digital intelligence briefing - adobe€¦ · · 2018-05-01actionable tips to help future-proof...

in association with

Digital Intelligence Briefing

2017 Digital Trends

in Retail

in association with

Digital Intelligence Briefing2017 Digital Trends in Retail

Published March 2017

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1 Foreword by Adobe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

2 Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

3 Digital maturity in retail: marketing and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

4 Increased availability of data fuels personalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

5 Focus on mobile continues to bear fruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

6 2020 vision – a technology-driven future with a human touch . . . . . . . . . . . . . . 18

7 Actionable tips to help future-proof your retail business . . . . . . . . . . . . . . . . . . . . . . . . . 23

8 Appendix:respondentprofiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Contents

4 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

The 2017 Digital Trends in Retail report provides a fascinating snapshot of how the retail sector is transforming itself in the digital era.

Customer experience (CX) continues to dominate the agenda, and it is clear from the research that retailers collectively grasp the importance of a personalised and mobile-friendly experience which is relevant at every stage of the customer journey.

It makes absolute sense for retailers to focus on optimising the mobile experience as part of their CX initiatives. CX is a differentiator for retail brands and, as part of this trend, the mobile experience in particular will increasinglydefineyourbrand.

The business case is compelling. According to the latest Adobe Digital Index published in January 20171, mobile accounted for 41% of retail revenues in the UK during the last Christmas period. Across other major markets, a similar (but slightly lower) proportion of consumer spending is attributable to mobile (31% in the US, 30% in the Nordics, 27% in Germany and 26% in France).

This underscores the importance of mobile and explains why almost two-thirds (62%) of retail respondents say their mobile marketing budget is going up in 2017, a higher percentage than for any other channel.

As well as being a useful bellwether for the digital maturity of the retail industry, the report also gives us a glimpse of the future and where technology is taking this sector.

The research shows that retailers will focus on making the experience as ‘easy, fun and valuable’ as possible, with technologies such as virtual and augmented reality coming to the fore as consumer uptake increases.

Retailers must strive to strike the right balance between meeting customer requirements now, while also keeping an eye on the consumer technology trends which will help to shape the future.

This can be a juggling act for retailers but exciting times lie ahead for those brands that can keep up with these trends and differentiate themselves from the pack.

Vijayanta Gupta Product and Industry Marketing Adobe

Foreword by Adobe 1

1 http://www.cmo.com/adobe-digital-insights/articles/2017/1/13/adi-holiday-2016-recap-report.html

5Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

Executive Summary 2The 2017 Digital Trends in Retail report is based on a sample of almost 500 retail respondents2 who were among more than 14,000 digital professionals taking part in the annual Digital Trends survey carried out in November and December 2016.

The research, conducted by Econsultancy in partnership with Adobe, is a barometer of the extent to which retailers are embracing digital technology, focusing their strategies and prioritising resources for the year ahead andbeyond.Thekeyfindingsfromtheresearch are summarised below.

Retailers strive to prioritise digital but only a small minority describe themselves as ‘digital-first’

• While retailers are striving to become more intrinsically digital, most are still not digitally-led. Asked about the extent to which digital permeates their marketing activities, 13% of retailers taking part in the survey describe themselves as ‘digital-first’.Whilethisisslightlyhigherthanthe 10% average across other sectors, the majority of retailers are still primarily led by bricks-and-mortar operations and traditional marketing activities.

• Only 16% of retailers say that digital permeates all their marketing activities although almost half (48%) say that digital ‘permeates most marketing activities’.

• In terms of the proportion of respondents whosaytheircompaniesaredigital-first,the retail sector ranks sixth out of 15, behind gaming and gambling, media, technology, professional services and telecoms.

Importance of the customer experience (CX) manifests itself in focus on personalisation

• More than half (54%) of retailers say that the customer experience is their most important area of focus, way ahead of cross-channel marketing (16%), data-driven marketing (14%), mobile (11%) and programmatic buying / optimisation (4%).

• Asked about their tactical priorities, a third (33%) of retailers say that ‘targeting and personalisation’ is one of their top three priorities for the year ahead, higher than for any other marketing tactic. Across other sectors, this tactic no longer takes the top spot this year as disciplines such as content marketing and social media engagement have stolen the limelight. By comparison, targeting and personalisation remain top-of-mind for retailers as they recognise this is a priority if they want to use the customer experience they provide as a differentiator.

• A quarter (25%) of respondents say that ‘making the experience as personalised and relevant as possible’ is where their organisation is placing the highest emphasis when it comes to improving the customer experience, ahead of factors such as making the experience ‘valuable’, ‘easy-to-understand’ and ‘fun’.

