Month: August 2022

Digital and automation technologies are rapidly evolving. This has resulted in new developments in a number of industries, including retail. Retail technology encompasses innovation and digitalization in retail and e-commerce processes, from checkout to inventory management, order fulfillment, and in-store service. The use of retail technology plays a fundamental role in enhancing the customer experience.

Today, both brick-and-mortar and online companies are investing in many aspects of retail technology. In-store retail technology tools include artificial intelligence technologies such as smart mirrors and self-checkout systems.

For e-commerce businesses, retail technology delivers efficient inventory management through cloud-based software, helps manage the customer base, and maintains a seamless retail experience across multiple platforms with CRM tools.

Retail technology market size

Retail technology is fundamental for mainstream businesses, B2B and B2C e-commerce businesses, online marketplaces, and e-services such as food picking and delivery. Funding for these segments has grown substantially in recent years, prompting companies to digitize their organizations. In 2020, investments and funding of approximately US$40.2 billion were directed towards retail technology deals across all sectors.

Leaders in retail technology

Globally, Asia has the largest share of investment and finance in retail technology. This is not surprising, as the region currently has the highest internet revenues and the highest number of e-commerce users. In second place is North America, which received about 34 percent of global funding for retail technology in 2020. Compared to the two largest retail technology pioneers, Europe is lagging behind in terms of investment in retail technology.

Market overview

The global retail digital transformation market was valued at $143.55 billion in 2020 and is expected to reach $388.51 billion by 2026, with an expected CAGR of 18.2% over the forecast period (2021–2026). The emergence of digital technologies for collecting, storing, analyzing, and disseminating information has created a new dynamic of digital transformation in the retail market.

This digital technology has also opened up many new opportunities for providers serving the market, as an organization requires an efficient and easy workflow due to the growth of global liberal trade policies and end users.

• Rapidly growing internet penetration is a key driver of market growth in the forecast period.
• The increasing use of smart devices and the gradual advancement of technology will pave the way for growth in this market, making this technology more affordable for small and medium-sized retailers.
• The emerging economies of the Asia-Pacific region, the Middle East, and Latin America have been instrumental in driving market growth, especially thanks to the growing purchasing power of consumers in China, India, and Saudi Arabia, among other countries.

Smart retail

Smart retail is a hybridization of traditional shopping methods and modern smart technologies. Through the Internet of Things, data is accumulated through the exchange of data between implanted devices and computers. As a result, consumers can have a more personalized, faster, and smarter experience. This can take the form of customized coupons and carefully curated promotions.

The global smart retail technology market is expected to grow from $22.6 billion in 2021 to $68.8 billion by 2026, growing at a CAGR of 24.9% over this period. The smart retail technology market in North America is expected to grow from $9.4 billion in 2021 to $28.6 billion by 2026, growing at a CAGR of 25.0%. Meanwhile, the European smart retail technology market is set to grow from $6.9 billion in 2021 to $20.2 billion by 2026, at a CAGR of 23.9%.

Retail technology trends

Digital payments

Digital payments are defined as cashless transactions processed over digital channels. The digital payments segment held a global transaction value of $5.204 billion in 2020 and is the largest FinTech segment. The digitalization of financial services is revolutionizing the industry when it comes to the checkout process (online shopping) and point-of-sale transactions (offline shopping).

As such, digital payments can be seen as the next evolutionary step towards providing value-added financial services and replacing legacy payment methods (from cash to credit/debit cards and mobile digital wallets). The digital payments market segment comprises the following sub-segments:

• Digital commerce consists of online consumer transactions directly related to the purchase of goods and services on the internet. Transactions can be made using a variety of payment methods (credit cards, direct debit, invoice or online payment systems like PayPal and AliPay).
• Mobile POS payments are processed using smartphone applications (called mobile wallets). Notable providers of mobile wallets include ApplePay and Samsung Pay. In this case, payment is made through the contactless interaction between a smartphone application and a suitable payment terminal.

Social commerce

The surge in online shopping continues, especially given the hurdles posed by the COVID-19 pandemic and brick-and-mortar store closings. According to a recent survey by PwC, in the past 12 months, 34% of shoppers purchased an item online using a PC, 38% purchased an item online using a tablet, and 44% purchased an item online using a mobile phone. 

• Over 50% of consumers surveyed said they have become more digital since the first Pulse survey.
• Smartphone purchases continue to skyrocket, with in-store sales up 2 percentage points immediately after the March 2021 Pulse survey and more than doubling since 2018.
• Compared to the first survey, more people say they shop online at least once a day.

Social commerce — a natural shopping experience on a social media platform — offers consumers an even more convenient way to shop online. Instead of going to a third-party website, users can shop directly from an app or social media site.

In 2020, we witnessed a partnership between TikTok and Shopify, expanding their own Snapchat stores for brands and opening up Facebook stores.

Social commerce sales in the United States are expected to grow 35% by the end of 2021 to over $36 billion.

Shops are custom showcases for businesses on Instagram and Facebook. Sellers can create collections of featured products and customize the look and feel of their Stores with banners, images, colors, and buttons. The same store can be accessed from both Facebook and Instagram, so once created, merchants have the ability to reach a wide global audience across two platforms.

With Shops, Facebook caters to more brands than ever before. This is part of Facebook’s effort to create a personalized shopping experience for users in the Store section of the app, which we expect to become more visible to users in the near future.

