Looking Forward: A Glance into the AI-enabled Future of Retail (next decade, 2030 and beyond)

Looking back over the past decades, the global and local retail landscape has transformed rapidly and consumers have adapted very quickly to these changes. This rate of change has accelerated with the pandemic and will continue to hyper-accelerate over the next decade to 2030 and beyond, driven by data and technological advancements —?the AI-enabled future of retail — and the ability of customer demands to shape the retail market and the way retailers operate.

Retail industry players must get themselves prepared for the future of retail now. Today, more retailers use technology innovation, cloud-based and increasingly more data-driven, AI-enabled ML-powered business models to adapt to evolving competition and consumer behaviour during the pandemic and leading up to the post-pandemic experience economy.

Let's first take a quick look back at the history and evolution of retail — before we take a quantum leap forward in the future of retail.

Looking Back: History and Evolution of Retail

Retailing has changed immeasurably since the days of — the mom and pop stores in the early 1700s to 1800s — the first arrival of department stores mid 1800s to early 1900s — the arrival of malls in the 1950s — to the very first Walmart?in Rogers, Arkansas in the USA opened over 50 years ago in the summer of 1962. Target and Kmart also opened their first stores that same year.

One of Walmart’s first store openings featured an event with exploding watermelons and donkey droppings. Courtesy of the Walmart Museum.

Retailing has also changed immeasurably in the 70 years since the Australian Financial Review (AFR) first published in 1951, but if there is one constant it is the enduring rivalry between Coles and Woolworths — along with CHANGE in consumer behaviour and technology advancements — which has spurred on much change to their: growth, stores, brands, channels, business models, cost models, profit models, merchandising, operations, supply chain, checkouts and customer service.

For more on Australian Retail history look at the AFR article.

Picture: A Coles New World supermarket from back in the day, complete with rockets on the roof.?

The efficiency and overall size of these indoor giants made them attractive to consumers looking for convenience and friction-free, no frills service. Unlike the department stores of early in the century that provided personalized service and attended to customers’ needs, these large retailers were more focused on self service and providing efficiency. At these big box stores, customers could find the consumer goods they needed, and at much lower prices.

Big box stores, and specifically Walmart, are still dominating in the present day. Walmart’s recorded net sales of around USD $341 billion in 2020. Other big box retailers are having to get creative to open new stores, revolutionize current stores and provide more value in the shopping experience to appeal to customer’s increased expectations in an Amazon and Walmart dominated world.??

Arguably one of the biggest flashpoints in retail history is the dawn of widespread internet shopping. The growth of e-commerce mirrored the growth of the internet. As more and more people had access to the digital world, they became more interested in shopping there. Amazon was established in 1995 as a simple online bookseller. In 2018, the online retail platform reported a?net income over US $10 billion. In 2020, Amazon reported a net income of?US $21.33 billion, up from a US $11.6 billion net income in the previous year. During the same fiscal period, the company's revenue amounted to more than US $386 billion.

The pandemic has upended the way people buy — online retail has soared, as high-street shops and malls close. Brands are now racing to exploit one of the most important weapons in the battle for buyers: their customers’ data. Using cloud-based infrastructure, retailers built and expanded their own direct-to-consumer online shops to decrease dependency from physical store sales and boost their margins.

The evolution of retail depicted in the timeline below.

Looking Forward: The Future Of Retail

We look forward to more accelerated change and VALUE to an even more granular customer-centric approach to digital transformation, personalized, intuitive, interactive, intelligent, composable and more innovative, sustainable, hyper-automation, data-driven and AI-enabled AI-powered future.

Many of these changes will likely lead to a safer, more secure, efficient and more planet-friendly, robust food and other non-food retail goods supply system in the face of this and potential future pandemics and related disasters (such as, extreme heatwaves and storms).

