Summary

COVID-19 has shaken the world economy to its core, deeply impacting operations and consumer behavior across all sectors. Against a backdrop of millions of confirmed cases and thousands of deaths, which have sent shockwaves around the world, Australia finds itself in a much better spot than many countries. Thanks to the timely implementation of precautionary measures, the number of confirmed cases are low in comparison to geographies like the US and Europe. With the number of fatalities limited to early hundreds, Australia is clearly winning this war. However, reviving economic growth will be one of the key challenges for the country, which has already suffered a major hit last summer due to bushfires.

This paper focuses on the pandemic’s impact on the Australian retail sector. It tracks how the lockdown restrictions and pandemic-stricken economic environment is in fact giving a boost to digital adoption. The Australian consumer has traditionally favored brick-and-mortar over emerging digital channels. With lockdown restrictions forcing retailers to close stores and consumers to go digital, the question is, will this digital trend continue, post-COVID-19? Further, will it change the way Australian consumers shop? Is digital here to stay? And what changes will retailers need to make to their business models, to fully adopt digital?

Digital Disruption

The forced temporary closure of brick-and-mortar stores around the world saw more consumers than ever migrating to digital channels for their shopping needs. Offline retailers1 all across the world, already hit by digital disruption, are struggling to survive, with many contemplating filing for bankruptcy, merging with retailers that have deep cash reserves or transforming their existing business models to go digital.

Digital transformation disruption, which had so far been somewhat limited in the Australian retail sector in comparison to geographies like the US and Europe, seems now to be accelerating. Digital channels have been present for many years in Australia but Australian consumers have been slow to embrace them. However, due to COVID-19, consumers have been at the forefront of embracing this change. In addition, retailers have been forced to significantly increase and strengthen their digital presence to keep up with emerging requirements.

Based on Australian Post data, there was an 80% YoY increase in digital shopping over the eight weeks to mid- May 2020. The full 80% YoY increase may not be sustained once stores open, but uptake of digital shopping is expected to remain considerably higher than during the pre-COVID era.

COVID Impact: Online Retail Trends

Online shopping, which offers varied choice from a large pool of global goods, easy product discovery, convenience and value has, in the past, been met with reluctance. Consumers have been hesitant about adopting new technologies, in addition to product trust issues in the absence of the ‘touch and feel’ experience offered in physical stores. Broken supply chains and logistics infrastructure have also served to diminish the digital experience. However, such barriers on the consumer side seem to have reduced to a great extent. Customers are getting comfortable interacting with digital channels as well as sharing their banking details for digital transactions. With a secular shift happening in consumer behavior, some portion of in-store sales may be permanently shifting to digital channels, even with the reopening of stores. As per the Australian Bureau of Statistics (ABS), Figure 2 below shows online retail sales as a percentage of total retail sales for last 12-month period. Pre-COVID-19, the average contribution of online in overall retail sales was typically around ~6.5%; during COVID-19, online retail witnessed a massive increase with 11.1% of total retail sales coming through online channels in April 2020.

According to National Australia Bank (NAB), in the 12 months to March 2020, around 9.7% of the total retail sales came through online channels; which is about 11.9% higher than the 12 months to March 2019. In March 2020 alone, the NAB Online Retail Sales Index recorded a large jump of 21.8% YoY.

Brick-and-Mortar Stores Continue to Face Challenges

Australia’s public transit hubs and retail outlets have seen huge declines in foot traffic, as measured by Google’s mobile data. Figure 3 below shows that in April 2020, there was an approximately 40% decline in mobility across retail outlets and a 60% decline across transit stations.

What Can Retailers Do?

The world post-COVID-19 will see a multifold surge in digital buying and online interaction with brands. Business leaders must now invest in and strengthen their digital presence. They must also explore the possibilities for reinventing their business models in the post-COVID-19 digital era. Some of the key areas for digital transformation include: building a new digital ecosystem for shopping,product discovery, branding and marketing; shoring up customer trust and mechanisms for customer feedback; ensuring that customer engagement and experience is as good as brick-and-mortar; investing in data infrastructure and better models for sensing customer demand signals; creating agile and responsive supply chains; and empowering employees to run the business digitally.

Digitally advanced and data-rich companies have already started to capture market share by treating this pandemic as an opportunity for innovation and customer acquisition.

How EXL Can Help Australian Retailers

EXL’s Digital Intelligence Solution Center (DISC) has been institutionalized to transform client operations through the smart use of new digital technologies and digital methodologies. Driven by the vision to make digital transformation real for clients, the DISC team strives to deliver unprecedented value by embedding digital intelligence into client operations. Digital intelligence is defined as dynamically and optimally combining domain expertise, data analytics, human creativity and advanced digital levers to deliver superior business and customer outcomes.

