Megatrend 1: Individualization

The megatrend Individualization discusses the development towards highly individualized lives of consumers. People will step back from linear and already projected lifestyles. Instead, individuals will form their own complex and dynamic environments based on their own desires and beliefs. They want to make their own experiences to gain satisfaction. (Hasan & Mishra, 2015, p. 14; Z_punkt, 2018, p. 11) This trend will completely change the nature of consumption. Personalized and individualized products and services have to be offered and customers integrated into the development process of new products and services. (Daunt & Harris, 2017, p. 173;

Faulds et al., 2017, p. 1) Corporations have to be fully customer centrically aligned to cope with individual needs. Further, the megatrend describes that consumers increasingly will focus on sustainability, which also will trigger a change in mind-set about ownership. Sharing platforms will pick up in pace and change the way companies generate their revenues. (Parente et al., 2017, p. 2 f.; Z_punkt, 2018, p. 11)

The consumer trends in context with this megatrend, which will be further discussed regarding the retail industry, are the trends Experience Shopping, Personalization and Sustainability.

Experience Shopping

Experience Shopping is certainly one of the key trends in the retail industry.

Nowadays, most shopping activities do not solely revolve around the product anymore.

(Triantafillidou et al., 2017, p. 1036) Instead, shopping has become a social experience, where customers are expecting ‘(…) multi-sensory, interactive, and holistic shopping experiences that entertain, stimulate, emotionally affect and creatively challenge them.’ (Terblanche, 2018, p. 49)

Retailers can highly differentiate themselves from others by providing a meaningful and engaging shopping experience. (Terblanche, 2018, p. 56; Grewal et al., 2017, p.

3) Especially in physical retail the shopping experience plays a major role in the competitiveness of a company. Research has shown that there is a strong linkage between in-store experience and consumer loyalty as well as positive support to the brand. (Poncin et al., 2017, p. 321; Bäckström & Johansson, 2017, p. 242) Multiple dimensions have to be taken into account when developing a great shopping experience. Emotions play a central role in this context. Consumers want to feel pleasure, joy, happiness and inspiration throughout the shopping experience and escape into a different world where they can forget about time and place. (Bäckström

& Johansson, 2017, p. 248; Triantafillidou et al., 2017, p. 1037)

As shopping activities are often carried out together with friends and family, there is a strong social dimension retailers should be aware of. By enhancing shared experiences, retailers are able to develop a strong bond between shoppers and brand.

(Triantafillidou et al., 2017, p. 1037) Furthermore, the aspect of learning in context with a great customer experience is being discussed. Mostly customers are already well informed when entering a store, but want to learn beyond what they already know.

Skills and competencies of the frontline staff have to be on point to match expectations to the in-store experience. (Hagberg et al., 2017, p. 266; Triantafillidou et al., 2017, p.

1037; Bäckström & Johansson, 2017, p. 248) Not to be underestimated is the importance of personalized service as a key to a unique and lasting shopping experience in both physical and online channel. (Hüseyinoğlu et al., 2017, p. 717)

Customer service should be quick and precise, products easy to locate and the overall appearance of the store attractive to the customer’s eye. Here, the implementation of technological solutions is of rising importance to develop a competitive advantage and enhance valuable customer experiences. (Bäckström & Johansson, 2017, p. 248 f.) Hasan & Mishra conclude that if the expectations of the customer shopping experience are surpassed, increasing sales and a higher visiting frequency will be the result. (2015, p. 14)

