Technology trends are rapidly changing the retail sector. Retailers looking to remain relevant in the future must primarily focus on two developments: High Productivity Platforms and Artificial Intelligence. This became clear during an analysis by IG&H.
In contrast to other technology trends such as Internet of Things, blockchain or virtual reality, High Productivity Platforms and Artificial Intelligence (AI) have been identified by Gartner as trends that have reached a mature stage, which enables them to disrupt the retail sector. Both High Productivity Platforms and AI intervene in each link of the retail chain, giving them a new dimension. That’s why IG&H believes that retailers who embrace these developments now greatly increase their chances to remain a frontrunner in their market.
High Productivity Platforms; react more quickly to developments
A High Productivity Platform can be based on generating code, as well as on model-driven execution. Low-code, for example, is an increasingly well known High Productivity Platform for software development based on object generated code.
The main business advantage of this technology is the ability to build new functionality quicker and at substantially lower cost, and the success of ideas can be evaluated more rapidly. One method of doing so is ‘rapid prototyping’. Retailers who adopt this trend are able to test new propositions quickly in changing market conditions and with little risk. A striking example is a leading food discounter which temporarily offers a more extensive luxury assortment through an online channel during the holidays. The technology offers countless applications; from small mobile apps to large back-end systems. Because of this, High Productivity Platforms are suitable for medium sized businesses as well as larger multinationals.
The accelerated development of applications shortens the time-to-market with 70 per cent in comparison to traditional packages. This is especially interesting when the development of applications requires customization. In comparison to traditional solutions, total cost of ownership is reduced to a third, a recent study by Gartner found. Next to development time, High Productivity Platforms offer big advantages when it comes to operational controllability in terms of ease of integration, altering applications, and the assurance that applications keep working after the update. All of this against lower maintenance costs.
Boost business with Artificial Intelligence
Data science is a multidisciplinary domain for more effective data gathering and analysis to facilitate better business decisions. Different techniques and algorithms can be applied, such as Machine Learning and AI. Deep Learning, an AI algorithm, is an advanced follow-up technique based on neural networks. Both Machine Learning and AI algorithms are often self-learning, which improves the effectiveness of applications over time and means the complex underlying mechanisms don’t have to be fully understood.
In the current retail landscape, we are increasingly seeing applications supported by AI and Machine Learning. There are ample examples of AI being applied in the chain, from bots in customer service with active customer dialogue, to creating supply chain flow by proactively sending goods to locations even before consumers made their purchase.
Even at the heart of retail, category management, we see AI making a difference with better integral business control. AI can, in contrast to error-prone and often department-coordinated traditional ways of working, make an accurate prediction of sales based on numerous chain factors, leading to better purchasing decisions. Our experience tells us that this prediction is accepted in up to 90% of the cases, leading to higher shelf availability and lower residual stock, in combination with higher efficiency at the department concerned.
In the fashion industry, for example, algorithms are being utilized to predict trends earlier and more precise. With Machine Learning, this enables offering personal discounts to the customer. Through enhanced customer personalization higher conversion ratios can be achieved and purchasing can be done more accurately. This results in lower residual stocks. The urgency is confirmed by the expectation that by 2020 more than 85% of retail transactions will be based on AI.
Dawn of exponential technological developments
Exactly the same reality holds true for us as consultancy. We see that our customers have a need for support with a large number of technologies and trends. To meet this need, our firm has more than doubled in size the last few years in the domains of Analytics and Technology.
The current and expected trends make us realize that we are at the dawn of exponential technological developments. To remain relevant and flexible as a retailer it is crucial to make the right choices. AI… Low-code… Public Cloud… On which technology trend will you bet?
Written by: Iris Huisman (Analist Retail), Michiel van der Werf (Consultant Retail), Sjoerd Norden (Consultant Retail) and Bram Gilliam (Director Retail)