Digital Intelligence Briefing Digital Trends in Retail. in association with

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1 Digital Intelligence Briefing 2017 Digital Trends in Retail in association with

2 Digital Intelligence Briefing 2017 Digital Trends in Retail in association with Published March 2017 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright Econsultancy.com Ltd 2017 Econsultancy London 4th Floor, Wells Point 79 Wells Street London W1T 3QN United Kingdom Telephone: Econsultancy New York 350 7th Avenue, Suite 307 New York, NY United States Telephone: Econsultancy Singapore 20 Collyer Quay #23-01 Singapore Telephone:

3 Contents 1 Foreword by Adobe Executive summary Digital maturity in retail: marketing and beyond Increased availability of data fuels personalisation Focus on mobile continues to bear fruit vision a technology-driven future with a human touch Actionable tips to help future-proof your retail business Appendix: respondent profiles...24

4 1 Foreword by Adobe The 2017 Digital Trends in Retail report provides a fascinating snapshot of how the retail sector is transforming itself in the digital era. Customer experience (CX) continues to dominate the agenda, and it is clear from the research that retailers collectively grasp the importance of a personalised and mobilefriendly experience which is relevant at every stage of the customer journey. It makes absolute sense for retailers to focus on optimising the mobile experience as part of their CX initiatives. CX is a differentiator for retail brands and, as part of this trend, the mobile experience in particular will increasingly define your brand. The business case is compelling. According to the latest Adobe Digital Index published in January , mobile accounted for 41% of retail revenues in the UK during the last Christmas period. Across other major markets, a similar (but slightly lower) proportion of consumer spending is attributable to mobile (31% in the US, 30% in the Nordics, 27% in Germany and 26% in France). The research shows that retailers will focus on making the experience as easy, fun and valuable as possible, with technologies such as virtual and augmented reality coming to the fore as consumer uptake increases. Retailers must strive to strike the right balance between meeting customer requirements now, while also keeping an eye on the consumer technology trends which will help to shape the future. This can be a juggling act for retailers but exciting times lie ahead for those brands that can keep up with these trends and differentiate themselves from the pack. Vijayanta Gupta Product and Industry Marketing Adobe This underscores the importance of mobile and explains why almost two-thirds (62%) of retail respondents say their mobile marketing budget is going up in 2017, a higher percentage than for any other channel. As well as being a useful bellwether for the digital maturity of the retail industry, the report also gives us a glimpse of the future and where technology is taking this sector Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

5 2Executive Summary The 2017 Digital Trends in Retail report is based on a sample of almost 500 retail respondents 2 who were among more than 14,000 digital professionals taking part in the annual Digital Trends survey carried out in November and December The research, conducted by Econsultancy in partnership with Adobe, is a barometer of the extent to which retailers are embracing digital technology, focusing their strategies and prioritising resources for the year ahead and beyond. The key findings from the research are summarised below. Retailers strive to prioritise digital but only a small minority describe themselves as digital-first While retailers are striving to become more intrinsically digital, most are still not digitally-led. Asked about the extent to which digital permeates their marketing activities, 13% of retailers taking part in the survey describe themselves as digitalfirst. While this is slightly higher than the 10% average across other sectors, the majority of retailers are still primarily led by bricks-and-mortar operations and traditional marketing activities. Only 16% of retailers say that digital permeates all their marketing activities although almost half (48%) say that digital permeates most marketing activities. In terms of the proportion of respondents who say their companies are digital-first, the retail sector ranks sixth out of 15, behind gaming and gambling, media, technology, professional services and telecoms. Importance of the customer experience (CX) manifests itself in focus on personalisation More than half (54%) of retailers say that the customer experience is their most important area of focus, way ahead of cross-channel marketing (16%), datadriven marketing (14%), mobile (11%) and programmatic buying / optimisation (4%). Asked about their tactical priorities, a third (33%) of retailers say that targeting and personalisation is one of their top three priorities for the year ahead, higher than for any other marketing tactic. Across other sectors, this tactic no longer takes the top spot this year as disciplines such as content marketing and social media engagement have stolen the limelight. By comparison, targeting and personalisation remain top-of-mind for retailers as they recognise this is a priority if they want to use the customer experience they provide as a differentiator. A quarter (25%) of respondents say that making the experience as personalised and relevant as possible is where their organisation is placing the highest emphasis when it comes to improving the customer experience, ahead of factors such as making the experience valuable, easy-to-understand and fun. 2 The 473 retailers who took part in the 2017 Digital Trends survey were among a total of more than 14,000 digital marketing and ecommerce professionals from all sectors who participated, from countries across EMEA, North America and Asia Pacific. Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 5

