We have read all the trends posts, and I mean all of them, so we have combined our experience with what the market is saying and taken a view, which essentially means we picked only the ones we think matter, particularly as we disagree with a lot of the recycled nonsense that just gets rebranded from year to year.
It is more important than ever to read between the lines because retailers have never faced more pressure to make good decisions about where to invest their tech budget. Most can agree that their digital transformation is not progressing as fast as it needs to if it is to meet the needs of a consumer that has never been more savyy about how and where to shop.
A lot of investment has been tactical, which is perhaps understandable as retailers have had to work so had just to deal with entirely new and unforeseen circumstances caused by Covid. And as they emerge from it shadow, it is clear that retail will never go back to where it was and this will affect how tech is funded, procured and implemented. Even now, that story is still unfolding.
Help, though often not taken, is at hand. Common to all these trends is a call to vendors to collaborate with third parties. It is not easy to go to market in partnership but It is really the only model that can work. And we at Retail Connections feel that it makes more sense to collaborate and to choose best of breed solution in preferences to another worrying trend and that is to build rather than buy.
While the IT vendors have continued to innovate and launch an astonishing range of solutions, there is in contrast very little evidence that building it in house is working. And yet, it remains a classic excuse not to buy, no more so than in the area of data science and artificial intelligence. Demand for data scientists continues to outstrip supply but we are still waiting for proof that recruiting so many has been a good idea. The best move ahead is for a hybrid model where internal data scientists work with external tools and suppliers to develop solutions together. And indeed this hybrid model may well show the way ahead for tech generally.
Direct to consumer and retail blend
Right now, there are clear distinctions between what is retail and what is D2C, even to the extent that some brands are pulling back from retail in order to go D2C alone. Very quickly though in 2022, it will become clear that the differences between the two are not that significant and anyway, many brands are already running a dual go to market strategy.
It will also become clear that some of the newer channels to market will require a hybrid D2C/retail infrastructure behind them. For instance, brands may want to do the D2C at the front end to the consumer, while retail manages the back end supply chain. What this will then mean is brands and retailers will start to collaborate in completely new ways until there is no longer any distinction between the two.
This is a very crowded marketplace with solutions being touted by the traditional ERP vendors, ecommerce platforms, and various specialists. This means that successful vendors will need very clear, simple, compelling and differentiated messaging, which should go without saying but right now, the messaging is as muddy as the market.
Headless but not clueless
So-called headless commerce tools refer to a software architecture that separates what the customer sees (the front-end interface) from core commerce functions like processing payments and keeping track of inventory (the back-end software). Essentially, the technology makes it possible to easily sell on a lot of different platforms. It’s the difference between buying directly on a retailer’s website versus buying through TikTok or Pinterest without leaving the app or, say, an Alexa smart speaker.
Some retailers are so excited about headless that they are forgetting to do the hard yards on their back end systems. To put it bluntly, headless helps them trade across multiple channels, but if they can’t fulfil the demand, then conversion and loyalty go straight down the plug hole. Of course this may not worry the headless front end vendors, but it should.
Advanced meets traditional analytics for more value
This is not just about AI. A few retailers have been getting good results using conventional systems; the point is, they have been using them, as opposed to others that are still paralysed by the scale of the problem.
The trend is therefore towards a blending of both AI and non-AI software which is based on simple pragmatism – some teams simply won’t change their ways to take advantage of AI. And the problem of internal data scientists delivering late or below par will continue, which forces retailers to fall back on what they already have in place. All in all though, it’s a positive sign that retailers want to push ahead.
Stop being an idealogue and adopt a more pragmatic approach in the sales process. This is less about retailers buying your solution and more about them partnering with you to find a solution, something that may well contain elements of you and elements of someone else. That’s what partnership means; you can’t have the whole cake.
Live streaming established as a new channel
In China, live streaming has been business as usual ever since Taylor Swift started opening Singles Day. So exciting and immersive is this for some consumers that it has gone way beyond its original role, that of bridging the gap between the store and online; that’s now a red herring. Live streaming is a fully-formed sales channel in its own right and brands are embracing it in full. This is partly because the ROI is so strong but also because technically it is easy to set up through existing platforms such as TikTok, and finding enthusiastic internal teams is no challenge at all.
And rather than treat augmented reality as a separate technology, we think it is simply an adjunct to live streaming.
Mainstream tech companies should be partnering with livestreaming tech vendors, who in turn are trying to build channel. There is a great opportunity for incremental tech for order management and payments.