Personalization

As mentioned in the previous trend experience shopping, personalization already plays a key role in the retail industry. Due to the dramatic increase in marketing activities, especially in the online channel, customers are ignoring most messages and are trying to block out all irrelevant information. (Anshari et al., 2018, p. 2) They have learned to filter out irrelevant content due to the oversupply of information they are exposed to every day, and try to consume only relevant content. (Vrontis et al., 2017, p. 273) Furthermore, markets are often flooded with an immense variety of products and services from retailers from all over the world. As the sourcing and evaluation of products has become a very time-intensive activity, customers nowadays are looking for personalized advice from retailers to get a better understanding of which product or service in particular solves their issue and satisfies their need. (Kaneko et al., 2018, p. 740; Karwatzki et al., 2017, p. 371) Retailers marketing activities have to be precise, fully customer driven and conducted at the right time. (Anshari et al., 2018, p. 2; Briel, 2018, p. 221) The collection and analysis of consumer specific information such as personal preferences, interests and expectations are of major importance when developing a personalization strategy. (Vrontis et al., 2017, p. 273) Recommendation systems have been widely discussed in context with this trend and have proven to be extremely successful tools in the context of personalization. 35% of all purchases on Amazon are based on personalized recommendations. Furthermore, 75% of what people watch on Netflix can be ascribed to such personalized services. (Wang et al., 2018, p. 21)

Through personalization, companies can achieve a better understanding of the values and desires the individual customer is striving for. The offered product portfolio can be adapted and mismatches eliminated, the cognitive dissonance of customers

minimized. In addition, personalization helps to bring the brand and customer closer.

Customer loyalty significantly can be increased, as the resulting experience from personalization is extremely positive and lasting. (Kaneko et al., 2018, p. 741 f.) Sustainability

It can be observed that a strong development towards a sustainable thinking customer is taking place. The responses towards products that ‘(...) have a positive environmental and/or social impact because they are produced with concern for human and natural resources,’ show highly positive feedback. (Brach et al., 2018, p.

254) However, higher prices, lower availability and convenience as well as performance and quality issues hold back a wider establishment and adoption of sustainable products. (Brach et al., 2018, p. 254) Additionally, more and more companies are becoming active in CSR-activities, as customers’ expectations towards such activities have completely changed. Research has shown that 94% of consumers expect companies to focus their activities beyond profit generation and contribute to the improvement of the society and environment. (García-Jiménez et al., 2017, p. 27) 2.2.2. Megatrend 2: Business Ecosystems

The second megatrend considered in context with the retail industry is the trend Business Ecosystems. The trend considers the increasing dynamics of market environments. The transformative power of digital technologies in combination with innovative advancements in business models and process levels form new interfaces across entire markets. (Schallmo et al., 2017, p. 3 f.; Hagberg et al., 2017, p. 264;

Goerzig & Bauernhansl, 2018, p. 541) Boundaries are increasingly vanishing as a result of a seamless integration of both physical and digital channels and touch points.

As a result, multi-channel structures will be transformed into omni-channel environments to cope with customer expectations. (Briel, 2018, p. 217; Hansen & Sia, 2015, p. 1; Verhoef et al., 2015, p. 175) Companies develop into highly flexible entities with changing business objectives due to changes in the expectations of customers towards them. (Z_punkt, 2018, p. 19)

The primary consumer trend that was derived from the megatrend is Omni-Channel Shopping. This consumer trend is mostly discussed in context with the trends Web- &

Showrooming as well as Social Shopping, as the trends are closely related to each other. Hence, all three trends will be taken into account for the theoretical framework.

Omni-Channel Shopping

Consumer shopping behaviour is currently changing more rapidly than ever before, as customers are not just dedicated to a single channel anymore when conducting their shopping activities. (Gallino et al., 2017, p. 2; Gao, 2017, p. 25) Instead, they are increasingly utilizing a growing number of online, offline and mobile channels and touch points throughout their customer journey. This forces retailers to offer goods and services through both physical and online channels simultaneously. (Hansen &

Sia, 2015, p. 1 ff.; Priporas et al., 2017, p. 374; Picot-Coupey et al., 2016, p. 337) Omni-Channel Shopping was triggered, in particular, by the emergence of the Internet and the rise of mobile channels offering permanent access to the Internet. (Picot-Coupey et al., 2016, p. 337; Verhoef et al., 2015, p. 175; Hüseyinoğlu et al., 2017, p.

713) Throughout the customer journey, a seamless shopping experience is expected whereby customers can interchangeably switch between channels and touch points, while relevant, consistent and orchestrated information is displayed. (Gao, 2017, p.

