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The COVID effect: how the pandemic has accelerated retail digital transformation

Apr 6th 2022 ecommerce

The COVID effect: how the pandemic has accelerated retail digital transformation
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Remember life BP (Before Pandemic)? 

From an ecommerce perspective, digital things were pretty different. While some sites and marketplaces had embraced advanced digital commerce, and others had new technologies in place to expand their business processes when the time became right, many had what amounted only to digital window dressing — attractive online storefronts with empty virtual rooms behind the home page. And for many consumers, brick and mortar stores and malls were still the place to be. So that’s where companies were concentrating their (non-digital-business-transformation) efforts.

Along came COVID

Who can forget March 2020? Heeding calls to stay home safe in an uncertain time, consumers worldwide locked down and, among other things, gave up going out to do “retail therapy.” Was brick-and-mortar retail going to get seriously ill or die of COVID?

As we later learned, uncertain times can give birth to revolutionary changes, and this proved strikingly true for digital technology in ecommerce. The silver lining of consumers being stuck at home? Discovering that they could still do all kinds of things in isolation, such as buy food, be allowed to work remotely, drive less and thereby help give nature a break, and fix up their living spaces by ordering uplifting decor from online retailers like Wayfair

For those going stir crazy in their home digs, all was seemingly not lost. Businesses that had made preliminary investments in digital upgrades stepped up further to provide the online resources to help consumers attain some normalcy amid the continuing crisis. Many digital leaders did insightful things like upgrading their search and discovery functionality to better meet their customers’ needs. 

Meanwhile, businesses that hadn’t done much digitally before the pandemic, such as those deeply rooted in the brick-and-mortar model, soon came to terms with the digital-disruption (Gartner definition) pickle they were in. They sat up and took notice, and, in many cases, began making quick investments in digital transformation tools so as to avoid missing out on the coming digital transformation gold rush.

Ecommerce sales started going up. After all, pandemic or no pandemic, people need and want stuff. And many of them like (or love) to shop for nonessential and essential items alike, whether they’re just browsing or checking out their favorite online retailers’ new product offerings. And many of them liked that even more when they were stuck at home with their computer or mobile device.

…and the idiosyncrasies of Zooming

Of course, in the pandemic, people started shopping in droves for certain different things, like flattering shirts and blouses to wear on those work Zoom calls. They largely ceased shopping for other things (like pants, since nobody can see what you’re wearing, or neglecting to wear, unless you make the mistake of standing up).

At any rate, it appeared that a modern-day pandemic, destructive to human lives as it was, could also be an excuse for consumers to spend money they’d saved up from not being able to travel, and thereby a boon for savvy retailers awaiting them with open arms.

According to Digital Commerce 360, “Ecommerce was growing fast before COVID-19 hit. But the pandemic pushed even more U.S. consumers online and pushed more consumers to spend more online and more frequently.” DC360 estimates that the pandemic facilitated a gain of around $218 billion by ecommerce in the past couple of years.

First priority when you’re stuck at home: get enough to eat and stock up on foodstuffs so you can feed your family. Also, because you’re antsy or bored, get some junk food or alcohol? People used online avenues to buy loads of groceries (and of course, stock up on TP, when they could find it). Not surprisingly, year over year, online grocery sales increased 103%, according to the Adobe Digital Economy Index. Great news, except for those who unfortunately gained the “COVID 15” pounds or who responded to the stressful situation by having too many happy hours

This is indeed fascinating social psychology data, isn’t it? But let’s get back to the state of retail during the pandemic.

In the at-home economy, certain sectors, like electronics and home improvement, understandably went off the charts. And other sectors (travel, energy) tanked miserably. For some companies in each category, the state of their digital transformation efforts at the start of the pandemic was a critical factor. For retailers worldwide, it was certainly a time of transformation, either for better or for worse.

The permanence of mortared brick

It came as a surprise to some, but brick-and-mortar retail did not necessarily fade away when in-person shoppers disappeared. And even in the new digital age, brick and mortar is a huge part of the retail picture. According to the Motley Fool: “You might think a majority of U.S. retail sales take place online but that isn’t the case. According to the Census Bureau, only about 13% of total retail sales, which includes categories like automobiles, goes through the e-commerce channel.”

