The Future of Omnichannel Retail

AN INDUSTRY STRATEGIC FORESIGHT TRENDS REPORT

Analyst Perspective

In the age of disruption, Retail and IT must end misalignment and enable omnichannel value realization.

Retailers need to prioritize the omnichannel experience – hyper-personalization through new operative models – which has been increasing since the beginning of the COVID-19 pandemic; recognizing and adopting future trending signals could increase revenue and market share.

The digital experience must be woven with online-to-offline models, smart store hubs, and metaverse commerce supplemented with automation. Driving this digital transformation will help achieve the long-term business goals as well as the technology vision and will be critical for retailers to stay relevant.

Info-Tech’s approach focuses on an analytical investigation of strategic insights to help the IT division and the business process what is happening in external environments to guide ideation and identify potential opportunities.

Rahul Jaiswal
Principal Research Director, Retail
Info-Tech Research Group

Executing omnichannel is key to the success of the organization’s strategy

Master omnichannel to enable seamless customer engagement

• Warehouse automation helps respond to customer needs by providing a seamless checkout experience and faster delivery of merchandise.
• Leaders are exploring the impact of new digital channel opportunities. For example, direct-to-avatar (D2A) commerce is an emerging business model in which products are sold directly to digital identities, with no supply chain management required.

Optimize operational excellence to realize key functions

• Standardize processes to improve efficiency and enable new services to fulfill last-mile delivery.
• Gather information during the customer journey. The greater the volume of data available, both internally and externally, the more telling and precise the analyses.
• Ensure tools are focused on enabling one view of inventory, delivery tracking, and customer access.

Build a unique value proposition

• Preset the entire enterprise planning and order management process through the order management system (OMS) and distributed order management (DOM) applications and controls.
• Make an exclusive value proposition to inform and access products and services.

Info-Tech Insight

“Omnichannel” is the increasing adoption of technology tools and processes within all aspects of an organization.

Omnichannel is bringing businesses closer to the customer by understanding their needs

Info-Tech Insight

Omnichannel has become an indispensable part of operation and customer strategy. It enables businesses to understand the evolving needs of the consumer.

E-commerce is forecasted to grow steadily in the future, driven by an increasing number of online buyers who are willing to spend more

Online sales growth

$7.385 trillion

Worldwide retail e-commerce sales are expected to grow to US$7.385 trillion by 2025, up from US$5.545 trillion in 2022 (eMarketer, 2021).

Just three countries account for 75% of the world’s retail e-commerce sales: China, with 52.1%; the US, with 19.0%; and the UK, with 4.8%. Japan, South Korea, Germany, France, India, Canada, and Brazil round out the top 10. (Source: eMarketer, 2021)

E-commerce growth drivers – worldwide

• E-commerce growth will remain strong throughout 2022 as the pandemic continues in many parts of the world and more consumers have become used to shopping online (eMarketer).
  • According to Morgan Stanley, China’s private consumption is set to more than double to reach $12.7 trillion by 2030 (CNBC, 2021).
  • Chinese e-commerce has evolved rapidly during the last five years, supported by high internet and smartphone penetration, increasing consumer confidence in online shopping, the rise of e-commerce platforms, and the availability of various alternative payment solutions such as Alipay and WeChat Pay (GlobalData).
  • More retailers are adopting omnichannel and click-and-collect strategies, which allow customers to order merchandise online for pickup in stores. The buy-online-pick-up-in-store (BOPIS) strategy is becoming a critical growth component of retail services.
• A growing number of retailers are now experimenting with metaverse applications like avatar-driven customer service, augmented reality shopping, 3D commerce, and more. Retailers agree that the metaverse will play an important role in the future of the industry.

Retailers need to plan their mobile strategy while customer adoption rate and mobile commerce are rapidly increasing

Increased adoption rate and growth in mobile commerce

72.9%

In 2021, 72.9% of all retail e-commerce is expected to be generated via mobile commerce (Statista).

Retail leaders are investing in mobile devices

• Driving speed and flexibility:
  • The flexibility provided by mobile devices was particularly valuable as the COVID-19 pandemic took hold. Retailers were able to quickly ramp up curbside pickup by using mobile devices to pick and pack, manage queues, and retrieve orders.
  • For example, Lacoste responded with “Street & Collect”; shoppers placed orders via the website or by scanning a QR code affixed to a store’s front window. That scan gave customers access to in-store inventory so they could place an order that was then delivered to them on the sidewalk or at the curb. Lacoste also rolled out “Croco Concierge,” which allowed VIP customers to shop virtually with associates through video calls or to schedule a shopping appointment outside of normal hours (Cegid).
• Enriching the customer experience:
  • Australian skincare company Aesop enables associates to access a single view of the customer, including cross-platform history, loyalty status, and preferences. They can then tailor the in-store visit to a customer’s individual needs and preferences and to access endless aisle solutions to ensure every purchase can be fulfilled (Cegid).
• With customers already consulting their smartphones before finalizing their purchase decision, the trend toward mobile will continue its significant influence on the retail sector.

Social commerce is anticipated to have a significant role in addressing the direct-to-customer (D2C) journey

The social commerce market is set to grow rapidly in the coming years

Users spend nearly 2.5 hours per day on social media platforms

• According to Deloitte, shoppers are 29% more likely to purchase a product on the same day when they use social media to shop (2015). Once they see a product they like, they can simply click on the link and buy it.
• Key growth drivers include increasing social media advertising, the rising Generation Z population, the increasing number of social media platforms, and the ease of shopping on social media.
• Facebook remains the biggest social media platform in the world, followed by Instagram, TikTok, and Twitter (Search Engine Watch, 2020).
• For retailers, there are opportunities to develop new types of shopping experiences, connect in new ways, and engage influencers/creators. And for brands, it means embracing small businesses and engaging directly with consumers through social platforms.
• More retailers are investing in technologies like product-level social networking integration, site performance monitoring, distributed order management, internationalization of their website, user tagging/personalization, product videos, and self-learning search.
• At scale, this means investing in building IT infrastructure that would allow centralized inventory management, data analytics, AI-driven distribution algorithms for optimized logistics, integrated customer service, and more.

Metaverse and 3D commerce will lead the next wave of growth with the direct-to-avatar (D2A) model through Web 3.0, NFT, and cryptocurrency

The metaverse market is set to grow rapidly in the coming years

The metaverse market is expected to grow to 10x its current size by 2030 – to US$1,542 billion. (Source: PwC via Korea JoongAng Daily, 2021)

The Future of Shopping is Hybrid

61%

According to a 2021 survey by Wunderman Thompson, 61% of Americans prefer online shopping. That leaves a large section of the population that prefers in-person shopping.

Factors driving growth

• A growing number of retailers are getting in the metaverse. AR in retail, commerce, and marketing is expected to surpass $12 billion in 2025 (Charged, 2021).
• However, shoppers are still not ready to go fully digital; global consumers believe the future of shopping is hybrid (Wunderman Thompson, 2021).
• Key growth factors include:
  • Virtual showrooming – Allows customers to take a tour and interact with 3D products such as cars, jewelry, or any digital asset.
  • Virtual try-on – Enables customers to tap into AR, try on glasses or makeup, and visualize furniture (e.g. Ikea, Lowes).
  • Customization & co-innovation – Nike uses 3D technology to let consumers build/design their shoes.
  • Enhanced experience across channels – Louis Vuitton created a video game to reach a younger audience and gamified it with branded NFT collectables.
  • Connected wellbeing – Digital treatments such as prescription gaming and VR pharmacies are gaining momentum in the medical world. This new class of meta-medicine brings a new physical dimension to digital tools.

Technology is enabling customers and impacting the way retailers address their changing expectations

• The customer of today is more technologically savvy, informed, mobile, and time-starved.
  • Consumers are using a blend of smartphones and mobile apps, and they expect seamless integration through these channels.
  • Consumer buying behaviors are being governed by peer reviews on social media apps like Facebook, Instagram, TikTok, Twitter, YouTube, etc.
• According to 2021 research by Appnovation, consumers are interested in touchless technologies, but brands need to address concerns like security to make them feel comfortable.
  • More than 85% of consumers agree that touchless technologies will become more popular as people begin interacting with brands outside the home.
  • 68% of American consumers feel companies using touchless technologies are empathetic toward consumers.
  • 63% of American consumers are comfortable with voice and facial recognition, while Canadian consumers are more comfortable using devices with sensor or gesture recognition and touchless technology.
• The result is a new customer base that wants to shop with technology on their own terms and at their convenience.

Traditional e-commerce platforms might not be up for the job. Today’s e-commerce solutions promise better performance, flexibility, and scalability, driven by an ecosystem of digital technologies such as microservices, headless commerce, API-first, and cloud-native SaaS.

The retail industry is entering the third generation of e-commerce: Generation 1.0 was stand-alone systems, Generation 2.0 was integrated systems with back-office processes, and Generation 3.0 is all about e-commerce services being vital to retailers’ operations.

Customers are actively using technologies across all phases of their shopping journey

Info-Tech Insight

Today’s shoppers expect to be able to transact with you in the channels of their choice. The right technology stack is critical to supporting world-class e-commerce and brick-and-mortar interactions with customers. Leverage Info-Tech’s proven, road-tested approach to using personas and scenarios to build strong business drivers for your omnichannel commerce strategy.

Examples of technology adoption by retailers and brands at various stages of the shopping journey

Effects of omnichannel are being felt on all enterprise entities as new functions/models are realized across the retail ecosystem

Retail CIOs must climb the maturity ladder to help CEOs drive growth

Based on 2021 benchmarking data, the Retail industry’s IT departments are at the “Trusted Operator” level on Info-Tech’s IT Maturity Ladder. CIOs at this level can play a role in digital transformation by improving back-office processes but should aim for a higher mandate.

CIOs at the “Business Partner” level can help directly improve revenues by improving customer-facing products and services, and those at the “Innovator” level can help fundamentally change the business to create revenue in new ways.

IT innovation leadership, business applications, and client-facing technology are considered underrated services due to their low importance and satisfaction metrics. Furthermore, from an IT staffing perspective, being heavily focused on infrastructure demonstrates that the industry has stagnated on the IT Maturity Ladder as a Trusted Operator. By leveraging digital transformation technology tools to enable new omnichannel capability components and placing more attention on applications and strategy, your retail operations will have the opportunity to demonstrate the value of IT and provide greater satisfaction. In the end, your IT department can establish credibility with business stakeholders and expand as a transformational or evolutionary innovator.

Use these Info-Tech tools and templates to compile and communicate your retail reference architecture and omnichannel commerce work.

The Retail Industry Business Reference Architecture Template is a place for you to collect activity outputs and outcomes.

Download the Retail Industry Business Reference Architecture Template

The Enable Omnichannel Commerce That Delights Your Customers blueprint will help you create a cohesive omnichannel framework that supports the right transactions through the right channels for the right customers.

Download the Omnichannel Commerce tools & templates

Omnichannel: Business perspective

Omnichannel strategy

47%
of e-commerce companies in North America and Europe consider omnichannel strategies to be very important in 2021 (Statista).

• Omnichannel commerce is a strategy that offers a seamless shopping experience from the first touchpoint to the last, regardless of the customer channel. It’s an approach that has started to show dividends for organizations.
• Retailers selling through a single branded e-commerce site saw a 58% growth in revenue after adding a marketplace (BigCommerce).
• Today, consumers are discovering brands in new ways and seeking contemporary conveniences to guide their shopping decisions. According to research by Statista, almost half of North American and European e-commerce decision-makers considered omnichannel strategies to be very important in 2021.

Steps for building an omnichannel strategy

1. Assess customer segment: Segmenting customers allows retailers to build a better, more tailored strategy to reach different groups. Some factors by which retailers segment their customers include income range, geographic region, generation, online behavior, values, and interactions with marketing campaigns.
2. Decide which channels to use for each customer segment: Use analytics to determine which of your channels are the most profitable, which are the most efficient, and/or which acquire the most new customers.
3. Strategize the customer journey: Enterprises need to know the how and why of what the shopper is doing. Being able to chart the customer journey can reveal insights into a customer’s thought processes and let companies know what is working for the customers.
4. Orchestrate reliable change and cross-channel customer support: Providing consistent, quality support that customers can count on may help increase their lifetime value and solidify their status as loyal customers.
5. Integrate & implement technology: One of the most fundamental reasons to closely integrate channels is to get a single view of the inventory. Seamless handoffs among channels are a massive boon for customer support as well.
6. Operate taking advantage of automation: Prioritize a tech stack that supports seamless integrations so that it always enables a real-time view of the enterprise and make decisions based on aggregated data.

