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BUSINESS INTELLIGENCE/ANALYTICS

Supermarket chain taps AI to improve automated replenishment

BY Deena M. Amato-McCoy

Time-starved shoppers expect their favorite grocers to have the staples they need when they enter the store — and supermarkets are hard-pressed to deliver.

U.K. grocer Morrisons is addressing this customer demand by adopting artificial intelligence to optimize replenishment and automate ordering among 26,000 ambient and long-life product SKUs in all its 491 stores. The Blue Yonder Replenishment Optimization technology automatically analyzes sales data and other data sources from Morrisons, and combines this with external data, such as weather forecasts and public holidays.

By applying data to the system’s machine learning algorithms, the solution learns as it goes and can manage a vast and complex amount of data to make highly accurate ordering decisions. This automated analysis can predict the level of demand down to the individual product and store location. Blue Yonder’s technology then fully automates ordering per store and per product.

Based on cloud technology, the system provides a low total cost of ownership and is highly scalable.

Since it launched in 2016, the technology processes data across the chain’s 491 stores, automates over 13 million ordering decisions per day, and has reducing shelf gaps by up to 30%, the company said.

“Our new automated ordering system has been our biggest new initiative. The system is capital light, and utilizes cloud technology and store-specific historic sales data to forecast stock requirements,” Morrisons’ CEO, David Potts said. “It is reducing costs and stock levels, while also saving time for colleagues, and providing a better offer for customers.”

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TECHNOLOGY

Report: Retail will look dramatically different by 2030

BY Marianne Wilson

Converging channels, customization and constant connectivity are expected to change the shopping sector in the years ahead.

That is the main theme of a new study by Synchrony Financial, which examines consumer perspectives and shopping trends that are expected to change the retail industry by 2030.

“The future of retail will look dramatically different in 2030 than it does today,” said Whit Goodrich, CMO retail card, Synchrony Financial.

According to Synchrony’s Future of Retail: Insight and Influences Shaping Retail Innovation report, technology will bring a new era of DIY shopping – changing how shoppers access, select and pay. The self-serve retail model, 24/7 stores with robot-assisted drive-thru windows, and interactive mirrors will become mainstream. Nearly half (47%) of consumers surveyed ranked interactive touchscreen mirrors in dressing rooms among the top three most exciting innovations of the future.

“Findings show shoppers seek self- and on-demand service, increased customization, and seamless home and in-store integration,” said Goodrich.

Brick-and-mortar stores of the future will focus on delivering genuine brand experiences to build both trust and loyalty – tapping into consumer desires. More than half of study participants (55%) are excited about blended in-store and entertaining experiences such as coffee shops, cafés, music, bars, or complimentary samplings of products or services.

In other findings from the report:

• Consumers will expect retailers to tap into the personal information they willingly provide to deliver better customized products and offers. From RFID in phones and wearables to biometrics such as finger and palm scanners, retailers will know shoppers well enough to direct them to preferred in-store items and send immediate and individualized sales offers. In-home chat bot devices and unbiased experts within “digital assistants” will become popular.

“One of the biggest disrupters in retail in the future could be 3D printing – footprints to create shoes and ways to produce many things faster and more inexpensively in a manner we never could before. It’s mass customization,” said Courtney Gentleman, CMO, payment solutions, Synchrony Financial.

• Increasingly, technology will give rise to a more demanding shopper base – one that expects what they purchase to be instantly available or returned. Among consumers surveyed, 77% anticipate better ways of making returns from online purchases in the future. Instant gratification will be an important part of the shopping experience offered in the form of stores on wheels, trunk stores, pop-up shops and subscription services; return buttons in retailer apps that re-package and pick-up items; and real-time inventory views and better ship-to-store options.

• The confluence of channels and high-definition camera technology will enable shoppers to access an interface through virtual or augmented reality to see how a new sofa, fabric and paint, garage door, flooring or other items will look in their house. Consumers will be able to secure in-home retailer services, purchase on demand using smart labels or QR codes, shop in 3D and use instant try-on features.

