Updated on 02/02/2023
Retail: more and more towards digital
How can traditional retailers not be overwhelmed by the rise of e-commerce? How digital marketing can improve retail industry? Simple: By having the courage to embrace digital transformation. This means using social media, exploiting smartphones, but also enriching the in-store shopping experience.
It’s a good idea to start this article by taking a clear position on the retail sector, namely that the digital segment will never completely replace traditional retail, made up of neighborhood stores, boutiques, department stores, and discount stores.
In other articles, in fact, we have already underlined how promising the e-commerce sector is compared to the more traditional ones, in the light, if anything, of the growth indexes, which remain well above the average of other sectors.
Discount stores have gradually gained an ever-increasing portion of the market, reaching 18.5% of packaged FMCGs and, over time, attracting consumers who are not just interested in convenience.
Digital retailers, on the other hand, continue to grind record numbers: think that in the course of 2021 the digital investment of Italian retailers has increased, so that the incidence on turnover has increased from 2% to 2.5% (source: pmi.it)
Indeed, after a previous period of stagnation, the improvements have been remarkable. In fact, according to the most recent data, the sales of the sector in Italy are estimated to grow by 1.3% in 2022, thus recovering from the slight decrease of 0.1% recorded last year, but following the leap of 5.7% in 2020, the year of lockdowns.
Even online is offline
There are some retailers who are setting the standard in a certain sense. One of the most interesting cases is undoubtedly that of Alibaba, the Chinese online retail giant, which opened Hema, its first physical store, in 2015.
Customers can enter the supermarket by checking in with their smartphone, which becomes a real shopping cart with which customers can buy products or get information about the goods that can be purchased using a QR Code. Inside Hema, customers can order from its cafe from their smartphone, scanning items via QR code and ordering through the dedicated app.
When the shopping (or meal) is finished, the customer can leave reviews or recommend recipes to prepare with the purchased products through their phone, after which they can go to the checkout, which of course works in self-checkout mode.
Having opened a physical point, it turned out to be a particularly useful move also from a logistical point of view, as the store is also a local distribution hub for delivering products purchased by users in the surrounding areas. In addition, the Chinese giant has allied itself with Auchan and purchased 36% of China’s second largest superstore, Sun Art Retail, which currently operates over 450 large supermarket-department stores.
The purpose of this transaction, in which Alibaba takes over both direct and indirect shares and Auchan Retail, the main shareholder of Sun Art, increases its stake to 36.2%, is twofold. For Alibaba, it allows them to enter the large-scale retail market, which at the moment is very difficult to conquer for e-commerce platforms. For Sun Art, but ultimately also for Auchan, they are able to achieve positive growth, which have been falling for three years now due to the massive migration of Chinese consumers to e-commerce platforms.
Another example is Amazon. Jeff Bezos’ multinational company bought a chain of supermarkets, the American Whole Foods, and then opened its own physical store where you can buy the classic products found in the aisles of a supermarket. Here, customers can shop using only their smartphone and without any need for human cashiers.
Threatened by increasingly aggressive competitors, will traditional retailers disappear? Will giants like Amazon and Alibaba become the supermarkets of the future?
These questions do not have easy answers. However, one thing you can be sure of: traditional retailers will not disappear, as long as they decide to change the way they do business in order to become more competitive.
But how? The answer is: embrace digitization, following the guidelines of digital transformation on which e-commerce is already evolving.
At this point, let’s look at the types of transformations that traditional retailers should implement.
There is no digital without physical: phygital
The first transformation is to foresee both a physical and a digital component within the purchasing experience in order to combine the benefits of both. Also, as retail giants have noticed, creating customer satisfaction is one aspect of the physical transaction that is irreplaceable.
Choosing a product, getting advice from an experienced salesperson who follows and supports you, buying it and getting it immediately, are all aspects of an extremely pleasant analog customer experience. Many studies show, in fact, that when you shop, your body reacts positively to a satisfactory experience; for this reason, after shopping you feel happier, on average.
The same studies also show that the more you can increase this positive feeling, the more likely it is that the customer will come back and shop again.
So what could be the advantage of having a digital part of your business?
The best welcome is provided by data
In answering this question, we also identify the second change that needs to be made, namely to constantly increase the use of data to improve sales and customer experience.
