Navigating the New Normal has been a challenge for individuals and organisations globally as we adapt to remote working lifestyle.
The shopping experience as a consumer has also changed, with online shopping and e-commerce becoming the preferred platform when heightened restrictions limited our movements.
Moreover, should consumers choose to patronise a physical store, they are likely to be more purposeful with their shopping as they are sure of what they are getting compared to before.
How then have retailers adapted to these changes given the impact of the pandemic?
As with every organisation and industry, there was an acceleration of digital transformation.
“The impact on the retail industry has been more of an acceleration of the digitalisation of retail. The digital disruption of retail had already begun years before the pandemic, due to e-commerce players like Amazon and Alibaba,” said Darren Ng, General Manager, Asia Pacific at Sensormatic.
“The lockdowns and heightened measures through 2020 and 2021 left many retailers no choice but to digitalise, as it was the only way they could continue to reach their customers.”
According to an eMarketer report, it is projected that by 2024, 78% of retail sales will still take place in physical stores. This suggests that brick-and-mortar shops would remain a constant for the retail industry.
Ng accredits it to the following reasons:
- Consumers crave the physical store experience as it cannot be replicated by online shopping. This is seen by retailers opening flagship stores in 2020 – NIKE in Paris and Louis Vuitton in Tokyo are two great examples of retailers understanding this.
- The role of the physical store is shifting towards more of a brand, loyalty and community building type role, and less that of a place where transactions take place. An example of this would be how Lululemon’s stores also double up as yoga and fitness studios.
- There are certain products that just must be bought at physical stores. Despite how great AR or VR technology can be, a virtual fitting room is still unable to replicate the feeling of fabric on the skin, or the freshness of the vegetables at your grocers.
- Even with deliveries promised to be “near-immediate”, instant gratification of purchase can only be satisfied by physical stores.
Shifting to e-commerce
Retailers have sought e-commerce as a solution to overcome the challenges brought upon them due to the pandemic. However, despite the opportunity to move to an e-commerce format, retailers are at risk of missing out on revenue and growth due to fraud.
Monica Acree, Vice President, APAC at Forter explains that this could be due to the phenomena of New User Missed Opportunity (NUMO), whereby there is an increased likelihood of new online consumers being declined by current fraud systems than returning consumers.
Identifying the causes for NUMO, Acree attributes it to:
- A lack of data
Merchants not having transactional or behavioural data on their new consumers. This challenge is aggravated for brick-and-mortar stores moving online as they can no longer meet their prospective customers in person. With limited access to personas and consumer behaviour, trust becomes a casualty leading to false declines.
- Traditional fraud management models
Traditional fraud management models rely on manual review and rules-based decisioning, making it ill-prepared to tackle this challenge. Being reactive in nature, these models are able to solve for fraudulent behaviour that occured in the past but are unable to adjust to new patterns of user behaviour and keep up with the rapidly evolving consumer landscape.
“This will be a huge challenge for businesses, and one that can only be solved with real-time fraud analytics of behavioural and transactional data,” adds Acree.
Customer experience remains key
Prioritising the customer experience is one of the key considerations for businesses when pursuing digital transformation. The same applies for businesses in the retail industry, where the goal is to adapt to the new normal while providing a fast and flexible service with no added friction.
“Cultivating trust amongst merchants and consumers is key to reducing friction, maximising revenue opportunities and reducing false declines. Trust is a two-way street, especially in an e-commerce transaction where retailers and customers are not familiar with and physically distanced from each other,” said Acree.
“Understanding shoppers at a behavioural as well as transactional level increases the chances for merchants to close sales with legitimate customers and minimises the risks of them missing out on new opportunities.
“Bothersome authentication processes are not conducive to a good customer experience and tend to push away legitimate, but potentially new customers. While riding the digital train to success, merchants need to enhance their fraud prevention strategies with real-time data and move beyond traditional rules and manual reviews.”