Digitalization, omnichannel strategy, and putting the customer at the center drive the post-COVID retail evolution
How has retail changed in 2020, and what’s the status of digitalization in the sector? How’s the market going to evolve, and what are the challenges ahead? Finally, what kind of digital tools and strategies must be implemented to cope with the new scenario?
The many questions on post-COVID retail reflect the uncertainty of companies in finding the right strategy for adapting to an unpredictable, completely new context.
Therefore, we dedicated an in-depth, 4-post study to this issue by consulting a top Italian digital marketing and retail sector expert, Gianluca Diegoli. He’ll clarify the topic and guide us in this complex scenario.
This first article will sum up the evolution of retail from the onset of the lockdown to today. Then, we’ll focus on the main challenges of the future and discuss all the complex issues of a sector that’s radically transforming. These include the role of messaging in the digital transition and the crucial role of an omnichannel strategy.
From developing integrations to strategic support, from creating creative concepts to optimizing results.
Who’s Gianluca Diegoli?
A digital marketing consultant for 10 years, professor of marketing and multichannel strategy at the IULM University of Milan, and co-founder of Digital Update, Italy’s first digital training school, Gianluca Diegoli is one of the best-known digital strategy experts in Italian marketing.
He deals with strategic marketing consultancy, digital transformation, e-commerce, and omnichannel strategy. He has authored numerous books, e-books, and articles on the subject of retail and the digital world. He’s the editor of a [mini] marketing newsletter, which attracts over 8,000 Italian marketers every Friday.
The first impacts of the pandemic on retail, the digital divide, and the urgency of omnichannel solutions
The digital tide has forever changed—first out of necessity, then by choice—consumers’ purchasing behavior. Possibly, this has affected distribution and commerce more than any other sector. Omnichannel means the seamless online and offline presence of a brand. Suddenly, it has gone from being a conference topic about a vaguely close future to the key in safeguarding turnover. This is so true, now that multichannel is considered fundamental for the survival of over 80% of Italian companies.
All of a sudden, companies had to acknowledge that digital was no longer a futuristic option. Rather, it was already the prevailing method of discovery, selection, and purchase for 55% of Italian consumers and, with great probability, also the decisive factor of survival and development.
However, neither consumers nor companies had the same starting point. In fact, alongside non-digitized firms, a minority of enterprises had already undertaken a process of digitalization of their contact points, albeit amid internal difficulties and sometimes inadequate budgets. Only 34% of companies could count on high digitalization at the beginning of 2020, considering both technology and human capital. On the other hand, 55% still showed a closed attitude toward digital, which was thought to be not very influential in developing their business (Source: Professionals and B2B Digital Innovation Monitoring Center of the Polytechnic University of Milan).
Very often, however, companies already oriented toward digital were poorly managing their data. They kept data in independent, disconnected silos and didn’t merge the online and physical shops contact databases. The Data Strategy was one of the biggest weaknesses of Italian companies. At the beginning of 2020, only 1 retailer out of 3 collected, harmonized, and integrated data from different channels into a single system. It was urgent to integrate and focus on customers, individuate their online and in-store behavior, and speak to them with a single voice.
Companies that had omnichannel-oriented forms of integration before the pandemic had achieved the best results. In fact, tools, processes, communities, and digital connections with their customers were already active. They had a direct conversation with people and knew how to process data, use tools, and measure returns.
Two restarting keys: e-commerce and digital investments
In short, someone had to speed up while others had to chase, especially in two key aspects. Obviously, e-commerce is the first one while the second is the allocation of the advertising budget under a digital perspective.
Italy had always been lagging behind when it comes to e-commerce penetration, with only 10% of companies selling online compared to 18% of the European average.
This backwardness was partly due to the immaturity of the demand by under-digitalized age groups, unable to buy online. But partly, it also depended on a still underdeveloped offer. In fact, the retailers showed a “follower” mentality, for example, waiting for some foreign player to enter the market. The outcomes were often not user-friendly and out of the average consumer reach. Indeed, the fragmented economic structure of traditional trade worked as a brake. Brands feared of damaging the already fragile physical sales network while implementing Direct-to-Consumer e-commerce strategies. This inevitably led to a situation in which only 1 in 10 Italian companies sold via the web to final consumers (about 11.5%).
