3 Retail Technology Trends to Watch in 2020

By: on January 29, 2020

As 2009 drew to a close, the world was reeling from the effects of a recession, Amazon was beginning to challenge the likes of Walmart and Target, and consumers were only just starting to use their mobile phones for more than calls and texts.

Fast forward to 2020 and retailers are feeling the heat of consumer expectations: Amazon has made free and one-day shipping the default, and mobile shopping isn’t just ubiquitous—it’s grown to encompass new user behaviors like looking up product reviews, comparing prices, and finding store locations.

For retailers, staying relevant—and ahead of the competition—means knowing how your competitors are strategizing and then planning your investments wisely. Below are three trends involving immersive technologies, delivery, and fulfillment, and shifting customer shopping habits that will impact the retail landscape by the end of the year.

Trend #1: Retailers will harness AI to optimize delivery services

Retailers across the board are having to contend with customer expectations set by Amazon’s same-day deliveries. In April 2019, the ecommerce giant launched one-day shipping for Prime customers; soon after, Walmart followed suit with their very own one-day delivery program.

Whether it’s by same-day delivery, curbside pickup, or in-store pickup, never has there been more urgency to get a product to customers as quickly as possible, whatever the method.

According to Gartner, same-day shipping has risen from 16% to 26% in 2019 for big box retailers since 2016. Similarly, major retailers offering free pickup options have increased from 73% to 77% in 2019 from the previous year.

Faced with such pressure, it should come as no surprise that retailers are making efforts and investments to use artificial intelligence based tools to improve the efficiency of their supply chain work processes.

What one retailer is doing in delivery with AI:

Online U.K. food delivery business Deliveroo uses big data and machine learning to improve the efficiency of their delivery in three ways.

deliveroo delivery

Deliveroo claims that delivery times have been reduced by 20% through “Frank,” its algorithm engine (Source)

  • First, it uses data to inform strategic decisions by tracking market trends.
  • Next, its machine-learning models are constantly re-trained with up-to-date data to support those decisions and recommendations.
  • Finally, data is used to provide real-time operational monitoring by connecting restaurants and delivery people, and predicting issues ahead of time.

Its dispatch engine ‘Frank’ also calculates and matches riders with customer orders based on historical data to predict rider and food preparation durations. Here’s the company’s VP of engineering, Dan Webb, explaining Frank in a nutshell:

“Frank’s job is, when given a set of orders and a set of riders, to compute the most optimal combination of those orders and riders, which will result in the food getting to our customers as quickly as possible and our riders being able to earn as much money as possible.”

How to execute:

1. Start by analyzing data on your customers’ buying behavior through your retail POS to determine trends you need to take action on.

2. Get deeper insight into your inventory with an integrated retail and inventory management system or business intelligence software. For example, not all items need to be available for same-day delivery or in-store pickup. Find out what items are most popular and assess whether a delivery or pickup service works for you; if so, you’ll need to focus on which service works best for which products.

3. Determine your delivery/pickup strategy. The success of your delivery strategy will be determined by having clear visibility into the availability and inventory of your items to execute on your strategy seamlessly.

Trend #2: Retailers will invest in AR and VR to create more compelling in-store experiences

Taking control of the fulfillment process and delivering quickly is just one part of providing a positive customer experience.

As customers continue to shop online, retailers must figure out the purpose of their brick-and-mortar stores. If you’re a retailer, you need to be able to answer the following questions:

  • Why should customers come to your store—is it to build a positive brand connection, or maybe just elevate sales?
  • What incentives are you providing for customers to visit in-store?

A growing number of retailers across various industries are already using augmented reality (AR) and virtual reality (VR) to make the in-store experience a more interactive one. According to Gartner, more than 100 million consumers will be using AR technologies to shop in-store and online by 2020.

