Digital Trends

Is European Retail Ready to Adopt Modern Technologies?

Yasmin Diekmann • July 25, 2018

The retail landscape has gone digital, but Europe, as a whole, remains in the early stages of its digital transformation. While global online giants like Alibaba and Amazon invest billions in technological investments (e.g. virtual reality, augmented reality, artificial intelligence, machine learning, etc.) for their omnichannel shopping experience, the European market has laid in wait to monitor how the market reacts.

It’s clear that the EU is ready for change, but timing is everything to them. Cautionary tales have taught companies the perils of investing too soon, and the EU has largely listened. To their credit, they have followed the customer rather than the market. That has proven considerably more valuable as companies seek sustainable success over being a technological pioneer.

Hype vs. Reality in European Retail

There is a great fear of misinvestment in European retail. Companies tend to be hesitant when investing in technological innovation, making it all the more challenging to determine whether there is concrete demand for it. That begs that all important question, when is innovation just hype versus a mature and profitable technology?

According to the Gartner Hype Cycle, trending topics like Augmented Reality, Intelligent Virtual Store, and Machine Learning were all in the hype phase in 2017. We can assume that these technologies have moved toward the so-called ‘plateau of productivity,’ but there are no reliable statistics or forecasts on the future of European retailing.

Only time and a keen eye on the market will show whether that hype will ultimately establish itself and be met with market acceptance.

Use Case: Face Recognition at the Point of Sale

New technologies can either be implemented too early or too late. Therefore you must decide whether to be a pioneer with high-risk appetite or a follower who is more reactive and safe. An example early adoption - while it is in the hype phase - is face recognition at the point of sale at the German retail chain real GmbH.

A year ago, real GmbH introduced face recognition at the cash desks for advertising purposes. Although data protectionists considered the technology to be harmless, customers felt differently. This experiment was quickly shut down as a result of the public backlash and pressure.

A survey conducted by the World Consumer Center and RichRelevance in 2017 confirmed the aforementioned backlash as about 70% of customers reject facial recognition, even if it comes with a discount. It was simply too early to use this technology. If real GmbH had done more educational work and limited facial recognition to a small initial market test, it would probably have been more successful.

Although European trade is oriented towards retail giants such as Alibaba and Amazon, it is entire possible that face recognition will be met with more acceptance in Europe over the next few years. Just because the technology came up short in 2017 does not mean it is obsolete. It may just mean it was presented to the market too soon.

Putting the User at the Centre of Product Development

It’s impossible to predict how a new technology will ultimately perform for your company, but one way to mitigate your risk is to focus on your consumer. Through a user-centric development strategy of your retail products, you can more comfortably gauge market interest in the technology – and more importantly, its fit for your brand.

1. Who is my Real Customer?

Since everything in retail revolves around the customer, a retailer must know exactly who its customers are. Which advertising channels do they respond best? How many channels do they use before making a purchase? Do they prefer to purchase online or offline? This is the level of specificity needed to truly understand your customer.

Demographic data is also very helpful here, because culture is a decisive purchase influencer. Do your customers understand and use the new technology already? If so, what are their expectations for it when it comes to your brand? Technology is often only rejected because the user does not have the necessary understanding for it.

2. What is the User Problem and What is the Added Value for the Customer?

Truly successful technology trends are characterized by their ability to solve a consumer issue. It’s in these cases that you see the greatest levels of buy-in and adoption. Implementing technology simply to be innovative is often where technology falls flat.

In addition, consumers want something simple and easy to use. Even if the technology solves a common problem, consumers don’t want to go through the hassle of learning a complex new process or function to solve for it.

Lastly, does the technology solve a high-priority or high-frequency issue? If what you’re solving for is more of a luxury than a necessity, maybe this technology isn’t right for now.

It remains unclear how the retail in Europe will develop in the coming years. What effect will the aforementioned technologies have in the future? Dealers can only guess and see for themselves. They will find far more success in doing so by…

  • identifying the right time to test markets and minimal viable products
  • solving a real problem with your application
  • creating added value for the customer

The future of retail in Europe needs a willingness to take risks. Every retail company must decide for itself whether it is prepared to take the risk of a misinvestment in order to significantly change the status quo and make a significant contribution to digital progress.

What is certain is that user-centric development helps to minimize risks and better assess when the market is ready to adopt a new technology.

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