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Posted by Marbenz Antonio on April 26, 2022
It goes without saying that retail has been severely disrupted in recent years. Even before Covid turned the world on its head, the media was awash in stories about the so-called “retail apocalypse.”
Since then, we’ve seen lockdowns, inconsistent openings and closings, some businesses going out of business entirely, celebrations of vital retail workers, and a spike in internet shopping that delivered record profits to some but left others with more uncertain consequences. With continued supply chain disruption, inflation, and a tight labor market, the retail sector is clearly facing significant headwinds.
However, these obstacles also bring opportunities, and every business leader serious about prospering in the post-Covid world will need to leverage the power of digital transformation. Retail isn’t just big, it’s massive: the National Retail Federation predicts that sales in the United States would increase by 13.5% to $4.56 trillion by 2021.
While we may not yet be in the post-Covid era, the contours of what that “new normal” might entail are beginning to emerge. According to recent data by NielssenIQ, the abundant availability of vaccines is fuelling a “cautious confidence renewal” among customers, even as the epidemic continues to affect priorities and buying habits.
But, in the middle of all this uncertainty, what trends should business executives pay attention to?
Each year analysts pay close attention to retail spending around the holidays, and this year the news was upbeat. Despite a 1.9% decline in December sales, the overall solid Q4 rise of 17.9% over the same period last year was offset.
People appear to have gone from a “just in time” to a “just in case” approach to shopping, as IBM CEO Arvind Krishna noted in a recent keynote speech at the National Retail Federation (RTF), however, whether this tendency will last is unknown.
Consumer buying patterns, like their relationship to the shopping experience, are changing. While there has been a significant movement toward internet purchasing, this does not mean that physical shopping is dead. Consumers demand more than just opening the door and picking up a package, according to new research from IBM’s Institute for Business Value (IBV) and the RTF.
In fact, over three-quarters of consumers (72%) say that retailers are still their primary source of purchases. Hybrid retail, which includes experiences like curbside shopping or ordering online and picking up in-store, is now the preferred mode of purchase for 27% of consumers.
Surprisingly, Gen Z consumers, sometimes known as “digital natives,” appreciate this hybrid approach of buying the most of any age group.
But, while trends show us where we are now and where we might be going, what can retailers do to ensure that their digital transformation programs are future-proofed?
With IBM’s Krishna informing the RTF audience that we have only tapped 10% of the technology’s potential, AI represents a powerful opportunity to raise profitability and deliver new and improved experiences.
AI is already being utilized to power virtual assistants and automated checkouts. By analyzing historical and location data, AI-powered logistics management can estimate product demand and get the appropriate products in front of customers at the right moment.
However, it’s also crucial to understand AI’s broader implications. More efficient, automated procedures have a human impact in addition to greater profits. The more that we can get machines to shoulder repetitive time-consuming work, lead to less stressed, more engaged employees and satisfied customers.
Another increasingly significant topic for company executives to consider when pursuing their digital transformation strategy is what impact our actions will have on the environment and society.
This isn’t just about meeting the growing number of regulatory requirements. According to the IBV, 62% of consumers are willing to adjust their purchase patterns in order to lessen their environmental effects. Meanwhile, “purpose-driven customers,” who seek products and brands that correspond with their values, are on the rise and already account for nearly half of all buyers (44%). Digital transformation also plays a key role here: for example, Heineken has partnered with IBM to modernize its integration capabilities while also supporting the company’s environmental and social responsibility goals.
The good news is that profit and purpose do not have to be mutually exclusive. In fact, a recent analysis of business sustainability strategies by the IBV found that between 2018 and the first half of 2021 a select group of “transformational trailblazers” saw estimated cumulative revenue growth of 51% — a difference of nine percentage points over their next best-performing peers.
Meanwhile, according to Gallup, Gen Z and Millennials now make up nearly half (46%) of the full-time workforce in the U.S., and these age groups want to work for companies with ethical leadership. Indeed, according to PwC data, 65% of employees throughout the world desire to work for a socially conscious organization.
Thinking thoroughly and holistically about how to implement new technologies like intelligent automation can help retailers not only increase profits but also improve customer and employee experiences, resulting in greater experiences for all.
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