With three-quarters of Americans online at least several times a day — and some continually — digital technology is taking firm root in our daily lives. Tech-savvy consumers are navigating a variety of platforms and devices as they push global e-commerce to a projected $4.9 trillion in 2021, more than doubling the 2017 figure of $2.3 trillion.
These shifts mean traditional approaches to e-commerce are no longer meeting the needs of digital shoppers. Whether they're buying goods on a mobile app, sending messages on social media platforms, or asking Alexa questions, consumers want a dynamic, responsive experience. Digital transformation is essential for companies that want to expand their client base and take advantage of new B2B and B2C markets being created by technology.
"Customer experience has become a key differentiator for businesses worldwide," says Craig Simpson, a research manager at IDC. "New innovation accelerator technologies like artificial intelligence and data analytics are at the forefront in driving the differentiation for businesses to succeed in their customer experience strategic initiatives."
Let's examine what digital transformation means for e-commerce in an environment increasingly dictated by consumer behavior.
What is Digital Transformation?
Digital transformation is the process of revitalizing a company's core operations by integrating technology throughout all functions and business units. This holistic strategy aims to improve productivity and efficiency to meet consumer expectations and, ultimately, convert sales.
A successful digital transformation begins with technology. A growing number of applications are available to improve efficiency at all levels, addressing inventory management, customer service, marketing and distribution, operations, supply chains, and product development. A true digital transformation removes the barriers between functions, eliminating bottlenecks and errors so that units work together as a whole.
Beyond technology, digital transformation is about embracing a more efficient way of doing things and driving businesses toward specific metrics and outcomes. This means overall corporate strategy must be digitally-focused, taking into consideration the capabilities of technology, customer needs, and competitor offerings.
It can be challenging for a company to implement digital transformation, particularly legacy brands that have an established way of doing things. A key element of transformation is an innovative culture where dialogue is encouraged, and employees are invited to contribute to new solutions.
Why Does Digital Transformation Matter?
Consumer behavior and expectations are leading the way in what Forrester once termed, "the age of the customer." As digitization continues to accelerate globally, enterprises must use technology to create an agile and responsive business model to keep up with societal shifts.
As John Kotter, a professor at Harvard Business School, once wrote, "The rate of change is not going to slow down anytime soon. If anything, competition in most industries will probably speed up even more in the next few decades."
By using technologies that allow for scalability, data to make informed decisions, and a forward-thinking strategy that focuses on anticipating employee and customer needs, digital transformation provides companies with a solid infrastructure that's prepared for growth, no matter what future channels emerge.
6 Ways Digital Transformation is Guiding e-commerce Growth
Digital transformation uses the capabilities of technology to understand consumer behavior, make better-informed decisions, streamline business functions, and deliver a rich, seamless experience. Let's look more closely at some of the technologies that can fuel e-commerce growth.
1. Headless commerce.
In the age of the customer, enterprises need adaptable systems that meet consumer expectations across multiple platforms and devices. Traditional e-commerce platforms are time-consuming to update and offer little flexibility for customization because the frontend and backends are fully integrated.
Many companies are finding headless commerce a dynamic solution. It decouples the frontend and backend for more agility in shaping user experiences. The backend contains product information, customer data, pricing, and online payment processes that power e-commerce transactions. Developers have the option of linking this engine with multiple frontends that call data through APIs.
Skullcandy, an audio equipment brand, uses headless commerce to customize regional websites in multiple languages and currencies. The company originally launched seven websites through a single e-commerce platform and continues to add new sites as it scales into other markets. Skullcandy's global storefronts are all connected to the same product information system and e-commerce platform, providing flexibility in tailoring content.
2. Rise of the use of PWAs.
Smartphone users are expected to reach 3.8 billion worldwide in 2021, with mobile becoming the most common device for online shoppers in the United States. Customers spend 80% of mobile time using native apps compared to an internet browser.
Progressive web apps (PWAs) provide the rich experience of a native app through a website, eliminating the need to have separate mobile-friendly websites and apps for Android or iOS. PWAs offer push notifications, access to a camera, microphone, GPS, voice commands, and other app-like features.
Speed and accessibility
Boasting fast load times and instant updates, PWAs remove friction from the purchasing journey, which is important for conversion considering mobile makes up 65% of traffic and 46% of online purchases on U.S. retail sites.
Consumers can buy directly from a PWA and pin the app to a home screen without using storage space. This technology is highly responsive, adapts to different screen sizes, and scales up or down depending on the capabilities of a device.