“Shoppers will be able to take a perfectly dimensioned picture of a person’s body, type and form and upload it to retailer apps. Bart Schaller, CMO, Synchrony Financial. “Without moving from the sofa, a pair of pants will arrive at their doorstep ready to go.”

• Instead of appealing to everyone, 57% of consumers agree that retailers must streamline and focus on doing one or two things well. Specialty retailers will remain a go-to in high-involvement categories, while online and automated reordering will reduce the need for as many one-stop-shop stores. Regardless of category, brands of the future must have a strong reason for being.

The Future of Retail report was developed from multiple research phases conducted January-February 2017 on behalf of Synchrony Financial with consumers and industry experts.

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FINANCE

Survey: Retail CFOs bullish about 2017, but…

BY Marianne Wilson

Bolstered by positive consumer indicators, retail CFOs are largely optimistic for 2017. But competition and consolidation could cloud their outlook.

That’s according to BDO USA’s 11th annual Retail Compass Survey of CFOs, in which respondents predict a 4.9% bump in total sales this year, up from 3.4% in 2016. The bullish predictions are echoed by online sales projections, with a 10.7% increase expected for the year ahead — the highest in survey history.

Still, with regulation and competition concerns mounting, there may be a bifurcation of industry performance this year. In fact, 38% of respondents cite competition and consolidation as their most concerning risk in 2017; and 11% of surveyed CFOs plan to invest more capital in M&A activity this year.

“The 2016 holiday season was a moment of reckoning for many in the retail industry,” said Natalie Kotlyar, national Leader of BDO’s consumer business practice. “Some are fired up following record-breaking results, and others are catching their last sparks. 2017 holds promise, but there’s no room for coasting in a marketplace so saturated with new and legacy concepts.”

All retail CFOs are coming to terms with escalating competition in the industry. Overall, 46% of retailers expect an uptick in deal activity, and just 1% project a decrease. Retail CFOs expect buyers will pay an average EBITDA multiple of 7.0, the highest in our survey’s history.

Additional findings of the 2017 BDO Retail Compass Survey of CFOs include:

• Trump’s tax and regulatory priorities drive uncertainty. When asked about potential tax changes, 61% of retailers say a reduction in the U.S. corporate tax rate would have the greatest impact on their business.

Another 19% cite potential state income and franchise tax audits and 10% point to expanding sales and use taxes as having the greatest impact. Retailers are keeping a close eye on the fate of the highly impactful border-adjustment tax proposal, which could impact the price of imported goods and lead to increased costs for consumers.

• Retailers integrate tech in pursuit of a perfected omnichannel recipe. It’s increasingly imperative that retailers move beyond a one-dimensional business model or risk becoming obsolete, which includes striking the right balance between brick-and-mortar and e-commerce offerings and capabilities.

As retailers assess how to take their in-store experience to the next level, 52% plan to invest in redesigning and remodeling stores. At the same time, many are focusing online, resulting in 68% planning to invest more capital in e-commerce and mobile channels in 2017. To help those channels communicate and improve operational efficiencies, 74% of retailers will invest in IT systems technology this year.

• Focusing on building a bedrock, starting with the supply chain. Consumers seamlessly transition between online and off — and they expect retailers to enable these behaviors. Ensuring transactions can take place smoothly starts with the supply chain. Thus, 39% of retail CFOs intend to invest more capital in their supply chain in 2017. And 14% of retail CFOs are most concerned with issues involving U.S. and foreign suppliers this year.

• Preparing for cyber risk and regulation. This year, 82% of retailers are EMV compliant, up from 76% last year.

EMV aside, 70% expect cybersecurity regulation to increase at least somewhat in the next year, and just three percent believe regulation will decrease. To prepare for regulations and security risks alike, 57% of those surveyed noted they increased cybersecurity spending in the past 12 months.

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