Have you shifted to your dream home recently? Wow! That’s a mixed feeling of absolute relief and delight. Relief from the endless trips to realtors, properties, negotiations, and especially, all the packing and shifting. Phew!
Now that you have settled down in your new place, there’s one more task to complete before you can finally call it your home. And for those finishing touches to make your house a home, home improvement retailers step in with everything you need, from shopping for home essentials like lumber, paints, tools, and home appliances.
As a one-stop solution, home improvement stores provide everything you need to set up – or upgrade – your home interiors. Super convenient. It’s no wonder that the U.S. home improvement industry is set to increase its sales to $620 billion by 2025.
Following the supply chain shocks due to the COVID-19 pandemic, the home improvement industry has been making an impressive comeback over the last 2 years. American homeowners are tackling the ongoing housing crunch by renovating their existing homes instead of building new ones.
On the other end, home improvement retailers are engaged in a competitive battle to win more customers and improve their profit margins. Traditionally, home improvement was driven by “brick and mortar” stores. This is no longer the case. The younger generation of home buyers and renovators are switching to online or digital channels.
Here are some interesting facts:
- Gen-Y customers are twice as likely to purchase home improvement products online than the boomer generation.
- 1 in every 4 DIY customers orders home improvement products directly to their home.
Which digital technologies are driving this change in the home improvement sector? In this blog, let’s discuss the technologies powering the modern era of home improvement, along with:
- How retailers are navigating challenges in home improvement.
- The best practices they are implementing for future growth.
The data-driven evolution of retail
From inventory management to customer experience, retail brands are leveraging data and AI technologies to improve their sales and operations. For instance, AI in the retail sector is set to grow from $11.83 billion in 2024 to $54.92 billion by 2033.
Here are 4 retail areas most impacted by the latest evolution in AI and data technologies:
- Customer data collection and analysis
Whether through in-store or online shopping, modern retailers are gathering valuable data from various customer touchpoints, including:
- Point-of-Sale (PoS) systems
- Virtual shopping assistants
- eCommerce websites and shopping carts
- Customer service calls
Through data-powered analytics, retailers can gain valuable insights into customer behavior and retail trends. This enables them to make accurate sales projections and plan for future demands.
- Personalized experience
In the competitive retail industry, AI and machine learning tools are personalizing the shopping experience, thus improving the customer’s brand engagement. Using intelligent algorithms, an online retail brand can personalize product recommendations based on the customer’s:
- Purchase history
- Demographic data
- Online browsing behavior
AI-powered retail systems can also make a personalized price offers based on the shopper’s behavior, competitor pricing, and current demand.
- Inventory management
Thanks to AI-powered predictive analytics, retailers can now optimize their inventory levels, thus avoiding both overstocking and under-stocking. Retail brands are leveraging AI technology to automatically reorder their stock. Similarly, accurate inventory forecasts are reducing their inventory carrying costs.
- Retail marketing
With real-time customer data, retailers are now able to personalize their marketing campaigns for the target customer base. Using data analytics, retailers can analyze customer sentiments about their brand – and the type of retail products that shoppers are looking for. These insights help marketing teams to personalize emails for better results.
On a parallel note, data and AI technologies can also power the home improvement retail industry. Let’s see the potential roadblocks that they are facing.
What challenges do home improvement retailers face in technology adoption?
Traditional retailers in the home improvement space have been slow to adopt new technologies to drive their next growth phase. Here are some of the industry-specific challenges facing home improvement retailers:
- Legacy systems and applications
The presence of legacy systems and applications create serious challenges due to incompatibility with modern technologies like AI and machine learning. For instance, AI-powered systems cannot utilize legacy data for delivering insights because of data-related issues like:
- Proprietary data formats that are incompatible with modern systems
- Data duplication due to manual data entry
Legacy systems lead to inefficiencies, causing communication breakdowns and slow customer response times.
- Complex supply chains
Supply chain disruptions in the home improvement domain are a complex challenge that can delay home improvement projects. These disruptions occur due to a variety of reasons, including:
- Inefficient product sourcing and logistics management
- Short supply of essential materials for home renovation
- High costs of building materials due to increased demand
- Shortage of experienced workers or low wages
- Delayed payments to material suppliers and contractors
- Incohesive shopping experience
Home improvement companies often fail to integrate customer touchpoints, including in-store, online, and mobile shopping. To deliver a unified customer experience, retailers must implement an efficient omnichannel strategy that covers all these touchpoints.
Data fragmentation along with a lack of data integration across channels can disrupt a cohesive business strategy, thus leading to missed opportunities and lower revenues. - In-store shopping experience
Among other challenges, home improvement retailers are unable to improve their in-store shopping experience and delight their customers. Technology-driven innovations like virtual reality can help customers “visualize” their homes. Similarly, self-checkouts can reduce the customer’s wait time and offer a faster mode for them to complete their purchases. Without merging their physical and digital experiences, retailers cannot enhance in-store shopping.
How can home improvement retailers leverage technology to improve their customer experience?
