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Digital transformation of Retail

Amazon Hair Saloon just opened in London, UK, letting patrons to leverage advanced technologies to get a more fulfilling experience. Image credit: Amazon

The retail sector has seen a growing shift towards e-commerce that has accelerated since the pandemic begun. Clearly the ecommerce is an aspect of the digital transformation of this sector and so far has seen the prevalence of few big players

Graphic showing the 2020 revenues of the top US on-line retailers. Notice the huge gap between Amazon and all others. Image credit: eMarketer

(see the graphic) although more and more companies have now a “shelf” presence in the cyberspace. Actually, several companies are using the big e-commerce retailers to offer their wares (Amazon and Alibaba leading the pack).

eRetail has been seen as a different beast from Retail as well as a competitor. Indeed eRetail has chewed onto the revenues of brick and mortar with two main propositions:

  • convenience of shopping from anywhere at anytime and of receiving the items right where you want to have them (the incredible sophistication of the delivery chain makes delivery very effective and basically free -the cost of bringing the merchandise to a brick and mortar store is basically the same of taking it directly to your home;
  • a limitless choice of goods. Amazon have some 12 million items on their shelves and if you include (as you should) the ones that are sold by their third party sellers (and presented on Amazon shelves) you reach a staggering 350 million items. Basically whatever you may be looking for you can get it from the Amazon virtual store.

So far, as I mentioned, most producers, because of the heat felt from eRetail, have open up an eRetail channel to flank their established brick and mortar ones.

When this eChannel proves effective the trend is towards shrinking the brick and mortar and this has a sharp impact on labour as well as on our lifestyle: as shops go out of business our cities and urban landscape change for the worse. Notice that several people still visit brick and mortar stores but then they buy on line. Brick and mortar are no longer points of sale but products showcase. Of course this does not work: retailers keep all the cost and lose all the revenues!

Although eCommerce has increased 5 times in the last 14 years it still represent only one fourth of the total retail revenues (data are from the US market, one of the most advanced in terms of eCommerce). Image credit: Digital Commerce

eCommerce is still just a fraction of the whole retail sector, varying in different Countries but remaining well below the brick and mortar stores retail volume (both in revenues and in volume). The US is one of the most advanced markets in terms of eCommerce adoption, thanks to very effective delivery chains, China leads in terms of volume and penetration. The amount of eCommerce has increased sharply during the pandemic, in the US as everywhere else and even thought it remains smaller than the brick and mortar it keeps growing affecting many more store owners (for an updated list of US stores  going out of business under the crunch of the pandemic & eCommerce read this article).

The trend is clear: eCommerce will continue to grow affecting more and more brick and mortar retail points. At the same time the cyberspace is opening up opportunities to add value to brick and mortar retail points leading to the digital transformation of Retail.

An example is provided by the opening of the Amazon Hair Saloon in London. For Amazon to enter this business seems something out of the blue. Yet, if you read the article you start to perceive several points of contact between Amazon core business (eCommerce) and this new biz. For the time being it may be seen as a trial to test the market (and the access will be restricted to Amazon employees for the first few months).

The idea is to augment the customers experience through augmented reality. As you enter their hair saloon and your biometrics, face, is captured and you are given a tablet whose screen becomes a virtual mirror. That mirror is actually a magic one, returning your 3D image with different hair styles (and colour) you can choose. You are also given a variety of make up options and you can look at yourself on the screen and choose the one you like best. You can also order the various make up products to be delivered directly to your home.

Of course a Hair Saloon is selling services rather than products but this is the direction for the Digital Transformation of Retail. If Amazon is using their Saloon to sell products by piggy-back  on services other brick and mortar retailers will need to start selling services by piggy.back on the products on the shelves. It will likely be the only way to survive the growing share of eCommerce.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.