University of Greenwich (UOG)
Bachelor of Arts (Hons) Business Management (Top Up)
ASSIGNMENT / PROJECT COVER SHEET
(to be completed individually by student)
| UOG ID Number |
001146048
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Course Specialization (*Please delete whichever is not applicable)
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Marketing and Sales |
| Subject Code/Name |
MARK 1051/ Contemporary Issues in Marketing
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| Assignment Title | ESSAY 2: Evaluation of Disruptive Technologies Application in Customer Acquisition and Retention processes in Retail Industry |
| Lecturer/Supervisor | Mr. Mahin Wijesekera |
| Word count | 2516 |
DECLARATION
| I, the above-named student, confirm that by submitting or causing the attached assignment to be submitted, I have not plagiarized any other person’s work in this assignment, and except where appropriately acknowledged, this assignment is my work, has been expressed in my own words, and has not previously been submitted for assessment. |
Contents
2.0 The need for disruptive technology in Retail Industry. 5
3.0 Application of Disruptive Technology in Retail Industry. 5
Executive Summary
Increased consumer expectations, tremendous technological advancements and the shift from the traditional brick and mortar to Omnichannel commerce are some of the trends reshaping the retail industry. The Covid-19 pandemic has seen retailers and customers leaning more towards eCommerce and social commerce as the new norm, and the trend is not reversing at any time.
Dwell sensing, scan pay and go, RFID, smart vending, autonomous delivery, and social commerce are disruptive technologies being used in the retail industry to provide customer satisfaction and increase customer acquisition and retention. Apart from serving the purpose of customer acquisition and retention, these disruptive technologies have been instrumental in reducing operational costs and increasing efficiency in the management of retail businesses.
1.0 Introduction
Disruptive technology has been described as new technology that has proven practical application. Despite its lack of refinement and initially limited appeal to a large audience, disruptive technology has the potential of causing an irreversible change in how an industry operates and at the same time gaining future massive adoption (Christensen, 1995). Examples of disruptive technology are; the electrical speed machine innovated by Alexander Graham Bell, which later came to be known as the telephone, and in modern times, the smartphones. Tim Zanni, a US-based global leader in the technology sector, says, “The convergence of emerging technology such as IoT, robotics and AI is creating new market value are displacing existing products and services. Impacting industries, business models as well as life, society and the environment in general” (KPMG, 2017).
Increased consumer expectations, tremendous technological advancements and the shift from the traditional brick and mortar to Omnichannel commerce are some of the trends reshaping the retail industry (McKensey & Co., 2020). For these reasons, there is increased pressure for operators in the retail industry to integrate innovative technological solutions in their operations to acquire and retain customers and sustain profitable operations in an industry characterized by slim profit margins. This assessment seeks to evaluate how players in the retail industry are applying disruptive technologies in their operations to enable their acquisition and retaining of customers. The assessment covers a review of relevant academic writings on the topic. Evaluate how businesses have employed disruptive technologies in their marketing function using real-life business examples.
2.0 The need for disruptive technology in the Retail Industry
For technological innovation to be considered disruptive, it has to be; highly accessible, low cost, started small targeting low-end market products. Initially not taken seriously but steadily expanded to capture a vast market, disrupts how the industry operates, e.g. the use of smartphones has disrupted the postal services as it has changed how people communicate through texting (Christensen, 1995). Steinhoff et al. (2018) argue that the shrinking human interaction in conducting modern businesses has necessitated the need for marketers to shift their relationship marketing efforts to internet-based channels. This has created both opportunities and challenges for modern marketers (Seinhoff et al., 2018). According to McKinsey & Company (2020), the retail industry faces the challenges of increased consumer expectations, advancement in technology and the adoption of Omnichannel as a means of operations. These increased demands coupled with the thin profit margins, which are a hallmark in the retail industry, have resulted in increased uncertainty and cost pressure. The need for change in strategy to inform customer acquisition and retention in the competitive industry calls for the adoption of disruptive technologies.
3.0 Application of Disruptive Technology in Retail Industry
According to Deloitte (2017), the modern business has shifted towards convergence, co-opetition, co-ownership, continuous learning and co-creation. This has resulted in a change in strategy, how businesses operate, and the need to adopt disruptive technologies. For example, to enhance customer experience, businesses are employing a holistic physical and digital experience across the entire customer journey through smart mirrors. Mobile apps, virtual reality tie-ups and blockchain have found applications in managing customers’ loyalty programs. The application of electronic shelf-edge technology has helped customize engagements with customers and create personalized deals. Findings from research carried out by Foroudi et al. (2018) indicate that disruptive technology in the retail industry has resulted in increased customer acquisition and retention.
