How innovative technologies can help retailers mitigate the impact of Brexit
Its’ no secret that retailers in the UK are facing challenging times ahead, with the decline of the high street, the rise of ecommerce and an uncertain political landscape. For British retailers, Brexit presents a number of challenges, whether the UK leaves with or without a deal. The loss of frictionless trade, combined with a possible decrease in consumer demand, means that retailers will have to differentiate more than ever before to improve their customer’s experience and remain competitive. Dalia Lasaite, CEO and co-founder of CGTrader, a 3D Content solutions provider for eCommerce, explores some of these challenges and how implementing innovative technologies can help retailers boost consumer engagement, reduce overheads and drive profitability, which will be even more essential after Britain’s exit from the EU.
Whatever kind of Brexit the UK goes through, it is common knowledge that businesses with any kind of ties to the bloc will be affected. Retail is one of the sectors that will be hit hardest, given that 1000s of businesses either export to the EU or have elements of their supply chain within member states. The reverse of this is true for retailers inside the bloc – they will also be affected by the UK’s exit.
Leading lights of UK retail have echoed this view. In June 2019 the Chief Executive of the British Retail Consortium (BRC), Helen Dickinson1, stated that tariffs on some goods, as well as delays at the border, would all contribute to higher prices and a reduced selection for consumers. Essentially, it will be more difficult for retailers to provide a wide range of goods and services at a low cost. This is clearly of concern for many retailers, exemplified in a study conducted by retail software firm, Brightpearl2, who found that 71% of UK retailers think that Brexit is having a damaging impact on the retail sector, while 81% are concerned about the effect it will have on their business in the future.
Leading UK furniture retailer, DFS3, also released a report in October 2018 expressing concerns that Brexit could lead to border delays, increased regulatory burden, the imposition of tariffs and declining consumer demand, which would all affect the group’s ability to provide products on time and at competitive prices.
The impact of Brexit
It would seem that retailer’s concern for the future of their market are well founded, given recent revelations on the risks that Brexit poses to UK businesses. Only a few months ago a government dossier was leaked relating to the government’s Brexit contingency plan – Operation Yellow-Hammer4. The dossier suggested that heavy goods vehicles (HGVs) could face a maximum delay of 1 ½ – 2 ½ days before being able to cross the border. The implication is that without the customs union in place, trade would be seriously disturbed.
In addition to this, there is a serious risk that there will be a decline in consumer spending, as economists fear that the UK could fall into a recession after Brexit day. In the second quarter of 2019, the economy shrank for the first time in 7 years5.Furthermore, all round retail sales have slumped, with leading UK vendors reporting significant losses in profits earlier in the year. Unless the UK can secure frictionless trade with the EU, it will be more expensive for businesses to operate, which unfortunately could lead to widespread lay-offs and decreasing wages. The fear for retailers is thus that there will be lower levels of consumer spending, making the retail sector a far more competitive space as businesses scramble to secure the smaller pool of custom.
How can innovative technologies help mitigate some of the impact of Brexit?
All things considered; the retail sector is clearly facing some sizeable challenges in the months and years to come. Speaking to some of our retail customers, they are all preparing for these eventualities, with many exploring new methods to ensure they remain competitive and mitigate factors that could result in a downturn in profitability and consumer demand. In fact, Deloitte have sought to help businesses in a recent report, recommending that retailers should create more engagement with consumers to keep up with changing behaviours. According to Deloite6, there must be greater understanding of the value of the customer base and they should be guided through the customer journey. Businesses need to differentiate further to generate adequate profit margins, while innovation should be focused on reducing costs and driving profitability – this means reducing store costs and overheads. All in all, the key takeaway is that retailers need to create a more immersive and differentiated experience, while keeping costs low.
There are a range of innovative technologies that can enable retailers to differentiate and streamline the customer journey. With technology forming such an integral part of people’s lives, it is possible for business owners to capitalize on this in a way that makes it far easier for consumers to buy into their products.
