Towards a frictionless future: 3 steps for Australian retailers to keep pace

by Brian Man and Andrew Aoukar

In our recent ‘Voice of the Consumer’ survey of more than 20,000 consumers across 31 territories, the message from consumers rang out loud and clear. Now more than ever, they are searching for retail experiences that promise speed, value, flexibility and convenience.

But while innovation is accelerating globally to meet this trend, Australian retailers are… lagging. We know that transformative technology, in many cases, requires a whole-of-business reinvention. And we know that Australian CEOs, grappling with regulation and competing operational priorities, are struggling to focus on the bigger picture.¹

Here's the thing: consumers are feeling the pinch, too. In a tight economy, they are more judicious about their spending. And they are becoming more discerning, as e-commerce disrupters like Temu and Shein woo them with ultra-low prices and differentiated experiences. In a world where the share of wallet is shrinking and competition is rising, the retail stakes couldn’t be higher.

Frictionless retail refers to a seamless and efficient shopping experience where barriers and inconveniences for customers are minimised or eliminated. This concept leverages advanced technologies and innovative processes to streamline the entire shopping journey, from product discovery to purchase and beyond. Key elements of frictionless retail include:

The goal of frictionless retail is to create a smooth, enjoyable, and efficient shopping experience that meets the evolving expectations of modern consumers.

The trend isn’t new. The first frictionless retail store opened in the US in 2016 and there are now more than 40 stores nationwide.² In the UK, there are five major retailers offering more than 20 frictionless stores.

Overseas, common applications include seamless checkouts, where computer vision AI identifies which products the customer has selected, and charges them accordingly using a variety of methods, from mobile apps and credit cards to biometrics.

Other examples include smart shelves that track inventory in real-time, and dynamic pricing that can update electronic shelf labels based on demand, promotions, or inventory levels – again, in real-time.

The value of frictionless retail is clear: 41% of consumers are willing to pay more for a product they can purchase quickly and easily.³

Our research also tells us consumers are increasingly buying directly from retail brands. In fact, 63% of consumers globally have purchased products directly from a brand’s website, and we expect that number to grow.

This is a huge opportunity for Australian retailers, especially as the low-cost online marketplaces gain a foothold here.

By adopting advanced technologies and streamlining the shopping experience, retailers can greatly enhance customer satisfaction and loyalty. Personalisation through data analytics allows for tailored marketing and product recommendations, driving higher conversion rates, while automation reduces operational costs and improves efficiency, enabling staff to focus on more value-added tasks.

Omnichannel integration ensures a seamless customer journey across all touchpoints, increasing engagement and sales opportunities. Moreover, the convenience of features like one-click purchasing and easy returns can attract and retain customers, while innovative technologies such as AR and VR can differentiate a brand and create memorable shopping experiences.

Ultimately, frictionless retail not only boosts customer satisfaction but also drives revenue growth and operational excellence, making it a strategic imperative for modern retailers.

With so much change, it can be difficult to know what to prioritise, and where to invest. In our experience, there are three vital considerations that every retailer should take on their frictionless journey:

1. Personalisation and customer experience
   Our research shows that four in five customers are willing to share some type of personal data in order to get a better experience.⁴
   
   This is gold for retailers. The key is to understand as much as you can about your customers, their preferences and their behaviours so you can personalise the benefits of your products and services to them and enhance their shopping experience.
   
   AI and machine learning algorithms can help you understand where and how and with what frequency customers make purchasing decisions, and what is important to them. These technologies can also help you re-think the role of your physical store and how to enable a more seamless transition between the customer’s online and offline experience.
2. Understand what frictionless options are available
   As we’ve alluded to above, there are a variety of frictionless technologies available to Australian retailers. Of course, implementing advanced technologies can require significant upfront investment and ongoing maintenance, so it’s crucial to understand where you are in your competitive journey, so you can make the right strategic decision.
   
   If you’re dipping a toe into the water, focus on ‘hygiene’ applications like checkout solutions (including self-checkouts, mobile checkout and contactless payments) and omnichannel integration (including ‘Buy Online, Pick Up In-Store’ and curb-side pickup).
   
   If you’re further along in your journey, focus on in-store technologies, like computer vision AI, electronic shelf labels and automated warehousing.
   
   For more advanced businesses, and those looking for a step-change, focus on your in-app customer experience, including how augmented reality or virtual reality technology can boost your product recommendations.
3. Reassure your customers as you develop your technology
   Handling large amounts of customer data requires robust security measures to protect privacy – and customers need to feel confident in your commitment and ability to deliver this.
   
   It’s important to be transparent about how you track, analyse and store personal information. Retailers who do this well embrace an ‘opt-in’ culture of consent to customer data collection that goes beyond Australian privacy laws.⁵ They also demonstrate their cybersecurity readiness and practices right across the value chain.
   
   If you’re not sure how to engage customers in this process, start conversations in two-way feedback channels about how you are improving the customer experience.
   
   Frictionless retail is a significant shift in the way retail businesses operate. As technologies continue to evolve, we can expect the landscape of frictionless retail to expand, offering even more innovative solutions to improve the customer experience – and retailers’ bottom lines.