How one retailer is enhancing the in-store experience with AR and VR:

At the start of January 2020, furniture retailer Natuzzi launched an AR and VR retail store in its New York City Madison Avenue showroom. The concept allows customers to immerse themselves in VR versions of their homes decorated by Natuzzi products.

screenshot of youtube video for natuszi products

Customers can immerse themselves in digital versions of their homes and furnish their houses with Natuzzi products (Source)

Wearing Microsoft’s HoloLens 2 headset, customers get to enter digitally rendered versions of their homes in virtual reality, move Natuzzi products around, and change patterns and colors while interacting with the environment.

“It gives them a sense of place and mood that’s almost as real as a physical furniture display, and the experience helps them form an emotional connection to their choices,” said creative director Pasquale Junior Natuzzi.

How to execute:

  1. Build a solid business case. How will VR/AR help your retail store achieve your goal of building a positive brand connection or increase sales? Recognize that the return on investment will take more than two years.
  2. Evaluate the top use cases for the technologies. Review your goals and priorities to ensure that the deployment of your technologies align with that.
  3. Engage with your marketing and sales team. Work together to develop pilot projects to identify which immersive technologies can transform your business, improve existing processes and provide a more engaging customer experience.

Trend #3: Retailers will adopt flexible payment methods to match customer spending habits

The concept of a monthly payment plan for a furniture purchase isn’t new. What’s new is that now almost every major retailer is offering flexible payment plans or “buy now, pay later” options on their checkout pages for a wide variety of items.

About 40% of consumers said they would be more willing to complete a transaction if an option to finance the purchase at checkout was provided, according to a survey by advisory firm 451 Research. Another study found that the clear repayment time frame offered by alternative financing options allows customers to better plan and budget accordingly.

The increasing appetite for “buy now, pay later” services is especially prevalent among younger customers, such as Gen Z and millennials, who want more options for how they pay for things.

Only one in three millennials carry a credit card, according to Bankrate, and if they do own one, still prefer to pay with prepaid or debit, found TD Bank. Evidently, debt-averse millennials want more flexibility and control over their finances—and alternative payment methods offer just that.

How retailers are implementing flexible payment methods:

Buy now, pay later: H&M, in collaboration with global payments partner Klarna, launched a “Pay Later” payment plan to provide “frictionless and flexible checkout” for customers. Members of its loyalty program are able to shop and pay later online and in-store via the H&M app.

screenshot of h&m's shop now pay later option for loyalty members

Members of H&M’s loyalty program have the option of selecting pay later in the app (Source)

Installment payment plan: Through loan company Affirm, Walmart offers customers installment plans of over 3, 6, or 12 months for purchases ranging from $150 to $2,000.

Customers can check their eligibility through Affirm’s website and a decision will be made in real time. Once customers select their preferred payment installment term, they’ll be presented the amount they need to pay each month, interest-free.

How to execute:

  1. Survey your customers to gauge their appetite for installment plans. Identify which customer segments are most receptive to that and which products are the best fit for that.
  2. Devise a strategy for promoting your alternative payment plans. Once you’ve determined your interested customer segments and which products to focus on for your installment plans, decide on a strategy and channel—social media, email, etc.—for promoting your payment plans.
  3. Identify the risks to your business. Giving customers the option to pay in installments can encourage more spending, which could lead to more product returns. This is especially prevalent in categories like shoes and apparel that experience ecommerce return rates of over 30%.

When that happens, fees paid to third-party vendors like Clearpay and Affirm are not refunded. Make sure that is a cost you’re able to withstand.

Prepare for what’s ahead in retail

The future of retail and shopping involves a merging of physical and digital worlds. Providing interactive experiences to drive in-store experiences and meeting customer expectations for rapid delivery and flexible payment methods are crucial this coming year and beyond.

At the heart of this lies the technologies that make it possible to stay ahead of the curve. Retailers who want to not just survive—but thrive—must ensure they use innovative technologies intentionally to meet growing consumer demands to provide more value, convenience, and compelling experiences.

Ready to kick off in 2020 with the right technology? Our advisors are here to help. Schedule a call with our retail expert advisors at a day and time at your convenience or talk to one online via live chat.

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Start 2020 with the right technology