How retail will change radically in the next five years

Sue Mitchell

Jan 2, 2020

AFR

Shopping in Australia may still feel more like the Flintstones than the Jetsons, but experts say the $330 billion sector will change radically over the next decade as retailers embrace data, digital and artificial intelligence to cut costs and boost sales.

Woolworths’ safety robot, nicknamed Greggles, alerts staff to trip and spill hazards but doesn’t clean up the mess himself – yet.  Supplied

“There will be more change in the next five years than there has been in the last 50 years in retail,” says retail strategist Stuart Harker.

“There’s been more data collected in the last three years than there’s been in the last 30 … the speed of change will get faster and faster.”

By 2030 consumers will still buy most of their food, clothing and homewares from bricks and mortar stores (rather than via Jetsons’-style vending machines), but online shopping will grow from about 8 per cent of sales to between 15 per cent and 20 per cent.

The way we pay for purchases will change, with fingerprints, facial recognition and mobile wallets replacing cards, pin numbers and cash, robots will all but replace manual labour in  distribution centres, and retailers will use artificial intelligence to make store replenishment faster and easier.

At the same time, retailers will attempt to build closer relationships with customers and better understand their needs, not only by mining customer data but by embracing their values.

“Retailers need a reason to exist beyond commodity transactions,” said Accenture’s ANZ retail managing director Michelle Grujin, citing research that shows consumers spend more with retailers who have a purpose that resonates with them.

Accenture managing director Michelle Grujin: “Retailers need a reason to exist beyond commodity transactions.”  Kate Geraghty

Woolworths, for example, is tapping into customer concerns about sustainability and plastic waste by entering into a long-term agreement with waste management company TerraCycle.

From 2021 ,Woolworths customers will be able to buy products such as washing detergent, shampoo, juice or ice-cream from their favourite brands in zero-waste reusable containers, delivered to their doors.

In North America, consumer electronics retailer BestBuy has not only launched an in-home support service to help tech-challenged customers, its Geek Squad staff have traded in their Volkswagon Beetles for eco-friendly Prius cars, a move which may one day be emulated by Australian retailer Officeworks’ Geeks2U service.

“A sense of purpose will become far more prevalent and relevant in the years to come,”   says Grujin.

Retailers will also use data to better curate their ranges and reach new levels of personalisation, making more relevant offers to customers based not only on past purchases but using predictive analytics to second-guess what they might buy next.

Liquor retailer Dan Murphy’s, for example, is already curating the range in one of its newest stores based on a customer’s online product ratings and making personalised offers based on their preferences.

The big box liquor chain recently launched a “discovery engine” which scores its 3.8 million customers against 5000 products and recommends products customers haven’t bought before, rather than offering the same red wine or craft beer they order regularly.

The technology could eventually be used to make in-app offers to customers when they shop online or walk into a Dan Murphy’s store.

As data shifts to the cloud it will become democratised and more readily available, not only to retailers but other players in their ecosystems, including suppliers and shoppers.

“It’s about moving away from legacy ERP (enterprise resource planning systems) and being able to provide data on the cloud and being able to recall that very quickly,” says Grujin.

“By being able to put it in the hands of your workforce or customers or your ecosystem partners [you can] service consumers far more readily and far more personally.”

For example, using apps in their phones, tablets or internet-connected wearable devices, supermarket staff will be able to assess stock levels and reorder fresh foods based not only on past demand but future demand – taking into account factors such as weather and events – and  push out offers to customers.

“That sort of technology is available now and you’ll see more wearables and IoT [internet of things] pushing into more of the larger format retailers,”  Harker says.

Coles, for example, is already using wrist-mounted scanning devices to help guide staff around stores as they refill shelves, and is looking at technology such as electronic shelf-edge tickets to simplify the task of marking down specials on 4000 items across 800 stores every week.

Coles and Woolworths are also investigating image recognition and artificial intelligence to solve out-of-stocks, a problem estimated by IHL Group to cost retailers globally more than $1 trillion in lost sales a year.

The retailers have been testing technology developed by Singapore-based tech company Trax Retail and the Lakeba Group which use shelf-mounted cameras and AI to monitor stock on shelves and alert retailers and suppliers when products need to be replenished.

