In-Store Digitisation: The Secret to High Street Survival

Kamran Hedjri, CEO of PXP Financial, looks at how physical stores can maintain a foothold by embracing fintech in an increasingly digital world

Retail shopping centre

Recently there has been cautious optimism on high streets around the world. Footfall is slowly creeping up, and retailers are looking for ways to make physical stores more attractive to consumers now accustomed to the convenience of online shopping.

The COVID-19 pandemic saw high street footfall drop dramatically after March 2020. French-based footfall analysis company Mytraffic and commercial property agency Cushman & Wakefield found that from March 2020 to March 2021, major shopping locations across Europe – including London’s Oxford Street, the Champs-Élysées in Paris and Kurfürstendamm in Berlin – all suffered significant reductions in both domestic and international customer footfall.

Meanwhile, according to a report by the Retail Industry Leaders Association in collaboration with McKinsey, e-commerce as a share of total retail sales is set to reach 25-40% after the pandemic. So how can bricks-and-mortar stores lure shoppers back over their thresholds?

Creating a new in-store experience

The buzzword here is ‘personalisation’. Consumers only have to log in to any online shopping account to be presented with recommendations based on their personal preferences and previous purchases. In essence, they expect retailers to know what they want before they do and will want to see this functionality replicated in-store. Blanket recommendations will lead to lost loyalty and revenue.

Fortunately, the technology exists to help retailers create highly personalised customer experiences that will not only meet new consumer expectations but set them apart from their competitors. Hyper-personalisation uses a combination of insights from user behaviours and artificial intelligence (AI) to interpret real-time and historical data about an individual. It can help optimise messaging to ensure it is highly relevant to the customer and allows for customer profiles to be adjusted in real-time, as AI algorithms can re-adjust behavioural data based on each new interaction. 

An example of this in practice is Target, which used AI to detect when customers were about to become new parents and therefore offered essential parenting items. The technology could predict when someone was pregnant by analysing common purchases made shortly before opening a baby registry. The technology was not only able to predict pregnancy, but it could also pinpoint which trimester the customer was in. For example, a purchase of unscented lotion could indicate the woman was at the start of her second trimester. Target used this data to personalise messaging and create relevant offers. Target also sent coupons for the most commonly purchased products to pregnant customers, helping cement brand loyalty.

Some retailers have also started using GPS-based geofencing technology to target customers. It allows them to define a range around their location, so they will automatically receive a notification when a customer comes close to that defined location. This message might include news of a sale or offers on products they might be interested in.

When executed well, these technologies give brands a point of differentiation and a competitive advantage, and when the data collected is used responsibly, retailers can create a seamless shopping experience. But consistency is key; it is crucial that regardless of the channel used by the consumer, the shopping experience remains the same.

Inevitably, the adoption of new technologies will transform the look and feel of bricks-and-mortar stores. So, what can shoppers expect to see on their hi-tech high street?

The store of the future 

The most obvious difference will potentially be the absence of a traditional till. Point of Sale (POS) will no longer be a stationary counter but wherever sales staff can interact with customers most effectively and safely. The global Mobile Point-of-Sale (mPOS) market is expected to be worth around 293.1Bn USD by 2031, growing at a CAGR of 5.99% during the forecast period 2021 to 2031. There were 1,490.5 million users of mPOS payments worldwide as of 2021, all benefitting from the speed and convenience it offers.  

There will also be a rise in self-service and checkout-free stores. These are a relatively new concept in many European countries but well established in other parts of the world, including China and South Korea. In Norway and Sweden, some small rural stores operate with no staff, with customers able to unlock store doors with their smartphones. More retailers are likely to embrace this technology as it addresses shoppers’ number one pain point – queuing. 

Less checkout space means more floor space for merchandising, which will appeal to many retailers. Others, however, will opt not to display much merchandise at all to personalise their in-store experience further. Instead of browsing rails and shelves, shoppers will be able to pre-book an appointment in-store with a personal shopper who will present a pre-prepared or pre-paid selection of items. Because this approach calls for more backroom storage space, it will still benefit from the space created by removing fixed POS stations. 

Of course, technology cannot completely replace the human interaction that makes in-store shopping unique. But in future, sales assistants will be able to use technology to improve the customer experience. Assisted selling mobile devices will enable sales associates to bridge the gap between physical and online intelligence to provide a unique, omnichannel experience. 

Staff will have instant access to essential product details to answer customer queries on the spot, but even more important; they will have customer preferences at their fingertips. This means making tailored recommendations, creating upselling opportunities, and increasing customer satisfaction and loyalty.

New ways to pay

As we emerge from the pandemic, and to meet new consumer expectations, retailers will also have to recognise the importance of accepting a more comprehensive range of alternative payment methods (APMs) to meet new customer expectations online and in-store. 

APMs are growing in popularity and are already the de facto way to pay online in many countries. For example, 57% of German shoppers prefer to use PayPal when shopping online, and in the Netherlands, consumers make 60% of their online purchases with the local bank transfer payment, iDEAL. In physical stores, consumers will expect the option not just to pay by card but with a tap of their smartphones. 

For this reason, QR code payments, (in which consumers scan a QR code displayed by the merchant with their smartphone to pay for their goods) may see a rise in popularity. Not only is it an incredibly secure card-not-present payment method because all information is encrypted and no customer details are stored on file, but it works on and offline. 

Venmo is a U.S.-based digital wallet service owned by PayPal. According to a February 2022 survey of online payment users in the United States, 32% of respondents had used Venmo in the past 12 months. After installing the Venmo app and linking their Venmo accounts to their credit card, debit card, or bank accounts, Venmo users can instantly exchange funds among one another, with Venmo functioning as a virtual intermediary. This peer-to-peer (P2P) payment app allows for the exchange of money directly between individuals and is one of several enterprises capitalising on the growing P2P economy. 

P2P is a simple way for retailers to accept a new way to pay without the hurdles typical of new payment technology. It puts the technology in the hands of the consumers who have the app, have tied it to their bank account, and learned how to use it. All retailers have to do is let them pay with it.

Buy Now Pay Later (BNPL) is also set to play an increasingly important role in retail as consumers move away from credit cards and look for more flexible payment options in-store. In recent years the retail industry has seen companies such as Affirm, Afterpay and Sezzle grow in popularity, and the growth of BNPL hit record-breaking levels. In 2021 Cornerstone Advisors predicted consumers would make nearly $100 billion in retail purchases using BNPL.

Finally, open banking will extend its reach to retail. As yet, retailers have not fully appreciated the implications of open banking for their sector, but this will soon change as payment service providers prepare commercial solutions, and merchants will soon be able to take advantage of the new SEPA credit transfers (SCT) which supports instant payments. By using immediate payments rather than traditional card payments, retailers will not only receive their funds faster, but the processing fees are expected to be less than a card payment. Both online and bricks and mortar retailers, will benefit from these features. 

Many traditional retailers are actively embracing the idea of connected commerce. Abercrombie & Fitch, for example, is investing in the ‘phygital’ concept by focusing on a seamless digital checkout experience for customers. A growing number of retailers recognise that to compete with their online counterparts, stores must become more experiential, and innovation must be used to reinvigorate traditional customer service. High street stores can facilitate all this with payments technology.


About the Author:

Kamran Hedjri, CEO of PXP Financial

Kamran Hedjri is the CEO of PXP Financial.