GO DiGi - How Will Technology Affect The Retail Industry?

E-commerce has grown from garage start-up in 1999 to existential threat today. The damage to traditional retail has already been severe, with the last few years seeing a litany of bankruptcies across the British and American stores business – Sears, BHS, Toys R Us, Mothercare, House of Fraser, Sports Authority, Claire’s, Gymboree – the list goes on and on. Yet the global share of e-commerce is still only at 10% of total retail sales. The question is, how far can and will it go? Right now, the advantages of the two rivals are somewhat even. E-commerce has the five ‘Cs’ – cost, convenience, choice, control and customer relationships. But retail still has the human factor, the physical product experience and the immediacy of delivery. So far, a slight advantage to e-commerce…. However, the relentless march of technology is set to further tip this balance in favour of the internet players. The development of artificial intelligence means that online shopbots are likely to be able to replicate 90% of normal human retail interactions within the next five to ten years. Virtual and augmented reality are going to create immersive online experiences which will enable customers to ‘see’ and even ‘touch’ the product virtually. And developments like drones, self-driving vans and street delivery robots are going to reduce the cost of home delivery considerably. The Internet of Things is going to put many basic items like groceries and household goods on automatic replenishment, coordinated by virtual personal assistants like Alexa and Siri, who will anticipate our every need. The growing power of Big Data is going to put increasingly sophisticated algorithms in the hands of the tech-savvy internet players, enabling them to analyze and predict customer needs well ahead of what the traditional retailers, with their clunky legacy systems, will be able to do. The march of technological progress is thus pretty much all one-way, and it is going to knock away many of the remaining props holding up the traditional retail industry, one by one. If e-commerce has done this much damage at ten per cent of global sales, imagine what it will do when it reaches twenty or thirty per cent. In order to survive, stores retailers are going to have to change their operating philosophy. They can no longer be ‘glorified warehouses’, wasting their precious retail space on piles of inventory that no one is sure anybody is going to want. They cannot use their precious staff as dogsbodies, wasting their precious time on back-breaking menial tasks like stock management, till operations and administration which can be automated or shifted to the company’s e-commerce logistics arm. They need to use these precious resources to create an immersive brand environment and an expert level of service that the internet cannot match. Only by doing this can they hope to survive in the brave new world of the future.