The pandemic of 2020 has brought unexpected changes to the retail and D2C markets. The role of mobile applications, self-checkouts, and product innovations have all seen sudden acceleration over the last year. This is drastically changing the future of retail.
To get a complete insight and understanding of the situation, we spoke to a few retail and D2C experts. Esha Jhangiani from Nestle, Vinay Dikshith from Schwarz Gruppe, and Laureen Ellison from Diageo got on a conversation with Shalini Devji and Mike Barclay from MoEngage to decipher the changes in customer engagement. They also considered some key retail strategies to be implemented for the future of retail and D2C.
In this article, you’ll learn an overview of the facts, insights, and experiences from the conversation. This will help you understand:
1️⃣ current challenges in the retail and D2C industry,
2️⃣ customer engagement for the future of retail and D2C, and
3️⃣ building connected customer experience across all channels.
Many brands are considering the outbreak of COVID-19 as one of the most challenging moments for retail. But what are these challenges encountered by the brands? Here are some of the issues:
With the outbreak of the coronavirus in 2020, most stores worldwide had a limit on the number of people permitted in store at a given time. With more than 50% of European and UK shoppers preferring to stay indoors, the rule to have limited numbers is affecting the whole retail industry. Despite stores being open in countries like Poland, there were only five people at the store at any time.
Other users who would visit the store often made the switch to e-commerce apps or store pickups.
This problem forced the adoption of ‘click-and-collect’ or setting up e-commerce networks. This change was primarily a challenge in the FMCG sector since hundred-thousand articles need categorisations and updating.
A brand like Diago found it harder to make a shift to D2C since they mainly worked with retailers. Setting up a whole new D2C segment was as good as starting from scratch.
These unusual times also demanded an acceleration in product innovation. A new problem in the world opened up the demand for touch-free, hygienic, safer, and cheaper products.
For example, Nestle was in the process of creating a touch-less coffee machine that works from a mobile application. This innovation reached a fast track since the pandemic boosted its demand. More businesses were forced to reassess their workforce and fund-allocation.
Once we understand the major issues at hand, it’s essential to address the future of retail going forward. What are a few things a brand can do to enhance customer engagement? While the options are endless; we focus on two interesting approaches:
The number one approach is to invest in creating loyalty programs. With such programs in place, brands can ease shopping by removing certain limitations like shipping charges or priority shipping, extra offers/discounts, and availability of products.
For a Hypermarket brand like Lidl under the Schwarz Gruppe, the biggest challenge with customer engagement was moving the process online. While ensuring sales of food products were happening as that was the biggest roadblock.
Lidl fixed this issue by creating a loyalty program system. This program gave customers a 10% discount on any product once they signed up on the app. The brand boosted engagement by observing more app sign-ups and giving users a reason to shop. Sign-ups provided the brand with a chance to start using their customer data for further engagement.
A consumer bounded at home could now consider shopping more often as an incentive was added to the mix.
For example, Nestle usually focused on coffee sales restricted to the first cup of coffee before work. Most Europeans got their second coffee in cafes or workplaces. This changing work culture (work from home) pushed for a better supply chain in the D2C network.
For this, Nestle had to double down on their own websites and apps. They started building better engagement journeys by creating a user journey for each product.
With more people locked into their homes, relevant content makes a significant difference when engaging with consumers. “Brands need to enable access to products, people, and content. Engagements cannot just remain as sales and advertising,” said Lauren Ellison from Diageo.
The use of actors, comedians, and channels like TikTok will make a difference. Digital experiences and relatable content can make a lot of the difference. Some companies are also increasing awareness of secondary products.
For example, using their website, Diageo were able to sell tours to their distilleries and allow people to create their own blends. The more unique the customer engagement, the better the results.
Experts in marketing suggest that a customer who just purchased a product is more valuable for a resale.
Perfect customer engagement comes down largely comes down to the level of personalisation applied. Adidas, for example, focused on ‘reactivations of consumers.’ They plan consumer journeys that kept the user occupied for 60 days after they purchased one of their products.
“If a customer buys something, they also tend to come back and buy again in seven days, so we re-target them,” said Vinay. “In retail, we segregate shoppers as ‘big spender’ or a ‘minimal spender’ and target them accordingly”.
Some brands manage their inventory on both their own platform and via retailers. In such cases, they must create a difference in service or price to keep sales active on both fronts.
For example, consider a packet of infant nutrition from Nestle. They are sold in all major stores and hypermarkets. However, when purchased using their own website/applications, the consumer can pick up larger-sized packets that are not available at the stores.
D2C should be incentivised since it will always give the brand more data on the user. Giant hypermarkets cannot collect data points on consumers directly. “Hypermarkets do not have the availability of finer data points; we only have information like first name and last name; that seems irrelevant for any analytics,” said Vinay.
Take Tesco’s example—in Tesco UK, they have a loyalty program to help them gather data on how much a consumer tends to spend, the type of products purchased, and discounts most likely used. So it is safe to say additional data can be gathered. However, brands need to make a fair exchange with the customer i.e., a great loyalty program in return for data.
If you wish to make an experience memorable, the product has to stand out from the clutter. Make products so interesting and unique to drive users to apps and websites.
Consider the personalised Kit Kat chocolates in Japan. Users can always pick up a Kit Kat packet at the store, but the online tool on their website allows users to customise their own flavours.
HAIG CLUB is another interesting use case in personalisation, a single-grain whiskey part-owned by David Beckham. The selling of such a brand requires an influencer approach and the brand just did that by using David Beckham himself. This approach helped the brand showcase “special edition products” in a new light allowing them to reduce planning and strategy time in half.
The best way to improve the role of customer engagement in the future of retail is the use of mobile phones and apps. Since the pandemic, there has been a need to move to the “mobile-first” approach.
We can break this down into three steps:
The first obstacle with making a switch to mobile is getting new users to sign-up. There are two ways to promote this practice:
➡️ The concept of a Digital Loyalty Card on the phone app is an ideal incentive. This approach helps to build better customer engagement and gives them a reason to move to the app in the first place.
➡️ Another simple trick is to provide a discount or offer. Consider the example of a Kaufland franchise in Romania. Users who joined the app got a 10% basket discount. This drove more users to the app and boosted overall app adoptions.
Once on the app, how do you encourage the user to stick along? How do you keep them from quitting after using the offers? Here are some ideas to consider:
➡️ Adding partners to the loyalty program is very helpful. In the case of Kaufland, they collaborated with brands like Shell and Netflix to add more value for each signup.
➡️ The apps should enable click-to-connect at the store and access to the e-commerce platform.
➡️ Adding a scan-to-pay feature is another valuable add-on during the pandemic. This approach assists consumers in conducting self-checkouts using their phone.
➡️ One example of the future of retail is the use of these applications for e-receipt. The practice is better for the environment and enables touch-less billing. On the flip side, it allows brands to collect email addresses which can then be used to engage with consumers in a multitude of ways.
Lastly, to retain users, one must determine what makes the apps better than all the others in the race?
➡️ Gamification of the app helps to retain an audience. For example, on the Kaufland app, a sale above €35 unlocked features like spin-the-wheel, a discount, or scratchcard.
➡️ A social message is also an interesting approach. For instance, there is an emphasis on the recycling of bottles in Germany. Using the app, stores promoted this initiative and provided discounts or donation options in return.
➡️ Use push notifications to help users and not annoy them. For example, once users are in/near the store, provide them with relevant offers and discounts.
Many trends in the retail and D2C space have come from the onset of the pandemic. But what retail trends are here to stay? We can break them down into the following:
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