6 When looking at the ways retailers plan to differentiate themselves from competitors over the next five years, making the experience easy, fun and/or valuable is perceived to be a key differentiator. More than half (57%) of retailers say they are planning to increase their investment in personalisation during Mobile remains a key area of investment as retailers prioritise understanding of how mobile users buy and research products as part of their customer journey Mobile marketing is the channel or discipline where retail companies are most likely to be increasing investment in the year ahead. Almost two-thirds (62%) of retail respondents say this part of the budget is going up in 2017, suggesting that it is still seen very much seen as a standalone discipline and discrete area for investment. Almost four in five (79%) retailers say that understanding how mobile users research and buy products will be very important for them over the next few years. Mobile is widely seen as a bridge between the digital and physical worlds, with 75% of respondents saying that optimising the customer journey across multiple touchpoints will be very important in the years ahead. Mobile optimisation is a top-three digital tactical priority for 23% of retailers, versus only 14% for non-retail respondents. Mobile is a strategic priority area for 55% of retailers, compared to an average of 48% across other sectors. The 2020 vision: VR and AR are part of the brave new retail world However, it is clear that retailers do see the potential for AR and VR to make a difference. Out of a range of technologies including artificial intelligence, voice interfaces, the Internet of Things and evolving payment mechanisms such as mobile wallets, engaging audiences through virtual or augmented reality is seen as the single most exciting prospect for Asked about the primary way their organisations will seek to differentiate from competitors over the next five years, making the customer experience as easy, fun and valuable as possible comes out on top. Just over a third (34%) of respondents cite this as the single most important differentiator in the future, more than double the number of respondents who cited customer service (14%), product/service quality (12%) or product/ service innovation (11%). This focus on a fun and valuable customer experience goes a long way to explaining why AR and VR are perceived as the technology trends offering the most promise to retail businesses, though success with these initiatives will depend on the quality of execution by individual retailers and continued consumer uptake and appetite, likely to be fuelled by the iphone 8 with its focus on mixed reality. Although technology trends will dominate the evolution of retail over the next few years, the importance of human-centred design cannot be overstated. Designled organisations that understand how a creative and holistic approach is required to deliver a seamless customer experience are likely to succeed where their competitors fail. The potential for augmented reality (AR) and virtual reality (VR) to be harnessed by marketers has been recognised for a while now, but they haven t yet gone mainstream across a range of business sectors outside gaming Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

7 Digital maturity in retail: 3marketing and beyond For many retailers, the quest for digital excellence has become a matter of survival. In highly competitive markets with squeezed margins and ever increasing customer expectations, businesses can ill afford to lag behind their competitors when it comes to digital maturity. And while most retailers recognise there has been a huge power switch to the consumer, acknowledging this trend is only the first small step on the journey towards the full digital transformation that many retail organisations need to embark on. Econsultancy s retail-focused Digital Trends report aims to understand and benchmark the progress companies in this sector are making as they seek to blend the physical and digital retail environments. While digital is having a transformative impact on pretty much every business function, marketing is a good starting point for understanding the progress retailers have made. Figure 1 shows the extent to which digital permeates marketing activities for the organisations that have participated in this research, with percentages for non-retail respondents for comparison. Retailers are 30% more likely to classify themselves as digital-first, with 13% labelling themselves as such, compared to only 10% for the rest of our 5,000-plus client-side sample 4. As can be seen in Figure 2, this puts the retail Figure 1: To what extent does digital permeate your own organisation s marketing activities? 60% 50% 40% 48% 46% 30% 20% 10% 18% 20% 16% 15% 13% 10% 9% 0% Digital marketing is very much separate Digital permeates most of our marketing activities Digital permeates all our marketing activities We are a digital-first organisation 5% Don't know Retail Other sectors Econsultancy / Adobe Digital Intelligence Briefing Retail respondents: 311 Other sectors respondents: 4,978 4 This non-retail sample does not include supply-side respondents who work for agencies, vendors or consultancies. Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 7