You will likely see more in the future around affinity, loyalty, speed, availability and resilience. Expect to see more of online becoming core and the move towards more intelligent and more convergence and blurring between digital and physical experience across existing retail channels and indeed better alignment between them (online, stores, Click&Collect, pickup), not to replace the physical store but to complement it and perhaps spurring some new ones (such as digital pantry, pantry, @home, home) with even more?predictive,?intelligent,?automated re-ordering?digital concierge?services and?automated use-by-date expiry notifications?—?the things that you always stock in your pantry — consumers will shift to fulfillment by subscription or online delivery — providing consumers with yet even more freshness, convenience, speed and less waste. Retailers will also be able to better predict, with fairly high accuracy, what you will want to consume in the next two weeks or two months, based on your past consumption.

One thing that the COVID-19 pandemic has shown us is how important technology is for maintaining and facilitating communication — not simply for work purposes, but for building real connections. In the next few years, we can expect to see this accelerate, with AI technology built to connect people at a human level and drive them closer to each other, even when physically they are apart. The line between physical space and virtual will forever be blurred — so too will the physical and digital retail customer experience increasingly become blurred.

Perhaps down the track online will provide further information for consumers providing more granular and quality information on each of the food and non-food items (than exists today), ie, where each item is sourced, the supplier(s), which farm/farmers, along with more information to consumers around health and nutrition. Expect to see online to provide more personalized and speedier online shopping based on lifestyle and health.

Retail Ecosystem — the rise of Direct-to-Consumer

Buying what you want, where and how you want. Advances in smart device technology allow consumers to literally buy what they see: anywhere, any time. Simple, real-time image capture analysis makes everything ‘shoppable’ from any source. Increased product placement across all media will drive a new style of brand marketing.

“According to our research two thirds of all customers use both online and retail stores to purchase products. While research is primarily done online, we find customers still prefer the experience of going into a store when possible”

- CBRE (2020)

Customer Experiences — blurring of physical and digital

Customer experiences are specific not generic. Retailers are now competing for loyal customers at a global level. The most successful brands are finding ways to connect with the customer in a way that tailors their offering to suit individual wants and needs at any given time. Understanding a customer’s buying habits, interests, style and colour preferences means retailers can provide bespoke, curated offerings. Brands will produce smaller, targeted ranges of products —?gone will be the days of ‘designing for everybody’.

Online or Offline: These cannot be the only options for consumers. The physical and digital retail customer experience will increasingly become blurred —?the blended retail experience. See how Alibaba is transforming traditional retail with a complete digitization of commerce.

Stores will no longer be primarily designed to sell products as experience takes precedent.? Retail shopping will become an immersive, sensory brand engagement experience. Despite the ease of online shopping provided by technological advancement, many categories will continue to appeal to our human curiosity to see, feel and experience specific products before choosing to purchase. Stores will become experiential brand centers facilitated by highly trained brand experts. Purchases will be delivered same day.

Creating an experience and establishing a relationship has become a major challenge for retailers and brands. Customers want to make a purchase with as little interaction as possible. The experience economy post-pandemic and the future of the consumer retail experience is also key to the future of retail.

Circular Business Model — with Sustainable Retail Experiences

Here is what is new: we have reached the tipping point to shift the retail industry to a circular business model. Consumers want it. A recent?Accenture survey?revealed that 67% of consumers are opting for more environmentally friendly, sustainable or ethical purchases. Consumers flock to e-commerce sites, such as thredUP, Depop, Humana and Thrift+, for secondhand shopping and online thrifting.

A growing number of large retail chains make it their mission to chase zero emissions and reduce landfills with recycling programs. Technology innovation is making this move to a circular business model possible. Digital supply chains connected by the cloud supported by intelligent technologies enable retailers to make business processes more transparent, such as the sourcing of materials and ingredients and the end-of-life handling.

Companies can?increase customer experience and satisfaction by more than 82% when they run highly resilient supply chains, according to a?global study by the MPI Group. The ability to track their environmental, social and economic impact across the supply chain and entire business networks will become the key differentiator in the recovery.

Market changes in the retail industry will remain fast and furious, and sometimes unpredictable, but technology innovation offers a path to more sustainable and resilient business models that not only provide customers amazing experiences, but also a responsible choice.

