What to Watch in Tech for Retail in 2023
After a tough year that saw major technology platforms change hands, revenues fall and online ads fail to keep share prices from tanking, it finally looks like tech is back — kind of.
The CES electronics show returned to Las Vegas this week, albeit in smaller form, following years of complications due to COVID-19. The Consumer Technology Association, the organization behind CES, estimated 100,000 attendees for this year’s installment, which is somewhat impressive considering the pandemic is far from over. But the attendance pales in comparison with its pre-coronavirus numbers, at only a little more than half of the usual draw.
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For the consumers who came out, the appeal of seeing upcoming innovations was irresistible, even worth braving the rare desert rains and tightened security measures. Industry executives had another motivation. Holding court in private meetings at convention center suites and hotels all over the Vegas strip, they were busy writing the future of business and technology with their wheeling and dealing. Astute experts, analysts and others can catch wind of the influential movements that will shape sectors of all kinds, from automotive to home goods, personal care and, of course, fashion, beauty and commerce.
WWD caught up with a number of experts at the show and elsewhere, and dug into plenty of research to learn what’s on the tech radar for the year ahead in retail. Here’s what brands and stores should be clocking in 2023.
The Sweet Smell of Technology
In 2019, Procter & Gamble introduced a novel device at CES called the Airia, a connected “smart scent device.” It seemed a bit gimmicky back then. Now it looks like it was an early sign of what was to come.
According to CB Insights, tech’s effort to digitize smells will make its mark in 2023. The firm laid out the scenario in a recent report covering upcoming tech trends: “Bringing smell into the digital world is a huge challenge. While light and sound can easily be measured with sensors and mechanically replicated to create a predictable sensory experience, odors are much harder to decode as they’re based on a complex interaction between molecules and smell receptors.”
Although the challenges are steep, the marketing benefits are apparent. “Food and beauty companies could use smell prediction to experiment faster and more cheaply by identifying potential products that consumers would actually enjoy,” CB Insights wrote, noting that digital scents would also offer a new dimension to immersive experiences like the metaverse.
Case in point: At CES, OVR Technology showcased its new ION 3, a “scentware” wearable for VR, AR, mobile and desktop gaming. According to the company, the universal cartridge for it can create thousands of different aromas, significantly upping the limited options for Procter & Gamble’s legacy Airia. “Up until now, no one has been able to successfully harness that power to enhance our digital experiences, but OVR has effectively digitized our sense of smell so we can get the most out of the digital experiences now and in the future,” claimed Aaron Wisniewski, chief executive officer and cofounder.
CB Insights has been seeing this kind of start-up activity accelerating around digital scent. The firm also notes that major tech-makers like Google have been pursuing breakthroughs to better understand the olfactory arts and sciences, including how to encode scent using artificial intelligence. “Google’s AI team recently announced that it used machine learning to map molecules to perceived smells,” CB Insights added. “Crunching through massive data sets, the team was able to successfully (though not perfectly) predict the resulting smell from the structure of a molecule.”
“Internet of Perfume,” anyone?
Sustainability Graduates
Green initiatives have been on the rise for years, but at CES this week, it has been a major theme across keynotes and exhibitors. It also prompted fashion and tech to join forces in a new way: Samsung and Patagonia partnered on a new project to reduce the environmental impact of microplastics shedded during the laundry process.
They codeveloped a new washing machine filter to mitigate microplastics emissions at the end of wash cycles, in an effort to stop them from leaking out into the Earth’s oceans and other aquatic ecosystems.
“Samsung’s new Less Microfiber Cycle and Filter are the products of that collaboration,” according to the announcement. “A breakthrough in the fight against microplastics, the Less Microfiber Cycle cuts microplastic emissions by up to 54 percent. Now available in Europe, the cycle will roll out to compatible washers in [South] Korea from February this year and in the U.S. soon.”
Patagonia has always been a strong advocate for the environment, but this business and others also know the time is right to crank things up several notches, as consumers increasingly choose cause-based brands.
“I’m really excited about the number of folks creating textiles and fashion products who are being more environmentally conscious, and I think technology is allowing that a lot more — from the way we use machines, to the way we sew, to the way we take blue jeans, for example,” Elizabeth Gore, president and cofounder of fintech firm Hello Alice, told WWD.
“Jeans used to be one of the worst things on the planet, and now they’ve gotten them down to simpler cycles, less water flow,” she said.
