The purpose of physical stores is changing

The COVID-19 pandemic has triggered profound changes, including accelerated digitalization and digital adoption. Buying behavior changed rapidly, with a temporary 20% decline in retail sales from February to April 2020. However, within a few months, sales even exceeded pre-pandemic levels, especially in e-commerce and omnichannel.

Despite some ongoing behavioral changes, the desire to shop remains, with the goal of personal and authentic experiences, both physical and digital. The pandemic has allowed the retail industry to show its resilience and adaptability, leading to a reshaping of retail to appeal to diverse audiences. By 2025, millennials and Generation Z are expected to make up more than half of all customers, signaling a shift in the target audience for retailers.

The importance of digital channels and on-demand delivery has become indispensable for consumers. E-commerce creates price transparency and offers convenient on-demand shopping anywhere, anytime, leading to new forms of retail. We are entering an era of "phygital" and virtual commerce, as can be seen in the emerging metaverse. Brands will find new ways to interact with customers as they become creators of their own experiences. Direct-to-consumer (D2C) commerce could pose a challenge for retailers as many brands increasingly build direct relationships with consumers.



The entire industry is talking about hyper-personalization - tailored experiences along the entire customer journey. But what does this mean for retailers? Customers are looking for authentic, exciting and personalized shopping experiences. Advances in data analytics and AI enable instant analysis of customer interactions. WHATALOCATION believes that hyper-personalization gives retailers a competitive advantage. Personalized services, supported by AI, are the future field for convenient, seamless shopping. Hyper-personalization is based on real-time customer data that is merged offline and online. Tools for real-time orchestration and optimization enable 1-to-1 personalization on a large scale. This increases customer satisfaction, upselling and loyalty. Retailers need to address privacy conflicts. According to Accenture, 58% of consumers would spend more if their privacy was protected. The shift from individual preferences to prediction and design is happening thanks to advances in technology and data analytics. Retailers can anticipate customer needs, but ethical concerns are taken into account. This "personalized manipulation" offers retailers the opportunity to increase customer loyalty.



With advances in AI, ML, robotics, computer vision, NLP and IoT, the world is becoming increasingly connected and intelligent. "Big data" is just the beginning, the data generated is growing exponentially. Intelligent technologies are driving automation and seamless experiences. By connecting devices and systems, we expect greater efficiency, lower costs and personalized experiences for consumers. By 2035, over 2,000 zettabytes of new data will be generated annually (compared to 94 zettabytes in 2022). With smart devices and smart infrastructure, the innovation possibilities are endless. Automation, data analysis and data-driven decisions are becoming crucial in the digital age. What was once science fiction is rapidly becoming reality. The proliferation of generative AI tools such as ChatGPT demonstrates the enormous potential of these technologies to drive automation and save time. In the fast-paced world, technology is becoming an integral part of everyday life. Advances in innovation are making technology more invisible and intuitive. "Shy tech" works unnoticed in the background, improving experiences, analyzing data and making decisions. Smart stores use AI algorithms and IoT sensors to optimize customer flow and shorten waiting times. "AIoT", the combination of AI and IoT technologies, brings rapid progress in IoT operations, human-machine interactions and improved data management and decision-making.



The pandemic has made the advantages and disadvantages of both the digital and physical worlds clearer than ever. It has shown that customers are looking for "real" and authentic experiences, want to interact and meet in person. At the same time, however, they do not want to give up the convenience and advantages of digital channels in terms of experience, availability and speed. At WHATALOCATION, we are convinced that retailers no longer have to make this trade-off. In the near future, everything will be phygital. Therefore, designing phygital environments is one of the most promising future fields for retailers. These environments will meet the unmet needs of global customers and fundamentally change the way people experience their time shopping. Phygital environments combine physical and digital channels to enhance the shopping experience for customers. They are designed for interaction and interactivity and offer digital services and amenities that make shopping more enjoyable. However, this does not mean that physical spaces and personalized customer service will disappear completely. Instead, retailers need to design physical spaces and entire environments from a customer-centric perspective. Service providers should move from static and linear offerings to interactive and multi-channel offerings.



The retail industry faces several challenges, such as data fragmentation, lack of transparency and inefficient transaction processes, leading to friction and customer dissatisfaction. We believe that Web3, blockchain technology and the resulting decentralized solutions represent a great opportunity to address these issues. Web3 represents the next evolutionary stage of the World Wide Web and has the potential to revolutionize the way people and organizations interact with each other - by creating trusted ecosystems and enabling efficient transactions. The Web3 Foundation describes it as "a decentralized and fair Internet where users control their own data, identity and destiny". We believe that Web3 has the potential to be the next wave of digital disruption, laying the foundation for a truly decentralized world owned by its builders, users and creators. With associated technologies such as blockchain, smart contracts, NFTs, cryptocurrencies and digital twins, it will transform essential aspects of our daily lives - including shopping and all its associated components.


The rapid advances in AI technology have meant that machines are now being used in many new areas. For example, when you buy a jacket online, it is often an AI rather than a human that decides the price. In stores, an AI system monitors your behavior, and AI systems also help with software programming and text translation. Virtual assistants, controlled by voice recognition, are now present in many homes, and self-driving cars are becoming more and more real. In recent years, AI systems have even helped to solve some of the most complex scientific problems.

In retail, AI has already brought about significant changes and is influencing the entire value chain. This includes not only product design and supply chain logistics, but also marketing, sales, customer service and the shopping experience online and in-store. According to McKinsey, the retail and consumer goods industries could benefit significantly from AI, especially generative AI, with a projected value uplift of between $400 billion and $660 billion per year.

Retail, which relies heavily on analytics, points to huge growth opportunities, especially with increasing adoption and investment in AI.Overall, the transformative power of AI could make a significant contribution to the global economy, with generative AI alone potentially generating $2.6 trillion to $4.4 trillion. This is particularly important as global retail sales are expected to exceed $30 trillion by 2024. The use of AI technology has become essential for retailers who want to remain competitive in today's market landscape. AI systems can analyze vast amounts of customer data and provide valuable insights for businesses. This information enables companies to customize their product range, improve the customer experience and increase operational efficiency.

Due to its impressive development trajectory, global AI deployment in retail is expected to reach $10.76 billion by 2023. This rapid increase demonstrates retailers' continued commitment to integrating AI technology to improve the customer experience, streamline processes and maintain competitiveness in an ever-changing market.

Long-term estimates suggest that the use of AI in retail will rise to over $127 billion by 2033. The industry views AI as a revolutionary force that is reshaping the way retail organizations operate, from supply chain management to personalized consumer interactions. According to Future Market Insights, demand for AI in retail is expected to grow at a remarkable compound annual growth rate (CAGR) of 28% between 2023 and 2033. This continued growth underscores the retail sector's commitment to fully harnessing the power of AI technology.

Source: GHARAGE AI Report Q4 2023