Harker, the former head of PwC’s retail and consumer division, says retailing will become increasingly “blended” as bricks and mortar retailers harness digital technologies in stores to engage and serve customers and improve processes such as replenishment.

“It won’t be an option to only have one channel to the consumer. You’ll have multiple channels and click and collect, click and reserve – they’ll be fundamental to the offer,” Harker says.

Retailers will develop systems that enable them to recognise customers whether they walk through the door or shop online, on their mobile phones or through apps.

AislePlus interactive touchscreens are like another pair of hands for retailers.  Stu Spence

“It will be a seamless experience and customer recognition will be fundamental to having a great experience,” Harker says.

“Personalisation and curation will continue to grow in the next three to five years. It will get better because of all the data and analytics. Consumers want less spam deals and more personalisation and curation of better tailored offers.”

Harker is chairman of a company called AislePlus, which has developed interactive self-service touch-screen kiosks which enable customers to search for products in-store or in a retailer’s or supplier’s warehouses, order online from an “endless aisle” and even complete transactions without staff assistance.

AislePlus founder Grant Oyada says sales of footwear at his chain of Between the Flags stores have risen 120 per cent since the digital kiosks were introduced and he’s been able to increase his range without physically holding the stock.

“With less stock retailers can shrink their footprint and reduce rent or keep stores the same size and offer a wider range and maximise returns per square metre,” says Oyada, who is testing AislePlus with other retailers.

“It also enables retailers to serve more people – consumers can start their next transaction on their own. It’s that balance between digital and your store network.”

Online fulfilment will also change. While many consumers will want the flexibility of collecting online orders from stores or pick-up places, retailers are exploring new ways to deliver online orders faster and more cheaply.

Domino’s is experimenting with drones and an autonomous delivery vehicle, or robots named DRU and DOM, while US retailer WalMart is testing deliveries using driverless cars or autonomous Prius cars powered by tech firm Nuro’s self-driving software and hardware.

Harker expects Australian retailers to develop a range of fulfilment options, from drones and electric bikes to mini-vans and ride-sharing companies such as Uber, depending on the need.

“The whole distribution mix and how products get to consumers will change,” he says.

Perhaps the biggest change in retail will occur behind the scenes and away from customers eyes as major retailers build fully automated warehouses and fulfilment centres.

Ocado’s grocery picking robots whizz around fulfilment centres at eight metres per second.  Supplied

Coles is building two highly automated fulfilment centres in Melbourne and Sydney in partnership with British online food retailer Ocado. Ocado’s pick and pack technology features Dalek-like robots which hover over stacks of grocery tubs, grabbing tubs from the top of the stack and dropping them off on to other stacks or taking them to a pick station, where a human selects items for customer orders.

About 1000 robot pickers will outnumber humans by three to one and will whiz around each fulfilment centre at eight metres a second, reducing the time it takes to pack a grocery order to about three minutes and boosting accuracy rates to almost 99 per cent, all but eliminating the need for vans to deliver replacements.

If the technology is successful, by the end of the decade Coles might have eight automated fulfilment centres around Australia, based on analyst estimates that food retailers need one CFC for every 80 stores.

Takeoff uses robots to pick items from its virtual shelves. Supplied

Woolworths is taking a different tack to Coles, building three mini automated fulfilment centres in supermarkets and liquor stores with US tech company Takeoff Technologies. Takeoff uses automation, robotic pickers and vertical shelves to minimise space and bring products closer to human pickers, reducing manual costs by more than 75 per cent.

Takeoff ‘s mini CFCs are a fraction of the size and cost of Ocado’s CFCs, take less time to build and can be retro-fitted into or nearby existing supermarkets. If all goes to plan Woolworths could conceivably build dozens of micro CFCs in stores, augmented by larger CFCs.

Rosie the robot maid from The Jetsons.  Supplied

Like WalMart,  Woolworths has also been testing robot cleaners (known in some stores as Greggles), who roam the stores and alert staff to spills and slip hazards.

Unlike Jane Jetson’s robot maid Rosie, Greggles won’t do the shopping for you, but the retail future envisioned by the 1960s cartoon series is proving to be surprisingly prescient.