Retailers Jumping on the Digital Bandwagon Are Transforming the Industry in 3 Key Areas
Last month, Virtusa Corporation released the results of a September 2017 study examining digital transformation across multiple industries.
Virtusa is a global digital engineering and information-technology services provider. According to its study, conducted by Forrester Consulting, 85 percent of businesses surveyed said they planned to invest in digital transformation in 2018.
That means that the vast majority of businesses are changing to internet-based online systems to find customers, market their products to them and process their payments. Storefronts are still part of the mix, but their role is diminishing more and more.
Many of those businesses fall into the six industry segments the study examined: retail, banking, healthcare, insurance, telecommunications and media. Of the 600 respondents, 37 percent said they planned to increase spending on digital transformation by 10 percent or more.
Of the six segments in the study, the retail industry in particular appeared to be setting the standard for innovative, digitally driven customer experiences. And those innovations are having a major impact on retail industry specifically; but that should come as no surprise. The reason: As more and more consumers turn to digital sellers, brick-and-mortar retailers increasingly are being left behind.
Large department store chains, for example, are either reporting digital transformations -- or closing their doors, as Business Insider described. The reason of course is that online shopping has become the go-to destination.
The need to embrace digital transformation is therefore clear, and retailers that have jumped in with both feet are starting to reap the rewards. Here are three ways digital transformation is changing retail, and how businesses can strategize to stay ahead of the game.
According to a report released by Business Wire earlier this month, department store retailer Macy's has seen unprecedented growth in recent quarters. And Macy's shares have increased in value by 13 percent.
"The winning formula for Macy's, Inc. is a healthy brick-and-mortar business, robust ecommerce and a great mobile experience," the report quoted Macy's CEO Jeff Gennette as saying. "While we have more work to do," Gennette said, "the continuing improvement in our stores is encouraging, and we once again achieved double-digit growth in the digital business,"
Providing consumers with a user-friendly, engaging and useful online and mobile experience is key for retailers. Macy's plans to take digital transformation even further with a new augmented reality feature on its mobile application.
Augmented reality can give consumers a real-life image of how a product will fit them or fit into their home. For instance, Ikea's app can show a potential customer whether that new sectional sofa she's been eyeing will really fit in the living room. This level of digital innovation communicates that a retailer is harnessing the power of new technology for the benefit of its customers.
In the past, retailers were forced to rely on traditional financial institutions for payment options. But, as technology has advanced, payment options and even the currencies consumers use have changed. Online retailer Overstock was the first major retailer to begin accepting bitcoin payments. The company embraced cryptocurrency in January 2014 and was able to generate $2 million in eight months, which equated to about $300,000 per month in bitcoin purchases, according to Reuters.
Cryptocurrencies are becoming more and more popular in general, but most retailers still don't accept them as a form of payment. Reasons for this reluctance include the volatility of the cryptocurrency value and slow transaction speeds. "Cryptocurrencies, if built on proper enterprise level blockchains, offer a significant reduction in transaction costs and increase in transaction security to benefit retailers," Stefan Krautwald said in a company white paper. Krautwald is commercial director of FluzCoin, a patent-pending intelligent retail cryptocurrency.
Certain cryptocurrencies, like bitcoin, come with a high level of anonymity and because of "know your customer" (KYC) government regulations, companies must be able to verify the identity of their customers, making anonymity a major issue.
But there are options for retailers looking to embrace cryptocurrency, Krautwald noted: "For ecommerce businesses," he said, "reduced fraud, such as the elimination of fraudulent chargebacks and lower transaction fees, can play a crucial role in cryptocurrency's adoption."
Just as brick-and-mortar retailers have had to switch up their game to compete with online retailers, ecommerce sites are finding themselves under assault by newer subscription-based companies. An example is Stitch Fix, a personal shopping service of sorts. Stitch Fix doesn't just sell clothing and accessories the way thousands of other online retailers do. Instead, its customers receive a box of clothing and accessories month, with each box specifically tailored to their individual needs.Stitch Fix collects a fee for the curation, whether the customer buys something or not.
Online retailers are succeeding due to the convenience they offer consumers; and, thanks to the digital transformation in online retail, subscription-based services are taking the convenience factor one step further.
At their core, subscription-based retailers are harnessing the power of automation to offer new innovative services. Consumers no longer have to go to a store when they run out of shampoo, or other necessary household items. Amazon offers a number of subscription options for necessities, and orders can literally be placed with the push of a button.
Amazon's Dash Buttons lets consumers order refills automatically. Other companies, like Dollar Shave Club, which offers shaving razor subscriptions, are popping up to fill niche markets and offering customers affordable products by passing on wholesale cost savings directly to consumers.
The success these retailers are having demonstrates that retailers that don't hop on the digital transformation train will be left at the station.