Omnichannel tech chooses sides
Consider what Saks has done, which is divide the stores and ecommerce into two separate businesses, contrary to what retailers have been urged to do for nearly ten years, which is integrate them better to serve a customer that shops seamlessly across channels. In 2022, more and more tech will get politicised by the impact Covid has had on retail.
Take time to understand the politics of the retailer you are dealing with. Is the ecommerce tail wagging the stores dog because the company knows it need to accelerate its shift online to survive? It could be that ecommerce is starving the stores of investment deliberately either for the good of the business or the good of its own self image.
Shelf edge technology solves the store’s identity crisis
The UK aside, electronic shelf edge labeling is already well established in Europe and is now acting as the spearhead for other innovations including Flash for replenishment and picking. Adoption is being led by two business imperatives; the first is, the customer wants the shelf to work harder for them in terms of price and promotions transparency, product information particularly around health and allergens; and second, as online shopping continue to grow, the problem of its unprofitability is starting to hurt. With the rising cost of labour, retailers need technologies that help staff pick a lot quicker.
So stand by for the tech-enabled shelf, which has the job of helping to manage the many roles that staff play in store – ranging, merchandising, replenishment, on line pick, third party on line pick.
Focus on the returns and ease of implementation. And if any retailer uses cost of labels as an excuse, walk away; it’s the oldest excuse in the book and means they are not serious.
Partner, partner, partner. Solving real world problems for retailers depends on the right software, hardware and an integrator that really understand what happens in a store. In store picking for online orders for instance depends on the scanner, the scanning software, flash to identify products, special trolleys, and wearable tech so more hands are free to pick.
Order management gets a lift through partnerships
The advanced element relates mainly to speed, as brands and retailers continue to obsess about fast delivery. This flies in the face of concerns over global warming as Gartner pointed out over two years ago that speed generates more carbon and waste than slow, but hey, this does not seem to have sunk into the skulls of the many established as well as startup players trying to deliver groceries in under 30 minutes.
To achieve this, order management systems must have single view of stock, customer and order as a baseline and then have direct and exclusive access to a dedicated supply and delivery chain. The danger of course is that the other 95% of the business, the slow part, is neglected as speed causes everyone to become light headed.
There are strong distributed order management systems that are good on the supply chain but weak at the front end and vice versa, so partner solutions are likely to get better take up.
It’s hard to resist trying to keep up with the Amazons. Its Prime Air uses drone technology to deliver shopper’s orders in 30 minutes or less, and I suppose drones are one example of a small carbon footprint. Moreover, as retailers get better at same day delivery, they will want to use faster delivery as a competitive advantage. They may want to get their first, and worry about the environment in other ways such as less plastic in packaging.
Mobile tech bridges the on/off line gap
Time was when retailers wanted to discourage their customers from browsing on line in store, because it meant they were looking to see if they could get something cheaper elsewhere. Now, customers are encouraged to be on line everywhere as long as the channel is owned by the retailer. Hence the growth of experiential web sites that do not sell anything. And the web sites are using interfaces that are familiar to consumers, particularly gaming. In 2022, retailers will spend even more through social, apps, owned and partner web sites, marketplaces and livestreaming.
A lot of what retailers are doing they can build themselves, which will have come as a shock to the generation of mobile app vendors that were once startup superheroes but are now watching their cash bonfire dying down. If that seems harsh, there is a lesson and that is for vendors to get closer to retailers and invest more time in understanding what they want. It was not just vendors that were innovating during the pandemic but retailers, some of whom want to do more for themselves, assisted by open software and architectures, and frustration with the cost and time involved in using third parties.
Tech helps promotions management catch up to itself
In some parts of retail, at any given time, over a third of products are on promotion and yet the retailers continue to use technology and processes created more than 20 years ago. This is an area where technology can make a huge difference, by automating the management of multiple promotions across multiple channels all from a single platform and we expect to see retailers adopt integrated software in 2022. There are of course many techniques that retailers can adopt in order to improve returns on promotions but right now, the gap between a creative idea and its execution is simply too great.
There are political and cultural barriers to entry here, as in so many areas in retail where automation and integration are needed. Promotions is one of those areas where it may be easy to find the decision maker only to discover that they are not an influencer upwards to where the cheque gets signed or where heads can be banged together to change working practices. Success therefore depends on searching more deeply to find those organisations that have open ways of working or are small enough to have a short decision chain.