In the highly competitive retail sector, where consumers place a premium on convenience in their shopping experiences, the pervasiveness of technology has influenced a shift in customer expectations.
To remain relevant in a rapidly changing market, retailers must be agile and adaptable. A Deloitte report on how the pandemic has affected retail consumer sentiment in South Africa found that the “COVID-19 crisis has fast-tracked the urgency for digital transformation in retail, highlighting the need to operate and serve customers differently”.
According to the same report, while digital transformation has been important to all sectors, retailers in particular need to find new ways to serve customers in order to remain relevant and competitive.
By leveraging technology, retailers can develop dynamic capabilities that are critical to gaining long-term competitive advantage.
For retailers to differentiate themselves, respond to changing customer needs, and prioritise innovation and agility across the entire value chain, digital transformation must be integrated into business strategy.
According to Forbes, since the start of the COVID-19 pandemic, Sainsbury Supermarkets in the UK reported that their in-store shopping app accounted for up to 50% of purchases in some stores and 37% of total sales across all of their stores in Q2 2020/21. Customers use the app to scan their purchases with their smartphones, skipping the queues and paying instantly at smart check-out points.
According to the same report, Tesco, UK’s largest retailer, plans to open check-out-free stores, where customers will be able to scan items as they shop and be automatically charged for their purchase when they leave the store, eliminating the need for check-out points completely.
Finally, with innovations such as in-store facial recognition payments, Alibaba’s Freshippo stores in China have taken check-out-free shopping to new heights. Freshippo describes its future vision as never transitioning from physical to digital, but rather seamlessly integrating online and offline, a concept they call “phygital” retail experience.
How can African retailers leverage digital transformation to innovate and achieve long-term sustainable success? Four key focus areas in particular bear investigation, namely:
Focus Area 1: Customer Centricity
Putting the customer first requires retailers to comprehensively understand the customer buying journey, their perceptions and expectations. Understanding these factors intimately is critical to ensuring a positive customer experience (CX), which can be a significant differentiator in difficult times, such as those caused by the pandemic.
It is important that retailers view customer centricity as a long-term strategic imperative that enables them to better react to changing customer sentiment and demands. For example, technology enables retailers to tailor their offerings to customer preferences with enhanced precision.
The ability to leverage technology to continuously collect information that enables retailers to understand customer needs as well as measure customer sentiment is paramount.
For example, a Deloitte report into the retail sector found that pricing and affordability became major drivers of negative sentiment during the early stages of the lockdowns. Therefore technology plays a critical role in enabling retailers to effectively manage CX, through tailoring their offerings, promotions and loyalty programs to customer needs.
Focus Area 2: Go-to-Market Channels
A KPMG retail study found that the use of mobile technologies will influence future customer needs, especially, as customers are increasingly using mobile devices to research their potential purchases.
For example, before making a high-value purchase, consumers could use their mobile phone to research details such as specifications or attributes, as well as compare different offerings from different retailers.
This means many consumers make their purchasing decision before leaving the house, and only go to a physical store to pay and pick up their predetermined purchase.
Retailers that have poor websites that are not mobile friendly could lose a significant portion of their customer base and their potential purchases as a result. It is therefore crucial that part of the retailer’s strategy addresses mobile as a critical go-to-market channel.
Focus Areas 3: Digital Supply Chain
Consumers are becoming increasingly concerned about environmental degradation, animal rights and other matters of sustainability.
As a result, in addition to pricing and stock availability, consumers want to know where and how the products they consume and use are sourced, produced, and manufactured.
These rapidly changing consumer trends further complicate an already complex retail supply chain and category management landscape. The use of intelligent technologies could hold the key to simplifying supply chain management.
Real-time software applications for procurement, sales and operations planning, logistics, and inventory management are no longer considered a luxury. Recent disruptions in South African supply chains due to protest action, for example, highlighted the importance of having an intelligent and integrated supply chain management system, as retailers scrambled to keep their stores open across the country after damage to some of their distribution centres.
Focus Area 4: Emerging Business Models
As the adoption of mobile devices, primarily smartphones and tablets, as well as access to the internet continue to accelerate in Africa, new retail technologies are expected to influence how retailers sell and how consumers purchase goods.
Technologies such as Artificial Intelligence and Augmented Reality are poised to shape the retail landscape of the future.
The traditional brick-and-mortar business model will continue to exist in the retail sector; however, as online sales increase, retailers must seriously consider alternative channels or routes to market that use technology as an enabler.
For example, prior to the COVID lockdowns, most customers were satisfied with a next-day delivery service; however, with the implementation of the lockdowns, food retailers that could effect same-day delivery (or in some cases even within 60 minutes) were able to differentiate themselves and capture the lion’s share of the burgeoning online market.
Today, despite the easing of lockdown restrictions, online grocery shopping continues to grow in popularity.