Word of mouth marketing drives US$6 trillion of annual consumer spending and is estimated to account for 13 percent of consumer sale.- The global augmented reality (AR) and virtual reality (VR) market is forecast to reach US$18.8 billion in 2020.
- By 2021, the influencer marketing market value is forecast to grow to US$13.8 billion.
Data-driven consumer engagement tools using digital technology, data analytics, user-generated content, influencer marketing, Augmented Reality, and Virtual Reality are rapidly changing the US$27 trillion global retail sector that is shifting from mass-market to target-market approach for retailers to increase their sales output in a very fragmented and competitive marketplace, experts at a RetailME digital conference told the audience.
“Many retailers operate an omnichannel model, which aims to integrate offline and online channels in a seamless way. In 2019, the global retail market generated sales of nearly US$25 trillion, with a forecast to reach close to US$27 trillion by 2022,” according to Statista, a global market intelligence provider.
According to recent research, technology-driven hyper-personalisation increases average revenue per user by 166 percent. A survey found that 86 percent of the buyers are willing to pay more for a better customer experience while 54 percent of the customers think companies need to fundamentally transform how they engage.
In the category of online entertainment, Netflix was the leading brand with a score of 89 percent in terms of how the brand met consumer expectations versus the consumer-generated, category-specific ideal.
Retailers are currently investing heavily in futuristic technologies to stay ahead of the competition. Globally retailers’ investment in Artificial Intelligence (AI) is expected to exceed US$7.3 billion in 2022, according to Juniper Research, which will deliver 25 to 50 percent cost savings on effective deployment to the tune of US$340 billion.
“Technology companies are creating new tools for retailers to increase customer engagement to boost their targeted digital sales output to compensate for the decline in physical sales, especially following the outbreak of the COVID-19 pandemic that changed consumer behaviour worldwide.” Shruthi Nair, Executive Editor of Images RetailME said at the Redefining Consumer Engagement digital conference held in Dubai recently.
“It is very important to have a discussion on the direct correlation level of customer engagement and business profitability. A study says companies that improve the customer engagement can increase cross-sale revenue by 22 percent, up-sale revenue by 38 percent, and order-size by 5 to 85 percent.”
The virtual roundtable was organised by Images RetailME, a 16-year-old retail intelligence media brand in the Middle East with 45,000+ strong print readership and over 100,000 digital reach across the MENA region inhabited by 411 million people living in 22 countries.
Bala Subramaniam, Head of Omnichannel at Max, part of Landmark Group, said, “For us, customers are the same in-store and online. So, when we look at the customer engagement, we like to look into the overall context and customer journey, and then we decide what the engagement would be like. When the e-commerce journey started, it was only for seeking information and looking for product information. Then, social media came and changed the journey. Now it’s more content and community-led and it’s also changing the user-generated content industry.
“Customer engagement is a two-way communication, and it establishes long-term relations affecting the whole brand, and not only the channel or the medium we use for the engagement.”
He says consumer content through mobile phones will be crucial and the retailers that have a better strategy to target the right customer with the right content will enjoy more sales and increased customer loyalty.
“The first thing you look for when you wake up is your mobile phone. It is the first thing we try to grab to see what is happening in the world So, the digital strategy targeting the mobile app is very crucial,” Bala Subramaniam says.
“Mobile is where the customer sees what is happening in our store what is going on with our offers etc. Digitalisation is really bringing both in-store and online together for a seamless customer journey.”
Retailers who refuse to change and shift their gears to an omnichannel customer experience might disappear, the experts warned.
Farimah Moeini, Business Solutions Lead at Snapchat, said, “For us, we define customer engagement with the help of the frequency of their visit done on the app, which is currently 30 times a day, and we also look at the time spent. Right now, we have users spending on average more than 1 hour daily on the app on key moments like Ramadan for example, which is quite high.
“From Snapchat’s point of view, engagement tools are very important as every touchpoint you have can be a way to connect with your customer.”
Retail transactions take place through various channels of distribution across an ever-growing range of industries. While physical or in-store retail is still the dominant channel, forms of non-store retailing are becoming increasingly popular too. Online retailing or e-commerce channels are carving out a share of the retail sector in many global markets, experts said.
