Consultancy group McKinsey & Co announced 14 top trends in tech in 2022, stating: “Technology continues to be a primary catalyst for change in the world.”
It noted that business executives can “plan ahead better by tracking the development of new technologies, anticipating how companies might use them, and understanding the factors that affect innovation and adoption”.
Computer Weekly looks at the 14 trends identified by McKinsey, highlighting the opportunities for retailers and the industry’s early adopters of the tech behind the trends.
1. Advanced connectivity
Technologies in this space include optical fibre which helps connect people to high-speed internet, Wi-Fi 6 connectivity, and advanced cellular tech standards such as 5G and 6G that are replacing 4G. According to McKinsey, advanced connectivity’s impact on retail could be the enablement of better digital and cross-channel experiences resulting in increasingly personalised and targeted shopping experiences for consumers.
Improved connectivity would also potentially allow retailers to better manage and improve existing day-to-day operations such as inventory and warehousing, as well as coordinating supply chains and adding augmented reality to boost product information.
IT analyst group Forrester suggesst in its The CIO’s guide to 5G in the retail sector report that retailers may be better off pursuing Wi-Fi 6 over 5G.
Dan Bieler, author of the report and principal analyst, says: “[Retailers] have achieved some great solutions with existing technologies, and they will not risk upsetting everything in the short term where they don’t see a clear [ROI] for making additional network infrastructure investments in 5G.”
Bieler says Wi-Fi may be preferred by tech leaders in retail simply because they don’t need the transformative powers of 5G, unless they are rolling out deployments of connectivity-heavy solutions such as virtual reality.
2. Applied artificial intelligence (AI)
The McKinsey research which accompanied the trends report found that the top two user cases in retail for applied AI were marketing and services. Across all industries, these departments – as well as product and service development function – represent the business areas making use of applied AI more than others.
The technology supporting this trend is machine learning (ML), and its various subfields such as computer vision and natural language processing.
An example of the latter in action in retail could be in chatbot usage to answer customer service or staff queries. John Lewis Partnership (JLP), for example, has worked with Zendesk since 2015 to run its Partner Choice internal website, which allows staff to access their company perks. Implementing the new tech means routine queries can be directed to its Help Centre with the assistance of automation, giving staff a chance to focus on higher-value activities. A rota system by which only one agent is managing support and answering queries at any one time is now in place.
Raphael Hewett, partner and publicity manager at JLP, says: “At the start, we had about five agents working full time dealing with queries, but the productivity boost from using Zendesk tools means that this part of the team’s role is quite a light touch now.”
3. Cloud and edge computing
Edge refers to data computation happening at close proximity to the physical location creating the data. It has emerged as an option for businesses as they realise the migration of servers from on-premise to cloud sometimes fails to offer the required processing speeds for some components of their modern strategies.
In retail, edge computing can help provide frictionless checkout experiences or real-time personalised promotions – which as McKinsey says, rely on “low latency edge computing and analytics applied to a range of in-store data streams”.
Amazon’s Just Walk Out technology is a prime example of edge in action. The tech is used in Amazon Fresh stores where customers check in via app before automatically being charged as they walk out without visiting a checkout.
Michael Zampani, principal software engineer with the physical stores tech team at Amazon, says: “While Amazon Web Services [AWS] helps us to elastically scale our resources to process data, stores can be a long distance from a data centre, and there can often be a large amount of data to process.
“Our initial prototypes and installations in our own store formats started with all of our processing done in the cloud. As we scaled to different locations and larger store formats, we quickly needed to iterate on an architecture to allow us to run our algorithms where it makes the most sense – either in the cloud with elastic compute or in the store where the data is.
“To manage these bandwidth issues, we built an edge computing architecture to process sensor data and compute receipts locally without going back and forth to the cloud. Placing compute close to our data helps us to improve reliability by sending less data over the internet.”
4. Future of bioengineering
Describing this tech trend, McKinsey says: “Converging biological and information technologies improve health and human performance, transform food value chains, and create innovative products and services.”
For retailers and consumer goods companies, bioengineering can support the development of manufacturing of more sustainable, cost-effective products – or, as McKinsey says, it might entail “the creation of sustainable, cost-effective, and higher-quality materials and production processes for consumer goods, such as clothing, accessories, shoes, beauty products, and packaging”.
Many new ideas in this space are coming under the jurisdiction of the London Fashion Fund (LFF), a group with City of London funding aiming to find and generate a portfolio of entrepreneurial fashion ventures. One of the directors of the LFF is Jane Shepherdson, brand director of Topshop in its heyday and former CEO of Whistles.
“What we do is we fund small startup businesses who we think will be the future of a responsible fashion industry,” she says.
Among the ideas supported includes a company growing cotton hydroponically, Hydrocotton, which uses less water than traditional methods. That business, Shepherdson says, already has a deal with H&M.
Another company backed by LFF is developing items that photosynthesise. The items reportedly have cotton absorbing more CO2 than a 100-year-old oak tree but, as Shepherdson muses, “you have to leave the jacket in front of the window otherwise it will die”.