Brick and mortar has not only not going away in the pandemic, it’s proven to be an anchor for successful digital transformation, as well as one of myriad “omnichannel” ways that people can shop. A consumer might want to either buy in the store or place an order online and have their item delivered, or go pick it up in person, either in the store, at the curb, or from a locker. They might then choose to return it by mail, through a third party, or by walking into the store. 

Retailers that can facilitate any and all of these options (of course, in an economical way) stand to increase their market share.

All good, but there’s still a relatively large pot of money sitting in the digital channel, so let’s keep looking at that subset of the economy. 

A “tipping point of historic proportions”

Here’s some eye-popping info: According to a global survey of corporate executives by McKinsey, because of COVID-19 — a “tipping point of historic proportions,” — companies have sped up “the digitization of their customer and supply-chain interactions and of their internal operations by three to four years. And the share of digital or digitally enabled products in their portfolios has accelerated by a shocking seven years.”

Some companies’ keen awareness of consumers’ changing needs during COVID have been making them bigger winners in terms of profitability. For example, PYMNTS refers to the rise of the “bring-It-to-Me economy” during pandemic isolation, encompassing items like groceries and household necessities. 

And since restrictions have eased, this trend has only gained steam among the living-and-working-from-home crowd. Adds PYMNTS, the “most common factor that consumers now say will encourage them to shop with more brick-and-mortar retailers is to not have to go into stores at all; they want in-store pickup and curbside delivery options.” Offering these options to meet or beat customer expectations has been a successful digital transformation initiative.

One example of a pandemic retail success story is Target, which gives consumers a variety of choices for online buying and pick-up in addition to being able to roam its vast store aisles. “Target has a faster-growing e-commerce business than both Walmart and Costco,” points out Forbes. You can order an item on the Target website and then either pick it up in the store without waiting in line, roll up in your car and have it brought out to you, or have it delivered. The retailer has also continued working on streamlining digital innovation, setting up operations to reflect the prediction that ecommerce will be the most important driver of long-term growth in the not-too-distant future.

What is digital transformation?

In general terms, “digital transformation” refers to the general idea of integrating digital components in a business to facilitate success. However, the term “digital transformation” is kind of problematic, points out Melissa Swift, an expert on trends in the American workplace. It’s vague, could potentially start arguments, and is used as a catch-all, among other things. 

OK, so let’s avoid that nebulous discussion and zero in on just one segment of digital transformation: retail digital transformation. Ask any businessperson who’s reaped the rewards of implementing a successful retail digital transformation strategy: are the potential business outcomes fantastic or what?

More to the point, what can companies do in terms of their own digital transformation as it relates to ecommerce?

Examples of digital transformation trends

So what’s trending in digital transformation, and what are the possibilities for your post-COVID digital strategy? 

Before undertaking major decision making, the first logical step would be to reimagine with your stakeholders what’s possible for your sector and unique business value propositions. After that brainstorm, you can create a customer-friendly, easily navigable ecommerce website, or refine the one you already have, and then invest in social-media advertising to help drive prospective buyers to that site. And go from there with a number of more advanced features. 

It’s all about your customer experience

For starters, as is the case with brick and mortar, remember that it’s all about your customer. Plus, you actually have another customer, your employees, which we’ll talk about in a bit.

So back to your shopping customers. What’s key in crazy times like this is ensuring a fabulous retail-therapy customer experience for them, a great shopping excursion that shines in every aspect of how they connect with you.

In what ways can you make your retail customer journey more fun, more rewarding, more magical, more memorable, and more worthwhile in their eyes, thereby also improving your site’s revenue and retention metrics? 

Digital transformation and a winning customer experience go hand in hand. Creating a seamless user experience may mean revamping your data integration workflows and how your internal systems relate to each other. For example, when you have a well indexed and searchable database, coupled with an AI-focused search engine, your shoppers can quickly find the products they want. And you can make their lives considerably easier while they’re in the process of doing that.

