There are two powerful but contradictory forces at work in the global retail landscape. The first is epitomized by the popularity of famed “declutterer” Marie Kondo, who exhorts people toward minimalism by keeping only those things that bring them joy. This is echoed by the burgeoning trend, especially among millennials, to value experiences over material objects — which companies like Apple build on by positioning their goods as lifestyle choices.
The opposing force is the trend toward immediate gratification — the need-it-now mentality served by ever-faster delivery and consumption. This force is supported by the acceptance of “good enough” products, epitomized by fast fashion brands like Forever 21 that are outshining more upscale chains.
What may not be apparent is that the same technology underlies both of these forces. Our increasingly online-based social connections are driving the former, while innovations in commerce enable the latter. On both ends, technology has sped up the feedback loop — allowing both consumers and companies to react faster to perceived changes in tastes.
Social is selling more than ever
Retailers are increasingly turning to social media to reach new customers and target offerings to niche audiences. While the success of social channels to reach buyers was viewed with skepticism for some time, social is more influential than ever in the sales cycle. According to a new Business Insider report, social media referrals to commerce sites increased by 200 percent from 2014 to 2015. Facebook continues to lead as the dominant social platform, but sites like Instagram and Pinterest are also targeting customers through personalized and sophisticated branding for high-end goods.
IoT makes commerce pervasive
The Internet of Things (IoT), though nascent in some sectors, is already having a big impact. In retail, IoT technologies are impacting the consumer experience and revitalizing in-store experiences by connecting point of sale across the supply chain. This is resulting in new revenue opportunities.
Mobile phones started as a convenient way to shop but have become a trend to connect everything and share data. Mobile makes the opportunity to shop pervasive, and makes it easier than ever for retailers to reach customers. Global spending on retail IoT initiatives is expected to grow from $14.3 billion in 2015 to $35 billion by 2020, and 80 percent of retail decision makers believe IoT technologies will drastically change the way companies do business in the next three years.
Commerce is becoming cognitive
For personalization or IoT strategies to be successful, retailers are increasingly turning to intelligent data insights to learn about customer preferences, what’s working, and to ensure that just-in-time models align to satisfy demand for new products and services. The next step for companies is to look beyond incoming data insights and drive decisions through adaptive systems that recommend and simplify decision making. Some companies already see the value of using cognitive computing to better serve their customers — beyond what they actually buy. For example, Under Armour is building apps that help people train and maintain fitness by learning how they workout, and connecting to data and services from other sources.
Digital transformation has not only affected companies, but also consumers, and the impact on the retail environment has been tremendous. Though the results may pull the market in conflicting directions, what is clear is that technological change is accelerating. The fate of retail will rise and fall with technology innovations in our increasingly interconnected world.