Two years ago, we saw retailers rise to the occasion almost overnight and adapt to new ways of selling. They quickly suspended operations at brick-and-mortar stores and managed disrupted supply chains to meet consumer demands.
Even before the pandemic, the retail industry, in the last decade, found itself in the middle of disruption – be it in the form of e-commerce, digital native startups and technology modernization, in the midst of a drop in revenue growth, store closures and reduced margins.
According to a report by Statista, despite all the challenges, the global retail industry has managed to grow at a CAGR of 5 percent in the last five years, except in 2020 the growth rate dipped 6 percent with unprecedented disruptions.
As the dust starts to settle in the aftermath of the pandemic, retailers are staring at the dawn of an era in which business models, relationships with consumers and the role of brick-and-mortar stores have altered permanently. Customers demand continuous innovation.
A glimmer of hope for the retail industry is the 2021 growth that saw global retail sales increase by 7 percent; according to Statista forecasts, this reasonably high growth trajectory is expected to continue at least for the next few years.
The Pandemic as a Defining Moment for Retailers of the Future
Price and convenience are still the primary factors driving consumers to purchase from retailers, but consumers are increasingly looking beyond this, for value and experience, to consign their loyalty to specific retailers. Retailers that have been investing in digital transformation and online businesses in the last few years, to give that value to consumers, have not just navigated the crisis but are now defining the industry’s future.
Industry pundits believe that the pandemic has accelerated the shift away from brick-and-mortar stores and toward e-commerce by roughly five years.
Technology transformation is shifting the customer experience away from a “pull” — in which retailers were once trying to entice consumers into exploring digital channels — to a “push,” in which consumers are now expecting retailers to create immersive experiences with the help of advanced technologies.
Reimagining Customer Experience
It is not a surprise that digital sales and engagements are going through the roof, with e-commerce showing a growth of at least 20 percent in the last four years, as per a report by Statista. Touchpoints such as social commerce, buy-online-pick-up-in-store (BOPIS), curbside pick-up and retail locker rooms saw a huge uptake in 2020 due to lockdowns. Consumers expect to take advantage of a few of these offerings in the endemic world – and will be looking for more value than just the product or service.
During 2020-21, consumers were more than forgiving when it came to poor experiences such as low inventory, delayed delivery, inadequate customer support and technology breakdowns, as the situation was far from normal. However, going forward, they will be far less tolerant.
COVID-19 has turned out to be a blessing in disguise for omnichannel and brick-and-mortar stores.
Many retailers spoke about an omnichannel transformation, but, until now, adoption has been sporadic across the industry. Today, omnichannel is finally a core focus for reimagining the customer experience. Even for brick-and-mortar stores, the crisis, in some ways, has created a new lease on life by enabling them to act as experience centers and serve as a complement to the online business.
As consumer expectations rise and loyalties shift, retailers need to engage with consumers in new ways to keep them committed to a brand. At the same time, with the blurring of lines between retailers in terms of offerings and digital channels, reimagining customer experience has become the topmost priority. Retailers’ relationships with consumers are expected to be unique, round-the-clock, seamless and omnipresent.
6 Ways to Strategically Invest in CX
The single most important aspect to delivering memorable customer experiences is recognizing that it is an ongoing investment that needs a strategic view at regular interludes.
Retailers need to take these six mandatory steps for reimagining the customer experience:
- Design your customer experience (CX) vision and path: With a digital-first mindset, retailers need to realize their starting points, envision the kinds of engagements they would like to consistently offer (and that consumers would remember them for) and plan accordingly. Most critical would be to avoid the all-or-nothing approach; instead devise a plan of action with identified goals and timelines. Retailers need cross-functional teams that use qualitative insights to create near-perfect experiences.
- Progressively invest in IT: Continually changing consumer purchasing behavior requires retailers to fund related initiatives in a progressive manner. This is about innovating and modernizing IT. Rather than looking at technology as an expense, these need to be seen as investments. Until recently, the focus was on reducing IT budgets.
- Prepare for the future of brick-and-mortar: Having a digital-first mindset and giving consumers the experience they long for requires brick-and-mortar stores to embrace new technologies such as AR/VR, QR Codes and blockchain. Reinvigorating the store experience will likely involve critical near-industry partnerships. Metaverse, the next big thing after the Internet, the culmination of Web3.0, blockchain, cryptocurrencies, and non-fungible tokens (NFTs) promise to create more engaging platforms for consumers, and a handful of retailers are already experimenting with these trends. At the same time, with the help of digital technologies and automation, store operations are doing more with less (cash-less, checkout-less, touchless and end-less aisles), enabling store associates to focus on helping in-store consumers find what they need.
- Take a 360-degree customer view: Retailers need large volumes of data on consumer behavior and buyer journey with a brand, as a structured input, not only for targeted campaigns but also for strategic purposes. It is no longer just about purchase history, financial profile, cart items, wish-lists and preferences. Retailers need data to help them understand customer interaction with a brand in the brick-and-mortar store and in the virtual world that includes social media, search engines, websites, marketplaces and mobile applications.
- Strive for agility and adaptability: For retailers, the COVID-19 crisis has shown how to rapidly adjust to drastic changes and adapt business models. The market is still evolving and, from here on, it is essential that retailers make their business models and business functions agile to stay ahead of the competition. Equally important will be to prioritize modernization of business functions and change management for smooth transitions to a new model.
- Invest in upskilling people: As the digital-first mindset becomes mainstream for both retailers and consumers, it is necessary to ensure that associates are equipped with the right knowledge and tools. The goal of upskilling and cross-skilling employees should be to equip them with what they need to help consumers in their buying journey and create a delightful experience every time they interact with a customer.
At the end of the day, retailers must bring all these aspects together for a unified and personalized experience for each consumer.
At ISG, we believe that CX transformation is the need of the hour, and an ongoing strategy is important for retailers to stay relevant. As a part of the ISG Provider Lens Report - Retail Services and Retail Platforms 2022, we will be rating service providers and platform vendors on CX Transformation Services and omnichannel commerce platform, respectively, for their vision, offerings, experience and innovation approach as they get more closely involved with retailers on a multiyear transformation journey.