The retail industry plays a significant role in the success of the global economy, both in terms of cultural and financial significance. In fact, the retail sector contributed £194 billion to UK economic output in 2017, which was an increase from £190 billion in 2016. Almost 2.9 million people are still employed in the retail sector, making it one of the largest sources of jobs in the UK, and amazingly, one-third of total consumer spending goes through retail.
However, with the rise in online shopping, we are now unfortunately starting to see some of the UK’s largest physical retailers like Poundworld, Toys-R-Us and Maplin being kicked off the street. Britain’s troubled retailers have also been forced to slash prices in giant summer sales in an effort to attract shoppers and boost the flagging industry’s fortunes.
At the beginning of 2017, the value of online retail sales reached 992 million British pounds, and this year, the e-commerce sales are expected to reach a share of 18 per cent of all retail sales in the UK. While this is great news for retailers from an e-commerce perspective, it has led many of us to question the future of the high street as we know it. The rapid adoption of smartphones, electronic payment technology and shopping apps are causing the amount of money spent on online to accelerate, and online shopping is becoming more popular as online retailers make the returns process easier and cheaper. With this in mind, physical retailers need to step up and find new ways of reeling people back into their bricks-and-mortar stores in order to survive.
One answer to this problem lies in embracing digital transformation to deliver an immersive, engaging and personalised shopping experience for consumers that is exclusive to physical retail environments. It is less about simply installing self-service machines in-store – although this of course forms one part of the digital transformation journey – and more about creating a seamlessly connected customer journey that extends across all areas of every store, from digital signage, implementation of iPads and interactive in-store areas. The only downfall however, is the high cost in doing so. Many businesses, especially in today’s tough landscape, are unable to afford such a transformation – unless they adopt a subscription model.
With retailers finding themselves increasingly under pressure to embrace digital transformation to remain in the game, research from Econocom UK sought to understand how far retailers are on their digital transformation journeys, and what obstacles are making these journeys difficult. It also looked at the most desirable technologies among retailers spread across a wide variety of sectors, and whether they believed adopting subscription models would ease the journey towards successful digital transformation.
These results were fascinating. To kick-start the research, we asked respondents what they were hoping to achieve as part of their in-store digital transformation plans, and the answers were pleasingly varied. It found that more than two-thirds (67 per cent) of respondents said they were looking to improve customer experience and satisfaction as part of their plans, which is a clear indication of how digital transformation can help to deliver that vital ‘wow’ factor to customers. Furthermore, over half (57 per cent) said they wanted to achieve cost-savings as part of their plans, 55 per cent were looking to future-proof their business and exactly one-third wanted to increase brand recognition.
Embracing new technology
But these ideas were not always so easy to make reality. Just 8 per cent of respondents said they had never faced any barriers when implementing new in-store technology, with the other 92 per cent admitting problems of some kind in the past, be it financial, logistical or otherwise. Looking more closely, 60 per cent said they struggled to put their plans in motion due to reliance on legacy IT systems, a lack of funds and/or insufficient staff resources, while more than one in ten (12 per cent) felt they lacked support from their senior leadership teams.
By bringing all these findings together, we can see a clear picture of retailers actively seeking to modernise and embrace new technology to attract customers and stay ahead of competition, but lacking the means to do so. It can therefore be suggested that the problem does not lie with retailers themselves, but perhaps with the current models they are using to roll out digital projects.
The reaction to being asked whether a subscription model would help alleviate these problems was overwhelmingly positive — 99 per cent of respondents said it would make it easier for them to achieve their digital transformation goals. Additionally, when asked which kind of business model would be the best option for their digital transformation plans, more than half (56 per cent) opted for a payment-over-time or usage-based model.
These models are a significant opportunity for ambitious retailers, and they strongly appeal to today’s ‘renter society’ sensibilities whereby commodities are paid for in regular instalments rather than large one-off payments. In fact, the research found that more than one in five (22 per cent) respondents are already using subscription models as part of their digital transformation plans — a sign that the revolution in retail is well underway. These payment models also allow retailers to operate with an unprecedented level of agility, which consequently allows them to be more proactive and to stay ahead of the competition.
Finally, it was certainly interesting to discover how often in-store technology is being upgraded, and what particular technologies are most desirable for retailers. On average, respondents said they update their digital assets every 15 months, with the entertainment sector being the most proactive (seven months), while the home & DIY sector lagged behind with a time-frame of 26 months. Meanwhile, Over half (57 per cent) were looking to install digital signage — the most popular technology out of all the options — while 48 per cent wanted to adopt mobile point-of-sale (POS) terminals and 45 per cent were looking to purchase mobile devices.
It is clear that retailers have no problem understanding the importance of digital transformation and the role it has to play in shaping the future of in-store high street shopping. They are aware that the future lies in delivering immersive and exclusive experiences to shoppers while simultaneously integrating a high level of personalisation.
They also know that they will fail to meet the expectations of their shoppers by not adopting the latest technologies, and so they need subscription models to make the digital transformation journey simpler. These payment models allow businesses to pay for the assets they desire incrementally over a fixed period of time – much like many of us pay for our mobile phones or cars – which in turn eases the financial strain associated with digital transformation. This means a higher percentage of retailers than ever before can realise the goals they set for themselves.
Chris Labrey, MD, Econocom UK & IRL
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