The Rise of Engagement Based Loyalty Programs

The Rise of Engagement Based Loyalty Programs

Your customers don’t buy your product. 

They buy your promise.

In today’s world of infinite brand options and glocal markets, product differentiation is tough to keep up with, market domination is short-lived, and share of voice ever diminishing. So, how does a brand increase its sales? By transforming its relationship with its customers and making it worth their time and money to become lifetime loyalists. 

The Changing Loyalty Scenario

Some time ago, customer loyalty was measured merely by transactional metrics, such as the share-of-wallet, and the value of lifetime purchases. That was an era of transaction-based loyalty marketing. Brands incentivized customers to spend more in less time through points-for-purchase programs, use-before-it-expires vouchers, and buy-two-get-three offers. It did help in fetching more revenue, but it lacked a holistic approach. Mostly, it saw customer value in the moments of purchase, which looked more like dots across the customer lifecycle and thereby missed the arc of engagement where multiple moments-of-truth existed, and if managed well, could lead to a virtuous cycle of wealth creation.

Today, the paradigm of customer loyalty marketing has shifted from one with a rational, transactional focus to one based on emotional engagement.

It has been necessitated in part by the new generation of ‘connected’ shoppers – those highly conscious and vocal about their persona and their ideologies concerning purchase decisions. These digitally connected shoppers have enormous power to influence new purchases – by posting a product review on Amazon, referring the brand to a friend over Messenger, or recommending it proudly through Instagram. And they exert this power not because they want to buy something but because they want to engage, express and emote feelings. 

Thus, engagement-based brand loyalty programs that build emotional bonds with your consumers and nurture a relationship of trust and joy become far more relevant in today’s world where every consumer is a potential influencer.

Introduction to Emotional Brand Loyalty

When customers are emotionally loyal towards a brand, they keep coming back, to meet specific emotional needs (as opposed to merely transactional needs) – which may be ideological or social. Take the case of Dove’s ‘real beauty’ philosophy; it doesn’t only sell a bar of soap but reinforces the idea that ‘natural is beautiful.’ Thus it creates emotional bonds with women who ‘like to feel’ the same way. Or take the case of TOMS Shoes, which donates a pair to a child in need for every pair of shoes it sells. Customers who want to make a difference keep coming back to TOMS and ‘feel’ good about it!

There are three shades or ways of emotionally connecting with a brand, better known as the three components of emotional loyalty – Affinity, Attachment, and Trust

Affinity means ‘I like the brand,’ and is the first step towards a deeper emotional connection. It doesn’t, however, guarantee brand loyalty when given cheaper, or more convenient options. 

The second level of emotional loyalty is ‘Attachment.’ The customer feels cared for, and brand interaction is personalized and relevant. There may even be special privileges that keep the customer coming back.

The third and the most potent shade of emotional loyalty is ‘Trust.’ When the brand consistently fulfils its promise time and again, through every touchpoint, it earns emotional loyalty in the real sense.

Benefits of Engagement-Based Loyalty

According to Forrester Research, emotion is the #1 driver of loyalty. A study by Capgemini further reveals that ‘Consumers with high emotional engagement’ buy the brand 82% of the time whereas ‘Consumers with low emotional engagement’ buy it only 38% of the time. That’s interesting to know for marketers. But how is emotional brand engagement superior to transactional incentives in achieving brand loyalty? Let’s delve into the unique benefits of building engagement-based loyalty among your customers:

  • Encourage Positive Brand Conversations

By associating a reward for non-purchase actions by their customers, such as referrals, reviews, shares, or blogging, a brand can connect with many more customers as opposed to only those who end up making a repeat purchase. Thus, a brand can generate rich conversations around the product, which are long-lasting and serve as an asset for brand image. 

  • Unearth Hidden Customer Insights

When a brand offers its customers a safe and comfortable space to emote and engage, irrespective of whether they ultimately buy a product, it can observe otherwise unknown facts about their behaviour, preferences, aspirations, and find interesting sweet spots for meeting customer needs that are ever-evolving. 

  • Earn Friends, Not Just Customers

A friend in need is a friend indeed. Here we are talking about emotional needs. A customer may want to know more about an item from other users, may wish to speak to the brand representatives, or try a product for free. These behaviors may stem from a need to get assurance, feel secure, or allay any fears about using the product. An engagement-based loyalty program appreciates these needs and thus forges lasting friendships. And not surprisingly, purchases naturally follow, soon after.

Thus, engagement-based loyalty programs facilitate an emotional connection between the brand and its customers. They help you cultivate champions who wear your brand on their sleeve and make it a trusted name among their peers.

Best Practices for Engagement-based Loyalty Programs

While emotional engagement is much more holistic than a transactional one, building a loyalty program based on customer engagement is also much more complicated. Brands have to think about the indirect bottom-line impact of the various ways in which customers may engage with them. It requires a smart approach with the ability to connect the dots between customer interactions and future purchase actions. Let’s discuss some best practices to adopt when formulating your engagement-based loyalty program!

  • THINK TOMORROW

Engagement-based loyalty programs are for the long haul. Hence, the program specifics and execution must fit in with the brand’s vision, long-term goals, and personality. Right from the start, even the timelines to measure the impact of these programs must be longer. A monthly sales target, for example, is a bad idea when assigning objectives to your emotional-loyalty marketing initiatives. Positive word-of-mouth, say over six months or a year, makes much better sense.

  • KEEP IT SPECIFIC AND MEASURABLE

It is vital to gauge the performance of engagement-based loyalty marketing to assess the effectiveness and fill any gaps. Each program must have specific goals attached to it – say for advocacy program, it could be the number of positive reviews and impressions received (for those reviews). Similarly, for referral programs, the goals could be ‘the number of referrals generated’ and ‘the monetary value of referral purchases’ that follow.

  • COMMUNICATE THE REWARDS CLEARLY

What’s in it for your customers? While yes, a happy customer would willingly engage with your brand, there is always a cost associated with that for every customer. Some may be hard-pressed for time; others may not have enough motivation. It is, therefore, essential to stimulate them to act by clearly telling them about what they stand to gain on engaging with the brand in specific, meaningful ways.

  • MAKE IT ACHIEVABLE BUT NOT TOO EASILY

Meeting the engagement criteria to be eligible for the rewards must require a healthy degree of effort from your customers. Something too easy to do may attract less than sufficiently motivated customers and something too complicated, may discourage most of them. Also, there must be different levels of engagement achievable gradually, i.e., over some time. It will ensure that your customers do not end up exhausting the various engagement options too soon, and will keep them interested for months if not years.  

  • LIVE UP TO THE BRAND IDENTITY

Last but not least, your engagement loyalty program must have your brand DNA in it. Every customer touchpoint, when rolling out the plan, onboarding the customers, or rewarding them for positive and meaningful engagement, must reflect the promised brand personality, values, and philosophy. Together these will strengthen trust, which itself will further reinforce loyalty.

Together, the above principles will help you design a winning brand loyalty program that has a healthy mix of transactional and non-transactional components and treats your customers as people and not just wallets.

To conclude, as Philip Kotler says – satisfied customers do the best advertising.

How Dark Stores are Revolutionizing Grocery eCommerce

How Dark Stores are Revolutionizing Grocery eCommerce

Let’s accept it.

It is a chore.

Yes, we are talking about grocery shopping – one of those unavoidable duties that millennials call part of adulting, and not in a fond way!

So, what do they do about it?

Often, they put it off till they no longer can. But once they decide to get things in order, research suggests, they are starting to look online, increasingly.

While grocery eCommerce is still miles behind electronics and apparel eCommerce, it is fast picking up, primarily driven by the need for convenience among the new age working individuals.

International researcher IGD Asia expects sales across the continent’s top 12 online grocery markets to grow from US$99bn in 2019 to US$295bn in 2023, making it 7.6% of the total grocery retail sales in these markets.

Shirley Zhu, program director at IGD Asia, predicts South Korea will lead this phenomenon propelled by the rise of single-person households and mobile shopping in the country. She also adds that India and Indonesia will become increasingly important due to their scale.

Zhu concludes that suppliers need to consider several things in gearing themselves up for this fast-paced growth in Asia’s online grocery market. And one of the factors she mentions is ‘supply-chain’! While partnering with brick-and-mortar retailers is certainly a way forward, newer supply chain formats like Dark Stores are offering a much more advanced model of fulfilling electronic grocery orders.

The Rise of Dark Stores

As the name suggests, a Dark Store practically exists in the dark for the shopper. It is not one of those stores with an impressive customer-facing shop front or lighting.

Dark stores were initiated in the UK and meant to serve a focussed purpose – to offer click-and-collect fulfilment for online orders. As such, these stores do not exist in prime real-estate spots such as high streets or shopping malls. They are instead tucked away in relatively nondescript establishments strategically at locations with great road connectivity.

Inside, you have pickers scurrying to collect ordered items for online shoppers and send them off for delivery. Outside, you have vehicles shuttling in and out, picking one order after another for delivery to addresses in the earmarked pin codes.

If the store is highly mechanized, you may even see robots picking groceries and items, requiring, of course, higher inventory accuracy, but ensuring in return much greater efficiency.

Why are dark stores rising in popularity for grocery eCommerce?