Robotics and Automation in Retail

Robotics are emerging in retail, with robots being used at the entrance of department stores to direct customers to a specific category or products they are looking for. Another new emerging technology is smart mirrors, which can provide an instant product check without even leaving the changing room. The technology scans all products being brought in into the change room, and the mirror will then display what other size and colours are available in the store. Customers can easily touch the smart mirror, which alerts the store staff to bring certain products to the changing room. The technology can also recommend other products that may go well with what the customer is trying on.”

Robotics and Automation in Grocery Retail

With the use of a new robotics application called 'microfulfillment', Grocery retailing will no longer look the same. The use of robotics downstream at a 'hyper-local' level (as opposed to the traditional upstream application in the supply chain) will disrupt this 100-year-old, $5 trillion industry and all its stakeholders will experience significant change. Retailers will operate at a higher order of magnitude on productivity, which will in turn result in positive and enticing returns in the online grocery business. This technology also unlocks broader access to food and a better customer proposition to consumers at large: speed, product availability and cost. Microfulfillment centers are located in existing (and typically less productive) real estate at the store level and can operate 5-10% more cheaply than a brick and mortar store.

Artificial Intelligence in Retail

Artificial Intelligence (AI) in retail involves?the use of automation, data and technologies such as Machine Learning (ML) algorithms — AI-powered algorithms — to deliver highly personalized shopping experiences to consumers. AI can be applied to consumer experiences in both physical and digital stores. Using AI-powered algorithms, retail businesses can?run targeted marketing campaigns based on customers' region, preferences, gender and purchasing habits. It will help in improving customer loyalty and retention as a personalized experience is a great way to show them care.

The main benefits of using AI / ML in Retail:

• Lower cost-to-serve as AI transforms the workforce. While routine tasks are being automated, AI will also support and enhance increasingly demanding work.
• More effective promotion and merchandising.
• A better, and richer, more personalized customer experience.

AI is enabling?retail to optimize customer experiences, forecasting, inventory management and more. AI in retail can offer personalized shopping experience to customers. Technologies like biometric and face recognition can identify customers revisiting a store and remember their likes and dislikes. AI can be trained to leverage individual behaviours, preferences, fears, beliefs and interests to personalize experiences. AI can also automate in-store operations and reduce operational expenses in retail stores. It can replace sales personnel to assist customers in the store, reduce queues through cashier-less payments and self-service checkouts, replenish stock by real-time stock monitoring, digitize store displays and trial rooms. In a price-sensitive market like retail, AI can provide valuable information for pricing strategy, helping retailers to analyze the efficacies of multiple pricing models before arriving at the optimal price for their products.?

Retailers around the world lose money every year due to inefficient inventory planning. AI-enabled logistics management can predict demands for products by scrutinizing historical sales, location, buying trends, etc. We have recently developed AI-powered drones for warehouse management that can reach difficult corners and automatically update a central database with available inventory in real time. As you can see, all aspects of the retail supply chain, including inventory, staffing, distribution and delivery, can be managed in real-time by implementing artificial intelligence.

Top 12 Uses of AI in Retail:

1. Stores can become cashier-free (self-checkout, self-service)
2. Chatbots to assist with customer service
3. In-store assistance
4. Price adjustments - AI-powered dynamic pricing
5. Price predictions - AI-powered price forecasting
6. Supply chain management and logistics
7. Product categorization
8. Visual search
9. Voice search
10. Inventory Management - improved forecasting for inventory management
11. Customer satisfaction tracking
12. Customer behaviour prediction

Some further retail AI use cases below — Gartner (2021) evaluates 23 potential use cases in retail based on feasibility and business value to help retailers target resources on the most beneficial use cases for their organization.

Gartner (2021) has also found that there are 5 top use cases IMPLEMENTED in retail.

