Executing a Digital Strategy is Table Stakes and There is No Turning Back

Today’s shoppers increasingly are digital natives, which means they prefer technology-based solutions and hold high expectations when it comes to the end-user experience. In fact, recent market research found that 86% of shoppers are willing to pay more for a better customer experience.

This explains why ecommerce has grown from a novelty to a tidal wave over the past four decades. According to the U.S. Department of Commerce, consumers spent a little over $500 billion online in 2018, which was up 14.2% from the previous year. These online purchases represented more than half of all retail sales growth last year.

As more and more brick-and-mortar business shifts to digital channels, retailers must ensure they are delivering the best possible customer experience.

With the advent of free, one or two-day shipping on many online purchases, and the ability to conveniently order on a smartphone or through an Internet-of-Things (IoT) personal assistant device, it is little wonder online purchases continue to skyrocket.

Many retailers are adopting omnichannel strategies to meet customer needs. A major market survey found that 46% of respondents are focused on the practice of clienteling, where customer sizes, style preferences, wish lists, past purchases and additional shopping habit indicators are tracked via tablets, smartphone and computer apps and programs. The same survey found another important retail trend. Sixty-one percent of retailers stated that the buy online, pick up in-store model (BOPIS) and the buy online, return in-store model (BORIS) are of growing importance to consumers and therefore of growing importance to retailers. The survey found that 90% of retailers anticipate offering such options within the next few years.

Branded currency, also known as gift cards, is another important opportunity for retailers to increase sales, build brands, enhance customer loyalty and reduce the overall cost of payments. First Data’s 18th Annual Prepaid Consumer Insights Study found that for the fifth year in a row spending lift from gift cards is on the rise. In fact, for every gift card purchased, consumers are typically spending on average $59 more than the original value of their card.

In this increasingly digital world, retailers must think globally, yet act locally when it comes to completing transactions. While the internet levels the playing field, allowing smaller businesses to sell goods around the world, they must at the same time ensure customers can choose from a range of popular payment options, such as credit and debit cards, Venmo, Paypal, Zelle, Alipay, or Pay With My Bank. This also means enabling customers to transact in local currencies.

At the same time, it is vitally important to protect transactions against fraud and stay compliant with stringent data protection policies, such as PSD2 in Europe. Advanced digitization solutions, such as tokenization, afford the opportunity to protect data on both the issuer and merchant side of the transaction, while providing higher authorization rates to improve the customer experience.

By extracting data from transactions and combining it with other rich data sources, retailers are just beginning to provide deeper, more meaningful customer experiences. Using cutting-edge data science technologies such as artificial intelligence and advanced analytics is allowing retailers to harness data to accomplish a range of critical tasks that will lower the cost of customer acquisition. The goal for retailers is to effectively target the right offer to the right person at the right time. Relevant offers provided in the right context have the potential to be a game-changer for those that get it right.

The next wave of innovation will begin to fulfill the promise of connected commerce. Already, customers can order products through their voice-activated technologies in their homes. A recent study found that 57% of consumers that owned a virtual assistant device used it to buy a product.

With nearly 20 million of these devices in homes in the U.S. today, it’s clear that artificial intelligence (AI) will be a game-changer when it comes to shopping. So, for example, connected commerce will allow a consumer to order a particular piece of clothing at a specific store through their personal assistant device. Then, when they get in their car, the car will automatically recognize the clothing order and ask the driver if they need directions to the store. In the parking lot of the store, the car will alert the clerk, who will have the merchandize ready. Now all the customer has to do is scan the QR code into his or her phone and the transaction is complete.

Another emerging trend in retail is augmented reality (AR). Stores that offer an AR experience have an advantage over those that don’t. Sixty-one percent of shoppers indicated a preference for stores that offers AR. Sales from AR are expected to hit $5.9 billion by 2020, compared to $1.6 billion in 2016.

In order to meet the changing demands of consumers and the marketplace, retailers will need to put an effective digital transformation strategy into place. This is not only smart for business, it is literally imperative for survival.

John Nicola is Senior Vice President of Retail Solutions for First Data Corporation