Technology

We are in the midst of the digital revolution and the changes have had a fundamental impact on the buying behavior of shoppers. Technology has a key impact on what and how we buy. Production technology has made it possible to offer a wide range of products and modem logistics infrastructure has ensured their availability. These developments have been the basis for the development of modem retail.

The development of modem retail was seen as a threat to traditional retail and to the structure of cities with their historically smaller stores. The car in combination with the development of infrastructure and the offer of more products at lower prices facilitated the development of large stores and the decline of small stores with their competitive advantage centered on proximity, service and expertise. The small store cannot usually compete on price or offer. With the increasing awareness of environmental issues and the growth of single households there has been a revival of city shopping, often thr ough chains with smallformat stores. In emerging and developing markets, the role of modem retail has sometimes been different. In Latin America, modem retail has been targeted more towards the emerging middle class while traditional stores are the preferred destination for the lower sociodemographic classes, often because they offer cheaper alternatives to leading brands, and also because they fractionate products or offer credits.

The internet is now putting the classic channels under pressure, as modem retail did with the traditional channels. Retailers like Amazon and Alibaba have changed forever the retail landscape, but also classical chains like Walmart are forming the new retail channel landscape. In industries where the manufacturer has a direct relationship with the customer, such as banks or telecommunications service operators, the changes have been fundamental. Digitalization is an opportunity to work more efficiently and lower costs. In this sense, technology is a key player in increasing productivity in retail. In the entertainment industry, digitalization has changed the product itself, such as books, music and movies, and not only the product, but the entire value chain, and even the production of content.

E-commerce has partly reversed the value chain. In the past, sales volumes had to be planned, and products had to be transported to shops and placed on shelves. In e-commerce, distribution comes after the purchase. Traditionally, manufacturers and retailers have been gatekeepers, and due to the limited space in retail, only big brands, or innovations that can drive traffic, have been allowed to arrive on the shelves. With category management and efficient consumer response (ECR) initiatives logistics efficiencies have been optimized, and a leading manufacturer is responsible for developing the entire category strategy in line with retailer guidelines.

Digitalization is turning this division of labor upside down, in some industries more than others. The example “par excellence” is the entertainment industry. Digital technology makes it possible to lower the production costs of books, which can then be distributed through alternative channels. Music and films are now streamed. Streaming sites, like Spotify and Netflix, have become leading distribution charnels. With YouTube, people can produce and upload their own content.

Still, not all products enjoy the same e-commerce penetration, for specific categories, the brick-and-mortar experience is still important.

Technology products, such as computers, as shown by Dell, for example, work well through e-commerce and most manufacturers of consumer technology products have their support through the internet. In clothing, initiatives like Zalando are successful, as long as the system of exchanging and returning products works well. For immediate consumption products such as food and beverages, the internet has influenced the reservation system on one side, and the delivery service, through companies like Uber Eats, on the other side. As with clothing.

Figure 1.9 Categories purchased online

Worldwide percentage of people who have purchased these categories online, 2018.

Source: Datareportal.com

Figure 1.10 Omnichannel usage

Shoppers who ordered on the internet to pick up products in store in the United Kingdom in 2013.

Source: Cognizant, 2014

the change in technology, from telephone to the internet, has increased usage, rather than radically changing behavior. Nevertheless, in many categories, the customer experience of face-to-face interaction and the shopping and consumption ambiance is crucial.

It is not only the internet, but other technological developments like artificial intelligence (Al) and robots that are becoming more important. In countries like Japan that are facing demographic challenges due to low birth rates and very strict immigration laws there is a lack of people for service jobs, e.g. in the health sector or in hotels. Robots have been tested to replace some of the work normally conducted by humans.

