Leon: Creating impact through digital transformation
The retail industry has undergone a seismic shift. Foundations have been rocked; assumptions shaken. Consumers around the world are living differently, working differently, and buying differently. As the post-pandemic dust begins to settle, it’s time to examine what all these changes mean for businesses in 2022 and beyond. Which global and local trends, fueled by evolving consumer behaviours, will continue to impact industry operations, define strategies, and shape ambitions?
Our latest Retail Report research with KPMG shows that globally, 67% of businesses across the retail, food and beverage, and hospitality sectors grew in revenue by 20% or more in 2021. This is largely thanks to accelerated investments in digital transformation, made in response to rapidly evolving shopper needs, local government regulations, and operational necessity. According to our research, 49% of respondents say their business is in a better position due to investments to improve operations during the pandemic, and 94% plan to invest further in 2022.
These results were examined in a recent interview with Sky News. Watch the video below to see our UK MD, Colin Neil, discuss digital transformation in the context of the cost of living crisis:
Consumers have noticed the change, too: 61% believe retailers used technology well to make their products available during the pandemic. But there’s still a long way to go. Having experienced retail’s recent rush of resourcefulness, innovation, and flexibility, consumers around the world now expect more from their shopping experiences.
Here are five key consumer expectations that are worth strategic consideration in retail right now:
The flexible, tech-driven experiences made available mid-pandemic are blurring the line between sales channels and fuelling the rise of nonlinear customer journeys. From the convenience of click and collect to in-app loyalty programmes, our data shows that 61% of consumers believe retailers should deliver the same cross-channel flexibility they provided during the pandemic. 55% are more loyal to retailers who have both physical stores and online options.
These shopping preferences present significant opportunities for loyalty building and revenue growth, but many businesses risk missing out. While 61% of consumers would be more loyal to a retailer that lets them buy things online and return in store – up from 54% in 2020 – only 28% of businesses say they enable customers to shop and complete transactions easily across online and offline channels. In order to close this expectation gap, businesses should consider exploring unified commerce solutions, connecting sales channels, consolidating payments, and breaking down silos for a more modern multichannel customer experience.
“Those retailers who can leverage digital technologies to make their service ubiquitous and engage with customers across channels are more likely to build long-term loyalty.”
It’s never been easier for people to find, compare, and shop with new brands. And this is affecting traditional customer loyalty around the world. Globally, 70% of consumers will not shop with organisations that have a bad shopping experience, either online or in store. To secure long-term loyalty, retailers must offer customers more compelling reasons to shop with them on a regular basis.
Loyalty programmes are an area of the customer experience ripe for innovation: 70% of consumers globally say retailers should use technology to make their loyalty or rewards programmes easier and more effective.
The Retail Report highlights a particularly strong opportunity in payments-linked loyalty programmes and apps: 61% of consumers would download a retailer’s app to receive better loyalty rewards and 57% would be more likely to shop with a retailer if their loyalty programme worked automatically through their payment card. Payment-linked loyalty models also help you to capture richer data insights, track shopping trends and preferences, assign loyalty points, and better anticipate your customers’ needs.
Consumers are increasingly looking to brands to make positive contributions to society. Our research found that showing support to good causes, and enabling consumers to make their own positive contributions, will help drive loyalty. Two thirds (66%) of customers believe brands have a responsibility to ensure their stock is ethically sourced and produced, and 53% prefer brands that stand up for causes they believe in.
Yet, retailers still have a way to go in effectively meeting these demands. While 38% of consumers will pay more for an item if the carbon emissions associated with production are offset, only 24% of businesses enable this.
Linda Ellett, Head of Consumer Markets, Leisure & Retail of KPMG in the UK, says Environmental, Social, and Governance (ESG) is an ever-growing consideration for consumers choosing which brands to shop with, and should be a top priority for the retail industry.
“Any business that doesn't take Environmental, Social, and Governance seriously may find themselves falling behind. Businesses need to make it easy for customers to make the choices they want to make.”
Despite the significant rise in online shopping during the pandemic, there’s still a strong appetite for the in-store experience. And consumers have high expectations that technology can be used to improve it. 64% of consumers say physical stores are an important touchpoint, even if they shop with the same retailer online. Half of consumers will shop online, but go in store for customer service, or help with a product that they couldn’t find online.
“Rather than a place to simply hold inventory, the store is now seen as a curated gallery or a showroom that is reflective of a brand’s vision and story.”
Shopping in a physical store should be fun, stress-free, and technologically sophisticated. With almost half of businesses planning to increase their numbers of physical stores in the next year, brands must find ways to captivate customers, shorten waiting lines, and create a memorable brand experience.
Our research shows that 55% of consumers are more likely to shop with retailers that use technology to improve the shopping experience, for example adding new ways to pay, offering kiosks to check stock, or using in-store technology such as digital mirrors.
Many retailers recognise the ongoing importance of in-person shopping, with 51% of businesses expecting the proportion of revenue to increase from physical stores in the next year. Embracing the role of the physical store as a place for brand experience and loyalty-building is a good start, and unlocking its full potential with digital technology and payments will be key to making the most out of your brick and mortar investments.
Lastly, a critical loyalty driver for retailers to focus on for 2022 (and beyond) is offering the right payment methods. Businesses have the chance to leverage the increasing popularity of digital and contactless payments, as well as the growing demand for alternative shopping options like buy now-pay-later (BNPL), social commerce, and buy online, return in store.
Payment method preferences will of course change region to region, but globally, 78% of consumers expect to be able to pay with major cards, and 68% of consumers expect to be able to pay with cash. 54% of consumers now expect to be able to pay with digital wallets.
BNPL shopping is on the rise around the world: 24% of consumers have used a BNPL service in the past year, with adoption highest in Sweden, Norway, Mexico, France, the USA, and Denmark. But while consumers are keen to embrace the flexibility of the solution, particularly for high value purchases, retailers are lagging behind. Just 18% allow customers to use BNPL services.
For many retailers, the move to embrace digital technologies that enable greater operational agility and richer shopping experiences hasn’t just helped mitigate loss during the COVID-19 pandemic; it’s opened up a wealth of new opportunities for growth.
As evolving consumer behaviours continue to fuel the need for innovation and flexibility in a competitive global market, businesses that connect their sales channels and leverage data to better understand their customers, anticipate their needs, and exceed their expectations will be the ones securing long-term loyalty.
To dig deeper into the latest consumer behaviours, and explore how digital transformation and payments innovation can help you harness these opportunities for long term growth, download the Adyen Retail Report 2022 today: