U.S. Retailers Look to Technology Providers to Respond to Pandemic-Driven Changes

ISG Provider Lens™ report sees a sharp trend toward online shopping as customers continue buying patterns prompted by COVID-19

More than 75% of retailers allow customers to buy products online and pick them up in stores; 58% provide curbside pickup, up from 4% in 2019

Consumer buying behavior, drastically changed by the COVID-19 pandemic, has U.S. retailers looking for technology providers to help them improve customer experience both online and in-store, according to a new report published by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

“As we return to normalcy after the pandemic, the sudden change in buyer behavior is having huge ramifications across the retail industry”

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The 2021 ISG Provider Lens™ Retail Software and Services Report for the U.S. finds the way goods are bought and delivered is changing rapidly in the country. More than three-quarters of retail outlets now allow customers to buy products online and pick them up in stores, while 58 percent of retailers provide curbside pickup, up from 4 percent in 2019, the report notes.

E-commerce in 2021 is expected to contribute about a fifth of overall retail revenue, up from 12 percent in 2019, the report says.

“As we return to normalcy after the pandemic, the sudden change in buyer behavior is having huge ramifications across the retail industry,” said Michael Witty, a retail expert and director in the ISG Consumer Services business. “Retailers have had to revamp their digital engagement with customers, their physical store locations and layouts, and their supply chains.”

The report sees retailers embracing new customer-focused website improvements, with visual search features, digital stylists and chatbot recommendations. Social networking has also become a direct commerce channel, with in-app checkout on some Instagram posts.

In addition, store locations and layouts are changing as retailers reduce their large-format mall footprints (ISG says 25 percent of existing malls are expected to close by 2022) and focus on high-tech experience centers and pop-up shops. Low-volume and dark stores are also becoming micro-fulfillment centers, the report says, with some converted to no-inventory locations to facilitate the return of merchandise purchased online.

In addition, retailers are facing a lack of visibility into supplier inventory, and an inability to accurately forecast local consumer demand and employee absenteeism caused by illness or staggered work arrangements, the report says.

Retailers are struggling to ramp up transportation capacity to meet the sharp increase in online demand, and to make up for a shortage of raw materials, ingredients and components caused by delays in international shipments. The report notes the need for functional supply chain silos to evolve into an interconnected dynamic network. This would enable more collaboration, eliminate inefficiencies and generate real-time data for better decision-making, the report says.

The retailers that performed well during the pandemic were the ones that had their merchandise planning and management systems integrated with their supply chain systems, the report adds.

The report finds many e-commerce platform providers are offering microservices that allow for a greater degree of customization, configuration and quicker time to market. Vendors are taking an API- and mobile-first approach to platform building. They are also offering many new and out-of-the-box functionalities such as promotions, recommendation engines, progressive web applications and loyalty programs, and leveraging machine-learning for greater insights into customer behavior.

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The report also looks at retail transformation services, including providers that help manage merchandise and enhance the customer experience in digital stores. Retailers are experimenting with technologies such as algorithmic retailing, artificial intelligence and the Internet of Things for better inventory tracking, workforce enablement, shrinkage prevention and operational planning, the report says.

The 2021 ISG Provider Lens™ Retail Software and Services Report for the U.S. evaluates the capabilities of 36 providers across five quadrants: E-commerce Platforms, Merchandise Planning and Management Software, Retail Transformation Services, Platform Migration Services and Managed Services.

The report names Capgemini, Cognizant, HCL, Infosys, TCS and Wipro as leaders in three quadrants. Oracle and SAP were named leaders in two quadrants, and Adobe (Magento), RELEX, Salesforce and SAS were named leaders in one.

In addition, Logility and UST were named Rising Stars—companies with “promising portfolios” and “high future potential” by ISG’s definition—in one quadrant each.