8 sector in sixth place out of the 15 sectors which comprise our annual Digital Trends study. Gaming and gambling is the sector which is setting the pace, with a quarter of responding organisations in this business vertical putting themselves in the digital-first bracket. Outside of the relatively small pool of digital pioneers, most retailers are typically still at the stage where they are striving to ally successful digital activities to existing bricks-and-mortar operations and traditional marketing activities. In the context of marketing, they are seeking to ensure that there is a strong digital element which complements campaigns that historically may have very much taken place offline, for example in the form of direct mail, newspaper advertising and television commercials. Just under half (48%) of retailers say that digital permeates most of their marketing activities, compared to 46% for non-retail respondents. A further 16% of retailers say that digital permeates all their marketing activities, recognition that marketing almost by definition has become digital. At the opposite end of the spectrum a similar percentage (18%) say that digital is very much separate. Worryingly, these paleolithic retailers (almost a fifth of the sample) seem to regard digital marketing as something of an add-on. While marketing as a function is often at the frontline of attempts to be more digitalfriendly, the journey towards digital maturity is largely about customer centricity and therefore necessitates an organisationwide approach which straddles all business functions. An array of overlapping elements contributes to a successful digital strategy for retailers, including, among other things, a focus on data-driven marketing, customer experience, mobile marketing, personalisation and innovative use of technology. Figure 3 outlines eight key components we have identified as requirements for digital success, namely collaboration, culture, data, process, skills, strategy, technology and UX design. The chart shows the extent to which retail respondents agree with statements relating to what might be regarded as key pillars for truly customer-centric digital businesses. Figure 2: Sector comparison proportion of companies regarding themselves as digital-first Gaming and Gambling 25% Media 22% Technology 19% Telecoms Professional Services Retail Print / Publishing 14% 14% 13% 12% Travel and Hospitality Automotive Financial Services and Insurance 10% 10% 9% Government Charities and Non-Profit Healthcare and Pharmaceuticals Consumer Goods 7% 7% 6% 5% Manufacturing and Engineering 3% 0% 10% 20% 30% Econsultancy / Adobe Digital Intelligence Briefing Respondents: 5,289 8 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

9 Figure 3: Key components for digital success proportion of respondents agreeing ( strongly or somewhat ) with these statements Skills we are combining digital marketing skills with analytics and technology Culture we have a cross-team approach with the customer at the heart of all initiatives 78% 73% 73% 75% Strategy we have a cohesive plan, long-term view and executive support for the future of our customer Collaboration we have tools that allow for streamlined workflows between creative and content marketers / web teams Data we have access and control over customer and marketing application data Process we have the means and methods to ensure that strategy is carried out efficiently 66% 64% 66% 60% 65% 64% 60% 60% Technology we have the tools to use data in order to create compelling, personalised, real-time experiences UX design we have well-designed user journeys that facilitate clear communication and a seamless transaction Retail 58% 61% 56% 53% 0% 20% 40% 60% 80% Other sectors Econsultancy / Adobe Digital Intelligence Briefing Retail respondents: 260 Other sectors respondents: 4,219 Digital skills In the context of skills, we asked retail respondents whether they agreed that they were combining digital marketing skills with analytics and technology. Almost four in five (78%) respondents agreed with this statement, a higher proportion than for any statement relating to these eight pillars for digital success. Encouragingly for this sector, retailers are seen to be ahead of non-retail organisations in respect of skills, with the average percentage of agreement in other industries being 73%. This shows the importance retail leaders are attaching to acquiring the right talent and skilling up existing employees to ensure that they can effectively harness the tools and data available to them. Recent research by PwC 5 pointed to the resilience of physical stores, with survey respondents across all product categories saying that they purchased the majority of their products offline in the past 12 months. Consumers often prefer a physical store as an element of both researching and purchasing, so retailers should examine the degree to which in-store sales are influenced by digital and vice-versa, and explore ways in which they can provide a consistent experience across both channels. This may be attributable to the greater need to focus on understanding what is happening across the customer journey, online and offline. Retailers understand how digital maturity depends on the right use of various skills, blending data and tools with a creative mindset to achieve the desired results. 5 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 9

10 Embedding the right culture culture eats strategy for breakfast Culture eats strategy for breakfast is a well-known phrase coined by management expert Peter Drucker and made famous by Mark Fields, President of Ford. This saying is as applicable to retail as it is to automotive businesses, with the most successful companies being those that are able to instil a culture that lends itself to innovation and experimentation. Just under three-quarters (73%) of retail respondents say they have a cross-team approach with the customer at the heart of all initiatives, an encouragingly high percentage though 3% lower than for nonretail respondents. European retailers are least likely to embed a customer-focused culture, with only 61% saying that s the case (compared to 82% in North America and 79% in Asia Pacific). Collaboration, which is very much related to company culture, is an area where retail respondents index significantly higher than their non-retail counterparts. Two-thirds (66%) of retail respondents agree they have the tools that allow for streamlined workflows between creative and content marketers / web teams, compared to 60% for non-retail respondents. Collaboration is another area where European retailers are lagging behind, with just over half (54%, compared to 69% in North America and 73% in Asia Pacific) saying they have the tools that facilitate it. Retail businesses typically recognise that they have a great opportunity to foster and master cross-departmental processes which help to facilitate the kind of seamless synchronisation across different touchpoints that is necessary for omnichannel success in the digital age. 10 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

