In recent years, retail has learned to better predict regional demand, market fluctuations, and inflation. Business models have become more flexible and adaptable, assortment matrix management and close vendor comparison have become possible. And this all is facilitated greatly by digital transformation. What trends in retail shouldn’t be ignored by companies and what is the advantage of the digital mindest of the whole industry? Let’s take a look.
What is Retail Digital Transformation?
Digitalization is the transformation of a business through digital technologies. The idea behind this transformation in retail is based on more efficiently meeting customer needs and expectations, streamlining business processes, and increasing company productivity.
The key drivers of digitizing the retail include:
- Growing consumer demands. The advent of smartphones, the development of IoT, the desire to get orders as fast as possible, and the ability to test products using AR/VR technologies set new business conditions. Companies need to adapt to new trends so as not to lose customer loyalty and boost profits.
- Increasing competition. Digitize or die! We can safely say that all your competitors who prefer digital transformation in the retail industry will definitely get their chance to profitably expand in the future.
- Personalized experience demands. Personalization in marketing and customer service is beneficially employed by Coca-Cola, Hubspot, TED, Grammarly, Uber, Amazon, Netflix, and Spotify. The latter creates personalized playlists with songs that the user may like. And it's an effective marketing tool - 91% of consumers prefer to shop from companies that provide personalized deals.
- Pandemic effects. The pandemic has accelerated technology adoption, robotization, and mass digitization in the business environment due to necessary remote interactions.
According to IDC, by 2023, 50% of retailers who have linked their self-service technology strategy to digital transformation can expect 35% net profit growth, a 10% increase in customer loyalty, and a 5% decrease in employee turnover.
Benefits of Digital Transformation in Retail
A well-thought-out digitalization strategy will increase the company's sales volumes, as well as consumer loyalty. Other business transformation benefits also include the following:
- Optimization of operations. The use of cloud technologies helps company employees to quickly respond to customer requests, improving the level of technical support. On top of that, access to real-time data allows you to forecast needs and monitor stocks in the warehouse.
- Better customer communication. Retailers can connect with customers through social media, mobile apps, websites, chatbots to get direct feedback and boost their reputation.
- Boosted income. Digital transformation allows you to reach a wider target audience and increase profits covering mobile and online shoppers.
Retail Digital Transformation Trends
Among digital transformation trends in retail, as well as popular technologies that provide an integrated personal experience, the following are worth highlighting:
- Mobile technologies. 40% of all online transactions today are made via a mobile device. Nearly half of users read product reviews on their mobile phones. 79% of users have made online purchases using smartphones in the last 6 months. This is why retailers should never neglect mobile technology and website customization.
- AR and VR solutions. According to a study by the consulting company Grand View Research, the global virtual reality market will exceed $45 billion in total value by 2025. This makes it clear that such solutions should be used more often in business.
What is the main advantage of AR and VR technologies? The ability to examine the product in detail - or even "mount" it into your space. You can try what a new shade of hair dye will look like, or see whether a piece of furniture will fit into your living room.
For instance, Google released the Cardboard virtual reality headset in 2014, and Volvo marketers were using the device to advertise the new XC90 SUV. The company developed a virtual reality app that allowed the crossover to be tested without leaving home. Christian Dior marketers and developers created an AR-mask for Instagram that enables you to try on sunglasses and headbands from the new DiorSoLight collection.
On top of that...
Large retailers lose millions annually in purchase returns - people return about 30% of products purchased online. VR technologies solve this "pain" by displaying the product as realistically as possible.
- Gamification. Yet another major trend in digital transformation solutions is the use of game mechanics. Gamification stimulates intrigue before the product or assortment updates, presents products in the original format, and boosts sales. Nike China has combined offline fitting with a 2D video game to promote Epic React footwear. 48% of the brand's store visitors who played it bought sneakers.
- CEM systems. The above mentioned technologies will not work without integrated solutions - customer experience management systems. Data obtained from mobile applications, communication channels, neuromarketing tools, and other equipment or technologies must be analyzed for sales growth.
Retail companies that digitized
The largest retailers are already testing and implementing digital technologies:
- Amazon — the Amazon Dash system for predictive forecasting and shipping drones;
- Zara — an RFID tags for supply management automation (the field of IoT);
- Domino’s — pilotless pizza delivery drones;
- Walmart — drones for storage residue inventory management;
- Tesco — predictive analytics for prognosing demand based on meteorological data (e.g., ice cream sales spike during the hot seasons).
Pitfalls of digital transformation in the retail industry
Despite the fact that 86% of CEOs are convinced of the effectiveness of business digitalization, only half really understand the principles and potential results of transformation. Hence the disappointing results: According to Forbes, 84% of digital conversions fail. Avoid the following mistakes to prevent defeat in the digital transformation of retail.
Lack of strategy
Each digital marketing method or tactic is critical to success in its own way. The goal of a leader is to objectively assess their potential for business and prioritize. Start by setting out the goals you expect from digitalizing your business and what technologies you think will help you achieve those goals in the first place.
No TA focus
Digital transformation starts with understanding what your audience wants and what their expectations are. Ask yourself questions:
- Which social channels your TA uses?
- What other communication channels may they use?
- Is the TA ready to be serviced by chatbots or would it prefer human tech support?
Forming a user engagement strategy will help you look at the company from the point of view of people who wll be eventually boosting your sales.
Ignoring generational traits
Buyer behavioral factors differ by generation. The generation Z in 2019 outstripped millennials in number and made up 32% of the world's population. Its representatives have been using smartphones since childhood and visit social networks up to 100 times a day. However, they are more consumer conscious, and 57% of them are more likely to save money than spend it on emotions-driven purchases. Unlike millennials, Gen Z is not prone to impulsive shopping.
Such details are important to consider when drawing up a strategy and implementing digital technologies. The digital retail industry of the future must be relevant to the generation that it is betting on.
Insufficient employee education
Suppose, your company has undergone a digital transformation. Do employees understand why and for what this was done? Have they started to effectively use the introduced technologies and tools? Most probably not. Focus on educating employees to leverage new opportunities.
Do you want to break into 2021 with a business-refreshing digital transformation? Feel like the time has come, but don't know where to start? Contact us to discuss a commercial offer or clarify the details of cooperation. We implement projects for retail companies, helping clients adapt to the new reality in the context of global digitalization.