2 The 473 retailers who took part in the 2017 Digital Trends survey were among a total of more than 14,000 digital marketing and ecommerce professionals from all sectors who participated, from countries across EMEA, North AmericaandAsiaPacific.


When looking at the ways retailers plan to differentiate themselves from competitors overthenextfiveyears,makingtheexperience easy, fun and/or valuable is perceived to be a key differentiator.

• More than half (57%) of retailers say they are planning to increase their investment in personalisation during 2017.

Mobile remains a key area of investment as retailers prioritise understanding of how mobile users buy and research products as part of their customer journey

• Mobile marketing is the channel or discipline where retail companies are most likely to be increasing investment in the year ahead. Almost two-thirds (62%) of retail respondents say this part of the budget is going up in 2017, suggesting that it is still seen very much seen as a standalone discipline and discrete area for investment.

• Almostfourinfive(79%)retailerssaythat‘understanding how mobile users research and buy products’ will be ‘very important’ for them over the next few years. Mobile is widely seen as a bridge between the digital and physical worlds, with 75% of respondents saying that ‘optimising the customer journey across multiple touchpoints’ will be ‘very important’ in the years ahead.

• Mobile optimisation is a top-three digital tactical priority for 23% of retailers, versus only 14% for non-retail respondents. Mobile is a strategic priority area for 55% of retailers, compared to an average of 48% across other sectors.

The 2020 vision: VR and AR are part of the brave new retail world

• The potential for augmented reality (AR) and virtual reality (VR) to be harnessed by marketers has been recognised for a while now, but they haven’t yet gone mainstream across a range of business sectors outside gaming.3

However, it is clear that retailers do see the potential for AR and VR to make a difference. Out of a range of technologies includingartificialintelligence,voiceinterfaces, the Internet of Things and evolving payment mechanisms such as mobile wallets, ‘engaging audiences through virtual or augmented reality’ is seen as the single most exciting prospect for 2020.

• Asked about the primary way their organisations will seek to differentiate fromcompetitorsoverthenextfiveyears,making the customer experience as ‘easy, fun and valuable’ as possible comes out on top. Just over a third (34%) of respondents cite this as the single most important differentiator in the future, more than double the number of respondents who cited ‘customer service’ (14%), ‘product/service quality’ (12%) or ‘product/service innovation’ (11%).

• This focus on a fun and valuable customer experience goes a long way to explaining why AR and VR are perceived as the technology trends offering the most promise to retail businesses, though success with these initiatives will depend on the quality of execution by individual retailers and continued consumer uptake and appetite, likely to be fuelled by the iPhone 8 with its focus on mixed reality.

• Although technology trends will dominate the evolution of retail over the next few years, the importance of human-centred design cannot be overstated. Design-led organisations that understand how a creative and holistic approach is required to deliver a seamless customer experience are likely to succeed where their competitors fail.

3 https://econsultancy.com/blog/68706-ashley-friedlein-s-marketing-and-digital-trends-for-2017/


Digital maturity in retail: marketing and beyond 3

For many retailers, the quest for digital excellence has become a matter of survival. In highly competitive markets with squeezed margins and ever increasing customer expectations, businesses can ill afford to lag behind their competitors when it comes to digital maturity. And while most retailers recognise there has been a huge power switch to the consumer, acknowledging thistrendisonlythefirstsmallsteponthejourney towards the full digital transformation that many retail organisations need to embark on.

Econsultancy’s retail-focused Digital Trends report aims to understand and benchmark the progress companies in this sector are

making as they seek to blend the physical and digital retail environments. While ‘digital’ is having a transformative impact on pretty much every business function, marketing is a good starting point for understanding the progress retailers have made.

Figure 1 shows the extent to which digital permeates marketing activities for the organisations that have participated in this research, with percentages for non-retail respondents for comparison. Retailers are 30% more likely to classify themselves as ‘digital-first’,with13%labellingthemselvesas such, compared to only 10% for the rest of our 5,000-plus ‘client-side’ sample4. As can be seen in Figure 2, this puts the retail

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Econsultancy / Adobe Digital Intelligence Briefing Retail respondents: 311Other sectors respondents: 4,978

Figure 1: To what extent does digital permeate your own organisation’s marketing activities?

4 This non-retail sample does not include ‘supply-side’ respondents who work for agencies, vendors or consultancies.


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Econsultancy / Adobe Digital Intelligence Briefing Respondents: 5,289

Figure 2: Sector comparison – proportion of companies regarding themselves as digital-first

sector in sixth place out of the 15 sectors which comprise our annual Digital Trends study. Gaming and gambling is the sector which is setting the pace, with a quarter of responding organisations in this business verticalputtingthemselvesinthedigital-firstbracket.

