Digitalisation

The pandemic brought about the acceleration of many digital trends already in motion within the retail sector. The required closure of bricks and mortar stores in much of 2021 meant that retailers had to fast track digital strategies and optimise their existing platforms to enable a seamless, straightforward click to delivery service and create meaningful consumer engagement opportunities. 

Key challenges of doing this include IT infrastructure - is it set up to be able to handle smaller orders with higher frequency? Are the licenses in place to permit sales to customers (licence metrics may be exceeded for example)? Also consider the availability of secure payment platforms when moving to direct online sales to consumers, consumer compliant terms and conditions, data privacy issues (including digital platforms to manage customer engagement and managing consumer data preferences), resourcing challenges, adopting AI effectively, and maintaining authenticity/brand control.

Platform hopping: Retailers have had to quickly rely on third party providers to meet customer demand. From delivery service providers, to relying on online marketplaces, use of third party infrastructure brings quick rewards. However, this needs carefully balanced against the risk of loss of customer insight data, particularly where use is made of third party marketplaces.  Looking forward, managing that asymmetry is a key regulatory theme in the UK, Europe and elsewhere to ensure that platforms do not have undue advantages relative to their users. Also payments may be restricted to those made via the platform or the payment options they offer which then entails new arrangements for the retailer to deal with. New online distribution methods can also place strain on the speed and flexibility of supply chains, which generally have to become faster and more able to respond to demand on those products which are selling well and those which are not. This includes manufacture, warehousing, order picking and delivery elements. 

Whilst phy-gital consumer engagement strategies can create new opportunities for retailers, success relies heavily on maximising consumer data effectively. The interaction and analytics of payments, loyalty and customer behaviour are vital elements of retailers' sales strategy.

The power of personalisation: With increased customer interactions (whether via your own platform or from third party data services), personalisation opportunities are on the rise. Extensive data allows for micro-segmentation of consumers to create a unique consumer experience to drive greater revenue and increase customer loyalty.

Transparency and third party data risk: To achieve slicker personalisation, data sharing is essential from a variety of sources – from social media to payment providers. These practices continue to be under the microscope following a recent ICO investigation into data broking. There is a clear regulatory trend in finding ways to control data sharing practices, especially in profiling and marketing to consumers. Retailers need to be much more transparent and have robust bases in law for use of data particularly from third parties – and this needs to be balanced against the power of understanding customer future needs.

Regulating big tech: Regulators across Europe and globally are focussed on addressing the challenges of big tech and have not been afraid to use existing tools and develop new ones to address the challenges.  These are not only focussed on consumer interests, but also seek to address potential imbalances of power, for example some of the major platforms the and businesses that rely on them. The European Commission continues to crack down on anti-competitive e-commerce practices with Amazon now facing a potential multi-billion pound fine for the use of non-public independent seller data and alleged self-preferencing. These are key concerns for many suppliers who trade on Amazon's platforms and comes against a backdrop of regulators across the world, including the CMA and European Commission, pushing for new legislation to regulate of online platforms to proactively regulate against practices such as self-preferencing by players in the digital market with significant market power. This year saw the CMA block Facebook's acquisition of Giphy – which could signal stronger moves to come from the regulators. Data protection regulators are also clamping down on non-transparent data sharing practices particularly across social media players.  This is largely focussed on cookie tracking tech. Some tech players are trying to get ahead of this with deploying much more privacy centric approaches – retailers are following this trend moving to give consumers much more control around their data.

Influencers: Many brands and retailers are also adapting the way in which they use influencers, harnessing them as a tool to connect with consumers and create authentic engagement and connection between online life and in-store reality. However, care needs to be taken that such use is transparent (i.e. that the influencer content is an advertisement), and last year saw the first UK advertising infringements of such rules by influencers on newer platforms such as TikTok. Additionally, use of third party content such as music by influencers, which has not been properly licensed, may draw brand owners into disputes with third party content owners. Use of children's data is also a concern to factor in.

Programmatic advertising: Whilst this method of purchasing advertising space can provide great benefits to retailers, it is an area that has been subject to investigation both by the ICO and the CMA due to the complexity of the advertising eco system, data sharing practices within the industry, inventory quality and lack of inventory transparency. 

POS engagement: Technological advancements continue to help businesses digitise the end to end consumer experience and bridge the gap between in-store and online. Digitalisation of POS takes advantage of these advancements through using digital shelf labelling, smart augmented reality mirrors in-store, visual searching, smart tags, apps detailing maps of store layout, to increase the connection with consumers, drive sales and create a retail experience worth returning for.