Methodology to enable omnichannel retail

1. Assess
   • Market Analysis – Customer Segmentation, Trends, Competitors, Shopper Personas, and Buying Patterns
   • Usability Assessment
   • Channel Fluidity
   • Maturity Assessment
   • Organizational Change
   • Process Implications
2. Ideate
   • Omnichannel Commerce Strategy & Blueprint
   • Assortment Planning
   • Order & Inventory Management
   • Centralized Marketing – Campaign Management, Location-Based Promotions, Personalized Communication, Consistent Product Information
   • Social Networking – Crowd Sourcing and Trend Monitoring
3. Strategize
   • Business Architecture
   • Architecture Roadmap
   • Data Definition for Single Source of Truth
   • Cost Benefit Analysis
   • Product Evaluation
   • Customer Experience Definition
4. Orchestrate
   • Change Management
   • Program Management
   • Technical Architecture
   • Design Governance
5. Implement
   • Cross-Channel Visibility
   • Cross-Channel Integration
   • Customer Identity, Access Administration
   • Off-the-Shelf Product Implementation
   • Bespoke Development
   • Mobile, Social, 3D Commerce Integration
6. Operate
   • Platform Operations
   • Application Support
   • Business Intelligence and Predictive Analytics
   • Technology Automation
   • Continuous Customer Engagement
   • Customer Services and Loyalty

Info-Tech Insight

Customers expect you to know them. It isn’t easy when there are so many channels involved, but you can’t leave your customer relationships to chance. Use technology to help you take thoughtful and deliberate actions to earn their loyalty and trust.

Omnichannel: Foundational IT elements

Real-Time Data, Open APIs & Integration

Enabling data from transactions and customer journeys via open APIs and integration is the first step to an omnichannel retail experience with accessible data points, greater functionality, and a better understanding of customer preferences with the ability to act upon them.

Big Data & Customer Behavior Analysis

Big data business patterns determine which data sources are best suited to the omnichannel architecture, which orchestrates data integration capabilities required to drive business decisions and makes the customer content relevant and the experience memorable.

Artificial Intelligence & Machine Learning

Enhanced processing speed and human-centric behaviors are possible by interpreting algorithms and data to identify patterns.

Internet of Things & Advanced Wireless

IoT, Wi-Fi, and NFC/RFID/BLE connect customers and stores through smart device technologies, breaking down data silos and integration barriers. For example, beacons track customers and their spending habits to offer dynamic pricing, promotions, etc.

Planning Optimization

Preset the entire demand planning and order management process through the order management system (OMS), distributed order management (DOM) applications, predictive analytics, and warehouse systems along with the end-to-end value chain, including ecosystem partners for last-mile delivery.

Hybrid-Scalability Using Cloud & Edge Computing

A broad multi-service infrastructure umbrella including cloud, edge computing, software-defined networks (LAN), customer identity access management (CIAM), and optimized cybersecurity enables omnichannel online and offline channels.

Omnichannel: Six enabling trends

O2O Hyper-Personalization

Shoppers expect sophisticated levels of personalization from retail brands. Retailers leverage AI, ML, and recommendation engines to predict consumer demand patterns by building on shopper online-to-offline (O2O) data and devising intelligent, insight-enabled marketing services.

Digital Experiential Era

Customer experience (CX) is now the competing factor among retailers. Accessibility, ease of use, knowledge of sales staff, and ambient factors of AR/VR and decor of retail stores are aspects of CX. Technology actions, tracks, and enhances its impact to provide personalized shopping experiences.

Social & Metaverse Commerce

Social and 3D commerce paves the next wave of growth with the direct-to-avatar (D2A) commerce through Web 3.0, NFT, and cryptocurrency. It offers retailers, brands, and shoppers instant delight. Transitioning smoothly across channels will advance social proofing and gamification opportunities.

Smart Store Hub

Smart store hubs leverage the IoT to enable retailers to monetize key customer insights. With data-driven innovative solutions, stores gather deeper insights into buyer engagement, optimal floor navigation paths, and hot zones for contactless checkout to provide online fulfillment using a combination of computer vision and sensor fusion technology to automate the payment at checkout.

New Operative Models

The pandemic forced retailers into digital transformation and strengthened the development of D2A and D2C customer satisfaction via new adapted functions like BOPIS/ROPIS, BOPIL, BOPAC, etc. Online-to-offline channels unlock new avenues for sales impact and customer drive.

Warehouse Automation

Retailers looking for ways to automate their replenishment and fulfillment are assembling highly automated warehouses to create different shopping baskets for customers. Delivery and fulfillment will see autonomous vehicles and wireless fleet management that distribute goods.

Omnichannel: Guiding principles

#1 Reimagine Customer Journey Maps

Retail models and sales channels are transforming at a rapid pace. Today’s shoppers specifically prefer to shop online – to save time, to get inspiration, to get a comprehensive overview of the wide range of products available, and to compare the prices of different suppliers. They dynamically respond to the situations and are open to new payment, delivery methods, and products.

#2 The Experience Counts

Connected commerce signifies the union of online trade with in-store retail. In the minds of shoppers, the online and offline channels are already a single world, with the smartphone or tablet serving as the connection between them. Variety and convenience when shopping make the purchasing process a real customer experience. For example, the checkout-free supermarkets of Amazon Go in the US set new standards for convenience in retail.

#3 Data is the Rocket Fuel

To stay viable, retailers must keep their databases up to date and at the same time must be able to evaluate customers based on a variety of parameters. The retailers respond to the needs of the customers, who want to have access to products online and offline. For this reason, there needs to be greater investment in process optimization and data streams. The main tasks here are the mobilizing, clustering, analysis, and merging of big data. Added to this is information about the shopper, previous orders, and items added to wish lists. With this data, retailers can offer customers the right deal at the right time across channels. Not only swiftness is critical for the shopper but also convenience and service.

#4 Align Data-Gathering Practices and Consumer Preferences

As data privacy and security are becoming more important to today’s consumers, retailers need to be more disciplined in collecting data, restricting their information requests to data that is useful in improving the quality of products or services or understanding their customers and target market. Transparency is the most important factor because customer trust forms the basis for a lasting customer relationship.

#5 Harness Relevant Technology to Meet Consumer Expectations

While many consumers are embracing new technologies, they do so with the expectation that they will deliver benefits such as an improved customer experience when searching for goods online, shopping and checking out, or making product or order inquiries. Retailers need to offer a broad range of payment solutions, both online and offline, as well as convenient delivery options. As consumers become more used to digital commerce, their expectations grow, challenging retailers and brands to constantly improve their game.

#6 Integrate Online-to-Offline (O2O) Channels

Today’s consumer sees the shopping journey very differently than previous generations. They expect a seamless integration of range, inventory, and pricing, whether browsing online or offline. If retailers are selling a product across multiple channels, they must entirely integrate physical stores and online channels with social media strategies that create a comprehensive brand proposition.

#7 Tailor Products, Services, and Marketing for Gen Z and Other Demographic Groups

Generation Z – the first born into a constantly connected world – has different expectations of customer experience, yet not many retailers have a comprehensive strategy to optimize engagement with them. Brands and retailers should examine how to better target Gen Z and other consumer segments through data-driven research as well as differentiated product and service offerings.

#8 Global Expansion and Localization

Retailers need to carefully think through their localization strategy when expanding globally, which may include operating in multiple languages, working with local logistics partners and e-commerce marketplaces, and tailoring marketing strategies for local social media and digital channels.

Understand the priorities of key stakeholders

Merchandising Leadership

The focus for merchandising is on the overall strategy and execution of product assortment, promotion, pricing, and placement in store across all categories to maximize sales and profit.

Marketing Leadership

CMOs need to understand all kinds of data from every touchpoint, both in store and online. They require appropriate technology solutions to manage all the data that is collected.

IT Leadership

IT must focus on identifying technical requirements and considerations when adopting technology solutions with the business’ context top of mind.

CSCO Leadership

CSCOs make organizations acknowledge that the supply chain is more than just shipping. The role includes choosing vendors, suppliers, and the logistics team and overall enabling the procurement process.

Operational Leadership

The emphasis for operations is to increase revenue, lower costs, and fulfill customer needs. Seek to align the enterprise operating models with digital demands by scrutinizing all dimensions of the supply chain: structures, processes, and people.

Financial Leadership

The retail CFO brings a deeply practical, objective, and analytical perspective, which is needed to evaluate important decisions and potential investments to protect the current asset base and maintain profitable growth.

Info-Tech Insight

As the world has digitized, the enterprise structure of retail organizations has changed dramatically. Many retailers have significantly restructured their teams to align or organize online store strategies and organizations. Similarly, IT organizations, once considered back-office utilities, have turned into strategic business partners.

Omnichannel | Info-Tech Pulse Score

Criteria and weighting factors

Our Info-Tech Pulse scores can help retailers and brands evaluate the trends against their priorities. The higher the pulse out of 100, the more available, applicable, and impactful it is to the industry. Info-Tech Pulse scores represent each trend’s weighted impact across two sets of criteria:

Omnichannel | Info-Tech Pulse Score

Developing the trends radar

Develop a cross-industry holistic view of trends

Moving from horizon scanning to action requires an evaluation process to determine which trends can lead to growth opportunities. Before implementing trend technologies, it is necessary to have a holistic understanding of how they will impact retailers on an industry-specific level.

Info-Tech evaluated the trend opportunities through a set of omnichannel drivers:

• BUSINESS GROWTH
• RISK & RESILIENCE
• OPERATIONAL EXCELLENCE
• CUSTOMER VALUE
• BRAND IMPACT

Once an organization has identified a trend that warrants exploration, it is valuable to understand the underlying forces that are driving the trend in order to effectively assess its potential impact. Drivers are a fundamental component of building plausible scenarios that could arise from the adoption of a given trend. These value drivers are used to understand what is or is not driving a particular trend. This is achieved by identifying the value drivers for each trend as superior, strong, medium, or weak:

Omnichannel | Info-Tech Pulse Score

Criteria and weighting factors

Business Growth

• Drives sustainable growth
• Diversifies methods of generating revenue
• Increases the business market reach

Customer Value

• Surprises and delights customers
• Connects associates with customers on a personal level
• Focuses on enhancing efficiency and convenience

Brand Impact

• Enables first-to-market or unique marketing positioning
• Assists in accomplishing strategic priorities

Operational Excellence

• Provides transparency in the flow of value to the customers
• Empowers associates and promotes teamwork
• Improves responsiveness in problem solving

Risk & Resilience

• Mitigates and withstands rapid changes across the business and IT landscape
• Secures customer information while protecting brand assets
• Easily integrates with current technologies, projects, and strategies
• Is readily available technology and has active vendor support and expertise

How does each omnichannel trend measure against the brand value drivers?

The Brand Value Drivers

1	2	3	4
Weak	Medium	Strong	Superior

Omnichannel | Info-Tech Pulse Score

Analyzing the impact of business capabilities

Moving from horizon scanning to action requires an evaluation process
to determine which trends can lead to growth opportunities. Before implementing trend technologies, it is necessary to have a holistic understanding of how they will impact retail on an industry-specific level.

Info-Tech evaluated the trend opportunities through an additional set of advantage-creating criteria:

COMPETITIVE ADVANTAGE

Focusing on these capabilities will deliver differentiated end-customer experiences

COST ADVANTAGE

Focusing on these capabilities will help the organization derive operational efficiencies

These advantage creators are used to understand how impactful a trend is for business alignment and whether IT should be making investments to help the business enhance its capabilities through the implementation of this technology. This is achieved by identifying the number of competitive and cost advantage creators for each trend in the integrated omnichannel retail business capability map.

Omnichannel | Info-Tech Pulse Score

The business capability map

Business Capability

Defines what a business does to enable value creation.

Business Capability Map

Demonstrates a primary view of all these capabilities and provides details to a specific area of the business for further assessment.