Although recognising the outlandish nature of some of these ideas, she adds: “Clearly, some of these things will work and make the world a better place, and help us move forward.”
5. Future of clean energy
Most of the UK’s largest retailers are exploring how to remove fossil fuels from their fleets – both long haulage and delivery vehicles – and transfer to cleaner energy and power supplies.
According to McKinsey, this is the trend where there was most investment ($257bn) in 2021, across sectors.
Much of the shift depends on a more rapid supply of alternatives to fossil fuels, and retailers have continually called on the government to lay down more plans for this changing infrastructure. For example, is hydrogen power the way forward, or perhaps its biofuel? Retailers are demanding guidance in this area.
Andrew Opie, director of food and sustainability at the British Retail Consortium (BRC), says: “I don’t know a retailer or a delivery company that isn’t looking at its sustainable transport at the moment.
“But there are some big areas of government policy that need to be delivered – the most obvious is electric vehicles, in particular for HGVs. What’s the next generation of HGVs going to be when we start to phase out diesel? That’s where government really needs to get its act together in terms of signalling the infrastructure for retailers.”
In the meantime, there are several examples of retailers experimenting with innovative technology in this space, such as Tesco’s electric van fleet roll-out in Scotland, and Sainsbury’s work with Flexible Power Systems to find greener tech to power its transport refrigeration units.
Currys is trialling use of solar to help power its vehicles. To help reduce the fuel consumption of nearly 200 vehicles across its network, the electricals retailer is working with Trailar to place “cutting-edge, ultra-thin solar panels” on van roofs. It has connected the panels to the vehicle battery and when solar power is generated it is used to power various on-board activities, as well as the vans’ tail lift.
6. Future of mobility
McKinsey says: “More than a century after mass production of automobiles began, mobility has arrived at a second great inflection point – a shift towards autonomous, connected, electric, and smart technologies.”
So how does this impact retail? Much of the work in this space crosses over into trend five and the future of clean energy, but there is also the potential for companies, as Boots has shown on The Solent and Isle of Wight, to use airborne drones to make deliveries.
As covered by Computer Weekly, Co-op is the UK retailer with the most prominent usage of autonomous machines for online delivery. Working with Starship Technologies in Milton Keynes, Northampton, and Leeds, the retailer fulfils local delivery of goods via GPS-tracking robots that route their way from stores to customers’ homes.
It was revealed at The Evening Standard’s Plug It In event in December that Ocado and Asda are both trialling driverless delivery vehicles in London alongside tech firm, Wayve, which hints at further retailer innovation in mobility in 2023.
7. Future of space technologies
Advancements in space-related tech could have a positive impact on the ground too. For example, the European Space Agency looks set to approve a three-year research project to see if solar farms in space can produce electricity to power properties on Earth. That could have positive consequences for consumers and businesses alike, including retailers.
McKinsey also says the future of space technologies might involve retailers being able to track moving shipping containers and providing positioning and navigation information. From a consumer product perspective, it adds that businesses might be able to experiment under specific space environment conditions to inform design and manufacturing of sneakers and footballs.
8. Future of sustainable consumption
The environmental awakening in society over recent years is making individuals and organisations think more than ever about their carbon footprint and the impact their actions have on the planet.
The trend of sustainable consumption centres on the use of goods and services that are produced with minimal environmental impact, and according to McKinsey includes the use of low-carbon and sustainable materials. It covers production of goods, packaging and the whole ecosystem that surrounds consumer behaviour.
Increasingly, there are enabling technologies emerging to transform industrial and individual consumption to address environmental risks such as climate change. Retail arguably has most to gain here, of course, as an industry that is built on the manufacture, selling and consumption of goods.
Lots of work in retail is under way to reduce the industry’s impact on the planet. An example of a retailer working on addressing the topic of sustainable consumption with new technology is Ocado, which is working with Echo Packaging to run a “closed-loop” system for its plastic bags.
Ocado delivery vans collect customers’ used and unwanted plastic bags at the doorstep, and this packaging is send to Echo where it is broken down into pellets, moulded into sheets, and then used to make “new” plastic bags which Ocado sends out to its shoppers.
9. Immersive reality technologies
Immersive-reality technologies enable people to “see the world differently” through mixed or augmented reality or “see a different world” through virtual reality, according to McKinsey, which says venture capitalists funded this sector to the value of $4bn in 2021. It says that represents the second largest annual figure after 2018, indicating that this is an area of tech regaining traction after the pandemic. This tech has multiple uses in retail – both customer-facing and behind the scenes in warehouses and the supply chain.
Cosmetics companies are among the brands to have established versions of this tech that are regularly used by their customers. In December 2022, direct-to-home cosmetics business Avon said it was launching a virtual try-on online shopping experience alongside tech firm Perfect Corp.
The e-commerce feature will allow Avon customers to virtually “try on” around 400 makeup products, in the lips, eyes and face categories, through their mobile camera or desktop webcam. The retailer is putting representatives from the beauty company in place to advise customers while they use the technology.
