Unconventional retail: The biggest innovations in the past five years

Today’s retail and the version of the same industry from five years ago are two completely different things. This market changes and adapts so quickly it can probably be compared to the fastest passenger aircraft helped by a tailwind. This is exactly what has happened in this sector. Much of the credit for the rapid changes should go to external circumstances that highlighted gaps and accelerated innovation at company level. At present, most forecasts for its further journey are based on expert assessments rather than on statistics. In this article, we will look at how retail has changed in recent years: what innovations have taken hold in major Russian and foreign companies, why retail is growing more customer-centered than ever, and whether the environmental agenda is still relevant in retail.

Then vs now

Five years ago, retail predominantly relied on conventional sales channels and marketing strategies. Most purchases were made in physical stores, and many retailers had limited online presence. The range of goods on offer was limited by the space on actual store shelves.

Today, the industry has seen a true digital revolution triggered by a broader digital transformation, which, in turn, was largely accelerated by external circumstances, the pandemic in the first place.

Lockdowns made online presence essential for a business’s survival, and many companies began investing in the development of e-commerce and digital platforms. This gave consumers additional opportunities for comparing prices and choosing goods, while companies began using data analytics to quickly respond to market changes and adapt their processes.

The customer and their shopping experience have become the focus of marketing strategies. Retailers analyze buyer behavior, heed their feedback and study their needs to chart their business development goals. The use of machine learning algorithms and big data analysis helps to predict consumer preferences and make customized offers.

Retail has clearly become more flexible, adaptive, and customer-centric.

Expansion of e-commerce

Over the past five years, online commerce has grown significantly, and this, in turn, has had a significant impact on conventional retail. According to Data Insight, in 2022, almost 2 bln orders were made on large marketplaces (Wildberries, Ozon, Yandex Market, AliExpress Russia and SberMegaMarket).

The following e-commerce trends we are seeing today are projected to further influence this market:

Marketplace boom: e-commerce continues to show steady growth globally. As consumers become more accustomed to online shopping, online sales are increasing steadily.
Mobile commerce: mobile apps are making online shopping even more accessible and convenient. Many consumers prefer to shop using their mobile devices, which leads to further growth in online sales.
The business model is evolving: some conventional retail companies are adapting their business models to include an online component. For example, many are offering delivery services or store pickup for online orders.

China, the United States and Japan have become the leaders in online commerce for sales in 2022. Russia was ranked ninth.

Personalized customer experience

In the past five years, a multidimensional approach to customer relations has developed in furniture trading and household items. Store chains have been developing technology to ensure seamless customer experience.

Three years ago, Hoff (member of the Retail Innovation Tech Alliance) opened its first phygital hypermarket in Moscow, integrating online shops and the benefits of offline shopping through various digital solutions: electronic price tags, touch panels, self-service checkouts and other devices. This multi-format concept has been introduced across all Hoff stores by now. A shopping consultant greets customers with a tablet in their hands to log customer journey.

At the same time, companies are implementing innovation for online customers. Some popular services include online design of kitchens, cabinet furniture, and video consultations. Hoff uses its AR-powered app to show customers how furniture will fit in their interiors. Innovative solutions help control quality standards in customer service. For example, since 2022, Hoff Tech has been testing audio badges that use speech analysis and machine learning to study the conduct of in-store consultants, boosting key store performance indicators by 35%.

Shop revolution: robot assistants and self-service checkouts

Retail stores have been embracing technology all over the world and Russia is not an exception. Below are just a few improvements that have made our lives easier:

RFID (Radio-Frequency Identification): this technology has been adopted by several industries, from logistics to agriculture, but it is most commonly used by retail – in shopping malls, supermarkets and warehouses. RFID is used to manage stocks and streamline inventory audit. Stores can easily track goods and prevent losses. Walmart was the first chain to use RFID for inventory audit in the early 2000s.
Mobile apps and platforms: retailers are increasingly crafting their own mobile applications to elevate customer satisfaction. These apps often boast a suite of features, ranging from product scanning capabilities to exclusive discounts, loyalty rewards, and seamless online ordering with pickup options. Lush, for instance, leverages its mobile app to provide customers with comprehensive product details, access to reviews, and the convenience of product scanning for additional information.
Automated cashier systems and queue-free payments (Amazon Go, Miratorg, Metro, IKEA, VkusVill): stores are increasingly adopting automated checkout systems, enabling customers to make purchases without needing a cashier. This innovation significantly cuts down on queue times and enhances service efficiency, a feature particularly appreciated in bustling urban areas where time is of the essence. In Amazon Go, for instance, transactions are seamlessly processed using a combination of computer vision technology, sensors, and advanced machine learning algorithms.
Data usage and analysis: retailers are leveraging consumer purchase data to enhance marketing tactics and product selections. Analytical tools enable demand forecasting, personalized offers, and optimal product placement. For instance, Lenta has seen a 10% boost in productivity by automating employee shift scheduling, improving planning quality.
Robotic technologies: in collaboration with its partner Symbotic, Walmart has implemented a fleet of robots to automate product selection and packaging processes. This innovative system streamlines online orders by delivering boxes directly to employees for final packaging.

These technological innovations are ushering in notable transformations within the retail sector, boosting operational efficiency, enriching customer experiences, and fortifying stores’ competitiveness. In Russia, the adoption rate may fluctuate based on regional dynamics and store categories.

Improving operational efficiency

Looking at both Russian and international giants, we can gauge the significant strides made in retail in this regard. Here are a few instances showcasing successful utilization of technology to enhance customer experiences and operational efficiency in retail:

Starbucks

Tech: Starbucks’ mobile application allows customers to pre-order and pre-pay for their favorite beverages while earning loyalty points. Moreover, Starbucks employs data analytics extensively to tailor offerings and optimize resource allocation.
Results: technology has notably enhanced the shopping experience by minimizing wait times for orders, while also fostering customer loyalty through heightened engagement and more frequent visits.

By the way, the Drinkit coffee chain under DoDo Brands also adopts a similar approach.

Amazon

Tech: Amazon’s order processing centers make extensive use of robotic systems to automatically pick up and pack goods, and have also deployed Digit humanoid robots at its Seattle-based warehouses. In addition, the company is integrating machine learning and data analytics technologies for inventory management optimization and demand forecasting.
Results: these technologies have allowed Amazon to efficiently process massive amounts of orders, reducing delivery times and improving customer service, and ultimately driving revenue growth and sustaining the company’s market leadership.

Wildberries

Tech: Wildberries, one of Russia’s major online retailers, extensively uses recommendation algorithms and data analytics to provide personalized suggestions and enhance user experience.
Results: the retailer has become immensely popular among Russian consumers due to its customer-centric user interface, wide product range, and prompt delivery system.

Ozon

In 2021, Ozon launched a laboratory to build robots for automated order processing and delivery. The company considers its robotics developments to be more efficient than purchasing ready-made solutions.

Going eco

Like many other countries, Russia is seeing a growing consumer interest in sustainable and responsible brands. The trend is becoming increasingly obvious, having its effect on consumer choices of goods and services. This is largely due to the global agenda, aimed to promote conscious consumption and provide our own, even if small, contribution to making the world a more sustainable place. Eco-friendliness is a trend that is here to stay – which is probably a good thing.

Many Russian companies respond to this trend by offering products and services that meet sustainable development standards. Obviously, they are aware that sustainable and responsible business behavior can boost consumer loyalty, improve brand reputation, and even increase profits in the long term.

In today’s retail environment, the need for continuous adaptation and innovation becomes increasingly essential for companies’ successful survival and growth.

We see the impact of digital innovation on retail occurring in three major areas:

Customer service and customer experience improvement.
Business processes and their automation.
Business models.

Ever-changing consumer preferences, along with increasing competition and technology breakthroughs, prompt retailers to constantly introduce innovations in their business models, processes and products. Only the companies that take active efforts to monitor global market trends, make flexible changes and introduce innovative operational approaches will remain competitive and thrive in today’s retail industry.