An evolving digital transformation journey

What should digital retailers be doing post-pandemic (for now) to get or stay ahead? A few elements of a customer experience worthy of post-pandemic online shopping include:

Providing touchless payments

One digital transformation project that companies have implemented since the pandemic is setting up touchless payment while shopping in a physical store. The world with COVID has changed in interesting ways, one of which is that nobody wants to hold a germy pen or sign a touchpad, even if it’s been duly sanitized.

Touchless payment is a no-brainer. Savvy retailers decided to get with the program and skip physical signing (just like when you’re buying something online). And they’re achieving the same thing when customers in a store or restaurant can simply open the company’s app on their mobile device and pay by having the QR code scanned.

Making shopping personalized through artificial intelligence

You’ve probably heard that AI-aided personalization has become a requirement for succeeding in the Big Data–fueled world of digital retail. This sage strategy has only grown more timely in the modern pandemic era. AI-facilitated personalization is a key component of successful digital transformation. 

AI is making significant inroads into the mainstream digital shopping experience. If, for instance, you happen to have been a Lands End online European shopper lately, you have an inkling of this, as the retailer is using AI to mirror in-store experiences. Managing Director Constanze Freienstein notes that “If [customers] are looking for a specific item, or thinking of moving on from our site, we use AI to help them understand what else is there by suggesting similar or matching items based on previous purchases.”

In embracing modernization, some retailers are going a step further and offering augmented reality or virtual reality in shopping experiences. For example, if you’re shopping IKEA online for a piece of bulky furniture, you can avoid headaches later by using one of the company’s apps to see what the item will look like set up in your actual space. 

Retailers are also implementing intelligent search engines that help shoppers easily navigate to the items they want to buy. The key is personalized search, whose intelligence notices what people are searching for and, for instance, shows them coordinating clothing items. 

United Kingdom online sports-attire retailer Gymshark, which reached $500M in revenue in 2020, is one company that’s found personalizing the shopping experience across its website to be a big help in growing its customer base.

Providing a coordinated omnichannel experience 

The majority of shoppers now typically use more than one method of identifying, getting to, and buying the products they want. They use a variety of shopping-experience entry and exit points. For instance, a consumer might see an ad for a product on their social media feed, go to the company’s website to buy it, and then decide they want it right away, so they’re going to go pick it up in the physical store (or have it brought to them curbside). 

Omnichannel marketing lets retailers micro-target these shoppers with a higher level of detail. And when all applicable channels are available to consumers, consistently branded, and well connected with each other in order to give people a shopping experience that feels satisfyingly holistic, that’s a win.

Beauty retailer Sephora is one company that has the omnichannel customer experience nailed down well, along with state-of-the-art personalization. Customers are treated to a seamless, integrated retail experience through multiple channels, and they can use the retailer’s feature-rich mobile app both remotely and while they’re in the store checking out products.

Setting up an “endless aisle”

You’ve probably noticed that since the pandemic began, many retail websites have added “ship- -from-store” and “ship-to-store” options. The endless aisle is the concept of a seamless shopping experience that lets people get started browsing or searching online and finish their shopping in the store, or the other way around, creating a “loop.” An endless aisle also eliminates the problem of having an empty physical store shelf by letting people then order the item using either their mobile device, a kiosk, or a tablet.

One company that has impressively implemented the endless aisle is Best Buy, whose management noted the convergence of e-commerce with brick and mortar and responded proactively.

Offering easy access and benefits through a mobile app

Since many avid shoppers continually use their mobile devices while they’re out and about, a key element of omnichannel is providing a mobile app for whatever features make sense given your business model. A good, highly usable app is a requirement if you want people to love buying from you. Even if your customers are just couch surfing at home, they’ll appreciate being able to find what they want fast. And if they’re actually hanging out in your physical store with their mobile device, they may still be using your app to look up reviews of items, for instance. 

