What is Happening?
Several ISG advisors participated in the annual NRF Retail’s Big Show, January 15 to 17, 2017 in New York City. The conference showcased how retail technologies and innovations are core to the industry. The show also highlighted disruptions – not only technological but also political – and how they form a challenging environment for retailers. But it’s clear that customers are the source of the most disruption – they expect a connected, fun, consistent brand experience.
ISG came away from the NRF show with four main themes that retailers and their technology partners should consider, as follows:
- Retailers need customer-centric and integrated digital platforms;
- The store still matters (as long as it’s connected);
- Analytics must drive actionable insights; and
- Blockchain is significant beyond payments.
Why is it Happening?
Today’s customers need new ways of engaging with buying and digital technologies have raised the stakes for the customer experience. These pressures are driving change within retail business models, forcing retailers to create new customer-centric operating models, and make dramatic shifts to technology investment strategies. These strategies connect and cross customers, the supply chain, and retailer departments, forming a “Digital Fabric” (Figure 1).
Figure 1: ISG Digital Fabric. Source: ISG
1. Retailers need customer-centric and integrated digital platforms. While front-end digital user interfaces garnered much attention from their “cool” factor, there was less buzz around such “bright shiny objects” at this year’s show than in the past. Retailers and vendors all recognize what goes into the effort to implement an omni-channel digital platform: it requires implementing a customer-centric technology platform.
Intel’s introduction of its new Responsive Retail Platform (RRP) reflects the need for integrated digital platforms. At the show, Intel announced plans to invest more than $100 million over the next five years in RRP. The platform connects disparate islands of in-store technology and makes it easier to develop and deploy Internet of Things (IoT) software and services by bringing together retail hardware, software, APIs, and sensors.
2. The store still matters (as long as it’s connected). The continued growth of online purchasing at the expense of physical stores seems irreversible. But retailers are once again recognizing stores for what they can be – a valuable asset for differentiating their brands. The emphasis at the show was not about transforming the brand to become an online retailer, but rather about the convergence of the brick-and-mortar and the digital worlds and the breaking down of barriers between channels. To address that need, Samsung and SapientRazorfish introduced IoT tools to bridge online and in-store shopping activities.
We talked with many vendors showcasing facial recognition technology, interactive store applications, Augmented Reality (AR), Virtual Reality (VR), and wearables. ISG’s research shows that these solutions are gaining faster adoption in enterprise applications. But while these emerging technologies all fit into the category of capabilities that improve the consumer experience and employee productivity, retailers need to focus their investments on consumer engagement technologies that blend the physical and digital touch points along the customer journey.
3. Analytics must drive actionable insights. Session presentations and our other interactions at the show indicate that retailers are getting smarter about Big Data. Top priorities include better data management, improved and actionable analytics, and leveraging sensors to better engage consumers and improve productivity of employees and assets. But the deluge of data makes actionable insights difficult to obtain. We heard from many at the show that integrating artificial intelligence (AI) in systems is the next logical action for retailers looking to deliverable actionable insights and improve performance across customer engagement, omni-channel commerce, and supply chain. Some of the providers with predictive analytics and AI-based offerings for the Retail sector include BlueYonder, Jetlore, CognitiveScale, and r4 Technologies.
IBM via its Watson cognitive computing / AI suite continues to deepen its capabilities and extend them across its commerce, marketing, and supply-chain applications. Other companies also offer credible AI systems to market – and not just traditional software providers. For example, Cognizant’s Intelligent Process Automation Framework applied to its RetailMate, HCL DRYiCE, Infosys Mana, TCS Ignio, and Wipro HOLMES AI platforms are from the outsourcing community. AI also has a clear role in customer engagement (e.g. chatbots) and insight as well as in support of knowledge worker productivity and efficacy.
4. Blockchain is significant beyond payments. Blockchain has the potential of having a significant impact on the retail industry well beyond secure transactions. Today’s “always on” consumer brand loyalty is directly impacted by their appetite for information and a demand for transparency. Blockchain can enable this transparency, allowing all parties—supplier, manufacturer, retailer, and end consumer—to trace a product’s journey. In addition to traceability, connecting all members of a supply chain to the decentralized blockchain allows for a direct exchange of bill of lading documentation between parties, potentially solving one of the shipping industry’s largest problems. There are also applications in warranty claims and counterfeiting.
As an example of a potential use of Blockchain in retail, Microsoft hosted a solution from partner Mojix at its NRF booth. The Mojix RFID and IoT platform solution, based on Microsoft’s Azure Blockchain-as-a-service, automates a retailer’s supply chain enabled by blockchain-based smart contracts between the retailer, its suppliers, and logistics providers.
Net Impact
An integrated digital platform – for retailers can and must provide an integrated infrastructure, and a set of core digital business processes in which common tools, capabilities, and data are transparent and shared, not duplicated. Such a digital fabric for back-end services allows a retailer to create a digital consumer engagement seamlessly across all channels. But putting the pieces in place requires making sense of the many choices of platforms, tools, and services.
Blockchain’s chain-of-custody record will aid in tracking product journeys as well as reducing counterfeiting for luxury items. Goods can be certified with a Blockchain’s digital ledger record, to more easily identify stolen merchandise. But Blockchain is still poorly understood and not widely trusted. So we think broad market adoption is beyond 2017, but Blockchain’s future applications will sweep across many aspects of Retail. Clients of ISG’s subscription research services will see further analysis of business uses of Blockchain and examinations of leaders and disruptors in future research publications.
To varying degrees, the analytics vendors at the show demonstrated capabilities to understand varied content and then reason through disparate data to draw conclusions and recommendations, learn as they go, and interact with knowledge workers and customers. In upcoming research we will cover more about the importance of advanced customer analytics and the role of AI.
Lastly, retailers should make sure emerging technologies under consideration have staying power, and determine whether they fit within the strategy for an end-to-end customer-centric operating model. Instead of being about disconnected or loosely connected, as we discussed about the innovations showcased at the CES 2017 show, retail technologies are bellwethers of where user experience technology innovation is going, using the convergence of data, devices, immersive connectivity, and artificial intelligence to improve customer engagement. Look for additional ISG research about the digital fabric of retail business.