Outside of the relatively small pool of digital pioneers, most retailers are typically still at the stage where they are striving to ally successful digital activities to existing bricks-and-mortar operations and traditional marketing activities. In the context of marketing, they are seeking to ensure that there is a strong digital element which complements campaigns that historically mayhaveverymuchtakenplaceoffline,for example in the form of direct mail, newspaper advertising and television commercials.

Just under half (48%) of retailers say that digital ‘permeates most of their marketing activities’, compared to 46% for non-retail respondents. A further 16% of retailers say that digital permeates all their marketing activities, recognition that marketing – almost bydefinition–hasbecomedigital.Attheopposite end of the spectrum a similar percentage (18%) say that digital is ‘very

much separate’. Worryingly, these paleolithic retailers(almostafifthofthesample)seemto regard digital marketing as something of an add-on.

While marketing as a function is often at the frontline of attempts to be more digital-friendly, the journey towards digital maturity is largely about customer centricity and therefore necessitates an organisation-wide approach which straddles all business functions.

An array of overlapping elements contributes to a successful digital strategy for retailers, including, among other things, a focus on data-driven marketing, customer experience, mobile marketing, personalisation and innovative use of technology.

Figure 3 outlines eight key components we haveidentifiedasrequirementsfordigitalsuccess, namely collaboration, culture, data, process, skills, strategy, technology and UX design. The chart shows the extent to which retail respondents agree with statements relating to what might be regarded as key pillars for truly customer-centric digital businesses.


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UX design – we have well-designed user journeys that facilitate clear communication and a seamless

transaction

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Process – we have the means and methods to ensure that strategy is carried out efficiently

Data – we have access and control over customer and marketing application data

Collaboration – we have tools that allow for streamlined workflows between creative and content

marketers / web teams

Strategy – we have a cohesive plan, long-term view and executive support for the future of our customer

Culture – we have a cross-team approach with the customer at the heart of all initiatives

Skills – we are combining digital marketing skills with analytics and technology

Retail Other sectors

Econsultancy / Adobe Digital Intelligence Briefing Retail respondents: 260Other sectors respondents: 4,219

Figure 3: Key components for digital success – proportion of respondents agreeing (‘strongly’ or ‘somewhat’) with these statements

Digital skills

In the context of skills, we asked retail respondents whether they agreed that they were ‘combining digital marketing skills with analytics and technology’. Almost four infive(78%)respondentsagreedwiththisstatement, a higher proportion than for any statement relating to these eight pillars for digital success.

Encouragingly for this sector, retailers are seen to be ahead of non-retail organisations in respect of skills, with the average percentage of agreement in other industries being 73%. This shows the importance retail leaders are attaching to acquiring the right talent and skilling up existing employees to ensure that they can effectively harness the tools and data available to them.

This may be attributable to the greater need to focus on understanding what is happening across the customer journey, online and offline.Retailersunderstandhowdigitalmaturity depends on the right use of various skills, blending data and tools with a creative mindset to achieve the desired results.

Recent research by PwC5 pointed to the resilience of physical stores, with survey respondents across all product categories saying that they purchased the majority of theirproductsofflineinthepast12months.Consumers often prefer a physical store as an element of both researching and purchasing, so retailers should examine the degreetowhichin-storesalesareinfluencedby digital and vice-versa, and explore ways in which they can provide a consistent experience across both channels.

5 http://www.pwc.com/us/en/retail-consumer/publications/assets/total-retail-global-report.pdf


Embedding the right culture – culture eats strategy for breakfast

‘Culture eats strategy for breakfast’ is a well-known phrase coined by management expert Peter Drucker and made famous by Mark Fields, President of Ford. This saying is as applicable to retail as it is to automotive businesses, with the most successful companies being those that are able to instil a culture that lends itself to innovation and experimentation.

Just under three-quarters (73%) of retail respondents say they ‘have a cross-team approach with the customer at the heart of all initiatives’, an encouragingly high percentage though 3% lower than for non-retail respondents. European retailers are least likely to embed a customer-focused culture, with only 61% saying that’s the case (compared to 82% in North America and 79%inAsiaPacific).

Collaboration, which is very much related to company culture, is an area where retail respondentsindexsignificantlyhigherthantheir non-retail counterparts. Two-thirds (66%) of retail respondents agree they ‘have thetoolsthatallowforstreamlinedworkflowsbetween creative and content marketers / web teams’, compared to 60% for non-retail respondents. Collaboration is another area where European retailers are lagging behind, with just over half (54%, compared to 69% inNorthAmericaand73%inAsiaPacific)saying they have the tools that facilitate it.