Reach a wider audience
Separate websites and native apps for iOS and Android can be cumbersome for both customers and developers. PWAs can be used on all major internet browsers and platforms, delivering enriching experiences without requiring a download and installation from a store. They can be shared with a link and appear on search engine results for easy accessibility.
3. Artificial intelligence.
Artificial intelligence provides enterprises with insight into consumer behavior by analyzing the buying patterns and actions of individuals and groups of customers. This data can inform a variety of decisions, such as determining the optimal prices for products to increase conversion and managing inventory and distribution based on anticipated sales.
Artificial intelligence can also help companies make accurate predictions about customer preferences to tailor product recommendations, search results, and marketing campaigns. Natori, a high-end fashion brand, uses AI to develop audiences and determine what images, videos, and content performs best for specific segments. Using this information, Natori increased conversions by 84% during a single holiday campaign.
Automation uses technology to execute basic manual tasks to improve efficiency throughout a company's core operations. For example, Forrester estimates that most organizations have automated at least 20% of traditional service desk functions, with some automating up to 80%.
This technology is central to digital transformation and helps free up worker resources spent on repetitive tasks. Automation can be used to issue purchase orders, send invoices, schedule promotions and flash sales, and prevent fraud by identifying high-risk orders. Customers can also receive real-time updates about when orders are received, fulfilled and shipped, and when out-of-stock items are replenished.
By accelerating workflows and reducing the risk of error, automation helps to increase buyer satisfaction and build ongoing trust.
5. Customer experience marketing.
Customer experience can be described as a consumer's impression of a brand based on their interactions at all touchpoints. Companies must strive to deliver an exceptional experience whether a customer is seeking information about the company online, searching for a product, gathering information to make a purchasing decision, or completing a transaction. A flawless purchasing journey results in higher conversions, brand loyalty, and word-of-mouth referrals.
Here are examples of how digital transformation can satisfy consumer expectations through all stages.
One challenge for consumers shopping online is deciding to purchase based on an image and product description. According to a survey by the National Retail Foundation, 38% of customers are very interested in technology that lets them try an item in person or virtually before purchasing. One-third said it was very important that brands and retailers use these innovations to help give a better sense of the look and feel of a product.
Technology, such as 3D product imaging, for example, lets consumers zoom in and rotate products to see them from different angles. Burrow, a furniture brand, puts augmented reality to work. Their app enables consumers to scan their living space on a smartphone and drag, drop, and rotate images of their products to visualize how they would fit in their home before purchasing.
Customer experience is also influenced by how quickly a consumer's problems are resolved. According to a HubSpot survey, 90% of customers want a response to a customer service question in less than 10 minutes. One-third say they're frustrated by being on hold and another one-third dislike repeating themselves to different customer representatives.
Chatbots offer a digital solution by providing immediate responses to FAQs and helping direct more complex inquiries to appropriate teams. Autodesk improved its response times for basic inquiries by 99% by deploying a bot to answer simple questions about address changes, log-ins, and payments. Once the chatbot was implemented, response times dropped from an average of 38 hours to just over 5 minutes.
6. Seamless omnichannel experience.
While customers engage with businesses through multiple channels, like brick-and-mortar stores, mobile apps, and social commerce, these are often disconnected, making it impossible for consumers to shift from one to another seamlessly. Omnichannel is a strategy that brings together all of a company's physical and digital channels to create a harmonious buying experience.
Harvard Business found that omnichannel customers spend an average of 4% more when purchasing in-store and 10% more online than those that use only one channel. These numbers increase with every additional channel used.
When multiple channels work together as a whole, consumers can check a retail app for discount codes in-store or order from a kiosk and have items shipped to their homes. They can locate products on social media and purchase them in-app, or add items to their cart on a smartphone and check out on a desktop.
Digital transformation is fundamental to a successful omnichannel strategy because all interactions must be flawless. Inventory counts need to be accurate when consumers are buying on multiple channels.
Customer support agents, who can spend up to 10% of their time pulling information from disconnected systems, must have access to complete transaction histories and deliver top-notch customer service. Enterprises must have the infrastructure in place to support a seamless omnichannel approach.
The global e-commerce market is expanding dramatically as modern consumers shift fluidly between online, mobile, and physical channels. Digital transformation is essential for enterprises to stay competitive and respond efficiently to customer expectations.
Technologies such as artificial intelligence, headless commerce, progressive web apps, and automation can help create an agile infrastructure capable of responding to consumer behaviors and buying patterns. Companies that embrace digital transformation are well-positioned to deliver superior customer experiences and maximize opportunities for e-commerce growth.