The retail industry and their customers have made significant adjustments since the beginning of the COVID-19 pandemic. With each of the 50 US states closing for weeks or months, customers shifted their behavior to assure they could still get their toilet paper, hand cleansers, and meals, while retail establishments made adjustments to try and ensure their viability.
Digital transformation was enforced on many retailers, and CIOs were left grappling with the abundance of technology choices to make critical business decisions.
eCommerce was put to the scalability test
While eCommerce is not a new phenomenon, the pandemic forced consumers to shift their buying into online purchases – causing retailers to invest in mobile ordering applications with home delivery, curbside pickup, ship from store, and BOPIS (Buy Online and Pick Up in Store) delivery options. According to the U.S. Department of Commerce, total retail sales rose by 6.9% from Q4 2019 to Q4 2020, while e-commerce sales jumped by 32% in the same time span, increasing the percentage of sales belonging to e-commerce from 11.3% to 14%.
Currently, 69% of Americans have shopped online, with 90% expected by 2023 (Optinmonster, 2021). But, buying online is not just a US phenomenon. Worldwide, there are over two billion online shoppers, 26% of the global population, and 63% of shopping trips begin on-line (Think with Google). The US does lead the way with $1,804 average revenue per online shopper, but countries like the UK, Sweden, France, and Germany are also over the $1,000 per on-line shopper mark (Optinmonster, 2021).
The transformation of stores into micro-fulfillment centers
Many retailers were forced to close their stores or declare bankruptcy. Iconic names such as Lord and Taylor, J.C. Penney, Neiman Marcus, and Bed Bath & Beyond suffered significantly due to the pandemic-caused drop in sales.
Other companies adapted to the changed circumstances. Target became not just a place to shop in-person, but a fulfillment center, where buyers could go and pick up the order they placed online, often curbside. Best Buy closed all their stores but were able to keep 75% of their sales volume by turning stores into fulfillment centers. They are now reconfiguring the stores that have re-opened, providing less square footage to the showroom and more to the role of micro-fulfillment center, a practice other retailers are likely to emulate.
The broader acceptance of Walk Out technology
Shopping online has its advantages – it can be done 24/7, you do not have to go anywhere, and you can see a multitude of options. Consumers often spend hours online looking up products, prices, features, and reviews. However, shopping in-person does have benefits as well. Shoppers can see a variety of choices, grouped together, examine them, and ask questions of a knowledgeable salesperson, all within 15-20 minutes. The in-person, tactile shopping experience will always have its place.
New technologies will also help the retail market rebound. Amazon introduced its Just Walk Out technology, allowing shoppers to roam a store, put purchases in their basket, and walk out, with no need to spend time in a check out line. This is done with an ingenious combination of AI, scanners, and computer vision. The technology was first implemented at Amazon Go stores but is now available for other retailers to incorporate. While retailers can be reluctant to embrace new technologies, likely early adapters are movie theaters and airports. The Just Walk Out technology does generate a lot of data, so retailers that install it must have the resources to interpret and act on that information.
The growing adoption of robots in everyday operations
Another technology finding adoption in retail is robotics. Amazon and other large retailers had been using robots for inventory management for some time, but the trend is catching up to automate other mundane tasks and trim costs beyond warehouses. Grocery stores are exploring using them to do routine tasks such as scanning shelves, checking for spills, and taking temperatures of specific areas. Automating these tasks frees up employees to help customers. By 2025, more than 150,000 mobile robots will be deployed in brick-and-mortar retail establishments, according to an estimation by ABI Research.
Technology came to rescue but a new challenge ensues for CIOs
The CIO who had to make quick changes to operating procedures in 2020 is now being asked to optimize those costs. Last year it was “get it done, forget the cost, this is about survival”, whereas in 2021 they are expected to find long-term solutions at a more manageable cost. The successful organizations will provide end-to-end technology solutions that remove friction from the shopping experience without IT complexities and ridiculous cost.