Social commerce and influencer marketing are some of the most popular retail market trends worldwide. Social media represents an attractive channel for retailers to sell their products and services as it is used by over 3.6 billion people worldwide. According to a survey carried out in 2019, around 25 percent of e-commerce companies planned to sell directly through social media platforms in 2020. Additionally, 15 percent of e-commerce companies reported that they were already selling on social media.
By 2021, the influencer marketing market value was forecast to grow to US$13.8 billion. Tik Tok and Instagram are some of the most successful social platforms used by influencer marketers. Other retail trends include the use of AR (Augmented Reality) powered shopping experiences, retail technology, faster delivery, sustainability, and smart speaker shopping, according to Statista.
Farimah Moeini says, “Influencers – those who have a very high impact on decision making – are also a great tool for customer engagement. I don’t like to call them influencers – we call them creators – who have a good impact on the consumers, and they know how to create engaging content.
“For the last few months, we have been using the Snapchat community to inspire each other, and we are doing so by making sure that the influencers are consistent with our values. We have recently created a Creator’s Marketplace – a new community of influencers – in which the creators share their AR ideas and contents.”
Despite the digital and e-commerce revolution, loyal customers remain the best advocates, according to some studies.
“Word of mouth marketing drives US$6 trillion of annual consumer spending and is estimated to account for 13 percent of consumer sales. Impressions from word-of-mouth result in 5x more sales than a paid media impression. People are even 90 percent more likely to trust and buy from a brand recommended by a friend,” said a report.
Despite the retail market’s promising growth globally, the industry was severely impacted by the COVID-19 pandemic. Though it was a thriving moment for e-tailers such as Amazon, it certainly was not the case for many brick-and-mortar companies in non-essential industries. Diverse sectors like shopping centres, high street retail, department stores, and office supplies stores were forced to close their doors for a prolonged period, which had a substantial impact on their sales.
“Every industrial revolution was catalysed by a major technological evolution. Today is no different. With 90 percent of the world’s data having been produced in the last two years and more than 26 billion smart devices in circulation, we are living in an era of unprecedented technological innovation — one that has spurred the Fourth Industrial Revolution,” the latest report by Deloitte, titled 2020 Global Marketing Trends, says.
Stanislas Brunais, Head of Marketing at Ounass, says data is the backbone of future business.
“If the customer is not loyal to a brand, whose fault is this? If the customer gets the best experience, why would they not become loyal? So, if the customer is not loyal, it is the fault of the retailers – not the consumers,” he says. “In a highly fragmented and competitive market, you need to engage with the customers and give them the best experience for the customers to become loyal.”
Augmented Reality and Virtual Reality Market
The global Augmented Reality (AR) and Virtual Reality (VR) market is forecast to reach US$18.8 billion in 2020. This would be an increase of over 78 percent overspending in 2019.
AR/VR technology makes use of sensory devices to either virtually modify a user’s environment or completely immerse them in a simulated environment. Virtual reality devices typically consist of specially designed headsets that offer complete visual immersion into a simulated environment, while augmented reality relies on headsets that add virtual elements to a user’s actual environment. In 2020, sales of AR/VR headsets were projected to reach 5.5 million units.
“We have commissioned a study in partnership with Publicis Media, which says that 88% of consumers in Saudi Arabia think AR will play a role in future shopping in the next five years. Marketers, however, are not taking it seriously enough. But they need to make it an integral part of their activation,” Farimah Moeini said.
“A study shows that interacting with products that have AR experiences leads to a 94% higher conversion rate. For the next generation, we are, and we should invest heavily in AR marketing technologies. The type of things you can do through AR is super and huge. Through AR, you can actually try a product on, change colour, scan someone’s cloth and find it online. It’s spreading massive experience and positive sentiments among customers.”
From mass production, mass market and mass advertisement, retail marketing and consumer engagement has shifted to a more targeted approach.
“If I step back prior to the digital age, mass market, mass production and mass advertising were driving the sale and Amazon would take these mass products to millions of customers and deliver a personalised experience. That’s why Amazon has so many loyal customers,” Bala Subramaniam says.
“We try not to apply a one-size-fits-all approach. For us to give such experiences to customers, we need data. The challenge is to have that kind of data intelligence and footprint to give our customers the same experience as big brands like Amazon. At some point in the future, through the help of social media and other new tools, we hope to get this problem solved.”