Which came first, the chicken or the egg? Determining first causes is notoriously thwart with difficulties. And it is virtually impossible to separate predictions of how people might shop in the future from the influence of technology. That then presents its own chicken-and-egg question - what drives innovation in retail? Is it the possibilities opened up by the evolution of digital technology, or is it changing attitudes and behaviours of consumers creating demand for change?
The answer is, in all likelihood, a combination of both. Technological innovation certainly plays its part. If it wasn’t for the invention of the internet, we wouldn’t have ecommerce. If it wasn’t for the invention of the smartphone, we wouldn’t have mobile or perhaps even social channels. If it wasn’t for automated digital encryption we wouldn’t have instant online payments, and so on.
On the other hand, you could argue that the underlying technologies - the internet, wireless connectivity, computer chips that get more powerful as they get smaller - are just the dumb tools used to craft innovations in retail for specific purposes. The invention of the internet did not inevitably lead to the creation of Amazon. All the great innovations in digital commerce, from the online shopping cart to location-based and personalised discovery, have come about from someone, somewhere trying to solve a problem or improve on what has gone before.
Or you could say, to answer a specific need - and the needs that really matter in retail are those of the customer.
The key point here is that the digitalisation of retail is not something that should proceed purely for its own sake. Yes, technological innovation can deliver general benefits around efficiency and productivity for all businesses. But in retail specifically, it should also be shaped around delivering what consumers want and expect.
When we quizzed 15,000 people from eight countries about their digital shopping habits and their views on online retail for our Future Shopper 2019 report, we found a consumer base eager to embrace technology and increasingly expecting more in the way of innovation from the brands they shop with. Through the power of their decision-making, we can therefore say that consumers are driving retailers to adopt the right technologies to meet their expectations, shaping the future trajectory of the industry. Here’s what we discovered.
CONSUMER THIRST FOR DIGITALLY INNOVATIVE
In the first instance, based on the opinions of the shoppers we spoke to, we can expect the use of digital channels to continue to grow. Close to two thirds (62%) of our survey participants said they expected to increase their use of digital shopping options in the future. This was weighted towards younger consumers, with almost exactly two thirds of shoppers under the age of 45 forecasting their shopping habits would become more digital.
Half of our respondents also said they wished brands would be more digitally innovative to improve their shopping experiences, with 43% saying they were more likely to buy from a digitally innovative brand. Again, there was a clear generation gap in the opinions we heard. A slim majority of under-45s expressed a desire for brands to be more digitally innovative, compared to just 38% of over-55s. More than half (52%) of 16 to 25 year olds said digital innovation played a role in deciding where they shopped, compared with only a quarter of over 55s.
This desire for more innovation from brands also correlated to how consumers rated their own digital literacy. Overall, 40% of respondents said they felt more savvy about technology than the brands they shopped with. But amongst 16 to 25 year olds - arguably the first generation of ‘digital natives - this rose to 48% and was also 47% amongst 25 to 34 year old Millennials. This dropped to just a third of 45 to 54 year olds, and only 22% of over 55s.
Interestingly, we also uncovered evidence of a gender divide in attitudes to technology in retail. 45% of male respondents said they felt more digitally advanced than their preferred retail brands, compared to 36% of female shoppers. This then correlated to 54% of men wanting more digital innovation from brands versus 47% of women, and 47% of male consumers saying they would choose to buy from a more innovative source compared to 40% of females.
REDUCING THE FRICTION THROUGH TECHNOLOGY
So what shape would consumers (or the younger ones at least) like technological innovation to take? We found that one in five consumers already use, or have used, smart assistants like Amazon Alexa and Google Home to shop. Signalling the market opportunity in so-called ‘voice’ or ‘Zero UI’ commerce, a further 36% said they expected to start using this emerging channel in the next two years. In accordance with our findings on attitudes to innovation, this peaked with younger shoppers - around two thirds of consumers aged under 35 say they either already use or expect to start using voice commerce.
Voice commerce represents a brand new frontier in digital innovation for brands and retailers to get to grips with. To date, all ecommerce has been built on the foundation of a graphical interface, using screens as the media through which shoppers browse, select and buy. The switch from visual to audio channels presents a completely new paradigm - brands will need to think about how they sound rather than look when it comes to creating a presence, and it raises a new set of technical challenges around things like product listings and optimisation.
Another trend we can expect to see make a significant play in the medium term is automated re-ordering, also known as programmatic commerce. As a half-way step towards the use of smart IoT machines which automatically order items when they detect they are out of stock (think Nespresso coffee machines and HP smart printers), Amazon Dash buttons (now online-only) are fast developing into yet another Amazon success story. Half of our survey respondents said they use or expect to start using the one-touch branded re-order buttons, rising to 64% of Amazon Prime members.
The numbers currently using or planning to use fully automated solutions are similar to those using smart assistants (18%), but again it is a trend that is grabbing the attention of younger shoppers - more than half of under 35s told us they did use or expected to start using these channels in the near future. And if we extend the concept of frictionless, zero action digital purchasing to include subscription services like Birchbox and Graze, the popularity is even higher - 51% of our survey respondents told us they currently have at least one active online subscription, rising to 65% of 16 to 24 year olds and 59% of Millennials.
The underlying reasons why voice, programmatic and subscription channels are growing in popularity are unlikely to be anything new to retailers - consumers prize convenience and simplicity, so the more you can do to take the friction and hassle out of shopping experiences, the more it will appeal. We found similar attitudes to in-store as well as purely digital shopping - 47% of our respondents said they were excited by the prospect of an entirely cashless future, while 39% said they liked the idea of completely checkout-less stores such as Amazon Go.
What we can certainly conclude from our findings is that a growing number of consumers, mainly younger, are using technological prowess and innovation as a barometer to judge brands and retailers with. This in itself can be viewed as a driver of digital adoption and evolution. In terms of the direction consumers are pushing this evolution in, convenience and reduction of friction is clearly an important trend brands must consider. But on the other hand, we mustn’t forget the importance of creating engaging, stand-out experiences that draw the customer in and lock in their loyalty. There is still a great deal to be said for the pleasure people take in shopping, and technology can play just as much of a role in this as it can in driving convenience.
Online and offline, it’s vital that retailers are creating engaging, memorable experiences for consumers. The average consumer doesn't know or care about "channel". They know what they want and expect to get that problem solved painlessly. Retailers seeking to thrive will understand this and adapt their tech-inspired strategies accordingly. The answer isn't either digital or physical; it's giving consumers the best of both worlds which we explore in detail in this new report “What’s In Store – The Hybrid Future of Retail”.
Written by Naji El-Arifi
Head of Innovation
As Head of Innovation, Naji focuses on solving problems in new, creative ways, showcasing how mobile and connected devices can address industry challenges for businesses in a digital-first world.
A note about the Future Shopper 2019 survey
Research for this Future Shopper 2019 report was conducted by independent research consultancy Censuswide. A total of 15,188 consumers, who shop online at least once a month were surveyed, across 8 international markets, led by UK and US.