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The real retail race for digitalization

Jarek Matschey, Director Retail, VMware EMEA

Even before the pandemic, retail was in a major and long-term state of flux. The entire spectrum of retailers, ranging from nimble and digitally-native start-ups to monolithic and traditional high street giants, had been exposed to years of changing shopping habits, consumer expectations, growth of omnichannel and many other technological and socioeconomic shifts.

It was driving digital to the top of the agenda and leaving some big-name casualties in its wake – Woolworths, HMV, Toys ‘R’ Us in the UK, and now recognised luxury brand Printemps in France and the chain Galeria Karstadt Kaufhof in Germany are in the midst of closing multiple branches. COVID and the retail race for digitalization changed from a marathon to a sprint overnight.

Zero patience for failure

The last 12 months have exaggerated the void between retailers that do digital well and those that do not. Online sales in the retail sector in UK saw five years of growth in just 12 months in 2020 as restriction and lockdowns shifted consumer spending online, according to the NatWest Retail and Leisure Outlook Report 2021.  Revenue in the eCommerce market in Europe is projected to reach US$465m in 2021, with US$103,9m in UK, US$95m in Germany and US$58,9m in France per Statista.

But survival of the pandemic is only one step. The trends towards rapid delivery, personalisation, courier mechanisms to suit customer schedules and massive advances in post-purchase interaction are all here to stay.

This trend is supported by the findings from a study we did with 6,000 European consumers*, which revealed a hunger for more interactive digital engagements with retailers – with little patience for failure in a post-pandemic world. The business-consumer relationship has been irrevocably altered and, as organisations work to discover their digital identity, growing consumer expectations are placing online experiences under a microscope.

Think, ‘digital-first’

In the UK, the demise of high street giant Topshop is the painful truth of a company that didn’t innovate sufficiently. It has now been purchased by ASOS, a 100% online fashion and cosmetics retailer, who followed in the footsteps of other online operators such as Boohoo Group which bought up traditional UK high street players.

The collapse of Debenhams is particularly acute when considering the speed of adoption to digital. Despite being in the top 10 for website traffic in the UK, its plight demonstrated that those who didn’t innovate sufficiently and put digital at the core of their business quickly found themselves exposed. It’s a harsh lesson to learn that to win the hearts and minds of consumers, you can’t just talk digital, you need to think, digital-first. Our research found that in a hugely competitive, post-pandemic market, half (48%) of consumers would switch to a competitor if their digital experience didn’t live up to expectations but just 10% of consumers are excited at the prospect of ongoing virtual interactions with retailers vs. in-store experiences.… so, as our route out of lockdown life is unveiled, what’s a retailer to do?

The frontier of innovation

Our research found that there are some basic hygiene factors for consumers when choosing to engage with a retailer. These are high levels of security and protection of their data (66%) – in a world of GDPR and heightened fraud awareness this almost goes without saying. This was followed by ease of use across all their devices (44%), and simple and effective apps (41%) – consumers want impact with ease. The research also found that 57% of consumers would leave a retailer’s website there and then if an issue couldn’t be solved immediately – whether that’s via a chatbot or member of staff. The message is clear – get the basics of the digital experience right, then we’ll talk.

Despite the high expectations, many consumers are hungry for more great digital experiences, with a strong percentage self identifying as ‘digitally curious’. 42% believe the increased presence of digital experiences in their daily lives is exciting rather than scary, and data also shows that 46% of people are using a specific brand service because of its superior digital offerings in the market. This is great news for retail organisations that are currently rethinking, adapting or creating their next digital strategy move. In Germany, for example, digital already accounts for approximately 15.5% of retail sales and this is forecast to skyrocket from here.

It’s a trend that points to retailers pushing the ‘frontier of innovation’ to win the hearts of digitally hungry consumers. This will include embracing pioneering technologies like VR and AI. Indeed, half (46%) of consumers would welcome the use of virtual reality to enhance the buying experience, thrusting the combination of online and brick-and-mortar to the fore.

Brick-and-mortar legacy

As the pandemic continues to drive online shopping, and the brick-and-mortar legacies of some of the UK’s high street stalwarts hang in the balance, the continued success of digital retail originators such as Moonpig, Notonthehighstreet, Zalando and Topshop’s new owner ASOS cannot be underestimated.  And there are a myriad of actionable lessons that brands and retail marketers can take from their approaches to help them to navigate the new marketing challenges that retailers will encounter in 2021 and beyond.

According to the Revolutionise the Everyday report, by the Centre for Economics and Business Research (CEBR) and Virgin Media Business, investment in digital technologies could add £11bn (+3.6%) to the value of the UK retail sector by 2030, and £21bn (+6.2%) by 2040, helping the industry to recover from the effects of the pandemic. The UK retail sector would be worth £361bn in 2040 as a result, rather than a projected £340bn.

Diversity of digital services

There is a ready-made digital audience hungry to experience new online services, but they’re not yet excited or compelled by what they’re being offered over the last year. As digital connectivity continues to improve the quality of leisure, work and daily living, today’s consumer is increasingly reliant on the functionality of their tech, and the possibilities it provides. And with this comes the opportunity for businesses to increase the diversity of their digital services – but in a way that separates them from the competition.

Retailers have a real opportunity to differentiate themselves by taking a digital-first posture, creating apps that attract, engage and retain consumers either online or in their stores. Retailers with digital in their DNA have everything to play for. For more information on how VMware can help propel your business on the road to digital-first retail, you can visit us here.

*Research conducted via online surveys via YouGov in UK, France, Germany Italy and Spain with a minimum of 1,000 respondents in each country ( UK with at least 2,000)


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