Digital transformation (DX) and Industry 4.0 have become the most discussed topics in today's world. Technological advancements were already underway and have only accelerated in the context of social distance. Currently, 63% of E-commerce companies intend to invest in a digital transformation strategy. On the global level, companies from all industries are expected to spend $1.6 trillion on digital transformation in 2022 and $3.4 trillion in 2026.
When it comes to E-commerce, customer demands are changing quickly. 80% of customers appreciate the purchasing experience as much as the goods, and 69% are willing to pay more for one or more value-added services that improve their user experience. In turn, digital transformation can help retailers adapt to changing markets, making their businesses more resilient.
So, what exactly is meant by digital transformations in E-commerce, what challenges does it address, and how can it be used to improve the customer experience? Let's take a closer look at key digital transformation trends. This article also includes examples of companies that are already using the trends and our advice on each trend adoption. We hope that this information will give you more clarity on the topic and inspiration to move forward.
What is digital transformation in E-commerce?
Digital transformation is tightly connected with the usage of cutting-edge technologies such as cloud, mobility, big data, the Internet of Things (IoT), 3D printing, robotics, and more. This also includes moving data to the cloud and using tech tools and apps to communicate and automate processes. Yet, just having access to technology is not enough.
Most businesses use these technologies but still can't get past the pilot phase and use their transformation projects to their full potential. The thing is, digital transformation is more than just using technology; it is a mindset that aims to transform business processes and provide new solutions to complex problems.
Here are the key characteristics that best define digital transformation.
- Rethinking old methods to operate. By using fast technologies (new sources of innovation), digital transformation makes it possible to modify and enhance old processes. This saves time and money.
Adding new approaches, solutions, and opportunities. It also allows new technology implementation and upgrading the business to add new value, such as by adding something new and engaging to the customer experience.
Here at Wise Engineering, we believe an effective digital transformation strategy is a balance of all forces that impact the improvement in the E-commerce industry: tools, processes, people, and mindset. The key lies in a good ratio among all the elements. You are not limited by strict rules or algorithms. Instead, you can use technologies as well as your creativity to improve existing processes or build new ones.
Reasons for digital transformation in E-commerce
Many predict that the future of E-commerce is expected to go hand in hand with digital business transformation. It’s all because the retail landscape necessitates changes for a variety of reasons, including the following.
- The market is growing. No matter how challenging the time is, E-commerce is still expected to grow at a CAGR of 11.1% from 2018 to 2025, hitting a value of up to $24,265.12 billion. The increasing demand for online sales will lead to an increase in the number of online stores and marketplaces.
- Dynamic customer needs. Customer behavior and expectations are evolving. The changing landscape of digital transformation in E-commerce is evoked by the adoption of convenience and factors related to it. Customers now prefer easy payments, quick deliveries, simple pickups, and effortless returns.
Economic instabilities. Other than that, all businesses as well as retail stores around the globe have to deal with economic instability, the aftereffects of the global pandemic, and the russian invasion of Ukraine. Every store owner needs to make sure their business can handle the global economic recession that we are about to face.
Digital transformation strategy: Top-7 trends for E-commerce
Learning by doing is the most effective way to create an effective digital transformation strategy. Here are seven digital transformation trends and use cases that show how businesses are embracing change and new ways of thinking.
#1 Direct-to-consumer (DTC) selling
One of the primary directions in digital transformation E-commerce is a direct-to-consumer (DTC or D2C) strategy. Its main goal is to allow customers to buy products directly from a brand rather than from a third-party retailer. Customers frequently state that DTC stores are more authentic because they offer a more unique experience and respond to each customer's individual needs.
More than 55% of customers want to buy directly from brand manufacturers. Retail expert Andrew Lipsman says that direct-to-consumer sales will make up 17% of all E-commerce sales in 2021. In the next three years, he estimates a rise of $99.7 billion, bringing the total to $212.9 billion by 2024.
Benefits of DTC
Many online marketplaces, including Amazon, make it hard for shoppers to find the products they need. The DTC model, on the other hand, makes it possible to give customers unique experiences and strengthens their connections to the brand. Brands can have more control over things like prices, product selection, and the overall customer experience.
