When bots do the buying, where’s the value in shopping?

By

Helen Merriott

EY UK&I Consumer Industries Advisory Leader

Army Reserves Officer. Chartered Engineer. Mother of three boys.

6 minute read 16 May 2018
Related topics Digital Innovation Consumer products and retail Disruption Growth
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When future consumers shop only for what helps them express who they are and use AI to buy, how will retailers transform?

Today the words buy and shop are almost synonymous. But for future consumers, they will describe very different activities. Buying will become an activity that we find necessary, but mundane; a task we’ll personally spend as little time and thought on as possible. Shopping will evolve into a realm of immersive experience requiring an investment in time we choose to give. It will be the space where we engage with the brands we love, that reflect our values and feel part of who we are.

That’s the start-point of our hypothesis on the future nature of retail, drawn from the insights revealed in our Future Consumer.Now program. Read on to reveal how this hypothesis might play out, and what this potential future could mean for consumer brands and retailers.

  • About Future Consumer.Now

    FutureConsumer.Now is an EY program helping business leaders to get their organizations fit for a very different consumer future. Through research and interviews with global innovators, futurists, business leaders and EY professionals we’ve identified over 150 change drivers that could shape the future consumer. We used those drivers to create eight powerful hypotheses, each of which relates to a key aspect of the future consumer: how people will shop, but also: eat, stay healthy, live, use technology, play, work and move. We then held a series of innovative hackweeks around the world to explore these hypotheses further and to model the kind of future worlds they might create.

Buying and shopping diverge

Buying will be boring, at least for the consumer. The voice-activated assistants that sit on a growing number of kitchen counters will evolve into super-intelligent concierge services and smart-home systems. Connected to the Internet of Things (IoT), our Artificial Intelligence (AI) platform of choice will serve as an access point to new buying ecosystems.

We’ll increasingly trust AI to complete many of life’s more ordinary purchases, especially for the consumer products we use every day. Our bot will curate choices for us and buy on our behalf, if we give it that permission and access to our data. It will evaluate what products or services we need, when we need them and where best to buy them – not just in terms of finding the right price, but also in terms of sourcing brands and suppliers that align with our values.

As adoption spreads, the rise of AI-buying will disintermediate transactions, payments, fulfillment and brands, commoditizing many areas of retail as we know it. The more relationships in the AI ecosystem, the more transactions processed, the more data gathered and analyzed, the smarter these platforms will become.

AI will predict our preferences

AI bots will predict or preempt our behavior in ways we value. They will become an indispensable part of how we live.

AI interactions will extend beyond the consumer-to-brand relationship; they will include our connections to the trusted AI’s of friends, family members and other associates; and between brands and other brands, and every participating organization in their respective value chains.

Over time, consumer engagement will polarize. We’ll become disengaged from most of the products and services we buy. Brands will need to ensure clear differentiation or risk becoming commoditized as a result. But we will also become super-engaged with those brands that capture our hearts and minds. This won’t be limited to luxury or expensive brands, but will also include brands that we value in different ways, for example, their ethics may resonate with ours or they may give us a sense of the treasure-hunt experience as we search for bargains. These super-engagement brands are the only ones we will actively “shop” for or with, because they help us express and shape our identities.

Future shopping will have to be a highly conscious and experience-led activity, taking place in retail destinations that provide differentiated and relevant goods and services in distinctive virtual or physical spaces. Talent will shift from task focus to offering expertise and experience. Successful retailers will be those producing their own branded goods and services. Most of their profit will come from production and related services, not distribution.

Retail transforms

Retail infrastructure will change significantly. Twentieth century retail was built around the car, high-traffic real estate locations and mass media advertising.

Twenty-first century buying will revolve around AI, voice, mobile and automated fulfillment technologies, such as drones and self-driving delivery vehicles.

Rather than being a competitive advantage, timely fulfillment-to-customer will evolve to being a basic customer expectation.

More consumer brands will adopt direct-to-consumer strategies. Meanwhile retailers will try to differentiate by increasing private label and vertically integrating enhancements to their services. This could take the form of acquiring logistics capabilities to secure distribution networks or incorporating media and technology arms to tie consumers into a broader ecosystem.

This will further accelerate the emergence of smaller, agile cross-sectoral players capable of quickly tapping into fast-changing mindsets. The brand and store portfolios of larger retail and consumer players are being pushed towards obsolescence due to an inability to adapt and restructure quickly enough to accommodate upstart brands and technologies. However, they are fighting back by developing their own offerings and by working across sectors to add value in other areas, for example providing e-commerce food delivery solutions on flights to avoid passengers returning home to an empty fridge.

Choosing where to play

As multiple industries converge around a different kind of consumer, retailers should decide where they want to play.

Data analytics, digital media, logistics and technology will be crucial battlegrounds in deciding which ecosystems consumers apply to drive their future choices. We will see an acceleration of partnerships and acquisitions of niche technology providers as retailers seek to fast-track their digital transformation. Pricing will be dynamic and customized as AI analyzes demand and supply in real time. Collaboration between ecosystems to create seamless end-to-end user experiences between providers will facilitate progress, but there will still be winners and losers.

Questions leaders must consider

  • Which purchasing decisions will be commoditized and which will require more consumer interaction?
  • What steps will brands need to take to ensure that they are visible choices? Both in AI-led buying and consumer-led shopping?
  • As channels and platforms become blurred, who will have the primary relationship with the consumer?
  • When algorithms influence consumer behavior, who programs the algorithm and how will their power be regulated?

Summary

With buy and shop divergence reshaping retail, consumer products companies and retailers must decide where they will play and how they will get there.

About this article

By

Helen Merriott

EY UK&I Consumer Industries Advisory Leader

Army Reserves Officer. Chartered Engineer. Mother of three boys.

Related topics Digital Innovation Consumer products and retail Disruption Growth
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