AR shopping

Innovative retail trends like augmented reality (AR), machine learning, and artificial intelligence (AI) are not going anywhere. While augmented reality is not new to retailers, it has grown from being a simple thing to being part of retailers’ e-commerce offerings.

With so many shoppers continuing to shop online during the pandemic, retailers are using augmented reality technology to bridge the gap between digital and physical. In fact, according to the 2020 IBM US Retail Index, COVID-19 accelerated the digital shopping experience by about five years.

While brands such as IKEA, Home Depot, and Target have their own augmented reality shopping experiences, augmented reality commerce isn’t just for megabrands. Shopify has introduced Shopify AR, an easy-to-use set of enterprise tools for creating AR user interfaces to showcase your products to customers.

Shopify reports that when interacting with products with AR content, the conversion rate is 94% higher than for products without AR.

Overall, when it comes to technological advances in retail, look for more brands to take advantage of AR opportunities in 2022 and more shoppers looking for AR opportunities to make purchasing decisions.

Virtual fitting rooms

Gartner predicted that there would be 100 million AR users by 2020, and that turned out to be correct. In 2020, the conversion rate of AR users increased by 90%. 

Virtual fitting rooms are one of the most exciting innovations in AR retail. Because it is more difficult to use a try-before-you-buy approach while complying with public health requirements during the COVID-19 pandemic, augmented reality is in a unique way to help shoppers make product choices.

While many other retailers have suffered losses in the face of the pandemic, Sephora made great strides in AR in 2020. Using virtual fitting rooms, shoppers can try on Sephora merchandise such as jewelry and cosmetics on their smartphones. Other retailers, such as Kendra Scott and Etsy, also use virtual fitting room technology.

Since virtual purchases can be made on customers’ smartphones, ARKit will be a vital part of building augmented reality apps in 2022. 

Smart speaker shopping

Everyone seems to have an Amazon Echo or Google Home these days. The global smart speaker market is projected to grow to more than $35.5 billion by 2025.

87.7 million adults in the United States have smart speakers, corresponding to more than a third of consumers. How will the retail trend for smart speakers develop over the next year?

Amazon Echo and Google Home smart speakers have become key tools for many online shoppers, especially as we all spend more time at home during the pandemic. About 20% of smart speaker owners use them for shopping, such as ordering groceries, doing research, or tracking shipping. This is expected to rise to 52% over the next four years.

In 2022, we can expect more and more consumers to shop online without even looking at the screen, especially on Amazon.

But even brands not listed on Amazon can leverage smart speaker and voice search technology. When a voice assistant gives an answer, it also lets users open the website where the answer was found. For brands that prioritize voice-optimized SEO, this can mean increased traffic.

By 2022, voice shopping may account for $40 billion in consumer spending in the United States. Voice assistants like Google Home, Apple’s Siri, and Microsoft’s Cortana have gained popularity among consumers who use voice assistants to find products, make purchases, and compare purchases. With voice assistants, consumers can find products faster, more conveniently, and hands-free, adding a whole new dimension to your retail strategy.

Chatbots

By 2023, it is expected that over 70% of chatbot conversations will be handled by AI-powered retail conversations. In a 2019 survey, around 40% of US consumers said they used chatbots for retail interactions.

As of 2020, around 54% of consumers interacted with artificial intelligence organizations on a daily basis. Chatbots provide 24/7 support, answer frequently asked questions, and can offer promotions to customers based on their intentions, making them a great candidate for retailers in terms of increasing customer satisfaction and brand loyalty.

In response to Covid-19, retailers have had to drastically cut personal customer support and lean towards more innovative retail trends. More and more businesses are using chatbots and personal assistants to meet customers where they are. Prior to the pandemic, the technology was already used in retail, banking, and healthcare.

While personal interactions certainly have their advantages, chatbots offer businesses and users great benefits, such as lower latency and 24/7 availability.

Some brands, like Lego, have even created digital shopping assistants that provide customers with personalized gift recommendations based on answers to a few simple questions. Once a user selects a product, the chatbot directs them to a website where they can make a purchase.

It’s also important to note that chatbots can go beyond recreating personal experiences — they can create fun, novel experiences unique to the digital space. For example, in 2016, Sephora used the Kik app to create a personalized high school prom.

Partnering with influencer Helen Philips, the brand encouraged subscribers to ask questions for her interactive guide through Kik. They also posted pre-event chatbot warnings and advice that encouraged interactions with Kik, as well as Facebook live streams.

IoT devices and wearables

IoT devices offer great potential to retailers to streamline operations and reduce manual labor:

• Automated checkouts
• Robot employees
• Smart shelves
• Warehouse and supply chain automation, etc.

According to this study, the number of IoT devices surpassed 30 billion in 2020. IoT technology improves store management and provides better customer service, faster service, optimized product placement, proactive equipment maintenance, and more. At the intersection of digital and physical devices, retail IoT devices help you use both for better results.

Final thoughts

Technological advancements are part of the fast-growing retail industry. Smart retailers are adopting industry best practices and recruiting accordingly, keeping an eye on new technologies that will expand and grow their businesses. Ensuring a pleasant shopping experience and customer satisfaction are the top goals of any industry. Retailers can accelerate growth and spend less money through the adoption of technology.

As you can see from the statistics we’ve presented, technology is driving retail, and adding it to your retail business is a must.

If you have any questions regarding retail technology, contact Mobindustry for a free consultation.