Home Depot’s Product Locator app is another example of a first-rate omnichannel effort. It’s “like a GPS for your shopping list,” explains the company on its website. On their mobile phones, shoppers can search for an item they need immediately on the site, designate their local store, and see whether the item is in stock. Cool. Now all they have to do is go to the warehiouse  and follow the GPS directions to the item. Home Depot is still a big, impersonal place, but you could argue that the company makes up for that deficiency by offering this easy-to-love shopping assistance, among other efforts.

Taking care of your other customers: your employees

What have you done for your employees lately? In the post-pandemic era, paying attention to their needs could be just as important in terms of achieving your success. 

By working to transform their digital lives, you can potentially make them like working for you more and therefore perhaps plan to stick around longer. You could, for instance, give them some great real-time digital transformation success tools, such as an online communication hangout like Slack, or a well-thought-out and intuitively searchable knowledge base to help make their jobs easier. And you can do more: some companies are even switching to a 4-day work week to help their employees de-stress.

You could give them flexibility in terms of where they work, too. Did you know that a 2020 Pew Research Center survey found that 71% of the respondents were working at home during the pandemic, and that being able to do that was a game changer? Fifty-four percent said they’d also want to continue working from home after the pandemic. 

So if you’re a retailer that genuinely wants to please your employees, how do you do the digital transformation thing?

One option is embracing a hybrid work model, which gives employees the flexibility to work some days remotely and go into the office on others. 

What about going further with that if employees don’t really need to show up in person, ever, to do their best work? Granted, in retail, completely remote work might be a bit of a challenge for some employees. On the other hand, if you have sales associates who could benefit from utilizing the hybrid or totally remote model, it’s worth considering if you want to attract and retain the best talent. Because ever since the pandemic sent employees home to work from their guest rooms and basements, the best talent is often insistent that they still be able to work from home (after all, they’ve been demonstrating that they can for a couple of years). 

The Enterprisers Project sums it up nicely: “For many workers, remote work has become a non-negotiable career requirement. Employees working remotely may even seek out another job if their company were to eliminate this option. In the current employment market, many employers are struggling with significant skills shortages and are not prepared to risk employee turnover.”

Some companies are also letting their retail store associates branch out from tidying  merchandise while they await customers by connecting online with shoppers they notice on the website. This practice can improve conversion and raise sales commissions (if applicable). And in some situations, such as a resurgence of COVID that shuts down physical stores again, this type of reaching out could happen entirely remotely.

In short, the more flexibility you can offer to your employees in this changing ecommerce landscape, the better your reputation as a company that’s embracing digital transformation could become.

Streamlining your operational efficiency

Analysts believe the post-COVID-19 retail environment is ripe for digital transformation fireworks. The pandemic has ushered in a customer-focused paradigm shift, and companies that have responded by embracing the various tenets of digital transformation are powering their operations and profiting handsomely from the new business model.

If as an online retailer, you aren’t using data analytics and machine learning to inform your major business decisions, this is one area where you could make major gains. Digital retailers of all types are using AI to gather data-driven insights and assess trends. Predictive analytics can effectively power your inventory and improve your efficiency. You can also focus on creating a better (digital) supply chain, and on embracing automation wherever it makes sense, such as in email campaigns and through using social media.

The digital transformation takeaway

So far, the COVID-19 pandemic has ironically turned out to be a very healthy thing for some businesses. 

So pandemic-wise, how can your company stay well and be ready for whatever happens next, be it another obnoxious strain of COVID, more consumers demanding great omnichannel perks because of what they’ve gotten spoiled by in lockdown, or the remission of viral threats, leading to more shoppers taking up mall crawling? 

Pandemic or no pandemic, upgrading your ecommerce site search functionality is a low-cost, high-ROI way to launch (or continue refining) an effective digital transformation framework, no matter what happens. 

A great way to get in on the benefits of digital transformation, supercharge your business strategy, and meet your post-pandemic business goals is by investing in Algolia Search and Discovery technology. When you’re ready, our team is looking forward to hearing your digital transformation needs!

About the author
Catherine Dee

Search and Discovery writer

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