In building the ‘store of the future, retailers are now using flashy technology to attract and engage with their customers. However, this is just a façade to much more complex and sophisticated technology employed behind the scene (McKensey & Co, 2020. Retailers are investing in technology capable of gathering and connecting data enabling seamless customer experience and fulfilment through frictionless commerce platforms. These technological innovations include; dwell sensing, scan pay and go, RFID, smart vending, autonomous delivery and social commerce.
3.1 Dwell Sensing
Dwell sensing is an essential metric used by retailers to analyze customers’ shopping behaviour. A study conducted by Path Intelligence (2016) showed a positive and significant relationship between sales and the time a customer dwelled in a particular section of a retail store. It has been found that a one per cent increase in time dwelt resulted in one hundred and thirty per cent increases in sales (Path Intelligence, 2016). The dwell sensing technology utilizes a video and a tracking system that senses customers’ paths while shopping within a store and the time dwelt at specific locations. The system is connected to overhead cameras that monitor customers’ time and progress. Data that has been collected is then displayed as a ‘heat map’ with different colours overlaying the store map, indicating the most popular routes and areas. The collected data is transmitted to a central computerized system through Ethernet or Wi-Fi. The data is then analyzed and integrated with the point of sales data to give real-time conversion rates.
Dwell Sensing technology helps retailers learn customers’ movements and interactions with displays within the store. Enabling them to evaluate where to strategically position most profitable stock items, evaluate the best display layout and signage, discover and eliminate bottlenecks that create unprofitable waiting time. The technology enables retailers to provide effective displays and optimize the store’s layout. This way, retailers can improve customer service and increase sales, hence boosting customer experience and optimized performance (Retail Sensing, 2020).
Aura Vision is an example of an in-store analytics platform utilizing the dwell sensing technology designed for use by retail shops and malls (Aura Vision, nd). The platform uses cutting edge AI technology to conduct customer count and movement. The technology is GDPR compliant, converts video feeds into anonymous analytics. The platform generates reports on a store’s performance where it segregates data by gender and gender. Some stores already using this platform include; Flannels, Telefonica, O2, Neighborhood Goods and Onitsuka (Aura Vision, nd).
3.2 Scan Pay and Go
The scan, pay and go technology allows customers to pick their shopping from the shelves, scan using their mobile phones, bag it and make electronic payments through their phones. The system allows contactless shopping, speeds up check-out processes, and eliminates queuing to make payment. Before the Covid-19 outbreak, retailers were hesitant to adopt this technology in their operations, with most citing inventory shrink and theft as deterrence (Walton, 2020). On the other hand, customers were concerned about the security of online payment methods. A study conducted by Putit et al. (2021) on customers’ attitude and adoption of contactless payment methods amid Covid-19 outlines six factors affecting customers’ attitude and adoption of contactless payment. These were; perceived usefulness and ease of use of the system, trust, social influence, convenience and fear.
Fig 1: Factors influencing customers’ attitudes and adoption of contactless payment (source, Putit et al.,2021)
According to Putit et al. (2021), fear of increased Covid-19 contagion in retail stores forced retailers and customers to rethink the adoption of contactless payment methods such as the scan, pay and go system. Customers’ found these forms of payment to help minimize the risk of contracting the virus. The systems provide an easy way to make payment, is convenient and social influence has increased the level of trust for the use of the system.
From the retailers’ perspective, the scan, pay and go technology has accorded them several advantages, e.g. minimizing the risk of Covid-19 contagion amongst its staff, reduced staffing, operational costs, and increased efficiency and customer satisfaction. Retailers are devising ways to counter the initial fears posed by implementing the system, e.g., installing effective entry and exit monitoring systems. Walmart and Costco are some of the retailers operating this new payment system.
