The discussion surrounding digitalisation in the retail industry is not something new, so any analysis and future recommendations for the sector cannot be solely a response to the Covid-19 crisis. With that in mind, in this first instalment of our four-part retail sector analysis, we will set the stage of how digitalisation has been shifting the industry as a whole and separating those with long-term success from one-off winners.
Although accelerated by the pandemic, transforming the sector using innovative solutions, be it customer experience or transactions, has been at the forefront of business development in the last half of the decade. In a 2017 Adobe research on the digital trends in retail, retailers proved 30% more likely to define themselves as “digital first” compared to respondents from other industries. As demonstrated by the same report, customer experience can be highlighted as the main avenue of undertaking impactful digital change.
At the centerstage of the debate lies the hybridity of “the physical and the virtual” brought about by technological advancements. Hagberg, Sundström and Nicklas (2016), emphasize a combination of “on-line” and “off-line” features to bring about competitive value creation. “Best practice” examples from across different segments of the sector prove the importance of accounting in the human element while challenging the status quo through digital solutions:
Adapting gamification for retail success
The ingenious “gamification” solution put into use by Lowes Foods, for instance, showcases how customer-centric thinking can be cutting edge. Customer’s would be greeted by a “game like” interface when they entered the website of the firm. The investment proved to be quite beneficial as the average basket size and number of transactions increased.
Let them visualise before they purchase
A giant like IKEA or the clothing firm Rebecca Minkoff have been investing in VR technology instead. Rebecca Minkoff’s use of VR mirror, not only carries user experience to the next level, but also grants the firm the capability to see which clothes are just tried on and which ones are bought. IKEA’s AR application, on the other hand, grants the customers the chance to practically experience how new furniture will fit into their homes simply through their smartphones.
Augmenting the physical retail experience
To make things even more interesting, other companies such as American Eagle or Carrefour, have implemented in store applications to help customers navigate easily in the physical space. Using the preferences determined through the data gathered, “in store” applications were able to provide personalised recommendations when the customers were browsing. Carrefour went as far as placing tablets in shopping carts to carry the customer-digital interaction to the next level as it applied an Internet of Things solution. Customers can use Apple’s bluetooth based iBeacon technology to personalise their physical route in accordance with their shopping lists, hence also providing the retail giant with valuable data on spatial and consumption behaviours of users.
Disrupt yourself before someone else forces you to do
Companies have not only invested in the implementation of new technologies, but also the research and development of possible new applications. Starbucks and Walmart have both created their own incubator centres. Walmart’s investments in its digital R&D project, Store No. 8, has returned in the form of InHome Delivery, the firm’s online grocery delivery service. For the coffee giant “Starbucks Digital Ventures” has produced a mobile app that proved to be quite lucrative. IKEA’s experiments with new store formats, as in the case with its new planning studios, is just another example of this entrepreneurial stance. Designed to be a convenient incity alternative, this new way of interaction is imagined to be an effortless version of the conventional IKEA shopping experience.
Creating solutions that are based on the needs of the customers, seem to be the right strategy for firms aiming at transforming themselves. Devoting their main resources to the process of “digital value creation”, firms need to not only collect data about their customers’ behaviours, but also engage with this data in a creative and insightful way. In return, the knowledge extracted from the process should be put into practice to answer the rising importance of customer interface. Redefining the relationship between the brand- platform-retailer side and the “human element”, is of utmost importance in the future which we’ve now firmly entered with the current reality.
How will the reality COVID-19 affect digital transformation strategies? For our next insight, we will be looking into the future of digitalisation...
By Navivest Research and Analysis Team
Werner Reinartz, Nico Wiegand, Monika Imschloss,
The impact of digital transformation on the retailing value chain,
International Journal of Research in Marketing,
Volume 36, Issue 3,
Hagberg, J., Sundström, M., Nicklas, E-Z. (2016)
The digitalization of retailing: an exploratory framework
International Journal of Retail & Distribution Management, 44(7): 694-712