Grocery has its unique category level challenges, such as the need for a high number of SKUs and, of course, item perishability. Moreover, online grocery stores are much more dispensable, with the ‘good old’ street-side vendors and marts readily available and now also offering near-real-time doorstep delivery to their hyper-local customers.  All this means that the challenge in grocery eCommerce lies not in getting the online order alone, but in fulfilling the same and getting customers to keep coming back week after week, or day after day! While everyone from heavily-funded startups to ecommerce mammoths like Amazon and Flipkart have taken a shot at hyperlocal commerce for grocery, none of them are yet to get it totally right. With brands like Spar and Reliance Smart investing in hypermarket ecommerce solutions and joining the fray, the segment has become even more competitive.

Here, Dark Stores come into the picture. They work especially well for groceries by addressing some specific challenges. Let’s see how:

  • The SKU Challenge

Someone needs a 6-loaves pack of gluten-free bread, and someone else needs a multi-grain, full-size pack of chemical-free and preservative-free home-made bread. When it comes to grocery, there could be as many SKUs for practically the same item as the number of consumers, simply because when it comes to food, everyone likes to have it their way.

By focusing on storage and click-and-collect functionality, Dark Stores can optimize SKU management in many ways. One, they save real-estate costs by steering clear of high traffic zones in the towns. Two, they can cater to multiple online grocery stores at once, so real-estate costs get shared. Three, they also save space because they do not have to bother about the shopping experience and display or in-store advertising. Thus, dark stores can accommodate much more variety per item at a much lesser space cost. What’s more, the scope for better SKU management increases fulfillment accuracy and reduces mix-ups, which are otherwise commonplace in the delivery of groceries ordered online.

  • ·The Perishability Challenge

There’s yogurt, there are pulses, and there’s the fresh spinach, all within the same order. Grocery involves items with all kinds of expiry windows. And they are all to be delivered together in their ideal states. Crackers mustn’t crack, liquids mustn’t spill, and what’s airtight must remain so. It is not easy to achieve this at scale. Unless there are dedicated places and processes designed to serve this very purpose – to retain item freshness not just for the duration of its storage but also till it reaches the consumer’s plate! That means fulfilling online grocery orders is not as simple as picking the item off the shelf (if it exists in stock that is!) and dropping it into the cart to be delivered whenever.

It requires impeccable inventory management, stock replenishment and order fulfilment – all of which needs to work seamlessly so that the window between off-the-store-fridge and in-the-home-fridge is as short as possible. Long story short, grocery fulfillment requires pickers to work at SPEED – not easily afforded in your average retail grocer where aisles are full of leisurely shoppers gliding around with their shopping carts.

Dark stores come to rescue by dedicating the much-needed time, space, and visibility for stock managers and pickers to manage order fulfillment while maintaining desired freshness levels for all items in the order. Brands will also need to invest in omnichannel ecommerce solutions that support hyperlocal capabilities like geo-fencing and localization.

  • The Fulfilment Window Challenge

Online grocery shoppers do not think beyond a few days. Orders happen not so much in foresight, as out of emergency. And delivery is expected the same day, at the most the very next day – adding to the speed challenge. Consider a situation where online orders may flood in at midnight, and delivery may be expected in time for the next day’s breakfast preparation, i.e., in the wee hours of the morning. Quite obviously, the brick-and-mortar grocery retailers are a bad site for the fulfillment of such an order. Hence, another grocery eCommerce challenge, that dark stores can address much better.

Benefits of dark stores

By addressing such challenges specific to grocery eCommerce, dark stores promise multiple benefits for the online storer as well as for the end consumers:

Easier to serve larger areas: Dark stores can serve multiple locations with high order density, unlike grocery retail stores, which come with space and volume limitations.

Greater product availability: Being dedicated to online order fulfillment, dark stores offer better visibility into stock availability and help e-tailers plan smarter.

Reduced cost of operations: Real-time visibility, space and time optimization, and efficient supply chain together make dark stores a much wiser choice from a financial angle, considering the volatility in the grocery market.

Better customer service: Whether it is 24×7 order fulfillment, picking accuracy, or living up to the quality promise, dark stores are in a much better position to make it possible.

 Future of Grocery eCommerce

 Indeed, there are umpteen challenges with Asian grocery eCommerce. The consumers depend highly on the neighborhood stores, they like to touch and feel products in the before purchase, and they think of shopping mostly when the next meal is due!

Yet, the overall picture looks good, given the market size. South Korea, China, and Japan are fast establishing themselves in terms of market share and scale. And Singapore and Taiwan will have more advanced channels by 2023. However, apart from size and growth, the different markets vary also in terms of grocery purchase habits and cultures. As a suggestion to marketers, IGD program director, Zhu points out, they will need a strategy for where to invest first. Overall, in terms of the online share in the total grocery market, Asia appears to be not far behind (7.6% by 2023), compared to the US (10% by 2022) And now, with Amazon entering this market, it is difficult for grocery retailers to shut their eyes to eCommerce.

Top Customer Loyalty Trends for 2020

Top Customer Loyalty Trends for 2020

While gaining customer loyalty has always been a priority for brands, it will become even more critical in the next few years. This is largely due to the shift of power from brand to consumer-driven by digitization, competitive marketplace and commodification. Moreover, rising customer acquisition and overheads costs will further prompt brands to double down on maximizing Customer Lifetime Value (CLV) by retaining existing customers. An uncertain global economy and higher focus on profitability by ecommerce businesses are further expected to fuel this trend.

This is apparent from the renewed focus by almost all major brands in either upgrading or completely revamping their loyalty program. Another factor fueling this trend is the realization by retailers that traditional spend/earn point loyalty models won’t cut it anymore and they need a more engagement focussed reward program to entice today’s spoilt-for-choice, attention-deprived customer. 

As a result, most of the traditional programs are now being replaced by behavioural-based, highly personalized omnichannel reward models which recognize customers for diverse actions/interactions like store check-ins, social shares, reviews and referrals. This makes good sense simply because brand loyalty, or loyalty in any context for that matter, is an emotional derivative, and rarely determined by logic or rationale. Here are the other top loyalty trends we expect to prevail in 2020 and beyond. 

  • The rise of emotional and behavioural based loyalty programs

By far, this has been the biggest shift in loyalty programs in recent years. Customer loyalty is a combination of behavioural, emotional and rational factors. Until now, most of the loyalty programs were driven by a combination of rational (points/transactions based) and behavioural models (these are mostly paid/subscription programs; Amazon Prime is a great example of behavioural loyalty). However emotional loyalty has been proven to have higher longevity and stronger connection compared to the other two.

The role of emotional loyalty is to answer the ‘Why’ for a customer. Why did they choose the more expensive coffee that got him/her more points (it was made with sustainably grown coffee beans?). According to research by Gallup, customers with strong emotional connections to retailers will visit their stores 32% more often and spend 46% more money than those without emotional bonds. A truly great loyalty program will be the right blend of rational, behavioural and emotional loyalty such that it wins both the heart and the mind.  

 

Key Takeaway:  Traditional loyalty programs were limited in the sense that they only rewarded customers during a transaction. This placed limitations on the brand’s ability to deliver an emotional experience. Brands are therefore switching to advanced, engagement-based loyalty platforms that allows them to greater flexibility like rewarding customers for signing for a wine-tasting session or going for a run in their IoT connected smart shoes.

  • Hyperpersonalization will separate the leaders & laggards

One-size-fits-all rewards will not work anymore, and the ability to customize rewards and communications based on individual customer behaviour, interests and preferences will become a critical factor in deciding the success of a loyalty program. Thankfully, the maturing of AI-related technologies has allowed brands to automatically predict the best channels, reward types, creative and format for individual customers at scale.

While loyalty programs can use data sets to personalize the customer experience, they also generate a  trove of customer insights around purchase history, product preferences and reward redemption which can be leveraged to power the entire marketing automation engine.

Key Takeaway: Invest in a loyalty platform that seamlessly syncs with your Customer Data Platform and CRM to create highly personalized rewards. 

  • Omnichannel reward programs will become the norm

The omnichannel model has been proven to be a win-win for both customers as well as businesses. While customers enjoy the enhanced convenience and seamless experience, brands have benefited from higher conversion, sales and customer retention.

Omnichannel

With the rise in the number of connected devices in the coming years, think IoT devices, Voice Assistants etc., we expect more brands to jump on the omnichannel loyalty wagon. For brands, the biggest challenge in enabling omnichannel loyalty has been capturing data from multiple sources like in-store, app, social and website into a single data pool. However recent advancements like CDPs have solved many of these challenges.

Key Takeaway: Digitize your loyalty programs so that you blend offers and rewards across in-store and online channels, thereby allowing shoppers to choose the channel that’s most convenient to them and get more value for their money.

  • Paid loyalty programs will rise in numbers

The success of Amazon Prime proved that customers are willing to pay for a loyalty program if they are offered additional perks and benefits. Paid loyalty customers typically have higher purchase frequency and Average Order Values, making them a no brainer for brands. In a customer study, a whopping 62% of respondents were willing to join a paid rewards program if their favourite retailer offered one.

