Five tech trends that will define retail in 2023

1. Cloud and supply chain tech 

CIOs and tech leaders are set to focus again on investing in cloud infrastructure in 2023, following the initial wave of investments in big solutions from the likes of Amazon, Microsoft and Google in the years immediately before the coronavirus pandemic. 

This is the opinion of Anna Barsby, a former Halfords and Morrisons CIO turned founder and managing partner of consultancy Tessiant, who says “lessons have been learned around the skillsets and capability retailers need in-house to properly run it”.

“It’s a case of going back around the houses with it as retailers try to get a better skillset and better productivity,” she says.

“I think retailers have lost a lot of money in operating expenditure because it was the new cool thing, but people are getting a bit cleverer about how to run it effectively and efficiently.”

Those overseeing cloud infrastructure projects now understand the importance of finding the right talent in this space, Barsby continues, otherwise “your costs just spiral”.

“They realise that, even if you’re outsourcing it, you need to keep a really tight grip on how you’re flexing, when you’re flexing and what your capacities are.”

“Those retailers that have started the supply chain tech groundwork in 2022 will carry on because it has been a must from Covid. Supply chains really do make or break a business operation”

Anna Barsby, Tessiant

Analysts and retailers Retail Week spoke to highlight the overall importance of investing in the back-end such as warehouse management systems and forecasting and replenishment tech.

New Look starts 2023 in the early stages of a Manhattan Associates order management system integration, realising the front-end, customer-facing service cannot stay relevant if it is not supported by significant supply chain investment.

Barsby adds: “Those retailers that have started the supply chain tech groundwork in 2022 will carry on because it has been a must from Covid. Supply chains really do make or break a business operation and there’s some great tech out there, including from Blue Yonder and Relex.”

Kelly Askew, retail strategy lead for Accenture in Europe, adds that lots of his consultancy’s clients are getting serious about radio-frequency identification (RFID) tags, too.

He says: “Ubiquitous RFID tagging of items allows retailers to know with certainty where things are, both in their store and their broader supply chain network.

“Knowing where products are allows you to behave differently and have fun with consumers through self-checkout, for example.” 

2. Frictionless point of sale

Self-checkout advancements and the wider “commerce modernisation” around the point of sale (POS) will be a 2023 trend, according to Stephen Hewett, future retail leader at Frog, a division of Capgemini.

In November, cloud-based payments service provider Checkout.com was appointed by Sainsbury’s “to simplify and modernise payment infrastructure across its business”.

The partnership will underpin the grocer’s SmartShop tech and allow people to pay for their shopping without having to visit a traditional till.

“Loads of retailers are stuck on tills from a decade ago and it’s a long painful path to get off that. Often they can’t make the investment to do it unless the burning platform has erupted beneath them”

Stephen Hewett, Frog

Sainsbury’s stablemates Argos and Habitat will also receive the technology upgrade in their stores over the coming months.

“A lot of traditional POS tills are going out of life,” Hewett explains.

“Loads of retailers are stuck on tills from a decade ago and it’s a long painful path to get off that. Often they can’t make the investment to do it unless the burning platform has erupted beneath them.

“The same thing is happening with some of the first wave of ecommerce platforms.”

Replatforming this tech is going to consume much of retail technology’s budget in the coming years, he adds, saying “there’s lots of POS modernisation work kicking off” as retailers search for payment tech supporting online-store integration.

Will Higham, futurist at Next Big Thing, agrees “anything that makes it easier” for people in 2023 should and will be a focus area for retailers serving what is expected to be an “anxious” consumer due to the expected economic challenges they face.

Amazon Go-style tech and frictionless till-free checkouts will grow in popularity, he says, as evidenced by Tesco, Aldi and others’ experiments in this area.

Hewett predicts “hybrid” checkout facilities will grow in popularity this year.

“It’s been a case of all frictionless or go somewhere else,” he says of the supermarkets experimenting with checkout-free stores.

“What we’re starting to see is retailers offering different levels of frictionless that are available. That will drive more people to use those stores because, at present, the all-or-nothing approach puts a lot of people off going in.”

3. AR’s second coming

McKinsey’s Technology Trends Outlook 2022 report says more venture capital investment was ploughed into virtual reality (VR) and augmented reality (AR) in 2021 than in any year apart from 2018, putting the figure at $4bn (£3.4bn).

