Amazon sparks a race for retailers to adopt predictive analytics

May 24, 20173 Minute Read

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Amazon is coming after retail stores. You can see it everywhere: Online retailers, like Amazon, are absolutely killing malls, downtown shops—even big box retailers. The e-commerce juggernaut recently announced it would begin operating stores where consumers can pick up items and head out the door, in addition to smaller outlets where Amazon customers can already pick up or return items.

Interactive shelf technology can play a big part in who stands tallest with consumers in the end. It’s all thanks to predictive analytics—a science that tries to help retailers better understand consumer behavior. This new interactive retail tech is powered by essential customer data—something Amazon, as an online giant, has in spades.

With these new options for consumers, what’s today’s retailer supposed to do? Predictive analytics is expected to be a $5.1 billion market by 2020, but somehow, it’s not everywhere just yet.

The retail experience today isn’t great

Like with any rivalry, the best bet is to fight back. Companies like Kroger, which are right in the crosshairs of Amazon’s foray into groceries and actual stores, have a plan. They’re launching interactive shelf technology in stores, allowing shelves to alert customers about shopping list items.

Taking away some of the hassle of shopping in grocery stores is a good idea, but no one’s quite solved it. We’re willing to bet everyone has had a terrible experience at self-checkout machines by this point. The thinking is that Amazon, with little retail experience, can totally rethink the way consumers shop.

Can predictive analytics help stores survive against an Amazon onslaught? It’s possible. In many retail locations, employees now leverage technology like tablets to guide customers based on past purchases. From Lowe’s bilingual robot guides in California to Neiman Marcus’s outfit-comparison mirrors, retail is showing up to the tech arena armed. But these won’t function as wonder cures for stores—they’re attempts to be as advanced as Amazon.

Good luck with that. Amazon spends tens of billions in research and development every year. In fact, the company is the largest R&D spender in the United States, according to Bloomberg. For a retailer, that’s impressive. For smaller businesses, it might be better to partner with Amazon’s technology than fight it.

Trial by tech—weighing cost and patience

Some of the experimentation businesses will need to endure to make predictive analytics a success in retail locations is worrying for managers. While retail is an experience that needs improvement, there isn’t agreement on how to do it. Another issue is privacy concerns. Do we really want a world like Minority Report, where targeted ads follow you around everywhere? Digital wallets bring their own hoard of security concerns, too. People don’t seem to have concerns about Amazon, but they might if every store starts collecting troves of data on customers.

This tech is expected to help businesses save money. Predictive Analytics World pegs the savings to be as high as 75 percent. But outlay costs are murky. Businesses will likely need to spend a lot before seeing any returns. JDA Software Group’s 2017 retail CEO survey shows a huge majority of retailers are up for the challenge, with 49 percent of respondents implementing the digital transformation plan they’ve developed and another 38 percent ready with a developed plan but waiting to pass “GO.” The survey found the top in-store tech investments most retailers either pulled the trigger on or plan to this year are smart mobile devices for staff and mobile beacon technologies.

Amazon is a tech giant and a retailer all wrapped into one company, making it an opponent with a serious advantage. As online and offline retailers continue to battle and strategize with tech, you can expect big things in the brick-and-mortar sector soon—including technological overhauls of the in-person shopping experience, as companies like Amazon dive in to stir the water.

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