Over the Christmas and New Year period 2015/2016, the most important retailers in the United Kingdom increasingly introduced e-commerce. Although there was a fear of cannibalization between sales channels, results showed that the different sales channels actually complemented each other. The retailers that had pushed e-commerce channels grew not only in that channel, but in the brick-and-mortar sales channels as well. Technology is not a zero-sum game, but opens up new opportunities to influence shoppers and their attitudes.¹⁶

The internet and the interaction of channels, such as ordering on the internet and collecting the products at a predetermined site, e.g. on the way home (click and collect) increases the convenience for shoppers.¹⁷

In addition, the interest for omnichannel solutions is clearly growing and will increasingly be an integral part of shoppers’ behavior in the future. Higher levels of shopper satisfaction are positively correlated with higher levels of spend by multichannel users.¹⁸ Multichannel means parallel channels that do not interact, while cross-channel or omnichannel is when channels interact. Shoppers show higher levels of satisfaction in omnichannel environments.¹⁹ Depending on shoppers’ attitudes, omnichannel usage has to be evaluated differently. More involvement, loyalty and experience equals more satisfaction.²⁰ This needs to be actively managed by manufacturers.²¹

Technology, especially the internet, not only changes how we buy and the production process, but also how we inform ourselves and how we are influenced.²² There is a video from Scholz & Friends called ‘Shift in Marketing Reality’ that shows how media and advertising rules have changed in recent years.²³ Until the 1990s, the most important medium was television and many countries only had one or two networks, mostly state owned. Today, the media available to us are vastly different. From the point of view of timing, one could say

Figure 1.11 Interest in oinnichannel solutions

Omnichannel capabilities that retailers worldwide planned to implement in 2018 (% of respondents).

Source: Brightpearl & Multichannel Merchant, 2017

Figure 1.12 News sources

Change in major news sources in the United States between 2001 and 2018.

♦Until 2013 reported as internet, after divided into news websites and social media

Source: Pew Research Center, 2013; 2018

that it has gone from prime time to right time. Moreover, the light time is in the hands of consumers and shoppers. The other big change is the equipment. If in the past the equipment of influence was the television or the radio, today there are a wide variety of media equipment and screens, such as televisions, computers, tablets or cell phones. Both traditional and social communication have a positive impact on brand equity.²⁴ With the increase of the number of touchpoints at the point of purchase, be it brick and mortar or digital, the point of purchase becomes even more important in the decision process.²⁵

The direction of communication has changed dramatically. Previously it was a simple model of communication, from manufacturer through major media channels to consumers/ shoppers. Today, there is a great variety of media channels, from classical ones, like television, radio, newspapers, peer to peer, and word of mouth (WOM) between consumers/ shoppers and among other influencers, to bloggers, YouTube personalities or people who have or want to have an opinion or make fun of companies and products.²⁶ This has been made possible thanks to new social platforms such as Facebook, Twitter, YouTube, Instagram, etc. Social media makes it possible to better target different segments of shoppers.²⁷ Influencers can have an important impact, especially if the public, potential consumers and shoppers, identify with them.²⁸ If in the past creativity was something that only belonged to the content of advertisements, creativity today has not only to do with content but also with the mix of channels and influencers. While not too much has changed when it comes to radio the importance of print newspapers and magazines has given way to internet sources. There are already newspapers and magazines that have only digital editions, such as the Huffington Post, which was founded as an internet newspaper.

For billboards, electronic screens offer the possibility of changing the advertisements faster and cheaper, and adapting to different timetables and targets. With codes, such as QRs, it is possible to tailor communications via consumers’ and shoppers’ cell phones. Electronic coupons have been found to be more efficient than paper coupons, increasing usage rates from 1 to 5 percent and even 15 percent in some cases. Cell phones also facilitate the management of customer programs, such as loyalty programs, customer clubs, newsletters and so on. Moreover, communication around products and services can be expanded by providing additional information through cell phones, referred to as “beyond the package”.²⁹ Location information on where to find stores, evaluation of stores and stock availability can all be accessed through the internet and cell phones. The use of cell phones can lengthen the shopping trip and spending through applications.³⁰

Figure 1.13 Use of cell phones during a shopping trip How consumers use cell phones in store in the USA in 2017 Source: Skrovan, 2017

The development of technology has changed and is changing the behavior of shoppers and thus shopper marketing, especially die management of touchpoints and omnichannel solutions.³¹