The Supply Side: Retail evolution continues as technology takes control

From the earliest days of commerce — where folks in the Old West paid upfront or got shot — to the nostalgic days of Main Street with the likes of Walton’s 5&10 in the 1960s, retail has always been a people business.

From the early 1970s into the 1990s, sprawling shopping malls popped up in the suburbs with department store anchors like Dillard’s and J.C. Penney in major expansion phases. Walmart and Costco and other big-box retailers also began to flourish in the 1980s and 1990s as shopping centered on low prices, broad assortments and treasure hunt deals.

For roughly 200 years the brick-and-mortar retail world focused on traffic counters, point of sale and promotions as shopping destinations for the masses, according to Eric Thorsen, global vice president technical service at JDA. Thorsen was a speaker at the recent Northwest Arkansas Technology Summit held in Rogers, and he spoke about the evolution of retail and the larger role technology will play in the next several years.

A little-known online marketplace for books was founded in July 1994 by Jeff Bezos in Bellevue, Wash., when the internet was starting to gain traction. By late 1997, Amazon began selling music and videos, and a year later it expanded to selling consumer electronics, video games, home improvement items and toys.

In a San Jose, Calif., living room in September 1995, Pierre Omidyar and Jeff Skoll founded eBay as a marketplace for the sale of goods and services for individuals. Amazon and eBay were able to scale their marketplaces as the World Wide Web linked consumers around the country via internet connections.

Walmart Inc. arrived later to the party, establishing Walmart.com as a subsidiary in January 2000, with a separate headquarters in San Francisco to be near technology talent and those with internet expertise.

Thorsen said retail up to that point was still focused on brick-and-mortar expansion. Retailers dabbled in e-commerce via web catalogs and somewhat basic websites for collaborative buying. Since 2008, thanks to the gradual saturation of smartphone adoption over the past decade, the age of omnichannel retail was born, Thorsen said.

He said retailers began gathering and gleaning big data from consumers. They radically improved their websites for usability and began offering endless aisle assortments online, which could be accessed via mobile shopping apps.

In the past couple of years, retailers have become agnostic to channels — physical stores, online, smartphone apps, etc. — and have pushed consumers to buy online and pick up in stores, as well as subscribe for free delivery perks for online orders.

Thorsen said the future will continue to include more changes coming at near lightning speed.

TECHNOLOGY TRANSFORMING RETAIL
Thorsen said visual search or “shop the look” is one of the trends gaining steam within retail. He said the popularity of Pinterest has sparked retailers to revamp websites to allow consumers to “shop the look” from fashion to home decor. Walmart.com recently revamped its website for home decor and baby to allow customers to easily purchase an entire “look” with one click of the mouse.

He said talk-to-text and voice search also are emerging technologies in retail, with shoppers beginning to use devices as proxies to research for products and purchase them. Walmart is testing voice shopping in a closed trial in Northwest Arkansas, as well as the talk-to-text, white-glove shopping service in Manhattan known as Jetblack. Amazon has been a leader in voice search for retail with its own devices, which were among the top-selling items last Christmas, according to the retailer.

The use of virtual reality in retail is also transforming the experience for consumers. Thorsen said consumers demand better experiences and smartphones have made this possible at scale. He said a group of people planning a ski trip to Park City, Utah, could have a retail experience by using virtual reality that makes them feel like they are in the snowy mountains as they try on sweaters and drink hot chocolate.

“This is possible with Google [Glass] or VR headsets, and it could be almost as fun as the actual trip,” Thorsen said. “The clunkiness of the goggles is one downside, but overall, the experience is still good.”

He said Sephora has been a leader in the augmented reality space with the ModiFace app that allows customers to try on makeup virtually by taking a selfie.

“Sephora has also been able to use this technology to teach various makeup techniques to consumers, and the company has been rewarded with a very loyal customer base,” he said.

The IKEA Place app also is an augmented reality experience that allows consumers to take a photo of their living room, then virtually try various furniture pieces in their room. Wayfair also offers a similar app.

Thorsen said other technology advances transforming the retail shopping experience include the internet of things (IoT) and radio-frequency identification (RFID), which can be combined to reduce loss prevention and track inventory. Smart shelves, bins and hangers are also being tested. He said retailers are testing various versions of smart shelves and electronic shelf labels, but no one is using the technology at scale.

He said robotics are being tested in retail stores and warehouses. From automatic floor cleaners to the Bossa Nova inventory tracker being used at Walmart, to the Kiva robots filling orders in numerous Amazon warehouses, robotics are being used at scale. Artificial intelligence, machine learning and deep learning are being used behind the scenes in retail. Thorsen said better cameras and more precise visual analysis is being used to reduce theft in brick-and-mortar stores and to enhance the machine learning capacities of robots conducting work within retail.

Lastly, he said blockchain, still in its infancy, does have applications in retail. Thorsen said blockchain is beneficial for journal integrity, tracking the lots for recall and tracing ethical sourcing.

He said 80% of planning activities will be automated by 2030. Consumer packaged goods subscriptions and automatic replenishment will drive up to 40% of sales in some categories, and about half of customer interactions will be with robots and machines.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.