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The digital transformation in retail has already revolutionized every part of the process from inventory management, training, and fulfillment to marketing and loyalty programs. Yet, its main mission is a work in progress: it has to keep customers purchasing items in physical stores, as well as online. Paradoxically, this can be achieved by making the offline shopping experience as similar to the online experience as possible.
Let’s see how technology is helping the industry bridge the gap between online and offline, creating a truly immersive digitized shopping experience in brick and mortar stores.
What is Retail Digital Transformation?
Digital Transformation in retail is a set of technological solutions, approaches, and best practices that transform B2C sales, particularly in offline environments. These technologies include cloud, AR, VR, AI, ML, big data, and RFID.
E-commerce has a distinct set of goals and tools at its disposal and is usually viewed as a standalone sphere from digitization. Digital transformation in retail refers specifically to the modernization of physical stores.
Retail Digital Transformation Trends in 2022
There are fashion trends that will pass, futuristic trends that will last. The trends below are molding the retail industry now and will continue to shape the future of offline shopping for decades.
Personalization and Customization
Personalization is the main differentiator of ecommerce and is key in offline retail.
Omnichannel reach, loyalty programs, beacons, social media presence, and shopping apps ensure that every customer engagement is tracked, analyzed, monitored, and converted into personalized suggestions.
CRM systems are expected to be connected to POS, website, app, social media, and customer service chatbots so that all guest communication and preferences are stored and used to drive loyalty and sales.
Specifically critical in the premium segment, personalization helps drive brand awareness, increases average check rates, and significantly boosts social media engagement. Research from McKinsey has found that personalization can lead to a 50% decrease in acquisition costs and a 5-15% increase in revenues.
Customization is a subset of personalization, whereby big brands like Burberry and Gucchi can provide an inscription or embroidery of your design onto their items.
Birthday messages with individualized discounts and ads served as per your browsing history are just an everyday reality now, even though they too are the result of personalization.
Big Data
Big Data is the one technology that still has plenty of latent potential. It is the basis for so many advancements in ecommerce and offline retail, including recommendation engines, predictive analytics, fraud detection, recruitment, and personalization.
Information is the oil of the 21st century, and analytics is the combustion engine.
Peter Sondergaard, EVP, Gartner
The bigger the company, the more it needs to rely on Big Data to make accurate business decisions. Store locations, inventory management, fulfillment, vendor management, marketing activities, revenue management, price optimization, and buyer strategy are all based on Big Data.
Database collection and management is just a starting point on the journey, which includes converting customer touchpoints into multi-million dollar business decisions.
This is the challenge addressed by French retailer Kidiliz Group [formerly Groupe Zannier], which owns Levi’s, Kenzo, and Esprit. The company decided to merge databases from two ERPs for better inventory, sales, and revenue decisions in the dynamic and volatile premium clothing retail market.
Walmart uses Big Data for decisions across every function of the store, including merchandising principles and how things are stored on the shelves, which it bases on shoppers’ preferences and purchasing behavior.
Omni-Channel
Customers shift from offline to online, sometimes naturally and in some cases in the hunt for a deal. This has led to the emergence of the showrooming and webrooming [ROPO – Research Online Purchase Offline] phenomena.
Not all brick and mortar stores will have a website, but they can still have an omnichannel presence across social media, loyalty program apps, email marketing, and customer support chatbots.
Omnichannel initiatives are vital for retail warehouse clubs like Costco and Sam’s Club, and include things, like Curbside pick up, Click and Collect, and saved shopping lists option for reordering.
Machine Learning and Artificial Intelligence
The application of ML and AI in retail is bottomless and the industry has just scratched the surface.
Walmart’s tech incubator Store No8 set up an experimental Intelligent Retail Lab — essentially a Walmart store equipped with thousands of cameras that use AI and ML to optimize dozens of operational processes.
The AI algorithms inside this store alert staff if banana skins go too dark and need to be replaced, when more cash registers need to be opened, or when inventory on shelves needs to be replenished.
