By Phil Offer

Changing consumer behaviours are re-shaping the retail landscape, from shopping online to relying on mobile devices to search for and purchase products. Digital applications and channels are no longer an option or a ‘nice to have’ for many retailers, they are now recognised as a key part of meeting consumer demand and competing more effectively.

At a global level, international retailers such as Starbucks have invested significantly in social engagement with customers by introducing a range of digital initiatives to inspire more personable customer interactions.  In North America, the coffee house offers customers an online loyalty scheme, mobile payments and most recently announced it will be introducing a virtual tip jar to its digital suite.

Local research shows Australian retailers are also responding by adopting digital strategies to drive stronger business results and meet customer expectations. In fact, retail ranked second in levels of digital adoption according to an industry preparedness index by Deloitte Access Economics in the Optus Future of Business Report 2012.

Consumer expectations around flexibility and always-on access are driving how many retailers are building digital into their business models. Mobile apps and online services in particular are changing customer engagement models for many businesses. In fact, the Optus Future of Business Report showed that within three to five years, 90 per cent of organisations across a broad range of industries, expect to deploy digital applications (online purchasing and ordering, online self-service, online service delivery, social media and mobile applications), up from 63 per cent in 2011. 

With the rise of smartphone and tablet market penetration, mobiles have become portable consumption devices, facilitating the rise in mobile commerce and changing the way customers interact with businesses. The report also found 35 per cent of cross-industry organisations believe customers will want to interact with them via mobile applications within three to five years. Retailers are choosing to respond by delivering mobile apps as an opportunity to boost engagement with customers and revenue targets.

The number of retailers offering mobile applications to customers is set to more than double from 22 per cent today to 47 per cent in three to five years. Some of these apps will generate their own direct sale and advertising revenue, but the majority are more likely to simply facilitate commerce or build brand engagement that indirectly leads to sales. However, retailers expect revenue share from mobile apps to rise to 23 per cent within three to five years, compared to 13 per cent currently.

By 2015 – 2017, e-commerce will also be the norm in retail, with nearly 75 per cent of retailers expecting to offer online purchasing and ordering for customers.  The number of retailers providing online self-service applications is also set to almost quadruple to 59 per cent during this period. Retailers aren’t just adopting individual technologies or digital channels in isolation: they’re forging broader strategies around entirely new business models which prioritise customer needs.

Getting digital
Retailers who haven’t yet developed a strategy for digital adoption face being left behind in a bricks and mortar world. Retailers should consider how digital channels and technologies can complement their existing channels to address customer needs – things like faster personalised service, competitive prices and memorable experiences.

To make the most of these changes, however, retailers need to constantly measure and reassess their digital strategy. That means measuring the benefits of existing digital applications – something which 17 per cent of retail organisations currently don’t do. It also means paying attention to how non-digital aspects of the business – including the storefront and supply chain – can be improved to support and integrate with the digital reality.
As retail becomes an increasingly digital environment, efficiency, consumer reach and innovation will become even more important for retailers to differentiate themselves in a competitive global marketplace.

Phil Offer is the vice president of mobility & convergence at Optus Business.