Key Takeaway: The success of a paid loyalty program hinges on having compelling, unique and high-value benefits 

  • Integration of ML, Big Data & Blockchain in loyalty programs

Big Data and ML have been increasingly used in loyalty programs to enhance personalization and predictive insight. The first use case is fairly straightforward – when a customer engages with a loyalty program, the system analyzes the information and segment members based on demographics, rewards preferences etc. This allows brands to personalize engagement over a period of time. For predictive insights, the system can create alerts for specific use cases, like the risk of customer churn, propensity to purchase, tier-upgrade probability etc. 

Blockchain-based loyalty programs aim to fix what has been a major pain point for brands: low redemption rates. The technology allows a customer to store all points in a single wallet rather than trying to manage multiple programs. There will not be separate rules for acquiring and redeeming points from different loyalty programs which will remove a lot of the friction and improve redemption rates. While blockchain programs are still in their infancy and there are questions around scalability, they nevertheless hold a lot of promise.

Key Takeaway : These emerging technologies typically have multiple use-cases. However, it’s advised to pick a specific problem to solve and run a pilot on a limited audience before scaling up.

  • Mobile loyalty apps will see continued increase in adoption

Mobile is becoming a critical component of brand’s engagement and sales strategy, with nearly a third of consumers saying it’s their favourite way to show membership in stores. Last year a slew of major brands like Target, Nike and Victoria’s Secret refreshed and revamped their loyalty apps to offer a more connected experience. The reason for this increased focus on mobile loyalty is simple:  it creates opportunities for better targeting and rewards delivery. In fact, no other channel can use information (like a customer’s exact location) to deliver highly personalized, real-time offers and rewards that can be seen and acted on quickly.

While brands are recognizing the need for loyalty apps, the experience part of it still falls short. In fact, while 84% of retailers now offer a mobile loyalty experience, only 22% of them allowed users to view their rewards on the home screen. Mobile loyalty is the critical bridge between online and offline experience and if it doesn’t portray the all-channel view of the customer, it risks being ignored.  While the last few years have been focussed on acquisition and adoption, the next 5-10 years will be focussed around enhancing and optimizing the mobile loyalty experience to be at par or better than the desktop.

Key Takeaway : Focus on improving the mobile loyalty experience and ensure it offers an integrated view of customer purchases, points and redemptions across all channels.

  • The preference for coalition loyalty programs

While the trend was mostly limited to travel and hospitality, it is expected to be adopted across diverse industries like apparel and footwear, automotive and manufacturing. The biggest draw of coalition loyalty programs is the flexibility and freedom of choice it offers to the customers. For brands, these programs are a great way to extend the reach and overall base of customers. In addition to the extra eyeballs, these programs enhance the credibility of your brand since it will be placed alongside other reputable brands. While multi-company loyalty programs are a clear step in the right direction, there are chinks to be ironed out, especially when it comes to restrictive point redemption policies.

Key Takeaway: Explore potential coalition loyalty partnerships with a win-win mindset for your brand as well as the customer. The key to success lies in understanding the persona of your customer in terms of their lifestyle and preferences. This will help you figure out the right set of brands to partner with.  

The Future

In the next few years, we expect more brands to switch to experiential loyalty programs that will be powered with emerging technologies like AI, Big Data and blockchain. In a nutshell, loyalty programs will evolve from being impersonal, static and transactional to one that is emotional, human-centric and dynamic.

Hottest Ecommerce Trends for 2020 & Beyond

Hottest Ecommerce Trends for 2020 & Beyond

With global sales set to hit $6 trillion by 2022, the ecommerce industry is a juggernaut that shows no signs of slowing down. 

While it presents a massive opportunity for retailers, the industry has been characterized by rapid transformation in terms of product innovations, new channels and augmentation of emerging technologies.

To stay ahead and win the sector, retailers will need to :

  • Be agile and forward-thinking in adopting new technologies and channels.
  • Be cognizant of the business and user experience impact of emerging technologies
  • Understand how the changing customer behaviour and preferences will shape the future of the industry

With this report, we aim to uncover the technological and customer trends that are likely to make the biggest impact on ecommerce in 2020 and beyond. To offer you a truer perspective, we have listed four  attributes for each of the trend based on their predicted : 

  • Longevity – Will it  be relevant in the next 5-10 years or is it just a passing fad that will soon be forgotten
  • The scale of Adoption – Will it achieve mass adoption or will it be relegated to a niche section
  • Business Impact: How the trend is likely to contribute to a brand’s overall revenue, sales and conversion
  • Customer Experience Impact: How the trend is likely to contribute to increasing the overall user experience in terms of ease, convenience and speed

1. API-driven commerce architecture will increase in popularity

Traditional monolithic commerce frameworks served well for desktop-based commerce. But newer engagement and commerce channels like voice assistants, wearables, PWAs and IoT-based devices like Amazon Dash, exposed the limitations of these straightjacketed frameworks when it comes to supporting new customer experiences, business models and ecosystem partners.

With User Experience and customer journeys gaining greater prominence, several enterprise brands are expected to migrate to an API-based, headless commerce framework to decouple the front end visual layer from the back end core commerce functionalities to seamlessly integrate new capabilities and systems.

Key Takeaway for Brands: Headless commerce solutions offer several benefits like faster time to market, greater security, easy integrations and superior customer experience. If you’re still stuck with a legacy ecommerce platform, this might be the best time to migrate to a cloud-based headless commerce solution. 

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2. Rise of Hyperlocal Commerce

While the initial ecommerce momentum was spurred by books, fashion/apparel and electronics, the next phase of growth – especially in emerging economies in Asia and the Middle East – is expected to be fueled by hyperlocal-based SKUs like grocery, personal care, beauty services, food and FMCG product sets. And for a good reason – Asian consumers prefer to shop at their local neighbourhood stores, due to multiple factors, mostly related to trust and emotional reasons. 

For instance, in India, 96% of the commerce still happens at mom and pop stores and in the coming years, India and China are poised for explosive growth in the hyperlocal space. Several hyperlocal startups (BigBasket, Zopper, Swiggy, Dunzo) along with ecommerce giants like Amazon and Flipkart are investing heavily in logistics and mobile technology to capture this massive opportunity.

Key Takeaway for Brands: While hyperlocal platforms can get you the initial eyeballs and sales, it will be prudent to start investing in your own ordering platform and logistics to ensure long term customer loyalty.

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3. Innovations in Mobile Commerce

Mobile Commerce or mcommerce is merely a natural subset ecommerce. However, it’s turning out to be a significant extension with the potential to outgrow its parent in terms of sales, engagement levels and conversions.

By 2021, mobile ecommerce sales are expected to account for 54% of total ecommerce sales, accounting for a staggering $659 billion in sales. And this year, conversion rates on mobile is expected to outpace desktop on Black Friday. 

Here are the major mcommerce trends and innovations that will gain traction in 2020 and beyond : 

  • The Need for Speed: Mobile users expect sites to load almost instantly, if not they will move on to the next one. Brands will need to think mobile-first and adopt newer technologies like PWAs and server-side compression to reduce bounce rates and improve conversion rates
  • Deeper AI Integrations: From automated chatbots to image recognition and personalization, Artificial Intelligence is expected to play a larger role in mcommerce.
  • Focus on User Experience: Msites and apps will continue to be optimized for a better experience on the small screen through simpler navigation, dynamic product pages, autocomplete features and one-click checkouts.
  • Hyperpersonalization : While personalization in the desktop realm has seen some traction, the trend is likely to cascade to mcommerce as well in the form of personalized product recommendations, dynamic content, offers, and loyalty rewards.
  • Geo-targeting: As much as privacy is a major discussion point today, 88 percent of consumers are okay with sharing their location if they get something of value in return. Retailers with physical stores are likely to invest in beacons and other proximity-based marketing technologies to target customers who are within a certain radius of their stores.
  • Augmented Reality : While AR technology has existed for some years, its likely to mature in the coming year and more brands will start embracing the technology to help customers to virtually try out and interact with products using AR-capable apps.

Key Takeaway for Brands: Brands and retailers will need to invest in mobile-first ecommerce platforms and PWAs to improve responsiveness, page load times and overall user experience. Chinese ecommerce giant Aliexpress saw a conversion rate increase of 104% by deploying their PWA. Additionally, brands will need to start considering their msite and mobile app as key components in their omnichannel strategy.

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4. AI and ML will see a greater play in Ecommerce

What made Amazon the successful ecommerce giant it is today? One of the best loyalty programs? Superior logistics?  Obsessive-levels of customer service? Maybe all of the above. But one thing that has helped Amazon gain a competitive edge above other ecommerce businesses is their ability to leverage AI and other cutting-edge technologies to enhance and improve all aspects of their business. From using Natural Language Processing to power Alexa to leveraging Collaborative Filtering to personalize recommendations and enhancing its logistics using predictive rerouting, Amazon has managed to expand the use cases for AI and ML. As computing power gets cheaper (Moore’s Law), and advancements in GPU technologies enables processing of complex neural queries, expect AI and ML adoption and applications to grow exponentially in the coming years. 

Here are top expected applications of AI in Ecommerce :

  • Personalized User Journeys
  • Predictive Product Recommendations
  • In-store Insights & Customer Engagement
  • Dynamic Pricing
  • Predictive Behavior Modeling.
  • Visual Search

Key Takeaway for Brands : Investment in emerging technologies can be daunting but take the opportunity to evaluate and analyze the business and customer benefits of these technologies and try to implement them in a staged manner. The User Experience and Customer Engagement is a great place to start. 

