Retailers take up emerging tech as brick-and-mortar becomes cool again

Cutthroat competition, escalated by the growth of ecommerce, is forcing brick-and-mortar stores and online retailers alike to explore emerging technology like machine vision, VR and AI. In some cases, online suppliers are migrating to the physical world, deploying technology that has proved to be an asset on the web.

This global trend holds true for the Middle East, with its thriving retail sector.

The retail sector, for example, is expected to be among the top three spenders on virtual reality and augmented reality technology by the end of this year, and sales of the technology in the Middle East are strong, IDC says. While global spending on AR/VR is predicted to near $20.4 billion by the end of this year, sales in the Middle East and Africa region alone are expected to increase from $181.59 million in 2017 to $6 billion next year, IDC says.

“The innovators that serve a broad base of industries support dynamic end user needs through the growing options in hardware and software solutions. We believe services will play a more prominent role in enterprise investments as the market matures,” Marcus Torchia, IDC research director, Customer Insights & Analysis said in a research report.

With AR, customers can virtually “place” a product in their actual living spaces or try it on. Both VR and AR can enable furniture shoppers to visualize, in an immersive way, how new items will look in their living environment.

Using AI to cater to luxury buyers

In the luxury goods market, sales are being driven by millennials and generation Z, and retailers are increasingly catering to them with AI, which can help provide a personalised consumer experience, reach a wider audience, deepen product experience, and build stronger customer relationships, according to a Deloitte report, Global Powers of Luxury Goods 2019.

Even though the complex cost structures of larger retailers can make it difficult for some of them them to get an immediate return on their investments in emerging tech, Deloitte said, luxury brands positioned as reliable sources of AI-driven recommendations are improving how they engage with consumers. More widespread adoption of AI is also making consumers increasingly reliant on suggestions and advice provided by their various devices, rather than making decisions based on personal experience, Deloitte said.

Shoppers in Dubai, meanwhile, will soon get to experience how a major regional luxury retailer is tapping machine learning and other emerging technology for a brick and mortar store. Luxury Middle East retailer Chalhoub Group last week officially announced its partnership with b8ta, a retail-as-a-service company with a chain of stores that serve as presentation centers with a sleek tech feel.

Chalhoub Group partners with b8ta

B8ta was founded in the U.S. in 2015 and operates 16 locations across the U.S. It is now taking its stores worldwide, starting with Dubai. In conjunction with Chalhoub, the first b8ta store in the region will open in Dubai Mall by the end of the year. B8ta will expand its presence in the near future by opening doors to other countries in the Middle East.

B8ta has made a splash with its retail-as-a-service concept, essentially using its brick-and-mortar store locations to provide a physical presence for a wide variety of manufacturers, often showcasing upscale tech items, including VR products. B8ta serves as a physical showroom where customers can try and browse products. Customer engagement data is analyzed, then passed along to vendors, who pay b8ta for the service.

 The new store in Dubai Mall will contain products from a wide variety of makers and utilise video, machine vision and b8ta proprietary technology to analyse shopping data, said Phillip Raub, co-founder and president of b8ta and co-ceo of Toys “R” Us. B8ta combines in-store cameras with machine-learning analytics to measure customer engagement with products.

“For b8ta it is our camera technology paired with our proprietary software that provides brands with detailed qualitative and quantitative data about what is happening with their products in our stores,” Raub said on the sidelines of the Gitex conference in Dubai last month.

In recent years, brands have shifted away from traditional advertising to digital platforms, Raub said.  However, as digital marketing costs increase and more competition emerges, brands recognise the importance of establishing an experiential strategy that requires more hands-on demos. 

Machine vision tracks shopper behaviour

Chalhoub is not the first retailer in the Middle East to use in-store cameras to gather data for analysis. Gul Ahmed, for example, has leveraged the capabilities of SenseR, a machine vision system developed by Integration Xperts, at more than 100 outlets.

Though ecommerce is growing faster than physical retail sales, the brick-and-mortar world still dwarfs online. Global ecommerce will rise 20.7% this year to $3.535 trillion and is expected to approach $5 trillion by 2021, eMarketer market research company says. But the overall retail market is expected to be $25 trillion this year.

The depth and product selection that makes the internet so great, is also the biggest detriment for many small brands sold online, which can get lost among all the options shoppers have, Raub said.  As a result, brands see the advantage of having a physical presence to help stand out amongst their competitors and boost both their online and offline sales, he added. 

The potential of emerging technology in retail was alluring enough to induce global management consultancy firm McKinsey & Company, in collaboration with the Mall of America, to announce in September the launch of its first-ever retail concept – Modern Retail Collective, a physical retail space in Mall of America, in Bloomington, Minnesota.

McKinsey tests in-store, retail tech

The space offers retailers the opportunity to work with McKinsey and Mall of America to test dozens of new technologies. Shoppers will experience interactive mobile hotspots throughout the store providing single-tap access to product details and allowing customers to create a virtual basket as they go, according to Abdellah Iftahy, a partner with McKinsey & Company Dubai. Smart mirrors and fit-predictor software allowing virtual trial of products outside the fitting room. Fast-payment options, including mobile and cryptocurrency capabilities, will also be offered.

The possibilities that physical stores provide to retail has also caused ThredUp,  the largest online resale platform in the world, to make a big drive into with brick and mortar locations, said Syed Usamah, the company’s director of engineering, at the Gitex conference.

The company announced earlier this year its Resale-As-A-Service offering, allowing  retailers to partner with the company in either its online ecommerce site or in physical locations.

ThredUp uses AI to give shoppers a personalized experience. The company uses machine vision technology to take images of clothing items and create data tags, Usamah said. The tags combine attributes of the items themselves as well as complementary data.

“We use computer vision algorithms to be able to detect many different styles of the garment, many different other attributes that are not as measurable physically, like changes in trends or whether the product is seasonal or aseasonal, whether it will be preferred by a particular cohort of users,” Usamah said. “We’re using the data tags, varying from street wear up to high-end; you want to be able to identify which customers have affinity to different … segments of brands.”

Based on ThredUp’s research, 85% of apparel is still bought in physical locations, Usamah said. And although that number is declining, that still doesn’t mean that online will become the only place that people buy stuff.

“What the future holds is a really amazing synergy between physical and online experiences and if you can combine those two together that’s where the magic will be,” he said.