9 BUSINESS MODELS THAT HERALD THE FOURTH INDUSTRIAL REVOLUTION

A Technological Overthrow in Retail

It is safe to say that the Fourth Industrial Revolution has fully begun merging the digital and physical worlds into a single reality. About 50 years of Moore’s law of exponential growth in computing power are coming together in 2017, leading to a whole new wave of technologies that are shaking up the retail game across all industries with a profound impact: the new technologies will drastically increase operational efficiency and connect billions of people to and through the web.

These top three technology drivers are about to disrupt consumer behavior and the retail environment:

  1. Artificial Intelligence: conversational interfaces such as Amazon’s Alexa are reshaping the way of communication at home, inside the vehicle, as well as in the retail space. Machine learning and AI is core to many new business models.
  2. Robotics: autonomous robots provide for adaptable manufacturing and service delivery. While they have primarily been employed in the warehouse, they will soon interact with shoppers as part of the in-store experience.
  3. Smart Sensors and Connectivity: smart sensors provide analytics as well as contextual communication by tapping on the immense data pool that emerges from consumers’ constant connectivity. Device-to-device networks are growing rapidly and the market for IoT is expected to grow to an installed base of 75.4 billion devices in 2025, up from 15.4 billion devices in 2015, according to IHS forecasts.

What are the implications for brick and mortar retailers?

The emerging technologies will affect the retail store at its very heart: the store associate. Technological improvements will redefine the purpose of store associates, leading to two possible scenarios: in the first one, we will see associate-free stores. This will eliminate a major cost base for retail businesses, but it will also result in drastic economic consequences for employees losing their jobs in retail. According to the Bureau of Labor Statistics, there are about 3.5 million employees in the US working as cashiers. UK predictions estimate that one third of retail jobs will be gone by 2025, leading straight to “technological unemployment”. However, the same scenario might also create more tech savvy store associates who are being enhanced with Artificial Intelligence, rather than being replaced. So called “centaurs” will combine the best of human service and digital intelligence, truly embodying the Fourth Industrial Revolution.

The following 9 retail businesses create outstanding consumer experiences by successfully weaving AI, robotics, as well as smart sensor technology into their retail business models. 


1.     IntelligentX – Creativity structured by data

IntelligentX Brewing Co. is mastering the process of customer co-creation. It is literally baking in the concept of marketing at the very core of its product: the world’s first beer brewed by Artificial Intelligence. Consumers can co-create their choice of beer by giving feedback on the company’s online system (integrated into Facebook Messenger), which the AI then directly incorporates into the brewing process. IntelligentX is able to instantly respond to consumers’ individual taste preferences. “People’s tastes are changing faster than ever before and AI is the perfect way to respond”, says Hew Leith, Co-Founder IntelligentX.


2.     Starship technologies – Self-driving delivery robots

Starship Technologies is sending out fleets of autonomous delivery robots in partnership with courier service Postmates and food delivery DoorDash. The self-driving robots use computer vision and map data to navigate sidewalks and are managed through an app. They are built to achieve a maximum speed of 4 mph while carrying up to 40 lbs within a delivery radius of 2 miles. Similar technology automation pilots are Amazon’s first successful drone delivery via Prime Air, as well as Uber’s Apple’s and Google’s interest in self-driving vehicle systems.


3.     Zume Pizza – Made-to-order pizza by robot chefs

“We are going to be the Amazon of food” claims Alex Garden, co-founder of Zume, a Pizza business far from normal. While robots assist humans in preparing perfectly artisan Pizzas, the real magic happens outside the kitchen in Mountain View, California: specially equipped delivery trucks will finish the baking process just in time as it arrives at the customer’s home by scheduling cooking to delivery time. The company is working towards creating a cooking and delivery process that is 80% automated and integrates prediction models of daily pizza consumption.


