Digital Disruption in Retail An Executive Briefing Insights for Strategic Decision Making

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Executive Briefing: Digital Disruption in Retail

Innovation & Insight

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Understand how retailers are addressing their most critical strategic challenges through Disruptive Technologies

Learn which are the top 6 Disruptive Technologies that will shape the future of Retail

Get strategic recommendations to future proof your business and maximise the technology potential

The Executive Briefing will allow you to

Prioritise your digital investments to transform your disruptive capabilities

Insights addressing Strategic Issues and practical Technological Solutions

5

Get an Executive Briefing for any of the top 18 industries and future proof your business

Please contact our consulting team on consulting@globaldata.com to discuss your requirement and for pricing information

Consumer Products

Retail

Foodservice

Pharma

Medical

Technology

Oil & Gas Power

Mining

Banking &

Payments

Insurance

Construction

Defence

Retail

Foodservice

Pharma

Medical

Technology

Oil & Gas Power

Mining

Banking &

Payments

Insurance

Construction

Defence

Automotive

6

Table of Contents

Executive Summary ….…………………………………………………………………………………………………… 3

Retail’s Strategic Challenges …………………………………………………………………………………….……. 7

Strategic Challenges impact on Retail’s Value Chain ….…………………………………………….……. 8

Disruptive Technologies that will shape the future of Retail ..………………………………….……. 9

Case Studies & Recommendations

Machine Learning in Retail ……………………………………………………………………….…. 16

Mobile in Retail …………………………………………………………………………………………... 25

Internet of Things in Retail ………………………………………………………………………….. 34

Automation in Retail ……………………………………………………….……………………….…. 43

Virtual & Augmented Reality (VR/AR) Technology in Retail ………………………... 52

Conversational Platforms in Retail ………………………………………….……………….…. 61

Appendix ….…………………………………………………………………….……………………………………….….. 70

About GlobalData Consultancy….…………………………………….………………………………………..…. 72

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Executive Summary

What are retail’s strategic challenges?

Since the arrival of e-commerce, traditional retailers have struggled to keep up with changes to consumers’ shopping behaviour. The ability of customers to easily and quickly find the lowest prices, plus the cost and investment of online operations has caused margin erosion.

As spend continues to migrate online, the fragility of the traditional retail model has become apparent and retailers have struggled with overcapacity.

The integration of channels has made understanding the value each contributes to purchasing quite opaque, which makes optimising the customer journey more difficult than ever.

The convenience of online has made attracting shoppers into stores harder, and so retailers are having to differentiate and shift emphasis in retailing from product to experience.

Which disruptive technologies can help with these challenges?

Over the next five years, six disruptive technologies will shape the future of retail and help address the challenges retailers face. We have prioritised them in order according to their ability to meet and solve these challenges; the extent of their application across the value chain; and the level of activity in deals and investment in each over the past four years. In order of priority they are:

Machine Learning

Mobile

Internet of Things (IoT)

Automation

Virtual Reality and Augmented Reality (VR/AR)

Conversational Platforms

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Executive Summary (cont. 2)

How are retailers using these disruptive technologies?

Machine learning - the ability of computer systems to learn and improve from data without human intervention Areas it is being used in include facial recognition, optimisation of site navigation, more relevant customer recommendations and better demand forecasting. Costco used the technology to accurately forecast the demand for baked goods each day, leading to reduced waste, a fresher product

at all times and unnecessary labour costs. Mobile – no longer just for m-commerce, but retailers can deepen their relationships with shoppers by getting them to interact on smartphones while in their stores, allowing the retailer to truly understand the customer journey and engage with the customer Amazon Go stores are an ambitious example of this, where shoppers are allowed – through the use of a smartphone app – entry to the store and are given the freedom to take the products they want without using a checkout, and Amazon gets a very rich data set to add to their already impressive knowledge of their customers.

Internet of Things – the use of connected sensors to control and monitor environments and learn shopper behaviour It has long been used in logistics, but plummeting costs enable its use at the product item level. Alibaba has used IoT technology to truly integrate the online and offline worlds in its Hema supermarkets, where customers have the benefit of a combination of convenience and experiential shopping in store, plus fast online delivery capabilities from the store. Cont/...

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Executive Summary (cont. 3)

How are retailers using these disruptive technologies?