11 Only 13% of retailers describe themselves as digital-first Process While skills, culture and strategy are the areas retailers are most likely to excel in, process (60%) is one of the elements fewer have managed to master. Clear processes are the backbone of an effective strategy, so creating processes which enable the entire organisation to play their part in customer experience is imperative. As was the case with culture and collaboration, European retailers are least likely to say they have the means and methods to ensure that strategy is carried out efficiently (56% compared to 64% in North America and 62% in Asia Pacific). Technology and data While culture is arguably the most important requirement for success, the importance of great technology and tools to harness data is inescapable. It is also clear from Figure 3 that many retailers are struggling because they don t have the tools to use data in order to create compelling, personalised and real-time experiences. Only 58% of the respondents agree these tools are in place, compared to an average of 61% for other industries combined. Effective use of data and personalisation is among the biggest challenges that need to be tackled by retailers amidst fast-paced changes in technology and a corresponding shift in consumer behaviour. Just under two-thirds (65%) of retail respondents agree that they have access and control over customer and marketing application data. Data is the only area in which European retailers are leading the charge, with nearly three-quarters (72%, compared to 61% in North America and 69% in Asia Pacific) agreeing with this statement. The next section of the report will focus on data and its critical role in improving the customer experience and, in particular, personalisation. Creating digital alchemy All these key pillars or components shown in Figure 3 need to be combined to create the alchemy required for digital maturity, with retailers constantly needing to assess if they are pulling the right levers hard enough. Although some success may be achieved by succeeding in just some of these elements, it is only the blending of them together that can lead retailers to a true digital nirvana: people, process and technology. It has become clear that businesses can t afford to be just a little bit digital. There are many qualities and characteristics which go into making a successful digital business, not least the existence of a clear digital strategy which is supported by leaders who foster a culture which lends itself to change and innovation Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 11

12 Increased availability of 4data fuels personalisation Our growing footprint as digital consumers and trackable interactions with retailers across a range of online and offline channels have spawned a wealth of data points about our preferences and behaviour. Smart businesses can harness this information to improve the customer experience by providing a more personalised experience, at the same time increasing the likelihood that we as consumers will purchase from them and recommend them to others. Personalisation can take numerous forms, ranging from website content tailored to your implicit or explicit preferences, an triggered after an abandoned purchase or, moving to the in-store environment, a highly relevant digital-screen advertisement or an alert on your phone triggered by beacon technology. The ability to provide authentic and personalised experiences within the parameters of customer privacy requirements has gone from being a nice-tohave strategy to a must-do mandate. 7 Figure 4: Which three digital-related areas are the top priorities for your organisation in 2017? Targeting and personalisation Social media engagement Conversion rate optimisation Multichannel campaign management Mobile optimisation Content marketing Brand building / viral marketing Customer journey management Search engine marketing Video content Joining up online and offline data Marketing automation Customer scoring and predictive marketing Mobile app engagement Social media analytics Real-time marketing Programmatic buying / optimisation None of the above 14% 11% 9% 7% 7% 7% 5% 5% 2% 23% 23% 22% 22% 19% 18% 29% 28% 33% 0% 20% 40% Econsultancy / Adobe Digital Intelligence Briefing Respondents: fnl_ pdf 12 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

13 This is evidenced by Figure 4 which shows targeting and personalisation to be the top tactical priority for retailers, cited by a third (33%) of retailers as being one of their three key areas of focus. In a world where the all-encompassing but sometimes nebulous concept of customer experience is top of mind for businesses, personalisation is a tangible way for retailers to realise these ambitions for greater customer centricity. It is worth noting that targeting and personalisation is more of a priority for retailers than for other businesses in non-retail sectors for whom the average percentage citing this tactic is only 24%, with other initiatives now taking top spot. While those in other verticals are this year more likely to be prioritising disciplines such as content marketing and social media engagement, retailers continue to major primarily on a one-to-one marketing approach, and this ongoing commitment to personalisation is also evident from our survey data relating to budget intentions. Almost three in five (57%) retailers plan to increase investment in personalisation during 2017, higher than for any channel or discipline apart from mobile marketing (62%) and marketing (also 57%). Retailers in Asia Pacific (APAC) are least likely to increase their investment in personalisation, with just over two-fifths (44%, compared to 57% in North America and 67% in Europe) saying that s the case. There are a few other key differences between regions, with North American retailers being most likely to prioritise mobile channels in Mobile optimisation is a top priority for 27% of North American retailers, ranking third on their priority list (after targeting and personalisation and conversion rate optimisation), compared to 23% in Europe and 16% in Asia Pacific. Additionally, North American retailers are twice as likely as their European and APAC counterparts to prioritise mobile app engagement (12% compared to 4% and 6% respectively). Turning our attention back to Figure 4, conversion rate optimisation (CRO) comes third in the pecking order, with data-driven retailers typically maintaining a laser focus on their conversion rates. Extensive research by Econsultancy on this topic has shown that personalisation is itself seen as the third most valuable technique (behind customer journey analysis and A/B testing) for increasing conversion rates. The 2016 Conversion Rate Optimisation report 8 also found that personalisation was also by some distance the most difficult method to implement when improving conversion rates. Getting personalisation right at a time of ever-increasing customer expectations is certainly not easy. Technology can be a barrier, and it was seen in Figure 3 that only 58% of respondents agree they have the tools to harness the data to enable compelling, personalised experiences in real time. Although the vast improvement in tools and technology can make this a less daunting experience, it is rarely a turnkey solution, despite what some marketing technology vendors may claim. There is still a requirement for skilled individuals to help 8 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 13

