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Digital Disruption in Retail An Executive Briefing Insights for Strategic Decision Making
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Executive Briefing: Digital Disruption in Retail
Innovation & Insight
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Understand how retailers are addressing their most critical strategic challenges through Disruptive Technologies
Learn which are the top 6 Disruptive Technologies that will shape the future of Retail
Get strategic recommendations to future proof your business and maximise the technology potential
The Executive Briefing will allow you to
Prioritise your digital investments to transform your disruptive capabilities
Insights addressing Strategic Issues and practical Technological Solutions
5
Get an Executive Briefing for any of the top 18 industries and future proof your business
Please contact our consulting team on [email protected] to discuss your requirement and for pricing information
Consumer Products
Retail
Foodservice
Pharma
Medical
Technology
Oil & Gas Power
Mining
Banking &
Payments
Insurance
Construction
Defence
Retail
Foodservice
Pharma
Medical
Technology
Oil & Gas Power
Mining
Banking &
Payments
Insurance
Construction
Defence
Automotive
6
Table of Contents
Executive Summary ….…………………………………………………………………………………………………… 3
Retail’s Strategic Challenges …………………………………………………………………………………….……. 7
Strategic Challenges impact on Retail’s Value Chain ….…………………………………………….……. 8
Disruptive Technologies that will shape the future of Retail ..………………………………….……. 9
Case Studies & Recommendations
Machine Learning in Retail ……………………………………………………………………….…. 16
Mobile in Retail …………………………………………………………………………………………... 25
Internet of Things in Retail ………………………………………………………………………….. 34
Automation in Retail ……………………………………………………….……………………….…. 43
Virtual & Augmented Reality (VR/AR) Technology in Retail ………………………... 52
Conversational Platforms in Retail ………………………………………….……………….…. 61
Appendix ….…………………………………………………………………….……………………………………….….. 70
About GlobalData Consultancy….…………………………………….………………………………………..…. 72
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Executive Summary
What are retail’s strategic challenges?
Since the arrival of e-commerce, traditional retailers have struggled to keep up with changes to consumers’ shopping behaviour. The ability of customers to easily and quickly find the lowest prices, plus the cost and investment of online operations has caused margin erosion.
As spend continues to migrate online, the fragility of the traditional retail model has become apparent and retailers have struggled with overcapacity.
The integration of channels has made understanding the value each contributes to purchasing quite opaque, which makes optimising the customer journey more difficult than ever.
The convenience of online has made attracting shoppers into stores harder, and so retailers are having to differentiate and shift emphasis in retailing from product to experience.
Which disruptive technologies can help with these challenges?
Over the next five years, six disruptive technologies will shape the future of retail and help address the challenges retailers face. We have prioritised them in order according to their ability to meet and solve these challenges; the extent of their application across the value chain; and the level of activity in deals and investment in each over the past four years. In order of priority they are:
Machine Learning
Mobile
Internet of Things (IoT)
Automation
Virtual Reality and Augmented Reality (VR/AR)
Conversational Platforms
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Executive Summary (cont. 2)
How are retailers using these disruptive technologies?
Machine learning - the ability of computer systems to learn and improve from data without human intervention Areas it is being used in include facial recognition, optimisation of site navigation, more relevant customer recommendations and better demand forecasting. Costco used the technology to accurately forecast the demand for baked goods each day, leading to reduced waste, a fresher product
at all times and unnecessary labour costs. Mobile – no longer just for m-commerce, but retailers can deepen their relationships with shoppers by getting them to interact on smartphones while in their stores, allowing the retailer to truly understand the customer journey and engage with the customer Amazon Go stores are an ambitious example of this, where shoppers are allowed – through the use of a smartphone app – entry to the store and are given the freedom to take the products they want without using a checkout, and Amazon gets a very rich data set to add to their already impressive knowledge of their customers.
Internet of Things – the use of connected sensors to control and monitor environments and learn shopper behaviour It has long been used in logistics, but plummeting costs enable its use at the product item level. Alibaba has used IoT technology to truly integrate the online and offline worlds in its Hema supermarkets, where customers have the benefit of a combination of convenience and experiential shopping in store, plus fast online delivery capabilities from the store. Cont/...
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Executive Summary (cont. 3)
How are retailers using these disruptive technologies?
