Best Practice

This is how the Retail of the future works: 5 hypotheses

Challenges and digital potential

One challenge is to develop a suitable business model with regard to the sales and digital transformation.

The potential for the retail sector lies in opening up new customer areas and income streams. Another challenge is to incorporate the change in customer behaviour (always online and ready to shop) into the business model. By collecting data, it is possible to gain customer insights for the personalised approach. A successful "Seamless Commerce" approach is essential in order to offer the customer added value on various distribution channels.

The most important challenge for the retail sector is to take advantage of areas of innovation such as Big Data & Analysis, Automation using Artificial Intelligence (AI), simplicity & security, loyalty & entertainment, in order to achieve increased process efficiency thanks to faster, personalised customer communication and predictive data analysis. Online continues to be on the rise: the latest figures from the German 
E-Commerce and Distance Selling Trade Association (Bundesverband E-Commerce und Versandhandel Deutschland e.V. - bevh) confirm sustained growth in online retail. In 2018, online retail took a 95 percent share of overall sales in interactive retail (online and classic mail order).

Reply's 5 hypotheses on the future of retail

Hypotheses 1: re-create or die

The change in retail concepts and sales structures is unstoppable. Traditional shoppers and with them the traditional retailers are threatened with extinction. Shoppers specifically prefer to shop online, in order to save time, to get a comprehensive overview of the wide range of products and to compare the prices of different suppliers, as well as to get inspiration. They respond to the situation and are open to new methods or products. 

One example is e-food: The bevh identified an increase in turnover of almost 27 percent in the second quarter of 2018. Even though the online sale of food is in its infancy in Germany, the market is growing extremely strongly in comparison to other online retail areas. On the whole, with their increasing need for personalised, yet simple, fast shopping, customers are at the centre of developments more than ever before.

Hypotheses 2: the innovative winner will take it all

Drones, chatbots, digital assistants and mobile phones ensure that shopping behaviour will continue to revolutionise. A study by Bazaarvoice shows that shoppers today are often on the move. Over 50 percent of page views come from mobile devices. Concepts such as a digital navigation system in the supermarket are high on the wish list of shoppers – as well as exploiting the opportunities offered by Artificial Intelligence and the associated automation. As the study "Automated Shopping – Hit or Hype in Retail?" by ECC Köln and SAP Customer Experience shows, four in ten consumers can already imagine automated shopping in order to make purchasing everyday products quicker. 

From 2020, the new 5G mobile network standard with a bit rate of 10,000 Mbit/s is to be introduced to the mass market. For retail it is expected that 5G will further advance the mobile use of AR and VR. New shopping concepts are required. For retailers, it comes down to reacting to the new customer requirements quickly and innovatively, with the aid of AI, IoT or other innovative technologies, by offering customer-oriented services. Examples include the use of modern apps as well as establishing and personalising the ordering system for the user. Consumer-generated content, such as product ratings and social content, is becoming increasingly significant for online retail.

Hypotheses 3: the experience counts

Shopping must be an experience across all channels – with entertaining formats throughout the customer journey, in order to ensure customers are not lost along the way. Within this time it is necessary to fulfil customer needs and entice them to make a final purchase. The aim for the future is to combine the data gathered in-store and out-of-store and translate it into a personalised approach to consumers for the retail sector. Options such as a mobile payment system – for example the checkout-free supermarkets of Amazon Go in the USA – set new standards in the area of convenience in retail.

Connected Commerce represents the connection and fusion of online trade with in-store retail. In the minds of consumers, the online and offline channels are already a single world. They move between the different channels, with the smartphone and tablet serving as the connection between the analogue and digital worlds. Variety and flexibility when shopping make the purchasing process a real shopping experience. Users do not comprehend differences between online and offline. The German Retail Federation (Handelsverband Deutschland - HDE) predicts that in 30 years retail will experience a complete paradigm shift and e-commerce will be the driving force in retail.

Hypotheses 4: data is the fuel

Shopping both online and in stores increasingly depends on data and algorithms. In order to stay competitive, retailers must keep their databases up to date and at the same time must be able to analyse them based on a variety of parameters. The industry acts according to the needs of the customers, who want to have access to products online or offline, depending on the situation. For this reason, there is increased investment in process optimisation and information flow. 

The main challenges here are the gathering, clustering, analysis and merging of big data. Added to this is information about the customer, about previous orders and about products that have been added to wish lists. With this data, potential customers can receive the right offer at the right time on the various channels. Not only is speed crucial for the user but also convenience and service. Transparency is the most important factor for customers, because their trust forms the basis for a lasting customer relationship.

Hypotheses 5: brand leadership rules

The time of exorbitantly high profit expectations in e-commerce is gone and market shares are distributed between the big players. Only with an innovative marketing concept can (online) retailers win over their target group. It is worth looking at the market leader Amazon. The e-commerce giant impresses its customers with consistently good service. The key factors are customer retention and a strong brand that consumers trust.

Competitors can start here and develop innovative, customer-centred shopping experiences. A strong basis of trust is created by retailers by such means as protecting customer data, ensuring the security of their own systems and having a high level of transparency. In addition, the use of all possible data and the incorporation of artificial intelligence and other new technologies are relevant for competition.

The Retail trade of tomorrow based on the latest technologies

The retail of the future is personalised, customer-oriented, available anywhere, emotional, flexible, connected and uses the latest technologies. For example, voice control and digital voice assistants also offer another touchpoint with the customer. Because, with the right approach, almost all customers purchase more. The philosophy of the consumer is "shopping anywhere, any time".

This will stay in your mind

  • The change in retail concepts and sales structures can no longer be stopped.

  • New customer needs must be met with innovative technologies.

  • Targeted omnichannel management turns shopping online and offline into an experience.

  • Those who use data intelligently have an advantage.

  • Strong brands dominate the market.

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