5 minute read 27 Jan 2023
Retail tech trends
EY Tech Trends series

Chapter X: Top retail technology trends to watch out for in 2023 - Part 2

By Digvijay Ghosh

EY India, Partner - Consumer Product and Retail Sector and Digital commerce

With close to fifteen years of experience, Digvijay has a proven track record in driving the strategic agenda for retail clients and helping them with the shifts across consumer and distribution.

5 minute read 27 Jan 2023

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DTC channels and customer first-party data are now crucial in the success of a retail brand.

This is part of the EY Tech Trends series wherein each chapter will focus on the rising shifts in key technology areas and the impact of these technologies across sectors.

In brief

  • Big brands and large retail organizations are adopting a robust direct-to-customer (DTC) and omnichannel strategy to attract customers.  
  • For DTC models to be successful, there is a need to incorporate technology solutions, such as seamless order management systems for online orders, stores and endless aisle experiences. 
  • Customer first-party data plays a critical role for a brand or retailer that wants to offer personalized services and offerings.   

The retail sector today has become extraordinarily competitive with consumers, forcing major shifts in retailer and brand strategies. Various technology advancements are helping retailers in customer acquisition. This part of EY retail tech trends focuses on the increasingly important roles of direct-to-consumer (DTC) and customer first-party data.  

DTC and omnichannel  

One of the prominent retail trends is the increasing popularity of the DTC model, which involves direct interactions with customers. The trend, which started in the US market with digital-only brands that sold directly to consumers through their websites, has now grown into a business model with traditional big brand retailers and larger conglomerates adopting it. The COVID-19 pandemic accelerated the trend of massive consumer shift to digital channels. In the US, the DTC market is estimated to have touched US$150 billion in 2022, according to an eMarketer report, and more than 80% of consumers are expected to make at least one DTC purchase over the next five years. As per a report by the Confederation of Indian Industries (CII), D2C brands in India are estimated to become a US$60 billion industry by FY27, growing at a CAGR (compound annual growth rate) of about 40%. 

Building a successful DTC and omni channel strategy consists of the following four key components: 

  • Building the right product portfolio and value offering
  • Seamless consumer experience and optimizing cost of acquisition
  • Leveraging offline presence to optimize cost of servicing
  • Making the right technology choices 

Various retail giants have come up with varied DTC strategies. For instance, a US retail giant and a leading apparel company have come up with differentiated value offerings such as buy anywhere — return anywhere.  However, for a DTC strategy to be successful, technology support is important. Retailers should have a robust order management system that can seamlessly pass online orders to stores, and vice versa. 

An advanced order management system is also important to build an endless aisle experience at stores. An integrated platform is needed to manage stores and online checkouts. Many apparel brands have this system at present. 

To orchestrate a personalized journey, organizations need marketing technology software that captures consumer data. To get the best results, this should be embedded with product recommendation engines. A scalable and modular architecture is critical to add/modify components as the scale of operations and complexity grows without disrupting daily business. Retailers should also build the right API structures and create a unified data layer.  

Building a profitable DTC model, however, also requires a critical review of the unit economics of the business. A strong consumer lifetime value is important to build the margin pool. While there should be disintermediation of channels as needed, there is also a need to strike a balance to ensure appropriate proximity to consumer location. Retailers should build hooks and content for consumers to keep returning to the brand. 

Customer first-party data 

Traditionally, companies would curate personalized experiences through third-party data. However, that is changing. With privacy concerns and major browsers blocking third-party cookies, retailers will, in the near future, not be able to collect and harness third-party data. 

Broadly, there are three types of customer data in play. 

First-party data: This is the data captured by a brand/retailer directly from the consumer with explicit consent via channels they own or can influence. For example, websites, apps, surveys, CRM, feedback, offline activations. 

Second-party data: First-party data of other platforms, or walled gardens, which the brand/retailer is directly working with. For example, data from platforms like Facebook and Google. 

Third-party data: This is data that is owned by various apps in content, publishing, social network, etc., where the brand/retail is not directly working with but leveraging ad networks and intermediaries, such as Google. 

Of these, first-party data has a big role to play as retail brands can use it to offer personalized offers and services. According to research by a major tech company, worldwide, 36% of marketing professionals expect customer purchase history to be their most valuable source of data once third-party cookies are gone. Also, companies find first-party data gathered through sources such as chats and emails more reliable to better understand customer preferences and analyze behaviors to deliver improved customer experiences. In addition to that, customer data will also help brands create innovative advertising campaigns by stitching together data in a compelling and interesting way.

With more data and predictive analytics coming into the picture, brands also need to change their marketing models. Rather than relying solely on marketing agencies, brands now have deeper engagements with technology partners and are using analytics to learn more about customer preferences to create more intensely customer-centric strategies. Brands are taking a closer look at their customers and redesigning marketing strategies that are a closer fit. 

However, acquiring customer first-party data is by itself not enough. Turning that into meaningful business results is the key to brand success. Typically, value from consumer data can be translated into the following benefits:  

  • Efficiency in acquiring consumer data at scale, which will reduce customer acquisition costs
  • Improvement in conversion and value of order via personalization of experiences
  • Driving efficiency in broader marketing spends
  • Access to real-time consumer insights and preferences 

While retailers also must comply with data privacy regulations, and should manage their data policy accordingly, many brands have built entire business models using deeper analytics solutions on qualitative and quantitative consumer data. With digitization of the physical shopping experience and integration of new retail and data capture technologies, retail 4.0 is now a reality. The transformation of retail is benefitting the end consumer, who now has greater control over the retail experience.  

Watch out for the first two trends in the first article


To gain more customers and retain them, retail brands across the globe are adopting various technology solutions, such as direct-to-customer (DTC) and omnichannel avenues, and efficiently using customer first-party data. However, to have a robust DTC strategy, it must be supported by the right technology solutions. In addition to that, with access to customer third-party data becoming limited, it is critical for retail brands to acquire customer first-party data to gain insights and design highly personalized offers and services. 

About this article

By Digvijay Ghosh

EY India, Partner - Consumer Product and Retail Sector and Digital commerce

With close to fifteen years of experience, Digvijay has a proven track record in driving the strategic agenda for retail clients and helping them with the shifts across consumer and distribution.