The Future of Digital Retail

The next two years will bring about new behavioural realities of device connected retail environments. What sort of shopper habits will develop as new retail technologies become widespread and expected by the consumer? And most importantly, what can retailers actually do about it?

Yes, current retail environments (both on and offline) are data-rich and increasingly personalised. But culture hasn’t caught up yet. In the past, technological advancements in retail have been defined by the friction they introduced to the shopping process, rather than convenience. Think of the current state of self-checkouts; theoretically timesaving, but in practice just an often-broken inconvenience. It hardly feels like progress.

But not for long. Retailers are growing savvy and sophisticated in their use of new technologies to improve customer experience (and their bottom line). As these realities take hold and culture adapts around new technological promise, entirely new consumer patterns and expectations will emerge.

Pro-Date, Not Anti-Privacy

Today’s consumer already gives up a tremendous amount of personal data through the ways they spend, browse, travel, and communicate. That said, people are largely ignorant of the way this data is used, even though retailers have begun to weave non-transactional user data into their commerce strategies.

To date, most retailers have approached the use of customer data with extreme caution. Privacy is a major issue; spooking their customers could generate publicity issues at best, and plummeting profits at worst. But as more retailers learn how to eloquently use customer data to provide an improved retail experience, customers will generate tolerance – and preference – for the practice.

Of course, there have been some highly publicised missteps over the last few years that have given data-powered commerce a bad name. Target, for example, devised a way to find out when women were entering their second trimester of pregnancy – a key time period during which purchasing habits are in flux. But they used the data in a decidedly insensitive way, targeting moms-to-be before acknowledging exactly how the brand had identified their pregnancy. For a consumer group unaccustomed to brands acknowledging their purchasing habits, this was highly unwelcome. And needless to say, it was a painful learning experience for Target.

Inevitably, there will be a gradual increase in the cultural knowledge surrounding how retailers use their data. In the best cases, it will save people money and time. Over time, consumers will develop an expectation of smart, highly personalised retail environments. It won’t be a novelty or a nice-to-have. It will be a necessity.

Predictive-Aware, But Savvier Than Ever

As retailers become able to predict shopping patterns and preferences with increasing accuracy, the most progressive among them will use their newfound knowledge to guide customers through the consideration and purchase process. But as we’ve learned through the rise of massive ecommerce outlets like Amazon and Alibaba, for customers preference does not equal intent.

Consumers around the world are increasingly empowered in the shopping process: peer reviews, transparent business practices, and comparison sites are used to help consumers make even the smallest of purchasing decisions. Handled clumsily, retailers who predict consumer preferences will be perceived as subverting customer choice. But retailers who use their predictive algorithms to create simplified choice for their customers, while maintaining a consumer’s ability to evaluate and make unilateral purchasing decisions, will thrive.

Keeping Money In Curious Places

Today, the average consumer’s purchasing power comes exclusively via debit, credit, and cash. But that’ll soon change.

Venmo, PayPal, individual merchant accounts by Amazon and Google, and other global banking alternatives are already infringing on the trusted space that only banks have occupied in the past. Younger consumers in particular are willing to trust their money and transaction security to new, relatively untested companies and services. Most notably those that ease peer-to-peer transactions and allow for completely mobile banking solutions. Over time, these services will become de-facto banks that allow consumers of all income levels to transact digitally, whether in-store or online. Embracing new payment methods will give retailers easier access to consumers who prefer to transact without fees through these services.

Increasingly Simplified Transaction And Delivery

Swiping a physical credit card? Standing in line to pay? These behaviours already feel like things of the past, and we still do them every day. New services are prepared to disrupt the vestiges of transaction processes. And with that comes considerable competition from digital retailers, whether physical retailers like it or not.

Today, brick-and-mortar retailers can count on both convenience and immediacy as factors that keep people walking in the front door. But as consumers come to expect instant payment and same-day (if not same-hour) delivery on the goods they purchase, price and service sensitivity become amplified.

If physical retailers are worried about ‘Showrooming’ today, the next several years will give rise to a consumer base that can transact and take delivery on a product from an e-retailer with nearly the same convenience and immediacy as if they bring it home right from the store. And while that may seem like a predictable outcome, the fact that an ecommerce transaction can happen right there in the store — albeit from a different retailer — will raise the bar for brick-and-mortar and online-only retailers alike.

2017 And Beyond

While the technological complexity of the retailer-customer relationship increases at a steady clip, brands should consider connected customers a massive opportunity rather than a detriment. Yes, convoluted pricing structures will become a thing of the past, and all retailers will be subject to an increasing array of factors that drive customer preference. But for retailers who continue to provide a superior shopping experience – albeit an increasingly digitally enabled one – the future is very bright.

Zach Pentel is Strategy Director and Partner at AnalogFolk New York