PhD (Economics) Natorina A.O.

Donetsk National University of Economics and Trade

named after Mykhayilo Tugan-Baranovsky

Digital Retail Trends and Challenges

the majority (88 percent) of retail business and IT executives anticipate the pace of technology change will increase at an unprecedented rate over the next three years. In order to improve their adaptability and respond to consumer demands for a highly connected, integrated and convenient shopping experience, leading retailers are investing in digital technologies across their businesses—expanding into mobile storefronts, adding social channels, plying analytics for data-driven decisions, moving infrastructure and applications to the cloud [1, p. 3].

Theoretical and practical aspects of digital retail were considered by many scientists and economists among whom: Brown S., Kapferer J., Keller K., Schieber H., Trout J., Ward K. However, these causes continue detailed study. Therefore, the aim of this paper is to research and define the features of digital retail and analyze retail dimensions of five technology trends.

Today, the word “community” often implies a virtual or digital community, particularly when applied to Millennials. However, retailers in the past few years have been responding in a host of ways to consumers’ quests for connection, exclusivity, customization, and membership. The traditional method of providing additional benefits to customers has been through membership in a loyalty/reward program. And loyalty programs have been astonishingly successful tools for retailers.

Consumers’ willingness to be part of a retailer community that brings tangible benefits is clear. But, in many ways, loyalty programs have grown stagnant through a failure of imagination, and don’t really build a community. Getting a certain level of award points due to spending a certain amount of money at a retailer does not connect customers to like-minded consumers in any significant way.

While social media is still in its nascent stages as a driver of online purchasing, its growth in both pure social-driven retail sales and referral traffic is undeniable, outpacing all other online channels. When looking at the top 500 retailers in the US for example, the $3.3 billion in sales from social shopping in 2014 marked a 26% increase from 2013, according to the Internet Retailer’s Social Media 500. This growth is well ahead of the roughly 16% growth rate for the overall e-commerce market in the USA [2, pp. 22-25].

In the next decade, this perfect storm will drive a massive reimagining of retail. This will present both huge opportunities and huge challenges to all the players in retail, across all sectors. The major forces on the future of retail are: customer expectations (changing shopper demographics, increased choice, and exposure to new technology mean that customers now have rapidly evolving attitudes towards shopping); manufacturer expectations (suppliers want increased visibility into retail operations and expect new services from retailers including shopper analytics, targeted advertising, and other analytics and insights); disruptive technology; global economic slowdown (retailers are operating in an increasingly over-saturated and highly competitive retail sector); online explosion (the shift to online sales has remade the retail landscape forever and requires very new thinking in the channel, 24/7 shopping landscape).

The 15 trillion dollars retail sector is now evolving at the speed of the Internet. To thrive and survive in retail, companies now need to innovate at that same pace. That means businesses increasingly need to be virtual, not just physical. By digitizing the entire business flow, retail will become more responsive to customer needs, able to personalize the shopping experience for each and every customer, and be able to continually tune and optimize their businesses over time. The five overarching technology trends (Intelligent Automation, Liquid Workforce, Platform Economy, Predictable Disruption and Digital Trust) have retail-specific dimensions as shown in Figure 1. In the following sections, we describe the trends and discuss the implications for retailers in each area. Over the last thirty years, digitization has utterly transformed and remade the media and publishing sector. A lengthy upheaval was triggered by sustained technological change. The changes wrought on the industry ushered in new business models, obsoleted prior expertise, changed customer expectations, and remade the entire business landscape [3, p.24].

Figure 1: Retail dimensions of five technology trends [1, p.3]

So, in the digital era, adaptive retailers must embrace the dimensions of these five technology trends with one common principle: people first. Equipping customers with automation for greater convenience. Enabling employees with digital skills through a continuous learning model. Extending offerings with business partners to create disruption. All of these options and more are available to retailers that use digital technology to its fullest advantage to improve productivity and unlock future growth.

References:

1. People First in Digital Retail Accenture Technology Vision for Retail 2016. Available at: https://www.accenture.com/t20160603T012006__w__/us-en/_acnmedia/PDF-21/Accenture-Retail-Technology-Vision-2016.pdf.

2. Total Retail Global Report, February 2016. Available at: www.pwc.com/totalretail.

3. The Second Era of Digital Retail: A Vision for the Future of Shopping, 2016. Available at: http://www.intel.com/content/dam/www/public/us/en/ documents/reports/futurecasting-report-june-4.pdf.