State of retail industry report.

A decade of technological innovations, coupled with shifts in consumer behavior, has fundamentally changed how, where — and even why — people shop.

Borderless transactions, “click and collect” shopping and buying and a shopping journey that can begin and end on a smartphone, tablet or in a store are just some of these changes. Looming on the horizon is a fully integrated and truly seamless consumer shopping experience that leverages artificial intelligence as the age of the Internet of Things becomes fully realized.

These are some of the key insights from a 136-page state of the retail industry report — titled “Frontier(less) Retail” from the Innovation Group of J. Walter Thompson Intelligence and done in collaboration with WWD. The report includes an extensive consumer survey, trends and insights on digital commerce and omnichannel retailing as well as the emerging trends in experiential retailing. Consumer insights in the report were culled from the U.S. and the United Kingdom.

The report, which can be found here, uses case studies and perspectives from retailers, brands and tech companies to weave a perspective on the retail industry today as well as where it is headed. The study also includes a “deep dive” on China as well as retail developments in Seoul, Bangkok, New Delhi and Dubai, among other markets.

Lucie Greene, worldwide director of The Innovation Group, said the inspiration behind the report “is that the current retail landscape seems to be just that — borderless, blurred and amorphous, with collapsing boundaries everywhere.”

Greene said the physical store and the digital realm “are set to merge in new ways with the introduction of artificial intelligence, virtual reality and the Internet of Things.” But technology is also reshaping how consumers connect to one another as well as how they experience shopping.

“Interactions are in flux too, as digital interfaces become increasingly intuitive, touchable and tactile thanks to new cognitive technology and haptic interfaces, and even conversational — with help from Amazon Echo and Facebook Messenger,” Greene said in the report. “Geographic territories are becoming increasingly meaningless as retail goes truly global — seen as Amazon and Alibaba spar in each other’s territories.”

Greene said that the idea of what a product is has also changed. A product, “which once simply meant a solid, tangible entity, is in free-fall.” The shopping experience is more “nebulous” she said.

The market itself is in a state of flux. The researchers of the report noted that Baby Boomers are shopping more like Millennials: having experiences, knowing the narratives behind a product and being more values-driven in their purchasing has now transcended the act of buying stuff. At the same time, consumers are seemingly fixed in a permanent state of frugality even while mass retailers “dabble in luxury,” the report said.

“It’s not just enough to have a product or a service,” Greene told WWD. “Consumers want meaning. And authenticity and transparency are key.”

At the forefront of many of these changes is Amazon, which has essentially redefined the retail model. “Amazon has become the gravitational center of e-commerce to a degree not seen before, setting a baseline for what consumers expect from online shopping,” the researchers said. “The tech giant increased its U.S. e-commerce sales by $23 billion in 2015 compared to 2014, accounting for 60 percent of all online sales growth.”

Consumers polled for the report backed up those sales figures. Of those polled, 83 percent of U.S. shoppers and 82 percent of U.K. consumers had shopped on Amazon in the past year. The survey also revealed that 70 percent of U.K. consumers and 80 percent of U.S. ones said they “prefer to shop at Amazon over other online retailers, with this number rising to a peak of 88 percent among U.S. Millennials,” the authors stated.

The researchers said in the “age of the omnichannel consumer, digital is infused throughout the buying process, and it’s difficult to separate e-commerce from shopping in general.”

This digitally infused experience is getting an added dimension with AI. The report cites The North Face as an “early mover in AI-powered retail.” The brand partnered with digital commerce firm Fluid to create a tool that is powered by IBM’s Watson “cognitive computing technology.”

“Using natural language, online shoppers respond to a series of questions about what they’re looking for, and the tool gradually narrows down the available options to suit,” the authors, said adding that AI is no longer “the stuff of science fiction and it is poised to disrupt nearly every industry over the next decade by supplementing human intuition.”

David Rose, chief executive officer of Ditto Labs, which is a “visual listening” company, said in the report that traditionally, “advertisers look at the people who have purchased something, and they say, oh, what age are they, or what ethnicity are they? They only look at a couple of facets of those people. What’s really interesting about AI is you can look at a million things about someone and then try to find people who are most like that person, across a million different variables.”

Rose said this allows retailers and brands to take a more “psychographic-based approach” where companies reach out to consumers who are likely to already have an affinity for their goods or service.

The researchers urged retailers to investigate the AI market, and noted that consumer expectations are already anticipating its application at retail. According to consumers polled for the report, “72 percent of U.S. Millennials believe AI will be able to predict what they want.”

Other notable trends in the report include:

  • Digital immersion, and what it means from a consumer engagement perspective;
  • The evolution of physical stores, and the role of virtual and augmented reality;
  • Generational “flattening” and Gen Z’s emergence at retail;
  • Borderless buying, fulfillment trends and the “experience economy;”
  • Case studies on Nike, Kodak and Samsung, among others;
  • Luxury brands and e-commerce in China

“I think what this report shows is that this is a very dynamic time to be in retail,” Greene said. “And it’s a time that is creating new opportunities for companies and brands.”


By the Numbers

What Consumers Are Saying

AI Shopping: “I would appreciate if a brand or online retailer used AI technology to show me products that are more likely to interest me.”

Demographic:              % of respondents who agreed:

U.S.     U.K.

Gen Z                             60%     51%

Millennials                   70%     62%

Gen X                            56%     44%

Boomers                       32%     26%


Chinese E-commerce: “I have purchased an item online in the past year from…”

Site:                                % of respondents

Taobao                          85%

Tmall                             85%                        70%

Amazon                       42%

Suning                         33%

Dangdang                    29%              12%

Vanci                             9%

eBay                              8%

Other                             2%

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