Automation – the reduction of human intervention through the use of computers and robots This is being used throughout the retail value chain, from food processing through to warehouses, and increasingly in customer facing tasks such as self service checkouts, while potential abounds with automated vehicle pilots for last mile deliveries. Ocado has invested heavily in automation at its grocery warehouses, in order to streamline the movement of products. Its robots pick and pack customer orders without human intervention, significantly speeding up the process, enabling it to cut costs and increase capacity.
Virtual Reality/Augmented Reality – the immersion of the user in an artificial world (VR) or the overlaying of digital images onto the user’s experience of the real world (AR). The technology is being used to overcome tangibility gaps between products and their pre-purchase experience of them. Furniture giant IKEA developed an AR app which allows shoppers to view how an item will look in their home, by overlaying a digital image of the item onto the camera function of the user’s smartphone.
Conversational platforms – technologies that facilitate human-like interaction with computer systems These are being used by a number of retailers as shoppers become less resistant to interacting with machines and retailers cut back on the labour intensiveness of customer service. Footwear brand Nike is using conversational platforms to interact with customers on Facebook Messenger, where a chatbot helps shoppers choose and even design personalised shoes.
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Executive Summary (cont. 4)
Source: GlobalData
Notes: See Appendix for methodology
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1
3
4
5
6
Machine Learning
Mobile
IoT Automation
Conversational Platforms VR/AR
High
Low High
Low
High
Low
Solu
tio
n fo
r st
rate
gic
chal
len
ges
+ ex
ten
t o
f u
se in
val
ue
chai
n
Bubble size = value of deals 2015-2018. Positioning scored on usage in value chain + ability to solve retail challenges x total number of deals and total value over the period
Investment activity 2015-2018
Technologies with most widespread application/and benefit to retailers in the value chain and highest investment/deal activity 2015-18
PRIORITIES
1. Machine Learning: Can be applied across the whole value
chain, and provides a response to all the strategic challenges
retailers face. Having the highest volume of deal activity and
second highest spend underlines its value.
2. Mobile: Recognised as the essential tool to engage with
shoppers, hence the high spend and deal activity. It has the ability
to resolve all the strategic challenges at some level and be utilised
across most of the value chain.
3. Internet of Things: Again widespread use to solve strategic
challenges, an evolving technology with more investment and
usage in future increasing potential.
4. Automation: Essential for cost effective and speedy operation.
5. VR/AR: Still in a nascent stage but has potential for greater
application and consumer engagement as it develops.
6. Conversational Platforms: Yet to be proven as a shopping
medium in the home, but chat bots improving customer
interaction with retailers.
2 Sample Slides
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Understand how Digital Technologies are addressing your industry’s strategic challenges (Sample 1)
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Retailers face multiple strategic challenges
Optimizing the customer journey
Margin erosion
Fragility of traditional
retail modelOvercapacity
Shift from product to experience
The need to understand the role of each channel and touchpoint in an omnichannel experience
Due to increased competition from pureplays and investment in multichannel
The struggle to evaluate emerging and diverse threats and adapting the model accordingly
Too much physical space in mature economies, exacerbated by increasing
penetration of online – shaking out weaker operators
The online experience emphasizes convenience,
forcing stores to differentiate and focus on experience
Source: GlobalData, 2019
Retail’s Strategic
Challenges
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These strategic challenges impact the entire retail value chain
Wholesale Distribution Centre
Retail Distribution Centre
Manufacturer/Processor
Distribution
Head Office
Website
Third Party Pick-up / Drop off
Store
Source Point of Sale
Farm
Product Components (e.g. textiles)
Packaging
Processed Final Goods
Third Party Market Place
(Amazon)
Consumer
Retail model
Optimising customer journey
Margin erosion
Overcapacity
Shift from product to experience
Source: GlobalData, 2019
The Retail Industry Value Chain
Transport & Logistics (Air, Land, Sea)
Consumer Interactions
Relevant Coverage
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Identify the Market Leaders & Disruptive Entrants across your value chain (sample 2)
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Learn from the most innovative companies (sample 3)
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What should retailers consider to maximise technology potential ?
Executive Insights for sound Decision Making (sample 4)
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Get an Executive Briefing for any of the top 18 industries and future proof your business
Please contact our consulting team on [email protected] to discuss your requirement and for pricing information
Consumer Products
Retail
Foodservice
Pharma
Medical
Technology
Oil & Gas Power
Mining
Banking &
Payments
Insurance
Construction
Defence
Retail
Foodservice
Pharma
Medical
Technology
Oil & Gas Power
Mining
Banking &
Payments
Insurance
Construction
Defence
Automotive
3 Credentials
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