This apparent second wave of AR looks set to influence retail in 2023, with H&M, Avon and The Very Group all announcing new explorations in this space in the last few weeks of 2022.

The tech behind allowing consumers to see what cosmetics or garments look like on their bodies digitally before making a purchase looks to have reached a sufficient stage of maturity.

Cassandra Napoli, senior strategist at WGSN Insight, says: “A 2022 Snapchat report revealed 100 million consumers are leveraging AR to shop, giving brands a big reason to invest in this technology now.

“AR is also easier to scale than VR and is emerging as a stepping stone to the metaverse, creating new ways to tell stories and convert shoppers.”

“An AR experience, when done right, has the power to cut through the clutter and convert shoppers if it adds something to the consumer’s life, like value or convenience or entertainment” 

Cassandra Napoli, WGSN

She references the emergence of “AR-first fashion collections” at labels like Bershka, which launched a line in June 2022 in partnership with digital fashion platform DressX. 

Social media platform Snap is also forging a strong proposition in this space, Napoli adds, and is partnering with H&M on building clothing ‘try-on’ capability into its mobile apps.

“An AR experience, when done right, has the power to cut through the clutter and convert shoppers if it adds something to the consumer’s life, like value or convenience or entertainment,” Napoli continues.

Askew suggests the re-emergence of AR is being driven by hardware. Platforms like Roblox, he says, are “completely accessible” and provide “a smooth experience”, which is driving uptake of the technology.

Hewett agrees: “Hardware can run it now and it’s better quality, more accurate and in the hands of more people. The tools to create AR are becoming more democratised – you can use drag and drop and create yourself immersive augmented experiences.”

Prior to this, he says, it was a case of ad agencies doing marketing activations as one-offs without building on them.

4. Generative AI

Google Trends UK data suggests very few consumers were searching online for the generative AI tool ChatGPT until December – but then it hit peak interest midway through the month and has remained a major area of focus.

So what is it and how might it impact retail? ChatGPT, which is the brainchild of AI research and deployment company OpenAI, is a conversational AI chatbot that can answer almost any question thrown at it with sophisticated responsive prose.

Despite public fears that content creators could soon have a robotic rival putting their profession at risk, the innovation comes with plenty of opportunity to help retailers boost their efforts in the personalisation of customer service, according to Hewett.

“That technology is finally coming to a state of maturity and the ‘so what?’ of that is personalisation,” he says.

“The big thing that blocks retailers from personalising at scale, aside from the obvious data stuff, is the content. It is just really difficult to operationalise personalisation at scale to come up with relevant content. The holy grail for that is that computers can customise and generate content in a personalised context.

“What we’re seeing unfolding in front of us is the growing up of that tech to a state where, I believe, we will start to see some retailers and brands experiment with it to use it as a key tool for personalisation.”

But rather than replacing human endeavour, Hewett predicts the technology will “elevate the role and craft of the human in it”, working side by side with content and digital teams to orchestrate better and more impactful content.

5. Retailers as platforms

Decathlon, B&Q and, in 2022, Superdrug have all created online marketplace sites to accompany their traditional ecommerce offerings. Others following this path include Mountain Warehouse, but the big one to come in 2023 is Boots.

These retailers are creating online models relinquishing some of the direct customer relationships in exchange for adding many more brands and product ranges to their inventories.

The marketplace model allows retailers to work with more partners without taking on full responsibility for fulfilment, marketing and warehousing. 

“There are lots of retailer naval gazing into how to make the most of what they’ve invested in and become more efficient,” explains Barsby, who says lots of ecommerce investment was made in the pandemic to meet demand but online sales have plateaued.

“Retailers are now sitting on a lot of assets that need to be sweated – and one of the ways to do that is marketplaces”

Anna Barsby, Tessiant

She describes marketplaces and retail media – where retailers sell digital space to brands and open up their first-party data to third-party brands, such as through loyalty schemes – as a valid trend going into the new year.

“I suspect behind closed doors there are a lot of marketplace-type programmes going on,” Barsby states.

“Retailers are now sitting on a lot of assets that need to be sweated – and one of the ways to do that is marketplaces and getting more revenue out of the online asset.”

Kingfisher, Morrisons and Boots – after recent partnership agreements with adtech and digital marketing companies – are among the retailers looking to become more prominent media platforms in 2023.

It is a move many are making as they see an opportunity to help brands reach consumers in light of the depreciation of online identifiers such as third-party cookies on Google Chrome and in Apple’s ecosystem.

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