Revolutionizing Retail: Creating Dynamic Customer Experiences through Advanced RetailTech

Here, we explain the movement called “retailtech,” which develops and uses the latest information technologies and has become widely used in the retail industry.

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06 Nov, 2023. 6 min read

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For retailers, selling commodities, apparel, home appliances, etc., the amount of consumer information you collect greatly affects sales. Unless you accurately assess what customers want now and stock up on inventory during the optimal period when they are required, in the optimal quantities and at the lowest possible cost, you cannot grow your revenue. To succeed in the retail industry, it is an absolute requirement that you develop the ability to discern customer needs.

The retail industry has a long history of continuously developing technologies and business methods for handling customers and products, developing distribution strategies, and managing various other types of information. The industry has always adopted the latest up-to-date information processing technology. Here, we explain the movement called “retailtech,” which develops and uses the latest information technologies and has become widely used in the retail industry.

Individually supporting diversifying consumer needs with digital technologies

Retailtech is a term that combines “retail,” representing the retail industry, and “technology.” It means the incorporation of artificial intelligence (AI), IoT, and other leading-edge IT technologies into the collection and analysis of customer information, the management of distribution and inventory, settlement, etc. to increase their effectiveness and efficiency. Broadly speaking, robots that help with sales, robots that pick products to be delivered at distribution centers, and the shift to cashless settlement, etc. are also included in retailtech.

Since the start of the 21st century, the environment surrounding the retail industry has dramatically changed.

First, the sense of values, interests, and preferences of consumers have diversified due to market globalization and the filter bubble effect*1 due to the expanded use of search engines, social networking services, and other Internet environments. As a result, it is becoming necessary to not only to grasp what is selling in the consumer market overall, but also to discern what items individual customers need and sell such items to them separately.

*1 The filter bubble effect refers to the phenomenon in which consumers are only able to see the information that they wish to see on the Internet. By continuing to collect and accumulate only information that matches their preferences without coming into contact with information that does not match their sense of values, individual consumers strengthen the tendency to develop radical preferences that are biased in a specific field only, and it is believed that diversification increases as a result.

Moreover, the information for retail shops to gain insight into customers is being digitized, and the location of commerce is shifting from real sales floors to Internet sites, which is a significant change. The digitization of customer information that started a long time ago from POS systems*2 and the point cards issued by mass-market retailers is further evolving with the current spread of online shopping. Now, artificial intelligence (AI) analyzes user registration information, their search history on the Internet, and on-site behavior history to discern individual interests and preferences, what products they currently want, and the amount they might be able to pay to purchase a product. Furthermore, retail methods that propose products that individual consumers might want at the optimal time have become commonplace.

*2 A POS (Point of Sales) system scans the barcode attached to a product when sales are made at the cash register on the sales floor to manage what products were sold when and where. It is used to collect information for effectively managing products, inventory, and customers.

The use of digital technologies is essential to individually responding to diversified consumer needs. If you are a skilled marketer, changes in market trends can be picked up from market information using your experience and sense. However, a person cannot make decisions about the individual needs and desired products for a massive number of consumers. Therefore, the use of AI and other forms of IT to replace the skills of a marketer and respond to individual consumers as needed becomes essential.

Integrating brick-and-mortar stores and online stores in order not to miss a targeted customer

In recent years, the movement to integrate online sales and product sales at brick-and-mortar stores by using the latest technologies is becoming apparent in the retail industry. This sales method, which collects customer information through multiple channels and aims to build a mechanism that can sell according to the method desired by each customer, is called “OMO” (Online Merges with Offline) (Figure 1).

Figure 1 Utilize IoT to integrate customer information from brick-and-mortar and online stores

Since the start of the 21st century, measures have rapidly developed to increase sales at online stores. However, brick-and-mortar stores and online stores each have their advantages and disadvantages. To increase the degree of satisfaction without missing a customer, it is more rational to separately use the characteristics of both types of stores according to customers’ needs. Therefore, the number of retail companies that are advancing attempts to utilize IoT to make it possible to collect the kind of detailed customer information that is collected online at brick-and-mortar stores is increasing in recent years.

Two technologies that are being utilized in various applications as a means to follow the movements of store customers and products within a brick-and-mortar store and collect customer information are image recognition and RFID*3 tags (Figure 2).

Figure 2 Collecting customer information with RFID, etc. and providing a high-quality customer experience with AR, etc. A product with an RFID tag attached (left) and utilizing AR to consider a furniture purchase (right)

*3 RFID (Radio Frequency Identification) is a technology that uses radio waves to read and write data without contact. By attaching a small semiconductor chip that stores an RFID mechanism and information as a tag to each individual product, it becomes possible to carry out fine-grained management of products by reading and writing information with RFID as needed.

Retail shops that have installed a large number of cameras, various sensors, microphones, and RFIDs, etc. and introduced IoT systems with AI that analyzes in real time what store customers picked up. The customer information that was collected with previous POS systems and point cards could not be collected unless a customer actually purchased a product. By utilizing such IoT systems, it becomes possible to know what products a store customer was comparing and what they ultimately bought.

If you utilize information collected in this way, you can take various measures such as sending special deal information to customer smartphone apps to give them a push, providing a reminder several days later about a product that they were interested in but did not purchase, optimizing the types, placement location, and flow lines of products displayed in the store in order not to miss customers. Moreover, if you install sensors on the product shelves and attach RFID tags to the products, you will become able to assess the product display conditions in real time to enable efficient sales that never miss a business opportunity through highly precise inventory management and just-in-time product replenishment.

In addition, it also became possible to identify the products to purchase and smoothly complete the checkout process just by placing the shopping basket in the designated location at the self-checkout terminal and scanning the RFID tags attached to the products. For store customers who created an account in advance at a cutting-edge store, it is even possible to automatically check out when carrying goods out of the store even if you do not pay at the register. With such mechanisms, the stress of waiting for the register will be eliminated.

Providing a high-quality customer experience utilizing AR and VR

Some retail stores are introducing systems that utilize augmented reality (AR) technology to provide assistance in selecting a product to purchase or to make accurate suggestions about how to use a product or what product to purchase on that occasion.

For example, there is a mass furniture retailer that provides an AR app that enables users to check on a smartphone or tablet device display what a piece of furniture they are thinking about purchasing would look like when actually placed in their own room. The impression given off by a piece of furniture changes considerably from the showroom to the location where it is actually placed. Depending on the situation, it may be too large to get into the room. By utilizing an AR app, you can avoid making the wrong choice and shop with a high degree of satisfaction. In the future, it might become possible to utilize virtual reality (VR) with haptic technology, etc. to check how a sofa feels, etc. online.

There are also supermarkets providing AR apps that can display the basic ingredients, place of production, allergens, etc. of products lined up in the food section. Recently, there are also stores creating systems that present cooking recipes using those ingredients or the seasonings needed to make a dish so that you can purchase them together.

In the retail industry, entertainment that moves people is required by sensitively perceiving the customer’s emotions and preparing the expected services in advance. All consumers want to enjoy their shopping. Going forward, more advanced forms of retailtech will appear one after another and likely provide new forms of enjoyment to consumers.


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