This is not an article about traditional retailers and the challenge presented to them by online retailers. We are all aware of the stats that identify the exponential growth of online sales, but the fact remains that even in the most mature markets they account for below 10 per cent of aggregate sales. The profitability and scalability of this business model is another separate discussion in itself — it is clearly evident in our discussions with leading retailers that most companies are pausing to evaluate the difference between fashionable concepts and functional business models. The financial results of online retailing aside; an equal force in driving this pause has been the impact of smartphone penetration in all countries. E-commerce is clearly being replaced by mobile commerce largely due to the fact that m-commerce is complementary to harnessing the power of “clicks” or the web-based platform, to create resulting transactions within the “bricks” or physical stores.
According to a recent PayPal study, mobile e-commerce is beginning to take off in the Middle East region. The report claims that, while mobile transactions are already at a comparable level to the rest of the world (10 per cent of e-commerce), current growth means that they will reach around 20 per cent of transactions within two years, as the m-commerce market grows from $1.3 billion (Dh4.77 billion) in 2013 to $3 billion by 2015.
The reality of m-commerce is that online and in-store strategies are no longer mutually exclusive, but if structured right, completely complementary.
The shopping journey can be divided into three parts — discovery, selection and transaction. Savvy retailers are aware of the discovery and selection components being increasingly initiated online or on mobile, and are using this ‘omni-channel’ engagement hook to ensure that the final and most critical component — transaction — is executed in-store, where they invest their rental, salary and advertising dollars, day in and day out.
In the past, technology enabled and streamlined the back-end infrastructure of a retailer, but today, it has emerged as the key front-end enabler of connectivity with customers. The scale is transformative and is compelling retailers to either evolve or perish.
The relationship that a retailer had with the customer has come full circle. What started as a personal relationship between a local merchant and customers, founded on trust and the expectation that the merchant would over a period of time know their likes and dislikes and help them with what they needed and alert and inform them about new items on the shelf, underwent depersonalisation and grew into organised retailing.
Organised retailing is all about scale of operation and the use of technology extensively to make shopping a lot more ‘self-service.’ While retailing was getting organised, a whole new revolution of wireless connectivity through mobile phones was underway and transforming the way customers connect and make informed choices.
Today, smartphones have enabled a whole generation of consumers to be ‘always on’. They have fused the virtual with the physical world, delivering ubiquitous connectivity with the internet and permanently changed consumers’ purchasing behaviour. Consumers have come to rely more on their mobile devices than their desktops or laptops for their shopping needs. In fact, social media and mobile devices have shifted power in the retail industry from suppliers and retailers to well-connected shoppers. These new consumers are equipped with a strong sense of entitlement and the expectation of consistent, high-quality service across multiple retail channels.
The depth of product features, prices and alternatives discovery that drove online visits is now expected on the go with a consistency between ‘clicks’ and ‘bricks.’
The single most critical consistency in being able to deliver is that a smartphone with an individually branded retailer application can deliver this dual functionality.
Omni-channel — The new retail paradigm
The proliferation of smartphones and tablets, coupled with the ubiquity of wi-fi networks, is urgently demanding a change in retailers’ traditional go-to-market model. The traditional attributes of retail being location, product, price, quality and service are simply a prerequisite now, rather than a differentiator.
Retailing in the connected world is about understanding the impact of mobile, online and social media. This irreversible trend is ‘omni-channel’ retailing. It is no longer just a concept, and is best defined as multiple and individually relevant touch points, equipped with unfailing memory and the intuition about consumer preference, available digitally and physically. This is helped by the game-changing ways in which wireless technology and applications are coming together to form solutions that are empowering sales associates, and connecting with the already connected customer with their personal tastes, at their preferred locations, through their preferred media.
This trend towards omni-channel retailing is borne out by Motorola Solution’s seventh annual Holiday Shopping Study conducted late last year in the US which showed that retailers’ technology investments were leading to a better in-store experience with shopper satisfaction up by 23 per cent since 2008. By enabling more associates with technology and offering self-service shopping options, retailers are not only increasing sales but also driving greater customer satisfaction.
A traditional retailer’s move towards omni-channel is an organic shift and a ‘must’, but what is striking is that some of the pure-play internet vendors are shedding their online purity and moving into setting up of a physical outlet.
Even Amazon has installed lockers in shopping malls from where customers can pick up deliveries. Could this be its baby step towards brick-and-mortar?
Embrace the converse
The future is not about the number of stores added, but about connecting with the customer, understanding what they want, when they want and where they want. Today’s global retail leaders are embracing technology to do away with these perceived occupational hazards, thereby garnering massive competitive advantage.
With digital space and smartphones, no longer does one size fit all. There is a compelling need for mass personalisation. Failure to change and to deliver an integrated shopping experience across all channels puts a retailer at risk of becoming irrelevant.
Customer experience revolution
There is a radical shift in the consumers’ purchasing behaviour due to the fusion of virtual and physical worlds. This was a sentiment clearly echoed by the retail community at the World Retail Congress in Singapore last year.
The collective voice at this key global industry event agreed that digitisation, personalisation and localisation are mandatory for success in retailing globally — more so in the Middle East due to the diversity of cultures.
Meanwhile, even as e-commerce and m-commerce open up a world of borderless shopping, there is a pressing need for local retailers to step up their efforts to capture a slice of the e-commerce and m-commerce pie, as evidenced by the following numbers:
• 30 million people are now shopping online in the Middle East, up 65 per cent from 2011.
• Of the GCC’s $15 billion in online sales, Saudi Arabia will account for $2.7 billion, Qatar will account for $1.25 billion, and the UAE will account for the lion’s share at $5.1 billion.
• A significant amount of that spending will be due to m-commerce ($700 million in Saudi Arabia, $100 million in Qatar, and $1.5 billion in the UAE, the latter mostly driven by tablet adoption).
The way forward
Never in the history of retailing has the customer been so central to future success. It is imperative for retailers to deliver a seamless customer experience across all channels and provide the right services and products at the right time to the customer. The good news is that future facing mobility solutions are available today. It is up to the retailers to embrace such technologies and align their business around the theme of evolving customers.
Constantly analysing customer behaviour is the way to get ahead of the customer and lead the experience game with the connected shopper.
— The writer is regional sales director — Middle East Region, Enterprise Mobility Solutions Business at Motorola Solutions.