6 Digital Tech Trends Retailers Can’t Ignore In 2020

Digital technology is radically changing the face of retail. Savvy organizations are using it to transform their businesses.

Emotions have historically been part of the shopping experience.Whether buying from the same local market each week because they have the bestapples, or frequenting a certain boutique because it carries the trendiest clothing,a real-life, genuine connection between a customer and a merchant has been anirrefutable part of the process.

Yet the advent of online shopping has taken away some of the connection buyers could have with their favorite stores. Technology is often considered the culprit, but, in fact, a slew of digital technologies are fueling retailers’ ability to evolve and take customer relationships to a new level. They’re also boosting efficiency and lowering costs.

To be sure, retailers must embrace a digital-centric mentality and combine various technologies, including the Internet of Things (IoT), augmented reality (AR), artificial intelligence (AI), and geolocation, to extend their capabilities and possibilities. Here are six digital trends that promise to reshape retail in 2020.

The IoT Connects Retailers to Customers

The IoT is taking shape and impacting retail in a major way. From automated mobile checkouts and smart shelves to personalized ads and connected products, businesses and consumers are clearly sold on the IoT. Gartner estimates next year will boast approximately 21 billion IoT devices worldwide. Some of the emerging capabilities are downright impressive.

For instance, in 2018, Nike introduced Speed Shop at its New York City flagship store. The service allows customers to reserve shoes online to try on in-store. They can head straight to a locker that their smartphone unlocks. Kroger, the grocery supermarket chain, has introduced digital pricetags as part of an initiative called Kroger Edge. Displays show pricing and nutritional information of products. Soon the technology will directly connect to smartphones and consumers’ shopping lists.

“IoT provides the capability to deliver new services that can be monetized to create unique revenue streams, and it has the ability to drive the shift of focus from the point of sale to the point of experience,” said Frank Antonysamy, vice president of connected products at Cognizant Digital Business. This, ultimately, generates top-line and bottom-line benefits, including the ability to fuel gains in supply-chain efficiency and squeeze more value out of physical spaces, he noted.

The opportunities to tap the IoT are broad, said Scott Likens, PwC emerging tech leader. This includes digital signage and magic mirrors that can display different styles of clothing or cosmetics, the ability to track shelf activity in real time, automation and checkout improvements, including automated checkouts, and the use of connected devices and systems to optimize physical store layouts and displays.

The key to fully unlocking the value of the IoT lies in understanding the why, the what, and the business outcome the resulting data delivers, Likens said. All paths must lead to the consumer experience and creating a richer and more satisfying shopping experience. For instance, “IoT can enable a replica of a shopping experience that can be experienced remotely, or it can be used to collect the data that serves as the backbone for AR experiences in-store,” he explains.

Retailers should also keep an eye on emerging 5G, said Peter Sheldon, senior director of strategy for Magento at Adobe. “The cellular networking technology will further change the dynamics of retailing and consumer behavior,” he said. “It will enable far more advanced IoT frameworks that don’t require Wi-Fi and open things up to new types of products and services.”

AR Can Alter Your Sales Picture

Although virtual reality tends to grab the headlines, augmented reality is quietly driving change within the retail space. Market Research Future predicts the global AR market will grow approximately 39% annually through 2023.

According to Adobe’s Sheldon, retailers can benefit from AR in several ways. One of the biggest is by embedding AR in apps and deploying smart mirrors in stores. “In many cases, the technology can alleviate purchase anxiety by showing how colors and styles actually look when they are worn or used,” he explains.

This can range from cosmetics, eyeglasses, and clothes to carpeting, furniture, and paint. “The best AR technology looks very real. It can adjust a product to match a person or room’s dimensions,” Sheldon said.

For instance, U.K. eyewear retailer Specsavers has introduced AR technology called Frame Styler that lets customers in stores see what they look like with different frames and glasses. Home users can also use a version of the technology. After a facial scan, a shopper receives suggestions for glasses based on age, gender, and facial features—and he or she can compare numerous designs quickly.

“AR bridges the gap between online and brick-and-mortar consumer experiences, giving buyers a sensory experience that leads to informed buying decisions,” PwC’s Likens said.

Yet, Likens also cautioned against relying on the technology for sizzle alone, and to carefully consider how it impacts a device or channel. “AR should enrich the customer journey,” he added. This translates into a need to consider not only when to use it, but also how much. “The goal is to provide actionable information to the consumer,” Likens said.

AI Makes Retail Smarter

AI is redefining the way retailers interact with customers—and how they manage business operations. Consulting firm Capgemini reports that more than a quarter of the top 250 global retailers are integrating AI into their organizations, versus only 4% that did so in 2016. Besides enhancing relationships, AI could lead to $340 billion in cost savings through 2022.

There are several ways to extract value from AI, said Shannon Warner, vice president of the Capgemini Invent North American retail practice. These include customer service chatbots, image recognition used in online shopping, voice recognition for customer authentication or digital assistants, and optimizing promotions and product recommendations.

AI can deliver a deeper view into customers—and their behaviors. It can digest images, video, sound, and text, and interact with IoT sensors in stores and homes. This delivers “a high-resolution view of a retailer’s customers, stores, digital funnel, and ultimately their business,” explained Bret Greenstein, senior vice president of consulting firm Cognizant.