Accessible Inventory Data
In a recent study, conducted by YouGov and retail software firm, Cybertill, the company’s CEO, Ian Tomlinson7, found that 73% of Brits prefer going to brick and mortar shops because they can purchase a product without having to wait for delivery. 44% of respondents said that they would use technology that provides real-time product availability of items in store. Of generation Z customers (aged 18-24), 59% would use a mobile app giving real time stock information of a nearby shop.
This demonstrates that shoppers are more likely to purchase from shops where they will be guaranteed to get the product they want. As a result, developing accessible inventory data for a retailer’s website offers a good way of developing the customer journey, in a way that responds to consumer demands. Implementing visible stock data is straightforward and, in most cases, simply comes down to regular stock takes and ensuring that data is updated whenever purchases are made.
Investment in AI and machine learning
Investing further in AI and machine learning can also help bring retailers closer to consumer needs. Not only does it make recommendations to customers and upsell, but the innovative technology also creates a more streamlined web shopping experience on eCommerce sites. By using data from previous customer purchases and viewed products, retailers can implement a sales recommendations engine, which gives bespoke, tailored product suggestions to customers. These engines are extremely effective, given that online retail giant Amazon receives 55% of its total sales from recommendations. Recommendation engines can also be used to generate automatic preference suggestions, such as what colour customers should purchase a product in or what size they are for clothing. Importantly, this can support retailers in achieving greater differentiation and improving the customer journey –critical in a post Brexit market.
Augmented Reality (AR)
Despite the common assumption that AR is something of a costly gimmick, it actually offers a cost-effective and effective method for retailers to improve the customer journey for retailers. AR allows shoppers to accurately visualise products in 3D, providing them a with a 360° view of goods in their natural environment. This is especially useful in the furniture market and sectors where people can place an item in a room to see how it will look. High levels of detail and good quality textures mean that shoppers will be able to view 3D models which bare a lifelike resemblance to real products. AR also has great applications in fashion, where shoppers can try items on and check how they look in a mirror. This is something that works well with items such as sunglasses and bags/purses, which consumers can simply use their inward facing camera to try on.
AR not only creates a unique and in-depth shopping experience, but also improves buyer confidence and sales conversions for retailers. Consumers can see and experience what products will look like before buying. According to consumer research firm, Retail Perceptions8, 71% of consumers would shop at a retailer more often if they offered augmented reality and 40% would be willing to pay more for a product if they could experience it through AR. This data is reflected in the success of IKEA’s AR furniture app, which was downloaded two million times and boosted visits to the firm’s website to 2.3 billion in 2017.
The ability to experience products before buying them can also minimise customer returns, which invariably costs retailers in terms of logistics and labour at depots to sort through each return. With consumers much more confident during the buying decision process, they are more likely to buy right first time. In addition, consumers would be less inclined to purchase multiple products just to try them with the intention of returning those they do not want to keep, if they can effectively ‘try them’ first via augmented reality. In a Brexit scenario, finding ways to minimize returns will be vital for retailers importing or exporting goods to and from
the EU. Especially where the UK no longer has frictionless trade with the EU, as sending goods back and forth will take far longer at borders.
While the result of Brexit is far from clear, it is essential that retailers reinforce their service offering to prepare for the worst-case scenario. Whether it’s deal or no-deal, it is clear that Brexit poses the UK retail sector with significant challenges in terms of declining consumer demand and potentially stagnant border customs. With the ever growing consumer shift from brick and mortar to eCommerce too, there’s no doubt that these innovative technologies can help retailers bolster their business –whether that’s by improving the customer experience and differentiating their brand, reducing operating expenses or increasing sales conversions. What you can guarantee is that those who don’t adapt to an increasingly unpredictable and challenging retail environment, may find themselves sinking rather than swimming.
Chief Executive, CGTrader, Dalia Lasaite