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5. The evolution from Omnichannel to Unified Commerce

For several years, omnichannel synced various digital and physical channels to deliver a seamless customer experience. However, omnichannel wasn’t without its share of limitations. In fact, 78% of retailers admitted that they were not successful in enabling a true omnichannel experience due to limitations in data sharing and real-time, personalized engagement. 

This is where ‘Unified Commerce’ gains an advantage over Omnichannel. In essence, Unified Commerce is an advanced form of  Omnichannel Commerce which essentially negates a lot of the limitations of the latter. For instance, rather than connecting multiple channels and platforms, you deploy a single, centralized platform that serves as a universal truth. With this, you can deliver a personalized and seamless customer experience every time, regardless of the channel.

Key Takeaway for Brands : Centralize data and transactions on a unified platform to get a single source of truth. Invest in API-driven ecommerce platforms to integrate and connect apps, channels and devices.

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6. Social Commerce will become a key revenue channel

Social commerce has been slowly gathering momentum in the last few years, and 2020 is expected to be its ‘flywheel’ moment. It’s a great way for brands to acquire more customers at a lesser cost besides simplifying the purchase journey. In the coming years, it’s expected to become the third major sales channel, taking its place alongside ecommerce and traditional retail. 

The percentage of brands in the US that use social media as an ecommerce sales channel nearly doubled in a year’s time—from 17% in 2017 to 33% in 2018.

The major factors that will fuel its rise are spike in video/visual content, Progressive Web Applications, cheaper data, greater smartphone penetration, improvement in user experience in terms of native checkouts and payment security and the continually increasing amount of time spent by millennials and the younger generations, on social media apps.

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7. Payment innovations will get a boost

Payment innovations like digital wallets, in-app purchasing,  peer-to-peer lending and new payment models like Venmo and even Facebook cash were significant factors that contributed to the rapid growth of ecommerce. 

Paypal paved the way for cross-border ecommerce by enabling ecommerce brands to reach a wider customer base through global transactions. From then on, companies like Payoneer and Stripe have followed the footsteps of PayPal but discovered their potential products and business models. For instance, Payoneer lets users pull funds from cancellations/returns to their card without the wait, unlike PayPal. This is a huge advantage for ecommerce shoppers, plus it’s much more accessible in developing countries. 

Another fintech company, Paysera offers its users payment services, easy currency conversion, and seamless checkout services for e-commerce companies, thereby removing many of the barriers towards success for e-commerce businesses. Yet another fintech innovation that has seen a lot of buzz of late is the cashierless payment system with a host of startups like Caper, Standard Cognition and Trigo Vision already launching a working prototype.

The innovations in payment and fintech is showing no signs of slowing down, and therefore its likely to further fuel the evolution of the ecommerce industry. 

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8. Cross-border commerce will see continual growth

Cross-border commerce has gained significant momentum in the last few years primarily due to the rise of distributed commerce channels like social commerce and conversational commerce. 

The phenomenon is likely to have the biggest traction in China and the Middle East. In China, TMall Global has emerged as the biggest cross-border commerce engine with hundreds of US and European merchants setting up storefront marketplaces. The platform doesn’t require the seller to have a legal entity in China which is a major advantage for retailers. In the Middle East, Namshi, Souq and The Modist are the biggest cross-border commerce platforms. Amongst these, Souq requires an in-country partner to show the support documents that allow selling in each specific country. The emergence of a high-spending, brand-conscious consumers in parts of Asia and the Middle East is further expected to fuel cross-border commerce in the coming years.

Key Takeaway for Brands : Cross-border ecommerce is here to stay and brands will need to evaluate it as a growth strategy for an ecommerce business. It needs significant investments in payment processing, staffing and logistics, and therefore should be done in a phased manner for maximum effectiveness.

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9. Dark stores will gain greater prominence

The proliferation of dark stores is a direct consequence of two factors: the rise of hyperlocal commerce and the rapid growth of the online grocery market. In fact, the surge in online grocery sales and dark store penetration share a symbiotic growth relationship; with each of them fueling the growth of the other. 

Dark stores are essentially retail distribution centers that resemble a typical supermarket but is used primarily to fulfill online orders. While the concept started out as a way to fulfill grocery orders, several brands are testing out the dark store concept for apparel and food deliveries. 

For several brands, dark stores have become strategically important in matching the ever-shrinking shipping time and superior customer service levels of major etailers like Amazon, Alibaba and Souq. They also fuel the growth of cross-border commerce by making it easier for retailers to expand their operations into new regions and markets.

Key Takeaway for Brands : Supermarket and F&B brands should consider leveraging dark stores in their fulfilment strategy. It can offer several benefits like higher capacity, increased efficiency, wider product assortment, centralized routing, faster shipping etc.

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10. Cross-migration of innovations between Ecommerce & In-store retail

As more brands realize the benefits and advantages of physical and digital retailing, expect the divide to further break down in the coming years.  Once pegged as rivals, ecommerce & brick and mortar stores will become closely intertwined to create a collaborative, integrated and interconnected retailing. The last few years saw traditional retailers adopt innovations and best practice from ecommerce counterparts like interactive websites, PWAs, and mobile point-of-sale solutions.

Going forward, expect the migration of advanced ecommerce innovations into the brick and mortar realm like highly personalized recommendations and customer engagement using AI-powered computer vision technologies and staff enablement apps, Endless Aisle solutions and smarter fulfilment/inventory management technologies.

On the other side, pure play ecommerce brands are expected to continue their offline expansion in the form of pop up stores, experience centers, dark stores and other O2O innovations like order-online-pickup in-store.

Key Takeaway for Brands : Pick a focus area (eg:- staff enablement, customer engagement, store insights, fulfilment etc.). Explore the solutions, start slow and analyze the results before scaling into full-fledged deployment.

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How AI is Revolutionizing the Fashion Industry

How AI is Revolutionizing the Fashion Industry

AI & Fashion: An Unlikely yet Perfect Pair

At first glance, fashion – which is primarily driven by art, intuition and creativity- seems like an unlikely match for a clinical, analytical and logic-driven technology like Artificial Intelligence. 

However,  AI holds incredible promise for the fashion industry due to the massive data sets  around historical style trends, sales patterns, market swings and customer preferences. For instance, did the global recession in 2009 impact people’s fashion sense and purchase behaviour? How about the Cold War? These are analysis that could yield interesting results and better yet, predict future behaviour and sales in response to global events. 

Brands like H&M, Nike and Tommy Hilfiger are leading the way in leveraging AI-powered technologies to optimize the supply chain, enhance the in-store experience, and improve the overall customer experience. Merchandising teams are increasingly relying on data from stores, websites, mobile apps and loyalty programs to tweak designs and layer it with insights from social media, customer reviews and fashion forums to refresh the entire stock every few weeks.

According to Mckinsey, while AI in fashion is yet to hit critical mass it’s on its way there and likely to impact everything from design to manufacturing to customer engagement.

In fact, the implications for AI in Fashion is so much that even tech giants like Google & Facebook are recognizing the massive opportunity. Facebook recently launched ‘Fashion++, an AI-powered fashion companion that helps you tweak your look. And Google teamed up with Versace to reinvent the famed JLo dress. 

AI-driven Innovations in Fashion Retail

With annual spending in AI expected to hit $7.3 billion by 2022, it’s no surprise that AI is set to become an integral part of the apparel industry. Here are top impact areas that AI will likely have on the fashion industry :

  • Smarter Demand Forecasting & Inventory Management

In the last 20 years, fast-fashion brands like Zara and H&M disrupted traditional apparel market by shortening the design-to-store time from a few months to a few weeks and trading quality for lower prices and fresh stocks. However, this model requisites a deep understanding of current fashion trends, customer preferences, and the ability to predict where the market is headed. If not, they run the risk of unwanted inventory, discount sales and profit loss.

According to Capgemini, using AI across procurement, supply chain, logistics, returns and in-store “pilferage” could generate $340 billion in cost savings across the industry by 2022

While demand forecasting techniques have been used to minimize the revenue loss, it was not always accurate as it solely relied on historical sales data and limited data sets. Machine Learning and AI technologies can incorporate learning from multiple sources and compute millions of data points to reduce demand forecasting errors by up to 50%.

  • Automated Manufacturing

The challenge so far in automating apparel manufacturing has been the inability of the robot to handle limp and flexible fabrics. However, Sewbo Inc., a Seattle-based startup found a fix by stiffening the fabric, thereby rendering it easier for the robots to handle the clothes. The startup recently launched its first robotically-sewn garment, which was crafted by a generic robotic system that was taught by Machine Learning algorithm on how to use a sewing machine. When coupled with accurate demand forecasting techniques, automated manufacturing has the potential to further shorten the design-store lifecycle down to a few hours!

  • Conversational Virtual Assistants

One of the major concerns for fashion brands is helping customers choose the right fit and style without having to sift through thousands of products. Enter chatbots and digital stylists  – customers can now chat/converse with these virtual assistants for getting style tips, finding the perfect dress for an occasion, getting the right fit/fabric based on their personal preferences or choosing a preferred delivery method. Expect this trend is set to take off, considering the rapid growth of smartphone and app adoption where the smaller real estate necessitates a more intuitive and faster product discovery.