3.3 Social Commerce
The concept of retailing can be traced back to 1858 when R.H. Macy opened the first one price buying dry goods store, and in 1930, Marshall Fields launched the first department store in suburban Illinois (Mohid and Rosli, 2015). However, changes in consumer demographics and trends are reshaping the modern-day retail businesses, with most shifting from the traditional mortar and brick to online retailing, also known as e-tailing operations. E-tailing is the sale of services and goods through internet channels. Social commerce is the convergence of e-tailing and marketing promotions through social media platforms such as Facebook, Twitter and Instagram. Yadav et al. (2013) describes social commerce as “Exchange-related activities that occur in, or are influenced by, an individual’s social network in computer-mediated social environments, where the activities correspond to the need recognition, pre-purchase, purchase, and post-purchase stages of a focal exchange”. On the other hand, Gatautis and Medziausiene,(2014), describe describes social marketing as “The integration of social networking capability into e-commerce sites, which include, but are not limited to, product reviews, rating, videos, blogging, live chats and online forums. It involves using social media, online media that support social interaction and user contributions to assist in the online buying and selling of products and services” (Gatautis and Medziausiene, 2014, p. 1237).
Disruptive technologies have created new forms of retailers, who some few decades ago did not exist. The emergency of the e-tailing concept and social commerce are driving the operations of online retailers such as Amazon, with traditional brick and mortar retailers such as Target, Walmart, CVS and Walgreen making a foray into this new trend. To establish an online store, retailers create product catalogues in an online domain with a dedicated IP address that provides users a link to connect to the online store server. Customers’ data is encrypted using SSL protocol to maintain the privacy and security of customers. The web server host creates, operates and manages the online store and e-commerce services by providing shopping cart software, database support, SSL protocol, security features and payment processing services.
From a customer’s perspective, online retail platforms provide an avenue where customers can access products or services on the internet through use of smart phone or computers. Customers need only visit the online store, pick their shopping, put it in an online shopping cart, make online payment through phone and the product is delivered at their doorstep by the retailer.
Fig 2: An illustration of how e-commerce works, source, https://www.explainthatstuff.com/ecommerce.html (2021)
Social Commerce offers several advantages as well as disadvantages to both customers and retailers. One of the advantages of social commerce for customers is that it allows seamless shopping experience. Through social commerce a customer is able to conduct shopping through the app, without logging in, no need to fill in boring customer’s information forms, no irritating passwords and usernames to remember in order to sign in. The social commerce allows customers to stay logged in with payment details ready on the go through use of an app, therefore it is simple and requires minimal effort. For the retailer,
It is estimated that at least fifty per cent of the world population i.e. 3.6 billion people are users of social media platforms such as Facebook and Instagram. A part from providing social experiences to users, these platforms influence customers purchase decisions where it is estimated that people are four times likely to buy a product when referred by a friend or based on positive customer reviews (Three Sixtee, 2021). Based on these statistics, retailers are now finding ecommerce to be an effective means to reach new customer through customer sharing on social media, increased customer engagement where they can leave feedback and ask questions through use of inbuilt conversational marketing tools. However, despite the advantages of social commerce, one of the main drawback of social commerce to retailers is that a negative review from a customer may result in irreparable damage, therefore retails have to invest time and energy in responding promptly to customer complains.
3.4 Autonomous Delivery
The emergency of e-commerce and social commerce has created the need for delivery of customers’ purchases right at their doorsteps. Most online retails outsource delivery services to companies specializing on these services such as FedEx, UPS and XPoLogistics. However, with the increase concern on global warming, nations are putting in efforts towards environmental protection which include reduction in carbon emission. On their part online retailers are now shifting focus on autonomous delivery robots as an alternative to use of trucks. Further, outsourcing of delivery services is proving to be very expensive for retailers; as well as prone to delivery mishaps which result in customers’ dissatisfaction. The shift has been informed by environmental concerns as well as the need to improve customer engagement and retention. Market data indicate that; thirty eight percent of customers say a bad delivery experience is one of the reasons not to purchase from a merchant in future, sixty percent of customers shift to a rival company that offers convenient ecommerce delivery and lastly, seventy four percent of customers believe free shipping to be an important factor in ecommerce (Magenest, 2021). Based on these statistics, online retailers are finding autonomous delivery robots as a cheap, faster and convenient means of delivery in ecommerce operations.