Trend Impact

The retail integrated industry reference architecture on the right demonstrates the business capabilities that are impacted by all six trends on a competitive and cost advantage scale, which has a role in how each trend is scored.

Info-Tech Resources

Demonstrate the value of IT’s role in supporting your retail capabilities and assess your initiatives and priorities.

How does each omnichannel trend measure against the business capability map?

Capability Count

Business Capability Map

Overarching IT risks – Improve core services metrics

Capabilities to unlock retail omnichannel

DATA & ANALYTICS

Analytical Capability – Satisfaction with effective standard reports, custom reports capability, and the ability to generate business insights.

Data Quality – Put policies, processes, and capabilities in place to ensure that appropriate targets for data quality are set and achieved to match the needs of the business.

Info-Tech Benchmarking Insight – Business stakeholders must understand the value of data and analytics in making the right decisions. Satisfaction must be improved as personalization and understanding shopper uniqueness will require automation and real-time data and analytics to maximize the customer experience.

IT SECURITY & NETWORK

IT Security – Satisfaction that organizational devices and data are properly secured.

Network & Infrastructure – Satisfaction with reliability of communication systems and networks.

Info-Tech Benchmarking Insight – The implementation of retail technologies will require superior IT security and network services and will therefore increase the importance of IT security and network to the business. Depending on IT’s maturity, this could positively or negatively affect business stakeholder and customer satisfaction.

Info-Tech Resources

Determine your IT and business stakeholder satisfaction

CIO Business Vision Diagnostic

IT Management & Governance Diagnostic

IT Staffing Assessment

How to read this trend report

DESCRIPTION

Each trend is introduced with a description and statistics, highlighting its growth and impact.

DISRUPTORS & SIGNALS

A signal of technological change (consumer, competitive, or otherwise) or a disruptive business model that indicates a divergence from the status quo.

OMNICHANNEL VALUE DRIVERS

An analysis of the 360-degree view of value drivers that will be impacted – both positively and negatively – upon the implementation of this trend.

BUSINESS CAPABILITY MAP

An analysis of the 360-degree view of business capabilities that will be positively impacted based on cost and competitive advantage weightings upon the implementation of this trend.

BENEFITS

A summary of benefits that could be achieved from a business and human perspective through the successful adoption of these technologies.

RISKS

A summary of risks and critical unknowns that could be realized from a business and human perspective through the adoption of these technologies.

CASE STUDY

A real-life illustrative example demonstrating operators’ implementation and usage of each trend for proof of concept.

MEMBER RESOURCES & RECOMMENDATIONS

Info-Tech’s recommendation on how to move forward when embracing these trends and a list of materials that will assist your organization with understanding and adopting these technologies.

Executive Brief

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Wiegand, Amy. “Walmart & DroneUp Announce First Multi-Site Drone Delivery Operation.” DroneUp, 22 Nov. 2021. Web.

“World Internet Usage and Population Statistics, 2022 Year-Q1 Estimates.” Internet World Stats, 2022. Accessed June 14, 2022. Web.

Yip, Alice, and Anson Bailey. “Retail’s Realignment: The Road Ahead for Omnichannel in the Greater Bay Area.” KPMG, 9 June 2021. Web.

Zhang, Jane. “Alibaba’s Taobao Live hits US$7.5 billion in first 30 minutes of presales for Singles’ Day.” South China Morning Post, 29 Oct. 2020. Web.

O2O Hyper-Personalization

Trend 01 | Omnichannel Retail

Shoppers expect sophisticated levels of personalization from brands. Leveraging AI, ML, and recommendation engines, retailers can predict consumer demand patterns by building on shopper online-to-offline (O2O) data and devising intelligent, insight-enabled marketing services.

Trend 01

O2O Hyper-Personalization

Omnichannel personalization connects the online-to-offline (O2O) experience

• Online-to-offline (O2O) hyper-personalization is capitalizing on real-time data collection to understand and benefit the customer by efficiently merchandising the products, content, and services most relevant to them.
  • The model aims at a deep understanding of customers across multiple data points – like behavioral, demographic, and marketing – to offer the most appropriate products and services in real time.
  • In-store personalization encompasses leveraging digital tools in the physical space and growing the incidence of digital touchpoints in physical stores – for example, tablets for sales specialists or customer-facing digital screens, etc.
  • Thoughtful planning of the entire end-to-end shopper journey, which comprises not only a shopper’s experience on a retailer’s website or in the store but also pre-purchase and post-purchase engagement.
  • Pre-purchase personalization, such as location-based announcements, geofencing, or context-specific ads, is intended to drive awareness and consideration, while post-purchase communications, such as follow-ups about a purchase or prompting a product review or repeat purchase, may extend engagement.
  • Sephora sends out location-based notifications to users’ mobile apps when they enter the radius of a physical store and follows up post-purchase with product recommendations.
  • Amazon adapts its homepage for every customer based on their prior purchasing behaviors, preferences, wish list, and cart. This makes it simpler for a customer to find what they want and discover new products.

Most effective AI applications used in a hyper-personalization strategy

Source: Ascend2, 2018

• Advanced AI technology is enabling personalization via content creation, recommendations, media mix, omnichannel, customer experience, and much more. Top brands are incorporating hyper-personalization in their marketing strategies by means of AI applications like predictive analytics, user experience, email marketing, etc.
  • Starbucks fully embraced mobile app capabilities by enabling customers to place orders on their phones for in-store pickup.
  • Starbucks’ loyalty program rewards customers each time they use their mobile app to pay, and 48% of smartphone owners said the Starbucks app is their favorite restaurant loyalty rewards app (The Manifest, 2018).
  • The Starbucks app markets and upsells to existing customers with personalized food and beverage recommendations based on their previous orders. It also offers in-store mobile features, such as a Spotify integration to identify songs and artists playing in the store.

Trend 01 I O2O Hyper-Personalization

Disruptors & Signals

Info-Tech Insight

Retailers are adopting data and AI technology to provide personalization throughout the customer O2O shopping journey.

Brand Management

Using AI to generate spontaneous alerts in case of inappropriate use of IP, branding, and messaging to protect the brand image.

Campaign Management

Targeting customers with unique messages by including either curated products or customer data.

Content Management

Providing content, product, or service recommendations that are tailored to the individual customer’s preferences.

Advertising Promotions

Leveraging customer purchases, micro-segmentation, and geospatial data to send extremely contextualized offers and communications.

User Experience

Using AI to keep track of customer behavior across multiple e-commerce platforms and analyze visitor data and preferences.

Loyalty

Using AI to generate recommendations that drive customer loyalty. Consumers are more likely to stay loyal when they get personalization based on their preferences.

Order Orchestration

Using existing customer data to prepopulate any documents, procedures, or claims that may be required to execute orders.

Order Fulfillment & Inventory Management

Providing customers with updates on the status of product shipments or refills based on their previous purchase history.

Customer Support

Using databases and AI technology to recognize and connect customers from both online and offline shopping channels.

Shoppers are tracked in real time from the moment they are inside a store or online. They:

1. Receive platform listings and information on products and services.
2. Receive hyper-personalized offers, dynamic prices, and information from the retailer.
3. Can search for information on specific products of interest with voice recognition technology.
4. Are greeted by sales associates who are aided by digital tools in store or virtual personal assistants (VPAs) online.
5. Get information on a product’s price, its nutrition facts, in-store stock levels, etc.
6. Get product recommendations, compare prices online, and check customer reviews.
7. Self-scan the products in their shopping basket.
8. Pay by mobile or through near-field communication (NFC) card.
9. Receive email or SMS receipts, vouchers, post-purchase re-engagement contests, and surveys.

Trend 01 I O2O Hyper-Personalization

Disruptors & Signals: Maturity Model

Top brands like Amazon and Starbucks have moved on to a stage of predictive personalization where AI and ML analyze a whole host of factors to power their recommendation engine.

Source: VentureBeat

Trend 01 I O2O Hyper-Personalization

Value Drivers

What is driving this trend in retail?

• Business Growth: Retaining a loyal customer is often easier and less costly than attracting a new one, which is why this trend is attractive. Hyper-personalized marketing will likely lead to loyal and active advocates with a maximized share of the wallet that can drive increased revenue. This trend also optimizes the marketing budget compared to traditional advertising methods by addressing a targeted audience rather than the masses.
• Risk & Resilience: This trend increases the volume of information collected about shoppers, making hyper-personalization a future-resilient approach to retaining shoppers. When and how this information is used and secured should be made clear to the shoppers.
• Operational Excellence: This trend empowers the retailer as it leverages digital marketing to automate the process, in contrast to direct mail methods, boosting and maximizing productivity.
• Customer Value: O2O hyper-personalization improves shopper value by making shoppers feel special and known when interacting in an online-to-offline setting. Avoid nonrelevant mass marketing because customers don’t want to be considered just another number. They respond more positively in service environments where individuality and uniqueness are considered.
• Brand Impact: Tailoring messages, promotions, and offers to individuals based on their usage relevance will drive repeat patronage, loyalty, and distinction.

Trend 01 I O2O Hyper-Personalization

Business Capability Map

Trend 01 I O2O Hyper-Personalization

Benefits & Risks

Trend 01 I O2O Hyper-Personalization

Case Study

Boden personalizes every visitor’s experience | Source: Bloomreach

CHALLENGE

British clothing retailer Boden recognized that personalizing the customer journey was critical to their long-term success. However, they were hampered by outdated tools, so they embarked on a multi-year digital transformation initiative to modernize their platforms with the following goals:

• Provide their clients with a personalized experience.
• Reduce the amount of time spent on manual rule-making.
• Increase the team’s agility and flexibility in responding to consumer requests.

SOLUTION

These needs prompted Boden to investigate Bloomreach’s Search and Merchandising (brSM) solution to learn how it could help in Boden’s success.

Boden can now deliver a personalized experience to each of its visitors thanks to Bloomreach. The AI-powered solution saves time-consuming manual effort and offers capabilities in A/B testing, slot-based merchandising, 1:1 personalization, segmentation, analytics, etc.

RESULTS

Boden can now update the product sort order every 15 minutes, rather than only two or three times a week, thanks to the use of Bloomreach Search & Merchandising. Instead of depending on guesswork they can make decisions based on consumer behavior. Using A/B testing and personalization functions increases top-of-funnel engagement.

Trend 01 I O2O Hyper-Personalization

Recommendations: Contextual Personalization

Contextual Promotions and Personalization

Create customized promotions based on product preferences and past responses to similar promotions. The analytics solution first identifies target customers and then helps design customized promotions for them.

Cross-Channel Promotions

Dynamic discounts to purchase online, pick up in store, or purchase in store and ship anywhere. Use analytics on real-time and historical purchase data to offer real-time recommendations in store, duplicating online personalization (on the web, social, in mobile, and by email).

Contextual & Real-Time Promotions

Real-time data via QR codes, RFID tags, NFC, beacons, and other sensors that gather useful data can help deliver real-time coupons, product information, and even games and promotions to customers.

Product Recommendations

Analyze customer purchase history to recommend products most likely to be purchased. Also, automated predictions on customer interests can be made by collecting shopping behavior data of similar customers.

Social Media Analytics

Leverage customer social media feeds to engage them online and manage their experience in real time. Sentiment analysis also helps track consumer behavior in real time and monitor brand health online.

Price Recommendation

Leverage past demand and price data to determine the price that most likely maximizes revenues and margins. The solutions help develop discounting schemes and other pricing strategies.

Info-Tech Resources

Industry Reference Architecture for Retail

Define Your Digital Business Strategy

Build IT Capabilities to Enable Digital Marketing Success

TECHNOLOGIES

Trend 01 I O2O Hyper-Personalization

Bibliography

Basel, Beni. “Are Retailers Ready To Offer Hybrid Shopping Experiences?” Forbes, 29 Dec 2021. Web.

“Connecting with Meaning: Hyper-personalizing the customer experience using data, analytics, and AI.” Deloitte, 2020. Web.

“Decoding Personalization.” Sailthru, 2017. Web.

“Effective AI Applications Used in Hyper Personalization Strategies, 2018.” Digital Marketing, 2018. Web.

“How Boden Personalizes Every Visitor’s Experience Through Digital Merchandising.” Bloomreach, n.d. Web.

