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Are the New Technologies In Online Retail Worthwhile?

By Andy Mulcahy - Editor at IMRG

Part 2 in our blog series Threats For Online Retailers 

Last week I published the first in a series of posts looking at some of the threats that online retail businesses face today. While that post focused on threats inherent in the political climate, this week’s looks at technology – specifically the pace at which it is evolving and the fear of missing out. 
 
New technology can pose a threat, as often implementing it represents a leap into the unknown. The potential is always heralded loud and clear, but the key thing to beware is listening to the ‘artist’s impression’ of how it is going to change the world – which is usually seamlessly, quickly and with immediate and unquestioned uptake from people on a large scale.

Buzzing away

There is much to be said for gaining first-mover advantage in use of new technology – and certainly no-one wants to lose ground to competitors who may already be reaping the benefits of implementing the latest buzz concept ahead of everyone else. 

But buzz concepts don’t always deliver on their early promise and some can take years to capture the interest of shoppers – sometimes making the investment too soon in something still emerging can lead to an expensive bit of kit sat there doing something very clever that no-one takes any notice of.

Buzz terms are pushed by marketing teams, compelling prospects to act quickly or risk losing out. Clearly these claims should always be ingested with a fairly hefty pinch of salt. So let’s consider a few of the latest buzz technologies for online retailers and identify the potential threats of slavishly chasing the next big thing. 

Virtual Reality (VR)

VR has been around for years. When I was a lad, it was all about expensive (relatively speaking) games down flash arcades (as in the Trocadero etc, not a local fair) yet the sense remained that this was amazing because we were being told it was, rather than actually being genuinely amazing.

It’s had a shot in the arm recently because the technology has got better and more affordable (not the Oculus Rift necessarily, which typically retails for about £500, but there are cheaper models not to mention Google Cardboard). It’s being talked up as the next big thing, with applications in multiple sectors including gaming, sport, music and (yes) retail.

It’s easy to see the attraction. Going somewhere ‘virtually’ where you can’t be physically – exploring a faraway city or gallery, attending a concert etc – or even doing something a bit ‘otherworldly’, such as flying a spaceship, starring in a classic movie or diving to the bottom of the sea. But when assessing the worth for retailers, we have to accept that none of those really sound much like shopping. 

A (virtual) reality check

A big factor in all this is, like with many things, down to the propensity of people to want to use it. You can lead a horse to water and all that. If someone can pop on a VR headset and walk around a haunted house, go to the Beyoncé gig that sold out in 0.04m/s or get a wonderfully immersive experience of the FA Cup final at Wembley, you can imagine that has a good chance of really capturing the imagination and getting them returning for more.

Extend that to retail, and obvious applications – such as providing the opportunity to browse stores remotely – seems somewhat less exciting. Another would be using headsets alongside changing rooms to enable shoppers to swipe through multiple items quickly and see if they suit them without having to undress once.

So far, so practical – and really this is the issue. In other areas VR promises a dazzling experience that is fun, first and foremost. If it’s use in retail is restricted to helping people engage with (and hopefully buy) products, it would seem a little flat by comparison and you could easily envisage a situation in which virtual stores sit there decidedly empty because they don’t compete with the VR experiences people are getting in other areas.

What would good look like?

So we’ve established that online stores are neither under the sea nor on the moon, and just using it to walk around remote stores or try on clothes may have limited appeal. How then, could retailers use VR to inspire people in a more sustained manner?

Imagination will probably be key, depending on the sector. Enabling people to get really close to the catwalk would seem like something a fashion shopper would respond well to. Participating in some kind of football-related activity with some of the game’s biggest stars may serve to successfully engage the sports shopper. And imagine if kids could walk around a toy factory, done up Willie Wonka style?

The point is not to focus on products explicitly, but the associated experience. Sometimes people respond very well to things that may even seem a little trivial on the surface. Taking a selfie with a helium voice and stars shooting out of your mouth might seem a little silly, but it hasn’t done Snapchat any harm.

Conclusion: big opportunity, get the feeling some will do it incredibly successfully by really using their imagination – but there will be plenty that don’t.