EXL’s DISC seeks to drive digital-led growth by leveraging key emerging trends like artificial intelligence, natural language processing/generation, speech recognition, machine learning, and omni-channel. EXL is also helping clients to redesign and digitize their operations and drive customer centricity by using a combination of bespoke proprietary solutions and partner-led capabilities, all underpinned by its analytics expertise.

Adding Value Through Analytics

1. Adding Value Through Analytics

Benchmarking a business’ digital assets against competitors is key to identifying gaps and building a roadmap for creating a market-leading customer experience.

EXL employs a comprehensive proprietary six-pillar evaluation framework (across 60+ parameters) to compare a client’s web assets against their competitors and suggest recommendations that enable the client to provide a bestin- class digital experience to their customers.

EXL’s digital benchmarking capability is a short-term engagement, requiring no access to client’s internal data and systems.

Analytical interventions

A few of the analytical interventions that can be undertaken after the website benchmarking exercise—or even on a stand-alone basis—include:

  • Enhancement of on-site search capability through auto search keyword options, fixing search refinement and results tagging
  • Improvement of Google Search ranking for nonbranded keywords
  • Fixing tags for site search tracking
  • Introduction of product recommendations and product combinations for an engaging user interaction
  • Prioritization of relevant marketing material in the form of videos, blogs and product case studies

2. DIGITAL CAPABILITY MATURITY ASSESSMENT

Retail industry leaders must evaluate their organization’s digital capabilities maturity curve internally and consider how it measures up against other retail organizations, so as to ensure preparedness for a world-class digital transformation strategy

EXL evaluates companies across six core digital competencies through its comprehensive proprietary framework, identifies key gaps from the best-in-class solution, and proposes digital evolution roadmap so as to increase conversions, revenues and optimize costs.

Analytical interventions

Some of the key analytical interventions that can be undertaken after the digital capability maturity assessment exercise or on a stand-alone basis include:

  • Creation of a customer 360-degree view by stitching cookies across devices and channels
  • Tracking and measuring performance of key metrics across digital assets
  • Building a contact management system to reach customers at right time, through the right channel with the right product
  • Dynamic website homepage personalization for incoming visitors for increased conversions
  • Designing a programmatic journey with marketing interventions at relevant journey checkpoints
  • Targeting customers through personalized product recommendations
  • Development of marketing attribution models to optimize spend allocation across channels
  • Auditing and managing digital audiences
  • Centralized marketing campaign execution, measurement and refinement tool
  • Enhancement of customer engagement, loyalty and cross-sell and minimization of attrition
  • Development of Anomaly Detection tool for identifying business anomalies/insights
  • Investing in building a homegrown data management platform to improve targeting on digital channels
  • Analyze relationships with key marketing agencies and trading desks, evaluate their performance and provide recommendations
  • Integration of social media channels, performance measurement and recommendations
  • Digital Key Performance Indicator dashboards for leadership

EXL has helped a UK-based catalog retailer in its journey to becoming a pure play digital retailer (#2 to Amazon in UK). EXL supported the retailer through various interventions including homepage personalization, email customer management, multi-touch attribution, abandoned basket analysis and returns optimization. EXL has also supported clients through digital dashboards, search engine optimization, keywords tagging and media mix modeling, etc.

To ensure a successful digital transformation journey, organizations should focus on a top-down approach with executive sponsorship and clear goals aligned with the company’s vision. The process should begin with the end in mind—identifying areas of high impact and prioritizing key initiatives. There should be enough flexibility to experiment, iterate and course correct, while the agility to implement while learning from experiences along the journey will serve businesses well in their digital transformations.

Conclusion

Going digital is the new impending disruption in global retail and the same holds for the Australian market. Organizations should focus on fostering a data-driven business culture through the right mix of people, processes and tools. Digital transformation is not on its way; it’s already here and it’s here to stay. Winners and losers will be decided on how easily and quickly digital technologies are integrated into the mainstream, so as to pave the way for easy adoption and benefit of consumers.

References

1. https://auspost.com.au/content/dam/auspost_corp/media /documents/ecommerce-market-insights-may2020.pdf
2. https://www.abs.gov.au/ausstats/abs@.nsf/7d12b0f6763c7 8caca257061001cc588/0aefe93da719d4aeca257c350010f2 12!OpenDocument
3. https://business.nab.com.au/wp-content/uploads/2020/05 /NAB-Online-Retail-Sales-Index-MAR20.pdf
4. https://www.google.com/covid19/mobility/
5. https://www.abc.net.au/news/2020-05-20/retail-salesplunge- as-stockpiling-shoppers-shut-theirwallets/ 12266788

 

Written by

Anshul Goyal
Senior Assistant Vice President, Digital Analytics

Swati Jain
Vice President, Analytics

 

Rajnil Malik
Analytics Head, Australia & APAC

Mohit Kesarwani
Project Manager, Analytics

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