“Hyper-personalization in retail: The key to building brand loyalty with shoppers.” Tag, 20 Feb. 2020. Web.

“Hyper-Personalization Strategies: Survey Summary Report.” Ascend2, 2018. Web.

Jha, Priyam. “Why Hyper-Personalization Is The Future Of Marketing (And How To Do It).” WebEngage, 11 Jan 2022. Web.

Levine, Ted. “What Does Today’s Consumer Want? Personalized, Seamless, Omnichannel Experiences.” Forbes, 11 March 2022. Web.

Lindecrantz, Erik, et al. “Personalizing the customer experience: Driving differentiation in retail.” McKinsey & Company, 28 April 2020. Web.

Marotta, Deb. “All Things Omnichannel in Retail: Trends, Strategies, Solutions & More.” Hitachi Solutions, 25 April 2022. Web.

Morgan, Blake. “50 Stats Showing The Power Of Personalization.” Forbes, 18 Feb 2020. Web.

“Online Vs Brick-and-Mortar: Who’s Winning?” Martechvibe, 31 May 2021. Web.

Panko, Riley. “How Customers Use Food Delivery and Restaurant Loyalty Apps.” The Manifest, 15 May 2018. Web.

“The personalization curve: Just how far along is your brand?” VentureBeat, 16 July 2016. Web.

“Personalization Technology: Landscape & Trends for 2021.” Yieldify, 13 May 2022. Web.

“The Success of Starbucks App: A Case Study.” The Manifest, Medium, 12 June 2018. Web.

“Top 5 Examples of Brands Leveraging Hyper-personalization in Retail.” RecoSense, 23 Aug. 2021. Web.

Digital Experiential Era

Trend 02 | Omnichannel Retail

Customer experience (CX) is now the competing factor among retailers. Accessibility, ease of use, knowledge of sales staff, and ambient factors of AR/VR and decor of retail stores are aspects of CX. Technology actions, tracks, and enhances its impact to provide personalized shopping experiences.

Trend 02

Digital Experiential Era

PULSE SCORE: 83

Growth of customer experience (CX)

• Customer expectations are changing rapidly, and retailers need to adapt through the digital revolution to recognize the shoppers and their journey. The shopping experience is now becoming the differentiating factor in customers’ decision-making process.
• The positive or negative experience customers receive across numerous touchpoints is what now defines the brand. Today’s shoppers increasingly rank experiences over material goods (particularly millennials, of whom 78% say they prefer to spend money on experiences over things) (Eventbrite, 2014).
• Omnichannel customer experience means streamlining all customer interactions across multiple touchpoints in a unified way to deliver a consistent brand experience. Nine out of 10 shoppers want an omnichannel experience with seamless service between communication methods (CX Today, 2019).
  • Better view of the customer journey: Omnichannel streamlines all interactions under one platform and provides insights into the right actions for improving your business.
  • Higher customer retention: Omnichannel CX strategy empowers customers to connect with the brand through their chosen channels by making a smooth transition in the same interaction. It increases satisfaction and acts as the best customer retention strategy.
  • First-time customer conversion to loyal customer: When you deliver consistent service customers are delighted with the experience and develop loyalty to your brand.
  • Greater customer lifetime value (CLTV): Satisfied customers not only have high lifetime value but also turn out to be the best brand advocates. They share their experience with their networks and improve brand credibility.

CX future growth drivers

• Data-informed insights: Retailers are generating data-led insights about the customer experience across the entire customer lifecycle. Data about customer preferences and existing inclinations are driving design thinking techniques.
• Shift to digital: For retailers to stay relevant, they must reimagine the customer journey online to offline into a thoughtful, memorable experience. Offering extended reality (XR) technologies like virtual reality (VR) and augmented reality (AR), brands now excite customers with engaging, immersive experiences during the pre-purchase and purchase stages.
• Mobile adoption: This offers retailers an opportunity to build an engaging environment for their customers.
  • Smartphones enrich the customer’s O2O experience journey.
    • Before the actual shopping experience:
      • Accessing a store locator
      • Searching for product availability
      • Tracking and tracing the delivery
      • Getting price and promotional coupons
    • During the in-store shopping experience:
      • Scanning barcodes or QR code or running price comparisons
      • Getting product information
      • Checking customer reviews/ratings
      • Quickly navigating aisles in store

Trend 02 I Digital Experiential Era

Disruptors & Signals

Retailers are deploying technology tools to engage with customers even before in-store shopping begins

Pre-Purchase

Trend 02 I Digital Experiential Era

Disruptors & Signals

Retailers are implementing technology to provide contextual experience throughout the customer purchase journey

Purchase

Trend 02 I Digital Experiential Era

Disruptors & Signals

Retailers are implementing technology to provide contextual experience throughout the customer purchase journey

Post-Purchase

Innovative, shopper-centric returns as a service (RaaS) model

• Between 15 and 40% of online purchases end up being returned (CNBC), costing an estimated $550 billion in 2020 in the US alone (SaveMyCent).
• Retailers are collaborating to enhance the shopping and returns journey. For example, Amazon partnered with Kohl’s to provide a convenient physical location for returns.
  • More than that, AI-enabled tools assist in optimizing the return method even before customers leave home.
• The RaaS-based model aims to keep pace with the unrelenting barrage of returns to encourage customer loyalty, reduce financial impact, increase recovery, and reduce needless waste caused by discarding low-value returns.
• Key components of (RaaS):
  • Single-touch disposition decisions from the point of return
  • Contract management software
  • Curated data from millions of SKUs to help disposition items
  • Supply chain infrastructure with value-add capabilities
  • Omnichannel recommerce approach
  • Ability to physically and financially reconcile goods after resale
  • AI-driven logic through a consumer portal for the best price decision
  • Partnering with non-competing businesses that shoppers visit frequently
  • Co-creating with partners the shopper-centric returns policies journey
  • Execute reverse logistics and ensure maximum recovery on every item
• Amazon offers a seamless returns experience via click-and-collect lockers – convenient, cost-efficient delivery leveraging its grocery stores network.

Case study: Walmart reinvents the returns process using a QR code

Walmart’s Mobile Express Returns is an innovative, industry-first, personalized experience that combines Walmart’s 4,700+ stores with its app to make returning items fast and easy.

• Mobile Express Returns experience – Using the Walmart app, the customer selects the items they wish to return and starts the returns process. The customer then receives a QR code in real time, a personalized in-app experience.
• Channel – Mobile, in-app notifications
• Approach – At the store, the customer fast-tracks through the line via the Mobile Express Lane at the customer service desk. Then they scan the QR code displayed on the card reader with the Walmart app and hand the items to the associate. The goal is to slash the returns process from 5 minutes to 30 seconds.
• Data considered – Contextual data, customer preferences, customer activity, past purchases
• Outcome – The refund is credited to the customer’s payment account as soon as the next day. No longer must customers send off their products and wait days for an online return to be processed.

Source: Supply Chain 24/7

RECOMMENDATIONS

The post-purchase period is an essential, yet frequently ignored, stage of the e-commerce customer journey. Repeat customers account for an average of 40% of stores’ revenue; retailers need a strong post-purchase strategy to continue customer engagement, encourage referrals, and ultimately drive more revenue (XP2).

Trend 02 I Digital Experiential Era

Value Drivers

What is driving this trend in retail?

• Business Growth: Customer experience has become the new marketing. CX impacts sales growth regardless of whether a retail brand is B2B or B2C, etc. As customer expectations change rapidly, brands continue to shift their focus from advertising awareness to experiential marketing impacting every part of the O2O customer journey.
• Risk & Resilience: Adopting this trend will require an immersive multimedia infrastructure to reimagine the extended, augmented, and virtual experience, which is a future-forward approach for the industry.
• Operational Excellence: This trend is a driver for operational excellence. The business can feel empowered as it leverages immersive, multimedia, and multi-entertainment (3D views) technologies to attract shoppers and enable employees with digital tools.
• Customer Value: The role of this trend is to provide various forms of engagement to keep customers interested and exceed their expectations. Seeing these technologies in play and taking part in these gamification activities provide customers with the wow factor they desire.
• Brand Impact: Paying attention to the voice of the customer has a direct ROI by improving the lifetime value of a customer, lowering the cost of acquisition, and enabling a brand to distinguish itself from the competition.

Trend 02 | Digital Experiential Era

Business Capability Map

Trend 02 | Digital Experiential Era

Benefits & Risks

Trend 02 I Digital Experiential Era

Case Study

GrandVision embraces the digital future | Source: Bloomreach

CHALLENGE

An optics retailer with more than 7,000 physical stores, several established brands (including Vision Express, Pearle, Eye Wish, and Apollo-Optik) across the globe, and millions of clients, GrandVision recognized that digital experience would play a growing role in their business – both in terms of online commerce and digital efforts affecting physical store sales (e.g. omnichannel effect).

GrandVision examined their customer journey to identify pain points and unmet demands. They defined what they would require from a central digital commerce platform to meet their goals, address those pain points, and offer a unique consumer experience for each of their brands.

SOLUTION

GrandVision selected a mix of Bloomreach’s Digital Experience Platform, Bloomreach Experience (brX), and the commercetools “headless commerce” platform as the core engine of their digital channels with these central requirements in mind.

GrandVision embodies the kind of forward-thinking retailer that will flourish internationally by integrating online and offline shopper journeys and future channels such as virtual assistants and social selling. That is completely consistent with post-web DNA.

Commercetools CEO Dirk Hoerig stated, “We are thrilled to help this dynamic company to handle its transactions in all 44 countries it’s active in – with just one commerce platform.”

RESULTS

The impact of Bloomreach and commercetools’ solution empowered GrandVision to:

• Combine the Bloomreach Commerce Experience Cloud and the commercetools headless commerce platform to power the central engine of their digital channels.
• Leverage Bloomreach Content to make it easy for customers to shop online, offering a digital shopping experience that is harmonious with the in-store experience.
• Moreover, the headless commerce platform gave GrandVision limitless commerce prospects and allowed them to create highly functional and attractive customer experiences.

Trend 02 I Digital Experiential Era

Recommendations

Build user-centric customer experience journey maps

Info-Tech Resources

• Industry Reference Architecture for Retail
• Create a Buyer Persona and Journey
• Enable Omnichannel Commerce That Delights Your Customers

Trend 02 I Digital Customer Era

Bibliography

“Copenhagen Airport.” Cisco, n.d. Web.

Denmen, Tim. “Stein Mart Launches Amazon Hub Locker Pickup and Returns.” Retail Info Systems, 22 May 2019. Web.

Djordjevic, Milos. ”18 Ecommerce Return Rate Statistics for an Enhanced Shopping Experience in 2021.” SaveMyCent, 22 Oct 2021. Web.

“Exploring the millennial shift towards buying experiences over things.” Strategic Retail Solutions, 8 Nov. 2019. Web.

“GrandVision Embraces Digital Future With Bloomreach and commercetools.” Bloomreach, n.d. Web.

Grate, Rachel. “New Data on Millennials Reveals What Draws Them to Events.” Eventbrite, 22 June 2017. Web.

Jarman, Paul. “Delivering an Excellent Omni-channel Experience.” CX Today, 11 Jan. 2019. Web.

Johnston, Chuck. “How Retailers Are Bettering the Online Returns Experience.” SupplyChainBrain, 4 Aug. 2021. Web.

Johnston, Chuck. “Returns as a Service: The Next Big Retail Innovation.” Retail Info Systems, 14 Sept. 2021. Web.

LaFleur, Griffin. “7 benefits of customer experience management.” TechTarget, 7 July 2020. Web.

Marr, Bernard. “10 Best Examples Of Augmented And Virtual Reality In Retail.” Forbes, 13 Sep 13. 2021. Web.

Melion, Pierre. “How to Improve Your Post-Purchase eCommerce Strategy.” XP2, Dynamic Yield, n.d. Web.

“Millennials: Fueling the Experience Economy.” Eventbrite, 2014. Web.

Patel, Snigdha. “15 Effective Customer Retention Strategies from Top Brands.” REVE Chat, 16 March 2022. Web.

Reagan, Courtney. “That sweater you don’t like is a trillion-dollar problem for retailers. These companies want to fix it.” CNBC, 12 Jan. 2019. Web.

Samat, Sameer. “New Research Shows How Digital Connects Shoppers to Local Stores” Think with Google, October 2014. Web.

