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Rethink Retail: The Impact of Digital on the Future of Consumer Engagement

June 25, 2018

Retail is heavily impacted by the digital revolution. Most obviously, the mix of brick-n-mortar and e-commerce has been changing for years now, bringing with it challenges and opportunities for the retailer. In 2016, online sales outgrew overall retail sales by 7.4 times, a 10 percent growth over online compared to just 1.4 percent overall. But it doesn’t stop there. Technology is playing an increasingly important role in consumer engagement and loyalty, and without a clear digital vision, traditional retailers risk irrelevance or even extinction.

Retail is as old as commerce itself. For hundreds of years the retailer has played a key role as the intermediary between the supplier of goods and the consumer. They have been responsible for:

  • selecting products for their customers 
  • the supply chain between manufacturer and user 
  • marketing goods (along with the supplier) 
  • managing the financial transaction 
  • the after sales relationship 

This responsibility has served them well, delivering profit, growth and power and it’s created some of the world’s largest brands along the way.

But recently there has been a shift in power. Some brands have chosen to go direct to the consumer, cutting out the so called ‘middle man’ and utilizing technology to do so. At the same time, e-commerce operations have taken many of the traditional attributes of retail online, driving untold convenience and purchasing agility. Simultaneously, consumer preferences have changed along with the way they select, purchase and receive goods. This turns everything we previously knew, or thought we knew, about retail on its head, creating an abundance of challenges and opportunities. But, the solution is not one-size-fits-all. 

We’re at the early stage of the revolution and the lines between online and in-store are already quite blurry, with brick-n-mortar retailers going online, e-commerce retailers opening stores and plenty of M&A activity in the sector. The only thing that we can say with some certainty is that technology, and specifically digital technology, is the enabler that drives winning engagement for all. Retailers have reportedly invested more than $70 billion in digital transformation already, and there’s a lot more to come. We’re at the cusp of even more change, so there’s no better time to explore options and understand where best to be positioned in this brave, new, digital retail world.

So, where is technology impacting the retail experience? The truth is - everywhere! Let’s start by exploring the purchasing process end-to-end. Consumers are bombarded with messages both on- and off-line, all promoting goods and services, all with links to make purchases simple. Choice for consumers is larger than ever and that choice is being influenced by more than just the shelves in the store and the adverts on TV. The consumer is looking to social media as the role of ‘influencer’ grows. These influencers can be anything from a user reviewing a product to a celebrity endorsing one. We are even watching videos on YouTube that showcase the unboxing process, the reveal if you will, underlining the importance of packaging to this new retail world. 

Perhaps most interesting in the purchase process is the potential for interactive or multimedia experiences. Augmented and virtual reality (AR and VR) experiences allow consumers to see what a garment might look like on the body, or what a piece of furniture might look like in the living room of their home. On top of this, consumers now enjoy the ability to totally customize a product online, be that a pair of sneakers or a car.

These AR and VR experiences don’t stop online either. Many retailers are testing AR and VR in store, like smart mirrors, to make the mall experience more compelling and entertaining. Stores still have a significant role to play in selection around ‘touch-and-feel’ and, of course, fit. But stores must work harder than ever to remain relevant. In this day and age of information everywhere, consumers do a lot of research online before they even visit a store for the first time, including finding the best price at the most convenient location.

Retail selection is just one step in the process though. The way products are marketed to the consumer is also in the midst of a massive shift thanks to bit data technology. Companies like Amazon are using AI and complex algorithms to suggest the products we might like, building a digital picture of our viewing and purchasing habits and using them to help promote the right product or the right offer.

Another key role of retailers has always been control over the supply chain. Success in this area has been critical to many retailer success stories, particularly those where demand or fashions can quickly change. Now the supply chain has evolved to operate with different models, including online retailers with their own supply chain and distribution systems like Amazon, vendors that use networks like Amazon’s to distribute and brands that choose direct-to-consumer models. These different models are all disrupting the status quo driving new business models and challenging old ones.

As e-commerce has grown as the preferred shopping choice, new demands have emerged for brands to transform their packaging. Once the consumer has selected their product and either purchased online or in store, the next part of the experience is the delivery. This might be as simple as going to the store, choosing, purchasing and taking the product home. But the process has changed dramatically with e-commerce, creating a super simple click-and-collect model and the packaging becomes even more pivotal to the brand experience here. If the purchase is made online, receiving the product might be the first proof-point for the brand. The whole unboxing experience is now a part of the product and brand relationship, often posted on Instagram, Twitter or YouTube by the consumer for all to see. 

In a recent survey undertaken for Jabil by Dimensional Research, we found almost everyone (95 percent) believed that packaging has an impact on the online purchase experience. In fact, 71 percent of recipients said that bad packaging can ruin the customer experience. That might be damaged, leaking, difficulty to open or simply unattractive packaging. On the flip side, 70 percent said that good packaging can create a memorable experience and agree that packaging should differ between e-commerce and retail. 

The point of delivery isn’t where the role of packaging ends. In fact, it can be the start of a whole additional value proposition for the brand. Sensors in packaging can deliver use data to the brand as well as highlighting the need for replenishment. Ecosystems like Amazon’s Dash Replenishment Service (DRS) allow brands to leverage data and drive brand loyalty. For the consumer, the benefits are equally strong – ensuring they never run out of their favorite products and enable reordering as simply as responding to a low-level warning on their smartphone.

All this data, from smart packaging, e-commerce, brick-n-mortar stores and social media moves around the retail ecosystem influencing the products that are stocked, offered and even designed.

Disruption is occurring throughout the retail world and digital technology is the catalyst. To win in this new digital world, brands and retailers must embrace change and gain control of the data that will help them make better, faster decisions and drive loyalty with the consumers they cherish. Whether in store or online – technology is a loyal friend with untold staying power.

Rethink Retail - Unveiling the Forces of Digital Retail Transformation

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