Analytics and millennials: The future of retail

Published on the 02/02/2018 | Written by Donovan Jackson

Future retail_GlobalData

Data driven insights and automated offers tempt penniless smashed avo generation…

Two new sets of research into retail paint a picture of a dynamic environment in which challenges and opportunities abound. Firstly, British market watcher Juniper said a new study shows that global retailer spending on ‘AI’ will reach US$7.3 billion per annum by 2022. That’s steep growth, from an estimated US$2 billion in 2018, and Juniper said retailers will be throwing cash around in the quest towards increased customer experience personalisation.

Then, American analyst GlobalData picked up on the by-now somewhat familiar refrain that millennials need special treatment, including from retailers. Not surprisingly, it noted that this special treatment is to be enabled by data and analytics.

In a statement, GlobalData said there is much to be done: re-assessment of business strategy and technological prowess by benchmarking store layouts, systems and processes against shopping preferences of millennials and post-millennials. Longer lifespans notwithstanding, and the generally accepted fact that it is in the hot little hands of the much-maligned baby boomers that most of the cash is to be found, GlobalData said it is these young upstarts who are going to redefine the future of retail.

How this will manifest, the market watcher said, looks something like this: ‘Pressed for time, millennial consumers look for convenience and flexibility. They expect a seamless omnichannel experience and look to combine online shopping, mobile apps and visits to physical stores.

But here’s the thing. GlobalData said that while millennials use eCommerce platforms and apps more than previous generations, above half of their purchases still take place in bricks-and-mortar stores. The old ways still work best, apparently (and if we may cheekily say so, maybe millennials had better get used to the fact that the world doesn’t and shouldn’t necessarily revolve around them).

Be that as it may, pandering to their every whim and desire might just deliver the gold. Said GlobalData: ‘Millennials need an incentive to visit stores, such as an entertaining environment, strong brands that they can identify themselves with, and recreational facilities like in-store cafes or experiences in form of memorable product demonstrations and trials.’ Us oldies aren’t immune to such charms either, one imagines.

And here comes the ‘AI’ stuff on which Juniper is anticipating the big spend-up (we’ll explain the inverted commas in a minute). ‘As millennials have not completely ditched visiting bricks-and-mortar stores, retailers need to deploy analytics to align their store layouts, systems and operational processes in line with millennials’ digital maturity and preferences’, said GlobalData.

Its digital retail analyst Andreas Olah, noted: “Retailers also need to work on their social media strategies and integrate these with loyalty programs, customer service functions, and various mobile apps, from style advisors and games to third-party apps that provide voucher schemes. They look to cooperate with strong brands that are popular with millennials.”

Along with millennials’ location, retailers need to provide store or aisle-specific content and notifications to encourage interaction and purchases, said GlobalData, and use various geo-fencing and tracking tools.

Back to Juniper. It its research, AI in Retail: Disruption, Analysis and Opportunities: 2018-2022, it found that retailers will heavily invest in ‘AI’ tools that allow them to differentiate and improve the services they offer customers. These range from automated marketing platforms that generate tailored, timely offers, to chatbots that provide instant customer service.

So why did we put ‘AI’ in those inverted commas? Primarily because the term ‘AI’ is a rather nebulous catch-all. Most so-called AI could be adequately described in terms of analytics and software programming, and so it emerges that within the catch-all, Juniper said it found that spending will be strongest in customer service and sentiment analytics. Here, it explained, ‘AI’ can be applied to understand customer reaction to the products purchased and the service received.

A year or two ago, we’d just have called that ‘analytics’.

In any event, Juniper went on to note that AI-related retailer spending in 2022 will be split into: Customer Service & Sentiment Analytics at 54 percent, AI-based Automated Marketing at 30 percent, and Demand Forecasting at 16 percent. It predicted that retailers will use AI insights to design and target new product ranges, as well as to create promotional offers.

Research author Nick Maynard added: “Retailers are looking to replicate the success of Amazon in making AI a core part of their operations, with retailers increasingly turning to solutions such as AI-optimised pricing and discounting, as well as demand forecasting.’

Juniper offers a complimentary whitepaper ‘Why are retailers excited about AI?’.

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