25; Verhoef et al., 2015, p. 176) With expectations developing towards Omni-Channel Retailing, both physical and online retailers must rethink their channel setup to match customer’s expectations. While online stores can only deliver hard information such as prices and product details, a physical store also can deliver non-digital attributes and much softer information about a product. (Bask et al., 2017, p. 34; Bell et al., 2014, p. 360) All retailers eventually will have to set up multiple new channels and touch points and break down barriers to enhance a seamless experience. (Picot-Coupey et al., 2016, p. 337 f.)

With Omni-Channel Retailing in place, new consumer trends are triggered as a result of the new retail format. Consumers tend to perform Show- & Webrooming (explained later on in this chapter) and are actively making use of free-riding possibilities.

Customer loyalty is increasingly vanishing and lock-in effects inside a companies’

ecosystem are heavily weakened. (Picot-Coupey et al., 2016, p. 343; Mou et al., 2018, p. 410) Physical retailers have to apply a holistic approach when strategically developing a shopping experience for their consumers. An overhaul of store concepts is often necessary, as most traditional store concepts are heavily out-dated. (Bäckström

& Johansson, 2017, p. 244) Retail stores eventually develop into distribution hubs for online orders, as consumers demand click & collect as well as home delivery services.

(Mou et al., 2018, p. 412)

Web- & Showrooming

The consumer trends Web- & Showrooming can be attributed to the multichannel-shopping phenomenon. Showrooming describes the trend of consumers visiting a physical retail store, tabbing on free available information and services, before subsequently going online and buying, in most cases, the identical product from another’s retailer shop for a cheaper price. (Arora & Sahney, 2016, p. 762; Sit et al., 2018, p. 163; Daunt & Harris, 2017, p. 166) Webrooming in this context is the exact opposite of Showrooming. It describes the process of customers searching for products and services online, while the final purchase is conducted in a physical store. It is common phenomenon that can be observed by online-shoppers that are seeking to purchase non-digital products. (Arora & Sahney, 2016, p. 762; Falvián et al., 2016, p.

470) Recent research provides implications that a lack of trust and information overload are substantial reasons for Webrooming and Showrooming, as customers seem to be overwhelmed and confused by the products and information available. (Bell et al., 2014, p. 360; Daunt & Harris, 2017, p. 173; Arora et al., 2016, p. 411; Sit et al., 2018, p. 170)

Showroomers and webroomers are often described as free-riders which take advantage of retailers by consuming free available resources without the intention of an actual purchase. (Arora & Sahney, 2017, p. 763; Sit et al., 2018, p. 163) They are considered as an extremely price sensitive and disloyal customer segment and want to make sure that the purchased product fits perfectly to their needs and they pay the lowest price offered on the market. (Sit et al., 2018, p. 172) Showrooming is a trend which is mostly perceived very negatively by traditional brick-and-mortars, especially those operating in developed and transparent markets, where e-commerce is vastly spread. The trend has been fuelled by increasing Internet connectivity, the mobile affinity of customers, an upsurge of competition in the e-commerce market, as well as a decrease in physical retailers. (Basak et al., 2017, p. 34 f.; Sit et al., 2018, p. 163)

Social Shopping

Research has shown that an increasing amount of consumers are following their favourite brands on social media platforms to keep themselves informed about new products and trends and to communicate with others interested in similar products.

(Chen et al., 2017, p. 628; Hansen & Sia, 2015, p. 51) More than 75% browse the web

before going into a physical store, the majority continues to use their mobile phones inside the store. (Hansen & Sia, 2015, p. 51) This behaviour is due to the customers’

lack of trust in the information provided by retailers. Customers utilize social media networks as a tool to share and exchange thoughts, opinions and experiences about brands, products and services with others. Third-party opinions are often perceived as more credible than product descriptions or recommendations from companies. (Chen et al., 2017, p. 628; Hüseyinoğlu et al., 2017, p. 714; Lal, 2017, p. 74)

Users in social media networks are becoming active content creators and form online social communities. Companies can directly influence the purchasing behaviour of customers by utilizing user-created content by embedding it into their channels.

