains is the way forward.
Retailers looking to ride these trends will need to lean on a clutch of digital technologies to enable frictionless supply chains and experiences. Tapping into data signals across the ecosystem, sophisticated machine learning (ML) algorithms to decipher, and autonomous decisions that are fed into workflows will form the future of frictionless supply chain.
4. Data-driven, autonomous retail
It’s proven that businesses are continuously adapting to today’s fast-changing world. In just a short window since the pandemic, we went from severe shortage of inventory to surplus inventory, from the great resignation era and resulting hiring spree to massive layoffs. A successful business needs to keep up with the changes, including external and internal factors like the economy, inflation, customer behavior, competitions, etc. Data-driven retailing is the only way forward. Retail is rich with data that is available from customers, suppliers and employees; however, making sense out the data requires sophisticated algorithms, and the retail industry struggles with heterogeneous data silos.
Pioneering retail companies are adopting a “One Inventory” model to leverage inventories across their supply chain to fulfill the demand from “anywhere,” leading to lower inventory compared to their peers, and thus making it harder to quickly respond to changing demand patterns. Optimized digital media and promotions can be now precisely targeted at zip code level micro-markets to continuously improve return on investment in marketing, trade investments, and shape the demand in line with supply constraints. Retail media networks are allowing retailers to monetize the data in a big way, given social media is losing its grip over ad spend and rising privacy data concerns.
5. Cybersecurity to sustain it all
Every one of these trends, be it autonomous retailing, online marketplace, or supply chain, sustains data at an incredible scale, in a variety of formats, gathered from an unlimited number of sources. As data travels between systems, applications, and devices, on various networks and the internet, it is exposed to serious cybersecurity risks. One estimate says global cyberattacks in the third quarter of 2022 were 28% higher than in the same period in 2021, with an organization facing 1,130 attacks every week, on average.
If retail enterprises expect their customers, partners, and other entities to share their information, they will have to ensure that their data, as well as privacy and confidentiality, are fully protected. This calls for comprehensive measures, such as employing zero trust architecture, security as code, and AI technologies for proactive defense.
Looking ahead, it’s crucial that retailers invest in and deploy enabling technologies to tackle the five trends outlined above – conscious consumer and personalization; everywhere commerce; frictionless everything; data-driven, autonomous retail; and cybersecurity to sustain it all. Consumers have become more thoughtful with where, when, and why they spend, forcing retailers to rethink their strategy from the ground-up. Cloud, big data, AI, automation, 5G and other emerging technologies are critical to a retailers’ success and will become mandatory for survival in the times ahead. Those who innovate to stay ahead of the curve and break through the competitive landscape will emerge from the economic onslaught with the ingredients needed for long-term success.