“Autonomous Delivery Robots (ADR) are electric-powered motorized vehicles that can transport things or goods to customers without the need for human intervention. These robots are trained to transport a variety of objects from one location to another,” (Global News Wire, 2021). ADR ecommerce delivery systems utilizes disruptive technology where, the motorized vehicles are operated through a computer systems, this minimizes problems of human error. The vehicles are electric powered and therefore do not emit carbon into the environment. This mode of delivery has been found to cut down on operational costs for retailers as well as increased efficiency, convenience and customer satisfaction with the ecommerce delivery contributing to retailers’ customer acquisition and retention.
4.0 Conclusion
The increased demand for superior customer experience driven by the need for seamless exchange between in store and digital shopping has opened new opportunities as well as challenges in the retail sector. To acquire and retain large customer base, businesses operating in the retail industry need to be proactive in implementing disruptive technologies. Changes in consumer demographics and increased expectations are driving the need for retains to keep pace with technological advancements, aimed at providing customer satisfaction and experience. The adoption of disruptive technologies in the retail industry has given rise to the development of e-retailing or online retail stores where acquisition and retention of customers is pegged on the capability of the technological innovations to offer seamless customer experience and also create platforms for that enable business to interact and build relations with their customers. However, for these disruptive technologies to be effective, retails also need to integrate advanced technology in other areas of operations such as in procurement, stock management, staff training and logistics. With increased consumer expectations, increased competition, need to increase profit margins and technological advancement the retail industry is expected to be dynamic with new innovations and changes shaping the industry more often in the future.
References
Aura Vision (nd). Available online at; https://auravision.ai/
Christensen, C., (1995), Disruptive Technologies: Catching the Wave, Harvard Business Review
Deloitte (2017), Disruptions in Retail through Digital Transformation: Reimagining the Store of the Future, November 2017 issue
Foroudi, P., Gupta, S., Sivarajah, U., Broderick, A., (2018). Investigating the effects of smart technology on customer dynamics and customer experience, Journal of Computers in Human Behavior (2018)
Gatautis, R., and Medziausiene, A. (2014). Factors Affecting Social Commerce Acceptance in Lithuania. Procedia – Social and Behavioral Sciences. 110. 10.1016/j.sbspro.2013.12.970.
KPMG (2017), The Changing Landscape of Disruptive Technologies: Part 2 Innovative Convergence unlocks new paradigms.
Steinholf, S., Arli, D. Weavens, S. Kozlenkova, I. (2018), Online Relationship Marketing, Journal of the Academy of Marketing Science, May 2019, DOI: 10.1007/s11747-018-0621-6
Magenest (2021). The E-commerce Delivery: Strategies, Solutions and Methods. Available online at https://magenest.com/en/ecommerce-delivery/#Delivery_and_logistics
McKinsey & Company, (2020), future of retail operations: Winning in a digital era
Mohd, F., and Rosli, M. H., (2015). Social commerce (S-Commerce): Towards the future of retailing market industry. 13. 5977-5985. Research Gate
Mordor Intelligence, (2021). Autonous Delivery Robots Market – Growth, Trends, Covid-19 Impact and Forecasts (2021 – 2026). Available online at; https://www.mordorintelligence.com/industry-reports/autonomous-delivery-robots-market
Path Intelligence, (2016). Time is Money, Shoppers Buy more when they Stay Longer. A White Paper, Path Intelligence. Available online at https://fliphtml5.com/olpx/fgfr/basic
Putit, L., et, al., (2021), “Gravitating towards Consumers’ Use of Contactless Payment: A COVID 19 Pandemic Perspective”, Journal of Marketing Research and Case Studies, Vol. 2021 (2021), Article ID 679283, DOI: 10.5171/2021.679283
Retail Sensing (2020), Retail Dwell Time – the Route to Higher Spending, Available online at https://www.retailsensing.com/people-counting/retail-dwell-time-metric/
Walton, (2020). Forbes, There’s A Technology Retailers Have Been Scared To Try, But Could Make Shopping Safer Immediately. Available online at; https://www.forbes.com/sites/christopherwalton/2020/04/13/amid-covid-19-retailers-should-press-scan-and-go-mobile-shopping-into-service-as-fast-as-possible/?sh=66d09525362a
Yadav, M., Valck, K., Hennig-Thurau, T., & Hoffman, D., and Spann, M,. (2013). Social Commerce: A Contingency Framework for Assessing Marketing Potential. Journal of Interactive Marketing. 27. 311–323. 10.1016/j.intmar.2013.09.001.