Insights

Why Digital Twins Will Determine the Future of Retail

Matthew Robare
May 11, 2022

The volume of data collected in commerce makes digital twins and the retail industry natural bedfellows, impacting everything from operations to logistics.

In today’s smart, interconnected world, perhaps no industry collects as much data about itself and its customers than the retail industry.

And all that data is the raw material of a really good digital twin, making them the next big revolution in selling.

According to VentureBeat, digital twins are already useful for helping customers connect their wants or goals with actual products.

Take home improvement for example. Lowe’s has an app that will help a customer measure the space for their project, input their intentions, and then make recommendations based on the dimensions.  

Digital Twins and Retail Logistics

One of the biggest uses of digital twins in retail (to say nothing of other sectors) is in logistics.

All businesses in retail have an intimate familiarity with logistics — it’s all about moving products from manufacturers to consumers.

In the past, big retailers would store a small portion of their inventory on-site, housing the rest in a nearby warehouse. As items were purchased, they were replaced on the shelves from the warehouse and more stock was ordered.

In the last few decades, however, many successful retailers, like Costco and Ikea, combined their warehouses and their stores. While e-commerce retailers, like Amazon, are now dispensing with the stores and shipping directly to the customer from the warehouse.

This creates enormous savings and also enables the companies to take advantage of economies of scale.

However, every day is a major logistical effort. Especially when the company offers shipping guarantees.

Even in the biggest warehouse or warehouse store, as items leave, replacements need to be reordered. 

With digital twins, movements from warehouse to store to customer can be tracked and put into the model, which can then predict when something will need to be reordered. It will also find inefficiencies in the shipping process itself.

According to Microsoft, digital twins can help retailers by running thousands of simulations of different conditions very quickly: “Identifying bottlenecks, supply shortages and demand curves in seconds creates a huge advantage”, allowing them to adjust ahead of competitors and keep products on their shelves. 

Improving Customer Experience

Another use for digital twins is to improve the customer experience.

As mentioned above, the Lowe’s app helps people find resources for their home improvement projects, while other companies are using digital twins to predict customer movements in stores and design aisles or item locations to avoid congestion.

Retailers are even using digital twins to design stores.

They can photograph the space, convert it into a model and design based on that.

They can even combine the simulations of foot traffic and refine the model further, resulting in a design that needs less alteration once work get started.

Retailers are also using digital twins to create virtual walk-throughs for customers, which allow them to plan their visits and get an idea of what products are available.

The same technology also allows people to manage multiple stores remotely, since they can see what’s going on in them.

Overhauling Operations

Lastly, digital twins are helping to remake the physical side of retail.

Models are helping companies revamp warehouses to optimize routes for restocking, design displays and storefronts that attract more interest, and even perform maintenance, according to VentureBeat.

These uses might help keep physical retail competitive, although e-commerce companies are using digital twins to find competitive edges for their businesses, too.

Digital twins promise to be one of the most important innovations in retail as the internet, Covid, and the decline of malls continue to upend the industry.

We may find that many stores went bankrupt or closed not because they couldn’t keep up. Rather it was because management’s practices were ossified from a previous era, with no way of seeing where to make improvements in operations or marketing.  

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