Automation – the reduction of human intervention through the use of computers and robots This is being used throughout the retail value chain, from food processing through to warehouses, and increasingly in customer facing tasks such as self service checkouts, while potential abounds with automated vehicle pilots for last mile deliveries. Ocado has invested heavily in automation at its grocery warehouses, in order to streamline the movement of products. Its robots pick and pack customer orders without human intervention, significantly speeding up the process, enabling it to cut costs and increase capacity.

Virtual Reality/Augmented Reality – the immersion of the user in an artificial world (VR) or the overlaying of digital images onto the user’s experience of the real world (AR). The technology is being used to overcome tangibility gaps between products and their pre-purchase experience of them. Furniture giant IKEA developed an AR app which allows shoppers to view how an item will look in their home, by overlaying a digital image of the item onto the camera function of the user’s smartphone.

Conversational platforms – technologies that facilitate human-like interaction with computer systems These are being used by a number of retailers as shoppers become less resistant to interacting with machines and retailers cut back on the labour intensiveness of customer service. Footwear brand Nike is using conversational platforms to interact with customers on Facebook Messenger, where a chatbot helps shoppers choose and even design personalised shoes.

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Executive Summary (cont. 4)

Source: GlobalData

Notes: See Appendix for methodology

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1

3

4

5

6

Machine Learning

Mobile

IoT Automation

Conversational Platforms VR/AR

High

Low High

Low

High

Low

Solu

tio

n fo

r st

rate

gic

chal

len

ges

+ ex

ten

t o

f u

se in

val

ue

chai

n

Bubble size = value of deals 2015-2018. Positioning scored on usage in value chain + ability to solve retail challenges x total number of deals and total value over the period

Investment activity 2015-2018

Technologies with most widespread application/and benefit to retailers in the value chain and highest investment/deal activity 2015-18

PRIORITIES

1. Machine Learning: Can be applied across the whole value

chain, and provides a response to all the strategic challenges

retailers face. Having the highest volume of deal activity and

second highest spend underlines its value.

2. Mobile: Recognised as the essential tool to engage with

shoppers, hence the high spend and deal activity. It has the ability

to resolve all the strategic challenges at some level and be utilised

across most of the value chain.

3. Internet of Things: Again widespread use to solve strategic

challenges, an evolving technology with more investment and

usage in future increasing potential.

4. Automation: Essential for cost effective and speedy operation.

5. VR/AR: Still in a nascent stage but has potential for greater

application and consumer engagement as it develops.

6. Conversational Platforms: Yet to be proven as a shopping

medium in the home, but chat bots improving customer

interaction with retailers.

2 Sample Slides

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Understand how Digital Technologies are addressing your industry’s strategic challenges (Sample 1)

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Retailers face multiple strategic challenges

Optimizing the customer journey

Margin erosion

Fragility of traditional

retail modelOvercapacity

Shift from product to experience

The need to understand the role of each channel and touchpoint in an omnichannel experience

Due to increased competition from pureplays and investment in multichannel

The struggle to evaluate emerging and diverse threats and adapting the model accordingly

Too much physical space in mature economies, exacerbated by increasing

penetration of online – shaking out weaker operators

The online experience emphasizes convenience,

forcing stores to differentiate and focus on experience

Source: GlobalData, 2019

Retail’s Strategic

Challenges

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These strategic challenges impact the entire retail value chain

Wholesale Distribution Centre

Retail Distribution Centre

Manufacturer/Processor

Distribution

Head Office

Website

Third Party Pick-up / Drop off

Store

Source Point of Sale

Farm

Product Components (e.g. textiles)

Packaging

Processed Final Goods

Third Party Market Place

(Amazon)

Consumer

Retail model

Optimising customer journey

Margin erosion

Overcapacity

Shift from product to experience

Source: GlobalData, 2019

The Retail Industry Value Chain

Transport & Logistics (Air, Land, Sea)

Consumer Interactions

Relevant Coverage

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Identify the Market Leaders & Disruptive Entrants across your value chain (sample 2)

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Learn from the most innovative companies (sample 3)

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What should retailers consider to maximise technology potential ?

Executive Insights for sound Decision Making (sample 4)

16

Get an Executive Briefing for any of the top 18 industries and future proof your business

Please contact our consulting team on consulting@globaldata.com to discuss your requirement and for pricing information

Consumer Products

Retail

Foodservice

Pharma

Medical

Technology

Oil & Gas Power

Mining

Banking &

Payments

Insurance

Construction

Defence

Retail

Foodservice

Pharma

Medical

Technology

Oil & Gas Power

Mining

Banking &

Payments

Insurance

Construction

Defence

Automotive

3 Credentials

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