14 Targeting and personalisation are the top tactical priorities for retailers organise a multitude of fragmented datasets into actionable insights which can facilitate personalisation at scale. Increased use of AI-powered machine learning and more sophisticated software-asa-service solutions will increase the potential for effective personalisation but they come with the same caveat. There is no substitute for human intelligence and creativity when it comes to creating engaging and exciting experiences 9 (more on this in Section 6). The importance of personalisation to the retail sector is further underscored by data shown in Figure 5. In the context of customer experience, a quarter (25%) of retail respondents are putting the greatest emphasis on making the experience as personalised and relevant as possible, ahead of factors such as making the experience valuable (20%), easy-tounderstand (13%) or fun (10%). Figure 5: Where does your organisation place the highest emphasis in terms of improving the customer experience? Making our experience as personalised and relevant as possible 25% Making our experience as valuable as possible 20% Making our experience as easy to understand as possible 13% Making our experience as fun / fulfilling as possible 10% Making our experience as fast as possible 9% Making our experience as safe and reliable as possible Making our experience as consistent as possible across channels 8% 9% Making our experience as mobile-friendly as possible 4% None of the above 2% 0% 5% 10% 15% 20% 25% 30% Econsultancy / Adobe Digital Intelligence Briefing Respondents: Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

15 Focus on mobile 5continues to bear fruit There is a school of thought which says that mobile should no longer be treated as a discrete area of focus. The theory goes that so-called smartphones more notable for their ability to provide internet access than to enable voice calls have become so ubiquitous that businesses are already either mobile-first, mobile-friendly or failing. There is some truth in the argument that mobile-friendly websites have become more of a hygiene factor than an opportunity for differentiation. But the reality is that mobile technology and related consumer behaviour continue to evolve in a way that demands the utmost attention from retailers, whether as an ongoing and vital consideration for practitioners in established digital disciplines such as and search, or as a conduit for a range of technologies such as locationbased services, contextual marketing and push notifications. Figure 6: Proportion of companies planning to increase budgets for the following digital marketing channels or disciplines in 2017 Mobile marketing Personalisation marketing Social media marketing Video advertising Marketing analytics (including testing) Marketing automation Content marketing Search engine optimisation (natural search) Affiliate marketing Paid search (PPC) Lead generation Display advertising Lead management Sales enablement Webinars / virtual events 16% 62% 57% 57% 56% 53% 53% 51% 47% 44% 38% 38% 36% 30% 27% 25% 0% 20% 40% 60% 80% Econsultancy / Adobe Digital Intelligence Briefing Respondents: 195 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 15