- Blume is a brand of latte mixes for folks who don't use syrups or artificial flavorings. This brand's DTC model includes category pages that explain what each product does and product images that make you nearly taste it. Blume's TikTok has recipes, hilarious staff videos, and the founder's behind-the-scenes stories.
- Halfdays is a women's ski-wear store that combines performance, comfort, and style. Halfdays was invented as a reaction to the fact that traditional ski clothing wasn't fashionable. The company has a Slack community where skiers can discuss planned trips, arrange meetups, and learn about apparel releases first.
- The Ridge, another E-commerce business that uses the DTC model. It is a slim wallet manufacturer. It's a minimalistic online store with only two product categories (wallets and key cases) and a few dozen items. The Ridge's Twitter account is what distinguishes the company from others in its field. It's full of sarcasm, jokes, and constant jabs at owners of huge wallets made of leather, or other materials.
While considering the DTC model, make sure your brand can create an emotional connection with customers. Offer high-quality products and be clear about your prices. A good E-commerce platform and a reliable fulfillment system are also important. Besides, be ready to take on the difficulties inherent in operating a DTC business, such as handling returns and shipping logistics.
#2 Cloud E-commerce
Another trend in digital business transformation in E-commerce that we most obviously will anticipate is the use of cloud computing. The phrase "cloud" is a metaphor for the Internet, and it refers to data centers that are not physically located in one location but can be accessed over the Internet. Storage, analytics, networking, software, and intelligence are available in these data centers. Therefore, the cloud allows businesses to store data on remote servers rather than on their own devices. Besides, you can access the data from any location, at any time, and on any device.
There are three major cloud service models:
- Infrastructure as a service (IaaS) bases all services on the infrastructure. IaaS lets you rent servers, databases, and networking equipment for E-commerce. IaaS suppliers include Amazon Web Services (AWS), Azure, and Digital Ocean.
- Platform as a service (PaaS). According to this approach, the cloud service provider delivers "infrastructure platforms" and tools for developing and managing applications, such as a source code editor, debugger, and compiler. PaaS can incorporate "serverless" technology, where you upload app code and pay for execution.
- Software as a service (SaaS) is the most popular cloud computing model in which the cloud provider distributes ready-to-use application software via the internet. This cloud-based technology manages and scales data storage, hosting, and digital commerce applications like virtual payments, inventory management, and product info management.
When you use cloud computing services, you don't have to buy or run a whole system. This can save you a lot of money on operational costs like hardware, software, and internet connection. Cloud computing also saves time for retailers when it comes to planning and getting budget approval for capital investments, development, and other operational issues.
- Zalora. After launching a number of its own product lines, the company's website could no longer handle the increased traffic. As a consequence, Zalora's whole infrastructure was migrated to the cloud. Now, site traffic may grow by 300 to 400 percent during sales without compromising performance.
- Nisa Retail, a provider of automated services to small merchants, has decided to construct its software solutions on a cloud-based platform. Thus, firm engineers were able to effortlessly handle dozens of distinct debugging settings and evaluate various data storage strategies. As a result, there was a three to four-month reduction in release times.
- IaaS is great for businesses that look for maximum control over their technological stack without hosting E-commerce systems on-premises.
- PaaS is perfect for merchants that wish to develop their own E-commerce apps but are willing to outsource infrastructure-related components of their technological stack.
- SaaS is perfect for businesses that wish to grow rapidly and devote more effort to product and sales than E-commerce platform development.
#3 Big data E-commerce
The big data E-commerce market was valued at $4.9 billion in 2020 and is projected to reach $26 billion by 2028. No wonder this technology will be among the top digital transformation trends in retail. E-commerce grows rapidly creating enormous amounts of data which becomes challenging to work with using traditional database management tools.
Using big data analytics, you can retrieve valuable information about your webshop visitor’s search history, click history, browsing patterns, page visits, order history, and much more. This happens through machine learning, deep learning algorithms, and neural networks which can modify site algorithms based on previous consumer activity and offer tailored recommendations. So you can get an in-depth understanding of your customers, both individually and collectively.
