Digital transformation in retail: from Big Data to personalization

What is the impact of digital transformation in retail? What are the opportunities for integration between physical and digital stores? Why is personalization at the heart of everything? That’s what we’ll talk about in this post.

Talking about retail means facing a vast, complex, and very diversified universe. For example, both Walmart (with annual turnover of over $500 billion) and the small neighborhood hardware store fall under the same label of “retail”. And yet, despite this enormous diversity of players in the sector, there is a trend that is the same for everyone: digital transformation.

The digital transformation in retail, moreover, has undergone an unpredictable acceleration during the phases of the Covid-19 pandemic, especially during the lockdown period. It can be said that digital has literally saved thousands and thousands of companies in the sector. Just consider that, in Italy, between 9 March and 5 April 2020 online sales increased 70%. For food alone, this percentage rises to +227% (source).

During the emergency, our habits have changed out of necessity. We all turned to digital with even more frequency and conviction, but what is even more important to underline is that this is not something temporary; this change in habits, this advance of the digital world, will undoubtedly continue over time, even after the return to “normal”. To stay within the Italian context: even before the pandemic, as many as 79% of the 300 most important retailers had an e-commerce site, according to data from the Osservatorio Innovazione Digitale nel Retail del Politecnico di Milano (osservatori.net).

This is only the first step and only one of the aspects and opportunities of digital transformation in retail. In this post, we will try to go further. We will talk about the opportunities of integration between “physical” and digital points of sale; the importance of an increasingly tailored Customer Experience (digital, but not only), the key role of personalization. Finally, we will move on to a more specific area, analyzing the centrality of video in this sector.

 

What is showrooming?

The digital world and the physical store are not separate worlds. On the contrary, the opposite is true today: digital and “physical” are increasingly integrated; in short, these two mix and reinforce one another. And this is something that all players in the retail industry must keep in mind.

That’s what showrooming is: that moment when customers use their smartphone, in a physical store, to look for more information about the products in front of their eyes or to look for better prices from the competition.

It’s a very delicate moment that is becoming increasingly common. According to Google data, from 2017 to 2019, searches via mobile devices carried out in physical stores increased by 15% (thinkwithgoogle.com). Is this a problem? It may be, but it can also become an opportunity. It all depends on how brands deal with it and, it’s not just a matter of price and discounts

The challenges are increasingly related to the Customer Experience. Both the physical one in the store (and here it is mainly a matter of personnel and environment), and the digital one. It’s not just a matter, then, of setting up a functioning online shop; you have to go much further, and create an omnichannel experience, capable of overseeing a Customer Journey that often goes from digital to “real life”. That’s not all: we must try to build this path in an increasingly personalized way.

Can this be done? Yes, in the following paragraphs we will see how.

 

Tracking the Customer Journey

Digital transformation in retail, as in all other sectors, is primarily a matter of data.

Gathering as much information as possible about your customers, their characteristics, their behavior, their needs, and how all of it changes over time: this is the real secret of success in today’s market. That is why we often hear that data is the new “oil”. All of this is true, of course, also for the retail industry. 

According to a study by McKinsey, proper and intensive use of Big Data analysis can increase retail operating margins by about 60% (mckinsey.com). A huge and decisive percentage. In 2018, the value of the “Big Data Analytics” market in the industry was valued at $3496.4 million USD, with a compound annual growth rate of 19.2%. Translated: by 2026 this value could quadruple to $13299 million (techvidvan.com). What are the areas where retailers collect their customer data?

  • Through their websites, first of all: hence the importance of Digital Marketing and first of all a surgical focus on all aspects of SEO and positioning; 
  • dedicated apps are becoming increasingly important;
  • an effective use of social networks remains central, but also of the timeless email marketing.

In short, there are two key themes: omnichannel and mobile-first. In this sense, a real frontier is the digitalization of the stores themselves. In this field, a lot is moving, even in Italy, and this goes well beyond the classic “loyalty card”.

According to a study by the Digital Innovation in Retail Observatory of the Politecnico di Milano that we mentioned above, 18% of the top 60 Italian retailers have implemented wifi in stores; even more important, 12% have installed systems for monitoring customers, such as smart cameras, to measure and analyze many KPIs (from the conversion rate, to the time spent in store, to the frequency of visits) in real time. In this way, retailers have a growing amount of data at their disposal, which they can use to track their customers’ journeys in a very efficient way. 

The advantages are numerous: from the optimization of decision-making strategies to the optimization of processes (not just pricing decisions); from predictive marketing possibilities, to the actual personalization of the Customer Experience. 

 

Becoming more and more personal

The real goal of Big Data analysis is to have in-depth knowledge of your audience: divide them into increasingly coherent segments, based on common characteristics, but the minimum target to aim at is the single person. The ultimate goal is personalization.

Is it possible, even when customer audiences are endless, as in the retail world? Yes, and there are many strategies. All of them are based on deep knowledge and subsequent “one-to-one” dialog with the individual customer. 

It is therefore a question of collecting as much information as possible on individuals, in omnichannel mode, and modulating one’s own communication and service based on individual characteristics. All of this has an enormous return in terms of engagement, which is the first step that leads to loyalty and, finally, to advocacy. All of the future challenges of the retail sector, after all, are at stake here, especially as competition becomes increasingly crowded, fierce, varied, and diversified.

Personalization is a formidable tool for marketing, cross-selling, and upselling operations ( in this area, Amazon serves as a model, with its tailored recommendation algorithms that account for 29% of total sales; see here). That’s not all: there are also those who base the very production of their products on personalization. One example is Dresden, an innovative eyewear company that allows customers to create their own customized glasses (dresden.vision). There are already many examples in this field, but the area where personalization offers the most powerful results is the Customer Experience.

Again: it’s about combining the customer’s experience in the physical store with the digital one. In this sense, the most powerful tool available to brands is video. 

 

The power of video: inside and outside the store

At the heart of all marketing and customer service strategies, in the days of Digital transformation, is video. Why? It’s simple: video is the most powerful, most widespread, most effective tool. 

By the end of this year, 2020, video will constitute up 90% of online traffic, according to Forbes data (forbes.com). According to other estimates, in 2021 every person — on average — will watch 100 minutes of video online per day; this is up from 84 minutes in 2019, an increase of 19% over two years. It’s no wonder, then, that consumers themselves consider videos almost indispensable before making a purchase. A Google search showed that more than 55% of customers worldwide use online videos even while shopping in the store (thinkwithgoogle.com).

This demonstrates the importance of integrating the physical and digital store! Video gives shoppers security. It is fast and convenient to use and it is decisive in making the final choice of a product. 

Now, you can see that pairing video with personalization can be the ultimate boost, “the ultimate marketing breakthrough that brands need” , as it was referred to in a Forbes article (forbes.com). This is precisely where specialized companies like Doxee, with its Doxee Pvideo®: personalized and interactive videos, are using video tailored to the characteristics and preferences of customers.

In this way the circle is closed. Data is transformed into relationships, fruitful and lasting relationships between the brand and individuals, with advantages on both sides. The real opportunities of digital transformation in retail are all here.