Why Australia’s flatlining retail sector could be good for local partners

Australia's retail sales were flat in March, with spending falling in a variety of industry subsectors according to the latest figures by the Australian Bureau of Statistics (ABS), but the sector’s sluggish performance could actually turn out to be good news for local tech partners.

Here’s why: the technology typically used by retailers to better engage with consumers both online and offline, boost operating margins, and lower overheads is set to surge in the next few years.

According to the latest figures by industry analyst firm Technology Business Research (TBR), the so-called shopper engagement solutions market is expected to grow very rapidly over the next three years, outpacing other high-growth digital marketing, to become a US$38 billion segment by 2021.

“As consumer online and offline behaviors…become more sophisticated, most marketers will seek an integrated solution TBR calls shopper engagement, which takes the massive amounts of real-time, high-quality signals from consumers across channels and devices and activates them in real time to drive a conversion,” TBR vice president Stuart Williams said in a special report.

As Williams pointed out, the consumer path to retail purchases continues to evolve as online and physical business models converge, with many retailers struggling to keep pace with the evolving market.

This is perhaps one of the various reasons why overall Australian retail turnover in March 2018 remained relatively unchanged from previous months in seasonally adjusted terms, seeing close to zero per cent growth, following a 0.6 per cent rise in February 2018, according to the ABS.

Many subsectors such as department stores, household goods retailing and personal accessory retailing clocked negative growth during the month, in seasonally adjusted terms, compared to the month prior.

While this appears at first glance to be bad news for retailers, it looks set to open up new opportunities for enterprise technology vendors and their channel partners, with TBR expecting to see a greater pull on resources from providers of technology used to better engage consumers.

“Investment in software, media and data will be required to keep pace with consumers in the fast-moving shopper engagement space,” Williams said.

According to TBR, as the shopper engagement solutions market grows from an estimated US$15 billion this year to US$38 billion by 2021, vendors and agencies will win share through unique data sets, machine learning, network effects and vertical expertise.

“Opportunities exist for cloud-based, end-to-end technology providers that will support – but not deliver the business result – across all areas of customer engagement, including advertising, marketing, sales, commerce and services,” Williams said.

“Key players will include AT&T, Verizon, Oracle and Adobe. They will leverage their respective video capabilities and unique data assets to capture market share."

At present, according to TBR, marketers typically use multiple tools and services to engage consumers in the shopping experience, from initial interest to a successful purchase.

However, while the segment will integrate existing technologies into a platform for brands that are across the required technology, TBR said it predicts that agencies and services firms will also enter the space, offering outcomes-based services for brands.

According to Williams, key market makers in this space will include Amazon, Google, Criteo, and Facebook.

More broadly, the industry research firm has identified four key subsegments that are participating and converging on the emerging shopper engagement opportunities.

Among these are agencies and other players with vertical expertise and systems integration skills, such as Accenture.

“Accenture has become a force in the high-growth digital marketing services arena leveraging its core enterprise IT services and deep vertical expertise,” Williams said.

“Meanwhile, Accenture supports a third model whereby it partners with leading technology vendors, then wraps an agency services layer and proprietary value-add tools en route to campaign execution, which may be based on time and materials, FTEs or outcomes,” he said.

At the same time, cloud-based marketing solutions such as those provided by vendors like Salesforce will help retailers integrate sales and marketing technologies while maximising the use of customer data.

Finally, TBR points to Advertising via platforms such as Google through vendors like Criteo and social media platforms, such as Facebook, as being the other two key subsegments set to win big as shopper engagement technology usage rises.

The tech vendors TBR expects to see increased market share by 2021 due to their unique business drivers in the emerging engagement technology space are Criteo, Salesforce, Adobe, Accenture, Oracle and others.