Today, despite the expansion of e-commerce, the progression of purchases on the internet remains relatively slow: 2% increase between 2013 and 2018. According to the “Federation of Commerce and Distribution”, in France, 91% of purchases in 2018 are still made in a physical outlet. The place of the store in the purchasing process remains considerable today.
According to the “Shopper Story” study published in 2017 by Criteo, (Criteo, 2017) analyzing consumer behavior in six countries, three-quarters of French people are “omnishoppers”, i.e. consumers who use several distribution channels to get information and make purchases.
According to the Fleishman-Hillar study (2010), the Internet represents a considerable time saving and facilitates decision making for consumers. Indeed, the quick access to a lot of information (product/service description, internet users’ opinions, rating…), as well as the simplicity of circulation and purchase on the internet make the consumer more demanding during his experience in a physical store. The current challenge for the physical store is to offer a fluid & continuous customer experience between the point of contact on the Internet and the experience in the store, with the objective of simplifying the purchasing process, guaranteeing brand loyalty and ensuring customer satisfaction.
A company’s competitive advantage consists of all the offers it provides that differentiate it from its competitors and give it an advantage over them.
Since the first mention of this concept by Wided Batat in 2017 (Batat, 2018), 3 main values have been identified: functional value, relational value and emotional value.
The emotional benefit is the most complicated to accomplish during a purchasing act.
Once achieved, it allows to impact the customer, to implant itself in his memories, to stimulate his buying acts, to increase his attachment to the brand and to create a long-lasting relationship. However, it is difficult to achieve, it implies creating an emotion between a consumer and the target product. Today’s retail players are revisiting and improving the customer experience in order to trigger emotions and guarantee brand loyalty. As an example, the dairy industry uses the family image in their promotion, conveying the bonds of kinship and the emotions of joy and nostalgia through their communication.
The evolution of the retail sector is underway, taking advantage of the best digital tools and connecting the “online” and the “offline”; retailers are developing the principle of omnichannelity. This principle allows to multiply the points of contact and to guarantee the user experience between online and offline. We observe that web players such as Alibaba and Amazon have already invested in physical points of sale with the objective of combining the “on” and “off” and offering a cross-channel experience. Since 2014, Alibaba has invested more than 12 billion including 635 million dollars in Chinese Ikea Red Star Macalline as well as the supermarket chain Hema Fresh . Meanwhile, Amazon has invested $15 billion in 2019 alone. In particular, the American company has launched Amazon Go cashless stores, bought Whole Food Market and opened many physical outlets. These events are disrupting the traditional store model and prompting traditional businesses to renew their operations.
Today, the major challenges are to combine the online and offline experience in order to respond to the challenges of information, simplification and personalization of the shopping experience. For brands, it is to offer an experience in which the consumer feels considered by the brand so that he develops a bond of attachment.
In view of all these observations, what levers can brand use to adapt to customers and offer the best experience?
The main axis of diversification of the offer, in the distribution sector, is the digitalization of the points of sale. The digital transformation of the sector impacts many interlocutors such as distributors, consumers, suppliers, service providers etc. The digitalization of the sector is notably achieved through:
At the level of the Marketing & Sales division:
- The tools allow to collect information on the purchasing behavior of consumersin an anonymous way. In the same way as e-commerce players, retailers look at consumer types, buying behavior, engagement rate, conversion rate, etc. For example, brands are developing product displays or corners equipped with all kinds of sensors to analyze consumer behavior (distance travelled, time spent in front of the display, place of stop, etc.). These data allow us to obtain KPIs that will then be translated and will allow us to adjust the devices, analyze the rate of engagement and determine the return on investment.
- Data management enriches customer knowledge. It allows to address them in a more relevant way and to have a better reactivityconcerning the proposed actions.
- Data analysis allows to measure the return on investment of tools and furniture (sensors and other measurement systems on POS, displays and corners).
- Consumer knowledge significantly reduces the cost of mass marketing campaigns in favor of more targeted and personalized campaigns.
- Increased in-store traffic has a significant impact onthe conversion rate. Indeed, according to the article “Customer experience and omnichannel distribution” by Virginie Carteron, the transformation rate is higher in store than on the Internet (30% in store against 2% on the Internet).
- Moreover, digital tools are becoming more and more accessible. There are tools to connect the store through various IoT, CRM systems, ERP, monitoring platforms, business intelligence tools and others… This opens a notable way for hybrid store models.
