Digital transformation is real, and it’s happening – our data in the retail industry lends more insight into the state of the transition. These are certainly not easy times to be a retailer. Digital disruption underway forces transformational change in not only business model innovation, but also technology investments in order to remain relevant in the eyes of customers.
Change is widespread. In just the first half of 2017, Amazon continued to pilot physical stores and also bought Whole Foods. Elsewhere, Alibaba, a major Chinese e-commerce firm, further enriched its relationship with brick-and-mortar Suning Commerce Group to create immersive cloud stores within a store, and also unveiled detailed plans focused on the integration of online and offline shopping, logistics and data transmission across a single value chain. Meanwhile, research by Credit Suisse suggests that well over 8,000 brick-and-mortar stores will close their doors in 2017, blaming the rise of e-commerce.
Our data illustrates that there is a lot we can learn from retailers in the Far East about strategies for embracing digital innovation. Digital transformation is a global phenomenon, with the overall – but seldom-voiced – goal being survival. The latest 451 Research survey shows that the strategic advantage is heading east, led by Hong Kong; 73% of retailers there are already embracing formal digital transformation strategies, compared to the US, where only 44% of retailers have formal strategies and as many as 33% have no plans at all.
Digital Leaders Embrace Change, Think Differently and Adopt New Digital Technologies
The retail industry must rethink customer experience and leverage new, innovative technologies to address the ‘digital divide’ between digital and physical experiences before, during and after a purchase. Retailers must achieve operational efficiency and improve agility without compromising customer service. Stores need to adapt to the emergence of alternative distribution channels and leverage e-commerce improvements, supply-chain efficiencies and data-driven marketing promotions.
Shoppers abandon purchases frequently due to inefficient checkout lines or difficult online transactions. Likewise, sales will suffer if store staff are unable to check item pricing or inventory for a shopper without leaving the sales floor. The ability to check out customers in the aisles also gives retail staff more opportunity to make product recommendations, employ upsell strategies, and generally provide more personalized customer service.
Reimagine the Future to Drive Contextual Experiences
Experiences, not price, will be the battleground of the future. Let’s reimagine the future of the retail store. Our data shows that 59% of retailers placed a high value on revitalizing retail store initiatives. Now more than ever, savvy retailers see the value in creating an immersive shopping experience across both physical and digital channels to meet the needs of the omni-channel shopper. Key transformational retail imperatives embraced by digital leaders are:
- 39% use the growth of customer data for more contextualized experiences.
- 36% create the digital retail store of the future (e.g., digital dressing rooms, virtual assistants, etc.).
- 32% create mobile apps for bridging in-store and online customer demands.
The future store must create a truly unique immersive experience for customers through a personalized shopping experience that capitalizes on insight into customer behavior and intent. Retailers can use data to drive conversions, improve customer service and set themselves apart from their competition.
IoT, Artificial Intelligence and Augmented Reality Drive Transformational Change for Customers
Technology is becoming increasingly central to how individuals experience the world around them. It is shifting the center of gravity from businesses to individuals in an unprecedented way. Catering to consumers’ preferred ways of consuming information and providing unique engagement strategies is a critical part of retailers’ strategic value proposition and competitive differentiation.
Internet of Things (IoT) in retail takes the form of sensors, connected devices and digital displays. The industry is witnessing a rapid increase of interest in digital signage solutions that can be used as a digital engagement platform that goes beyond the capabilities of static displays to embrace newer technologies such as cloud, edge connectivity and big data.
The desire to capture and analyze new forms of data plays a powerful role in improving digital innovation through the use of artificial intelligence and machine learning. Since the universe of what is ‘knowable’ is expanding, new machine-learning technologies help us to see further and deeper to improve business decision-making.
The goal is to use patterns so that the application ‘understands’ and adapts based on a variety of conditions. This in turn enables retailers to create more intelligent interactions, which demand automated insight on unstructured data with embedded analytics. Connected devices and sensors give retailers a more complete picture of consumers’ in-store behavior to optimize marketing, merchandising and operations such as tracking customer traffic, optimizing staffing levels and measuring the interest in a store’s window displays.
The use of augmented reality and virtual reality in a variety of both digital and physical settings is also about to change the future of retail. They offer retailers the opportunity to transform shopping experiences including product selection, elevate customer service, and create a differentiated, personalized customer experience.
The retail industry has already been through numerous transformations – some voluntary, some involuntary – and has had to adapt quickly to the effects of technological change perhaps more than any other vertical. But in a world that talks increasingly of contextual experience, we need to begin to deliver on the future.
Editor’s Note: Join us October 10, 2017 at 11:00 AM ET / 8:00 AM PT for a live webinar where 451 Research Analyst Sheryl Kingstone and CenturyLink Strategist Sudesh Girdhari will discuss the latest trends and insights coming out of the recently completed survey of global enterprises in the retail industry. Learn More & Register Now