Consulting firm Accenture Strategy has identified four business models — all driven by digitization — that are shaping the future of digital commerce, and companies that can create the new consumer experiences could unlock $2.95 trillion in value by 2025 for the retail industry.
The four are: Sharing economy, such as the rental market; personalization economy, such as “Surprise Me” subscriptions; replenishment economy, such as auto-replenishment for routine purchases, and services economy. The results were based on an Accenture Strategy Global Consumer Pulse Survey conducted in July 2016.
For the sharing economy, 52 percent of consumers said they’d use a rental subscription for apparel to rent an outfit for an occasion and then return it instead of buying it outright. For the personalization economy, 48 percent said they’d use a subscription program for apparel where an expert personally selects items based on previous purchases. Examples are Rent the Runway and Stitch Fix, respectively.
The remaining two predicted economies are more for the home. Amazon is already using an auto-replenishment model through its product-specific, Wi-Fi connected Dash buttons, allowing consumers to press the button and reorder the item — from laundry detergent to pet food — when their stock runs low. Fifty percent said they would use subscription services Accenture dubbed “do it for me.” One example cited is a laundry services that includes pickup, wash-and-fold and delivery back to the consumer’s door.
Others that didn’t make the top four include Internet of Things; autonomous vehicles and drones; artificial intelligence; robotics; digital traceability; 3-D printing; augmented reality and Blockchain.
Chris Donnelly, a coauthor of the Accenture study, said that some of the changes through the growth in digital technology include how data is collected. “Retailers can create promotions for assortments that speak just to the [individual] customer. As they automate the process [through artificial intelligence], people in the process will come to the conclusion that ‘I don’t need to make every decision. Let the machine do it, and the machine will get smarter [each time].’ Speed is important, and humans can’t keep up with that speed,” he said. That doesn’t mean data analytics will go away. Individuals will need to collect and interpret the details to help “point machines in the right direction,” Donnelly added.
The coauthor also said apparel retailers and vendors will rely on digitization, such as how Stitch Fix uses AI, to develop new products based on what they’re seeing people like. He said Accenture is working with a global apparel retailer that is using AI to apply image recognition for trend spotting. “Instagram images in a given market or of trendsetters, however you define it, discern some fashion trends faster than [people might],” Donnelly said.
Also on the rise in apparel is the use of augmented reality. Getting AR right will give one a better view on how product will look on the consumer, particularly since there’s the option of overlaying product and fabric to see flow and fit. “That will make a big difference on returns in the marketplace. About 30 to 5o percent of items are returned, which represents lost opportunities,” Donnelly said.
And finally, Donnelly said Blockchain would have a big impact on product authentication. “In fashion and apparel, if I knew this Birkin bag was actually a Birkin bag — I know who owned it and when — it will buy confidence and create a much easier secondary market….Once you authenticate the product, there is trust in the system,” he said.
Accenture said that while the physical store will continue to be the largest revenue-producing channel until at least 2026, traditional stores would undergo a metamorphosis to stay relevant as online purchases in most categories continue to grow. It noted that within six months of creating a digitally connected store, fashion brand Rebecca Minkoff saw a six- to seven-fold increase in ready-to-wear sales.
Through the growth of digitization, routine purchases are expected to be “effortless” by 2026, saving consumers time and simplifying their lives. And by 2026, Accenture said bricks-and-mortar shopping would have been transformed so going to a store will no longer be just about a product purchase, but about engaging in specialized experiences. That means stores will become destinations to “interact with the product, talk to product experts” and provide an ambiance that “encourages consumers to stay and keep coming back.”
While robotics will automate some back-office operations that don’t drive value to the consumer experience, such as stocking shelves and checkout, it will be the collection of data that will personalize the shopping experience via sensors and digital devices at one’s home, in apparel and appliances.
Accenture concluded that the key indicator of a truly digital enterprise is agility, and the leaders of tomorrow are already using digital technologies to meet rapidly changing market needs globally. That means developing a platform-based ecosystem using advanced data sciences, nailing last-mile delivery similar to Amazon, and preparing the workforce to adapt to how the next wave of digital changes will impact their jobs.
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