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The future of retail – 5 big trends driving retail innovation

The next decade will be a defining one for global and Australian retail. Gen Z is nearly 30% of the total global population, and it’s predicted that they’ll make up about 27% of the workforce by 2025. Down under today, Gen Z represent 20% of the Australian population. They’re also the first generation fully raised in a digital world - spending more time online than any other group. And their spending power is growing.

If we look even further afield, by 2033 (those born from 2010 onwards – being Generation Alpha), will also begin joining the workforce, and they represent 12% of the Australian population today. Growing up in a digital environment, with all knowledge just a click away, will not only affect their experience expectations, but defines the way they interact with and view the world around them.

As digital generations grow up, the pace of change required by the retail industry to meet their needs also grows. Many traditional retailers and consumer product companies face major challenges in adapting to these changing needs of customers.

So how are retailers needing to evolve and change and what big trends and innovations will shape the future of retail?


Spend in physical stores



 

Ethical commerce shaping the decisions consumers make


Sustainability and climate consciousness continues to grow, and the next decade will be characterised by a wave of new retail digital innovation to meet changing consumer expectations. There’s now a critical mass of shoppers who talk of making a difference with their purchases. In Europe, 74% of consumers say they’re willing to pay more for products with a positive environmental impact or health benefits. In the US, that figure is 71%. In the Asia-Pacific region, it’s 90%.


Whilst a separate report, The Future of Commerce found that 46% of consumers have already used sustainable delivery options when ordering online (up from 43% the year prior).


As brands seek to reduce their carbon footprint and make more ethical and sustainable choices, a wave of innovation is occurring from supply chain through to instore and online experience.

Delivering great retail experiences today leaves quite a significant carbon footprint. As shoppers increasingly rely on visuals to inform their online purchase decisions, retailers are pressured to produce multiple visual images per product. In fact, according to a study by Coresight Research, 81% of retailers typically display at least five product visuals for a single product on their websites. This challenge is compounded by the need to produce visuals for other channels. CGI and 3D technologies can be used to create product images sustainably, reducing the need for photo shoots, but the traditional photo shoot process does generate a sizeable carbon footprint.


But it isn’t just de-carbonising the online experience that are in retailers' sights. A shift to re-sale and the circular economy is driving retailers to innovate through new platforms and brand collaborations that enable consumers to play an active role in the circular economy.

To deliver on sustainability goals, collaboration is becoming front and centre for brands like Selfridges - and we can expect more of this in the years ahead. Luxury department store Selfridges developed a vision to reinvent retail through its ‘Project Earth’ initiative which aims for net-zero carbon emissions by 2040. As part of their commitment, Selfridges is looking to encourage greater adoption of circular fashion, having recently partnered with online marketplace LOANHOOD - a marketplace and service for renting out clothing. Customers can exchange their fashionable items for previously owned treasures at the upcoming event. The initiative, which comes under Selfridges’ ‘Worn Again’ concept, is part of Selfridges’ season of second-hand and circular shopping events. Its goal is to extend the life of clothing.



Established in 1883, Frye - an American manufacturer of shoes and boots etc - has gone a step further creating their own exchange platform to enable Frye loyalists to sell their ware. Frye offers a smooth online process for selling products, leveraging prior purchases and the online product catalog to make it easy for customers to find the item they want to sell and add product content.



Traceability is also vital to enable consumers to make more conscious and sustainable choices. Fashion consumers have shifted from conspicuous to conscious consumption and want a guarantee of ethical practices. Consumers of food want to be informed about exactly what they are eating and how it was sourced before chowing down on their favourite treat or meal.


In the UK, a government backed consortium have recently announced the launch of Digital Sandwich following a two-year development project. The platform has been developed to connect primary production and supply chains to retail, to provide traceability and provenance of ingredients whilst increasing manufacturing productivity, improving processes and reducing waste across the supply chain.


Technology like this enables brands to be able to provide the transparency in supply chains that was often missing to enable consumers to be able to make more informed decisions.


 

Digital payments taking new forms


Australia is seeing one of the fastest adoptions of digital payments in the world. According to FIX global, the total value of cash payments made in Australia represented just 6% of all point-of-sale transactions in 2022. As developed countries move towards becoming cashless societies – digital payment innovation continues to flourish. Anne McDonnell, Chief Market Officer of ANZ Worldline Payment Solutions says “several major payment providers, recently introduced or commenced piloting mobile app technology that turns Android mobile devices into a terminal with no additional hardware required. This innovation will improve how large businesses serve customers.

For example, allowing them to accept payments anywhere in-store and eliminate the frustration of queues.”


