How Digital Transformation is changing the consumer and retail

Digital is leading the world of distribution towards a new competitive scenario: multi-channel, social networks, e-commerce and back-end tools are just some of the paths retailers are taking to meet the demands of the hyper-connected consumer.

For at least five years, retailers have been aware of the need to invest in digital, as is suggested at every opportunity by business consultants, speakers at conventions they attend and industry sector articles. Despite this awareness, retailers are still hesitant in adopting digital innovations compared to their consumers. Connected 24 hours a day, thanks to the use of multiple devices (smartphones, tablets, etc.), consumers are able to have multiple buying experiences that are not only more lasting but more gratifying than ever before. According to Bill Bishop, founder of the American consulting firm Brick Meets Click and the opening speaker of the annual conference organized by the Category Management Association last September in Las Vegas, ā€œModern retail sales is in the midst of a battle between traditional retailers and large ones such as Amazon. A challenge in which digital merchandising will continue to be the keystone that gets the better of itā€. Also according to Bishop, this innovative wave has not only changed the consumers’ buying behavior but the very spirit of the category management as well. Thanks to the incredible amount of information that technology is able to provide to large-scale distribution, retailers no longer stop at the simple search of the right product for their customers. They also want to know how and why a purchase is made. Digital Transformation is redefining the boundaries of a new world where the consumer, by virtue of their capabilities to move smoothly and consistently between the real and virtual worlds, is constantly searching for the best price as well as a personalized shopping experience.

According to the findings that emerged from the annual Las Vegas conference on Category Management, entitled ā€œBridging Traditional and Digital: Connecting with shoppers in the new retail landscapeā€, the world of digital has challenged retailers to design a new and innovative sales system based on the merger of the traditional model with new digital tools, in which the center is represented by the consumer with their updated and precise profile, orbiting around a retailerā€™s offer. A personal relationship, one to one, a relationship that is simply priceless.

A look at Italy

Analyzing what is currently happening within our borders, we find that same global trend exists: when it comes to digitization, consumers and retailers seem to travel at different speeds. According to data on digital innovation in retail from the Osservatorio del Politecnico di Milano, in 2015 the number of Italian Internet users was almost 38 million (a 3% increase from 2014) with 18 of them having purchased online (a solid 11% increase from the previous year). A confirmation that digital is constantly spreading. So, how is the Italian retailer responding to this? According to a sample survey carried out by the Politecnico with the 50 top retailers of the peninsula, results show that the principal innovations involved three macro areas:
1. Back-end Innovation: adoption of business intelligence tools, CRM solutions and e-billing software that will allow retailers to take immediate advantage in terms of cost reduction and improvement of performance;
2. Omnichannel: last year was the period that had the most impact on the investments of the key players of Italian distribution. About 50% of the retailers in the aforementioned survey had invested in innovation for improving interactions and reducing the distance with their customers (21% have developed or strengthened their corporate website, 22% have implemented or improved their e-commerce platform, 29% have developed an app and 18% have created a corporate presence on Social Media);
3. Customer experience at POS: About 33% of retailers surveyed had allocated their efforts to the strengthening of this area by creating or updating apps with online sales capabilities (27%), the introduction of systems for the acceptance of innovative payments (18%) and the adoption of sales force automation systems or online selling systems in points of sale (17%).

Digital Loyalty

The digital ā€˜revolutionā€™ is also naturally taking an interest in one of the historical incentives used by distribution: loyalty and promotions, developing a new method for holding on to consumers in the Internet age. In Italy, millions of people are registered with loyalty programs of many different brick and mortar store signs so, itā€™s no wonder they are now doing so with those online, but it is interesting to note how the arrival of promotional intermediaries, as well as creating a new model that would allow anyone to discover offers, read store flyers and receive personalized services, is offering marketing experts the opportunity to further segment an offer and profile various clusters of consumers in an increasingly precise manner. The two souls of modern retail, physical and digital, are ā€˜challengingā€™ each other on several fronts to achieve the same goal: raise the levels of customer loyalty.

The loyalty programs are designed to increase customer retention, keeping them engaged and avoiding that they turn to alternative suppliers. Therefore, if e-tailers are increasingly investing in services that raise the level of loyalty (ex. Amazon Prime and Fresh, eBayā€™s recent ShopBot, etc.), retailers are focusing on improving the shopping experience at points of sales. In fact, thanks to the increase in the amount of information at their disposal, a retailer becomes fully aware of a customer’s purchasing behavior, as well as their habits outside of the buying process itself.
Itā€™s a wealth of unique information that ā€˜digitally evolvedā€™ distributor will use to review and revise his business strategy, reexamining assortments and layouts of points of sales, and promoting new services that will make a shopping experience unique.

According to ICLP, an agency specializing in loyalty marketing, the future of loyalty in retail will coincide with the active involvement of consumers (users), through the release of feedback on the product and/or service, or participating in initiatives of crowdsourcing via social media to, for example, defining the launch of a new initiative or choosing the name of a new product. Another key point of the demands of hyper-connected consumers, also known ATAWAD (Anytime, Anywhere, Any Device) is, and will increasingly be, the ability to pay in any location and with the ease of digital tools.

E-commerce, a steady growth

According to data from the Politecnico di Milano, the turnover produced from the world of B2C e-commerce in 2016 will reach 20 billion Euro, a growing trend but still not in line with the results from major European countries.
Evidence of this data leads to what was previously noted: digital innovation in Italy travels at a slower pace not only compared to other European countries but also within the division between retailers and e-tailers (ex. Amazon, eBay, Showroomprive). It is also interesting to note how mobile use has progressed during the course of the year: 3 of the 20 billion Euro of turnover from e-commerce was generated by purchases made via smartphones and tablets. Analyzing each segment, the purchases concerned were in the following sectors: tourism sector (44% with a 10% increase compared to 2015), followed by consumer electronics (worth 15% of the market with a growth increase of 28%), ending with clothing (which stands at 10% with a growth increase of 27%). Absolute importance has been given to the growth in the sectors of food & grocery, furniture, beauty and toys, which together are worth over 1.5 billion Euro.

Category Management Website
Progressive Grocer – Article: “Live at CMA: Bridging Traditional and Digital”
ICPL loyalty marketing agency’s website
Osservatorio MulticanalitĆ  2016

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