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Try that on for size: How a global pandemic impacted the future of retail

Try that on for size: How a global pandemic impacted the future of retail

Covid-19 UpdatesCXInsightsRetailTop Stories

The global pandemic prompted a rapid acceleration of Digital Transformation built on identity security, with aims to win the loyalty of a new generation of shoppers. Emma Maslen, VP and General Manager, EMEA & APAC, Ping Identity, explains how the pandemic has prompted retailers to adapt the shopping experience and extend their ethos into online communities.

The pandemic has massively impacted the UK high street but has led to a boom in e-commerce. One of the biggest gains has been persuading net-new customers to come online – many of them from older demographics that had traditionally shied away from online stores. As a result, e-tailers are adapting the shopping experience and one of the biggest changes is the metamorphosis of customer service focused high street brands – of which Marks and Spencer is a great example – that are extending their ethos into online communities.

Bright sparks

As one of the UK’s oldest and most trusted retailers, Marks and Spencer has been an exemplar of the massive disruption that the pandemic has had on the traditional bricks and mortar sector. Last year, M&S posted its first loss in its 94 years as a public company, as Coronavirus kept shoppers locked down at home.

Yet the company has been moving into more services, including online, over the last decade and the pandemic has accelerated these efforts through several innovate steps. The first wave, early on in lockdown, used technology to overcome some customer and staff store access issues. For example, it became the first major UK retailer to roll-out appointment shopping to help customers plan with reserved shopping slots. The system allowed customers to make online reservation service to all its 566 foodhalls to offer convenient visits instead of experiencing the lengthy and panic scrums that occurred at several other retailers.

Another instore innovation was the launch of checkout-free technology using mobile payment to all its UK stores, allowing instore customers to skip checkout queues by self-scanning and paying for their items using their smartphone and then simply leaving the store. Yet, even with these efforts, the practical issues around lockdown caused M&S, like most high street stores, to experience a massive reduction in sales.

However, its online e-commerce sales were up 75% according to its latest interim results. And the firm is also set to launch 46 new websites to expand its reach to over 100 countries, from Argentina to Uzbekistan. The website experience itself has also improved – with many subtle additions enhancing the online user experience. An interesting example is the implementation of guest accounts, which allow customers to pick, pay and go without having to setup a full-blown account. The average cart abandonment rate is just under 70% and being forced to create an account is a top reason why people leave. In fact, 34% say they would abandon for that reason alone, with no remorse about moving to a competing retailer that does not require account creation.

Every little bit helps

Although its online retail activities have grown, M&S has made the decision to slim down some of its ancillary financial services. However, the opposite is true of its high street rival, Tesco, the UK’s largest retailer that also launched a retail banking division in 1997. The bank maintains 5.3 million customer accounts and has continually expanded its offering to span a range of banking, credit card and insurance products. The company was an early pioneer in generating customer insights through data and its banking products are also tied into to its loyalty card scheme, another UK first, which offers customers a connected set of benefits.

In September 2020, Tesco Bank also became the first UK bank to use open banking to enable credit card holders to pay their balance. The service allows its 2.6 million credit card customers to make payments directly from their current account via electronic payment services.

The new feature is made possible because of the EU’s Open Banking legislation and in terms of simplicity, customers do not have to remember any account details or find their debit card to make a payment. Customers can also make safe and easy payments from non-Tesco Bank accounts using their bank’s usual online or mobile app login details to verify payment.

The support of the Open Banking initiative is part of a wider push by retailers like Tesco to provide a more seamless experience for customers across not just physical goods but digital services. However, as retailers have organically grown online, many of these services are often provided by third parties. This has led to the perception of a ‘single brand’ but in practical terms this may require customers to log into separate websites, with differing credentials – and then complete multiple stages of form filling because the identity data is not shared between the brand and the various service delivery participants.

This was the case at Tesco where customer identities had become siloed across products and services, adding friction to the customer experience. At the same time, the bank needed to prepare for compliance with the revised Payment Services Directive (PSD2), a European electronic services regulation requiring strong customer authentication, as well as address an inflexible security posture that was adding cost and time to the launch of new applications and features.

Like many in a similar position, Tesco Bank has successfully completed a major project to transition to a common identity provider across banking, credit cards and general insurance. This now allows the bank to use unified customer identity and enable innovations such as Multi-Factor Authentication (MFA) which strengthen security through additional identifiers such as secure smartphone apps that can be backed up with biometrics like fingerprint swipes from a modern smartphone.

Although promoted in part by PSD2 compliance, the result is better customer experience that also helps it gain customer insights. At an operational level, the solution has also removed a major security burden from developers so they can deliver self-service features and new services much faster and more cost effectively.

Digital first

This need to work more seamlessly with customers digital identities while maintaining security and opt-in privacy controls is one of the major trends that retailers are increasingly faced with as online engagement grows. Even as vaccinations ramp up, certain trends look set to continue. Waitrose, another UK retailer, recently surveyed 2,000 people across the UK and found that 77% now do at least some of their grocery shopping online, compared with 61% the year before.

The survey found that the biggest shift towards online supermarket shopping was in the over-55 age group, where regular online shopping nearly trebled. As shoppers start to get used to the convenience of services such as ‘click and collect’ and ‘appointment shopping’ it seems unlikely that going back to normal will be an option.

These digital interactions are also generating huge volumes of potentially valuable data that can be used by pioneers to build innovative new experiences that not only match the brand perception, but also engage with net-new customers. Identity is a crucial part of this process moving forward and must span the entire customer journey from initial registration, through authentication and self-service activities while supporting the privacy that customers expect.

The final takeaway for retailers is that the pandemic has prompted a big shake up in brand loyalty. According to a survey conducted by McKinsey & Company just before Christmas 2020, 61% of shoppers have tried new shopping behaviour during the pandemic including switching brands and using new digital channels. The survey also found that over 80% plan to continue these new approaches even after the pandemic is over. With such disruption in the market, trying out new digital innovation for size now will help build captivating online retail experience that will pay dividends well into the future.

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