The Digitisation of Everything – Retail

Thursday 06 February 2020


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It is becoming increasingly clear the future of retail will not simply be a matter of online vs bricks and mortar stores. It will be as much about the transformation of how we shop in-store as it is about the shift to online shopping. Technology will change how consumers approach the shopping experience and how merchants and suppliers optimise their operations to connect with an increasingly digital customer.

Our technology accelerators have shaped the e-commerce environment but are now playing an important part in the physical retail store, from supermarkets to high end boutiques.

In his 2017 letter to shareholders, Alibaba’s founder Jack Ma announced the “Five New” strategy which included a concept he named New Retail. He described it in the following way:

“E-commerce is rapidly evolving into ‘New Retail’. The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer.”

Alibaba-owned Freshippo (known as Hema in China), is a good example of how the company is implementing this concept. Freshippo has been built from the ground up to be an experience centre, consumption centre and logistics centre all in one. Not only is the technology facilitating an omnichannel shopping experience where the customer can purchase items online, in-store or a combination of both, but it is providing new ways for the company to interact with its customers.

For example, scanning a product’s barcode in the Hema app brings up its details and provenance as well as its ratings and reviews. Through the use of AI, the app will recommend other products the shopper might like and personalise this and future shopping experiences.

Amazon is digitising the offline shopping world with Amazon Go, Amazon Books and Amazon 4-Star. Amazon Go is a cashier-less supermarket that uses a series of AI powered cameras and sensors to allow customers to purchase an item by picking it up and walking out with it. Using sensors and IoT the store knows what item was taken and debits a linked Amazon account.

Amazon Books and Amazon 4-Star use AI combined with data gleaned from Amazon.com to stock a highly curated selection of products customised according to a store’s demographics.

Both Alibaba and Amazon are also digitising the warehouse and logistics side of their operations. This involves extensive use of robots to automate simple and repetitive tasks like picking, scanning and transporting products. Warehouse automation using robotics and AI increases accuracy, minimises required space and can reduce labour costs by up to 70%.

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About the Author
Lachlan Hughes, CFA

Lachlan Hughes, CFA

Chief Investment Officer

Lachlan founded Swell Asset Management in 2014, wanting to create a unique investment offering – a global portfolio with a genuine long term focus. He is the CIO, with responsibility for all investment decisions of the Swell Global Portfolio. Previously he was a Senior Analyst with NovaPort Capital, a boutique fund manager owned by Challenger Limited. Prior to that, Lachlan was a corporate lawyer working with King & Wood Mallesons, The Bank of New York (London), and Allco Finance Group.

Lachlan earned the right to use the CFA designation granted by the CFA Institute in 2010. His professional qualifications include a Bachelor of Commerce (Finance) and a Bachelor of Laws.