Jan. 21, 20228 min read
Authors: Krzysztof Heyda - Digital Product Consultant
A tough year lies ahead of the retail industry.
Companies struggle against the economic crisis, rising inflation, and increasing fuel costs, which all translate into an overall increase in commodity prices. In addition, we are undergoing temporary supply issues – not only with essential everyday products but also all kinds of technological goods. Many potential customers continue to work from home or in a hybrid mode, which has completely changed their consumer behavior. As if that were not enough, employment costs are rising, and even the labor force itself is much harder to acquire.
All those circumstances result in retail chains undergoing a strong push towards digital solutions as well as rethinking their business models and creating completely new ones. Let's take a look at the three dominant trends that will shape the retail industry in 2022.
Autonomous stores have been commonly discussed in the media for over five years, ever since 2016 when Amazon opened its first autonomous Amazon Go store in the convenience format. The store launched by the Seattle giant is based on image processing technology, sensors, and a mobile app (as customer ID) that allow customers to enter the store, pick the items they need from the shelf and simply walk out – a solution Amazon calls “Just Walk Out”.
Since that time, not only have more Amazon stores popped up – including larger formats – but retail chains all over the world have opened locations based on the same technology or similar ones. We have also witnessed the appearance of companies like AiFi and Grabango, which offer ready-to-use technology necessary for launching an autonomous store. Their solutions have been used by Carrefour for their Paris-based Carrefour Flash as well as by the largest convenience store chain in Central and Eastern Europe, Żabka, which has launched Żappka Store and, in a partnership with Decathlon, Nano Store locations.
What is more, the technology is being adopted not only by grocery stores but also e.g. by sports retailers. For example, the Miami Dolphins sports team, alongside AiFi and Verizon, has opened an autonomous snacks and gadgets store by Hard Rock Stadium in Miami.
In theory, there are no restrictions, and virtually every product available in any stationary store can be sold autonomously.
In the reality of 2022, self-service stores are an excellent way to scale up your business with relative ease. They provide a fast and convenient shopping experience, which is essential nowadays, without interacting with another person. Moreover, they are available to customers with virtually no limitations. Not only can they be open 24/7 regardless of the available human resources, but also, thanks to the extensive analytics, they allow you to do a better job at ensuring that the goods a customer is looking for will always be available on the shelf. In addition, because most of those solutions are integrated with mobile applications, they allow for improved customer loyalty, creating a direct relationship between the brand and the user.
The last two years have seen enormous growth in the demand for quick deliveries. Customers are becoming less and less open to long shopping sessions, not to mention long waits for their delivery – regardless if they're getting groceries or new jeans. That is why they expect both fast delivery and an easy collection of purchases they've already completed.
That is also why the popularity of services such as Amazon Prime and Walmart+ should come as no surprise. Their users can even count on same-day delivery as well as weekend delivery. What is more, these days, customers are willing to pay for faster and better deliveries. 66% declare that they pay for a better delivery service, and as many as 25% use more than one paid program.
The same trend is causing the growth in the number of customers who use click & collect services. For sellers, having consumers place an order and then pick it up themselves has many advantages. E-commerce sales are more profitable than other online sales because they eliminate the cost of door-to-door delivery and allow store employees to do a double job as order pickers. In 2021, Walmart generated over $20 billion in sales on the C&C service alone. At the same time, 25% of all C&C orders in all US stores were made at Walmart.
The other side of the fast delivery trend is q-commerce (named after quick commerce). It is estimated that in 2021, e-grocery generated up to USD 25 billion in revenue. The added value of q-commerce is that the delivery is supposed to only take up to half an hour, and in some companies – even just 10 minutes from placing an online order. Q-commerce offerings can range from food to cleaning supplies and small household products. All you need to do to use the services of companies operating in the quick model is download their mobile application and make an online payment. Thus, the service combines the advantages of e-commerce with innovations that make the whole process even more convenient for the consumer.
In the beginning, q-commerce was based on deliveries from existing stores – for example, that is how the well-known and popular Glovo came to exist. The way it works is that the courier buys individual products or places an order at the cash register and then brings them to the person who made the online purchase. Currently, the Spanish company is testing its own, 24-hours a day "supermarket" in Barcelona (the so-called SuperGlovo), that will only serve as an origin point for deliveries – a so-called dark store.
Large players and completely new startups that have noticed a niche on the market now invest in q-commerce. Żabka, the convenience store chain with nearly 8,000 locations in Poland, has set up a startup that has recently test-developed Jush, an application that guarantees a 15-minute delivery time and is already present in several cities in Poland. To handle q-commerce, Żabka is constructing its own dark store network. Startups such as Jokr, DoorDash, or Instacart operate similarly. Their suppliers are now flooding the streets, and dark stores occupy city centers around the world.
Of course, we have to remember that q-commerce is a service that fits a specific customer profile: mobile, high-earning, with not much free time. What matters in serving them well is choosing the right SKU and always fulfilling the fast delivery promise.
These days, with how difficult it is to fight for a customer’s interest with prices and promotions, the real battlefield is the fight for the best customer experience in contact with our business. Customer Experience (also known as CX) is defined by the interactions and experiences the customer has with the company throughout the customer journey, from first contact to becoming a happy and loyal customer.
The best motivator for investing in CX is the profit it is sure to bring. Temkin Group research shows that companies that achieve annual revenues of $1 billion can gain up to $700 million over 3 years by investing in customer experience. To discuss this at a more human level, know that 86% of customers are willing to pay more for a better shopping experience.
In the food industry, 63% of customers say convenience when shopping is important to them, and 66% are willing to pay more for better service. The same is said by 61% of customers of fashion stores and 59% of those of electronic stores.
Good CX has many faces, both in terms of the digital as well as in terms of in-store experiences. Customers expect convenient service in every channel, and we can now see companies getting a return on the omnichannel strategies they had been implementing for several years. Adobe shows that companies that invest heavily in cross-channel customer engagement enjoy 10% year-over-year growth, 10% higher average order value, and 25% better conversions.
We need to remember that for customer experience to be good, it has to be developed at an early stage of product or service creation process. CX experts have the right skills to investigate the problems faced by consumers, discover the right opportunities, and decide what channels to create to best serve the customer.