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Escaping the retail apocalypse

The "for-rent signs" are lined up one after the other - more and more commercial spaces are vacant. Of course, there are still open shops, but they also have signs: the merchandise displays are plastered with sales and discount signs seemingly all year round.
Closed Store

The “for-rent signs” are lined up one after the other – more and more commercial spaces are vacant. Of course, there are still open shops, but they also have signs: the merchandise displays are plastered with sales and discount signs seemingly all year round. Retailers are trying to get rid of their surplus goods at any price – in the truest sense of the word.

Not only brick-and-mortar retailers are complaining about the increasing domination of the big online retailers, also the rural population laments the increasing vacancies and criticizes the decreasing attractiveness of their city centers.

It’s not just the smaller brick-and-mortar retailers who are affected, larger chains have also passed away or been forced to shut down stores, including Gerry Weber, K&L, AWG, Beate Uhse, SinnLeffers and several others.

Store closings are not a purely German phenomenon

The increased mortality rate among retailers is also affecting other countries. Take the USA, for example: since the beginning of 2019, 8,558 stores have closed their doors, while in 2018 it was “only” 5,844 spread over the entire year. In the UK, the same picture can be seen, with 633 stores closing since the beginning of the year and only 431 new stores opening.

The culprit is quickly found – the so-called “Amazon effect”. Customer expectations have risen, everything has to be immediately available everywhere, for the lowest price possible. The transparency provided by the internet has enabled customers to find the best price with just a few clicks. This is because e-commerce platforms not only frequently offer the same or similar products in their assortment, but they have also given rise to price comparison portals.

And now Amazon also wants to conquer the brick-and-mortar retail world. After all, many customers still like to go to physical stores and get personal advice – provided the customer experience is right. That’s why Amazon is now opening real stores that look as modern from the outside as the high-gloss Apple and Tesla stores.

Retailers must learn from the big players

The good news is that the retail apocalypse is not inevitable and cannot be compared to the invasion of German forests by the common bark beetle. The current situation is more akin to the Darwinian scenario “survival of the fittest”. Those retailers who adapt best will survive and even flourish.

The key to survival: the intelligent use of data! Retailers need to understand their customers, anticipate their needs and at least meet, if not exceed, customer expectations. This can be achieved with the help of data. Over the past two years, 90 percent of the world’s data has been produced, thus, a shortage of data is not the issue. The biggest problem is making it usable. Data must be carefully analyzed in order to provide insights. This validated data is called Smart Data and is the food of artificial intelligence (AI). AI uses data to make decisions and automate processes.

Zalando and Co. truly understand their customers

Zalando, the fashion company known above all for its eye-catching shoe advertising, is present in 17 European markets with around 400,000 products and 27 million customers. At the same time, Zalando manages to know, if not anticipate, every customer wish. Zalando’s artificial intelligence gets to know each customer based on his wish list and click behavior. Based on this data, the AI generates outfit suggestions tailored to the customer. Thus, customers scream with happiness and reach deeper into their wallets. According to Zalando, the system’s personalized product recommendations lead to 40 percent larger “shopping baskets”.

Machine learning is now indispensable

Meanwhile, other companies not only evaluate the data that customers unknowingly leave behind, but also directly ask potential customers about their wishes and preferences. For example, the outdoor outfitter North Face does this with IBM’s “Watson” chatbot. The AI processes a Q&A with the customer in a chat window in order to understand which products might be of interest to him and to provide personalized suggestions.

Artificial intelligence also works in the analog world. This is demonstrated by the American giant Walmart. AI cameras monitor the products displays and register when particularly popular products need to be refilled and less popular products need to be replaced.

The way to AI-controlled systems is as follows

Developing an AI system and integrating it into your own business processes costs time and money. Moreover, many companies simply lack the technical know-how to develop AI applications on their own. But this is no reason to despair: aifora offers retailers direct access to its cloud-based AI, which powers aifora’s pricing and inventory solutions. Prizeworthy solutions: aifora was nominated for the Paris Retail Award in the category “Data Optimisation”.

Switch to the winning side, defeat the “retail apocalypse” and make your business fit for the future.

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Patrick Brüns - Head of Marketing

Patrick Brüns
Head of Marketing

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