How Digital Transformation in Retail is Rewriting the Rules of the Sector

By Sevil Hoppmann

Rewriting the Rules of Retail

In an age defined by rapid technological advancements, the world of retail is undergoing a profound metamorphosis. Traditional brick and mortar retailers that once stood as the epitome of shopping experiences are now fighting a fierce battle against leading e-commerce players. 

Digital transformation in retail has accelerated since the pandemic, but that does not mean that stores are unimportant. 

But first, what is digital transformation in the retail industry?

Digital transformation in retail is the incorporation of technology in the retail industry to amplify operational efficiency, enhance customer service, and improve growth. Some examples of digital transformation in retail include contactless ordering, AI-powered systems and product recommendations, and the utilization of QR codes.

Why is digital transformation important in retail?

Retailers who market their products online use the possibilities of an optimized consumer approach. The advantages of online shopping amplify flexibility and convenience. From the opportunities for comparison across a wide range of products on offer, browsing and shopping whenever you like, contactless payment and delivery of the goods to your home.

Ever since the pandemic, there has been an uptick in demand for online channels. 20.8% of retail purchases.  are anticipated to occur online by the end of 2023 and 24% by 2026. In total, e-commerce sales are expected to grow 10.4% in 2023.

Yet, it’s the blurring of boundaries between the physical and online that for many consumers is the biggest win for e-commerce. Modern, casual and individualized ways of communication alongside the simplified integration of services can give the customer the feeling of being addressed personally; contributing to customer loyalty. 

This does not mean that stores become unimportant

Equally, customers also want the advantages of online shopping when making purchases in physical stores. The latest data from McKinsey suggests that retailers can’t afford to be in a wait-and-see mode. First, they need to reimagine their baseline requirements and then turn their attention to taking their customer experience to the next level. The Point of Experience (POE) is to replace the Point of Sale (POS) in the future. 

The advantages of e-commerce should not be overstated. Exceptional customer service, knowledge and a tailored approach cannot be exactly replicated through e-commerce. It is time to start the revival of physical trade, to meet customer wishes and to make shopping an experience in physical trade as well. 

The pandemic has led consumers to adjust their behavior in almost all areas of life, adapting to the new normality and focusing on values such as commitment, reliability and sustainability. Important aspects that we must take into account in future communication. 

What digital transformation really means for retail: Re-thinking the in-person experience 

Previously, it was important to draw the consumer's visual attention to the product using a strong design and to combine storytelling with strong emotions to create a perfect brand world. 

In the new world, a direct connection must also be established, which allows for the most personalized interaction possible. Consumers inform themselves about products on the internet before, during and after the purchase. 60% of people in Germany use their smartphone to get further information about products because the information at the POS or on the packaging is not enough. Similarly, 80% want a seamless connection between online and offline channels. 

We achieve this by linking stationary business with online business

The trends in the consumer world require an amplified networked approach, which is also necessary for brand design. That is why we break down the silos between packaging design, client engagement and digital content design. 

We have recognized that the customer journey in the brand world must be simplified more than ever and that the possibility of interaction amplifies customer loyalty, which ultimately leads to brand success.

Some retailers have already recognized that the consumer needs a shopping experience and more service, but the digital transformation in retail needs meaningful concepts and reliable partners for its consistent realization. The aim should be to harmonize digital experiences with real experiences. 

What works online will be adapted to physical retail in the future and both the digital and physical market presence will be homogeneously linked to each other in such a way that the consumer is offered a simplified brand and shopping experience. 

This omni-channel concept offers consumers the information and services they want at all touch points and surprises them with relevant content and individual approach at the right time.

The revival of the QR Code

The proliferation of QR codes during the pandemic has largely been an unspoken success story for connected packaging. After years of uncapitalized potential, the code has now found a platform for track and trace systems and digital restaurant menus facilitated by the ease of consumers using their smart phones.

With the usage of e.g QR-codes to link consumer to their regional web presence retailers can meet their customer’s needs for information and entertainment around the clock and provide a seamless shopping experience. Codes can help link consumers to recipe ideas, interactive games and provide greater traceability to where the product was made.

While QR codes gained traction during the pandemic, they are far from going away. Marketers continue to use QR codes to build direct connections with customers, collect primary data, and ultimately drive website traffic.

Customers can check stock levels before ordering products using track and trace technologies. These systems further track when the product either arrives at the customer's home or when it can be picked up at the next branch.

The use of QR in store, further provides the opportunity for brands to identify and provide more detailed and rich data profiles of the product’s existing consumer market. This data can better inform brands of existing consumers geo-location, session duration to allow for both better conversions and broaden the scope of their consumer market. 

Overall, the use of coding at home and in the shop can trigger a holistic, shared brand experience.

Bridging the Gap Between Physical and Digital Retail Through AI

Another tool marketers are using to connect in-person and online experience is artificial intelligence. This advanced technology can utilize customer data to target customers and assist employees with creating a more personalized experience. For example, ALDO, a shoes and accessory retail branch, has utilized AI to create more tailored experiences by organizing customer data and sending it to their staff. This system has helped ALDO staff spend more time building their brand loyalty and creating a more connected experience between their physical stores and their website.

At this point, AI and automation are essential for digital transformation in retail. According to Khoros, an award-winning engagement platforms, when it is utilized efficiently, AI can enhance customer support, automate order processing and inventory management, personalize product recommendations, and can create virtual shopping assistants. All these features elevate the customer experience on a larger scale with less cost.

Digitization is Rewriting the Rules of Retail
Consumer expectations for a seamless shopping experience can be met by using different digital links between the online and offline presence. It is irrelevant whether we "only" provide additional information about the product or entertain the consumer with augmented reality applications. 

As long as there is a consistent strategy behind it, connected packaging can build a bridge between the POS and the digital presence and offer the holistic appearance from which both stationary and online commerce benefit.

About Sevil Hoppmann

For more than 20 years Sevil Hoppmann has been working for and with well-known brand owners and retailers in Europe, supporting them in staging their brands and achieving a homogenous market presence at all touch points of the customer journey. The expansion of our portfolio and the achievement of highest customer satisfaction are particularly important to her. As Business Development Director at SGK, she is responsible for increasing sales in Continental Europe.