Alex Long, head of omnichannel global marketing at Avon, says the tech will enhance interactions with customers, adding: “Until now, it has only been prestige brands offering this type of brand experience.”
10. Industrialising machine learning
Several of these top tech trends are interlinked, but McKinsey differentiates industrialising machine learning from applied artificial intelligence (AI) by saying the former refers to the systems that put AI and its subfields into production for real-life business use. Applied AI, it says, “refers to the real-world business use cases after the technical infrastructure is implemented”.
In short, trend 10 is all about unlocking the true potential of AI and ML, and holds potential benefits such as supporting scalability and interoperability within an organisation, as well as leveraging bigger, richer reused data sets. Embracing this trend can lead to reducing costs through faster development and deployment, and standardised processes.
Will Higham, futurist at Next Big Thing, says: “Retailers are going to need to find a way to make things as efficient as possible in 2023. Creating more efficient communications between bits of technology or machine to human will be a focus. The latter will be about augmented intelligence – things that enable people in the supply chain to do things more quickly.”
Boots’ use of collaborative robots in the warehouse to help staff picking and packing during busy times such as Black Friday is an example of the latter in action in retail.
11. Next-generation software development
This trend broadly relates to progress in the field of software development. It’s an area continually evolving and improving, with next-generation tools or methods related to software application development.
Tools in this space include AI-enabled development, as well as low-code or no-code platforms. Part of the trend is the advert of a microservices approach to development enabling faster development as microservices and APIs serve as building blocks companies use to effortlessly add functionality to software.
Decathlon, through its work with Aiven, and Toolstation via partnering with Percona, are examples of retailers embracing next-generation software development practices. Computer Weekly covered the work in a previous article.
12. Quantum technologies
As the McKinsey analysis suggests, quantum-based technologies have the potential to provide “an exponential increase in computational performance for certain problems and transform networks by making them more secure”.
Be it quantum computing, quantum communication or quantum sensing, these futuristic technologies aspire to change our computational, networking and sensory infrastructure in the years ahead. It is early days in its influence on general enterprise IT, but companies such as Alibaba, Amazon, Google and IBM have already launched commercial quantum computing cloud services which are available to their customers, including the retailers that rely on these tech providers’ platforms.
Next Big Thing’s Higham says quantum computing is going to help businesses such as retailers make decisions “incredibly fast”.
Optimising delivery routes and the supply chain in general will be areas of focus with this tech capability, he says, adding: “It will probably help AI and improve chatbots too, as they’ll be more nuanced and they’ll be quicker to pick up on what people want and anticipate people’s needs.”
13. Trust and architectures and digital identity
Digital-trust technologies allow organisations such as retailers “to build, scale and maintain the trust of stakeholders in the use of their data and digital-enabled products and services”, according to McKinsey.
For retail and consumer goods companies, specifically, the emerging zero-trust architecture technology could have most impact in this space.
In effect, this is a type of IT security system design where all entities, inside and outside the organisation’s computer network, are not trusted by default. Instead, they need to prove trustworthiness – and this covers areas such as access management, device protection, network security and data encryption.
All of this will become increasingly important to brands such as Heinz as they build their own databases and go direct to consumer, and retailers such as Boots and Morrisons as they look to monetise their historic and new swathes of data by forging retail media partnerships with brands.
If, loosely speaking, the original Web was about reading on the internet, Web 2.0 was more interactive – exemplified by the growth of social media – then Web3 is putting the ownership of the internet back into the hands of the user so they can truly participate and create.
As a result, as-yet-undreamed of new digital products, channels and experiences will emerge in this world. They will provide the capability of fusing the physical and the virtual – a prime example of this in retail would be customer engagement and e-commerce in the metaverse.
As McKinsey notes, Web3 will involve “disintermediation with a shift toward individual ownership and control over data monetisation, functionality, and value”. And retailers are using Web3 technologies to create new offerings, devise new modes of customer engagement such as loyalty programme that offer access to unique experiences, and to track and orchestrate logistics across global supply chains.
Ralph Lauren, for example, is for the first time “designing for the metaverse first” via a new venture with Epic Games, the maker of the online game Fortnite. The partnership debuts a digital apparel and accessories collection which will launch in the Fortnite Item Shop, with a replica of the digital boot available in the physical world.
In the October launch announcement, Ralph Lauren said it was “testament to the company’s belief in the power of the metaverse”. David Lauren, chief branding and innovation officer, said: “Ralph Lauren has always designed dreams and created new worlds.”
He explained the collaboration with Fortnite represents “a completely fresh take on the Ralph Lauren brand – designing for the metaverse first – that is thoroughly focused on the future”.
Former Halfords and Morrisons CIO, Anna Barsby, who is now founder and managing partner at consultancy Tessiant, says more retailers and brands will be thinking about metaverse in 2023, but argues that explorations in this space “must have a point”.
“Brand awareness for the future generation I get, but beyond that I haven’t really seen a compelling story in that space yet,” she says. “People will continue to dabble – everyone is dabbling and a lot of digital directors are trying to get their heads around how can they get value beyond brand awareness. I think they’re waiting for someone else to do something cool, and they’ll all copy.”