Comment: Transforming technologies in retail: an investors perspective

The retail landscape of 2017 was, in many ways, a continuation of previous years’ trends. Many traditional retailers struggled to maintain their market share and faced a slump in sales over the Christmas period - Mothercare, for example, reported like-for-like sales fell by 7.2% over the 12 weeks to 30 December, while Debenhams issued a profit warning. Those that have successfully deployed mobile including ASOS and Missguided, typically fared better.

Alongside the continued growth of mobile, there are several technologies that are already transforming retail and will continue to do so throughout 2018. 

Personalisation reaches new heights
Recently, we’ve seen retailers developing their own technology to help them manufacture personalised products more quickly - offering on-the-spot customisation or next-day delivery - and more affordably. 

Companies such as My 1st Years and Monica Vinader are offering high-quality personalised products on demand, and are enjoying strong growth as a result. While retailers providing a range of generic products available via other channels - and getting into price wars with the likes of Amazon - are struggling, those providing highly-differentiated products that are unique to them are excelling. 

Those providing unique services are also excelling. In particular, we’re seeing a growing number of ‘stylist’ retailers, including Stitch Fix in the US (which recently went public at a valuation of $1.4 billion) and Thread in the UK. These companies ask customers to spend a short amount of time answering questions about their style preferences and then recommend products they might like. 

As investors, most of the new retail businesses we see already have some sort of personalisation or guided shopping strategy, which means the larger retailers need to be thinking about this.

There are a growing number of guided selling technology solutions, such as Smart Assistant, available on the market, and the integration of machine learning and artificial intelligence will only make them more effective. Ultimately, it is this type of time-saving and personalised service that helps retailers remain in control of the relationship with customers across a range of channels. 

More retailers implementing robotics 
As machine learning and artificial intelligence have become increasingly sophisticated, it’s allowing some retailers to become more efficient. Robots are now a common sight in warehouses - Amazon already uses 45,000 thousand of them - and we’re now starting to see them used to manage stock in-store. Walmart recently announced it would be using robots to audit its stores, checking inventory, prices, and misplaced items. 

The rise of voice services and products such as Amazon Echo and Google Home have made consumers more comfortable interacting with ‘bots’. The Amazon Echo Dot and voice-controlled Fire Stick were the biggest-selling products from any manufacturer in any category on Amazon over the Black Friday and Cyber Monday shopping binge.

Together with developments in technology, this has driven the growth of a range of ‘shopping assistant’ tools within messaging services. Both Sephora and H&M introduced popular chatbots via the social media service Kik, while Domino's Pizza launched ‘Dom’ via Facebook Messenger to make it easier and quicker than ever for superfans to order their favourite dish. 

The continued rise of robotics will also change up the retail workforce considerably. It is highly likely that we’ll see an increase in demand for technology and data experts in the retail sector as this develops, and designing the algorithms to create the best outcomes for customers will be a key differentiator. 

Mobile continues to grow
Mobile continues to be a driving force for retail revenue. According to data from ChannelAdvisor, between Thanksgiving and Cyber Sunday in the UK, 73% of shopping searches took place on mobile devices and 64% of all online purchases took place on mobile devices. Mobile is now also driving new realities for retail, in particular as augmented and virtual reality become more accessible. 

In Europe, we haven’t yet seen many retailers creating virtual environments that capture the imagination of consumers and drive sales. However, in the US, V-Commerce is becoming more tangible, and is most useful for larger-scale purchases where in-situ visualization is important - Lowe’s VR experience Holoroom is now live in 19 stores across the country.

This virtual environment allows customers renovating their house to picture what specific designs will look like. Expect to see companies such as InContext Solutions, who have built a successful B2B VR solution, become the backbone of the first wave of v-commerce.    

While there are a plenty of exciting developments in retail, the figures show that, overall consumers still mostly shop offline - according to a study by CBRE, 70% of millennials in the UK still shop offline. The picture in similar in the US, where more than 77% of ‘Generation Z’ consumers said brick-and-mortar stores are their preferred shopping channel, according to Accenture research. Until retailers are able to make experiences like holoroom more widespread, they will need to maintain a physical presence.

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