Tharp, Carrie. “Beyond COVID-19, retail looks to transform with AI/ML.” Google Cloud, 20 Nov. 2020. Web.

“Walmart Reinvents the Returns Process as Amazon Tries to Play Catch-Up.” SupplyChain 24/7, 9 Oct. 2017. Web.

Social & Metaverse Commerce

Trend 03 | Omnichannel Retail

Social and 3D commerce paves the next wave of growth with the direct-to-avatar (D2A) model through Web 3.0, NFT, and cryptocurrency. It offers retailers, brands, and shoppers instant delight. Transitioning smoothly across channels will advance social proofing and gamification opportunities.

Trend 03

Social & Metaverse Commerce

“Metaverse Commerce = Ecommerce (Speed + Convenience) + Physical Retail (Personalization + Experience)”
– Ongun Duman in AR/VR Journey

PULSE SCORE: 82

Meta versed

• The metaverse is “a virtual reality construct intended to supplant the internet, merge virtual life with real life and create endless new playgrounds for everyone.” According to Mark Zuckerberg, “You’re going to able to do almost anything you can imagine” (AP News).
• In the enterprise space, immersive 3D environments are becoming more popular. Brands are building digital products, modeling their real physical environments in digital space.
• Blockchain will provide a way to manage digital identity and assets across metaverse platforms. It might be useful in the metaverse to track digital identity, manage digital assets, and enable data portability.
• Generative AI can create content that’s meaningful based on natural inputs like language or visual information. For example, a user might give voice commands to a smart assistant and have a metaverse environment created or take photos of a real-world object from different angles to have its likeness digitally imported.
• Synthetic data will also play a role in the metaverse. Instead of relying only on people to create a lot of relevant data to train AI, metaverse platform providers will also use simulated data to provide context.
• Real-time communications allow for synchronous collaboration. Mixed reality headsets come with integrated microphones and speakers to enable voice communications. Spatial audio will also be an important component of voice exchange in the metaverse.

Source: Info-Tech Research Group

Industries actively leveraging the metaverse

• The metaverse is an exceptional way to engage Gen Z and millennials. These 3.5 billion people are digital natives and comfortable in the virtual world. They believe digital clothing on an avatar is an expression of creativity, just as fashion is in the physical world.
• Fashion — Brands are empowering consumers to express their personality via digital storefronts. Roblox and blockchain-based worlds such as The Sandbox are good examples of this, and even luxury retailers like Gucci are getting involved, selling digital-only products and using NFTs on the blockchain to prove the authenticity of unique merchandise.
• Big-box retail — The metaverse is becoming increasingly mainstream. In January 2022 Walmart filed new trademarks for virtual goods including electronics, home decorations, and personal care products, and it also plans to create its own cryptocurrency and NFTs.
• Gaming — Online games like Fortnite and League of Legends have become social environments in which shoppers can buy skins or digital outfits and identities. Through blockchains, gamers can sell in-game items for a currency that converts to real cash. Statista predicts that gamers will spend a staggering $50 billion by the end of 2022.

Source: Cloudinary

Trend 03 I Social & Metaverse Commerce

Disruptors & Signals

Why is direct-to-avatar (D2A) commerce essential?

• Ryan Gill, cofounder and CEO of Crucible, explained: “Direct-to-avatar (D2A) refers to an emerging business model selling products directly to avatars – or digital identities – bypassing any supply chain management like dropshipping, logistics of how to get a physical product to a consumer's door.”
• According to Samantha G. Wolfe, founder of PitchFWD and adjunct professor at NYU, "Gen Z considers their digital avatars an extension of themselves. This generation loves individuality and challenges social constructs. So, it makes sense that as they spend more time in virtual worlds, they want to represent themselves uniquely. This might start as buying branded goods and clothing, especially ones that connect to them authentically.”
• The advent of NFTs and the metaverse has given brands across industries access to gamers and the avatar community.
• Gen Z are engaging with digital worlds like no generation before, and they expect a wide spectrum of brands to participate as well.
• The D2A economy is expected to reach $50 billion in 2022. Brands hoping to be a part of this growth must recognize what is valuable to avatars in the digital world and the best channels to connect with them.

Source: MG Empower

Retailers already use blockchain

1. Carrefour: Carrefour uses blockchain technology to track its meat, milk, and fruit production from farm to store. Using this technology to inform their customers has helped increase customers’ trust in products. With a simple scan of a QR code they can learn where and when the product was harvested, whether it contains any pesticides, etc.
2. Home Depot: Home Depot uses blockchain technology to manage disputes in the supply chain faster and more efficiently.
3. De Beers: The diamond giant De Beers has developed Tracr, technology that traces where and how the diamond was extracted and how it reaches the store.
4. Amazon: The e-commerce giant uses its AWS platform to provide blockchain solutions for companies. Amazon Managed Blockchain is a fully managed system that ensures the correct networks are working together and the overhead costs to maintain them are eliminated.
5. LVMH Group: The luxury group, together with Microsoft, developed AURA, a platform that provides product tracking and tracing services and enables customers to learn about the origin of the products.

Source: Kapsul

Info-Tech Insight

Enterprises need to develop a holistic strategy and reconsider all business and technology capability components while planning future social and metaverse commerce. Many enterprises do not recognize the use of blockchain, digital twinning, AR, or VR as vital to their business. Interest in these spaces is growing fast as digital currencies, NFTs, and the metaverse generate new outlooks for value creation.

Trend 03 I Social & Metaverse Commerce

Value Drivers

What is driving this trend in retail?

• Business Growth: At NRF 2022, WGSN Insight’s Cassandra Napoli said, “The possibilities are truly endless for brands in this avatar economy, as avatars will extend the scope of storytelling for brands” (NRF). With the rise of NFTs and metaverse, the realm of shoppers has been unlocked for brands across several segments within retail industries. With the growth in the retail industry focusing on the new generation, this trend can increase market reach by attracting young shoppers. Similarly, since the goal is to incorporate social integration, this could increase revenue for multiple streams including recommendations with ratings.
• Risk & Resilience: Adding new mixed reality devices to the enterprise network will create more potential points of access for a cyberattack. Previous experiences with IoT in the enterprise have seen them exploited as weak points and used to create bot nets or further infiltrate company networks.
• Operational Excellence: Retailers will be able to benefit from deploying mixed reality devices by making them valuable to workers. Serving up relevant information in the context of a hands-free interface will become a new competency for enterprises to master.
• Customer Value: Blockchain has spurred a new economy around digital assets. Smart contracts can be used to create a token on a blockchain and bind it to a specific digital asset. Owners of NFTs can prove their chain of ownership and sell their tokens to others on a variety of marketplaces.
• Brand Impact: Brands are already leveraging blockchain in the metaverse to track digital identity, manage digital assets, enable data portability, and manage disputes in the supply chain faster and more efficiently.

Trend 03 I Social & Metaverse Commerce

Business Capability Map

Trend 03 I Social & Metaverse Commerce

Benefits & Risks

Trend 03 I Social & Metaverse Commerce

Case Study

H&M opens store in the metaverse with CEEK City | Sources: Forbes & Blaze Trends

CHALLENGE

• Hennes & Mauritz AB (H&M) is a global apparel manufacturer based in Stockholm, Sweden, that is well known for its fast fashion. The company offers online shopping in 33 countries.
• H&M wanted to enter the metaverse by opening a virtual store and providing customers with a 3D shopping experience.

SOLUTION

H&M decided to create a virtual store in the metaverse via CEEK City:

• CEEK is a technology platform for the development of virtual experiences. It is accessed using a VR headset and glasses compatible with any mobile device.
• Customers pay a membership to enter the platform, where they use augmented reality to explore everything from theaters to clothing stores.
• The store within CEEK City contains mannequins, discount signs, boxes, promotional messages, and even virtual changing rooms.
• Customers can buy digital products and tokens using the CEEK coin currency.
• Customers can also purchase physical products and pick them up in store through a service like click and collect.

RESULTS

• The H&M metaverse retail stores are open 24 hours a day, seven days a week, and have a positive impact on the top line and bottom line.
• The reason garments can be purchased both digitally, as a fungible asset, and physically is to promote and develop omnichannel. In this way, H&M got one step closer to its corporate goal of breaking down the barriers that separate the digital and the physical worlds.

Info-Tech Resources

What Meta’s metaverse means for enterprises

Into the Metaverse

How the Metaverse Can Unlock New Levels of Collaboration

Trend 03 I Social & Metaverse Commerce

Recommendations

Retailers need to map out their journey from today to being ready to offer the metaverse commerce experience that customers will expect

Trend 03 I Social & Metaverse Commerce

Bibliography

“Amazon Managed Blockchain.” Amazon, 2022. Web.

Bhatia, Swati. “The Metaverse: Building Blocks and Market Map.” Level Up Coding, Nov 16. 2021. Web.

Brown, Britney. “10 Retail Companies Using Blockchain Technology.” Kapsul, 14 Sept. 2021. Web.

Buyer, Lisa. “Marketing in the Metaverse: The Future of Search & Social.” Search Engine Journal, 25 Aug. 2021. Web.

Clement, J. “Statista predicts that gamers will likely spend a whopping $50 billion by the end of 2022.“ Statista, 7 Sept. 2021. Web.

Cortés, Andrea. “How can brands jump into direct to avatar [D2A] commerce?” MG Empower, 16 Dec. 2021. Web.

“Digital Fashion Report.” LYST Insights, 2022. Web.

Duman, Ongun. “Metaverse: The Future of the E-Commerce.” AR/VR Journey, 10 Feb 2022. Web.

Faithfull, Mark. “CEEK And You Won’t Find: H&M Denies Metaverse Rumors.” Forbes, 6 Jan. 2022. Web.

Hackl, Cathy. “Is Direct To Avatar The Next Direct To Consumer?” Forbes, 9 Aug. 2020. Web.

Hackl, Cathy. “How Brands Can Thrive In The Direct To Avatar Economy.” Forbes, 29 Jan. 2021. Web.

Heethuis, Nick. “How The Metaverse Will Reshape E-Commerce Forever.” Forbes, 24 Jan. 2022. Web.

Jackson, Brian. “Into the Metaverse.” Info-Tech Research Group, 2021. Web.

King, Brittany. “Faster invoicing resolutions build stronger relationships.” IBM, 2022. Web.

Lal, Pradip. “Direct-to-Avatar (D2A) Commerce in the Metaverse and Delivery of 3D Assets Explained.” Cloudinary, 2 March 2022. Web.

“LVMH, ConsenSys and Microsoft announce AURA, a consortium to power the luxury industry with blockchain technology.” Consensys, 16 May 2019. Press release.

McDowell, Maghan. “How the metaverse influenced New York Fashion Week.” Vogue, 15 Feb. 2022. Web.

O’Brien, Matt and Barbara Ortutay. “Plenty of pitfalls await Zuckerberg’s ‘metaverse’ plan.” AP News, 7 Nov. 2021. Web.

Scott, Terry. “H&M creates its first store in the CEEK City metaverse.” Blaze Trends, 12 Jan. 2022. Web.

Soltes, Fiona. “Retail and the metaverse: The time is right for exploration.” NRF, 10 Feb. 2022. Web.

Thomas, Lauren. “Walmart is quietly preparing to enter the metaverse.” CNBC, 16 Jan. 2022. Web.

Thomasson, Emma. “Carrefour says blockchain tracking boosting sales of some products.” Reuters, 3 June 2021. Web.

Smart Store Hub

Trend 04 | Omnichannel Retail

Smart store hubs leverage the IoT to enable retailers to monetize key customer insights. With data-driven, innovative solutions, stores gather deeper insights into buyer engagement, optimal floor navigation paths, hot zones for contactless checkout, and online fulfillment using a combination of computer vision and sensor fusion technology to automate the payment at checkout.

