In the Retail market, transactions now take place across a wide variety of distribution channels. The trend toward multichanneling—often omnichanneling—crosses an increasingly large and diverse set of industries: from food to automotive, from apparel to electronics, to name a few examples. Although physical retail (consumed in a brick-and-mortar store) is still the dominant mode, virtual forms of retail are now structurally part of the sales and distribution system.
Online e-commerce, marketplaces, and social selling (which takes place on social networks) are carving out an increasingly large space within global, interconnected retail markets. Numerous sellers, from multinational corporations to small business owners, are using a model where they integrate offline exchanges and online interactions in a secure, fluid, and transparent way. This is phygital, which holds virtual and physical together in an effort to recompose the most significant aspects of the sales journey into a rich and “complete” experience.
Phygital combines a focus on the strategic use of different channels with the realization that the consumer’s buying process must present as little friction as possible and that, in order to be easily resolved at any time, it must hook seamlessly into online and offline elements.
Beyond the changes, undoubtedly profound and destined to last, that digital transformation is producing, interpersonal interactions both physical and virtual, are confirmed as an irreducible element on which retailers must continue to focus. A shift in sensibility and imagery is taking place that is leading consumers to favor brands that are authentically sustainable, capable of using new technologies and managing the enormous amount of data from the target audience to develop personalized communication, open up spaces for conversation, and significantly improve the shopping experience.
Multichannel approach and immersiveness: how the Retail market is evolving
Let’s look at the Retail market from an angle that allows us to talk about the channels through which it operates.
While the physical store continues to present itself as the predominant sales mode, the opportunities that digital transformation offers are convincing more and more retailers to choose to replan their sales funnels by opening and enhancing their virtual stores.
This is retail internet: e-commerce and marketplaces that allow people to browse the web and purchase products and services remotely and then receive them at home. Although these are often platforms that merely translate the physical store into a digital space, advanced features have been introduced recently, thanks to which an additional, more immersive dimension can be added to the shopping experience, for example through augmented reality applications or forays into the futuristic environments of the metaverse.
Mobile Retail is an articulation of internet retail that is based on the distribution to smartphone app users (and other mobile devices) that make it possible to immediately purchase products or services, without the need to refer to a specific site.
In the case of both internet retail and mobile retail, multichannel and omnichannel retailing, chosen and practiced with conviction by an increasingly large share of retailers, involves the integrated use of traditional and digital sales channels and the rational use of performance indicators (Retail KPIs), with the goal of increasing the number of consumers and simultaneously reducing any inventories.
New consumer buying habits in the retail and mass retail market
According to a recent Accenture report, consumers are integrating old and new habits into their purchasing and consumption patterns, consistent with the reorganization of their priorities.
In fact, the Accenture survey finds that the vast majority (85%) are looking, in Retail as well as in large-scale retail (which of Retail represents a particularly relevant sector), for an interlocutor who can accommodate a series of deep and articulated instances related to quality of life.
Large-scale retail (GDO) is a retail segment that brings together operators with very different characteristics. It is a type of large-scale retailing that is carried out through a series of free-service operated outlets, organized over large areas and generally linked to the same distribution chain serving multiple signs.
Within the Retail universe, large-scale retail is a varied and composite category that has invested in digitization in most activities, from warehouse organization to logistics management, from supply control to cash points: practically all processes have been streamlined and simplified through software automation.
Although principles such as convenience and price are confirmed to drive shopping decisions (74% of respondents look for convenience first), in Retail as well as in large-scale retail, consumers seem to be tired of the usual shopping experiences and above all, they want to:
- save time (59%),
- reduce food waste (61%),
- make the shopping process easier (61%).
Retail and large-scale retail marketing must take note of this by not only trying to find solutions to expressed needs but also to pick up any signs of latent and developing needs.
In light of the above, we are perhaps beginning to sense how the retail environment is extremely dynamic and that it offers considerable scope for development. Within a market whose value continues to grow, however, there are some reasons that threaten to make the near future uncertain and discontinuous. Let’s delve deeper into this issue.
How much is the Retail market worth?
In 2021, the Retail market generated worldwide sales of more than $26 trillion. This is an astronomical figure that is expected to exceed $30 trillion by 2024, according to Statista forecasts.
U.S. Retail, which includes the three giants Walmart, Amazon, and Costco, is worth more than $6.5 trillion. China’s in 2020 was about $2 trillion. Among emerging markets, India’s especially is growing strongly, with 1.2 trillion recorded in 2021).
In Europe, the United Kingdom and Germany are the two largest retail markets, with the value of the former amounting to more than £465 billion (about €560 billion), while the German market is now worth €586 billion.
Expectations are therefore bright, despite the fact that the current international business-to-consumer scenario is still burdened by the consequences of the pandemic and is simultaneously facing new challenges.