Artificial Intelligence (AI)

What does AI even mean, where does it start and end? Could go on for a while about that, but the reason it’s a buzz topic at the moment is that we are now interfacing with something that seems very AI-esque, to the general public at least – which broadly means things that communicate with us and learn in the process – in our day-to-day lives using voice activation applications in our phones, myriad home devices and even cars.

In a retail capacity, it is most commonly being looked at in a customer service capacity – either providing a text-based interface through message-style applications, or even voice. AI programmes can offer a range of benefits such as working 24-hours a day without the usual human staff-related breaks (due to inconveniences like sleeping, sickness or going on holiday), but most interestingly they have the capacity to log and measure every word spoken or typed. 

That helps build a referenceable database of past communication from which to learn, adapt and, hopefully, improve.

Another satisfied customer?

And that, of course, represents the great known unknown (as Rumsfeld would have had it) about this stuff. These kinds of system – not just in customer service, but any area of the retail experience – can only be as good as the data they base their performance on.

And so the variable here is not the machines, but the most unpredictable element imaginable – people. When people contact customer services they are usually annoyed or frustrated, so anticipating how they will respond to conversations with a robot, on the whole, remains to be seen.
A few possible outcomes:

  • They think it’s great – responsive, intuitive, friendly and quick to resolve issues;
  • They find it funny – which might lead to odd outcomes as they realise they are talking to a robot and just speak nonsense (‘have you seen my pet zebra Rufus?’);
  • They find it annoying – clever as it is, they feel affronted that the brand has lost its humanity in communication with them;
  • They think talking to a robot is weird – it makes them feel uncomfortable and puts them off; or
  • They don’t really notice – it’s just like talking to a person.

There are others we could list too, of course. But the point is that it’s simply not possible to know what impact it will have on attitudes and people’s satisfaction with the overall experience, or how they will react.

Conclusion: the potential benefits to efficiency are too strong to ignore and retailers should look to identify the areas of the business that could quickly benefit from automation, but it’s very difficult to predict what is going to happen as machines start to put their learning into serious action.

Keeping up with the Joneses

It seems like every week there is some announcement in the press about a flash new implementation of technology in retail that threatens to revolutionise how things work – sometimes these can seem like bolts out of the blue that can make retailers sit up straight and wonder whether they need to follow suit immediately or risk floating off into inefficient retail irrelevance.

It’s tempting perhaps to read ‘Joneses’ in the above heading as ‘Amazonses’, as they are often at the very forefront of innovation in retail, with functional prototypes before anyone else has even thought of it. Amazon have after all launched free same-day delivery for Prime customers, they are continuing to push ahead with drone delivery trials and even showcased a version of in-store shopping without, well, the customer having to do anything inconvenient to be honest. 

But in reality, it’s not just Amazon who are innovating. There was a notable recent news piece on Ocado’s increasingly automated factories for example, one of the clear competitive battlegrounds for achieving ever-greater efficiencies.

Choosing the innovations for you

No-one wants to lose ground to competitors, but there are so many innovations it can be hard to settle on the most pressing. It’s worth bearing in mind that many take a while to bed in, catch shopper interest, start producing genuine efficiencies / return on investment etc. 

By way of example, let’s put same-day in perspective. While it undoubtedly provides a pretty hefty potential advantage over those retailers only offering much slower delivery times, it only currently accounts for a tiny percentage of delivery volumes – 0.06% in December, no less, according to the latest IMRG MetaPack Delivery Index.

However – this move does seem to have spurred many retailers into speeding up delivery. For 2016 as a whole, 31% of online retail orders were next-day, up from 26.8% in 2015. So it doesn’t necessarily follow that you have to imitate an innovation faithfully, it’s more important to identify what that means for customer expectation and evolve areas of your proposition accordingly.
 
Conclusion: keep a close eye on how things are developing, but remember to only do the things you think you can do well. And make sure you separate trend from technology.

Next time…

Next week I’ll focus on some of the fundamental shifts we are seeing in online retail and the inherent potential threats they pose.