Trend 04

Current state

• These last couple of years, retailers have made great progress in setting up their stores to fulfill e-commerce orders seamlessly. They've reconfigured the O2O technology, trained staff on new responsibilities, and perfected curbside pick-up – driven mainly by the growing demand for quicker delivery.
• According to McKinsey (2022), most consumers expect delivery within two to three days, and 30% expect same-day delivery. In many ways, Amazon Prime has set this expectation. It’s more challenging for physical retailers, but those with hundreds of locations nationwide can provide a similar experience and may even have an advantage.
• On an earnings call, DSW CEO Roger Rawlins shared the following:
• The company fulfilled nearly 60% of digital orders in 2021 from its stores. Its 2021 revenue of $3.2 billion was a 43% increase in sales from 2020, which was a difficult year for the retailer due to its heavy dependence on in-store traffic.
• DSW will be transforming its 20,000- to 25,000-square-foot stores into 15,000-square-foot stores to create its "store of the future" and is expected to dedicate some extra space to fulfillment. This decision requires both physical and logistical renovations, which are costly and time-consuming.

Source: “Why Retailers Are Converting Stores,” Forbes, 2022

Future state: Smart store hubs will be crucial in omnichannel networks

• Smart store hubs combine emerging innovative technology trends across retail, including in-store robotic fulfillment, contactless checkout, live personalized dynamic pricing, and more to provide an all-in-one connected experience.
• Less space is dedicated to merchandise on shelves as retailers shift more space and resources to online fulfillment, digital engagement, and even green recycling gains. Meanwhile, real-time customer analytics and automation will become key to store operations. Using new tech-enabled tools, smart store hubs will be able to provide customers with a smoother, more personalized experience (CB Insights).
• For example, even though Macy's has closed many stores over the past couple of years, it still has over 500 locations. And over a quarter of Macy's online orders are fulfilled by its stores. It’s also partnered with DoorDash for same-day delivery. Similarly, Target owns and uses Shipt to provide same-day delivery in over 5,000 cities across the US.
• Walmart is testing the idea of stores as fulfillment centers by converting the back half of some stores into a warehouse. The company owns most of its real estate, which makes it easier to make those changes. For brands that are tenants, a change of use can be more difficult.
• A landlord typically receives a percentage of in-store sales (increasingly including web sales tied to the store). If fulfillment happens in-store, retailers may have to include e-commerce sales in percentage rent.

Sources: CB Insights; “Why Retailers Are Converting Stores,” Forbes, 2022

Info-Tech Insight

Real-time business intelligence presents the best opportunity to help retailers respond to rapidly changing consumer in-store and hybrid demands.

Trend 04 | Smart Store Hub

Disruptors & Signals

Smart Store Hub

Smart store hubs combine emerging innovative technology trends across retail, including in-store robotic fulfillment, contactless checkout, dynamic personalized pricing, and more, to deliver an all-in-one connected experience.

Stores as Marketplaces and Platforms

Retailers use their stores to extend engagements via the platform. Amazon is the most popular online marketplace worldwide, averaging about 5.2 billion visits a month (Statista, 2021).

Retail as a Service (RaaS)

Retailers who have developed operational expertise can sell it as a capability to other organizations. For example, Amazon Go has streamlined in-store dynamics, providing in-aisle experiences and eliminating the checkout aisle bottleneck. Amazon will sell this expertise to other retailers as a retail as a service (RaaS) offering.

Stores as Invention and Innovation Hubs

Retailers such as Walmart, Nike, and Adidas use their stores to experiment with new formats, products, technologies, and services.

Stores as Replenishment and Fulfillment Hubs

Leading retailers such as Walmart are using their physical stores as fulfillment centers for products ordered online. This is cost-effective since they are using existing resources. As the click-and-collect trend grows, retailers will find it increasingly necessary to fulfill orders from stores.

Stores as Brand Image Representation

Consumer-packaged goods manufacturers such as Nespresso are rolling out stores to strengthen their brands as an advantage over grocers’ private labels.

Stores as Growth-Generating Hubs

Digitally native e-commerce brands such as Casper (home), Third Love (apparel), 5 Element Pet Food Therapy (pet food and care), and Away (accessories) have opened stores to generate sales and increase brand awareness.

Trend 04 I smart store hub

Value Drivers

What is driving this trend in retail?

• Business Growth: By adopting this trend, retailers can increase methods of generating revenue by leveraging existing store infrastructure to fulfill online-to-offline customer orders. Many retailers are already using their store environments to test new formats, products, and innovative technologies and rolling out the capability for others, called “retail as a service” (RaaS), which opens avenues for additional partnership opportunities.
• Risk & Resilience: With e-commerce gaining more prominence, store as a marketplace and platform will allow retailers to rapidly deploy a larger footprint and enable more future resilience from business disruptions such as pandemics and land-based operating challenges.
• Operational Excellence: By adopting this trend, retailers can minimize errors, improve fulfillment, and maximize floor space through flexible planogram configurations that, in turn, increase revenue and reduce unnecessary operational costs. Also, self-checkout automation that eliminates mundane work like scanning items at a store will free up human employees to do more rewarding tasks.
• Customer Value: The smart store hub furthermore gathers deeper insights into customer engagement, efficacy of store display, and optimal floor navigation paths and provides hot zones to enable contactless online pick-up and automated convenient checkout.
• Brand Impact: As more and more retailers implement these ideas, eventually they will no longer be differentiators for the brand. They can, however, strengthen the brand’s identity by providing digital tools to enable employees in packing, pick-out tracking, etc., and increasing customer engagements.

Trend 04 I Smart Store Hub

Business Capability Map

Trend 04 I Smart Store Hub

Benefits & Risks

Trend 04 I Smart Store Hub

Case Study

Walmart incubates companies with the potential to transform the future of commerce | Sources: Store No8 and CB Insights

BACKGROUND

“Store Nº8 was formed in 2017 as part of Walmart’s larger innovation mission to shape the future of retail. Our ultimate goal: fuel the core business, create new operational efficiencies and unlock amazing experiences for our customers in the long-term.”
– “Our Story,” Store No8

SOLUTION

In April 2019, Store Nº8’s launched the Intelligent Retail Lab, a New York-based store that is a testing ground for the potential of AI in retail. Specialists use cameras and sensors to generate real-time data on inventory levels, etc., in a live shopping environment.

Target investment areas include frictionless shopping, mixed reality, sustainability, and the future of food, health, and wellness.

Walmart and Store Nº8 teamed up with the MIT Media Lab in August 2021 to drive this initiative with cutting-edge research, the world’s best interdisciplinary thinkers, and a network of peers from 45 corporate members.

RESULTS

After launching Mobile Express Returns, where in-store purchased items could be returned online and then dropped off in person using a QR code, in-store return transaction times dropped 74% (CB Insights).

Other Initiatives include:

• Conversational Commerce
• Frictionless Checkout
• In-Store Digitization
• Last-Mile Delivery
• Mixed Reality
• Shopping Automation

Trend 04 I Smart Store Hub

Recommendations

Smart store fulfillment hub

These key steps can help you assess the physical stores and support the creation of an integrated smart store fulfillment hub:

1. Market Scrutiny: Analyze market and shopper trends and the competitive landscape to gain a deeper understanding of your target state and how to get there.
2. Capability Assessment & Maturity: Understand both your existing O2O capabilities and your capability maturity levels in order to determine the investment you’ll need to make in people, processes, and technology as well as the potential ROI of store changes.
3. Bite-Size Tactic: Start with pilots and test your top-performing products before slowly increasing scope as your capabilities mature. Underdelivering on promises could damage consumer satisfaction, brand image, and sales performance.
4. Upgrading and Upskilling: Reconsider all aspects of the store’s operation – update positions, improve infrastructure, and redefine performance standards. Be sure to include both in-store and office staff in your change-management approach.

Smart store innovation hub

Use these guidelines to launch smart store innovation labs to increase innovation impact:

1. Establish Core Versus Beyond-Core: Take a dual perspective and break it down into core and beyond-core innovations.
2. Integrated Versus Detached: Innovation and transformation activities within the current scope of the core business should be driven by relevant units therein. Classify a solution provider or launch an innovation division to drive or support beyond-core innovation.
3. Setting Up for Scaling Up: Define the right infrastructure operation for this innovation hub to make sure the fundamental operating model strategy is aligned with the retailers' drive, digital strategy, and goals.
4. Host a Proven, All-Inclusive Set of Guiding Principles and Designs that enable an effective partnership between the innovation store hub and core retail business for scaling up success, thereby developing existing core assets and capabilities for a highly standardized blueprint that is often geared toward moving success factors to startups.

Info-Tech Resources

• Retail IT Strategy Initiatives Workbook
• Department Stores IT Management & Governance Benchmarking Report
• Amazon Is Offering Its Cashier less Store Technology to Other Retailers

Trend 04 I Smart Store Hub

Bibliography

Adhi, Praveen, et al. “Reimagining the role of physical stores in an omnichannel distribution network.” McKinsey & Company, 24 Dec. 2021. Web.

Boland, Mike. “Will Retail-as-a-Service Transform Local Shopping?” Localogy, 4 Oct. 2019. Web.

Burns, Tiffany, et al. “The five zeros reshaping stores.” McKinsey & Company, 16 March 2022. Web.

“Designer Brands Inc. (DBI) Q4 2021 Earnings Call Transcript.” The Motley Fool, 17 Mar 2022. Web.

Faithfull, Mark. “CEEK And You Won’t Find: H&M Denies Metaverse Rumors.” Forbes, 6 Jan. 2022. Web.

Hensel, Anna. “Macy’s faces an uphill battle pitching itself as a digital-first department store.” Modern Retail, 23 Feb. 2021. Web.

Kramer, Shelly. “Customer Experience Fuels Today’s Retail.” Broadsuite Media Group, 28 Nov. 2018. Web.

Mahmood, Khurram. “Three Trends Transforming Stores Into Smart Shopping Hubs.” Forbes, 12 July 2019. Web.

Mazur, Ola. “10 retailers who increased sales by launching a marketplace.” Divante, 30 Sept. 2019. Web.

“Retail’s Digital Crossroads: The Race to Meet Shopper Expectations.” Incisiv, 2018. Web.

Scott, Terry. “H&M creates its first store in the CEEK City metaverse.” Blaze Trends, 12 Jan. 2022. Web.

Snelling, Brin. “Why Retailers Are Converting Stores Into Fulfillment Centers.” Forbes, 4 April 2022. Web.

“The Store Of The Future: What Retail Could Look Like In 2030.” CB Insights, 21 July 2021. Web.

“Leading online marketplaces worldwide as of April 2021, based on number of monthly visits.” Statista, 15 July 2021. Web.

“We are the incubation arm of Walmart.” Store No8, 2022. Web.

New Operative Models

Trend 05 | Omnichannel Retail

The pandemic forced retailers into digital transformation and strengthened the development of D2A and D2C customer satisfaction via new adapted functions like BOPIS/ROPIS, BOPIL, BOPAC, etc. Online-to-offline channels unlock new avenues for sales impact and customer drive.

Trend 05

New Operative Model

Current state

• Even pre-pandemic, the retail sector was experiencing immense change. The pandemic fast-tracked disruption into hyperdrive. In some marketplaces, shoppers were essentially limited to online shopping during lockdowns. In-store retailing was put into a curbside fulfillment channel. As a result, some business models flourished while others suffered.
• According to GAP CEO Sonia Syngal, “Shoppers will want to understand what safe shopping practices are in place before heading out and occupancy data is key” (New York Times). This quote undoubtedly has a tremendous impact on the shopping environment and the functioning of the retailer’s operating model. As a result, retailers are capitalizing on technologies to realize key functions like BOPIL, etc.
• Frictionless point of sale: Retailers are investing in contactless or mobile payment technologies as a starting point. A recent survey conducted by American Express indicated that 58% of shoppers that have used contactless payments in the past are more likely to do so post-pandemic (CNBC, 2021).
• Measuring conversion: Shoppers arriving in stores are more decided now than ever before. Beyond improvements in raw traffic counts and conversion, visit frequency is another measure of an effective restart. Many retailers rely on loyalty programs, membership data, IoT beacons, and Wi-Fi or app usage to help calculate rates of return visits (LinkedIn).

Future state

• Often retailers set out to become a digital customer-centric only to discover that merely going digital is not enough to genuinely be digital (Deloitte).
• The change needs to permeate every aspect of the organization. The operating model must be adapted to align the organization with the overall business strategy and goals (Deloitte).
• Retailers need to consider trends and design their strategy accordingly, with the long-term roadmap capabilities and components aligned with the business model:
  1. An industry reference business architecture helps accelerate the strategy redesign process and enhances IT leadership’s ability to align people, processes, and technology with key business priorities.
  2. It should cover all core level 1 and level 2 retail business capability components, including strategic planning and purchasing, distributing, and selling products, etc.
  3. It should be leveraged as guidelines, for example, for process design, operational analysis, due diligence, omnichannel alignment, and retail performance management. It can also serve as an IT architectural lens to enable retail transformations.