  • On-demand Designs

Bombsheller, another Seattle-based apparel brand has started on-demand designing and manufacturing of clothes to a market of just one person. The company relies on a community of artists to submit designs using 3D modeling tools that create a photorealistic picture of how the finished product would look. The brand uses powerful software borrowed from video game engines to render the exact product as it will look even before a single stitch has been sewn.  These ‘virtual’ leggings get uploaded to brand’s online catalogue. Once a customer hits “Buy,” the printer inks on the graphic design, and a seamstress cuts and sews the leggings. The finished product is then shipped out the next day. What makes Bombsheller unique is that they don’t spend a dime until a pair of leggings is sold. That translates to no dead inventory, no guessing market trends, no warehouse clearance and no loss of profits.

  • In-Store Analytics & Engagement 

Using deep learning, Natural Language Processing and in-store analytics, the Smart Stores of the future will offer superior in-store experience by borrowing the best of personalization, customer engagement and CX practises from their online counterparts. Smart cameras and people counters powered by learning algorithms will offer accurate store insights about visitor demography, persona, sizing, product preferences, and online behaviour to help retailers stitch together a rich customer profile and hyperpersonalize the entire store experience.  Several retail brands are experimenting with algorithms that predicts the most valuable customers who are likely to make repeat purchases based on previous in-store behaviour, loyalty earn/redemption rates and number of store visits. Other in-store applications of AI include identifying customer’s current fashion sense to make personalized recommendations , cashierless stores, monitoring shelf-life and freshness of perishables and interactive displays.

  • Quality Control & Counterfeit Screening

The Hong Kong Polytechnic University (PolyU) recently developed a smart fabric defect detection system, called “WiseEye”, which uses advanced AI and Deep Learning algorithms to help manufacturers instantly detect defects and anomalies in the production line. The system has been proven to reduce the chance of producing defective fabric by 90%, thus significantly reducing loss and wastage in the production. 

Several brands are also experimenting with Machine Learning algorithms to find and filter fakes and counterfeit products. This technology is also used by customs and law enforcement officers to verify the validity of premium products like sunglasses and purses which are frequently counterfeited

  • Visual Commerce

Another trend that has been picking up steam of late is visual commerce. It essentially allows customers to take pictures of clothing they like or styles they want to imitate and find the exact items for sale.  Additionally, AI-enabled shopping apps allow customers to take screenshots of clothes they see online, identify shoppable apparels and accessories in that photo, and then find the same outfit and shop for similar styles. For instance, if you have a specific patterned dress in your mind that your friend had worn at an event, AI can enable you to locate it. You can click a photo of your friend, upload it on a fashion site, and the AI algorithms will do the rest.

Fashion Brands Spearheading Artificial Intelligence Adoption

  • Nike

Nike has been the frontrunner in adopting technology to keep up with the changing times and stay ahead of the competition. In the last 5 years, the sports apparel giant spend millions on an acquisition spree of digital media, Ecommerce and analytics startups like Celect, Zodiac and Virgin MEGA to transform itself into a tech and data company that also sells fashion and apparel. When visitors walk into Nike Inc flagship store in New York and log into the app, the brand knows who they are,  their shoe/apparel sizes, what sports they play and their favourite colours. Nike has reaped the benefits of its technology investments by reducing product defects, returns, shorter lead times, and most importantly, higher customer engagement and brand loyalty. The brand recently launched an app – Nike Fit  – that offers  “hyper-accurate” sizing recommendations for its shoes by scanning your feet with a smartphone camera.

  • H&M

H&M was one of the many brands whose sales took a severe wallop due to the retail apocalypse. The brand is now leveraging AI and Machine Learning to claw its way out of the slump and transform its business by spotting upcoming fashion trends, reduce unsold stock, optimize logistics and improve sales. The world’s second largest fashion group has started full-scale implementation of several pilot projects that were aimed at using data to match supply and demand as closely as possible. H&M is also harvesting data from loyalty cards and sales receipt to customize merchandise for an individual store. The brand recently teamed up with Google to create ‘Coded Couture’ , a cool app that creates a personalized design for every individual by analyzing their activities and interests over a period of one week.

  • Tommy Hilfiger

Tommy Hilfiger partnered with IBM and  Fashion Institute of Technology to help designers create new clothing line by analyzing customer sentiment around the brand’s apparel and imagery. The project was aimed at identifying key trends in silhouettes, cuts, patterns and styles that evoked positive customer sentiments by analyzing 15,000 images of Tommy Hilfiger products, 600,000 runway images that were publicly available and 100,000 patterns. Going forward, the brand plans to augment its design process with AI-powered insights to alleviates the pressure on the designer around creating a mass appealing creation.

  • ASOS

In 2018, the UK-based online retailer developed an AI system to help customers find the right size of garment when shopping online. The smart fitting tool personalizes sizing suggestions based on multiple data sets like customer’s previous purchases and returns, as well as an optional set of questions based on height, weight and fit preferences. The online retailer rolled out the Fit Assistant across 200 markets and is available across ASOS collections, exclusive labels and fashion favourites. This year, the brand partnered with an AR startup to launch an augmented reality catwalk for users of its fashion app. The technology allows customers to view models as if they are walking in front of them by simply pointing their smartphone camera at any suitable flat surface and clicking the ‘AR’ button on the app.

  • Stitch Fix

Stitch Fix is a San Francisco-based fashion startup with a unique sales model. It combines the expertise of personal stylists with insights of an artificial intelligence system to analyze data on style trends, body measurements, customer feedback and preferences to deliver personalized apparel right to their customer’s doorsteps on a regular basis. Once the delivery is done, the customer can choose to keep all of the products or return what they don’t like or need. This input is fed into the company’s AI-powered data vaults to make the algorithms even better at determining the preferred style for each person and current trends. The brand also uses data to create its own designs known as Hybrid Designs. The system works by disassembling attributes of style such as color, arm length and neckline, etc. It then analyzes the feedback and customer sentiments available for each of these attributes and mutates them slightly to create new designs to share with human stylists.

Way Forward

While AI has proven its effectiveness in improving all aspects of fashion retailing, it’s impossible to remove the human factor from the equation.  When they work together, the results are supercharged productivity, better customer engagement and higher profits. This trend clearly indicates the evolution of AI as an Augmented Intelligence rather than an Artificial one.

Ecommerce in Saudi Arabia : Growth, Trends & Opportunities

Ecommerce in Saudi Arabia : Growth, Trends & Opportunities

State of Ecommerce in Saudi Arabia 

Despite a high Ecommerce readiness index, the Kingdom of Saudi Arabia never really experienced significant growth in online sales for the longest time. To put it into perspective, KSA’s Ecommerce penetration in 2017 was 1.4%, this was less than half of that of the US’ in 2005. But that narrative has been steadily changing in the last two years –  with eCommerce growth rate exceeding 32% and online sales in the Kingdom expected to hit 9 billion USD by 2025. 

According to a ystat report, by 2020, Saudi Arabia is expected to outpace UAE as the largest online retail market in the (GCC).

Until now, the protagonist in Saudi Arabia’s Ecommerce growth story has been its wealthy, tech-savvy population which ranks among the highest in the world in smartphone penetration (expected to reach 66.6% by 2022) and social media consumption (currently at 59%). However, while the initial traction was around the sale of high value and luxury items – primarily driven by the Kingdom’s affluent population – the trend has now spilled over to a larger audience and across a wider category. With the government going all out to improve digital payments, streamline licensing, and activation of affordable e-commerce enablers, the Ecommerce growth in KSA is expected to grow at an even faster pace over the next few years. 

  • KSA’s similarities to Emerging Ecommerce Markets

While starkly different in terms of Internet penetration, population demography, and infrastructure, the Kingdom’s Ecommerce growth shares certain similarities to emerging Ecommerce markets like India and Brazil. The commonality lies in the region’s preference for Cash on Delivery payment option.

64% of online shoppers in Saudi Arabia prefer to pay cash on delivery

This is primarily driven by two reasons – limited credit card penetration amongst key segments like females, youth and lower-socio economic demography and an overall mistrust in online payment systems. The other similarity with emerging markets is in the nature of category adoption – while the initial momentum was driven by electronics, fashion and travel, the next phase of Ecommerce growth in Saudi Arabia is expected to be driven by fast-moving goods, groceries and personal care items.

 

Consumer Behaviour in KSA

  • Digital Penetration in Saudi Arabia 

Among the GCC countries, Saudi Arabia boasts of some of the highest internet penetration and mobile usage. In 2018, 9074.81 percent of the population were internet users. This share is projected to grow to 96.44 percent in 2023. An impressive 88% of Saudis use the internet at least once a day and 59% of the population has a presence in at least one social media platform.  Around half of the Kingdom’s population owned a computer, although the majority said they preferred a laptop or tablet for connecting to the Internet. According to a survey by General Authority for Statistics (GASTAT), mobile phone usage in KSA hit 99.16% in 2018.  The average time spent online per day by consumers in Saudi Arabia is 6 hours and 45 minutes, which is 15 minutes more than the average American consumer.

