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A decade of digital disruption

By Retail Technology | Wednesday December 30 2020 | UPDATED 30.12.20

As 2020 comes to an end, how has technology helped evolve retail over the last 10 years? Mike Willoughby, CEO at PFS takes a look

For retail, the last decade has been one of the most disruptive and fast-paced in living memory. Back in 2010, ecommerce comprised of just 6.5%  of all retail sales in Great Britain. Although a significant rise from the 0.8% of sales at the turn of the century, 2010 marked the beginning of the industry’s first “digital revolution” and set the tone for what was to come over the next 10 years.

The following year, online retail sales grew 25%. By 2019, they had increased 188% from the beginning of the decade – accounting for 18.7% of all UK retail sales last year. While the rapid growth of eCommerce represented an opportunity for agile retailers to capitalise on a new and concerted revenue stream, simply diversifying to omnichannel or creating an online presence wasn’t enough.

The move to digital has opened up a host of additional opportunities, factors, threats and concerns for retailers to consider. It has also acted as a gateway for many of the concurrent trends that retail has navigated over the past 10 years.

Here, we expand upon the influence of retail’s digital transformation before delving into the sector’s additional defining transitions of the last decade.

A digital balancing act

Much of the pressure and tension that online retailers have battled since 2010 has centred around providing customers with more convenience and an improved shopping experience, compared to the traditional brick-and-mortar store offering. However, this caused something of an internal conflict for many. A transformation of this magnitude required considerable investment, but retailers still had to consider the needs of the huge numbers of consumers still purchasing in-store. The high street or department store hadn’t died – consumers just liked having options.

This forced businesses to consider the extent of their diversification. Should they invest whole-heartedly into online to maximise the opportunity, but risk losing traditional existing customers? Or should they double-down and focus on their current offering, but risk losing consumers to digital competitors? The answer was to find a balance between the necessary early investment and the prospective income. This balancing act frequently led to poorly executed investments into omnichannel retail offerings and often resulted in poor inventory visibility, as companies struggled to manage the new art of data collation, insight-driven supply and demand business models.

Personalisation is the new differentiator

Struggling against the rise of retail giants like Amazon, differentiation manifested in the form of personalisation as retailers sought to out-compete the relative coldness of such a massive and digitised conglomerate. Brands tapped upon something that the consumer seemed to be missing – the human touch. This isn’t to say they wanted to abandon Amazon’s convenience, but there has also been a stronger sense of favourability towards brands who strike a chord with consumer wants and needs.

Amid the digital deluge, consumers wanted to be seen again. There’s been a sense over the past few years that ‘if you have my details and all of that data insight, then there’s no excuse not to meet, or even pre-empt, my retail demands’. Online and Instagram new favourite Function of Beauty, for instance, has taken personalisation to a new level, not only tailoring promotions to users based on their hair desires, but also allowing them to add their name to packaging. Meanwhile, health and beauty brand Birchbox has seen success through personalised subscription boxes – providing customers with five mini make-up, skincare, body and haircare products based on the information gathered in the beauty profile, completed upon registration. By anticipating wants and needs, and targeting customers as individuals with bespoke offerings, brands can build a deep-rooted relationship. No longer is brand identity enough to inspire loyalty. Instead, service, convenience, experience and a personalised offering have become the new differentiator for retailers.

Perhaps the culmination of this 10-year period has been the rise of augmented shopping experiences, blending the digital and physical realms to offer consumers the convenience and immediacy of online retail without the risk of regretful purchases. It transcends numerous verticals too. The notion of picking out a new sofa without attending a showroom. The ease of buying new sunglasses without physically holding them. Today, augmented, and virtual shopping trends are continuing to surge, enabling online brands to provide a tactile experience often missed when shopping online. A trend the industry will track well into the next decade.

Consumers demand transparent sustainability

What personalisation has really proved over recent years is that no matter how innovative or outlandish trends become in the retail space, consumer expectation and demand will always overrule.

Businesses have faced increasing societal pressures to become more sustainable. Ignited by regulation, national policy and carbon emission agendas as a result of heightened climate change awareness, the determining factor is consumers increasingly filtering their preferred brands according to ethical concerns. In fact, recent research conducted by PFS and LiveArea revealed that during lockdown consumers had the opportunity to reflect and re-evaluate their shopping habits. In fact, 64% of UK and Irish consumers, and 71% of millennials, are now actively looking for ethical or sustainable features in the products they buy online.

It’s led to a cry not just for face value compliance, but in a lot of cases, complete transparency. According to further PFS research, consumers are actively seeking online brands that can stand by their sustainability credentials. People want to know how products are made, how materials are sourced, what those materials are, even how workers are remunerated or cared for across the circular economy and social value chain. In fact, over a third of consumers now say that when making a purchase a product must be naturally or locally sourced, or sustainable.

Arguably, not adhering to this consumer demand is even more dangerous than underestimating the digital transition. Failing to prepare your omnichannel presence successfully would result in a lost customer. To be outed as unethical, unsustainable or damaging to the environment is likely to result in social media uproar, long-term reputational damage and an uphill battle to retain consumers no matter how many personalised e-promotions you plant in their inbox.

COVID-19: the decade’s final exam

The past 10 years have not been easy for retailers and they would perhaps be forgiven for thinking that the challenges faced couldn’t be topped in 2020. That was until the COVID-19 pandemic, which saw brands pushed to the very limit. Not only testing the flexibility, diversification, morals and consumer relationships established by brands, but also shutting down many of their stores and placing them on the verge of financial ruin.

The pandemic has served to accelerate the end for some struggling companies and confirmed the fact that digital and traditional retail aren’t enemies or even separated. They’re two sides of the same coin that, when presented effectively, feed the notion of choice. Retailers are increasingly recognising that the in-store experience, in order to compete, must reflect the brand’s core values. There is still very much a place for bricks-and-mortar retail. However, it must be able to offer the same personalised and tailored offerings we are now seeing in the online realm.

After all, choice has been critical for consumers around the world who have been forced to online platforms while missing physical spaces. This nostalgia is likely to be an immediate nod ahead to 2021 trends. It’s set to be a bridging year, comprised of rebounding consumer patterns and a sentimental return to stores on the one hand, with a volatile and unpredictable period of Brexit-induced supply chain disruption and 2020-recovery on the other.

As we look ahead to the start of the next decade, brands must ensure that the lessons they’ve learned since 2011 are carried forward. Be agile, don’t put all your supply chain eggs in one basket. Establish resilience in the form of multi-node fulfilment, and never forget that customer experience will always win through.

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