16 The statistics continue to bear out the huge impact of mobile, with retail sales in the UK alone reaching 133bn in 2016, a 16% yearon-year increase of 18bn. Sales made via smartphones increased by a massive 47% year-on-year in December 2016, according to data published in January 2017 by the IMRG and Capgemini. 10 In the US, mobile accounted for 21% of total digital commerce dollars in Q4 2016, up by 45% year-onyear. 11 These are compelling figures, even before the contribution of the mobile channel as an influencer to offline purchases is considered. This research suggests that the majority of retailers agree that mobile is still a discrete and fertile area for investment. Almost two-thirds (62%) of retailers surveyed are planning to spend more on mobile in the year ahead, the highest percentage across a host of digital-related activities and channels. European retailers are slightly more likely than their North American and APAC counterparts to increase their mobile investment in 2017 (67% compared to 60% and 61% respectively). Retailers are investing heavily in mobile marketing because they know it is likely to yield tangible results. Respondents in this sector are 38% more likely than their peers to say they are confident in their ability to measure the return on investment for mobile marketing programmes (44% of retailers, versus 32% for non-retail). So we have established that mobile is still a thing but how important is this area relative to other initiatives within retail businesses? Figure 7 shows that mobile is still a top-three priority for the majority of respondents, with 11% of retailers making it their first choice. It is clear from the same chart that a more important priority for the average retailer is customer experience, with 54% ranking this as their top choice. Of course, mobile needs to be harnessed as part of a retailer s customer experience programmes, rather than being seen as a competing area for attention and budgets. Indeed, the same applies to data-driven marketing, cross-channel marketing, mobile and programmatic, which are the other strategic priorities shown in Figure 7. Figure 7: How retailers rank strategic priorities in 2017 Customer experience 54% 22% 13% 89% Data-driven marketing 14% 23% 29% 66% Cross-channel marketing 16% 24% 21% 61% Mobile 11% 22% 22% 55% Programmatic buying / optimisation 4% 8% 14% 26% 0% 20% 40% 60% 80% 100% First choice Second choice Third choice Econsultancy / Adobe Digital Intelligence Briefing Respondents: Retail-E-Commerce-Spending-Up-18-Percent-vs-Year-Ago 16 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

17 Figure 8: How important will the following be for your digital marketing over the next few years? Understanding how mobile users research / buy products 79% 19% 2% Optimising the customer journey across multiple touchpoints 75% 24% 1% Ensuring consistency of message across channels 65% 34% 1% Training teams in new techniques, channels and disciplines 55% 38% 7% Understanding when and where customers use different devices 50% 43% 7% Using online data to optimise the offline experience 48% 37% 15% Using offline data to optimise the online experience 44% 42% 14% 0% 20% 40% 60% 80% 100% Very important Quite important Not important Econsultancy / Adobe Digital Intelligence Briefing Respondents: 236 Figure 8 underscores the importance retailers are attaching to an understanding of the customer journey. Virtually all retailers (98%) say that understanding how mobile users research and buy products will be important over the next few years, and 79% say that it will be very important. A key part of the process for retailers is to understand the points during the customer journey when decisions are made and preferences are shaped. Customer journey mapping can help marketers identify these momentary windows and optimise interactions, for example when customers are seeking inspiration (as part of the research process), decisive pieces of information or a clear route to purchase. The Internet of Things era promises to add a whole new dimension to this process, with retailers armed with even more data about the customer lifecycle and consumer interaction with products and services. With this in mind, it is no surprise that threequarters (75%) of retail respondents say that optimising the customer journey across multiple touchpoints will be very important in the next few years. Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 17

18 2020 vision a technology-driven future 6with a human touch The commitment of the retail sector to customer experience as the path to success is highlighted by Figure 9 which shows what retailers regard as the key requirements for successful differentiation over the next five years. Overwhelmingly the most popular option for this question was customer experience and specifically making the experience on our properties as easy / fun / valuable as possible. More than a third (34%) of respondents selected this option, significantly ahead of other choices such as customer service (14%), product / service quality (12%), product / service innovation (11%) and joining up online / offline experiences (10%). Not only is the focus on customer experience increasing, it is also not region-specific. Respondents across North America (30%), Europe (39%) and Asia Pacific (31%) are all most likely to perceive CX as a key differentiator over the coming years. Figure 9: Over the next five years, what is the primary way your organisation will seek to differentiate itself from competitors? Customer experience making the experience on our properties easy / fun / valuable 34% Customer service enhancing our reputation for brilliant service across all touchpoints 14% Product / service quality 12% Product / service innovation Joining up online / offline experiences ensuring consistency across virtual and physical worlds 11% 10% Price Convenience e.g. fast delivery, in-store pickup, buy online return-to-store etc. 7% 6% Mobile catering to mobile shoppers / buyers 5% None of the above 1% 0% 5% 10% 15% 20% 25% 30% 35% 40% Econsultancy / Adobe Digital Intelligence Briefing Respondents: Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