 

Decoding Saudi Arabia’s Digital Consumer 

  • Demography, Motivators & Shopping Patterns : 

While the level of internet penetration and smartphone usage in Saudi Arabia is comparable to other countries in the GCC, the country is an outlier when it comes to consumer demographic.  With a GDP per capita of USD 20,028 and a median age of 29 years, the typical Saudi consumer is wealthy and tech-savvy. It’s also the only country in the GCC where the locals account for 72% of the population.

While Ecommerce adoption is rapidly increasing amongst all demographic segments, the fastest growing segments are females and millennials. This can be attributed to the recent relaxation of rules around driving, entertainment industry, licenses for gyms and fitness centers for women etc, all of which has resulted in more financial empowerment and employment opportunities for women. For Saudi customers, price and convenience are the prime factors for making an online purchase. For apparel and electronics, pricing was the major reason to shop online while groceries and personal care online sales were majorly motivated by convenience.

Shoppers in Saudi Arabia tend to lean more towards being Finders (consumers who have decided on the brand they will purchase before visiting a store/website). 

Around 74% of online shoppers in Saudi Arabia are 18 to 34 years old and mostly purchase electronics and household goods. The majority of Saudi consumers are skeptical of online shopping due to previous bad experiences, concerns about the online payment process, the lack of touch/feel factor and delivery deficiencies. Brands will need to deliver an omnichannel experience – by blending the best of online and offline worlds to win the Saudi consumer. 

  • Payment Preferences

Cash on Delivery and Digital Payments are popular payment modes amongst females and younger millennials, while credit cards remain the preferred payment option for older segments, and male shoppers. The low credit card penetration means 66% of transactions are made using cash on delivery. 

There is still a lot of reluctance for credit card payments amongst the Saudi population which is a barrier for ecommerce penetration. However, as mobile wallet technology and digital payment ecosystem improves, consumer adoption is expected to increase. This would allow Ecommerce players to offer broader delivery options and increase profitability.

  • Top Ecommerce Categories

The total ecommerce revenue in Saudi Arabia across all product categories is expected to hit 9 billion USD by 2025. Fashion is currently the leading product segment in the Kingdom and accounts for 1.91 billion USD sales, followed by Electronics, which generates 1.85 billion USD. However, in terms of category penetration, Electronics leads with 25%, followed by Fashion (23%) and Personal Care (18%). By 2025, electronics is expected to remain the most developed vertical with an online retail penetration of 33%,  followed by fashion and consumer appliances with an expected online retail penetration of 28%, while online spend on food and beverages is set to reach 1.3% in line, which is similar to US penetration levels today. While physical stores have a major advantage over online stores when it comes to groceries and fast moving goods, the category still holds a high growth potential in the future. 

 

Top Ecommerce Sites in Saudi Arabia

The following are top ecommerce sites in the Kingdom:

  • Noon.com
  • Souq.com
  • Aliexpress.com
  • Jarir.com
  • Wadi.com
  • Alibaba.com
  • Opensooq.com

Factors Spurring Ecommerce Growth in Saudi Arabia

  • Government Impetus to Ecommerce

Ecommerce was recognized as one of the pillars of Saudi Arabia’s Vision 2030  under the National Transformation Program and is expected to contribute 80% of the retail sector by 2020. The Saudi Arabian government is planning an investment of over $100 billion in the development of logistics infrastructure to boost ecommerce growth in the region. The Vision 2030  national development strategy also states that the Kingdom aims to provide job opportunities for an additional million Saudis by 2020 in a growing retail sector that attracts modern, local, regional, and international brands across all regions of the country.

In July 2019, the Kingdom’s cabinet passed a new Ecommerce regulation that will dictate the terms, conditions, and liabilities between all entities involved in an online sale. The law is expected to enhance the reliability of online transactions, offer stimulus Ecommerce activities and protect the consumer against fraud, misinformation, and deception.

 Here’s a  brief summary of Saudi Arabia’s  new Ecommerce regulation from a retailer’s point of view:

  1. The Ecommerce seller or provider of services will provide consumers a clear and understandable statement on the contract’s terms and conditions
  2. The seller must provide all the steps involved for a consumer to purchase a commodity or service
  3. Ecommerce sellers should be transparent and upfront regarding service provider, description and prices of the services/goods. This includes any additional fees, payment and delivery arrangements and implementation. 
  4. The service provider/seller should submit an invoice to the consumer showing the price of the product or service.
  5. All sellers should submit information regarding his/her registered organization, the applicable professional title, the country in which this title was granted and any other information the Ministry of Commerce and Investment considers important for consumer protection.
  • Affluent, Tech-savvy Population

Saudi Arabia ranks in the top 20 richest countries by spending power, according to the World Bank and the region’s youth are extremely tech-savvy and heavy users of social media. The internet and smartphone penetration are critical components of the ecosystem which will accelerate ecommerce growth. Also, they play a crucial role in the research, discovery and purchase lifecycle of ecommerce. 

  • Socio-economic Reforms 

Prince Mohammed has made several economic changes, mostly aimed at reducing the country’s dependence on oil revenue. He has also brought in several socio-economic reforms like dismantling the strict controls over women like lifting the driving ban, and allowing women to study at university, undergo surgery or get a job without the need for a guardian. These reforms around empowering women will likely have an impact on Ecommerce sales and growth in the region as it opens up a whole new segment of customers.

 

Opportunity for Retailers

  • Higher Basket Value

According to a report by Bain & Company, the Average Basket Value for consumers in Saudi Arabia ($150) is similar to shoppers in the UK, US and China, however, the frequency of purchase is less frequent.

  • Rise of Digital Payments 

Online and digital payments were part of the Vision 2030 reform plan and the Kingdom expect to achieve an e-payment target of 70 percent by 2030. In this regard, the Saudi Arabian Monetary Authority (SAMA) had been encouraging electronic payments and settlements in order to reduce the reliance on cash. Over the last two decades, SAMA has introduced several digital payment systems like Saudi Arabian Riyal Interbank Express and the online bill payment portal SADAD. Mobile wallets have been gaining traction in the region, with global tech players, telecom operators and local banks rolling out solutions and driving merchant and user adoption. Apple Pay was introduced in the Kingdom at the beginning of 2019, increasing the choice of cashless payment methods available to Saudi consumers.

  • Bricks to Support the Clicks

Saudi Arabia has a robust offline retail sector that online retailers can leverage for a great omnichannel play. This complementary nature of retailing where brick and mortar stores are supplementing online retail will negate trust issues around payment, product quality and delivery.

  • The Disparity in Category-wise ecommerce Sales

There is a major variance in maturity levels and volume of sales amongst product categories in KSA. While apparel, and electronics have almost comparable sales to that of developed markets, grocery and fast moving goods are lagging far behind. This indicates a significant headroom for growth across categories.

  • The resurgence of the Economy

The economic recovery, supported by higher oil prices and other internal social changes like expanded women’s rights, are further expected to have a positive impact in shaping consumption and market dynamics in the coming years.  Brands that can crack economies of scale, and provide value-add or greater convenience, will reap the rewards.

  • Open Market

Since the eCommerce market in Saudi Arabia is still in its nascent stages, it’s the perfect time for new entrants. This is especially true in emerging product categories like grocery and appliances where there are no clear dominant players.

  • Social Commerce

Consumers in Saudi Arabia are active social media users, with Facebook, Twitter and Instagram ranking among the ten most visited websites in the country. As a result, all major retailers, as well as independent sellers use these platforms for advertising and promotional activities. Between one-third and one-half of online shoppers in Saudi Arabia made purchases from social media sites, according to a survey from early 2017 cited by yStats.com.

 

Key Takeaways  

  1. Ecommerce has been growing at an impressive rate in Saudi Arabia, thanks to rise of digital payments and allowing key segments like females and youth higher accessibility.
  2. Discounts and offers are the primary factors that entice shoppers towards Ecommerce platforms. This is especially prevalent for products like Electronics and Fashion.
  3. Saudis are increasingly purchasing small value, fast-moving goods like personal care and groceries from online stores. However, retailers must focus on speedy and timely deliveries to capture loyalty and business growth in this segment.
  4. Retailers need to be cognizant about how Saudi Arabian consumers behave differently depending on the audience segment, product preferences and categories. For instance, groceries and electronics see higher impulse-driven purchases while apparel sales are premeditated.
  5. Personalization and offline customer engagement will be a critical factor in influencing purchase decisions and brand loyalty
6 Reasons Why Channel Loyalty Program FaiI

6 Reasons Why Channel Loyalty Program FaiI

What is a Channel Loyalty Program?

A channel loyalty program is a critical sales pillars and a crucial element in the growth strategy of your business. Channel loyalty is focussed on transforming the relationship between a brand and its trade partners from that of a purely transactional one to a long term, emotional connect. This is increasingly becoming critical for a brand to succeed in a competitive market.

The most important factors in fostering channel loyalty are implementing value-driven loyalty schemes, transparent two-way communication, personalized incentives and driving emotional connects through constant engagement and experiences.

Why Brands Need a Channel Loyalty Program?

