Consumer buying is steadily shifting from traditional storefronts to new channels: 16% of retail sales were e-Commerce transactions in 2018. That’s expected to grow to 25% by 2026.
Analysts expect retailers to shutter 75,000 stores by 2026 as online shopping continues to grow, and this movement already has begun. Last year saw the closure of more than 9,300 stores by discounters such as Kmart, retail icons like Sears and luxury brands including Barneys.
Some have referred to this as the retail apocalypse. But a closer look reveals that what’s happening here is better described as a retail transformation.
Physical and Online Retail Are Focusing More On Experience
Another important new trend in retail is a focus on providing customers with experiences.
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Consider Canada Goose’s “The Journey” experience in Toronto.
There’s no inventory at this mall location. Instead, associates invite customers to try on one of the company’s parkas in a snow-filled room. Visitors can traverse a mock icy rock face. Shoppers also can work with a “personal tour guide” to make purchases online via touchscreen.
This also has benefits to the top line. A joint study by the Wharton School, Harvard Business School and Idea Farm Ventures found that customers who shop at inventory-free stores spend up to 60% more.
The move to deliver “intelligent” experiences cuts across the physical and online worlds.
We’re now in Wave 3 of digital commerce, focusing on the voice of the customer. But initially, retailers employed digital technology to bring online what already existed in the physical world.
Wave 1 occurred in the 1990s when Amazon and eBay appeared and other companies began experimenting with digitization. Wave 2 was in the early 2000s, when technology suppliers began offering back office tools that gave retailers a packaged, repeatable approach to using large, monolithic enterprise technologies. And in Wave 3, retailers are surgically employing artificial intelligence to improve customer experiences across every touch point.
AI Is Enabling More Customer Engagement And Smarter Retail Strategies
Digital experience platforms that leverage AI allow forward-thinking retailers to drive higher customer satisfaction. That’s important in the competitive retail environment, in which customer expectations are high.
However, the hype around AI has gone into overdrive. And nearly every technology solution provider catering to retailers today has AI as part of its messaging. As a result, retailers are suffering from AI fatigue. They need to look beyond the hype.
Not All AI Is The Same
There is a new category of applied AI, aimed specifically at improving customer experiences. Retailers should know that the best AI solutions both facilitate conversations and look at customer signals. This allows retailers to make better recommendations, drive customer satisfaction, and benefit their own businesses by increasing sales and lowering costs.
For example, AI can help a retailer understand that a certain item has a high rate of return. The retailer can then avoid recommending that product. Future customer satisfaction would increase, and the retailer would avoid restocking costs.
Retailers Need Holistic AI Platforms With Breadth And Depth
That’s why for AI to meet its promise, retailers must apply it holistically to the entire customer experience. It’s not about one touch point – it’s about the whole customer journey.
Only AI platforms with breadth and depth allow retailers to address the entire customer lifecycle. Breadth means focusing on the customer across all retail interactions, from the start of the user experiences at catalog sales and promotional videos through service and omnichannel support post-sale. Depth is the ability to understand what the data can tell retailers about call deflection, cost reduction, customer service, and product reliability.
As more retailers embrace AI strategies, expect to see a rise of the platforms over single-function AI solutions. Such holistic solutions and strategies will deliver maximum value for retailers and their customers.
Brian McGlynn is Vice President of Commerce at Coveo.
