Digital Transformation has never been talked about as much as it is now, since the coronavirus pandemic brought on the quarantine. The term has become very popular, catching the attention of professionals and entrepreneurs alike. But how exactly do you implement Digital Transformation in retail? Is it right for every business, or is it only for tech companies? Because it is such a broad concept, it’s natural to have questions about how it applies to companies, especially in brick-and-mortar retail, where its potential is still largely untapped.

First of all, we need to understand what Digital Transformation means: it is a process that brings technology into companies in order to optimize results, automate processes and improve reach. This internal process can take quite a long time, depending on the size of the company. But it certainly changes the mindset of employees, and that is reflected externally in customer satisfaction.

Once Digital Transformation has taken hold within the company, the challenge becomes sustaining it and growing it gradually, reaching every department in a collective effort to keep teams aligned with new changes as they come. Retail is no different. Bringing technology to customers as part of the shopping experience is a scalable approach, and it requires trained professionals to develop techniques and deliver the best possible customer service.

Keep reading to learn more about the subject!

The disruptive process in retail

How do people shop, and what factors influence their decisions? Understanding the consumer profile has always been the key question for retailers, and the pandemic and the drastic shifts in behavior it brought have created new challenges. But let’s take it one step at a time. Understanding how the different channels surrounding customers lead them to a purchase may be the first step toward understanding the customer journey.

Today, people are surrounded by factors that influence their purchases. Someone might start searching for a product online and complete the purchase in a physical store, but that’s not guaranteed. They might go to the store to try the product and end up buying it on the website, because the price was lower and shipping was free. After all, we have to take into account the many sales channels out there, which consumers can use to compare prices and benefits.

Digital disruption has expanded the customer experience and the number of options for making purchases. That doesn’t mean brick-and-mortar retail will disappear; on the contrary, companies are facing the challenge of reinventing their spaces to become part of this simultaneous network of experiences. But with one key differentiator: delivering the best experience to people. Using technology to make the most of what in-person contact has to offer, setting themselves apart from the online space.

We are in an ecosystem that makes the customer experience diverse, and technology has increased the number of purchase influences. To begin understanding this universe, we can break digital disruption down into two parts. The first is to unpack the customer experience into two dimensions: physical and digital. The second concerns the types of sales channels: offline and online.

The next step is to relate these spheres and establish the connections between them. Although each dimension, viewed separately, is a critical success factor for retailers, it is essential to understand how they interact in order to get as close as possible to today’s retail reality. This leads us to identify four distinct retail models that companies must proactively manage to stay competitive. Let’s look at the figure below:

Quadrant 1 (traditional “Bricks and Mortar”) represents the core domain of most traditional retailers and still accounts for the majority of retail sales today. In this model, the entire process takes place in a physical, offline environment. The sale is completed in the store, and the customer is influenced mainly by a combination of in-store experience, sales force effectiveness, store design and traditional media. In quadrant 2 (“Webrooming”), on the other hand, the digital experience is the main influence on the customer’s purchase decision. However, the final purchase still takes place through an offline channel. In quadrant 3 (“Showrooming”), by contrast, the customer takes advantage of the physical sales channel to experience the product firsthand. However, the customer buys the product online, in most cases at a lower price. Finally, in quadrant 4, most of the attention tends to focus on the rise of the “Pure Internet-based” model, with its digital experience and online sales at the expense of the traditional bricks-and-mortar model.

Closing the gap between digital channels and consumers

In the first phase of the pandemic, retailers across the board joined forces to close the gap that existed between digital channels (e-commerce, shopping apps, etc.) and consumers. It’s worth stressing that this gap affected consumers and retailers alike. As we mentioned above, brick-and-mortar sales still account for the largest share. According to internal Google data from a study on search growth by category and product, online retail revenue in Brazil before the pandemic represented only 4% to 6% of the total, and nearly half of Brazilian companies made less than 10% of their revenue from online sales.

This first impact of the pandemic, analyzed between March 15 and April 15, was a period in which people focused on: reducing risk, by searching for health protection and safety products (hand sanitizer, masks, soap and toilet paper); stocking up (food); and entertainment (more searches for books and streaming subscriptions). Faced with this surge in online shopping searches, what did retailers do to fix the problems in their digital channels that were getting in the way of completing sales?

Apps were improved to offer in-app shopping perks. With the sales force redirected to digital, salespeople started working as online consultants, staying close to customers (personalized service via chat and WhatsApp). New opportunities emerged for retailers to expand their categories, and they began selling a wider range of products. Another smart solution was turning closed physical stores into distribution centers, supporting logistics and helping move inventory. We also saw an interesting movement of large retailers opening their Marketplaces to small retailers. All of this came alongside adjustments to the final stage of the purchase process, such as easier exchanges, more payment and installment options, and the push for contactless payment methods, such as digital wallets and tap-to-pay.

All these adjustments and solutions built the bridge needed to bring customers closer to brands and improve the digital shopping experience. So we can say that we are, in fact, in the midst of the Digital Transformation of retail. However, we are still constantly evolving as consumer behavior and needs continue to change.

Looking at the second impact of the quarantine on people and on retail, between April 15 and May 1, Google’s internal study pointed to two new search trends. First, according to the research, people went through a period of adaptation, which drove up searches for home office items, indoor exercise equipment, furniture and screens (TVs, cell phones, tablets). This last search reveals the need to share these devices with other people in the same household.

Second, the study showed that this new routine brought new triggers, leading to strong demand for gaming consoles, fashion and beauty, and wellness. Interestingly, Fashion was a category that had practically disappeared from searches until then, and it now resurfaces alongside Beauty, but both with new meanings: fashion shows up in searches for comfortable clothing, such as pajamas and sweatshirts, while beauty emerges as entertainment through “do it yourself” content – skin and hair care tutorials and step-by-step guides.

Digital Transformation: present and future

So many changes made in so little time. And yet we keep heading toward new ones. The brick-and-mortar retail of pre-pandemic times is unimaginable today. When stores fully reopen after the crisis, retailers are expected to deliver more to people. It is extremely important to maintain the acceleration we have seen during the pandemic.

To give you an idea of this transformation, Google’s internal study revealed that the “In-store pickup” option appeared in 20% of responses as an alternative that could improve the online shopping experience. In other words, even after the pandemic, this habit will still matter to people and may become permanent.

What lies ahead? Retailers need to watch the present closely, especially the changes in the consumer journey and what consumers are looking to achieve: data that is presented in studies. So keep looking for references in articles and websites specializing in retail.

At the POS, research on behavior across sales channels will be a must: it’s a great opportunity for retailers to deploy digital experiences in the physical store in order to gather consumer feedback.

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