19 Only 7% of retailers selected price as the primary differentiator over the next half-decade which shows that competing primarily on reduced cost of products and services is not a viable business strategy for the overwhelming majority of companies in this sector. Engaging audiences through virtual and augmented reality (28%) comes out on top in this chart, ahead of using artificial intelligence / bots to drive campaigns and experiences. Let s take a look in more detail at the impact some of these technologies are already having on the retail sector. Retailers are embracing various technologyrelated business trends as part of this commitment to an easy, fun and valuable experience. Figure 10 shows the extent to which retailers regard particular technological trends as an exciting prospect for Figure 10: Looking ahead, which of these do you regard as the most exciting prospect for 2020? Engaging audiences through virtual or augmented reality 28% Utilising artificial intelligence / bots to drive campaigns and experiences 24% Enhanced payment technologies e.g. mobile wallets, e- receipts 20% Internet of Things / connected devices e.g. wearables, audience tracking 18% Voice interfaces e.g. Amazon Echo, Google Home 7% Other 3% 0% 5% 10% 15% 20% 25% 30% Econsultancy / Adobe Digital Intelligence Briefing Respondents: 305 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 19

20 Virtual reality and augmented reality Virtual reality (VR) and augmented reality (AR) are separate but related technologies which both offer potentially great but often unrealised promise for retailers. VR allows consumers to experience a brand s offering in a very real and visceral way, for example transporting people to a store or other brandrelated location. It can do this with animation, real video or even in real time with live streaming. The possibilities for providing innovative experiences that strengthen the bond between retailers and consumers, from virtual dressing rooms to backstage access to the biggest fashion shows, are endless, and Econsultancy has covered this extensively in its Marketer s Guide to Virtual Reality 12. Despite the potential for virtual reality, Econsultancy Founder Ashley Friedlein argued in his 2017 digital trends predictions 13 that VR hasn t yet been harnessed by many marketers because the hardware requirements are still too onerous, the tech and apps too fragmented, [and] the use cases mostly gaming or too niche. AR refers to technologies that augment views of the real world with computergenerated information, unlike VR where experiences are purely computer-generated. The most famous example of AR is locationbased game Pokémon GO which was a huge trend in 2016 (in case you missed it!). Brands have already been using AR for several years, including for example IKEA which launched an AR app in late 2013 to enhance its catalogue. As with VR, Friedlein argues, AR s adoption could be turbo-charged by the iphone 8 release this year, with its focus on mixed reality. While VR and AR have both been talked about for a while, the sense is that both these related trends will come more to the fore as we get closer to The onerous hardware requirements and significant costs mean that the uptake will continue to be slow over the next few years Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

21 AI and chatbots We have already focused on the importance of personalisation in Section 4 of this report, focusing on how retailers can personalise the experience for consumers at scale, based on a range of data sources including known preferences, browsing behaviour and purchase history. Going beyond conventional ecommerce, retailers are moving towards conversational commerce, with the use of messaging apps to create AI-powered bots that enhance the customer journey and help consumers find the products they are looking for. As it becomes more challenging for retailers to convince consumers to download their apps, chatbots aim to create easy, fast and pleasant interactions, offering a highly responsive and personal approach. Although the use of AI-driven chatbots is still at an early stage, successful examples are already in evidence, such as cosmetic retailer Sephora s interaction with its customers on instant message platform Kik, offering make-up tips and product recommendations. US retailer Macy s has introduced a mobile tool called Macy s on Call that helps customers while visiting the store, improving the customer experience by offering relevant information for each location. Another good example is grocery retailer Waitrose which has focused on improving the in-store customer experience by introducing direct assistance through a smartphone app that helped customers find the right products, or call for assistance from the store s staff. One of the key challenges for retailers using artificial intelligence is to maintain the genuinely human element that helps consumers trust the brand. How retailers avoid the uncanny valley when almosthuman behaviour can elicit negative feelings will be an interesting challenge for technologists to overcome in the next few years. Despite the challenges of making the experience both personal and personable, AI is set to have a huge impact on the retail sector, with global revenue from artificial intelligence expected to reach $36.8 billion by Artificial intelligence can ultimately be used to help retailers connect with consumers through superior experiences, powered by the right use of data. It has the ability to revolutionise the way retailers gain insights into consumer behaviour, helping them improve the customer experience in the most appropriate way. AI isn t just about chatbots, which strictly speaking some would argue aren t necessarily artificial intelligence in any case 15. As well as being used for chatbots which facilitate better customer service by helping customers to find things and by making more intelligent recommendations, AI has the potential to be harnessed by retailers in a plethora of other areas, including social media sentiment analysis, content generation (e.g. optimised web and copy) and digital advertising optimisation. Other technology trends Other technology trends featured in Figure 10 include payment technologies, the Internet of Things and voice interfaces. Payment technologies are crucial for retailers who want to accommodate increasingly smartphone-reliant customers requiring multichannel options supporting quick and secure digital payment. A glimpse of the future is already available in Amazon s Seattle Amazon Go grocery store where shoppers can bypass checkout lanes because purchases will automatically be charged to their Amazon account. The store was opened for testing in December 2016 and was due to open in early The Internet of Things similarly offers huge potential for marketers as briefly touched on earlier in the report, for example through physical products with a digital layer of personalised interactive services which can talk directly to consumers and back to a retail brand, enabling a service which becomes increasingly data-driven and personalised. For example, automated purchase and replenishment services might become the norm over the next few years, with smart household appliances being connected Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 21