In the face of growing competition in the home improvement space, companies can leverage technologies to elevate their customer experience. Here are some business use cases:
- Product visualization
With the use of augmented reality (AR), retailers can empower their customers to visualize products in their home. This includes items such as home furniture, lighting equipment, and even floor tiles. Through a simple mobile app, customers can visualize these home improvement products before purchase.
- AI-powered personalization
With AI-powered tools, retailers can personalize the customer experience (CX) based on their previous purchases and browsing behavior. For instance, they can offer an exclusive promotional offer for painting brushes or rollers to customers who recently purchased paint.
Here’s how the Lowe’s retail brand is enhancing its in-store shopping experience. - Real-Time inventory management
With inventory-related features like product locators, retailers can provide the nearest local store where customers can easily find their products. Additionally, with real-time inventory updates, customers can find out if a particular item is in stock before visiting the store.
Besides, retailers can use real-time inventory control to stock up on items based on local demand. - Dynamic pricing
By using AI-powered pricing models, retailers can dynamically adjust their product pricing based on:
- Current demand for the product
- Product availability
- Competition pricing
Through faster data processing, AI algorithms can quickly adapt pricing based on the customer’s behavior. For instance, an online shopper abandoning a shopping cart can be encouraged to complete their purchase with an instant discount.
- Self-checkouts and cashier-less facilities
For the convenience of in-store customers, home improvement stores can feature self-checkout kiosks where customers can quickly scan their products and complete the purchase. With AI-powered computer vision technology, retailers can prevent in-store thefts and frauds.
Similarly, cashierless stores enable retailers to operate with fewer staff and overhead costs. - AI-powered chatbots or virtual assistants
With AI-powered chatbots, retailers can assist customers inquiring about available products or their order status. As chatbots are available 24/7, customers can now get online assistance at any time. The use of virtual assistants also frees up human resources to focus on improving the customer experience.
- Mobile shopping
Through mobile shopping, retailers can now bridge the gap between in-store and online shopping. For instance, with the “Buy Online, Pick Up In-Store” model, mobile app users can place their order online – and then pick up the order from the nearest store at their convenience.
- Supply chain tracking
In the home improvement space, retailers have to deal with seasonal or slow-selling products or heavy items, which can challenge their existing supply chains. Through automation, they can optimize their supply chains. For instance, seasonal products require advanced planning for replenishment to ensure that they reach the stores at the right time.
- AI-powered demand forecasting
With AI-powered predictive analytics, home improvement retailers can accurately forecast sales for the next year or even the next quarter. Accurate demand forecasting also helps them optimize their inventory levels for the coming year or season. This is beneficial for forecasting sales and revenue figures.
- Sustainability
To appeal to eco-conscious consumers, retailers can offer environment-friendly products and energy-efficient appliances to reduce their carbon footprint. Larger retailers can also promote green initiatives by:
- Investing in renewable energy sources
- Promoting recycling of home improvement products
- Reducing their environmental waste
Technology solutions and best practices in home improvement retail
To implement innovative technologies, home improvement retailers must first build a scalable resilient infrastructure. Here are some of the underlying solutions and best practices that support these innovations:
- Cloud solutions
Each year, cloud solutions like Google Cloud and AWS are surging in popularity because of their cost-efficiency, scalability, and data security. With the emergence of micro-cloud platforms, retailers can now implement a smaller cloud platform closer to their retail store. This helps them manage the increasing transaction volume without compromising on performance.
- High-performance networks
High-performance networks are essential for retailers to deliver an exceptional CX. With more customers switching to online shopping, they expect seamless access to mobile applications, eCommerce shops, and digital payment gateways. With efficient networks, they can also improve in-store experience through faster point-of-sales systems and inventory tracking.
- Data modernization
Retailers can no longer rely on outdated legacy systems to drive their business operations. Through data modernization, they can migrate their legacy applications and workloads to the cloud. Effectively, data modernization in the retail space can help them leverage analytics and improve customer experience.
- Data security and compliance
As more customers share personal information, data security and compliance become more critical for retailers. Security measures like data encryption and access control – along with compliance-related policies – can ensure data integrity and privacy.
Future of home improvement retail: AR, VR, and beyond
Along with AI, immersive technologies like augmented reality (AR) and virtual reality (VR) are expected to dominate the future of technological innovation in the home improvement space. With AR and VR, consumers can now “visualize” their homes before getting started on the renovation project.
For example, Lowe’s is implementing the “Holorooms” project, which uses AR and VR systems to integrate physical with virtual spaces. Virtual try-ons are also becoming popular in the home improvement domain. Using VR technology, customers can “checkout” home improvement products in a completely virtual environment.
Conclusion – Partnering with technology experts
As a strategic technology partner, Onix has enabled global retailers to transform their business operations and move away from legacy systems to the cloud. The Onix team can provide expertise in:
- Cloud migration and modernization – of legacy infrastructure and applications on the cloud.
- AI and machine learning – to power your industry-specific use cases.
- Data analytics – to extract real-time actionable insights for improved decision-making.
- FinOps – to optimize your cloud spending and minimize waste.
With our customized solutions tailored to your business needs, we can help you improve your customer engagement and maximize your ROI. Get in touch with us today.