Previous studies have shown that social commerce is a strong tool to build brand trust, loyalty and helps customers in the purchase decision making. (Erdoğmus & Tatar, 2015, p. 189 f.; Lal, 2017, p. 71)

2.2.3. Megatrend 3: Digital Transformation

The third megatrend, that was identified to be relevant for the retail industry, which impacts most consumer trends that were discussed, is Digital Transformation.

The dominance of digital technologies will further increase and take over an even more dominant role in our lives. Due to the advancements in the production of high-speed mini-sensors and processors, everything around us will become increasingly smart.

Many different digital technologies were introduced into the retail industry in recent years, and are slowly but surely changing the channel environment completely.

(Pantano et al., 2017, p. 102; Hagberg et al., 2017, p. 264) The world is becoming an increasingly smart place where entire ecosystems are communicating and exchanging data, new virtual worlds are born with the help of VR and AR. (Z_punkt, 2018, p. 13;

Hagberg et al., 2017, p. 264)

With digital technologies in place, new opportunities are born for big data and data analytics. Conclusions can be drawn from available data to better predict consumer behaviour and effectively increase the success of targeting. (Grewal et al., 2017, p. 5;

Hagberg et al., 2017, p. 264) With the emergence of artificial intelligence, tremendous amounts of data can be analysed to enable real time computed decision making for companies. (Snow et al., 2017, p. 4; Grewal et al., 2017, p. 5) Automated machines

and robotics will be the answer to sophisticated problems that will work fully autonomously. (Z_punkt, 2018, p. 13)

The following digital technologies will be further considered: Augmented & Virtual Reality, Data Analytics, Artificial Intelligence, Self-Service Technology and Mobile Payment as well as Robotics. Certainly there are more digital technologies which potentially help leveraging consumer trends, but the research in this field was narrowed down to these six technologies to set the scope for the literature research.

Virtual and Augmented Reality

Virtual Reality technology generates a new and computer-powered world where ‘(...) the user feels a sense of presence… and which has the ability to engage the human senses including vision, hearing, but also offers kinematic and proprioceptory experiences. (Van Kerrebroeck et al., 2017, p. 437) AR and VR can have a tremendously positive impact on retail in particular. (Hagberg et al., 2017, p. 264) Research shows implications that VR positively correlates with the brand perception and purchase intentions of customers as it delivers a lasting brand experience by allowing them to escape the real world and immerse into a completely absorbed and engaged new environment. (Van Kerrebroeck et al., 2017, p. 439 ff.)

VR allows retailers to bring the physical showroom into the online channel, which, with the right gear, can be accessed from anywhere at any given time. These virtual showrooms simulate the customer experience of a physical store and potentially replace the visit to a physical store. (Gao, 2017, p. 3 ff.) However, non-digital attributes cannot be delivered through VR, as technology will never be good enough to transfer the haptic analogue items. (Bell et al., 2014, p. 360; Gao, 2017, p. 25 f.) AR, on the other hand, considers the integration of computer-animated graphics into a real world picture. It is based on three-dimensional technology, which delivers graphics that can be explored with the help of digital devices, a head-mounted display or similar technologies. With the new dimension of delivering information about products and services, companies have new possibilities to further improve the customer experience and enrich customer engagement to increase the chance of converting a lead into a customer. (Poushneh, 2018, 169; Pantano et al., 2017, p. 90)

Further, AR is a powerful technology to improve the customer engagement especially during the research process as it has proven to be a vital way of displaying additional useful and personalized information about desired products. It enhances the user experience as it delivers more relevant product related information and an increased entertainment factor. (Poushneh, 2018, p. 169; Poushneh & Vasquez-Parraga, 2017, p.

230) Augmented reality should facilitate the shopping experience, remove anxiety and improve customer satisfaction but it can only work if the technology can output accurate, valid and personalized information. AR will not only improve the customer experience but it will also make the customer want to stay in the store longer as the entertainment factor is rising. (Poushneh, 2018, p. 173 ff.)