A B2B loyalty program is a powerful way to create loyal, long-lasting relationships with your stockists, dealers, influencers, resellers, and retail partners. They are critical for brands to survive in a highly competitive, globalized economy where competition is intense and multiple brands are battling it out for the attention of distributors, influencers and retail partners. 

A well-strategized channel partner loyalty program can positively influence the willingness, and motivation of your channel partners to recommend and sell your products and services. It can also unearth new sales and revenue opportunities as well  as function as a recruitment channel for onboarding new partners and increasing your overall distribution network

More than 80% of distributors confirmed that the opportunity to get rewards from the supplier is a critical factor in their purchase decisions.

Much like its B2C counterpart, the primary goal of a B2B loyalty program should be to elevate the relationship between a brand and its partner from that of a purely transactional one to one that of a long-term, emotional one. This can help your brand to create reliable, long-term revenue and more importantly, increase your brand mindshare amongst partners as well as your end consumer.

Why Partner Loyalty Programs Fail

Gaining the loyalty of your channel partner can be tricky but it’s not impossible. The biggest mistake most brands make with their channel loyalty programs is focussing heavily on transactional and monetary rewards.  

In fact, research shows that companies that implement non-cash reward and recognition programs for their channel partners record annual revenue increases averaging 10% compared to other companies which average 3%.

Here are some other pitfalls you should avoid while executing your channel loyalty program :

Lack of commitment

For a loyalty program to work, it must be well planned, have stakeholder buy-in and promoted extensively. It’s recommended to have a dedicated program manager who oversees the loyalty program and reports the sales and revenue impact to the senior management.

Lack of personalization

If your brands operate a complex supply chain featuring distributors, dealers, influencers, sub-dealers, retailers etc, it’s important to customize the rewards and incentives for each segment. It is also important for brands to have clarity about the behaviour they want to encourage; it could be different for a distributor than a reseller, for instance.

Not setting measurable goals

It’s important to attach measurable goals like increase in sales, revenue or higher market share to your channel loyalty program to ensure its success. The goals should also be communicated to your sales and marketing team. Also, it’s important to get an understanding of your channel partner’s goals and motivations. This will help you to sync your own business goals with that of your partner’s and thereby create a symbiotic partnership.

Complex program structure

The success of your channel loyalty program depends on how seamlessly it can integrate into the routines of your partners. Ensure that the sign up is hassle free and you list out the rewards and other terms/conditions upfront. Also, ensure that points and rewards are  attainable; making either of them too difficult to earn will disengage partners from the process.

Not leveraging data  

A channel loyalty program with advanced analytical capabilities can help you track the overall health and status of your loyalty program. To ensure the success of a program, it’s imperative to constantly check the participation and redemption rates along with its sales pipeline contribution.  An added benefit of tracking the progress of your channel loyalty program is it can uncover potential upsell/crosell opportunities for a specific region. 

Launch it and forget it approach

Most brands treat their loyalty programs as an autonomous entity that can function on its own once it’s launched. Unfortunately, this leads to the decline and eventual failure of a program. The primary reason is that there are several brands vying for the attention of the same partner and your loyalty program needs to be exceptionally good for it to stand out.

Strategies for Effective Channel Loyalty Program

While the actual strategy will vary depending on the target audience goals and aspiration of your specific audience (distributor, wholesaler, retailer etc), here are some key things which you will need to incorporate into your loyalty program to ensure its success.

Understand Partner Goals 

This is the first step in implementing a channel loyalty program and should form the core of your strategy. Make sure you segment your audience based on their goals and offer them unique, personalized goals and rewards.  If your loyalty program doesn’t sync with your partners’ strategic goals, adoption and redemption will suffer

Easy Reward Redemption via Ecommerce website/mobile app 

Whether it’s a gift card, a holiday or an appliance, make it easy for your partners to redeem their rewards, if not your program will slowly lose traction. The ideal way to do this is to setup a dedicated B2B ecommerce app or website, where your partners can login and choose from multiple incentives in a single platform.

Setup Member Events

Constant partner engagement is critical for the success of your channel loyalty program. Try to organize localized events and meet/greet sessions where you can communicate with individual partners. This is also a great way to build a long lasting relationship with your partners and ensure lower marketing costs.

Personalization & Segmentation

No two partner’s motivations and goals are alike, therefore it’s important to offer highly personalized goals and incentives. Make sure you set clear rule structures for each partner centered around their behaviour that consistently produces business results. The personalization aspect should also flow into your communication strategy. For instance, language barriers and other geo specific cultural nuances need to be taken into consideration for effective reach and engagement.  

Tier-based Incentives 

Tier-based incentives have been really successful in the B2C context and works very well for partners as well. This structure essentially aligns with the aspirational mindset that is core to human behaviour.  Start from a base tier for signups and offer higher incentives as the partner moves up the tier based on their sales and purchase volumes.

Leverage Gamification 

Gamification concepts like  Leaderboards, Spinwheels, Engagement Trackers and sporting event (IPL , World Cup) related activities can help boost engagement levels of your loyalty program. For gamification to be successful, it must sync with the user journey, your business goals, and communicated clearly to the partners through multiple channels like emailers, app notifications, SMS and sales visits.

Benefits of Channel Loyalty Program

Boost Sales & Reach 

A channel loyalty program directly impacts the sales and revenue growth of your brand by motivating influencers and retail partners to sell more of your products. 

Gain Channel Insights 

Data from your channel loyalty program can offer you insights into product sales and customer preferences in specific geos. These insights can be leveraged to gather best practises and optimize your inventory and supply chain in the long run.  

Real-time Partner Engagement

Advanced channel loyalty program software lets you engage with your partners in real-time. This can help boost brand mindshare, loyalty and ultimately sales and conversions.  

Efficient Channel Management

Get insights on the product preferences and sales across multiple channels and leverage it to identify bottlenecks, crosell/upsell opportunities and potential new markets. 

Lower Acquisition Costs

By encouraging existing partners to refer to new partners, an efficient channel loyalty program can significantly reduce your cost of acquisition.

Long-term, Profitable Relationships

This is the ultimate goal of a channel partner loyalty program and can have a major impact on your sales and brand loyalty.

Start increasing sales & partner engagement with Capillary’s Channel Loyalty Solutions

Decoding Saudi Arabia’s Digital Consumer

Decoding Saudi Arabia’s Digital Consumer

Over the last few years, rapid digitization has made a significant impact on the Saudi consumer’s lifestyle. Today, a whopping 88% of Saudis use the internet at least once a day and 59% of the population are now present in at least one social media platform.  While the growth in digital usage in Saudi Arabia wasn’t really a surprise, what has befuddled even the experts is the absolutely staggering growth rate.

While the level of internet penetration and smartphone usage in Saudi Arabia is comparable to other countries in the GCC, the country is an outlier when it comes to consumer demographic.  With a GDP per capita of USD 20,028 and a median age of 29 years, the typical Saudi consumer is wealthy and extremely tech-savvy. It’s also the sole country in the GCC where the locals account for 72% of the population.

This young, tech-savvy and wealthy population in Saudi Arabia serves as the perfect substrate for eCommerce growth, and the number of online shoppers in the region is expected to reach 17.1 million by 2020.

Smartphones are increasingly becoming the preferred device for online shopping with 69% of Saudis preferring it over a desktop. However, offline promotions and engagement remain a critical aspect of the purchase journey with  35% of Saudi consumers preferring to research about the product through offline channels prior to purchase.

From a business perspective, the region is not without its share of challenges. Socio-economic shifts in the region like fall in oil prices, the introduction of Value Added Tax, and an exodus of expats have had a negative impact on consumer sentiment in the last few years. Amongst these, the biggest impact was from the introduction of 5% VAT.  While a relatively low rate, it resulted in a significant shift in consumer behaviour. The average Saudi consumer became more cost-conscious than ever before and the trend is expected to continue at least for some more time. However, there are positive signals that the situation is being reversed.

Customer confidence levels in the Kingdom for the month of June 2019 was 62.1; placing it at the top 3 next to China and India (the global average is 43.3). The economic recovery, supported by higher oil prices and other internal social changes like expanded women’s rights, are further expected to have a positive impact in shaping consumption and market dynamics in the coming years.  Brands that can crack economies of scale, and provide value-add or greater convenience, will reap the rewards.

Key Takeaways for Brands :

1. Localization is critical to survive and grow in the region
2. There is a growing interest for western apparels, both for online and offline shopping
3. Consumer spending has slowed; brands will have to innovate using personalized promotions and provide value-add to stay ahead
4. The new breed of GCC consumer expects a highly personalized experience.
5. The shift towards price-consciousness is expected to lower brand loyalty among consumers
6. Ecommerce will continue to grow at a steady pace; especially from mobile devices
7. Offline customer engagement will be a critical factor in influencing purchase decisions and brand loyalty

 

To know more about the event, register here: https://www.capillarytech.com/know-how/stayready/riyadh/2019/sep

 

In-store Personalization Guide : The Need-of-the-Moment for Retailers

In-store Personalization Guide : The Need-of-the-Moment for Retailers

The Personalization Gap in Offline Retail

At a time when Ecommerce is so competitive thanks to smartphone and internet penetration, the yesteryear model of retail, brick and mortar, is threatened. When products are available at the customer’s convenience at discounted rates, he is more likely to use the service as opposed to going to a store and buying it. Ecommerce companies typically encourage and enable consumerism through a combination of convenience and value. However, where pure-play online brands have a clear edge over offline stores is their ability to personalize customer interactions across the purchase cycle – from acquisition to fulfillment. On the other hand, offline stores have a tendency to provide a one-size-fits-all experience for the customers who walk in through their doors. If a brick and mortar store is to keep up with ecommerce companies and their hyper-personalization capabilities, the stores will need to start collecting, analysing and leveraging customer data – In-store Personalization is the way to go! 

