Two years before the COVID-19 pandemic jolted the retail landscape, Jeff Schmitz (@JeffreySchmitz4)
Chief Marketing Officer Zebra Technologies, insisted the retail sector was in the midst of a revolution. He explained, “The outlook is strong and retail technology spending is expected to rise three percent over the next three years among retailers with greater than 50 stores. It’s undeniable that we’re in the midst of a retail revolution.”[1] Schmitz identified four trends he believed characterized the ongoing revolution. They were:

1. Retail Stores Blur with Distribution Centers. Schmitz noted, “The rise in alternative fulfillment options, like buy online, pick up in store (BOPIS), is driving a holistic integration of e-commerce and in-store operations. This end-to-end visibility model means retail stores should now be equipped to double as distribution centers.”

2. Shopper Expectations Squeeze Supply Chains. According to Schmitz, “66 percent of shoppers prefer next- or same-day delivery. Meanwhile, more than half of online shoppers are not satisfied with the returns/exchange process. Heightened fulfillment expectations are shifting retailers’ focus to providing online customers the immediacy of what you historically get in store.”

3. Mobile Devices Give Life to a ‘New’ Store Associate. Since the emergence of the smartphone, showrooming had been the bane of many retailers. Schmitz believed 2018 marked a pivot point at which mobile devices were finally welcomed on to the retail floor. He wrote, “Associates armed with advanced, user-friendly mobile devices are suddenly able to take on backend or warehouse tasks without ever leaving the customer’s side, giving life to a new type of associate.” Entrepreneur Andrew Medal (@AndrewMedal) adds, “Providing consumers with a user-friendly, engaging and useful online and mobile experience is key for retailers.”[2]

4. Renewed Focus on Quality. One benefit of in-person shopping is the ability to see, touch, and evaluate merchandise for quality. Schmitz believed retailers were going to make quality a priority selling point. He wrote, “Quality is top of mind for retailers, even those who aren’t in the luxury business. Whether it’s recycled and environmentally-friendly materials, or custom-made, today’s consumers increasingly ask for a new standard in quality.”

The pandemic accelerated many of those trends along with one trend he didn’t mention — cashless transactions. Writing about the same time as Schmitz, retail journalist Daphne Howland (@daphnehowland) noted, “Despite the fact that for the most of their lives smartphones have been an extension of their very selves, Generation Z, like their older millennial cousins, love stores and cherish experiences — they even use bank branches more often than Baby Boomers. This sounds like a throw-back, an affinity for the vintage. So how many younger consumers are likely to pay with digital wallets? Probably more than most retailers are prepared for.”[3]

There is no denying that the pandemic changed the face of retail forever. Retailers soon learned they had to master omnichannel operations as well as adapt in other ways to this new business landscape. The question is: Did these changes amount to a retail revolution? Whether you consider those changes revolutionary or evolutionary, change has certainly been in the air these past four years.

Retailers Embrace the Digital Age

Prior to the pandemic, retail business consultants, like consultants in other economic sectors, advised clients they needed to transform into digital enterprises. At first, there was some reluctancy. After all, it’s difficult to change course when the traditional way of doing things has been successful. What changed the mind of many retailers was the so-called retail apocalypse triggered by the growth of e-commerce. Medal noted that a 2018 study by Forrester found, “The retail industry … appeared to be setting the standard for innovative, digitally-driven customer experiences. And those innovations are having a major impact on retail industry specifically; but that should come as no surprise. The reason: As more and more consumers turn to digital sellers, brick-and-mortar retailers increasingly are being left behind.”

Nevertheless, digital transformation requires careful consideration about how technology is used. Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, insists that digital transformation requires a paradigm shift in the way organizations operate. She explained, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[4]

Retailers that were well into their digital transformation journey at the start of the pandemic generally fared better than competitors that had yet to embrace the Digital Age. Nevertheless, Wang’s point about “doing digital” as opposed to “being digital” had some pundits worried about the future of retail. For example, Luis Perez-Breva (@lpbreva), an MIT professor and Faculty Director of MIT iTeams, also writing two years before the pandemic struck, worried that artificial intelligence (AI) in the retail sector was going to be used incorrectly. He explained, “Everyone seems to be ‘using’ artificial intelligence these days. So is retail. … There’s just one problem. Most of what the retail industry refers to as artificial intelligence isn’t AI. Furthermore, it’s bad for both customers and retailers. Using the ‘AI’ that worked online in physical stores risks making physical stores look increasingly like websites amid a larger trend towards automation and reducing human presence in stores. This is altogether a very poor idea.”[5]

Perez-Breva predicted that the retailers would find their best use of cognitive technologies in the area of supply chains. He explained, “There are two areas where a more genuine use of those same tools holds potential for retail: Logistics and turning customer assistance into expert advice and information gathering. AI technologies help interpret information differently from humans. This means that they hold great potential for priming supply chains, potentially all the way to your physical store.”

Concluding Thoughts

Scanning today’s business landscape, it’s fair to ask whether the retail sector has, in fact, undergone a revolution. Diane Burley, Director of Content at Coveo, seems to think the revolution remains ongoing. She writes, “Retailers know that they need new ways to engage and retain shoppers, technology teams are searching for new skills and better tools to achieve that.”[6] She adds, “Shoppers are ready to buy from retailers that personalize the shopping experience.” To achieve retail goals and satisfy shoppers, Burley believes retailers need to leverage artificial intelligence. Retail journalist Dan Berthiaume (@DBerthiaumeCSA) agrees with that assessment, he writes, “Retailers are finding machine learning (ML) technology to be highly applicable to current business issues.”[7] He adds, “In the past few years, retail has found itself facing a number of high-impact events that even the best currently available AI-based predictive systems could not foresee. These include the COVID-19 pandemic, global supply chain disruption, and an ongoing labor shortage.”

The advantage of cognitive technologies, Berthiaume notes, is that retailers leveraging them can react faster than they could in the past. “Technology provides two key advantages in dealing with this type of unpredictable disruption,” he writes. “First, as soon as an event like a pandemic occurs, ML solutions can begin detecting and analyzing data patterns to recommend responses that are much more constructive than reactions based on human intuition alone. Second, once an ‘unpredictable’ event such as COVID-19 or global supply chain disruption has occurred, ML technology can recognize otherwise undetectable data patterns to sense when a similar situation may be developing. And even if something like a pandemic reoccurs without advance notice, ML systems can rely on previous learnings to provide retailers with a much stronger initial response.” I’ll let you decide if the retail sector has evolved or been revolutionized.

Footnotes
[1] Jeff Schmitz, “Why Supply Chains and Manufacturers Can’t Ignore the Retail Revolution,” DC Velocity, 20 February 2018.
[2] Andrew Medal, “Retailers Jumping on the Digital Bandwagon Are Transforming the Industry in 3 Key Areas,” Entrepreneur, 5 June 2018.
[3] Daphne Howland, “Gen Z is about to kill cash,” Retail Dive, 23 April 2018.
[4] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[5] Luis Perez-Breva, “Why retail’s artificial intelligence bet is all wrong,” Quartz, 5 March 2018.
[6] Diane Burley, “What shoppers want requires AI – while tech execs are wary,” Retail Dive, 22 February 2022.
[7] Dan Berthiaume, “Machine learning – the future is now for retailers,” Chain Store Age, 9 September 2022.