The End of Online vs Offline; Time to Unify the Customer Experience
Updated: 6 days ago
In the first instalment of our analysis of the retail sector, we’ve covered the four trends that have defined this sector prior to the current crisis; gamification of the retail experience, allowing the customers to visualise the products before they purchase, augmenting the physical set up of their experience and most importantly constantly experimenting different ways of improving that experience.
Keeping these in mind, in this instalment, we’re going to talk about bringing the two worlds together - online and offline - much faster than predicted thanks to Covid’s lasting impact.
As the shift from conventional brick-and-mortar to online channels accelerated during the pandemic, the shoppers were introduced to a more convenient way of doing groceries or, say, browsing through apparel. Even with the easing of restrictions and the urge to break out of lockdown, the changes in the customer mentality is here to stay. According to a digital sentiment survey by McKinsey, more than 60 % of consumers in banking, entertainment and grocery sectors have already “adopted” the digital mindset. Leaving the traditional and transitioning to digital will become a matter of survival for retailers in the long term.
Beyond E-Commerce for Survival
Surviving is hard business for retailers nowadays. Victoria’s Secret has already announced its plan to close down 250 locations across North America back in May, as reported by Forbes. In another research by Local Data Company and PwC, 11,120 outlets were forced to cease operations between January and June 2020, only in the UK! Amidst this storm, the primary trend we have observed is the acceleration of the “unstoppable” rise of e-commerce. In an Adobe Analytics report, a 107B USD difference between the expected online spend and actual levels was observed just in the US market.
Firms will have to adapt. What is important to note is that retailers like Target, who had already invested in e-commerce, show remarkable resilience against the shock. According to a piece published by emarketer.com, Target was even able to increase its e-commerce market share in the US by 24% between 2018 and 2019. Considering Amazon’s dominance in the said market, reaching 38.7% in 2020, seemingly such a small increase poses a significant return on investment.
Surviving will be about focusing on how to innovate to use new digital opportunities. That being said, it’s not just about launching an e-commerce site. The transition into e-commerce necessitates a rigorous approach to store data and analyse it. Investing in cloud technology will not only offer opportunities to establish the necessary infrastructure for online retail, but also open up new avenues for innovations. Businesses are advised to use these new opportunities to innovate their sale-supply chain models and operations, in an analysis carried out by Deloitte. Companies that invest in such technologies will be able to, for instance, better understand the mindset of its consumers through analyzing the browsing imprint they leave, hence develop more accurate search algorithms. Better understanding of the customer profile will also be quite beneficial not only in expanding the customer base, but also optimize the online platforms for new segments. As reported by DZone, a study by Backspace also showed that “88 percent of cloud users reported cost savings and 56 percent of respondents said that cloud services have helped them increase their profit margins”. Targeting such innovations will bring about a snowball effect that will pave the way for the competitive edge.
Failure to Adapt
However, as we have pointed out in a previous article, forcing digital transformation on retail without assuming a “digital mindset” would be problematic, at best be half hearted and not maxing out the full potential. Costco’s attempt at digitalising the retail experience is one of those examples, due to a piecemeal approach on how to utilise e-commerce. The firm was not able to assume a holistic perspective that accounted for all relevant metrics in customer behaviour. They underestimated the value of capitalising on data to grasp shopper’s tendencies, hence forgoing the importance of developing for example; ‘like algorithms’ that would put the human element at the forefront of retail. Despite its sheer size and dominance on the physical market and attempts at e-commerce, the company continues to lose against Amazon.
Primark comes as another ‘’worst practice example”. By not attempting to establish an online presence altogether, the giant lost 650M GBP and furloughed 68000 employees across Europe during the pandemic.
Digital Innovations in the Physical Market Place
In our previous piece about the digital trends in the retail sector, we have highlighted the importance of the human oriented digital customer experience.
Setting the rise of e-commerce aside, what sort of new hybrid innovations did the crisis bring about?
With the “Click and Collect” option put into use by giants such as Marks and Spencer or the UK bakery franchise Greggs, the customers have the opportunity to simply order their purchases online and just show up at the location to pick up, moving a significant portion of the whole experience to the non-physical environment. According to a report by internetretailing.net, Marks and Spencer reported a 39.2% rise in online sales in August. Greggs, on the other hand, was not only able to listen to the health concerns of the public, but was particularly observant when it comes to changing consumption patterns as well. The company introduced a new ‘vegan sausage roll’ through listening to the demands of the consumers, even experiencing a drastic increase of 60% between the introduction in January 2019 and May 2019.
The “Scan, Pay and Go” technology, on the other hand, gives the shoppers the chance to bypass long queues. Using the convenience of their own smartphones, customers are able to scan the items they are purchasing and pay for them without standing in line before the checkout point. The British supermarket chains ASDA and Sainbury’s amongst many, have already started implementing this technology across their stores. Bringing together the “online” and “offline” experiences prove to be of utmost importance.
The COVID crisis has once again proven that retailers will have to ideate new solutions to deal with the changes in the sensibilities of their customers. The rise of E-Commerce is ever faster than before as what we understand of conventional shopping evolves. Through capitalising on this shift to digital, they will have to invest in ways to gather data, store and segment it in the most accurate way to analyse their customers’ behaviours. However, traditional brick and mortar stores are not going anywhere either; they are just evolving. Practical innovations to merge “physical” and “online” aspects of in-store customer experience have paved the way for the next stage in retail.
For instance, IKEA’s new in-city stores supported by an augmented reality experience that simulates the physical dimensions of products, saves customers from long trips to the large outlets. Such innovations to merge digital and conventional elements, while serving customers' needs will define the future of the retail industry.
In our next article, we will be looking at how the global start-up ecosystem is responding to the changes we experience and opportunities to consider...
By Navivest Research and Analysis Team