Amazon sparks a race for retailers to adopt predictive analytics

November 8, 20173 Minute Read

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 behaviour. 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 a growing, multi-billion dollar industry, but somehow it’s not everywhere in Canada just yet.

Retail enlists predictive analytics to fight back

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 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. 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. Major Canadian grocery retailers now outsource their analytic analysis to experts to save time and money. But outlay costs are murky. Businesses will likely need to spend a lot before seeing any returns. Forrester says an estimated 10 percent of Canadian retail purchases will be made online by 2019—up from 6 percent in 2014, and coming close to the 11 percent 2019 forecast for the United States.

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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