The Impact of Digital Retail on Consumer Behaviour

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By - V Srinivasa Rao, Chair Open Digital Innovations, IET Future Tech Panel

Online retail is driven by hyper-personalization. In a sea of sameness, where every product search on a platform throws up at least 7-8 similarly-priced options, the choice is driven by the newness and uniqueness of the shopping experience.

Most industries have been changed for good, in the wake of the pandemic. And in some ways, consumer choices, lifestyles, and expectations have changed forever. Retail, in India, is no different. With one of the highest growth rates, the Indian retail industry was heavily impacted in the last two years and saw many challenges and bottlenecks starting from supply chain problems, extreme fluctuations in footfalls, store and trade restrictions, workforce impairments, and so on. Digital technologies have been changing the retail industry significantly throughout the value chain. As a result, technology investments have gone up to provide superior customer experience and enhanced operational excellence. 

In today’s world of on-demand access, hyper-customization, and ten-minute delivery, let us explore the constantly changing demands of retail consumers and the new ways in which both traditional retail streams and online e-tail streams need to operate.

How can a Brick-and-Mortar (B&M) Retail Store up its Game?

The pandemic forced heavy e-tail adoption and consumers simply got more used to shopping from home. In this scenario, B&M stores must move quickly to create new, interesting, and cost-effective ways to draw the consumer back to stores and provide them a shopping experience that is superior to the online check-out process and at the same time, remains just as hassle-free. 

●    Some brands and stores are introducing price display screens for each product, which allow price changes to reflect real-time without the logistics of manually changing display set-ups. 
●    Consumer researchers noticed that empty shelves result in significant customer loss. So now, shelves are equipped with CCTV Cameras and RFID tags, so that the store manager gets an alert to fill up when stocks run low. 
●    The 3-D body scanner technology which gathers 1,000s of data points can create a realistic digital twin of the buyer which can be used to model outfits and ensembles, mitigating the hassle of overcrowded changing rooms. The same technology can also be used by e-tail brands to provide a similar experience at home.
●    Interactive hangers further add to a great shopping experience, which triggers informative visual media, background music, and relevant lighting. 
●    At the high end of the tech machinery for retail - Machine Learning Algorithmic merchandising optimization helps retailers precisely determine the items that need to be displayed and stocked and how they could price and promote the products to maximize sales and profits.
●    Existing hyper-local tech already provided targeted and contextual messages to customers regarding nearby price discounts and offers. Buy Online Pick-up in Store (BOPIS) once again streamlines the experience so that gratification is not delayed and customers need not wait for doorstep delivery. 

How to Replicate the Brick-and-Mortar Experience Online?

Online retail is driven by hyper-personalization. In a sea of sameness, where every product search on a platform throws up at least 7-8 similarly-priced options, the choice is driven by the newness and uniqueness of the shopping experience. On the other hand, shopping in a retail store gives a very personalized experience - buyers can interact with the store personnel, spend quality time, and experience the products to make a quick purchasing decision. This is what most online retailers try to emulate, in a sense, trying to replicate the brick-and-mortar experience online. 

●    Try-before-you-buy: Augmented Reality technology helps buyers get a new experience while purchasing the product. For example, an online shopper can try various makeup samples or even spectacle frames using a virtual mirror in the mobile app or web app.
●    Online furniture and décor brands can simply ask for photographs of existing rooms, or even uploaded house plans, which can provide an AR/VR experience to push customers to purchase.
●    We’ve all experienced the persuasion power of AI-powered recommendation engines which drive the online purchases of the majority of the cart-fillers today. First, the persona is defined based on the data collated about a customer from different channels. Then, as per the persona and previous buying patterns, the recommendation engine persuades the customers to make the right buying decision. Going a step further, AI chatbots will not only help consumers with online shopping but also provide them with information and recommendations that are tailored to their specific needs.
●    Virtual Stores in the Metaverse have been providing new experiences to customers. A few retail stores have been selling their products as NFTs using CryptoCurrency in the Metaverse. At present, Metaverse is used for customer engagement and promotional activities. 
●    Social commerce is picking up today, using Facebook, Instagram, YouTube, and Twitter to promote and sell products and related services. For instance, live streaming of product unboxing and other marketing videos is used as a digital marketing channel with integrated e-commerce to enhance retail sales

The Changing Rules of Consumer Buying Behavior

Today, everyone uses the internet, mobile devices, social media, and other digital channels in their day-to-day lives. That has changed consumers' expectations, needs, and wants even while shopping. Purchase behavior now includes online research and perusing customer satisfaction reviews, influencing purchasing initiatives and decision-making. The increasing influence of the digital natives - millennials, Gen-Z, and newer generations is also visibly apparent.

●    The use of social media as help desks for customer service and issues is not new. But today, this feedback into the marketing automation engine, enabling the Customer Service team more time and allowance to address and convert irate customers.
●    As AI technology evolves, virtual shopping experiences in the metaverse beyond space and time will expose customers to a completely new shopping experience with AI-powered avatars shopping for their virtual wardrobes! 
●    On-demand information and real-time updates are hygiene today, however, redundant and repetitive communication on multiple platforms is also seen as intrusive – so retailers need to carefully tread the fine line between transparency and disturbing, assisted by tech. For instance, AI-powered algorithms pump up or down-regulate communications, based on how many times notifications are dismissed or checked. 
●    Badly handling an irate customer can have a backlash that far outweighs just one lost sale. Social media rants about negative or less-than-ideal experiences influence a horde of potential customers. The opposite is also true – in a world of influencer-driven marketing, digital natives still easily navigate between paid-for influence and genuine customer delight. Highly evolved, online listening tools are heavily utilized by brands today, to garner real insights about their perception among consumers and implement the insights to improve customer experience.
●    A hassle-free payment process flow is a mainstay of today’s retail, be it online or physical. UPI has solved the issue in both POS formats, for India. With B&M, today’s consumer is primed to choose a store equipped with self-check-out POS kiosks which have become an efficient solution to cashier bottlenecks and lengthy queues, especially during Sale season.

Apart from these, there are many more cases of tech applications improving experiences across the value chain. For instance, several brands have moved into omnichannel models that provide a seamless experience to customers across multiple channels (store, mobile app, desktop, wearable device, console, etc.) with integrated gamification techniques. 

Also, most retailers have been working on establishing digital learning platforms and creating an environment to build an excellent in-store workforce. Today, the in-store workforce is enabled with technology tools like AI apps, conversational apps, communication and collaboration tools, gamification-enabled task management tools, etc. These improve their productivity and empower them to be part of the new-age customer experience.

Today’s digitally-aware retail consumers easily predict or even expect most changes that make shopping better for them – making them extremely hard to surprise. Tech can help. But where to start? Here’s a 4-layered model for retailers to help them focus and execute a 360-degree digitalization plan:

●    Digital Business blueprint (3-year focus) 
●    Digital Product and Service Innovations 
●    Digital Business Operational Excellence 
●    Digital Technology Foundation 

The Lean Digital Business Excellence Model is an innovative methodology that can help retailers to digitalize their organizations in a very structured manner with higher ROI and better business benefits. 

And in a business where the customer is traditionally king, both kinds of retail players need to move fast and continually invest in emerging technologies that can find new ways to mine customer delight.


At the Future Tech Congress, we will be discussing AI, Blockchain, Digital Twin and how these future technologies can help businesses gather customer insight and boost growth, in the areas of Manufacturing, Healthcare, Fintech and Supply Chain. Explore our full agenda here.

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