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» » Analysis: Predicting the Future of Retail Technology
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By Nick Hughes

Augmented reality and interactive TVs could be about to change how people shop. Retail Week and eBay gathered retailers to discuss their future. Nick Hughes reports on what was said.

From the birth of the internet to mobile technologies, the digital revolution has been the most disruptive influence in the history of modern retailing. It has transformed business models, changed the consumer relationship unrecognisably and altered the rules of retail for good.

Yet even as retail businesses continue to grapple with this new landscape, a ‘third wave’ of technologies is set to revolutionise the retail sector.

And while the rise of another game-changing set of technologies is daunting, a new report, Technology in Retail: Retail’s Two Year Transformation, from retail research agency Conlumino in partnership with eBay says the 10 largest UK retailers could see additional sales of £235m in the next two years by exploiting thesenew developments – including augmented reality, image recognition and interactive television. They will give consumers more choice, interactivity, knowledge and price transparency than ever before.

Earlier this month, retailers gathered at a roundtable discussion, co-hosted by Retail Week and eBay, where they shared opinions on the impact these technologies might have on the industry and their own businesses. The consensus was that the opportunities to present information to consumers in ways previously not possible were hugely exciting, but the implementation of these ‘third wave’ technologies was not without challenges.

The development of mobile technologies has already had a transformative effect on the way people shop. Globally, eBay predicts that $10bn (£6.24bn) of transactions will take place on its platform via a mobile device in 2012, and in 2011 eBay transacted $5bn (£3.12bn) through mobile devices, an increase of 150% from 2010. EBay UK, meanwhile, aims to have around a third of items in its Christmas campaign bought through a smartphone.

EBay UK head of acquisition Joe Tarragano says: “The proliferation of smartphones means that consumers now have a shopping centre in their pocket, where they can research items and make purchases whenever or wherever they want. This, combined with other in-store technologies, is changing the shopping experience and is raising consumer expectations.”

The rise of interactive TV

In exploring what impact the next wave of technologies might have on the UK retail sector, Conlumino deliberately focused on technologies that are rooted in the here and now, rather than the distant future. It concluded that of all the technologies, interactive television is likely to be the most influential, because it forecasts that by the end of 2014 one in four people will regularly use interactive television to shop.

Smart TVs will enable retailers to make online experiences richer and more immersive for consumers, using multimedia to greater effect. TV shows and films are likely to become more interactive – eBay’s US ‘Watch with eBay’ iPad app, for example, already allows users to browse and buy items related to the TV shows they’re watching. By bringing together television and the internet, Conlumino estimates retailers will generate about £750m worth of direct sales by the end of 2014.

Another technology that is set to come to the fore over the next two years is augmented reality, enabling digital information to be overlaid onto real products and spaces. The potential uses of augmented reality can range from showing shoppers 3D projections of products that aren’t physically there, to enabling someone to watch a catwalk show by pointing their phone at a magazine page. EBay’s latest fashion ad campaign, for example, included a virtual magazine available via an augmented reality phone app.

The evolution of in-store technologies will also enrich the customer experience and improve store efficiency, according to the report. Many of the retailers present at the roundtable were already employing in-store kiosks linked to their online stores and equipping staff with mobile devices with transactional capabilities in an effort to integrate their store and online operations. John Lewis is going a step further by piloting virtual mirrors, which project clothing items onto an on-screen image, in selected stores as part of its multichannel offering.

Conlumino also cites image recognition, which allows devices to identify consumers based on their facial features or to identify objects based on their attributes, as having potential applications in retail. Image recognition can drive greater personalisation because it will enable software and systems to react to individuals. And on the product side it could allow consumers to perform visual searches on products they point their devices at.

Finally, smart devices with integrated technology have the potential to make mundane tasks far more efficient. Smart fridges, for example, could add out of stock items to a shopping list, while washing machines could read information from RFID tagged buttons on items of clothing and optimise settings for the wash based on each load.

The opportunity for retailers to exploit these technologies is vast. Conlumino believes they have the potential to add £2.4bn to the retail industry in two years, while the technologies will also indirectly influence £9.1bn in retail sales in the same period.

Where retailers are in agreement, however, is that for third wave technologies to deliver what they promise, they need to be presented to the consumer in a seamless way. Many retailers currently think in terms of channels – mainly comprising stores, online and mobile – but third wave technologies will blur the lines between channels and retailers will need to link different touch points in order to offer a consistent brand experience across all media.

A common view expressed during the roundtable conversation was that for omnichannel retailing to work successfully, getting the back office systems in place will be just as crucial as bringing together consumer facing systems. One of the main challenges for retailers will be managing stock systems so that they have full availability at all times and customers can get what they want, when they want and where they want it.

Culture change

The convergence of channels will also necessitate a cultural shift in the retail sector. Rather than looking at the sales and profits delivered by individual channels, retailers will need to accept that some channels will play more of a supportive role in driving overall growth. As a result, identifying where investment will yield the highest returns will become increasingly difficult. As one retailer put it: “Deciding what is making money will become a lot more complicated. A store might be loss making, but is it working as a showcase for your online site?”

For many, this will mean a fundamental shift away from a culture of competition between different channels. Store managers, for example, who are wedded to the goal of meeting sales targets will have to resist the inclination to view online or mobile sales as lost opportunities, and will need to view their store simply as another touch point for consumers. As one retailer suggested: “Nobody’s allowed to say the word cannibalisation any more, it’s all about choice.”

An omnichannel approach will also need buy-in from boards. For many retailers, online is still viewed as a separate channel that many directors don’t fully understand and is therefore not as well represented at boardroom level. “The first step is that chairmen and chief executives have to entrust multichannel directors,” said one attendee. “If you only know stores and then you’re asked to spend £7m on a new warehouse that’s a big investment.”

Furthermore, retailers will have to get used to the fact that consumers will increasingly only see one channel of their brand. A bad experience in a changing room might mean the consumer no longer visits the online store, while ordering a poorly fitting item of clothing through a TV could negatively affect the opinion the consumer has of the bricks-and-mortar store.

Ultimately, as third wave technologies become reality, the challenge for retailers will be to push the technological boundaries while maintaining consistency across the brand. Those present at the roundtable agreed that only when these pieces of the jigsaw come together will there be a true revolution in the way we shop.

Source: Retail-week

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