As new systems and digital capability continue to evolve the way retailers run their businesses, Essential Retail will be gauging the views of the sector's main figureheads, via a series of exclusive interviews over the coming months. First up, we hear from IBM's head of retail in the UK & Ireland, Martin Butler.

The key technology trends that will drive innovation in retail in the coming year revolve around data, mobile and advanced (cognitive, predictive and real-time) analytics – and the newly merged Dixons Carphone business is talking a good game when it comes to defining the current retailing landscape, according to IBM's head of retail in the UK & Ireland, Martin Butler.

The new CEO of the combined electricals and mobile business, Sebastian James, highlighted his vision for the future of the industry at the British Retail Consortium's (BRC) Annual Lecture in May, saying that maths and data management will be the secret to successful retailing.

James spoke of the need for retail marketing departments to employee PhD-level staff to deal with the data and he referenced a "brave new world" where the smartest retailers will use analytics to understand what a customer wants, before they've even started their shopping journey. It's a landscape that IBM's Butler can also envisage.

"We absolutely loved Seb James's speech at the BRC Lecture; he couldn't have written a better speech, in our view, it was totally in line with our thinking of how predictive analytics and cognitive computing are important," the retail technology boss explained to Essential Retail.

What is cognitive computing?

The emergence of what the IBM man describes as "cognitive computing", or "computing that learns" is the next step up from predictive analytics systems that have been used to varying levels of success in the retail space over the last decade. IBM is one of a number of tech organisations that has developed tools of this nature.

Its IBM Watson solution, for example, is currently being used in healthcare to help with cancer treatment. The tool, currently in use in one hospital in the US, can digest research data about diseases, before using analytics and probability models in association with a patient's health history to help doctors' determine relevant treatment.

"If you think of the world in the future, Watson could be your very best sales associate in a computer – it can almost become the support centre analyst," Butler noted.

"Or if you are shopping online it could, in the future, provide you with options or ideas depending on what it knows about you. Customers could come to your website, suggest a scenario, then Watson comes back with solutions."

The wider retail industry is some way off rolling out such technology, but the digital DNA that customers now shed as they buy products across various digital channels means it is an entirely feasible retailing process of the future.

Virtual reality

Other pertinent – and arguably more accessible – areas for retailers to exploit for the betterment of their businesses, according to Butler (and as he explains in the YouTube video, below), include social media and the increased capability surrounding mobile technology.

Both are technology trends that have significant potential to drive innovation in the retail industry and allow businesses operating in the sector to thrive, with many companies already working on virtual solutions surrounding augmented reality and proximity marketing through mobile devices.

Butler said: "There are a whole bunch of technologies that are about to explode pretty soon around bringing digital into the store.

"Augmented reality naturally exploits the capability of the smart devices – every smart device has a camera and if people can't find a store associate they want to be able to self serve. If augmented reality can help, then so be it."

IBM has been working with one of the big-four supermarkets on an augmented reality project that aids the grocer's stock replenishment processes. Store associates can use it on tablet devices to monitor product levels in individual aisles, but it is a technology that certainly has the potential to switch from in-house operational usage to a customer-facing level.

"We have to make sure it's correct in a store; it's better to pilot on a store associate process than piloting on a customer," explained Butler.

"But the application for customers is pretty powerful. You might walk down an aisle and use it to spot promotional items, getting them to jump out at you on your mobile device. It could be used to aid people with nut allergies or if you're pursuing a particular diet by highlighting specific products – the technology can help these processes, as well as just guiding someone around a store."

The IBM retail boss also thinks that there are multiple ways retailers should be using social media to understand more about their customers – and their own staff. It is not new for retailers to monitor what the general public are saying about their brand online, but Butler argues that businesses need to find ways of linking this information in with other details they have about their shoppers' purchasing behaviour.

And while customer feedback has always been important for shaping the direction of a business, there are analytical tools out there – some of which are offered by IBM – that can help organisations better understand the behaviour and attitude of their own workforces.

Creating value through social

During their company's bi-annual 'Jam' event, all 350,000 IBM-ers spend time blogging their thoughts on the business, including noting down ways they think the organisation can improve. After three days of staff generating ideas and constructive criticism, IBM uses a tool to aggregate all of the information and identify common goals and key focus areas, which are fed back to senior management and used in business development strategy.

"Why can't we do that with retail? The teams on the shopfloor, or distribution centre or buying offices live and breathe the problems every day," noted Butler.

"Why can't we use the same technologies we use for our Jam to enable people to provide feedback and provide guidance to help the board drive the organisation? For any business that has a lot of employees, it's a great way of thinking – it's a way of connecting with the staff."

It would seem that so many of the ideas for innovation in retail revolve around strategic data mining and intelligent information gathering. The challenge for retailers is that customers are now interacting with them on so many different channels – be it in-store, via the web, on mobile, through social media, direct mail, on the phone or with a loyalty card – and to ensure great service, they need to know who that shopper is whichever platform they use.

Getting this right can significantly help a business's bottom line, with one retailer Butler knows sending 24 million pieces of mail in a year, only for half a million of those items to be returned. With each letter costing approximately 25p to send, it is clear "the maths start to blow up pretty quickly if you can get the basic data right", he argued.

"The tech we are investing in is about building a very clear view of the customer and getting information that is more than just getting product x for customer y," explained Butler.

"It's about building much more holistic data from a customer; maybe that's through social media, or other places where customers are interacting with the retailer on their purchase journeys. That's a big area of focus, and quite a few retailers in the UK are looking at how to get the single view of the customer."

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IBM UK

Hear Martin Butler speak on retail industry trends at the Making Retail Smarter event, to be held in Manchester on 23 September.