Digital twins — virtual replicas of physical objects, processes, and systems that are used to simulate, predict, and enhance real-world activities — were initially limited to manufacturing and engine design, but they’re quickly expanding to take on various forms across many sectors. Retail is set to be one of the industries to lead the way in adoption.

According to Tata Consultancy Services’ (TCS) latest global study, Digital Twindex, 84% of industry experts predict digital twins to become commonplace in retail within the next three years.

As two of the most mature cloud markets in the world, Australia and New Zealand are in a prime position to get the most out of digital twin technology. A recent study by TCS titled Connected Future: How cloud drives business innovation found that the most desired outcomes that ANZ businesses want to get out of cloud-enabled innovation are: participating in digital ecosystems; exploring new business models, including operating processes and workflows; creating new products and services; enhancing customer experiences; and improving employee engagement and productivity. This is true across a wide range of industries, but especially in retail.

As digital twins directly address these priorities, and are more affordable than ever, we can expect all retailers, from small businesses to large multinationals, to incorporate the technology into their operations.

There are three types of digital twins that will become prevalent in the retail industry in the coming years: customer digital twins, store digital twins, and operations digital twins.

Digital twins of customers: Delivering a new level of personalisation

The concept of the Digital Twin of the Customer (DTOC) is gaining traction in the retail industry, due to its promise to personalise shopping on a level we’ve never seen.

Using this technology, retailers can create an accurate digital replica of a customer’s behaviour, preferences, and shopping patterns to predict what they’ll buy in the future. With those insights, merchants can provide exclusive deals, unique promotions, and personalised recommendations without interrupting the shopping experience like traditional ads do — ultimately, saving shoppers time and effort searching for products.

VR headsets can make the shopping experience even more immersive by allowing customers to get a realistic view of how a product looks or fits, from anywhere in the world. No more confusion over sizing, returns, and other policies.

Digital twins of stores: Enhancing layout and design to boost sales

Store digital twins are also showing a lot of potential for retailers. Using 3D models of stores, retailers can better analyse how customers use their space, from hot spots for theft to popular routes taken through the store.

This also allows retailers to test different product arrangements virtually before making any changes to their physical store. Based on the insights gathered, they can then strategically place products in high-traffic areas to increase the likelihood of purchases. As well as allowing them to configure layouts, shelves, and even entire stores more effectively — to create a better balance between in-store shopping and the demands of order fulfilment.

In the age of home delivery and curbside pickup, digital twins offer even further value. By mapping out the optimal routes for inventory robots, retailers can locate and retrieve items more efficiently, freeing store staff to focus on high-value activities like customer service, marketing, and sales strategy.

Digital twins of operations: Building resilient supply chains

The pandemic revealed how fragile supply chains can be. With a digital twin of their entire supply chain, retailers can collect information about everything from supply to consumers, to make real-time predictions about how the supply chain will behave. The technology then suggests the best course of action, like finding a suitable supplier based on cost or time to market.

This is useful when retailers want to explore how different planning decisions and order sourcing rules will perform with different customer demands and supply chain configurations.

Retail managers can also find new fulfilment opportunities, predict how a specific item will perform given the customer profile, and optimise inventory planning for upcoming shopping seasons. And if there’s a disruption, like severe weather, digital twins can help retailers figure out how much inventory they need and where to source it from.

The more complex a scenario, the more retailers benefit from using digital twins.

Digital twins in the enterprise metaverse

Digital twins hold immense potential in the metaverse, making it possible to interact with digital versions of people, places, products, and objects from any part of the globe.

Imagine a retailer that connects the digital twin of their store to the digital twins of their warehouses, supply chain, call centre, and all things in between. With these replicas sharing insights with each other in real time, retailers can make decisions based on the full picture.  On top of that, retailers can add a layer of applications and analytics built from the twins’ data, held together by APIs.

As these technologies continue to mature, forward-thinking retailers will harness the opportunity to reinvent entire processes and experiences. The next step is for retailers to dive in and discover what’s really possible with digital twins. 

Parag Patki is managing partner of consulting practise at Tata Consultancy Services Australia & New Zealand.