During 2018, there was no shortage of headlines about the shift in the retail landscape from “bricks” to “clicks.” But, is this the end of the department as we know it or is it just an industry that needs to evolve?
Department stores used to be the one-stop shop for consumers to get all the goods they needed in one place. Now, with the proliferation of online shopping, home deliveries, and digital-native retailers, consumers have more choice and purchasing options than ever before. This means that consumers no longer need to go to department stores, and may even prefer not to due to the breadth of choice online, as well as the improving speed of online deliveries.
The challenge for department stores then is to create an enhanced experience for consumers that will maintain footfall and, ultimately, sustain their revenue.
It is not technology that has triggered the fall of bricks and mortar retailers and department stores, it is the changing nature of consumer behavior. Of course, the rapid advancement of technology has played a role in this disruption. It is making our lives faster and easier. Consumers can now easily order groceries from their mobile phones, within minutes, to be delivered to their home on the same day. More than that, the experience offered is often hyper-personalized. For example, online retailers can now use artificial intelligence (AI) algorithms to suggest shopping items to consumers based on what they have bought before. As such, shoppers have grown to expect in-store experiences that reflect this level of personalization, ease, and speed.
Technology can help to revitalize department stores in two critical ways. Firstly, it is instrumental in providing experiences that match customer expectations. To be successful, department stores need to provide consumers with a seamless, quick, and intuitive digitally led experience. This can be done in many ways, including the use of self-service machines for quick and easy checkouts, digital signage, and smartphone apps to help customers quickly find the answers they need. Department stores also need to use customer data more strategically. AI has the potential to help retailers understand their customers’ buying behavior in more depth. By analyzing data from customers’ repeat purchases and online transactions, retailers can create hyper-personalized buying experiences in store. Armed with this knowledge, shop assistants could, for example, provide customers with tailored buying suggestions, creating a VIP experience for them.
The second way technology can revitalize department stores is through transforming operations. A recent Capgemini report found that retailers can save as much as $340 billion in the future by scaling AI deployments across the retail value chain. The use cases for AI across this domain are vast and they are becoming key to competitiveness in the sector. Some examples include utilizing AI for stock replenishment, reducing in-store pilferage or using in-store bots for shelf inventory scans.
Department stores are certainly not doomed to fail, but they do need to evolve to succeed. Ultimately, people are social beings – there will always be a craving and need for social interaction and physical experiences. Department stores have a huge opportunity to provide this. To maintain customer footfall, loyalty, and interest, these experiences must be intrinsically linked with emerging technologies.
The technology shift within department stores will be beneficial to employees, in addition to customers. Today, store staff often do a lot of repetitive and manual work – such as inventories and replenishing stock. The use of technology like AI and the internet of things (IoT) can eliminate mundane and cumbersome tasks, thereby freeing up staff time so that they can add more value to the customer experience.
To compete in an increasingly digitalized world, department stores must think of AI as a strategic imperative sitting at the heart of their business. There is a huge set of benefits to be gained from AI implementation for stores, ranging from improving the customer-experience to revolutionizing operations. Our recent report into AI in retail found that 89% of retailers are currently focusing on complex deployments, such as using data analytics for marketing and lead-gen purposes, which are hard to scale. In order to see the best ROI, department stores should first focus on easy-to-win AI deployments which are ultimately easier to scale.
Physical retail spaces will continue to evolve to remain relevant in the digital age. However, as we move forward, the right location is becoming equally as important and must provide an experience itself. With the likes of the Amazon Go store and Ikea’s move away from warehouses to the high-street, we will see more iterations of retailers trying to keep up by making shopping a leisure pursuit. More brands will bring what they have learned from experiential pop-ups into their stores to ensure maximum customer engagement and satisfaction. In 2019, this could come to life via a partnership between a new or existing retail brand and a popular food/drink manufacturer. By giving consumers a chance to shop, socialize, eat, browse and share from a single location, brands will bring experience to the center of their proposition.
Technology has certainly jump-started changes in consumer behavior. But these changes do not necessarily herald the end of the department as we know it. I believe that, in 2019, we will see the evolution – not the death – of department stores as they innovate and augment in a race to keep up with digitally-native competitors.
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This post originally appeared on www.gigabitmagazine.com, on Mar 05, 2019.