Can Advanced Technology Bring a Cutting Edge to The Retail Sector?
Advanced technology could be the shot in the arm the retail industry needs to remain relevant in a digital world.
Luxury retail uses new tech to capture consumers’ attention. Advanced technology could be the shot in the arm the retail industry needs to remain relevant in a digital world. With the advent of consumption driven by artificial intelligence and machine learning product personalisation, augmented reality (AR) mirrors and virtual try-on experiences, consumers are living in a bold new era of shopping. Many businesses and investors believe that the full potential and returns on investment in such technologies have yet to be fully realised.
With these being early days in integrated retail experiences, the e-commerce sector in 2018 continued the trend of double-digit growth, with online retail seeing 13.4 per cent annualised growth over the past five years, according to IBISWorld.
In an age when social media influences consumption choices and when the ‘influencers’ are primarily the wealthy, online distribution of luxury goods has been attracting investment and entrepreneurial interest. So, too, have on-demand services such as Uber, AirBnB and others that have successfully gained traction with the public and venture capitalists alike.
A prime example in the US has been luxury clothing and accessories rental agency Rent-The-Runway securing a US$200 million ($281 million) credit facility with Temasek, bringing its total funding to a healthy US$416.2 million ($584 million). Over the past decade, retailers have sought to implement an increasing number of technology-use cases in an effort to improve the quality of the consumer’s shopping experience. The success of such implementations confirms that today’s consumer has developed a good level of familiarity and comfort with the integration of technology into the shopping experience. Large fashion retailers such as The North Face, Rolex and Sephora have executed projects in AR virtual try-on, machine-learning-driven product personalisation and utilising AI personalities such as Alexa (Amazon), Assistant (Google) and Siri (Apple).
Luxury fashion conglomerates like LVMH have led the way in enhancing the runway and shopping experience with technologies such as AR/virtual reality (VR) through their Luxury Lab LVMH technology forum, run in collaboration with the annual Viva Technology Show in Paris.
Retailers are allocating more resources to their e-commerce platforms and seek solutions to soften declining sales in their brick and mortar business segments. The main problem lies in the trade-off between a customer visiting the store and shopping online. Sephora has been a great example of how to elevate the in-store experience with their augmented reality mirrors that enable customers to ‘virtually’ try on different colours and looks.
As more retailers are understanding the power of utilising machine learning in data analytics, product personalisation has become a common feature of websites for most retailers. The North Face provides product personalisation using IBM’s Watson and generates more than 300 tailored online offerings to customers.
Some of the most accessible manifestations of the virtual shopping assistant have been AI personalities like Amazon’s Alexa and Google’s Assistant. According to IBISWorld, one-third of Amazon Echo owners have ordered something from Amazon Prime. With voice-controlled shopping and an auto-replenishment service, customers can detach themselves from the friction of deciding whether to spend the day shopping or stay at home.
Although the realm of AI personalities is currently dominated by only a few players, investors are seeing how the data collected could be transformed into revenue by having the AI learn consumption behaviour through machine learning. IBIWorld’s expectation is that AI will boost overall e-commerce sales by 7.8 per cent over the next five years.
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