Retail businesses typically recognise that they have a great opportunity to foster and master cross-departmental processes which help to facilitate the kind of seamless synchronisation across different touchpoints that is necessary for omnichannel success in the digital age.


Only 13% of retailers describe themselves as digital-first

Process

While skills, culture and strategy are the areas retailers are most likely to excel in, process (60%) is one of the elements fewer have managed to master. Clear processes are the backbone of an effective strategy, so creating processes which enable the entire organisation to play their part in customer experience is imperative.

As was the case with culture and collaboration, European retailers are least likely to say they have the means and methods to ensure that strategy is carried outefficiently(56%comparedto64%inNorthAmericaand62%inAsiaPacific).

Technology and data

While culture is arguably the most important requirement for success, the importance of great technology and tools to harness data is inescapable. It is also clear from Figure 3 that many retailers are struggling because they don’t have ‘the tools to use data in order to create compelling, personalised and real-time experiences’. Only 58% of the respondents agree these tools are in place, compared to an average of 61% for other industries combined.

Effective use of data and personalisation is among the biggest challenges that need to be tackled by retailers amidst fast-paced changes in technology and a corresponding shift in consumer behaviour.

Just under two-thirds (65%) of retail respondents agree that ‘they have access and control over customer and marketing application data’. Data is the only area in which European retailers are leading the charge, with nearly three-quarters (72%, compared to 61% in North America and 69% inAsiaPacific)agreeingwiththisstatement.The next section of the report will focus on data and its critical role in improving the customer experience and, in particular, personalisation.

Creating digital alchemy

All these key pillars or components shown in Figure 3 need to be combined to create the alchemy required for digital maturity, with retailers constantly needing to assess if they are pulling the right levers hard enough. Although some success may be achieved by succeeding in just some of these elements, it is only the blending of them together that can lead retailers to a true digital nirvana: people, process and technology.

It has become clear that businesses can’t afford to be just a ‘little bit digital’. There are many qualities and characteristics which go into making a successful digital business, not least the existence of a clear digital strategy which is supported by leaders who foster a culture which lends itself to change and innovation6.

6 https://econsultancy.com/blog/67596-digital-transformation-in-the-retail-sector-challenges-opportunities/


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Econsultancy / Adobe Digital Intelligence Briefing Respondents: 310

Figure 4: Which three digital-related areas are the top priorities for your organisation in 2017?

7 https://offers.adobe.com/content/dam/offer-manager/en/na/marketing/Industries/us_91098500_retailpersonalization_fnl_11202014.pdf

Increased availability of data fuels personalisation 4

Our growing footprint as digital consumers and trackable interactions with retailers acrossarangeofonlineandofflinechannelshave spawned a wealth of data points about our preferences and behaviour. Smart businesses can harness this information to improve the customer experience by providing a more personalised experience, at the same time increasing the likelihood that we – as consumers – will purchase from them and recommend them to others.

Personalisation can take numerous forms, ranging from website content tailored to your implicit or explicit preferences, an email triggered after an abandoned purchase or, moving to the in-store environment, a highly relevant digital-screen advertisement or an alert on your phone triggered by beacon technology. The ability to provide authentic and personalised experiences within the parameters of customer privacy requirements has gone from being a ‘nice-to-have’ strategy to a ‘must-do mandate’.7


This is evidenced by Figure 4 which shows ‘targeting and personalisation’ to be the top tactical priority for retailers, cited by a third (33%) of retailers as being one of their three key areas of focus.

In a world where the all-encompassing but sometimes nebulous concept of customer experience is top of mind for businesses, personalisation is a tangible way for retailers to realise these ambitions for greater customer centricity.

It is worth noting that targeting and personalisation is more of a priority for retailers than for other businesses in non-retail sectors for whom the average percentage citing this tactic is only 24%, with other initiatives now taking top spot.

While those in other verticals are this year more likely to be prioritising disciplines such as content marketing and social media engagement, retailers continue to major primarily on a one-to-one marketing approach, and this ongoing commitment to personalisation is also evident from our survey data relating to budget intentions.

Almostthreeinfive(57%)retailersplanto increase investment in personalisation during 2017, higher than for any channel or discipline apart from mobile marketing (62%) and email marketing (also 57%). Retailers inAsiaPacific(APAC)areleastlikelytoincrease their investment in personalisation, withjustovertwo-fifths(44%,comparedto57% in North America and 67% in Europe) saying that’s the case.

There are a few other key differences between regions, with North American retailers being most likely to prioritise mobile

channels in 2017. Mobile optimisation is a top priority for 27% of North American retailers, ranking third on their priority list (after targeting and personalisation and conversion rate optimisation), compared to23%inEuropeand16%inAsiaPacific.Additionally, North American retailers are twice as likely as their European and APAC counterparts to prioritise mobile app engagement (12% compared to 4% and 6% respectively).