So why is In-store personalization is so vital for a retail brand?

According to a report by Medallion Retail, 46% of shoppers will buy more from a retailer that provides a customer with a personalized shopping experience. This is another sure-fire way to convert a first-time customer into a returning customer and win his loyalty. Moreover, customers who shop online are used to this level of personalisation and they expect a similar experience in a real-world situation as well.

A one-to-one retail experience is essential for in-store personalization. The key is to know enough about your customer’s information in the three tenses – past,  present, and future.

  • Past: It’s important to know the customer’s purchase history – what products they’ve searched, interacted with. This is so that the business can gain a better understanding of the consumer preferences in order to deliver a tailor-made in-store experience for him.
  • Present: Which zones of the store is the customer visiting? Which areas are does he/she stop at? What items hold his/her attention? Observing a customer’s behaviour while he is inside the store can help you gain valuable insights about how to serve him better based on his tastes.
  • Future: What are the products that the store stocks that can possibly interest a customer who is going to come in? What offers can you give the customer to entice them to make a purchase? What reward can you offer to a one-time customer to convert him/her into a returning customer? These are some of the questions that a store owner must be cognizant of when it comes to personalizing his in-store experience for the customers. In this manner, in-store personalization becomes a key part of the omnichannel strategy and omnichannel retailers will need to make the connection between a customer’s online experience and their offline journey through the brick and mortar store.

The Offline Retail Advantage

The Medallion Retail report also points out an interesting insight – that customers prefer to be acknowledged in-store rather than via digital channels. While ecommerce companies may have access to a vast database of user information, it is entirely possible that a user can get irked by an ad that feels too personal or invasive. In this way, in-store personalization is a good way to make a human connection with your customer and make him/her feel they are cared for. It is important to train your staff in such a way that they are well equipped to handle your customers’ needs. In this way, in-store personalization sets the stage for an offline business’ omni-channel marketing success. It is the final step that works in collaboration with other steps such as loyalty programmes and online shopping options in order to make the omnichannel marketing program a successful one.

Benefits of in-store personalization in retail

From a brand’s point of view, in-store personalization can bring tangible results to a business in terms of higher customer engagement and conversion. A report by Infosys states that 59% of consumers who have experienced personalization believe it has a noticeable influence on purchasing decisions. The same report also states that a whopping majority of 92% of the consumers who are in a store, look to discover new products and are open to making impulse purchases even if it’s not on the agenda. In fact, consumers are three times more likely to make an impulse buy in-store rather than while shopping online.

 

  • Personalized engagements with precision targeting

Access to data such as email IDs and brand preferences enable a business to tailor marketing efforts to suit their customers tastes. Beyond the marketing messages themselves, knowing what a consumer prefers enables a marketer to speak in the same language as the consumer – making the marketing exchange conversational and more personalized.

  • Boost brand loyalty

It is much more economical for a business to retain an existing customer than to acquire a new one. Taking the efforts to personalize the retail experience for a customer increases the chances of an incidental customer becoming a returning customer who is eventually loyal to your business and your brand. The end goal of a marketer is customer retention. Personalization is a powerful way of building upon the relationship that a customer has with a business and it contributes towards retention efforts in the long run.

  • Increase digital mindshare with relevant content

Knowing a customer’s preferences enables a brand to create content that resonates with its customers. It could be content for email newsletters, or content for an ad copy or a simple post purchase ‘Thank you’ card. For example, if a marketer has the knowledge that their target audience likes science fiction movies, then it becomes easier for him to create content in such a way that the target audience finds it relatable. Once he does, you have grabbed your customer’s attention and increase the chance that he/she will share it with her friends/followers in the digital universe.  Smart offline retailers are also using these digital data to further personalize the in-store experience for their customers.

  • Sync offline and online customer personas

Customers are more likely to associate with a brand and turn into returning customers if they interact with the brand both online and offline. 89% of buyers surveyed in the Infosys survey admitted that interacting with brands has some impact on their purchasing habits. Traditional retailers who are able to connect the online personas of their customers (eg:-across social media, website, and app) with in-store browsing behaviour will be in a position to offer hyper-personalized engagement across offline and online channels.

  • Make your Marketing More Impactful

We live in a world that’s densely populated with screens. In such a situation, there tends to be an information overload from brands who are trying to make their digital presence felt. When this is the case, brick and mortar retail stores have the advantage of getting the customer’s full and undivided attention in the store.

Implementing In-store Personalization

  • The first step in implementing in-store personalization is to know your advantage over your competition.

The major advantages that brick and mortar stores enjoy over their online peers are : tactile experience, human interaction and higher Average Order Values (AOV). To stay ahead and be relevant, retail stores will need to understand how to leverage each of these strengths. Of these, higher Order Values is something that can be greatly enhanced through personalized recommendations based on the customer’s previous purchases and in-store behaviour data collected through movement, dwell time and voice/sentiment analysis.

  • The second step is to understand your audiences’ preferences.

Once you have a pulse on your customer’s preferences, tastes, and requirements, then you will be better placed to accurately deliver what they require. Knowing exactly what your customers need also puts you in a position to deliver marketing messages of utility that they do not ignore. A retailer can also extensively use technology in order to create a personalised experience for the customer. The store can equip itself with augmented reality technology so that the customers can try on items in real time.

          A store can also use an AI-powered footfall counter in order to increase store conversion and sales. These in-store vision tools help a business unlock powerful retail insights about customer demographics, store conversion ratio and the impact of marketing campaigns. Capillary’s VisitorMetrix is a 95% accurate people counter that’s equipped with an intelligent people tracking system to capture age and gender demographic data in real-time. This data can further be used to personalize the in-store experience for the customer. Ecommerce platforms have access to these insights and therefore deliver tailor-made ads but with VisitorMetrix, the insights it gives you can empower your business to optimise store inventory and predict customer preferences in order to maximize sales and conversions.

  • The final step is to optimize staff deployment and empower them with customer insights

It is important that your sales staff is equipped to create a personalized in-store experience for your customers. VisitorMetrix can help you optimize staff strength and set conversion goals based on store footfall data. In-depth footfall analytics can also be used to schedule staff breaks and store maintenance at the ideal time in order to prevent losses and loss in sales.

Examples of In-store Personalization Done Right

  • Starbucks

Starbucks has a robust loyalty program that is personalized according to the users preferences and serves his needs. The loyalty program also comes with perks such as personalized offers for customers using the app and a free beverage on their birthday. Starbucks has access to customer data thanks to its loyalty app.  People are comfortable sharing their data via the app as they are aware of the kind of rewards it can yield. It’s a win-win situation for the business and for the customers.

  • Macy’s

Even though Macy’s is a department store that was first opened in 1858, they have quickly adapted their retail strategy to suit the digital age. Macy’s extensively uses big data to offer a smarter customer experience. They analyse multiple data points such as stock levels and price promotions. The analysis of these data points are further combined with stock keeping unit data for particular products at particular locations. Macy’s also closely studies customer data to ascertain which products sell well at which store location. They also study how frequently a customer visits a store and what style they purchase. This ensures that the products that they have in their stores suit the customer’s buying habits in each location. Using this data, Macy’s even offers incentives at the point of sale in addition to loyalty points and promotions. The data they collect also enable them to send directly targeted mail to their customers, hence enabling them to boost conversions.

  • Target

When you are a Target customer, you will be assigned a guest ID number after you interact with the brand for the first time. That ID is used to store data that is related to customer demographics. This ranges from ethnicity to job history and it is used to track buying behaviour. Target realized that their consumer’s buying patterns remained largely unchanged unless a big event happens in their life – such as pregnancy. Target found that it could ascertain which of its customers were in their early stages of expecting a baby when they purchased things that they never previously considered – such as diaper bags or cocoa butter lotion. Once Target could ascertain those behaviours, it enabled them to provide their customers with special deals on baby-related items that were personalized and tailor-made to suit their requirements.

  • Abercrombie & Fitch

At a time when mall-based retailers are struggling to maintain numbers due to reduced footfalls, Abercrombie & Fitch is investing in their digital capabilities in order to ensure that they capture the millennial market. Abercrombie & Fitch are well known for their personalized email communications and their loyalty program. The retailer personalizes e-mails communications with the help of in-store and online data about styles and brands that the customers prefer and use. The retailer also encourages shoppers to use their mobile app and rewards their loyalty with loyalty points and other benefits.

Future of In-store Personalization

The rise of Machine Learning and Big Data is expected to have major implications in the retail space, especially with regards to personalization and the in-store experience. Retailers will likely be able to enhance in-store personalization through advanced computer vision to see the profile of the customers who walk in and leverage voice analysis, emotional state and facial signals to predict the likelihood of a sale and probability of a repeat visit.