Technologies that Keep Retail Businesses Competitive
What comes to mind when you hear the word ‘technology’? For me, I associate ‘technology’ with processes and inventions which help to bridge gaps between civilisations and improve our way of life. Economists, on the other hand, generally define ‘technology’ as, “. . .anything that helps us produce things faster, better or cheaper.”
No matter how you define ‘technology’, one thing’s for certain. Technology has revolutionised the world we live in. It has impacted the way we market and consume goods and services in the information age; from buying and selling online, advertising through digital channels, to tracking and understanding purchase behaviours and customer demographics, these are some practices that were not commonly seen in the 1980s or 1990s but have become ubiquitous since the 2000s.
In order for retail businesses to stay competitive with time, the adoption of technology is necessary and an inevitable next step.
Financially, setting up an eCommerce site is relatively cheaper compared to a physical shopfront. Let’s look at some cost factors.
Comparison: Traditional Shopfront
In Singapore, a storefront located in the city would typically cost SGD $10-$40 per square feet per month. The average retail shop measures around 1,000 square feet, which will cost at least SGD $20,000 per month.
To lease a shop, retailers must sign a commercial lease agreement. In addition to the rental cost outlined in a 2-year lease agreement, retailers are required to place a 3-month security deposit upon signing of the contract.
Apart from the property lease price, initial cost of renovation and equipment can incur almost tens of thousands of dollars. On top of that, there are other recurring costs such as monthly store maintenance and insurance. These additional costs could add up to another few hundreds or even thousands of dollars depending on the business.
Breakdown of Investments for A Physical Shopfront
Renovation = SGD $10,000
3-month security deposit = SGD $20,000 x 3 = SGD $60,000
1st month’s rental for a 10,000 square-foot space = SGD $20,000 x 1 = SGD $20,000
Total initial investment = SGD $60,000 + SGD $20,000 + SGD $10,000 = SGD $90,000
Creating A Website and Hosting
There are many different companies that provide tools to create a website. For starters, eCommerce subscription costs begin at SGD $30 to about SGD $80 per month. Most of the eCommerce service providers cover web hosting; but if they do not, you should be expecting to pay only about SGD $10-$30 per month. Retailers, who are willing to commit to a specific service platform for an extended period of time (1 year or more), are usually able to enjoy discounted prices on subscription.
Website customisation and purchase of a unique domain are value-added services that you may want to apply on top of your basic subscription. A professional website builder can cost around SGD $6,000, depending on the extent of customisation. A unique domain for your business can cost about SGD $20-$50 per year.
Breakdown of Investments for An eCommerce Sales Platform
Website creation tool = SGD $80
Web hosting = SGD $30
Unique domain = SGD $50
Total initial investments = $80 + $30 + $50 = $160
Benefits of eCommerce
Besides lower costs, having an online sales channel exposes your brand to a larger group of potential customers beyond the locality of your physical retail store. This brings about more opportunities for reaching customers. Furthermore, thanks to the advancement in software technology, you would no longer need specific technical expertise to create an eCommerce website.
The benefits of having an eCommerce website do not stop here. The ease and convenience of shopping online, anytime and anywhere, makes eCommerce an attractive purchase channel for many consumers. By catering products and services according to your customers’ preferences, and extending your retail store’s presence online, your brand can be accessed conveniently and positioned as one that places your customers’ shopping experience first.
Worldwide retail eCommerce sales made up 10.2% of total retail sales in 2017 and is expected to increase to 17.5% by 2021.
eCommerce sales are growing with increasing demand. It is an opportunity for retailers but this does not mean that brick-and-mortar is dying. Instead, offline and online retail are coming together as an integrated experience known as omnichannel. Retailers should be re-imagining and integrating the two different sales channels so as to better serve customers and their needs.
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#2 Digital & Social Marketing
Marketing is a prevalent business function across industries. Starting from the days when the first advertisement was published in a newspaper, we have made significant progress and arrived at the information age where advertising campaigns are more regularly executed online. This is a phenomenon of the century as the world transcends geographical distance with interconnected and borderless communication enabled by the Internet.
“89% of customers begin their buying process with a search engine.”
Most shopping journey today start with the search engine. Retailers should leverage on these search engines to reach out to potential customers.
The most popular search engine, Google, provides advertising opportunities through Google Ads.
One of the many advertising opportunities available on Google is Search Ads. Every time someone searches on Google, for example, ‘beachwear’, a search result which is similar or relevant to the keyword appears.
This is one way for retailers to drive traffic to eCommerce websites. In addition, Google’s pay-per-click (PPC) advertising model is cost-effective as businesses will only have to pay when potential customers click on the featured advertisement or when a conversion action is completed.
1.47 billion active users visited Facebook daily during the second quarter of 2018.
Social media marketing is a great way to grow your brand following. As the name suggests, ‘social’ media platforms focus on conversations, storytelling and content. From content pieces to promotional offers, retailers are able to reach the business’s ideal customers through specific ad targeting.
Successful content creators would be able to build themselves a cult following of loyalists; some examples include Apple, Dollar Shave Club, Wendy’s and more. Not only have these brands been producing quality products, they have also built awareness along the way by engaging customers in meaningful conversations.
Engaging with your brand’s followers builds hype, attracts attention and conveys a positive (or negative) brand image which could make or break your business.
When people see relevant or relatable content shared by your company or even prompt responses given to complaints and queries, these actions build trust and positive rapport with potential customers. Social interactions make your customers engage and feel personal about your brand and in turn – indirectly – builds a community. These engagement efforts help to strengthen brand confidence and loyalty amongst customers, thereby encouraging interest and involvement which can invite more opportunities for conversion.
In 2020, projected TV ad spending will total $77.17 billion of total media ad spending, while the projected digital media ad spending will total $105.21 billion of total ad spending in the US.
Digital marketing is, increasingly, the preferred marketing channel for businesses today.
As traditional advertising such as newspapers, television and magazines, requires huge investments, businesses struggle to justify advertising spend and the return on investments (ROI) made.
Digital marketing, however, gives retailers the ability to mould campaigns targeted at specific groups of audiences; this makes advertising more specific and cost-effective. Other than being able to justify advertising spend, the ability to track your campaigns’ results also helps businesses to understand and achieve optimal performance in advertising.
#3 Big Data
“86 percent of consumers will pay more for a better customer experience.”
Good customer experience is key. In order for businesses to create positive shopping experiences for customers, many are beginning to adopt big data analytics. With data retrieved from your customers, such as transactional data, online shop browsing behaviour, product preferences and interlinked social media accounts, retailers can tailor unique shopping experiences for different groups of customers.
“On average, [one happy customer tells] nine people about their experiences with a company.”
A positive customer experience makes your customers happy, and extraordinary customer experience seeds virality. Satisfied customers would be more willing to put in a good word and share their experiences with people around them. Such word of mouth marketing helps businesses drive interest and perhaps even additional revenue!
North American retail pharmacy used big data analytics to reduce inventory by $1.5 billion while maintaining service levels and growing sales.
Another important benefit that big data brings is the ability to predict stock movements within an inventory. Coupled with an automated inventory system, big data retrieved from integrated systems would be able to plot trends and possibly assist to automate certain procedures along the stock ordering process.
With the right application, big data can be a powerful tool for businesses as it allows retailers to work more efficiently and reduce unnecessary costs incurred from other areas of the business. Most importantly, it is a technology that can give businesses an boost in efficient and a competitive edge over competitors.
We hope this article has helped you understand how technology can keep your retail business competitive in the digital age. If you have any other useful or beneficial technologies to recommend, please leave a comment below.