Turning our attention back to Figure 4, conversion rate optimisation (CRO) comes third in the pecking order, with data-driven retailers typically maintaining a laser focus on their conversion rates.

Extensive research by Econsultancy on this topic has shown that personalisation is itself seen as the third most valuable technique (behind customer journey analysis and A/B testing) for increasing conversion rates. The 2016 Conversion Rate Optimisation report8 also found that personalisation was also – by somedistance–themostdifficultmethodtoimplement when improving conversion rates.

Getting personalisation right at a time of ever-increasing customer expectations is certainly not easy. Technology can be a barrier, and it was seen in Figure 3 that only 58% of respondents agree they have the tools to harness the data to enable compelling, personalised experiences in real time.

Although the vast improvement in tools and technology can make this a less daunting experience, it is rarely a turnkey solution, despite what some marketing technology vendors may claim. There is still a requirement for skilled individuals to help

8 https://econsultancy.com/reports/conversion-rate-optimization-report


organise a multitude of fragmented datasets into actionable insights which can facilitate personalisation at scale.

Increased use of AI-powered machine learning and more sophisticated software-as-a-service solutions will increase the potential for effective personalisation but they come with the same caveat. There is no substitute for human intelligence and creativity when it comes to creating engaging and exciting experiences9 (more on this in Section 6).

The importance of personalisation to the retail sector is further underscored by data shown in Figure 5. In the context of customer experience, a quarter (25%) of retail respondents are putting the greatest emphasis on ‘making the experience as personalised and relevant as possible’, ahead of factors such as making the experience ‘valuable’ (20%), ‘easy-to-understand’ (13%) or ‘fun’ (10%).

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Figure 5: Where does your organisation place the highest emphasis in terms of improving the customer experience?

9 https://www.econsultancy.com/blog/68648-five-predictions-for-conversion-rate-optimisation-cro-in-2017

Targeting and personalisation are the top tactical priorities for retailers


Focus on mobile continues to bear fruit 5

There is a school of thought which says that ‘mobile’ should no longer be treated as a discrete area of focus. The theory goes that so-called smartphones – more notable for their ability to provide internet access than to enable voice calls – have become so ubiquitous that businesses are already either mobile-first,mobile-friendlyorfailing.

There is some truth in the argument that mobile-friendly websites have become more of a hygiene factor than an opportunity for differentiation. But the reality is that mobile

technology and related consumer behaviour continue to evolve in a way that demands the utmost attention from retailers, whether as an ongoing and vital consideration for practitioners in established digital disciplines such as email and search, or as a conduit for a range of technologies such as location-based services, contextual marketing and pushnotifications.

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Figure 6: Proportion of companies planning to increase budgets for the following digital marketing channels or disciplines in 2017


The statistics continue to bear out the huge impact of mobile, with retail sales in the UK alone reaching £133bn in 2016, a 16% year-on-year increase of £18bn. Sales made via smartphones increased by a massive 47% year-on-year in December 2016, according to data published in January 2017 by the IMRG and Capgemini.10 In the US, mobile accounted for 21% of total digital commerce dollars in Q4 2016, up by 45% year-on-year.11Thesearecompellingfigures,evenbefore the contribution of the mobile channel asaninfluencertoofflinepurchasesisconsidered.

This research suggests that the majority of retailers agree that mobile is still a discrete and fertile area for investment. Almost two-thirds (62%) of retailers surveyed are planning to spend more on mobile in the year ahead, the highest percentage across a host of digital-related activities and channels. European retailers are slightly more likely than their North American and APAC counterparts to increase their mobile investment in 2017 (67% compared to 60% and 61% respectively).

Retailers are investing heavily in mobile marketing because they know it is likely to yield tangible results. Respondents in this sector are 38% more likely than their peers tosaytheyareconfidentintheirabilitytomeasure the return on investment for mobile marketing programmes (44% of retailers, versus 32% for non-retail).

So we have established that mobile is still ‘a thing’ but how important is this area relative to other initiatives within retail businesses? Figure 7 shows that mobile is still a top-three priority for the majority of respondents, with 11%ofretailersmakingittheirfirstchoice.It is clear from the same chart that a more important priority for the average retailer is customer experience, with 54% ranking this as their top choice.

Of course, mobile needs to be harnessed as part of a retailer’s customer experience programmes, rather than being seen as a competing area for attention and budgets. Indeed, the same applies to data-driven marketing, cross-channel marketing, mobile and programmatic, which are the other strategic priorities shown in Figure 7.