The New Consumer — Meet Generation Alpha

Expect to also see retailers tailoring and personalizing — hyper-personalization — of their customer experience for the new consumers - Generation Alpha (GenAlpha) (born between 2010 and 2025). In Australia today, GenAlpha is aged between zero and 10 years, numbering approximately 3 million people — or 12.39% of the population. Globally, by December 2024, there will be approximately 2 Billion worldwide, making them the largest generation in history. In four years, they will outnumber the Baby Boomers

Future of Retail — Retail Predictions for 2030

Technology has transformed the way people shop, but by 2030, technology will become the order of the day.

• Augmented Reality — Customers visiting stores and trying out new products from the comfort of their home will become a norm.
• There’ll be more number of compact showrooms that allow customers to view products, which are then delivered home.
• There’ll be a rise in 3D and even 4D “virtual merchandising” in stores, saving retailers the cost of having a large product inventory.
• Retailers will use virtual mannequins and 3D holograms to display merchandise.
• Ultra-fast Delivery — products being delivered in few hours of being ordered will be a common thing.
• Online shopping will become even cheaper and easier with lowered delivery time and cost.
• Shopping on the go using mobile phones and smart devices will become conventional, and will make marketing on the go essential.
• Customers will define the inventory of businesses i.e., what they don’t view or buy will not be ordered from suppliers.
• The retail era will move from personalization to hyper-personalization.

Peter Diamandis?(Entrepreneur and Futurologist, Founder and Executive Chairman of the XPRIZE Foundation)?has made the following AI-enabled metatrends predictions for the next decade, by 2030?-?source:?Diamandis?(2020).

• On-demand production and on-demand delivery will birth an “instant economy of things":?Consumers will learn to expect “instant fulfillment” of their retail orders as drone and robotic first and last-mile delivery services carry products from local supply depots directly to your doorstep. Further riding the deployment of regional on-demand digital manufacturing (3D and 4D printing farms), individualized products can be obtained within hours, anywhere, anytime. This metatrend is?driven by the convergence of:?networks, 3D and 4D printing,?robotics?and?artificial intelligence.
• As AI becomes increasingly embedded in everyday life, your custom?AI will soon understand what you want better than you do.?In turn, we will begin to both trust and rely upon our AIs to make most of our buying decisions, turning over shopping to?AI-enabled personal assistants. Your AI might make purchases based upon your past desires, current shortages, conversations you’ve allowed your AI to listen to, or by tracking where your pupils focus on a virtual interface (ie. what catches your attention). As a result, the advertising industry—which normally competes for?your?attention (whether at the Superbowl or through search engines)—will have a hard time influencing your AI. This metatrend is?driven by the convergence of: machine learning,?sensors, augmented reality and 5G/networks.
• High-resolution VR?will transform retail:?High-resolution, lightweight virtual reality headsets will allow individuals at home to shop for everything from clothing to real estate from the convenience of their living room. Need a new outfit? Your?AI?knows your detailed body measurements and can whip up a fashion show featuring your avatar wearing the latest 20 designs on a runway. Want to see how your furniture might look inside a house you’re viewing online? No problem! Your?AI?can populate the property with your virtualized inventory and give you a guided tour. This metatrend is?enabled by the convergence of:?VR,?machine learning?and high-bandwidth networks.
• Increased focus on sustainability and the environment:?An increase in global environmental awareness and concern over global warming will drive retailers and companies to invest in sustainability, both from a necessity standpoint and for marketing purposes. Breakthroughs in materials science,?enabled by AI, will allow companies to drive tremendous reductions in waste and environmental contamination. One company’s waste will become another company’s profit center. This metatrend is?enabled by the convergence of:?materials science,?artificial intelligence?and broadband networks.

The CBRE (2020) report analyses the findings of a survey of retail occupiers, developers and investors to deliver a vision of the Asia Pacific retail landscape in 2030.