Info-Tech Insight

Articulating a clear strategy that not only aligns IT with business objectives but also enables IT to adapt to changing business needs is the most important activity a CIO can do for the IT department and the organization. A strategy map is a tool to help narrow the focus to what matters most. With ever-changing resources, business strategies, and external environments, the strategy map can ensure IT is consistently providing value through the enhanced prioritization of IT programs.

Trend 05 I New Operative Models

Disruptors & Signals

Trend 05 I New Operative Models

Value Drivers

What is driving this trend in retail?

• Business Growth: The primary role of new models is to serve a wider market faster. These operating models offer guidelines and avenues to address customers’ many systems in order to capitalize on customer lifetime value. The new consumer adaptive models could realize increased revenue by giving consumers access to a greater variety of products and offerings.
• Risk & Resilience: By incorporating this trend, retailers can steer away from outdated functions and instead move toward a future-forward model that uses digital technology to create convenience and efficiency for both staff and shoppers. This trend relies on integration between online and offline systems.
• Operational Excellence: Operational excellence empowers retailers as it streamlines processes, people, and technology to automate services and the process, maximizing productivity for the team.
• Customer Value: Embracing the direct-to-consumer adaptive functional models saves time and effort for retailers while expanding their product and service options, which adds value to the consumer by improving service convenience.
• Brand Impact: Personalizing a variety of products and services at respective touchpoints gives the retailer the opportunity to focus on customer satisfaction, which will strengthen the brand’s uniqueness.

Trend 05 I New Operative Models

Business Capability Map

Trend 05 I New Operative Models

Benefits & Risks

Benefits

Upgraded Adaptability

The retail landscape evolved rapidly during the pandemic. The past couple of years have been a testament to retailers' ability to react and respond to change with models like D2C, BOPIS/ROPIS, etc. The retailers who upgraded to adaptable models thrived and stayed ahead in the digital transformation maturity curve.

Expanded Reach

Customers can now order products from anywhere across the globe. The familiarity with e-commerce via B2B and B2C marketplaces and platforms has enabled access to a wider target market. Retailers can now also easily manage relationships with suppliers and last-mile providers, which means the market is not confined to the local area. This change has enabled brands and retailers to have an expanded global reach.

Higher Customer Value

The extent to which new customers expect digital experiences is increasing in a commensurate fashion with the pace of business. The organization must cater to these expectations to remain competitive. The retail industry can keep up with this pace and meet customer expectations by implementing consumer adaptive models.

Risks

Vendor Relationship & Incompatibility

A consumer adaptive model will require partnerships with numerous suppliers and third-party logistics providers, etc. Global procedures and trade compliance agreements are huge barriers to cross-border fulfillment. If the last-mile execution capabilities are incompatible and there are no established supplier network management systems, this will pose a risk to the scalability of the enterprise.

Integration

An online-to-offline model involves integrations that can connect e-commerce systems to ERPs and CRMs, warehouse and order fulfillment to the retailer's online storefront, and even customer data to marketing and sales. The potential for a 360-degree view of retailers’ D2C business makes integrations invaluable and essential. Some solutions have application programming interfaces (APIs) already developed to connect common solutions together. In other cases, retailers may need to have integrations built.

Capital Availability

Limitations on capital expenditures may be a determining factor. Retailers need to think through the enterprise IT systems (such as ordering and inventory management) needed to support omnichannel and how much can they invest year on year.

Trend 05 I New Operative Models

Case Study

Starbucks and Volvo’s retailization of the EV sector | Source: The drum

CHALLENGE

Volvo Car USA and Starbucks are working together to establish the first public electric-vehicle charging network at the coffee chain's stores in the US starting summer 2022.

Their goal is to fuel business growth, create new operational efficiencies, and unlock amazing experiences for customers in the short and long term.

SOLUTION

The pilot program calls for Volvo to install up to 60 Volvo-branded, ChargePoint DC fast chargers at up to 15 Starbucks locations along a 1,350-mile route between Denver and Starbucks’ Seattle headquarters.

They plan to install a charging location about every 100 miles, which is well within the battery range of most electric vehicles. ChargePoint DC fast chargers can bring EVs like the Volvo C40 Recharge from a 20% charge to 90% in about 40 minutes.

While cars are recharging, drivers and their passengers will have the option to eat or drink at the Starbucks store.

RESULTS

This is a well-strategized partnership that aligns with both companies’ values and business models.

Volvo plans to be a fully electric car company by 2030, and Starbucks aspires to be an industry leader in reducing its carbon footprint – an effort that includes the EV charging initiative as well as increased investment in solar power at its locations.

"We are thrilled to partner with Volvo Cars to test how we can charge our customers’ electric vehicles at Starbucks stores," said Starbucks Chief Sustainability Officer Michael Kobori. "Imagine a future where Starbucks helps our customers to connect – more sustainably“ (Volvo Car USA).

Trend 05 I New Operative Models

Recommendations

1. Unify the organization’s perspective on how it creates value.
2. Analyze the value streams to identify and describe the organization’s capabilities that support them.
3. Validate the capability map with the executive team and other key stakeholders.
4. Analyze the level 1 and 2 business capabilities to identify and describe at a more granular level the organization’s capabilities that support them.
5. Define and establish the value creation and capture metrics for each level 2 business capability component across the map.
6. Focus on capabilities that drive a cost or competitive advantage for your organization.
7. Validate the strategy map in layers. Start with IT and confirm which IT programs enable capabilities.
8. Use process to drive collaboration and integration. Begin by assessing whether each key capability has data available to support it.
9. Determine how well key capabilities are supported by applications.
10. Elevate your focus from the IT level to the organization level. Leverage MoSCoW-based analysis for business capabilities to add value to the strategic roadmap.

Info-Tech Resources

• Industry Reference Architecture for Retail
• Review Your Application Strategy
• Build Your Infrastructure Roadmap
• Document Business Goals and Capabilities for Your IT Strategy

Trend 05 I Smart Store Hub

Bibliography

Andersson, Daniel. “From Starbucks to Sony: how brands can merge with the electric vehicles sector.” The Drum, 4 April 2022. Web.

“Four transformative business models for retail and consumer goods.” Consultancy.uk, 29 Aug. 2017. Web.

Hackl, Cathy. “How Brands Can Thrive In The Direct To Avatar Economy.” Forbes, 29 Jan 2021. Web.

Maheshwari, Sapna. “Gap Plans to Reopen Up to 800 Stores by the End of May.” New York Times, 6 May 2020. Web.

McCall, Peter. “Why Retailers Need to Reconsider their Operating Model as they Emerge from COVID-19.” LinkedIn, 16 June 2020. Web.

Morgan, Blake. “More Customers Are Shopping Online Now Than At Height Of Pandemic, Fueling Need For Digital Transformation.” Forbes, 27 July 2020. Web.

“The New Retail Operating Model of the Future: How retailers need to adapt their operating model to become future-ready.” Deloitte, n.d. Web.

Snelling, Brin. “Why Retailers Are Converting Stores Into Fulfillment Centers.” Forbes, 4 April 2022. Web.

“Volvo Cars explores electric vehicle charging network at U.S. Starbucks stores.” Volvo Car USA, 15 March 2022. Press release.

White, Alexandria. “58% of Americans who have used contactless are more likely to use it now than before the coronavirus.” CNBC, 4 Nov. 2021. Web.

Warehouse Automation

Trend 06 | Omnichannel Retail

Retailers looking for ways to automate their replenishment and fulfillment are assembling highly automated warehouses to create different shopping baskets for customers. Delivery and fulfillment will see autonomous vehicles and wireless fleet management that distribute goods.

Trend 06

Warehouse Automation

Current state

• The warehouse robotics space is growing by more than 15% every year and will more than double in size by 2027. According to industry experts, it’s also boosting productivity by 200-300% (Forbes).
• The emergence of the industrial internet of things (IoT) and the influx of a network of connected systems are helping the retail industry execute many tasks, for example, material batching, picking, ordering, packaging, warehouse security, and inspection. They are also vastly improving operational efficiency. The growth in the global e-commerce industry and the increasing need for efficient warehousing and inventory management are driving the market growth (ReportLinker).
• According to DHL, a prominent third-partner logistics company, 80% of warehouses are “still manually operated with no supporting automation”; only 15% of warehouses use conveyors, sorters, pick-and-place solutions, and other equipment that is not necessarily automated; and just 5% of warehouses are automated (ReportLinker).
• Ocado, a British online grocer, industrialized its own warehouse robotics and grocery home-delivery technology. The platform was so effective that Ocado licenses it to other supermarkets (CNN).

Future state: robots-as-a-service model and digital command centers

• Logistics company Locus Robotics ships robots using the robots-as-a-service model. They can add extra robots to build capacity during busy times. And there is no training time – once the robots are connected to the robotic network they’ll be assigned tasks and integrated into the workflow right away.
• Locus CMO Karen Leavitt says one customer reported 80% fewer worker injuries, plus less fatigue and greater job satisfaction. The humans basically have become part of a command-and-control network run by a warehouse or logistics operating system.
• According to DHL executive Adrian Kumar, “Locus’s innovative multi-bot solution has helped DHL to consistently double our worker’s productivity all around the world.”
• For now, humans are betting at getting items off the shelves, but as robots get smarter, more capable, and cheaper, ultimately they will be able to do that part of the job as well.
• Amazon now uses robots strong enough to lift 1,200-kilogram pallets and smaller robots dexterous enough to handle more delicate articles. It’s not hard to imagine that someday all jobs in shipping and fulfillment will be done by robots, managed by complex software to optimize timing and productivity.

Source: Forbes

Info-Tech Insight

The robots-as-a-service model can be seen as the amalgamation of shared services and digital transformation. Shared services have become increasingly popular because of their convenience, cost-effectiveness, and relative ease of implementation. Linking shared services and digital transformation is an opportunity to apply the robots-as-a-service model within your organization.

Trend 06 I Warehouse Automation

Disruptors & Signals

Even with lower adoption costs, over 80% of warehouses in the US are still largely manual (SelectHub, 2022).

Robotics

Investment in warehouse robotics startups increased by 57% in the first quarter of 2020 to more than $380 million (FreightWaves, 2020). This is expected to increase in areas with workforce shortages, like Japan.

Cobotics

Cobotics refers to collaboration between humans and robots. Cobots in warehouse automation include autonomous mobile robots (AMRs) that can scan their site and avoid collisions.

Supply chain as a service

Companies offering subscription-based, full-service automated warehouse solutions seek to replace manufacturers and service providers that offer automated equipment and system sales.

ERP integration

APIs and machine learning are enabling automation systems that integrate with ERP suites to build an end-to-end automated business platform

Blockchain technology

Blockchain databases allow supply chains to connect and share permanent, automated records for every transaction made, with shared data storage and a secure network.

Warehouse drones

Intelligent drone fleets driven by advanced algorithms and equipped with visual sensors or barcode scanners are connected to cloud-based WMS to help manage warehouse inventory.

Fast shipping

The “Amazon effect” has set expectations and created intense demand for fast online shipments irrespective of who sells the product. The goal of same-day delivery will drive warehouse automation.

Internet of things

RFID sensors will drive new IoT applications that streamline supply chains and warehouse operations. IoT expands visibility by providing location data on equipment and inventory in real time.

Mobile shelving

Autonomous robot fleets can load and transport mobile shelving units with stored inventory to designated locations. This helps workers pick orders with minimal movement and walking time.

Warehouse cleaning

A new class of automated mobile cleaning robots is being developed to safely sanitize and disinfect high-touch indoor workplaces like warehouses and distribution centers with UV lights.

Autonomous vehicles

Autonomous vehicles are expected to advance up the supply chain to include robotic delivery trucks that transport inventory between warehouses, manufacturers, and retail locations.

Wireless fleet management

Developments in IoT applications, cloud databases, and sensor technology have created the ability to manage automated fleet vehicles wirelessly.

