According to the latest figures from the Office for National Statistics, Black Friday helped boost sales in November 2017 to 1.6 percent higher than in 2016. However, over Christmas retailers were on tenterhooks more than ever over whether consumer spending habits would remain consistent with the preceding 12 months.

The last couple of years have been a been a testing time for the retail sector. Hyper sensitised consumers, blurred lines between the online and physical world, intensification of competition and rapidly changing retail dynamics have collectively contributed to the creation of the perfect retail storm.

What is evident is that the proliferation of technology to grow and differentiate retailers, as well as drive speed and flexibility, has proven to be a key competitive edge. Retailers must now lean on it to weather the storm.

This year we are therefore likely to witness the use of some very innovative and differentiating technologies in the following areas.

Customers at the core

Customers will take centre stage like never before.

Primarily, the shift from segmentation to understanding individual buying behaviour has never been more real. While this has been pervasive in the online world, the physical world of retail still operates in the realm of consumers in segments or aggregates.

With the exciting developments in conversational commerce, chatbots and the growth of voice and image recognition technology, vast sums will be spent on better understanding consumer journeys and life cycles to integrate those insights uniformly across all channels.

This integration across all devices, platforms, channels and services will become the norm. Amazon is leading the way in this area, with retailers like Home Depot, Best Buy and Nordstorm are not far behind.

Reimagining physical stores

Retailers are increasingly disrupting the store to enhance it, rather than to replace it.

Regarding stores, therefore, we can expect a significant increase in the adoption of emerging technologies that bridge the information edge online retailers currently bring to the marketplace. The Internet of Things (IoT) and artificial intelligence (AI) / machine learning will be merged to achieve new levels of intelligence. As we see the emergence of the next generation of customer engagement, we will also see the deployment of an array of technologies to better understand key customer triggers, the path to purchase, sensitivity to changes in price and display and service levels in store itself.

We will also see the emergence of multiple store formats that will lean heavily on the use of digital and innovative technologies to help differentiate them.

Artificial Intelligence (AI) will come of age

If 2017 was the year that AI and job loss hit the headlines, 2018 will see the technology taken to the next level.

With an increase in the mainstream business application of AI and a greater adoption of cloud, we can expect to see the scale and magnitude of AI implementations grow significantly.

Areas like customer experience will continue to be used increasingly across all retail formats, and AI will also be increasingly lent on to pursue new business avenues; especially in supply chain, store operations and merchandise execution.

From a pure technology perspective, AI blends three distinct components together. The algorithms are the brain, the big data platforms the body that hosts everything and the cloud the legs that allow AI to move significantly faster and cheaper.

Though each of these components will evolve rapidly, we will also see innovations on collaboration forums that will unite these elements and create innovative and powerful AI deployments at scale.

Value chains will be transformed

Understanding consumers have become intrinsic to the existence of the retail sector, so delivering on promises at the very least is of fundamental importance.

In order to deliver on the promise of a new digitally charged world, retailers will start working on transforming their entire or at least significant parts of their value chain.

What this means is that we will expect to see supply chain planning shift towards the concept of Network-Based Panning, with all nodes of the supply chain on one physical network. This will allow retailers to gain end-to-end visibility, react in near real time, increase velocity, availability and reduce costs across their supply chain.

Fundamental shifts in Amazon’s business model (in its Grocery section, for example) will cause retailers to restructure physical networks and create a smaller flow through distribution centres to emulate Amazon’s same-day delivery promise.

Both of these examples will result in the restructuring of processes, investment in new technologies and physical assets, and greater adoption of the cloud.

In essence, we are witnessing the evolution of what could be termed retail 3.0, which is not only powered by technology but will also experience rapid evolution and transformation with breakthrough technological innovations.