6 Digital Transformation Trends in Retail
From shifting consumer habits to new online competition and the impact of COVID-19, find out all the retail digital transformation trends you need to watch for in 2022.
The last few years have seen the pace of technological change rapidly increase in all sectors. Nowhere has this been as fast and as disruptive as in retail. The most successful retailers have been the ones who have embraced these changes and connected with their customers in new ways. Find out which 6 retail digital transformation trends are leading the way in this new industry landscape.
Why these retail trends, and why now
The pandemic has transformed every area of our lives, including our shopping habits. 85% of shoppers believe the pandemic has impacted how they shop.
While in-person retail experiences remain popular, online purchases have increased and brand loyalty has decreased. Retailers have to be world-class to survive in today’s markets where online retail allows overseas competitors to reach any customers. Almost three-quarters of retail leaders say the industry is extremely competitive or very competitive.
PwC Customer Experience Research shows that speed, convenience, knowledgeable help and friendly service are essential to just under 80% of US consumers. 73% point to customer experience as an important factor in their purchasing decisions. Which, unsurprisingly has a real measurable impact on profits. Yet, only 49% say companies are providing a good customer experience today. Quite an experience gap!
To bridge this gap, successful retailers are turning to digital technologies. It’s not about forgetting about bricks and mortar retail but creating a seamless customer experience – whether online or in-person.
There are many challenges and benefits to digital transformation in retail. To name a few, transformation if done properly can improve how people interact with brands and spend their money. Digital transformation improves the customer experience while having a positive and lasting effect on profits and loyalty.
6 Digital Transformation Trends in Retail
Digital changes that have been in the pipeline for years have suddenly accelerated. Whether it’s contactless payment or Artificial Intelligence (AI) driven product recommendations, new technologies are transforming retail experiences and helping businesses stand out from the competitors.
Here are the 6 digital transformation trends in retail you need to know about.
- Move to omnichannel: The shift to e-commerce doesn’t mean the end of bricks and mortar but customers expect a consistent brand experience – from online to in-store.
- Shift to contactless: The use of both contactless payment and digital wallets continue to grow and create more efficient, secure purchases.
- Data and analytics for better customer understanding: Gathering data enables a better understanding of what your customers want and need.
- AI powering effective delivery: Once retailers understand their customers needs, they innovate with AI-powered processes that can deliver exactly what the customers want.
- Creating a retail technology ecosystem: From supply chain to customer service, different retail tech needs to integrate and work together in an effective ecosystem.
- Renewed focus on security: The dramatic increase in online shopping has seen an increased focus on managing the associated risks and cybersecurity.
Let’s take a closer look at each of these key trends.
Retailers move to omnichannel
Since the pandemic, more than one-third of Americans have made omnichannel purchases, such as buying online for in-store pickup part of their regular shop. And this looks set to continue with younger generations of consumers thinking outside the traditional channel boundaries to evaluate brands and retailers on the seamlessness of their experience.
Previously a great omnichannel experience was an added extra. Now it’s a requirement for retail businesses to survive and thrive. So, it’s no wonder that the top digital investment for most retailers is the move to omnichannel. Over 77% will make significant, major or some investment to combine their online and physical presence.
Shift to contactless
The shift to contactless payments isn’t new but is looking to continue apace. 83% of the UK population now use contactless to pay for goods. Contactless payments are 52% higher than pre-pandemic levels. And the average contactless payment increased by almost 30 per cent since the new £100 limit was introduced.
Investing in the right payment infrastructure is clearly key. It allows retailers to maximise transaction efficiency and convenience for both the merchant and the customer.
The use of digital wallets – paying for goods with smartphones through an app, such as Google Pay or Apple Pay, connected to the user’s credit/debit card details – is also on the increase. It can create further convenience as the customer only needs to carry their phone. It’s also a more secure payment method as card data goes straight to the processing solution.
Data and analytics for better customer understanding
Retail technology offers more opportunities than ever to get to know customers. Over 75% of retailers are looking to take advantage of this and monitor customer traffic flow and predict movement. As customers engage with brands at various touchpoints, data is gathered about their needs and preferences. Using real-time data analytics and predictive analytics can develop comprehensive data about consumers across all channels.
Other opportunities arise from Open Banking. This means UK-regulated banks can share information and data, upon the request and permission of the client, with third parties. This data can be used to promote products and services tailored toward the individual customer. The customer benefits from this greater choice, increased awareness of what’s on offer and a more personalised shopping experience.
AI powering effective delivery
Of course, data on its own is of no use. Technology is needed to turn the data into great customer experiences.
Over two-thirds of retailers are investing in technologies such as the Internet of Things (IoT), AI, machine learning, predictive data analytics and real-time data analytics. From making relevant recommendations to creating a personalised in-store experience, these technologies can help retailers improve customer journeys and insights. They also support operational efficiencies with the opportunity to target investments where they really have an impact.
Creating a retail technology ecosystem
If you look to one piece of technology, you’re unlikely to meet all your business’ and customers’ needs. Instead, retailers are looking to create a digital ecosystem and build partnerships which work together seamlessly.
Tech industry firms are seen as important partners in the digital experience. Over 90% of retailers greatly value cybersecurity technology providers, technology providers, and channel and sales partners as collaborators in their digital initiatives.
Renewed focus on security
With all this fast-paced retail technology adoption, it’s no surprise that retailers are putting increased focus on managing the associated risks and cybersecurity. This has jumped from #10 priority in 2020 to #4 business priority now.
The ongoing migration to cloud-based services has seen cloud security highly prominent on risk registers. Over three-quarters of retailers list cloud security as a high or major challenge.
This makes it far and away the #1 ICT strategic challenge in the retail industry.
The retail industry is continuing to transform in response to intensified competition and new challenges following the disruption of COVID-19. In this ever-changing landscape, one thing is clear: technology is the key to building an accurate view of customer needs and to offering seamless personalised experiences – whether that’s in retail stores or on digital channels
We’ve looked at 6 digital transformation trends which are shaking things up in retail. But, of course, great customer experiences can’t be created with technology alone. Investing in the wrong approach or tech can create a limited or even negative impact. Understanding your strategic and customer priorities is key to choosing the right focus for expanding your digital capabilities. This can then be fed into your retail digital transformation strategy.
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