22 Engaging audiences through virtual and augmented reality is the most exciting retail prospect for 2020 to services similar to Amazon Dash Replenishment. These have the potential to completely transform the retail and distribution of staple goods. APAC retailers are 50% more likely than their peers in North America and Europe to perceive the Internet of Things as an exciting prospect for 2020, showing a willingness to experiment. Voice interfaces such as Amazon Echo and Google Home are not top-of-mind yet for retailers but will become relevant as consumer adoption increases. Human-centred design Although technology trends will dominate the evolution of retail over the next few years, it feels right to conclude this section somewhat paradoxically with a reminder about the importance of human-centred design. This is not a new concept but it is certainly a trend that retailers need to consider as a way of balancing tech-driven automation which is becoming more prevalent. A design-led approach means having the overall customer experience at the heart of product and service development, ensuring consistency across all touchpoints. This is very much an art as well as a science. Our research shows there is a growing interest towards design and, encouragingly, more retailers seem to consider their organisation to be design-focused. This year, two-thirds (66%) of retail respondents describe their company as design-driven, up from 60% in 2015 when we previously asked the same question. Figure 11: Would you describe your company as a design-driven organisation? 50% 45% 40% 35% 30% 25% 40% 44% 34% 29% 20% 15% 20% 22% 10% 5% 0% 6% 5% Yes, definitely Yes, somewhat No, not really Not at all Econsultancy / Adobe Digital Intelligence Briefing Respondents 2017: 384 Respondents 2015: Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

23 Actionable tips to help future-proof your retail 7business 1. Embrace a digital-friendly culture The journey to digital success is built on a range of key pillars explored in this report, including strategy, process, technology, data and skills. Finding the right alchemy within the business depends very much on fostering the type of business culture and working environment which lends itself to innovation, creativity and data-driven experimentation. Retailers need to empower employees by letting go of the traditional command-and-control structure and encouraging bottom-up innovation so that it can permeate the organisation. 2. Use data compulsively to improve the customer experience through personalisation The most progressive and innovative retailers use data in a multitude of shapes and forms to help improve both the user experience and business performance. Retailers have a raft of data sources at their disposal, including online browsing data and purchase history. Every consumer has unique purchasing habits and personalisation places emphasis on the individuality that characterises our customer journeys. Get to grips with the full range of customer-related data which is available and prioritise personalisation as a way of helping you to differentiate through customer experience rather than price. 3. Understand the customer journey and identify key moments A design-led approach to the overall shopping experience is essential for 21 st century retailers who want to ensure a consistent approach across all touchpoints. While every customer journey is unique, retailers can simplify their digital and mobile initiatives by mapping typical paths to purchase and understanding where they occur, targeting those particular points in time during the customer journey when preferences are made and decisions are shaped. 4. Experiment with more innovative technology As well as the tried-and-tested tactics which are delivering success today, retail organisations need to have one eye on the future so they are not left behind by competitors. Ring-fence some budget for more innovative initiatives, experimenting with technologies such as artificial intelligence, virtual reality or augmented reality. Keep an eye on the latest trends and don t be afraid to poach ideas from other retailers. But don t feel you have to do everything for the sake of it. Good luck! Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 23

24 Appendix: respondent 8profiles Figure 12: In which region are you based? 40% 35% 36% 36% 30% 25% 20% 15% 10% 13% 10% 5% 0% Europe North America Asia Australia / New Zealand 2% 1% 2% Africa Middle East Other Econsultancy / Adobe Digital Intelligence Briefing Respondents: Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with

25 Respondents based in Europe Figure 13: In which of the following countries are you based? UK 43% Sweden 14% Netherlands 8% Germany France 6% 6% Norway Italy Belgium Austria Denmark Switzerland 3% 2% 2% 2% 1% 1% Other 12% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Econsultancy / Adobe Quarterly Digital Intelligence Briefing Respondents: 171 Respondents based in Asia Pacific Figure 14: In which of the following countries are you based? Australia / New Zealand 45% India 18% Singapore 10% Malaysia 6% China 4% Thailand 4% Philippines 4% Indonesia 4% Taiwan 3% Other 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Econsultancy / Adobe Quarterly Digital Intelligence Briefing Respondents: 109 Digital Intelligence Briefing: 2017 Digital Trends in Retail In association with 25