Let’s get phygital – retail is buying into tech to keep customers happy and margins secure

As befits a sector that thrives on bringing us the latest trends, retail needs to be adept at embracing new ones.

Chief among them right now is data analysis. “Data is king. We hear it everywhere in relation to customer data, but it has been forgotten about in relation to suppliers,” says Julie Schiro, assistant professor of marketing at UCD’s Smurfit Graduate Business School.

“But companies that are better able to integrate data across their entire supply chain, and not just harvest customer data, will have more robust modelling of supply and demand, be more sustainable, better able to minimise waste, and have greater speed to market.”

When it comes to customers, the volume of third-party data available has shrunk, a result of GDPR and changes to the way cookies are managed. Increasingly, consumers must “opt in” to these info-seeking apps when browsing, and typically are not doing so.

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“As a result, first party data, such as customers who give you their email or phone number, has become more important than ever,” says Schiro. “And the way you get first party data is through a value exchange. You need to earn it.”

She points to L’Oréal’s ModiFace by way of example. It’s an augmented reality app that allows customers to try on make-up or hair colour virtually, and get skin-scans, the results of which come by email. “That’s a value exchange,” says Schiro.

Another challenge that brands, and by extension retailers, face is a highly fragmented marketing landscape, including everything from blogs and social media to Amazon. The brands that do best “embrace this”, she says.

But retailers must now also contend with the fact that consumers increasingly value “social proof”. Says Schiro, “at consideration stage, consumers spend so much time seeing what other people think”.

Consumers are increasingly searching online but finishing their purchase, or picking it up, in store. Also, “More and more consumers are pulling out their phones and searching for information or reviews while physically in the store,” says Schiro.

“Leaning into this by encouraging shoppers to engage with the brand, such as through the use of QR codes, is a clever way to help steer this phone exploration to a brand’s channels – simply opening a tab may serve as a memory cue for later,” she adds.

Property is expensive and retailers will increasingly seek to use technology to enable a smaller physical footprint. “It’s about how to make the best use of your retail space,” says Paul Prior, head of digital and Three Ireland.

This will result in increased use of virtual shelving. “Customers will put on a headset and look at a blank wall and effectively see a whole warehouse of items,” says Prior. These virtual shelves also promise a hyper-personalised service, tailored to each customer.

Younger consumers, and perhaps more surprisingly, those aged 65+, are most likely to seek out sustainable goods to purchase

—  Cian Kelleher, KPMG

Retailers already use heat map technology to track store visits, while LED screens and 3D technology will be employed to give a sense of space. Retail will become increasingly “phygital”, he says, an optimised blend of physical and digital experiences.

Digital transformation will reach ever deeper. “So far, it’s been largely focused around providing a superior online shopping service, but now many retailers will be looking at how they might implement generative AI into their businesses,” says Cian Kelliher, management consulting partner at professional services firm KPMG.

Consumer awareness of generative AI exploded with the launch of ChatGPT last year.

“It’s important for all retail businesses to decide at this stage if and how they might incorporate AI into their businesses and to make sure they don’t miss out, as competitors begin to adopt early and potentially gain a competitive edge,” says Kelliher.

“AI has the potential to revolutionise everything from eliminating manual tasks through process automation, providing automated customer service, analysing consumer behaviour and preventing the loss of products through theft and expiry. But as noted, it’s still at a relatively early stage, and how it will ultimately be commercialised and regulated is still somewhat unknown.”

Sustainability is another area which will continue to dominate the sector, he believes.

“Younger consumers, and perhaps more surprisingly, those aged 65+, are most likely to seek out sustainable goods to purchase. However, customers are very sceptical of the ‘green’ claims made by brands. Governments and regulators are going to be increasingly cracking down on ‘greenwashing’, making misleading or exaggerated sustainability claims, and it’s important for retailers to understand how to handle this,” he cautions.