O’Carroll, CEO of Brightpearl

PCR November retail analysis: Shoppers Are Flocking to a New Digital ‘Hood. What Does This Mean For Retail?

Derek O’Carroll, CEO of Brightpearl explores a trend that every retail business needs to get on board with – and fast – because in the digital neighbourhoods of the future, people will ‘show up’ to online stores as an event; not only to browse and buy goods, but also to socialise and be entertained, just as they do in physical stores. Digital neighbourhoods are forming – and they’re here to stay.

During the pandemic, much like our working lives and our socialising, retail had to migrate solely online – and with this seismic shift, shopper expectations have skyrocketed.

A smooth transaction and quick delivery is no longer a perk for customers – it’s the baseline expectation. Consumers everywhere now seek a rewarding and enjoyable online shopping experience – one to rival, if not replace, the real thing – and this doesn’t look set to change, even as Covid restrictions are lifted.

So what does this mean for retail brands?

Welcome to the ‘digital neighbourhood’
The concept of ‘place’ has become meta, and the pandemic has only accelerated this convergence of the digital and physical world. We have work meetings from our own homes, young teens meet on ‘Fortnight’ to socialise after school, and we hang out in digital spaces to watch virtual streamed concerts.

In essence, there are digital neighbourhoods forming – and they’re here to stay.

So what’s a digital neighbourhood? It’s just like any other neighborhood – but it’s online. It happens when people are brought together via multiple platforms and virtual spaces to explore and form a community.

It might sound futuristic, but it’s a trend that every retail business needs to get on board with – and fast – because in the digital neighbourhoods of the future, people will ‘show up’ to online stores as an event; not only to browse and buy goods, but also to socialise and be entertained, just as they do in physical stores.

If retail brands aren’t plugged into these emerging digital neighborhoods from the start – and if they lack the ability to rapidly and continually evolve as new apps and technology do – they risk being locked out.

Making online shopping more immersive
As ecommerce becomes more social and experiential, the range of channels available to both consumers and retailers will expand and diversify. In social media, Youtube, TikTok and Instagram are practically digital cities already; made up of endless influencers and brand ambassadors, integrated shopping options and numerous selling opportunities for brands and business owners.

Instagram’s shopping feature now allows users to pay for items in-app, so followers can buy products without stepping away from the conversation.

However, despite this cultural evolution for retail, the experience of shopping online is still, in the main, boring – it’s been constructed this way. The intention is to scroll and select with ease, and tools such as Amazon’s auto-replenishment feature mean shoppers don’t even have to remember what they like.

But is this what they really want? According to the Future Commerce ‘Vision 2021’ report, 51% of shoppers admit that during the pandemic, they’ve missed the socialising element of going to the shops, and one in four still watch classic shopping channels like QVC. For now at least, that sense of interaction and community is lacking in online retail.

The next step is for retailers to diversify their technology to keep up with this consumer appetite for a more immersive shopping experience.

Because experience trumps loyalty. If a retailer can’t (or won’t) provide the shopping experience consumers in these new digital neighborhoods crave, consumers will simply find another retailer who can.

Are retailers up to the challenge?
In recent years, retail brands have proven they can successfully evolve in line with consumer expectations as they have added the role of conversational facilitators to what they offer.

Today, customers expect their chosen brands to recognise their potential as impactful cultural entities, and use their influence to speak out on important causes.

For instance, the Black Lives Matter movement of 2020 put the spotlight on brands to champion diversity and inclusivity; not just within the workplace but also in their marketing and product ranges. We saw wide adoption of efforts such as the 15 Percent Pledge, which had retailers such as Sephora, Macy’s and Rent the Runway commit 15% of their shelf space to black-owned businesses.

So brands can successfully evolve to meet consumer expectations. The only difference with embracing digital neighborhoods is that retailers must have the right tech at their fingertips.

How will you stand out on the street?
For brands that want to stand out on the virtual streets of the digital neighbourhood, it will become essential to have the functionality to make sales through numerous channels. That will lead to greater system complexity and an operational minefield. In this environment, no “One Vendor” can provide the best functionality for all the applications needed for running a modern eCommerce experience.

Furthermore, reliance on legacy ERPs is preventing retailers from quickly upgrading and evolving their tech stacks, and, in future, this is going to cause major issues. For example, if your ecommerce business can’t immediately connect to the latest hot sales channel, using TikTok as an example, then consumers will simply go elsewhere.

As a result of this shift, companies will require – probably demand – the flexibility to rapidly select, integrate and assemble best in class functionality for specific business requirements, and switch out technologies when they no longer are fit for purpose.

We believe this consumer driven change will usher in a new era of Hyper Scalable Commerce, defined by the need to rapidly curate new services and deploy better shopping experiences. But how can brands deliver?

The solution is in adopting flexible solutions and open API where brands can curate dynamic and interconnected tech stacks with systems that enable them to quickly integrate a changing roster of best in class tools and applications.

This is essential to simply keep pace, let alone differentiate, in an already saturated B2C market and we’ll see more brands building out agile tech stacks through API to keep up with consumers’ demand.

Exciting – not intimidating
Though a ‘one vendor’ approach may have worked for retail businesses up to now, to overlook the multi-levelled, immersive retail environment of the future risks consumers looking elsewhere, and never coming back.

In fact, leading brands are now openly admitting that being locked into a service from an ERP vendor is holding them back.

The latest research (July 2021) by Brightpearl has revealed that a whopping 90% of brands with a £5-50 million turnover are concerned that a ‘single vendor’ ERP approach to e-commerce is ‘limiting their ability to quickly deploy better shopping experiences, keep up with customer expectations and sell more’.

What’s more, 71% of merchants with a turnover of £5-50 million, and 52% of those bringing in more than $50 million, agree that their current ERP makes it ‘nearly impossible to integrate new, better e-commerce technology from other vendors’ at the pace they would like.

With many brands admitting they lack the ability to integrate new, better e-commerce technology from other vendors, new approaches are sorely needed. This new era of commerce requires systems built for scale, agility, and optionality – you can no longer rely on cookie-cutter, one-size fits all strategies from a single vendor

API adoption will be the way forward for eCommerce brands to develop and nurture their customer experience investment and remain plugged into the evolving digital neighbourhood.

In fact, Brightpearl’s research reveals that more than half (52%) of companies turning over £5-50 million, along with 41% of those with turnover of more than £50 million, believe the adoption of Application Programming Interface (API) and microservices is ‘much more urgent’ over the next 12 months compared to the previous year.

Yes, the upcoming desire for consumers to be able to ‘buy wherever they are’ will unearth operational complexities; but with the right operating system it needn’t be intimidating.

For those who are willing to grasp the opportunities that will blossom from digital neighbourhoods, there’s perhaps never been a more exciting time to be in business.

A flexible tech stack will ensure you are two steps ahead of the most innovative online merchants, utilising various best in breed systems to support consumer expectations, rather than relying on one vendor to produce standard functionality fit for everyone – which will not be enough.

It’s no secret that the retail industry is still reeling from the effects of the pandemic – but while many have struggled or sadly failed, others have thrived. To ensure you land in the latter camp, prepare your business logistically to be an ever-evolving leader within the digital neighbourhood – or risk being locked out altogether.

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