Key messages include:

• ?The Future of Technology:?Technology will shift from retail disruptor to enabler. AI-enabled, AI-powered, consumer analytics, in-store automation and mobile payments have been identified as the most important tech innovations in the next decade.
• The Future Consumers:?The five generations of consumers by 2030 including the Generation Z, Generation Alpha and understanding their respective values and preferences will be the key to success.
• ?The Future of Retail Store: Retailers will continue to invest in enhancing in-store experience and support online orders. Therefore there will be an increasing allocation of space for next-generation fitting rooms, product testing zones and click-and-collect counters.
• ?The Future for Landlords: The potential disappearance of existing retail trades and formats, along with changes to how properties are valued, will require retail landlords to rethink their business strategies and redefine performance metrics.

CBRE’s (2019) Future of?Retail?report identifies?30 predictions?for what?retail?will look like in?2030.? Three key drivers have been identified as having largest influence on the?retail?environment by 2030: sustainability, experience and convenience.

A Glance into the AI-enabled Retail Future (2030 and beyond)

2002’s Minority Report is considered a sci-fi classic movie. It is set in the year 2054 — and looking back, the movie did an incredible job of predicting the technology that would likely come in the future decades especially when it comes to retail, targeted promotions and advertising. ?We see shoppers passing advertising and billboards which adjust their marketing message to each unique person by scanning their eyes (retina scanning).

As the Tom Cruise character walks through a futuristic shopping mall, his retina is automatically scanned. Digital billboards welcome him back to the store and offer tailored promotions. “Hello Mr Yakamoto! Welcome back to The Gap, how did those assorted tank tops workout for you?”.

We will never know from the movie, but what happened to the data from Tom Cruise’s retina scan: when he entered the store, what he looked at and for how long, the angle of his view, the emotional response in his eyeball, and so on?

Minority Report, of course, is fiction. But this level of technology-driven, precision marketing, hyper-marketing and hyper-personalization is much closer than many realise. From smartphones in our pocket that provide tailored notifications, to geo-tagging software that tracks our location, to artificial intelligence, such as Apple’s Siri, that will become more pervasive and predictive in time.

Retailers will have more data than ever. In fact, the ability to capture, analyse and incorporate data into strategy could become the most valuable competitive advantage of them all. High-performing retailers and organisations will integrate humans and machines in ways previously unimagined — AI-enabled, AI-powered. From the board to the storefront floor, these companies will have staff whose work is inextricably intertwined with increasingly powerful technology and larger datasets.

A glance into the future of retail — the scene from the movie Minority Report where Tom Cruise enters The Gap store and is greeted by a 3D hologram. Remember that scene in?Minority Report?where Tom Cruise’s character walks into a Gap and an AI voice asks him if he’s still enjoying the trousers he bought last week??

Lasting Thoughts...

“We’re at beginning of a golden age of AI. Recent advancements have already led to invention that previously lived in the realm of science fiction?—?and?we have scratched the surface of what’s possible”

–?Jeff Bezos

Amazon Founder and Executive Chairman

"The?real opportunity?isn’t going to be AI versus humans;?it’s going to be?AI with humans"

-?Peter Diamandis

Entrepreneur and Futurologist, Founder and Executive Chairman of the XPRIZE Foundation

What would you like to see in the future for retail? Please share or click below.

Sources:

AFR (2021) - www.afr.com/companies/retail/the-70-year-battle-that-changed-australian-retailing-20210801-p58eun

Alibaba (2018) - www.youtube.com/watch?v=336YkwayCD4&t=159s

CBRE (2019) - www.cbre.com.au/research-reports/30-predictions-for-2030

CBRE (2020) -cbre.vo.llnwd.net/grgservices/secure/2020.11.06%20The%20Future%20of%20Retail_A%20View%20of%202030.pdf?e=1632196583&h=0cc22ddd5e43c4131653eba716ce055f

Diamandis, Peter (2020) -?www.diamandis.com/blog/20-metatrends-2020s

Gartner (2021) - blogs.gartner.com/robert-hetu/files/2021/03/AI-Use-Case-Main-Graphic.png

The Economist (2021) - www.youtube.com/watch?v=ad-GuV6YIMI

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