The 2020 emergency made people overcome reluctance and hesitation. A huge rush to open online stores pushed 50% more companies into e-commerce compared to 2019. This, despite they often didn’t conduct the necessary strategic investigation about positioning, existing market alternatives, and buyers’ real needs. In practice, the offer has simply moved from the store shelf to the online catalog. Obviously, this wasn’t a success in all cases: the online store is a part (albeit an important one) of the omnichannel project, but not the only one. Concrete results require a layer of digital engagement around the project to accompany the audience in the discovery, information, conversion, and purchase repetition. “I create a shop, and then someone will come” doesn’t work on digital.
Technology itself no longer seems to be out of reach, for neither consumers nor brands. Unexpected consumer segments crowded online shops such as supermarkets, drugstores, and beauty, furniture, and traditional electronics shops for a total of about 3.2 million new e-commerce users in Italy (about 5% of the population). Meanwhile, companies that were already at a mature stage of the digital transition have strengthened their e-commerce infrastructures (about 88% of the top players), and a large part of small and medium-sized enterprises (64%) has launched new contact and sales methods (Source: 2020–2021 Retail Digital Innovation Monitoring Center). CRM and messaging systems like MailUp, e-commerce platforms such as Shopify, and content management systems like WordPress are, in fact, within the reach of any company that aims to invest in digital growth. The ease of access to these tools has been a lifeline for many SMEs. Among new MailUp customers of the last quarter of 2020, 34% use a WordPress platform and 37% of these adopted the WooCommerce plugin.
Alongside these technological enhancements, click and collect systems, as well as subscriptions and delivery systems of niche products, have emerged (or re-emerged). These include home and garden maintenance items, wine and tea, pet food, vertical marketplaces, virtual tours and tests, dark kitchens, and so on. The offer of home delivery services boomed as never before. MailUp customers sent approximately 21 million delivery-themed emails in April 2020 alone. Users showed a clear interest in the beauty and personal care or home and garden sectors.
Retail challenges in the new normal
1. Finding the right product-market fit
The extent of the changes triggered by the pandemic is putting new challenges on the table. What’s at stake is the survival in an increasingly competitive market on two parallel levels. One is external and it’s about intercepting a new public. The other, internal, is about the company’s management adaptability.
The first challenge now lies in creating the right overlap (the product-market fit) between supply and demand, i.e., between consumer needs and business organization. This means a process update for planning and budgeting digital retail no longer as wishful thinking but as the main development driver.
2. Intercepting the user by integrating physical and digital experience
The further, great challenge of retail is about being able to seize any moment when customers express their need. Both the physical and online store must have a strategic role in easily intercepting the user. Physical and digital need to intertwine and merge in the customer journey. This means,
- considering e-commerce as an ever-changing envelope that adapts to any consumer needs, as these can quickly shift even within the same target. It’s vital for companies that their e-commerce sub-systems (external databases, CRM, CMS, ERP, Business Intelligence systems, and email advertising platforms) work together. The data coming from the different platforms must communicate to incorporate the online store in a well-thought-out sales strategy. The goal is getting an in-depth overview of the customer’s interests and behaviors.
- enhancing the role of the physical store as a high involvement experience that may answer the continual, 24/7 digital research carried out by potential customers. In fact, for many sectors, the shop will adapt according to the new needs and will get a new status, turning into a different and superior experience rather than a “mere warehouse”. Store digitalization isn’t about multimedia screens. It rather means immaterially keeping in touch with those customers who registered through their personal devices. These are the current consumers’ real tools of discovery and choice.
When the physical store fits the digital marketing system, it turns into an exclusive positioning and engagement that facilitates the user’s journey. At the same time, it balances the users’ need for security, which is meant to last a long time.
The big bang of retail has just begun.