3 Retail Store Trends that are Redefining Physical Shopping

How AI helped reinvent brick-and-mortar retail in 2021

With the exponential growth of e-commerce, the sentiment that physical retail was ‘done’ first surfaced a few years ago. Catalyzed by the disruptive impact of the pandemic, this situation nearly came to be. From corner stores to specialty stores and hypermarkets, the ‘Retail Apocalypse’ ^[1] seemed to swallow up stores of all sizes and sorts, resulting in mass shutdowns across markets.

Now, two years into the pandemic, things have unfolded quite differently. It appears that retailers haven’t just delayed that physical retail apocalypse but have also succeeded in mitigating it. And how? With the strategic implementation of digital capabilities. A Gartner study reveals that 73% of retailers plan to increase investments in store technology ^[2], marking digital transformation as key to future brick-and-mortar strategies.

In the case of early adopters, retail innovation enabled them to transform their stores from transactional shops into experiential storefronts, which allow for interactive customer experiences, seamless cross-the-channel transitioning, and improved resilience owing to their multifunctional format.

With 2022 midway, here are the three key store innovations that retailers put into effect in 2021 that can help your retail chain become omni-capable and future-ready:

1. Experience-focused stores

2. App-friendly stores

3. Fulfilment-ready stores

1. Experience-focused stores to shift from transactional to experiential

According to a market study, for 40% of retail brands, offering experiential retail will be a top priority in the coming year ^[3]. As customer preferences become more experience-oriented, improving in-store experiences will be a critical first step for retailers. In this respect, AI-led digital transformation will guide physical stores toward the stores of the future, catapulting them from transactional outlets to experiential stores.

In this evolution, brands will interface directly with customers to enhance digital-channel engagement, providing smart product recommendations and delivering services such as voice commerce, chatbots, and visual search on apps and landing pages. Moreover, this digital engagement will extend to physical stores as well, augmenting in-person shopping.

For instance, using augmented reality, a Danish retailer tied up with a social media giant to create an AR Fashion Boutique where customers could use QR codes to access the full digital retail experience, which included arcade games, a digital music booth, and an exclusive selection of clothing, resulting in 18 million impressions and high engagement across markets ^[4].

Innovations in retail such as contactless payments that facilitate no-touch checkout experiences, localized store-as-destination formats that allow for a chance to convey brand stories in an organic, community-driven space, and AR/VR technologies like virtual shopping assistants, in-store AR, and interactive store walkthroughs will enable retailers to provide highly personalized and immersive shopping experiences in-store, resulting in increased footfall, conversions, and CX and CSAT.

2. App-friendly stores to offer seamless cross-the-channel transition

Mobile apps have changed how customers shop with and perceive their favorite brands. For retailers, a smartphone app is an excellent place to kickstart engagement and increase foot traffic in a physical store. This is being made possible by Near Field Technologies (NFT) such as Bluetooth beacons and geofencing that are enabling the surge in proximity marketing, allowing brands to notify customers about nearby store locations and discounts precisely at the point of searches. Furthermore, an omnichannel approach that eases the transition from online to offline when customers are in the physical store necessitates an investment in a user-friendly mobile app.

However, developing an app is one thing; developing a data-intelligent app is another. The latter is completely contingent upon making the most of user data to offer individualized shopping experiences. This is where AI enters the picture: intelligent technologies such as Visual Search and Natural Language Processing (NLP) allow retailers to gauge better what and how customers might be searching for and improve their product discoverability by way of search optimization to boost conversion across channels.

With the rise of voice retail and touchless payments, a mobile app serves as the perfect platform to integrate functionalities such as voice assistant and scan-and-pay to offer customers a seamless cross-channel experience. Moreover, this experience can also extend to the physical store, as in the case of an American food retailer that introduced a scan feature in its app, allowing customers to scan and bag their products while shopping. Further, the app also allows the retailer to offer personalized recommendations and discounts to the user while reducing time-to-checkout significantly ^[5].

3. Fulfilment-ready stores to enable omni-capable retail formats

Delivery has become the keystone for all e-commerce today. In the race for same-day and express delivery, retailers are now converting physical stores into hybrid “Phygital” stores. These stores serve two key functions:

• Acting as dark stores – micro-fulfillment centers that serve as distribution hubs exclusively for rapid delivery of online orders, or,
• Acting as spaces for in-person interactions – allowing for BOPIS, BORIS, and click-and-collect services, which during the pandemic alone increased by 208% ^[6].

But for these hybrid stores to be fulfillment-ready, several operations, including real-time inventory monitoring, shelf optimization, assortment, and quality assessments, are key. Here, ML-powered analytics tools can process scores of data linked to product availability, SKUs, order specifications, and the supply chain to help retailers optimize forecast accuracy and improve resource utilization, all while fulfilling the most number of orders in the least time possible.

A case in point highlighting the efficacy of hybrid stores is a leading American fashion retailer who, after witnessing a sharp drop in the sales of high-end apparel and accessories, transformed its physical stores into trade counters. As part of this model, only a small section of the store was open to the public, with the rest becoming a dedicated warehouse space. This hybridized model leveraged analytics to enable store teams with enhanced in-store inventory-forecasting ability, allowing for smart aisle placements and boosting efficiency for both customers and employees ^[7].

What’s in store for the stores of tomorrow?

The role of a retail store has evolved from being just a commercial touchpoint to becoming a brand footprint. With 61% of retailers aiming to explore new retail formats in the year ahead ^[8], the traditional brick-and-mortar setup is on the trajectory of transforming into a digitally driven retail format. This evolution will be underpinned by retailers iteratively identifying the retail store format that best fits their omnichannel strategy based on customer footfall, e-commerce sales, and fulfillment models. Considering this, retailers need to make strategic investments in avenues such as store-based system apps, talent, and newer formats that meet consumers’ in-store expectations. Conclusively, brands need to adopt a digital-first retail strategy purposed towards providing an experiential omnichannel experience to their customers, for only by expanding their tech-in-store investments can they maximize ROI in an era of digital-first retail.

For a more detailed view of the trends set to reshape the retail industry, download our 2022 Retail Trends Report.