Retail and technology: the great 21st century love affair

In our 2012 report, Digital disruption: Short fuse, big bang?, we predicted which sectors we thought would be among the first to face significant challenges as a result of digital disruption.

Retail was front and centre. We expected the sector to experience significant disruption, and for it to happen soon. At the time, the impact of digital disruption on retail was largely expected by most industry analysts to manifest itself as a substantial reduction in physical retail space, as bricks-and-mortar lost ground to cheaper, faster, more convenient online shopping.

These predictions were based on an assumption that for customers, online was the epitome of convenience and physical-only retailers could not compete. In other words, it presumed online and in person retail were in competition with each other, and that only one could prevail.

Of course we now know what has happened in the retail sector looks different to those predictions. There has been a definite increase in the percentage of shopping conducted online, and physical retailers in Australia have certainly lost a significant share of growth in retail to e-commerce. But purchases in-store still account for over 90% of all retail transactions, and instead of digital channels replacing physical ones, a combination of channels are being used by shoppers. Bricks-and-mortar retailers have developed omnichannel initiatives to better synchronise their online and offline offerings. 40% of in-store visits were influenced by digital in Australia in 2015.

Perhaps the ultimate sign that the death of bricks-and-mortar retailing has been exaggerated is the growing trend for previously online-only retailers moving to open physical stores. Some of the biggest online-first retailers, including Amazon, Warby Parker and Bonobos, have opened physical stores to allow customers to experience their products in person.

retail technology

Where to next?

It’s difficult for any retailer to stay on top of the huge range of trends and developments globally and locally.

The best thing that retailers can do is understand their customers. The next best thing they can do is be open to the advantages that integrating technology solutions into their operations can bring, and adapt their business processes and models to enable the quick and agile adoption of new technologies.

But, there is a big difference between truly integrating digital technology into the physical retail experience, and bolting it on as an afterthought.

Successful digital technology integrations in retail help the customer to save time and find what they are looking for. And on the other side, they help the retailer to understand their customers better and to track what’s working.

Most importantly, it won’t feel like an additional layer. It will be behind the scenes, or will integrate so seamlessly into the customer experience that they won’t notice the technology, only the positive outcomes.

Digital technology should be seen as a conductor and a facilitator of better service, rather than the end point or main focus.

And we’re witnessing dozens of Australian start-ups take on the challenge of helping traditional retailers to bridge the gap between digital and physical commerce, whilst capitalising on what continue to be their most important advantages over digital – their physical stores, their expert staff and the sense of community created by an enjoyable, value adding in-store experience.

The bricks-and-mortar retail store is not obsolete, far from it. But the retailer that does not have a meaningful relationship with the consumer is. The retailers that will be most effective in today’s marketplace will likely be those that fundamentally rethink the retail experience, developing business models that blend physical, virtual, and community experiences, centred around the customer, with the technology not as the focal point, but as the infrastructure that enables it.

This blog is an excerpt from the Deloitte point-of-view paper: Technology in Retail: From centre stage to supporting player

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