Online retailer LovetheSales.com now uses machine learning, a subset of AI, to categorize more than 1 million products from a wide range of retailers. An algorithm sorts everything into product categories automatically. Meanwhile, a chatbot offered by Madison Reed, Madi , guides customers to the right shade of hair coloring. A person uploads a photo, the app asks a series of questions, and then it delivers recommendations using image recognition, responses, and the location. Customers can browse other shades before making a decision.

This insight can help retailers provide what customers are looking for, but it’s critical to establish a strategy, rather than looking for niche and one-off opportunities to use AI, Warner said. “Many retailers typically employ a fast-follower or even laggard strategy when it comes to adopting new technologies,” she said.

Instead, they should focus on targeted testing and learning across the retail value chain. “The biggest risk to retailers is not acting fast or aggressively enough to define and execute against the best-fit AI use cases,” she said.

The Retail Compass Points Toward Geolocation

Geolocation technology points retailers toward remarkable capabilities. The list includes dynamic pricing, highly personalized marketing and promotions, and entirely new types of services. It’s possible to create breadcrumb trails that lead customers to specific products in a store, and establish business partnerships to drive traffic into stores. Taco Bell, for example, partnered with ride-sharing service Lyft to allow customers to go through a restaurant drive-through while on their ride. This pushed visits up by 8% on weekends.

“A retail customer’s smartphone provides multiple ways for geolocation information to be collected,” according to Tim Zimmerman, research vice president at Gartner. “Wi-Fi, BLE, and UWB are indoor options that vary by the necessary granularity, while cellular and GPS provide outdoor location options.”

Geolocation, particularly when combined with AI, makes it possible to harness data at a far more granular level and establish micro-strategies that are based on the specific needs of a store.

“Geolocation applications not only provide personalized marketing to users, they also provide valuable information such as the path that all users, or a specific subset, travel through the store, or how long they typically spend looking for what they purchase,” Zimmerman noted.

This means retailers can design and build stores that are suited to a specific location—and replace “manager intuition” with sound evidence. Using GPS information to determine how far users travel to get to a store helps retailers also determine the physical location of new stores. In the end, this makes it possible to use location to optimize a retailer’s global brand marketing strategy.

However, for geolocation to be most effective, retailers must adopt a far more granular view of the market. This means crafting a different strategy for each store based on local needs, plugging in the right data and analytics tools, and using AI and automation to manage tasks. Retailers must then overlay all of this with global rules and dashboards that tie all the threads together.

Next comes the ability to separate the signal from the noise. When every price point a retailer collects is multiplied by the number of stores it has, specialized technology is required to handle the volume and acquire more precise data on competitor prices.

Digital Wallets Are About Dollars And Sense

Digital wallets are quietly ringing up gains in retail. They not only offer a way to purchase things with a phone or smartwatch, they’re evolving into full-fledged ecosystems that unlock customer insights and forge loyalty by providing convenience, value, and security.

“Adoption of digital wallets in the U.S. is advancing as retailers build out a variety of features, such as ease of checkout—especially for omnichannel orders—access to loyalty and reward programs, coupons, personalized offers, receipts, order history, and more,” said Capgemini’s Warner.

Greater trust and value are at the center of the equation, Warner said. “Digital wallets, through the use of facial recognition, have become an important tool to enable seamless, convenient, fast, and secure transactions.”

It’s a fact that hasn’t escaped Starbucks, Target, Ticketmaster, and Five Guys, which all offer increasingly sophisticated features tied to orders, payments, tickets, promotions, rewards, gift cards, and more. In September 2019, Walgreens announced that Apple Pay users would receive 3% daily cash on purchases made at stores and online. The digital wallet is tightly integrated with its loyalty program.

The concept is expanding. Auto manufacturers are dropping digital wallets into cars, which will further drive changes in consumer behavior. For example, Honda Motor Corp. has introduced a system, Honda Dream Drive, which uses the vehicle’s onboard infotainment display to enable payments at gas stations, smart parking lots, grocery stores, and drive-through restaurants.

General Motors, Hyundai, BMW, Volkswagen, and Ford Motor have also announced that they will offer in-car payment technology.

These integrated wallets can change behavior and drive engagement, Warner said. The technology, especially when combined with analytics, AI, and geolocation, can help retailers glean data, understand behavior, and embrace a one-to-one relationship. Savvy retailers are exploring ways to build deeper relationships around them.

Smarter Digital Commerce Platforms Deliver Value

The complexity of e-commerce grows daily. Consumer expectations are rising, the barriers to market entry are dropping, and the need to combine digital technologies effectively is critical. With touch points multiplying and interaction points growing, it’s little wonder why 86% of business leaders said they are experiencing rising customer acquisition costs, according to a study conducted by Retail Dive and BigCommerce.

Enter next generation digital commerce platforms, a.k.a. “headless commerce.” This technology attempts to rein in the complexities associated with delivering personalized content across the plethora of devices, screens, channels, databases, and information sources. By simplifying development tasks, headless commerce allows organizations to generate granular content and get it out to consumers faster.

A headless model relies on a content management system (CMS) platform and is managed by an e-commerce platform on the back end.

“It serves as a front-end development toolkit and programming language that produces unique digital experiences,” explained Adobe’s Sheldon. “It delivers flexibility and agility to developers so that an organization can move beyond a specific format or experience.”

It’s something retailers—particularly large businesses—should consider, Sheldon said. “If you have a diverse customer base, large architecture teams, and deep pockets, it can deliver significant benefits.”