January 18, 2016 | Written by: Steve Laughlin
Categorized: Cognitive Commerce | Data Analytics
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The retail business model is being disrupted and the industry knows it.
In a recent study, 58 percent of retailers agree that businesses focused only on brick-and-mortar stores will not survive past the near future, and 72 percent of respondents stated that they believe one or more prominent merchants will disappear in the next one-to-three years.
The business model in retail is hundreds of years old: select store locations, train associates, create product assortments, manage the supply and distribution chains in order to attract and retain customers.
Technology is now, at once, enabling two tectonic shifts — enabling outsiders to disrupt retail’s traditional business models and drastically changing consumer expectations. As a result, the industry as we know it will undergo a major transformation in the next 10 years.
According to Vision Critical , the concept of the sharing economy has become increasingly popular with 51 percent of US Internet users connecting with peers and using technology to make transactions for goods and services in 2015 — up 12 percentage points over the sharing economy’s reach in 2014. By 2025, the entire supply ecosystem will be transformed as consumers fully embrace the sharing economy.
Customers will design their own products using 3D printers, producing an estimated $4 trillion in 3D printed goods. The opportunity for consumers to become co-owners of merchandise will extend well beyond what is today offered by the likes of Rent The Runway and Lending Luxury. They will be able to take the neighbor’s Porsche for a spin with Turo , own someone’s snowboard for a weekend trip using Splinster or even become their own kennel masters with DogVacay .
With new tools and digital information proliferating at a rapid rate, retailers have more and more channels to directly connect with consumers. For years, they have relentlessly pursued omnichannel capabilities to provide customers with a seamless shopping experience at every touch point. Today, there is only one channel that retailers really need to tap into: the customer.
Retailers need to become more relevant and responsive to stay competitive and increase market share. They’re turning to cognitive technologies that can analyze massive amounts of unstructured data, enabling them to better understand consumer behaviors and deliver differentiated, individualized shopping experience at any point in time. In an IBM study, 94 percent of retail executives familiar with cognitive computing say they are likely to invest in the technology in the near future.
This industry is also realizing the potential of the Internet of Things (IoT), where data harvested from IoT sensors and devices can be used to enhance the customer experience, optimize store operations and improve inventory and supply chain management. Analysts predict the IoT retail market to grow 20 percent to $35 billion in five years. Soon we can opt-in to become walking, running and sleeping data streams that will constantly update contextual information through all of the products around us, in our home, our car and our workplace.
When paired with cognitive computing, this IoT-generated data will assist retailers in understanding and responding to the disrupted landscape and changing customer expectations.
In 2025, we may not have flying cars or a smart refrigerator that can replenish milk while you’re at work, but the future of retail puts customers and their needs at its core. The companies that can get that strategy right will still be standing in 10 year’s time.