Future of Retail Tech

by David Halperin,
General Partner & Co-Founder

As a topic, consumerism gained momentous interest during the pandemic, revealing new patterns and insights into purchases and acquisitions. As social media suggests, humans are inherently impulsive shoppers, with the pandemic sparking an unmatched and frenzied level of ‘panic buying’.

Such unwarranted and relentless demand for products has provided many valuable lessons for retailers on how technology can cope with the growing influx of online and offline shoppers.

The advent of technology in retail has redefined how consumers shop, their preferences, and even their expectations. More consumers are better informed and, subsequently, ready to choose alternatives that offer competitive prices or better quality.

In addition, the ongoing sustainability movement has led to retailer transparency regarding various components of supply chains and to the awareness of what is deemed questionable.

Although retail is one of the few sectors that has benefited from the evolution of technology, there is still untapped potential for innovation.

Some of the key technological trends that are transforming the retail industry are:

1. Virtual Fitting Rooms

With many consumers shopping online, one of the most significant bottlenecks is the inability to try on clothing or accessories physically before buying. The intuitive experience of “feeling” a product virtually is nearly impossible to replicate. This problem is further compounded for niche or custom-made products or during public health emergencies such as this pandemic. However, there is now a solution.

Many retailers have introduced virtual fitting rooms that allow consumers to test products without being physically present, which is an additional improvement to the “try-before-you-buy” business model. Thanks to virtual fitting rooms, brands can boost online sales and therefore their profitability. 

In addition, return rates may be significantly reduced as consumers are better informed about their purchases, rather than a “trial and error” approach to shopping. Sephora saw huge traction during the pandemic because of its augmented reality technology, which allowed consumers to visualize the appearance of products, such as cosmetics and jewelry, via smartphones.

2. Staff-free and Cashier-less Stores

The concept of a cashier-free store or Just Walk Out system (as Amazon calls it) has been widely popularized by the Amazon Go Grocery model, wherein sensors, as well as AI, track items in the shopping cart and automatically bill the consumer upon leaving the store.

This is a game-changer for the retail industry as it eliminates one of the most significant expenses for large retailers: salaries and wages. The adoption of cashier-less counters or self-checkout options has resulted in a seamless transaction experience without human intervention.

Moreover, the proliferation of QR codes to disseminate product information allows consumers to obtain additional information without engaging in a pseudo-manhunt for the nearest retail executive; thus, consumers are self-empowered.

3. Personalized Retail Experience

Something not as synonymous with retail shopping is personalization. With consumers flocking to shopping malls and other retail locations as lockdowns ease up, providing a personalized shopping experience is a daunting task.

Nonetheless, as consumers become increasingly aspirational, personalization is a key differentiator, and companies are investing heavily in technology to create customized experiences.

For example, uses an AI-powered virtual concierge service to understand consumer’s preferences and make appropriate recommendations.

Another prominent example of retail customization is Levi’s Tailor Shops which, besides repair and sewing services, allows consumers to customize their Levi’s apparel through stenciling, monograms, embroidery, and more.

4. Digital Wallet

A lovechild of FinTech and the retail industry, digital wallets allow smartphones to operate as a store-specific payment method. The digital wallet is a practical, cashless program that often serves as a subscription or loyalty program for many retailers.

In addition, the digital wallet enables companies to obtain valuable data on consumer spending habits, while increasing the effectiveness of marketing methods.

A fascinating insight into the prowess of digital wallets can be seen from the following chart: in 2016, Starbucks’ digital wallet held more money than many small banks — the figure was $1.2 billion (and increasing).

Technology is constantly revamping all sectors of the economy, and retail is certainly experiencing growth in this direction, too. The next frontier for technology in retail is to reproduce sensory experiences in a virtual mode, and there are enormous advances underway.

With many consumer-friendly and cost-effective initiatives, the use of technology in retail will undoubtedly elevate the overall shopping experience to new heights — a win-win situation.

October 2021