New challenges on the horizon: the conflict in Ukraine, inflation, and the great resignation
In issue No. 9 of MIND, Deloitte highlights the critical issues of the current historical moment, pointing out that the conflict in Ukraine will cause very high human costs also because of the effects it will produce (and is already producing) on inflation. That’s because it will exacerbate some phenomena that were already affecting the economic scenario, such as the difficulties in procuring goods in the supply chain and the increased costs of raw materials and energy.
Added to this picture is the phenomenon of “great resignation“, which seems to have now spread from the United States to Europe as well, and which risks leading to a general lack of personnel, especially those with specialized IT skills.
The perception of an unstable and uncertain future risks undermining consumer confidence in companies, which has inevitable repercussions on the propensity to spend, and it increases the need for corporate transparency. Hence the increasing attention to sustainability, to be understood, as we shall see, in its operational meaning as an all-round value that the company practices as part of its daily activities.
The Retail market in Italy and the incidence of B2C eCommerce
Within a global context where the Retail market is recovering strongly, in Italy, too, all forms of distribution are registering an increase, which is particularly accentuated for online commerce (Source: Istat, May 2022).
The pandemic and then the war in Ukraine have led to an almost total zeroing of “retail tourism,” in Italy, but there has also been a parallel revaluation of the domestic market and the urban sphere. Thanks to the potential of digital, the shopping experience strategy has improved some processes (for example, in stock management) and simplified the purchasing procedures both in store and online: the awareness that omnichannel is the winning sales strategy has matured in Italy as well.
This is the same conclusion that was reached by the eCommerce B2C Observatory during eCommerce B2c: the Future of Retail Begins conference, sponsored by the School of Management of the Milan Polytechnic and Netcomm, which highlighted how a growing number of Italians are choosing ecommerce:
- In 2021, online purchases were worth €39.4 billion (up 21% from 2020).
- In 2021, the share of total Retail sales for B2C eCommerce, an index of online maturity, reached 10% (it was 9% in 2020).
Thus, the emphasis is on the integration between the physical channel and B2C ecommerce (which is increasingly preferred by Italians), an integration that we can now observe not only in the case of large organizations, as in the past, but also for medium and small businesses. In many cases, however, the report points out that the approach to multichannel was rather elementary, based on online interaction modes and order acquisition models through social and/or instant messaging platforms, thus not properly ecommerce. There is still a long way to go.
The adoption of digital and physical channels is one of the most crucial trends for today’s Retail market. We will now see how digitization underpins another trend that is at work in the retail and organized distribution sectors: sustainability.
How digitization is helping to make the Retail market sustainable
For many years now, sustainability has been one of the key principles that “theoretically” guides the actions of companies, including in retail. Theoretically, because often this term is used as a buzzword, good for empty and superficial communications. If, however, as Capgemini states, nearly 80% of retailers believe that a commitment to sustainable actions increases customer loyalty, we must conclude that beyond generic greenwashing we are witnessing a real cultural shift.
The reality is that consumers, today as never before, show their support for brands that invest in truly sustainable initiatives. Their environmental concerns influence purchasing decisions and thus, greatly simplify the business results of companies. Consumers find green and sustainable choices beneficial not only to the environment, but also to their quality of life.
Despite the positive trend, however, sustainable products continue to be much less affordable, in terms of price, than their traditional alternatives. And this is not the only limitation of the so-called “green” approach adopted by the majority of companies in the Retail market. BCG points out that integrating sustainability into day-to-day business requires an overhaul of the operating model and a shift in responsibility that can only be achieved by fully embracing digital technologies, which are essential to support and make decision-making transparent.
Technological innovation: to enable hybrid, fluid, and personalized experiences
Designing more consistent and frictionless omnichannel shopping paths, offering unique and memorable experiences that blend elements of the digital and physical worlds, designing personalized propositions based on truly sustainable processes: these are the ultimate goals of players in the Retail market today.
As physical places are restructured to become experience centers through the inclusion of digital components (e.g., augmented reality, such as interactive kiosks and touchscreen displays) the opposite is also happening: retailers are introducing physical features into digital environments (such as apps to virtually display furniture in customers’ homes or to try on clothes).
These are all hybrid experiences, once considered experimental, that are becoming increasingly common. But sharing this dual plane of reality is not enough: if 71% of consumers expect companies to provide personalized interactions and 76% feel frustrated when this does not happen (source: Vue.ai), then the experience must also be useful and meaningful for that particular customer segment or, even better, for that individual user.
It is personalization in Retail, the process that provides a unique path to each shopper through different touch points and different channels. Personalization is based on a unified, holistic view of data: historical information and real-time buyer intentions processed contextually.
The ultimate goal of personalization in the Retail market—the culmination of marketing that aspires to one-to-one dialog—is to make the consumer feel irreplaceable, special, and emotionally connected. In this sense, personalization represents the trend that encompasses all others and the point at which innovation (technological and cultural) returns to the human element.