Fashion-Retailers have increasingly experimented with the implementation of magic mirrors in dressing rooms to give to opportunity for customers to virtually check the fit of the product. (Foroudi et al., 2017, p. 273; Poushneh, 2018, p. 175) Photos can be taken and immediately shared on social media channels as well as encourage the customer to directly order a product straight from the dressing room. (Foroudi et al., 2017, p. 273)

Data Analytics

Data Analytics enables companies to develop a new form of business intelligence, as relevant information can be extracted from a large set of data to enhance and improve further strategic decision-making across all kinds of activities that impact the performance of a business. (Bradlow et al., 2017, p. 85)

With an increasing amount of new digital technologies being integrated into both online and offline channels, big data and predictive analytics is obtaining a major role in the success of a retailer’s business model. (Grewal et al., 2017, p. 2) It is crucial for retailers to be able to track new customers and link all kinds of activities and transactions to be able to individually communicate to its customers on a very granular basis. (Bradlow et al., 2017, p. 80; Grewal et al., 2017, p. 1) Data analytics helps companies to make real time decisions and optimize their business operations to the maximum. It automatically helps to offer the right products at the right time to the right customer through micro-targeting. The product range can be adapted and optimized and customers in-store movements and online journeys monitored and perfected. These real-time insights allow a much greater flexibility and drastically

enhance the customer experience. (Bradlow et al., 2017, p. 80 f.; Grewal et al., 2017, p. 4)

By collecting geo-data about customers through location-based applications, retailers can communicate personalized and highly significant information at the right time during the customer journey, based on previous purchasing behaviour. Beyond that the end-to-end customer journey can be reproduced, as information from touch points from the physical and digital world can be combined and data analytics can be brought to its next level. (Bradlow et al., 2017, p. 80 ff.; Grewal et al., 2017, p. 1 ff.)

Artificial Intelligence

One of the ground-breaking trends in recent technological advancement is the development of artificial intelligence. Artificial intelligence is based on neural networks which enable computers to have the ability to think, act and learn like human beings. (Dirican, 2015, p. 570; Pan, 2016, p. 410; Oana et al., 2017, p. 357) Artificial Intelligence is the highest level of how companies currently can make use of collected data, as it automatically analysis behaviour, learns from reoccurring patters and transfers seemingly useless sets of data into knowledge. (Oana et al., 2017, p. 358) With the help of machine learning, language processing and sentiment analysis, artificial intelligence can dramatically improve the customer interaction process with a retailer across a variety of channels. Consumers are increasingly using AI-powered technologies to receive an answer to any question, such as Siri from Apple, Home Assistant from Google or Alexa from Amazon. (Kirkpatrick, 2017, p. 18; Cerf, 2017, p. 7) In retail, many customer contact centres are already using AI to reduce the total call volume, as it is able to deliver correct and necessary information in real time to the customer. Intelligent bots can automatically handle routine information requests and evaluate whom to forward the request to and has already dramatically reduced the costs for front-line service employees. With the help of sentiment analysis, the

One of the ground-breaking trends in recent technological advancement is the development of artificial intelligence. Artificial intelligence is based on neural networks which enable computers to have the ability to think, act and learn like human beings. (Dirican, 2015, p. 570; Pan, 2016, p. 410; Oana et al., 2017, p. 357) Artificial Intelligence is the highest level of how companies currently can make use of collected data, as it automatically analysis behaviour, learns from reoccurring patters and transfers seemingly useless sets of data into knowledge. (Oana et al., 2017, p. 358) With the help of machine learning, language processing and sentiment analysis, artificial intelligence can dramatically improve the customer interaction process with a retailer across a variety of channels. Consumers are increasingly using AI-powered technologies to receive an answer to any question, such as Siri from Apple, Home Assistant from Google or Alexa from Amazon. (Kirkpatrick, 2017, p. 18; Cerf, 2017, p. 7) In retail, many customer contact centres are already using AI to reduce the total call volume, as it is able to deliver correct and necessary information in real time to the customer. Intelligent bots can automatically handle routine information requests and evaluate whom to forward the request to and has already dramatically reduced the costs for front-line service employees. With the help of sentiment analysis, the