4.     Au Pont Rouge – Exhibition Retail Space enabled by Robotic Systems

The 110 year old Russian department store Au Pont Rouge is housing an open exhibition retail space, fusing tradition and technology. The space is designed around a robotics system that interacts with products and is managed via app, liberating the exhibition space from all trading operations. Consumers scan items via app and add them to their virtual shopping cart. The automated system forwards the chosen product to the point of sale after the purchase or prepares it for delivery. Associates are able to focus on providing personalized customer service and take the role of curators, engaging consumers in deep and intellectual conversations.


5.     ICA – In-home in-absence food delivery

Swedish grocery retailer ICA is on a mission to solve one of the biggest food industry challenges: elusive customers. ICA is testing a new service that allows messengers to deliver groceries into consumers’ homes and straight into their fridges, even when customers are not at home. Security is ensured through an add-on door lock that customers simply place on top of the existing front door lock. The sensor-enhanced smart lock is managed by the customer and the messenger through an app. Messenger service and customer satisfaction can be rated on the app, ensuring that customer expectations are met and demands are fulfilled.


6.     TokyWoky – Crowd-powered e-Commerce

This peer-to-peer chat enables live communication and interaction between website visitors and claims to grow conversion rates by 400 to 600 percent, according to GDS. L’Oréal is among the players who have already integrated the chat. The service of the Paris-based startup is especially tailored towards Millennial consumers, satisfying their demands for transparency and authenticity. 10.000 peer questions are answered each month, according to TokyWoky.


7.     Battersea’s #LookingForYou – Contextual interactive out-of-home

The cute dog Barley is virtually following shoppers around East London, looking for a new home. Battersea Dogs and Cats Home has teamed up with OgilvyOne to create a contextual advertising campaign that shows individualized ads to consumers passing by the screens. The magic is based on RFID chips that are attached to Battersea leaflets, triggering the billboards to display the video every time a person carrying a leaflet passes the screen.


8.     Martini Smart Cube – Smart sensors for getting sloshed

Smart sensor innovations are also being applied in the gastronomy sector. Martini has developed an artificial ice cube that is enhanced with a Beacon sensor to connect the consumer’s glass to the bartender’s app via Bluetooth. The bartender will be notified whenever the glass is empty to ensure a smooth reordering process and to avoid long queues at crowded bars. The smart sensor application will likely pave the way for more solutions that tackle the challenge of better connecting customers and waiters within the gastronomy environment. Customers in need will be able to notify waiters via digital cues, making the gastronomic experience less stressful for both sides.


9.     Opening Ceremony x Unmade – Knitwear on-demand

The experimental London-based label UMd and the cult US label Opening Ceremony are collaborating on a capsule collection for customizable knitwear. Every piece is made-to-order and unique. Customers can adjust patterns, colors and lines with a click of a mouse to suit their individual preferences. And because it is made-to-order, there is no waste or unwanted stock. The manufacturing secret is based on patented technology: “Our approach means we can knit different items through the same machines automatically, without any need for human intervention, so we maintain the advantages of scale, but each product can be different.” Ben Alun-Jones, co-founder and creative director of Unmade. The implications for the future of fashion? “The supply chain needs to be radically rethought to account for customer’s choices in a much more responsive way. The industry’s current approach doesn’t account for what people want and hence leads to unsold stock and a broken retail model that works around this overproduction by marketing to people must-haves, discounts or buy-one-get-one-free.”


Smart Retail Technologies Are the Only Way to Match the Needs of a New Generation.

The use cases above show extremely innovative application scenarios of new technologies that will soon become common practice in modern retailing. The focus is shifting towards Millennials and retailers need to offer technology-driven innovations to fulfill the diverse needs of a generation of discerning digital natives. New technologies constitute the infrastructure for building retail business models that match the expectations of Millennial consumers. Every retailer needs to consider the implications those technological advances have on their own business as well as on their customers in terms of improving productivity and providing the experience that is demanded today, especially by Millennials – namely personalization, availability, and transparency. 

The ball is in your court – Retailers must embrace AI-enabled automation, because the question is not if industry 4.0 will affect retail, but how and when the transformation will take off.

It’s only a question of timing. Better be ready!