An undeniable advantage that digital retailers have over their analog counterparts is that the former are able to collect a lot of consumer data and change their business accordingly by building a specific marketing strategy.
When you conclude an online purchase, often the same platform offers other products similar or related to what has just been purchased. Moreover, the purchases make the consumer “traceable” and for this reason, you can use marketing messages that are perfectly targeted on specific sales habits to reach the customer at other times.
These upselling and remarketing mechanisms are obviously not possible in a traditional retail context unless you plan to integrate a digital component into your business.
Imagine, for example, a downstream flow (from e-commerce to the physical store) in which customers start by pre-ordering a product and then pick it up from the store. Along this path they leave a series of information that can be used by shop assistants upon first contact. In this way, when they enter the store, customers will find an employee who, although not knowing them, is prepared about what they want to buy, their preferences and immediately creates a deep sense of empathy and trust with them.
And this close relationship makes any additional sales easier, just like an e-commerce platform.
The best retail is omnichannel
Another change that traditional retailers must make is embracing omnichannel.
We are still in the context of the customer experience: it is a fact that the shopping experience no longer takes place through a single channel and for this reason, with the customer at the center, retailers must build an interconnected system that involves all the points of contact that a consumer can meet during his or her customer journey.
After all, it is a widespread habit for users – increasingly connected and demanding – to check the availability of a product online before actually buying it. According to Google, this search phase is considered an essential part of the experience for 71% of those who use their smartphone to buy products online (thinkwithgoogle.com).
Equally important is ensuring that the entire customer experience develops smoothly and seamlessly through all the touch points you decide to activate.
Also because an omnichannel shopping experience is exactly what the average customer expects, given that, according to Forrester, about one third of users continue to use their smartphone during the in-store shopping experience to check availability, variety, or get additional information. For this reason, guaranteeing an omnichannel experience means meeting the customer’s needs. As you know, a satisfied customer is a customer who is happy to buy again.
Improving upstream flow through mobile
Among other things, this trend of the growing use of smartphones for shopping – of which Italy is a great example – must absolutely be taken into account by traditional retailers who are preparing to digitize.
The smartphone, in fact, combined with a solid omnichannel structure, can be the tool to start consumer tracking.
Imagine a customer entering a store and not finding what they are looking for. The retailer can take advantage of this situation to invite them to subscribe to the newsletter or visit their e-commerce platform to order the product, perhaps using solutions that interact well with the smartphone, such as the QR Code.
At this point, the customer will have the opportunity not to leave the store unsatisfied, having perhaps also received a welcome discount for signing up, while the retailer will have had the opportunity to start immediately profiling the consumer in view of future offers.
Digitization also passes through social
To successfully complete the digital transformation, retailers must be open to social networks.
Facebook and Instagram are implementing functions related to the sale of goods and services: think of the great success of Facebook Marketplace and eBay.
Among other things, social is useful because it helps to build and strengthen the relationship of trust that convinces the customer to return to the store and buy again.
In addition, your Facebook or Instagram profile can be the perfect tool to assist users when they need a hand or more information – and it goes without saying how important it is to have fast, simple, and effective customer care for a business that wants to remain competitive.
Another aspect that may seem marginal to a retailer’s digital transformation, but which is fundamental, is the fact that there are different options for payment.
Fewer and fewer customers move around with cash in their pockets; more often they prefer credit cards or even the contactless mode offered by some apps. So, simplifying and increasing your payment options can be a good move to make your purchase a truly satisfying experience, from start to finish.
Digital is not just a site
The last change that traditional retailers need to make to improve their business is to integrate the most innovative technologies that digital transformation makes available. After all, everything we’ve mentioned so far focuses on a single point: making the customer experience more and more memorable.
To do this, the human component is essential, but at the same time constant innovation is necessary.
There are many ways to do this, and they depend on the economic capacity and structural characteristics of each retailer. They range from the use of chatbots to the use of artificial intelligence to perform and refine some repetitive procedures, something Walmart has recently promised to do, for example. Particularly interesting is the use of augmented reality to enrich the in-store experience.
An example of the application of this particular technology is the Natuzzi company, which has recently opened an innovative retail space, the Natuzzi Augmented Store, which thanks to augmented reality, holographic displays, and the use of an innovative 3D configuration designed specifically for interior design can provide a truly effective and immersive consumer experience.