At the store sales force level:
Digital tools optimize the work of the operational staff, they allow for easier access to information (regarding products, provenance, stocks etc.). Digital tools also allow:
- to provide personalized advice and expertise around products. Thus, retail employees can focus on higher value-added tasks by providing the advice that consumers expect when they visit physical stores in search of answers to their questions.
- Operate a digital transformation as a real support to decrease the so-called “low added value” tasks(such as inventories, stock consultations or product information consultations, etc.).
At the consumer level:
- The digitization of points of sale, through digital experiences in store, allows to entertain the consumer more.
- For example, several players are setting up interactive terminals (Undiz Machine or KingJouet). These interfaces allow to presentthe offer in store through a playful experience. Others, such as Nike or Samsung, offer immersive journeys to immerse the consumer in the brand’s universe before proceeding to the transaction, they offer aunique experience to their customers.
- Access to more informationon products through interfaces is also an interesting lever to invite them to discover the entire catalog
- Make them interact & share their experience on social networks
- Digital tools allow to keep the essence of the store (product presentation, original experiences) while offering advice thanks to the salespeople in the store. The latter can therefore focus on advice and expertise, becoming ambassadors, true representatives of the brands or products. This is for example the case of Decathlon, where all the products have been equipped with RFID chips, thus allowing inventories and express checkouts.
The objective for the retail actors is twofold:
- To multiply the points of contact with the consumer to know him better
- To propose to the consumer a continuity between his experience on the Internet and in the points of sales, by finding the same type of information, simplified practices/uses and the personalization of the course.
These objectives encourage attachment & consumption for brands.
How to integrate these new means inside the points of sale?
The multitude of points of contact with the consumermakes it possible to capture a lot of data (bigdata), becoming the sinews of war in distribution today. It is atool for improving and transforming existing modelsand also thesource of a competitive advantage. The adoption of the “data driven” policy allows to get a global view of the online and offline customer behaviors, making them interconnected.
According to the Xerfi study “Cross and omnichannel strategies in retail” (2015), the benefits of using bigdata are multiple:
- Value chain improvements from logistics to after-sales service;
- Leveraging customer data in the value creation process and new products and services.
- Improving the existing experience;
- Logistics automation to anticipate risks, improve operations productivity and traceability of flows & products;
- Value chain management based on real consumer needs.
The phygital convergence will be one of the dominant models based on omnichannel.
However, in order to best integrate these new tools, it is also necessary to take into account the brakes of consumers / interlocutors to the implementation of such a digital project.
Indeed, despite the constant evolution of the tools, their industrialization and large-scale operation remain problematic (due to today’s technical and economic challenges), as the ROI can be disappointing.
Logistics automation or even the implementation of new customer journeys are stuck at the experimental stage for various reasons:
- Organizational difficulties.
- Psychological barriers.
- Resistance to change.
Call to action
The digital transformation of retail is in full swing It requires adaptation of information systems, supply chainand customer experience. The integration of these new tools has repercussions on companies and modifies their intrinsic culture, their processes and working methods. Practices have already been proven in different sectors, such as agility, XP, Lean, etc.
These actions also require appropriate skills. To support you,5 DEGREES offers youthe services of its team of expertsspecialized in customer experienceand supply chain automation.
Contact us for more information!
Co-written by Margarita Pinchuk, Product Owner expert in retail, Charlène Bourse & Tatiana Bonnet
Batat, W. (2018). Designing and improving the digital customer experience.
Carteron, V. (2013). “Customer experience and “omnichannel” distribution” . xpansion Management Review, p. N149. N149.
Criteo. (2017). Shopper Story. Retrieved from https://www.criteo.com/fr/wp-content/uploads/sites/4/2018/08/Criteo-Shopper-Story-2017-FR.pdf
Federation of Commerce and Distribution. (2019). Evolution of trade and distribution: facts and figures. Federation of commerce and distribution.
Fleishman-Hillar. (2010, June 29). THE NEW MODES OF CONSUMPTION INDUCED BY THE INTERNET MARK A DECISIVE TURNING POINT IN THE ADVERTISER/INTERNET USER RELATIONSHIP. Retrieved from Harris interactive:https://harris-interactive.fr/opinion_polls/les-nouveaux-modes-de-consommations-induits-par-internet-marquent-un-tournant-decisif-dans-la-relation-annonceurinternaute/