When it comes to innovation, there might not be a hotter sector right now than retail. Retail is the area that tops the O’Reilly charts in AI maturity, something retailers have had to experiment with as the COVID-19 pandemic forced people indoors. As analyst Benedict Evans wrote, “The lockdowns of the past 12 months led to a lot of forced adoption and forced experiment,” which is paying off in dramatic increases in e-commerce. 

Perhaps not surprisingly, the greater the lockdown, the greater the return on retail investments. Is this one silver lining from the pandemic?

SEE: Guide to becoming a digital transformation champion (TechRepublic Premium)

Retail R&D goes into high gear during the pandemic

Though everyone and everything seems to have been affected by the COVID-19 pandemic, few industries were so directly, adversely affected as retail. Not only were supply chains ravaged early in the pandemic, with grocery store shelves going bare, but the very idea of physical retail was challenged. Small wonder then that among all the different industries affected by the pandemic, it’s the retail industry that was forced to kick R&D into overdrive. 

One place this shows up is in investments into cutting-edge areas of technology, like machine learning and artificial intelligence, as O’Reilly survey data highlights (Figure A).

Figure A

For such a high percentage of retail respondents to report that level of maturity in their AI adoption, they likely didn’t get started after the pandemic hit. Physical retail has been under duress for years, causing companies to figure out new ways of reaching customers. 

Even so, the pandemic put those plans into overdrive. And the tighter the lockdown, the more pressed to innovate these companies were. Comparing the U.S. and U.K. shift to e-commerce, for example, Evans wrote: “[T]he UK had a much more rigorous lockdown than the USA, and it had a much larger increase in e-commerce adoption.”

That increase shows up (see the blue rectangle below) as a big jump in online retail even as physical retail plummeted during the pandemic in the U.K. (Figure B).

Figure B

So what does this mean in the real world? Well, some of these gains will likely be given back. But also, something fundamental may have changed, according to Evans, though what it is remains to be seen: “[I]f the UK continues to have 50% or more higher adoption of e-commerce than the USA, that might have some very interesting consequences for start-up ecosystems, as well as physical retailers and commercial real estate, with all of the second and third order consequences that flow from that.”

SEE: 8 must-have e-commerce tools for boosting revenues in 2021 (TechRepublic)

In other words, just as mobile first boomed in Japan and Western Europe, and the U.S. lagged, the U.S. may also have to play catch-up in retail. It would be interesting to dive deeper into the ML/AI data, for example, to see if U.K. retailers have embraced ML/AI more than U.S. retailers, in line with Evans’ finding above. Regardless, it will be fascinating to see if countries with the most stringent lockdowns end up leading a new retail revolution.

Disclosure: I work for AWS, but the views expressed herein are my own.

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