Queensland-based tech company TagR has gone one further. Its web-based tech enables shoppers to scan and pay for products on their phones and promises to increase retailers’ sales by freeing up store staff to focus on customer service and making queues a thing of the past.


According to a study by PYMNTS and ACI worldwide, real-time payments are also gaining a lot of focus and attention across the globe. India, Bahrain and Brazil show the fastest levels of adoption, but appetite is growing in developed markets like the US and UK.



Real-time payments are payments made between bank accounts that are initiated, cleared and settled within seconds, at any time of the day or week, holidays and weekends included. 61% of millennials and 59% of bridge millennials say they are highly interested in real-time payments in the US. Consumer appetite is driven by convenience and ease of use, alongside it enabling them to better track their financial situations.


Down under, real-time payment adoption is trailing other markets. In 2022, real-time payments accounted for just 6.1% of the total payments volume of transactions - but adoption is slowly growing. Woolworths, Australia’s largest retailer, is the first major company offering customers the option. The tie-up uses Australia’s new payments platform, PayTo. The real-time payments infrastructure is built by the banks and run by Australian Payments Plus.


Alongside is the adoption of crypto as a form of payment in both the US and UK. Appetite to leverage scan-and-go via a merchant app is also high on the priority list for many UK retailers.


 

Immersive experiences taking flight

As immersive technologies advance in their capabilities and experience delivery – it is dramatically changing retail across the globe. According to recent research, 68% of consumers in APAC and 58% in Europe advocated for immersive technology experiences. Whilst another study has found that younger shoppers are currently the highest adopters of such technology being 2-3 times as likely to have shopped using emerging media - like social media, virtual try-on, and online live stream.1


This means that modern consumers are ready to embrace immersive technologies in their daily lives. When it comes to eCommerce, buyers want to connect with their product before making a purchase, and up until now it has been difficult for retailers to bridge the gap in their online experience. Immersive technology helps to do just that, enabling online retailers to reimagine the eCommerce experience through virtual try-on’s and other 3D visualisations to help better inform purchase decisions. Whilst these are already emerging – they will become table-stakes to compete in market over the coming years and become a more standard feature within retail sites.

Wardrobe-ai.com is one such example of an array of NextGen tools enabling consumers to try on before they buy.


Not only however do these innovations enhance the customer experience – they are also good for retailers and consumer brands alike, as leaps in experience enable consumers to select products that are right for them - reducing returns and exchanges.


Immersive experiences are also being adopted to improve the instore experience. Luxury brand Farfetch has been experimenting with technological advances in their latest store of the future concept. Known as the connected mirror – FarFetch enables consumers to request a bigger size and even browse recommendations for products they may also like that go well with the product they are trying on.


In the world of grocery, AR and VR experimentation is rife – as brands seek to address key pain points during the instore experience. Sainsbury's is using AR to help customers find products in supermarkets. They open the Sainsbury's app and camera on their phone, search for a product, and the item pops out from the shelves.

 

Automation is accelerating and the robots aren’t just coming - they are here...

Whilst the advent of robots is not new and retailers have been testing them in various forms, we are likely to see more wider scale adoption onto the shop floor in the years ahead. With retail brands eager to boost sales, relieve workers from mundane tasks and respond to the ongoing labour shortage, retailers and supermarkets are adding robots to their store aisles.


In Sam's Club and BJ Wholesale, inventory robots are already being deployed. Outfitted with cameras and sensors, autonomous  robots can verify price signs and look for out-of-stock items, elevating team members from mundane tasks and ensuring customers gain access to faster and efficient services.



Within fast food restaurants, automation is also taking hold. White Castle - a fast food restaurant in Chicago - now deploys a mechanical arm and computer vision technology to cook everything from onion rings to cheese sticks, improving consistency in the quality of food production and reducing the need for customer service team members to undertake mundane tasks.


 

Voice enabled shopping experiences fill the customer service gap


With greater adoption of voice, voice enabled experiences are also increasingly being considered by retailers to bridge customer service gaps and provide more frictionless experiences.


Having returned from the National Retail Federation conference in early 2023, QUT’s Professor Gary Mortimer says he sees “a role for AI-enabled voice technology in retail stores, given the fact that many consumers already use voice to connect with Siri, Alexa and Google Assistant on their mobile devices.

Rather than tracking down a shop assistant to ask where the capers are, consumers could open a retailer’s app and ask for assistance.” He believes that widespread use is not too far away as “it’s one of the types of technology we’re already using – we might have Google Assistant or Alexa systems at home,” Mortimer said. “The next stage will be talking to my phone to order groceries.”


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