Democratization of Data
WWD caught up with Hello Alice at CES to learn more about the trends it’s seeing. The platform ripples with more than 1.1 million small businesses, and out of a recent random research sample size of 100,000 owners, as many as 94,000 come from the fashion or retail ranks. Their biggest challenge used to be marketing and customer acquisition, but now as many as one-third stated that it’s now raising capital to deal with pressures like supply chain disruptions and macroeconomic uncertainty.
As for what these merchants will or at least should do with the money, Gore highlighted one key area first and foremost.
“The thing I’m most excited by is data analytics in fashion,” she said. “If you look at in-store consumer behavior, I think we’re just reaching the peak of tracking clothes via your phone or in-store [scenarios] of how we shop, where we shop, how we make decisions. That is going to strengthen and make a better buying experience for the customer, and it’s going to give great analytics to the seller.”
Data intelligence, tools and strategies aren’t new, but they may hit a peak in 2023, especially among Gore’s clients of small or indie merchants, because the technology has become more accessible.
“Data analytics is getting so much cheaper, it’s clearly going to give new people who are selling fashion a big leg up on some of the bigger brands, because it’s bringing a lot of equity,” she said.
5G Connectivity for the Store
“The expansion and availability of 5G is a hot topic broadly, but also in the retail industry — and not just for the connectivity of the consumer,” said Kasey Lobaugh, chief retail innovation officer at Deloitte. “If you look at stores and store systems at the major apparel retailers, they still operate on somewhat antiquated systems in an untethered mode. The reason for that is because a system or point-of-sale going down in a network-based model [would] shut down the store.”
But that’s clearly changing, he explained, with a dramatic push into upgrading and renewing store systems and hardening the connectivity, so that a simple internet outage doesn’t take down the whole business.
That surely includes the point-of-sale, but it’s not limited to the cash-wrap alone. It will also extend to the store’s broader set of systems, so “that will take advantage of the network connectivity, cloud computing and the centralized model,” he explained. Think real-time monitoring of inventory, whether on the shelf or in the back, or AI insights into traffic flows.
“We’ll know more about the consumer, so we’re able to personalize the experience,” added Lobaugh. That would benefit stores of all sizes, but for large retail chains, there’s an obvious benefit: They’ll be able to hyper-localize experiences for each door more easily. “We’ll be able to more fully personalize individual stores, because we get a lot more signals.”
Personalization, “Micro” Retail Will Become Essential
More signals — read: data — means a greater capacity for things like automation and predictive analytics. According to Lobaugh, that will no longer be “nice to have,” and more like “must have.”
It boils down to more personalized experiences, such as product recommendations, styling advice and similar features. All of that has been in the works for years now, but with more tools and resources such as Google Cloud, Amazon Web Services and other providers, plus better connectivity and ability to capture data, they’re set to become even more ubiquitous and sophisticated, all the way down to a granular level.
“Our clients are shifting from mass to micro, because the market is shifting and getting hyper relevant, especially in apparel, certainly in the number of options that you have, the number of variations, the number of companies that are targeting — very specifically — what your needs are,” he said. “Low cost, or gender-neutral clothing, or needs for x, y or z as an individual. There’s dramatically more optionality, and that means that the market is hyper-targeting those needs, wants and desires.”
In a larger retail organization, that granularity shows up in other ways as well.
“[If you] recognize the market is shifting in that direction, that means that you have to be incredibly relevant at a granular level, and that means every decision you make drives relevancy. Where do I put a store? What should I sell? How much should I sell? How to play with inventory and pricing? All of those things are facing the same pressure.
“With humans trying to manage that level of granularity,” Lobaugh added, “you can’t do it.” He calls it a matter of “decision orchestration,” and retail has been heading toward that for years.
Now, finally, the time looks ripe. If that’s true, then this may be a pivotal, perhaps even transformative, year that could change the retail business for many more to come.
A final note: Although social media didn’t make this list, its influence can’t be denied.
“Tiktok has eclipsed every other social media channel for small businesses selling products,” noted Hello Alice’s Gore.
Despite the backlash in Washington, D.C., fueled by fears over U.S. national security, as TikTok is owned by China’s ByteDance, those concerns apparently aren’t keeping retailers up at night, she said. That could change if decisive action is taken against the social video app, however, but it’s not at all clear that would take place in 2023.