10 https://www.econsultancy.com/blog/68709-uk-online-retail-sales-hit-133bn-in-2016-up-16-year-on-year-stats 11 http://www.comscore.com/Insights/Press-Releases/2017/2/comScore-Reports-109-Billion-in-Q4-2016-Total-Digital-US-

Retail-E-Commerce-Spending-Up-18-Percent-vs-Year-Ago

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Figure 7: How retailers rank strategic priorities in 2017


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Optimising the customer journey across multipletouchpoints

Understanding how mobile users research / buyproducts

Very important Quite important Not important


Figure 8: How important will the following be for your digital marketing over the next few years?

Figure 8 underscores the importance retailers are attaching to an understanding of the customer journey. Virtually all retailers (98%) say that understanding how mobile users research and buy products will be important over the next few years, and 79% say that it will be ‘very important’.

A key part of the process for retailers is to understand the points during the customer journey when decisions are made and preferences are shaped. Customer journey mapping can help marketers identify these momentary windows and optimise interactions, for example when customers are seeking inspiration (as part of the research process), decisive pieces of

information or a clear route to purchase. The Internet of Things era promises to add a whole new dimension to this process, with retailers armed with even more data about the customer lifecycle and consumer interaction with products and services.

With this in mind, it is no surprise that three-quarters (75%) of retail respondents say that ‘optimising the customer journey across multiple touchpoints’ will be very important in the next few years.


2020 vision – a technology-driven future with a human touch 6

The commitment of the retail sector to customer experience as the path to success is highlighted by Figure 9 which shows what retailers regard as the key requirements for successfuldifferentiationoverthenextfiveyears.

Overwhelmingly the most popular option for this question was ‘customer experience’ andspecifically‘makingtheexperienceon our properties as easy / fun / valuable as possible’. More than a third (34%) of respondents selected this option, significantlyaheadofotherchoicessuchas‘customer service’ (14%), ‘product / service

quality’ (12%), ‘product / service innovation’ (11%)and‘joininguponline/offlineexperiences’ (10%).

Not only is the focus on customer experience increasing,itisalsonotregion-specific.Respondents across North America (30%), Europe(39%)andAsiaPacific(31%)areall most likely to perceive CX as a key differentiator over the coming years.

1%

5%

6%

7%

10%

11%

12%

14%

34%

0% 5% 10% 15% 20% 25% 30% 35% 40%

None of the above

Mobile – catering to mobile shoppers / buyers

Convenience e.g. fast delivery, in-store pickup, buyonline return-to-store etc.

Price

Joining up online / offline experiences – ensuring consistency across virtual and physical worlds

Product / service innovation

Product / service quality

Customer service – enhancing our reputation for brilliant service across all touchpoints

Customer experience – making the experience on our properties easy / fun / valuable


Figure 9: Over the next five years, what is the primary way your organisation will seek to differentiate itself from competitors?


Only 7% of retailers selected ‘price’ as the primary differentiator over the next half-decade which shows that competing primarily on reduced cost of products and services is not a viable business strategy for the overwhelming majority of companies in this sector.

Retailers are embracing various technology-related business trends as part of this commitment to an easy, fun and valuable experience. Figure 10 shows the extent to which retailers regard particular technological trends as an exciting prospect for 2020.

‘Engaging audiences through virtual and augmented reality’ (28%) comes out on topinthischart,aheadof‘usingartificialintelligence / bots to drive campaigns and experiences’. Let’s take a look in more detail at the impact some of these technologies are already having on the retail sector.

3%

7%

18%

20%

24%

28%

0% 5% 10% 15% 20% 25% 30%

Other

Voice interfaces e.g. Amazon Echo, Google Home

Internet of Things / connected devices e.g. wearables,audience tracking

Enhanced payment technologies e.g. mobile wallets, e-receipts

Utilising artificial intelligence / bots to drive campaignsand experiences

Engaging audiences through virtual or augmentedreality


Figure 10: Looking ahead, which of these do you regard as the most exciting prospect for 2020?


Virtual reality and augmented reality

Virtual reality (VR) and augmented reality (AR) are separate but related technologies which both offer potentially great but often unrealised promise for retailers. VR allows consumers to experience a brand’s offering in a very real and visceral way, for example transporting people to a store or other brand-related location. It can do this with animation, real video or even in real time with live streaming.

The possibilities for providing innovative experiences that strengthen the bond between retailers and consumers, from virtual dressing rooms to backstage access to the biggest fashion shows, are endless, and Econsultancy has covered this extensively in its Marketer’s Guide to Virtual Reality12.

