Digitalization: for retail, there is light at the end of the tunnel

In 2020, Italy was one of the first countries in the world to be hit by the pandemic, and the retail industry has been severely impacted. However, meeting consumer demand for online shopping has accelerated retail digitalization, and retailers need to keep the momentum up to stay ahead of their competition.

Online shopping has created opportunities for retailers to bring in new customers and build stronger brand loyalty. According to research by JP Morgan, the pandemic-driven move towards online shopping has triggered retail innovation in Italy. This includes subscription models and same-day delivery.

One of our customers – the Spanish courier start-up Glovo – can deliver products to customers in key European cities in thirty minutes or less. Glovo has reported a ten-fold growth in its business in Italy during the global health crisis. We’ve also seen diverse organizations teaming up to fulfill consumer demands. Take Italian based start-up Milkman, which focuses on last-mile logistics for e-commerce deliveries. It has secured investment from Poste Italiane to create a premium delivery service.

The pandemic has changed our shopping habits forever

E-commerce has become an essential part of Italian life, both for consumers, who can’t visit physical stores, and retailers, who would have no other way of selling their products. In many cases, it has changed consumer behaviors permanently. To remain relevant in the future, retailers will need to ensure their digitalization plans don’t lose impetus. Italian luxury fashion house Moncler, for example, has said it is investing in digitalization to create deeper personalization for consumers across all brand touchpoints.

During the first month of the pandemic, 31% of Italians said they would purchase products online that they would typically have bought at a physical store, according to a survey by Casaleggio Associati. This shift is continuing, and Italy’s National Institute of Statistics (ISTAT) found retail sales started to climb in the fourth quarter of last year, despite lockdowns. The good news for retail is that ISTAT forecasts that the Italian economy could grow 4.2% in 2021. Digitalization will be a key enabler.

Meeting customer needs

According to McKinsey, global retailers that can rapidly reimagine their omnichannel approach to create a distinctive customer experience will recover much faster from this crisis. For instance, department stores have increased online sales of beauty products by nearly 10% on average since the start of the pandemic, and these sales are continuing to rise.

McKinsey advises retailers that the customer experience should be “zero friction,” thereby making the shopping experience as seamless as possible. At the same time, they need to focus their merchandising on high-margin and big-ticket items. This means designing web pages optimized for digital shopping, which includes a consistent experience on mobile devices. For example, McKinsey suggests that payment options and shopping carts should be updated in real time across all devices.

We are likely to see more physical stores turn into product showcases, with appointment-only shopping, and fulfillment hubs. They can be places to engage with experts and act as click-and-collect hubs. According to JP Morgan, around 65% of Italian e-commerce merchants now have mobile-optimized sites.

By analyzing data from customers’ omnichannel experiences, from online purchases, apps and in-store, retailers will be better capable of creating a truly connected and personalized experience online and in physical stores.

Therefore, it is little surprise that IDC predicts that by 2021 retailers will accelerate digital transformation programs by embracing cloud-first principles, third-party services and systems integration partnerships. The retailers who can offer a first-class, safe and pleasing digital omnichannel experience will be the ones that win.

Retail will be tech-driven

Leveraging technology through digitalization programs will be imperative to the recovery of the retail business. These technologies will include data analytics, multicloud, artificial intelligence (AI), IoT and virtual and augmented reality, allowing customers to virtually try on clothes, for example. At the same time, these technologies will drive automation.

To meet growing demand, we’ve seen retailers quickly turn to cloud to make the most of its scalability and strengthen resilience in an uncertain economic environment.

Of course, jobs in retail will be affected across the board by this increase in automation, from logistics to customer-facing sales. A recent McKinsey Global Institute report found that around half of current retail tasks are open to automation. Gartner found that 77% of retailers plan to deploy AI this year, using robotics for warehouse picking as the premier use case.

While technology will replace some tasks, demand for human skills will grow in other areas, such as problem-solving and advisory roles. As the manual parts of supermarket checkout are automated, cashiers will take on roles that require social and emotional skills, such as answering questions and delivering more targeted sales.

Innovating to keep pace

Retailers that don’t make digitalization an investment priority will see their customers go elsewhere. Take innovation in payment as an example. Cards are still the most popular payment in Italy online, but this is changing. When it comes to payments, digital wallets are set to grow by around 27% in Italy by 2022, according to research by JP Morgan. Undoubtedly, new contactless payment methods will also appear.

The pandemic has highlighted the importance of technology in maintaining relationships with customers. The standards have been set by big retail giants such as Amazon. Now, a consistent, easy-to-use, personalized omnichannel experience must be part of every retailer’s strategy. It needs to provide customers with channels that can adapt to their priorities and ultimately take advantage of their purchasing power.

Learn more about how digital retail can deliver superior customer experience.

Francesca Puggioni
Francesca Puggioni

Francesca Puggioni is the Managing Director of Orange Business for Southern Europe. With an extensive international business background, she is a champion of cultural diversity in the workplace to inspire creativity and drive innovation and favors a dynamic and innovative management model. She is a great supporter of socially responsible initiatives, especially where technology can have a positive impact on society as a tool for social, economic and environmental development.