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 changing tone and mood of customers can be foreseen and thus behavioural advice given to the sales staff to calm situations before they escalate. (Kirkpatrick, 2017, Hagberg et al., 2017, p. 264) Furthermore, AI in retail can be utilized to enable real time recommendations and increase aftersales through the prediction of needs and desires. (Syam & Sharma, 2018, 10)

Robotics

Robots are a strong utility for reshaping the future physical store, as it innovates customer interaction with the physical store. (Leung, 2018, p. 43; Bertacchini et al., 2017, p. 383) With the advancement in artificial intelligence, robots will soon be able to take over various types of tasks in both back-end and front-end business areas of a retailer. (Leung, 2018, p. 43; Bertacchini et al., 2017, p. 382) With the ability to learn social interaction with human beings, robots potentially have the ability to replace the sales staff in physical stores in the long run, since they will be able to interpret and process gestures, emotions and body language and react appropriately. (Priparos et al., 2017, p. 379; Snow et al., 2017, p. 10) The number of tests for robots as a replacement for sales assistants is globally increasing as they can help to reduce the operating costs as well as help to improve both the customer experience and satisfaction. In physical stores, robots can be utilized as a navigator to lead customers through the stores and bring them to their favoured products. (Bertacchini et al., 2017, p. 382) Research has shown that customers are feeling more positive towards robots in retail, as they take over tasks in cooperation with people, rather than fully replacing them, such as self-service technologies do. (Bertacchini et al., 2017, p. 383)

Self-Service Technology

The term Self-Service Technology describes technological interfaces that offer services to customers without the necessity of the involvement of a service staff.

(Considine & Cormican, 2016, p. 103 f.) The advantages and disadvantages as a result of Self-Service Technologies are highly debatable. On the one hand, lots of space can be saved, as i.e. Self-Service Counter lanes take up less space than normal check-out lanes. On top of that, the number of cashiers necessary can be reduced to a minimum, and employees can focus on great customer service rather than a standardized payment process. (Bulmer et al., 2018, p. 107; Mou et al., 2018, p. 408) Furthermore they help reduce long queues, accelerate the check-out process and improve the overall shopping efficiency of the customer at the point-of-sale. (Bulmer et al., 2018, p. 107) It is proven that Self-Service Counters are improving the in-store customer experience, and are triggering higher customer satisfaction in terms of service received. (Mou et al., 2018, p. 408) On the other hand, Self-Service Technologies are often criticized for their lack of human interaction. (Mou et al., 2018, p. 408) On top of that, Self-Service Technologies are used by people who have very low technology anxiety levels as well

as by people with superior self-efficacy who are confident about their capabilities to successfully use such technologies in the right way. (Bulmer et al., 2018, p. 108; Lee

& Lyu, 2016, p. 330)

Thus, Iberahim et al. explain that ‘(…) it is essential for a Self Service Terminal to have an adequate number of machines, a convenient and secure location of the machines, a fast user friendly system, a minimum of errors, a high uptime, cash back, a low cost and various services coverage.’ (2016, p. 15) It is important for retailers to identify the exact expectations and intentions of targeted customer segments in order to avoid negative attitudes towards such technologies. Self-Service Technologies need to be fun and interesting to use. These key factors mixed with human interaction can encourage the majority of people to accept and use such technologies. (Lee & Lyu, 2016, p. 330)

Mobile Payment

New payment technologies, which are based on Near Field Communication (NFC), QR (quick response) codes and various types of mobile applications, i.e. mobile wallets or Peer-2-Peer applications, are reshaping the payment process in both online channels and physical stores. (De Kerviler et al., 2016, p. 334; Taylor, 2016, p. 159 ff.) The term mobile payment describes the process of a payment transaction with the help of a mobile device (Bailey et al., 2017, p. 627). With the launch of their own mobile payment services, large smartphone manufactures, such as Apple or Samsung, are cooperating with major players from the banking industry and are catching the consumers attention. (De Kerviler et al., 2016, p. 334; Taylor, 2016, p. 159 ff.) Mobile payment improves the speed of the checkout and payment process and helps building a bridge between the online and offline channel of a retailers business. (Bailey et al., 2017, p. 627) It can further improve the customer experience as well as provide another touchpoint between the customer and retailer. The technology also can be used to send personalized mobile marketing campaigns that should help the customer make a smart decision in the purchasing process. (Foroudi et al., 2017, p. 273) In 2015, the payment service from Apple – Apple Pay – was available in more than 700,000 different points of sales in America. (Bailey et al., 2017, p. 626)