Despite the potential for virtual reality, Econsultancy Founder Ashley Friedlein argued in his 2017 digital trends predictions13 that VR hasn’t yet been harnessed by many marketers because “the hardware requirements are still too onerous, the tech and apps too fragmented, [and] the use cases mostly gaming or too niche”.

12 https://econsultancy.com/reports/a-marketers-guide-to-virtual-reality/ 13 https://econsultancy.com/blog/68706-ashley-friedlein-s-marketing-and-digital-trends-for-2017/

AR refers to technologies that augment views of the real world with computer-generated information, unlike VR where experiences are purely computer-generated. The most famous example of AR is location-based game Pokémon GO which was a huge trend in 2016 (in case you missed it!). Brands have already been using AR for several years, including for example IKEA which launched an AR app in late 2013 to enhance its catalogue.

As with VR, Friedlein argues, AR’s adoption could be turbo-charged by the iPhone 8 release this year, with its focus on ‘mixed reality’. While VR and AR have both been talked about for a while, the sense is that both these related trends will come more to the fore as we get closer to 2020. The onerous hardware requirements and significantcostsmeanthattheuptakewillcontinue to be slow over the next few years.


AI and chatbots

We have already focused on the importance of personalisation in Section 4 of this report, focusing on how retailers can personalise the experience for consumers at scale, based on a range of data sources including known preferences, browsing behaviour and purchase history.

Going beyond conventional ecommerce, retailers are moving towards conversational commerce, with the use of messaging apps to create AI-powered bots that enhance the customer journey and help consumers findtheproductstheyarelookingfor.Asit becomes more challenging for retailers to convince consumers to download their apps, chatbots aim to create easy, fast and pleasant interactions, offering a highly responsive and personal approach.

Although the use of AI-driven chatbots is still at an early stage, successful examples are already in evidence, such as cosmetic retailer Sephora’s interaction with its customers on instant message platform Kik, offering make-up tips and product recommendations.

US retailer Macy’s has introduced a mobile tool called Macy’s on Call that helps customers while visiting the store, improving the customer experience by offering relevant information for each location. Another good example is grocery retailer Waitrose which has focused on improving the in-store customer experience by introducing direct assistance through a smartphone app that helpedcustomersfindtherightproducts,orcall for assistance from the store’s staff.

One of the key challenges for retailers usingartificialintelligenceistomaintainthe genuinely human element that helps consumers trust the brand. How retailers avoid the ‘uncanny valley’ – when almost-human behaviour can elicit negative feelings – will be an interesting challenge for technologists to overcome in the next few years.

Despite the challenges of making the experience both personal and personable, AI is set to have a huge impact on the retail sector,withglobalrevenuefromartificial

intelligence expected to reach $36.8 billion by 202514.

Artificialintelligencecanultimatelybeusedto help retailers connect with consumers through superior experiences, powered by the right use of data. It has the ability to revolutionise the way retailers gain insights into consumer behaviour, helping them improve the customer experience in the most appropriate way.

AI isn’t just about chatbots, which – strictly speaking – some would argue aren’t necessarilyartificialintelligenceinanycase15. As well as being used for chatbots which facilitate better customer service by helpingcustomerstofindthingsandbymaking more intelligent recommendations, AI has the potential to be harnessed by retailers in a plethora of other areas, including social media sentiment analysis, content generation (e.g. optimised web and email copy) and digital advertising optimisation.

Other technology trends

Other technology trends featured in Figure 10 include payment technologies, the Internet of Things and voice interfaces.

Payment technologies are crucial for retailers who want to accommodate increasingly smartphone-reliant customers requiring multichannel options supporting quick and secure digital payment. A glimpse of the future is already available in Amazon’s Seattle Amazon Go grocery store where shoppers can bypass checkout lanes because purchases will automatically be charged to their Amazon account. The store was opened for testing in December 2016 and was due to open in early 2017.

The Internet of Things similarly offers huge potentialformarketersasbrieflytouchedon earlier in the report, for example through physical products with a digital layer of personalised interactive services which can talk directly to consumers and back to a retail brand, enabling a service which becomes increasingly data-driven and personalised. For example, automated purchase and replenishment services might become the norm over the next few years, with smart household appliances being connected

14 http://www.adweek.com/digital/5-bleeding-edge-brands-are-infusing-retail-artificial-intelligence-175312/15 http://venturebeat.com/2016/10/08/the-difference-between-an-a-i-interface-and-an-a-i-chatbot/


to services similar to Amazon Dash Replenishment. These have the potential to completely transform the retail and distribution of staple goods. APAC retailers are 50% more likely than their peers in North America and Europe to perceive the Internet of Things as an exciting prospect for 2020, showing a willingness to experiment.