Trend 06 I Warehouse Automation

Disruptors & Signals

Global Warehouse Automation Market Size 2022-2026

With increasing capability and configurability, robots are taking more significant roles in warehouses. According to Statista, retailers expect to see the market for mobile robots rise from US$17.9 billion today to US$30.15 billion in 2026, enabling small and mid-sized businesses to adopt them even on smaller budgets.

Warehouses use robots for a wide range of tasks, such as sorting, picking, packaging, batching, transportation, fulfillment, security, and inspection.

Trend 06 I Warehouse Automation

Value Drivers

What is driving this trend in retail?

• Business Growth: Automation empowers retailers with better data, increased efficiency, and overall cost savings. It reduces busywork and error-prone manual tasks, allowing staff to focus on impactful business decisions. Robots as a service makes robotics and automation accessible to businesses of all sizes, with a lower cost of entry and no need for extensive robotics knowledge. Retailers also benefit from the flexibility and scalability of the model (Deloitte).
• Risk & Resilience: Adopting this trend requires the technical feasibility of automating part or all the tasks within a function using currently available technology.
• Operational Excellence: This trend drives operational efficiency. The benefits of warehouse automation include improved production processes, faster order turnaround time, maximized throughput and capacity, and drastically reduced operating costs.
• Customer Value: This trend provides engagement with automation robots, etc., and helps retailers capture more comprehensive data about inventory, delivery monitoring, and tracking insights.
• Brand Impact: Not many retailers have jumped onto the total automation bandwagon. Those that do will create brand differentiation and drive satisfaction and retention.

Trend 06 I Warehouse Automation

Business Capability Map

Trend 06 I Warehouse Automation

Benefits & Risks

Benefits

Improved Accuracy

In an automated warehouse, data and procedures go through fewer hands, leaving less room for human error.

Reduced Operating Costs

Various robotic and automated solutions can moderate the need for labor, prevent order mistakes, enable higher productivity, and reduce time between order and delivery. All of these things greatly increase warehouse profits.

Inventory Management

Automation leveraging AI and machine learning can optimize inventory management by compiling market data, customer demands, real-time inventory levels, and replenishment and manufacturing lead times. The degree of automation ranges from basic improvement recommendations to complete autonomous management. Benefits include preventing overstocking and stock-outs and allowing just-in-time production and management of large quantities (GEODIS).

Risks

Increased Capital Spending

High initial and continuing costs of automation can put it out of reach for smaller warehouses. While robots don’t need health insurance or employee benefits, they do need maintenance and programming, and with skilled robotics programmers in short supply, these ongoing expenses can be significant (Flock Freight).

Change Management

The success of an automation project often hinges on employee buy-in. Retailers need to deploy effective change management, communicate across the organization, and consult with every impacted department. Be sure to include floor staff and middle managers, who can have a positive influence on the overall sentiment toward the project (Cisco-Eagle).

Job Elimination for Workers

Warehouse workers may find their jobs eradicated as technology advances and robots can take on more and more tasks.

No Adaptability or Ingenuity

While workers can analyze warehouse problems and use their ingenuity and critical thinking to come up with solutions, a robot can only follow its programming.

Trend 06 I Warehouse Automation

Case Study

Iptor transforms digital supply chains with cognitive AI bot “Sara” | Source: SDC Executive

Trend 06 I Warehouse Automation

Recommendations

Warehouse Inventory and Material Tracking

Locate and monitor inventory to optimize logistics, prevent quality issues, and even detect theft. Prescriptive analytics can help determine the exact amount of stock to be kept for each item.

Demand Management

Big data and predictive analytics can help forecast based on current trends, historical data, deviation analysis of forecast versus actual production, production planning, and expected sales.

Condition Monitoring

Environmental sensors monitor products in real time and alert if conditions are not ideal for transport – ensuring higher goods survival rate, lower costs of return, removal of defective goods, and lower transport due to lower reshipping rates.

Route Optimization

Prescriptive analytics, sensors, and GPS deliver insights to the trucker fleet on traffic jams, potential delays before the trip, and alternate routes that will enable them to reach their destination at the expected time.

In-Transit Visibility

RFID-enabled pallets, GPS, and analytics offer info like shipment location, weather, real-time traffic scenarios, speed, and idle time to identify ideal departure times and accurately predict arrival times.

Inventory Slot Location Optimization

Predictive analytics can use historical order data to help place materials in the warehouse that are often picked together near each other, thus reducing warehouse travel/pick time.

Mobility to Democratize Decision Making

Enable warehouse executives to access the information and insights in real time on their mobiles and wearables so they can make instant decisions.

Supplier Visibility

Real-time updates at multiple checkpoints offer better visibility to the shop floor and even suppliers. Visibility into material consumption on shop floors allows retailers to replenish stock just-in-time, avoiding stock-outs and material carrying costs.

Technologies

Info-Tech Resources

• Why Retail Distribution Centers Need More Than Just WMS
• Wholesale Automation Report
• Get Started With Artificial Intelligence
• Create an Architecture for AI

Trend 06 I Warehouse Automation

Bibliography

Baker, Linda. “Report: Warehouse robotics investment surges 57% in 2020.” FreightWaves, 2 July 2020. Web.

Chalberg, Michael. “The Benefits and Features of Automated Inventory Management for Retailers.” Korona POS, 9 Feb. 2021. Web.

Heymann, Nicholas, et al. “Robotics, Automation, and AI: Explosion of New Markets Across Broad Segments of the Economy.” William Blair, 6 March 2020. Web.

“How can Robotics-as-a-Service (RaaS) benefit your organization?” Deloitte, 2021. Web.

“Iptor Transforms the Digital Supply Chain with AI-Enabled Chatbot ‘Sara’.” SDC Executive, 2 Dec. 2019. Web.

Jenkins, Abby. “Warehouse Automation Explained: Types, Benefits & Best Practices.” Oracle Netsuite, 10 Dec. 2020. Web.

Koetsier, John. “Keeping Up With Amazon: How Warehouse Robots Are Revolutionizing The On-Demand Economy.” Forbes, 4 April 2022. Web.

Koetsier, John, host. “Automating the on-demand economy: keeping up with Amazon’s 200,000 robots.” TechFirst, 4 April 2022. Podcast.

“The logistics automation market was valued at USD 52.19 billion in 2020 and is expected to be USD 104.23 billion in 2026, registering a CAGR of 12.42% during the forecast period (2021 - 2026).” ReportLinker, 2 Feb. 2021. Globe Newswire. Press release.

Mangubat, Riley. “Pros & Cons of Robots in the Warehouse.” Flock Freight, 15 Nov 2017. Web.

Marak, Sylvia. “Warehouse Automation Trends in 2022 and Beyond.” SelectHub, 17 March 2022. Web.

“Number of mobile app downloads worldwide from 2016 to 2021.” Statista, 31 Jan. 2022. Web.

Oitzman, Mike. “Locus Robotics announces a unique multi-bot approach to warehouse logistics management.” Mobile Robot Guide, 10 May 2022. Web.

Pickett, Chris. “Pros & Cons of Robots in the Warehouse.” Flock Freight, 15 Nov. 2017. Web.

Placek, Martin. “Global warehouse automation market size 2012-2026.” Statista, 12 April 2022. Web.

Prisco, Jacopo. “Why online supermarket Ocado wants to take the human touch out of groceries.” CNN, 24 May 2021. Web.

Stone, Scott. “Warehouse Automation Risks to Avoid.” Cisco-Eagle, 15 Oct. 2020. Web.

“Top 5 benefits of warehouse automation.” iWMS Australasia, 25 Oct. 2019. Web.

“Warehouse automation best practices: Setting your automation up to succeed.” iGPS, 23 April 2020. Web.

“Warehouse robotics market - growth, trends, covid-19 impact, and forecasts (2022 - 2027).” Mordor Intelligence, 2022. Web.

“Warehouse Robotics Market - Growth, Trends, Forecasts (2020 - 2025).” Mordor Intelligence, Oct. 2020. Web.

“What are the key benefits of an automated warehouse?” GEODIS, 10 March 2022. Web.

Prioritization & Alignment Tool

Trends Report | Omnichannel Retail

Funnel technology trends into business opportunities

Transform strategic foresight trend insights into actionable initiatives by determining what technology you should prioritize and how to win stakeholder approval

Analyzing trends is one of the most important tasks for innovation and digital transformation. It provides the basis for developing the future alignment of the retail omnichannel. However, being aware of a trend is one thing. Developing a strategy for response is another. Info-Tech has evaluated and chosen trends that are important in different capacities.

Your strategy should involve the following steps:

1. Prioritization: Info-Tech began this step for you by determining the general impacts of the trend for the industry and the technologies available in the space. Now it’s your turn. Which technologies should you prioritize?
2. Alignment: After determining what to prioritize, establish which trend offers benefits that closely align with and promote the success of your business’ goals.

Use the MoSCoW analysis for prioritization

Assessments based on time, relevancy, and impact will inform the overall effect on the industry and specific organization. This information, when contrasted with the concept of a MoSCoW-based relevance to impact analysis, forms an enhanced decision-making framework that can be used to determine initiative sequencing on a strategic roadmap.

	Ranked technologies based on your needs: Technology MUST ADDRESS Technology SHOULD ADDRESS Technology SHOULD ADDRESS Technology COULD ADDRESS Look to implement these technologies into your omnichannel retail enterprise.
Legend: 1 – Weak 2 – Medium 3 – Strong 4 – Superior

Vetting of technology opportunities

To determine which opportunity to act on, use a prioritization framework that enables decision makers to see the timing, relevance, and impact the opportunities pose.

We have defined this criteria already; now leverage it to prioritize the technologies to pursue.

Remove consideration for technology that has already been implemented .		Deprioritize technology that has a timing, regulatory, or budget conflict .

Deprioritize technology that has a timing, regulatory, or budget conflict

1. Business Goals
   • Extract business initiatives from corporate documents that contain business aspirations and goals and outline initiatives to determine existing priorities and goals set out by the organization. Examples of documents include annual reports and business unit strategy documents.
2. Omnichannel
   • Determine the benefits of the omnichannel initiative that closely aligns with and promotes the success of the business goals.
3. Current State
   • Make the case for the omnichannel initiative by discovering gaps in the current state and describing how the retail technology can accomplish the enterprise’s business goals.

Next step

Leveraging the trends report as a key input

The Future of Omnichannel Retail Trends Report

As part of your next steps checklist, leverage the trends report for priorities that drive measurable topline organizational outcomes and unlock direct value.

Business Context & IT Strategy

• Reference Architecture
• IT Strategy
• Digital Strategy

The future will behold more trends and technologies, making it pivotal that your retail enterprise continues to establish itself as the disrupter, and not the disrupted. You must establish a structured approach to innovation management that considers external trends as well as internal processes. Info-Tech’s Industry Reference Architecture for Retail, Define Your Digital Business Strategy blueprint, and Build a Business-Aligned IT Strategy blueprint give you the tools you need to effectively process signals in your environment, build an understanding of relevant trends, and turn this understanding into action.

Research Contributors

LARRY FRETZ
VP of Industry Research
Info-Tech Research Group, USA

DURAID IBRAHIM
Executive Advisor, Global Services
Info-Tech Research Group

RAJIV SHANKAR
Chief Information Officer
REDTAG, United Arab Emirates

CHANDAN MAHAJAN
Co-Founder & CGO
dotkonnekt, New York

ANONYMOUS CONTRIBUTOR
Senior Advisor, Founder
Vancouver, Canada

JOHN LEIDL
Executive Counselor
Info-Tech Research Group

MONICA PAGTALUNAN
Research Specialist
Info-Tech Research Group

CARLOS THOMAS
Executive Counselor
Info-Tech Research Group

GHISLAIN VATHELOT
General Manager & CIS
Generix Group, Accentis CIS

CHEROKEE CHAMORRO
Client Leader
Vancouver, Canada

JEAN-MICHEL KIENTZ
SVP, Technology Lead
The Estée Lauder Companies, New York

CRAIG PATTERSON
Founder, and Co-Editor-in-Chief
Retail-Insider.com, Canada

NASTARAN BISHEBAN
Chief Technology Officer
KFC, Canada

SAJID SAIYED
UX Leadership
Palo Alto, USA