Similarly, Walmart’s use of AI helped drive customer acceptance of substitutions to 95%. Poorly substituted groceries cost the company and lead to lower customer satisfaction, so Walmart used AI to help decide which alternative produce to add to the cart instead of the missing inventory. It’s still a work in progress, but the early results are outstanding with only 5% of clients rejecting the substitutions now.
Gamification
Gamification in retail is the prerogative of the trend setters. It is widely used to boost motivation of employees, vendors, and buyers.
Badges, leader boards, and prizes can speed up the learning curve when incorporated into team training.
Nike+Fuel , a personalized app made by the sneaker giant, helped the brand amass troves of valuable data by integrating gamified elements into the app, allowing users to compete against each other.
Target used gamification to boost its Christmas sales and collect the valuable customer preference data, which can be extrapolated to the entire chain. It managed to collect over 100,000Christmas wish lists created by users in its “Holiday Wish” app.
Just Walk Out
Amazon Go pioneered Just Walk Out technology, which lets shoppers pick up the products they want and leave the store.Technology takes care of the rest, recognizing the presence of the guest in the store, adding products from the shelves to the virtual shopping cart, and charging the card.
This shopping method is enabled by a combination of technology that includes deep learning, computer vision, beacons, and sensor fusion.
IoT [Internet of Things]: RFID and Beacons
IoT in retail offers helpful information around the store. RFID and Bluetooth beacons are a good example of how low-energy devices work to enhance the user’s experience.
Marketing beacons help bridge the gap between online and offline by connecting to a user’s smartphone via Bluetooth when they shop offline. Shoppers receive personalized offers depending on how long they are in a certain aisle.
Smart Fitting Rooms
Fitting rooms are where most conversions happen in offline retail.
On the other hand, they are the most secluded environment in the entire store.
Peak-hours staff shortages take this issue to another level.
Many retail brands have introduced smart fitting rooms as part of their retail digital transformation strategies.
Not only do smart fitting rooms help floor associates communicate with customers using RFID and barcode scanners to quickly find items in different sizes or colors, they can suggest look pairings. Both Mango and Ralph Lauren have successfully experimented with smart fitting rooms to boost conversion rates.
Contactless Checkout
During the pandemic, contactless checkout has been in high demand.
Target wanted to ensure a safe environment for its customers, so it integrated the Wallet app with its proprietary software solutions to enable 100% contactless checkout. Guests who have the Target app installed can use their devices as a scanner and checkout point.
AR and VR Technology
Macy’s digital transformation initiative expanded into the use of AR and VR technology in retail.
The Virtualize Your Space experience used AR to let users place furniture pieces in their home, increasing average check rates by 60%. Makeup simulation kiosks let customers try on different hues of lipsticks and other cosmetics.
Smart Shelves
The use of IoT in retail includes smart shelves technology.
Market leaders like Walmart are experimenting with the technology, as are vendors themselves in a bid to help retailers sell more of their goods. Hershey’s gives retailers tools to keep shelves full and avoid low inventory.
Are You Ready for Digital Transformation?
The challenges of retail stores making digital transformations are myriad, yet there are hundreds of reasons to invest in this approach.
With so many retail digital transformation trends and technologies to choose from, every retailer can find technology to drive conversions, boost loyalty, spread brand awareness, and increase average check rates.
Dev.Pro has amassed experience in FinTech, EduTech, HealthTech, and other industries. Our FoodTech projects include creating POS systems to enable our clients better manage the sales flow, similar to that of retail. We don’t have a no-compete clause in our contracts but do have heaps of relevant experience to offer RetailTech companies.
Are you looking for a tech partner that can provide digital transformation consultancy services? We’d love the chance to provide our vision. Send us your RFP or fill out this inquiry form so that we can craft the right digital transformation roadmap based on your specific parameters.
Still looking around to figure out how to digitally transform your business? Download this digital transformation roadmap for a step-by-step algorithm for when you are ready.