Voice interfaces such as Amazon Echo and Google Home are not top-of-mind yet for retailers but will become relevant as consumer adoption increases.

Human-centred design

Although technology trends will dominate the evolution of retail over the next few years, it feels right to conclude this section – somewhat paradoxically – with a reminder about the importance of human-centred design.

This is not a new concept but it is certainly a trend that retailers need to consider as a way of balancing tech-driven automation which is becoming more prevalent. A design-led approach means having the overall customer experience at the heart of product and service development, ensuring consistency across all touchpoints. This is very much an art as well as a science.

Our research shows there is a growing interest towards design and, encouragingly, more retailers seem to consider their organisation to be design-focused. This year, two-thirds (66%) of retail respondents describe their company as design-driven, up from 60% in 2015 when we previously asked the same question.

20%

40%

34%

6%

22%

44%

29%

5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Yes, definitely Yes, somewhat No, not really Not at all

2015 2017

Econsultancy / Adobe Digital Intelligence Briefing Respondents 2017: 384Respondents 2015: 112

Figure 11: Would you describe your company as a design-driven organisation?

Engaging audiences through virtual and augmented reality is the most exciting retail prospect for 2020


1. Embrace a digital-friendly culture

The journey to digital success is built on a range of key pillars explored in this report, including strategy, process, technology, data and skills. Finding the right alchemy within the business depends very much on fostering the type of business culture and working environment which lends itself to innovation, creativity and data-driven experimentation. Retailers need to empower employees by letting go of the traditional command-and-control structure and encouraging bottom-up innovation so that it can permeate the organisation.

2. Use data compulsively to improve the customer experience through personalisation

The most progressive and innovative retailers use data in a multitude of shapes and forms to help improve both the user experience and business performance. Retailers have a raft of data sources at their disposal, including online browsing data and purchase history.

Every consumer has unique purchasing habits and personalisation places emphasis on the individuality that characterises our customer journeys. Get to grips with the full range of customer-related data which is available and prioritise personalisation as a way of helping you to differentiate through customer experience rather than price.

3. Understand the customer journey and identify key moments

A design-led approach to the overall shopping experience is essential for 21st century retailers who want to ensure a consistent approach across all touchpoints. While every customer journey is unique, retailers can simplify their digital and mobile initiatives by mapping typical paths to purchase and understanding where they occur, targeting those particular points in time during the customer journey when preferences are made and decisions are shaped.

4. Experiment with more innovative technology

As well as the tried-and-tested tactics which are delivering success today, retail organisations need to have one eye on the future so they are not left behind by competitors. Ring-fence some budget for more innovative initiatives, experimenting withtechnologiessuchasartificialintelligence, virtual reality or augmented reality. Keep an eye on the latest trends and don’t be afraid to poach ideas from other retailers. But don’t feel you have to do everything for the sake of it. Good luck!

Actionable tips to help future-proof your retail business 7


Appendix: respondent profiles 8

36% 36%

13%

10%

2%1%

2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Europe North America Asia Australia / NewZealand

Africa Middle East Other


Figure 12: In which region are you based?


2%

3%

4%

4%

4%

4%

6%

10%

18%

45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other

Taiwan

Indonesia

Philippines

Thailand

China

Malaysia

Singapore

India

Australia / New Zealand

12%

1%

1%

2%

2%

2%

3%

6%

6%

8%

14%

43%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other

Switzerland

Denmark

Austria

Belgium

Italy

Norway

France

Germany

Netherlands

Sweden

UK

Respondents: 171

Respondents: 109

Respondents based in Europe

Figure 13: In which of the following countries are you based?

Respondents based in Asia Pacific

Figure 14: In which of the following countries are you based?

Econsultancy / Adobe Quarterly Digital Intelligence Briefing



64%

12%

24%

0%

10%

20%

30%

40%

50%

60%

70%

B2C B2B B2B and B2C (equally)

17%

2%

3%

3%

14%

23%

38%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Other

Board level

VP / SVP / EVP

C-level / general manager

Director / senior director

Junior executive / associate

Manager

Respondents: 473

Respondents: 473

Figure 15: What best describes your job role?

Figure 16: Are you more focused on B2B or B2C marketing?




8%

20%

17% 17%

19% 19%

0%

5%

10%

15%

20%

25%

<£1 million £1 – £10 million £10 – £50 million £50 – £150 million

£150 million – £1 billion

More than £1billion

Respondents: 172

Figure 17: What is your annual company revenue?


in association with

Digital Intelligence Briefing2017 Digital Trends in Retail

Published March 2017

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher.

Copyright © Econsultancy.com Ltd 2017

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