Big data may enable E-commerce companies to sustain millions of daily visits without the risk of data loss. In addition, it may offer businesses information about their consumers' buying habits so that they can personalize the customer experience across all sites, devices, and channels.
- eBay. The company has to deal with a massive customer data turnover, servicing over 140 million active customers across multiple channels. This makes up 250 terabytes of data stored, and it is written/read about 5-6 million times each day. This is exactly why the company quickly adopted the rapid, mass data processing technology as soon as it had the chance. Big data is the exact tool that helps the company cope with market pressure.
- Amazon. The company is currently using predictive customer behavior analysis to provide customers with precisely what they want (to the extent possible) at the right time. For instance, Amazon has two new services – My Mix and You Should Also Buy. My Mix allows Amazon to identify and recommend personalized products for customers, and You Should Also Buy attempts to establish a connection between two different items and suggest the other one based on customer behavior.
There are a variety of ways to use Big data in E-commerce. Here are several suggestions from our team.
- Forecasting. Consider the application of big data to holiday sales as an example. Christmas is without a doubt a huge sales opportunity, but big data may be used to anticipate the magnitude of the rise as well as subsequent peaks and valleys. This prediction can not only help you prepare for seasonal discounts but also indicate when it is appropriate to put certain goods on sale.
- Personalization. 83% of customers are eager to offer their information in exchange for a more personalized experience. Using big data analysis, it is possible to precisely establish what a buyer is interested in purchasing.
- Lost sales. When a buyer abandons an item in their shopping cart, they may do so for a variety of reasons. To optimize abandoned cart recovery for your webshop, data analysis may simply help you identify why they did not convert and take the appropriate steps to get them back to your site using a variety of strategies.
- Feedback and insights. With the proper tools, you can track who your campaigns have reached, whether they've received a favorable or negative response and whether they've visited your store or converted.
- Delivery. You can speed product delivery via anticipatory shipment, intelligent route planning, and self-driving trucks or drones using machine learning-augmented logistics.
#4 Augmented reality (AR) & Virtual Reality (VR)
AR and VR technologies for customers can be game changers in E-commerce, particularly for stores selling clothing or beauty products. More than 60% of consumers prefer brands that provide augmented reality experiences during the purchasing process. It’s all because this technology advances significantly in allowing customers to see how a brand's products appear in real life.
AR and VR integrations may play a significant role in the digital transformation E-commerce. It’s all because these technologies can transform E-commerce by removing a significant psychological barrier to purchase. AR and VR may increase purchase confidence by ensuring that customers’ expectations match product descriptions. It also facilitates product choice, drives conversions, and decreases shopping fatigue by offering quick and easy custom try-ons.
- NYX Cosmetics has AR built into kiosks in-store which allow consumers to try on different shades of makeup products based on their hair, eye, and skin color—helping customers engage with a wider variety of products and make more informed purchases.
- Burrow has developed an app called Burrow at Home that allows customers to digitally check out furniture in their living areas. They scan the floor of a room using the app, configure their Burrow couch, and then drop it into view.
- LIVEb4buy is a SaaS E-commerce platform that works with a range of AR integrations. More specifically, it lets customers create 360-degree panoramic spaces (the inside of physical stores, demo spaces with furniture in them, and so on). Customers “walk” around these spaces and select products to learn more about them.
Among possible ways of adopting AR and VR technology, we advise you to consider the following options:
- 3D model catalogs. Such catalogs allow users to view the shape of realistic 1:1 3D models that they can visually explore via an AR-supporting device.
- Product try-on/try-out. It lets users digitally place things in custom interior settings (like home appliances, furniture, and decorations) or on themselves as a stand-alone feature or an extension of AR catalogs (like jewelry, clothes, and cosmetics).
#5 Conversion rate optimization or CRO
While SEO approaches help to drive traffic to your website, conversion rate optimization (CRO) strategies convert those visitors into buyers. CRO usually means coming up with ideas for parts of your website or app that could be improved and then testing those ideas with A/B and multivariate testing. Such an optimization improves the shopping experience in order to promote a specific KPI, usually sales.
CRO can be applied on landing pages, category pages, or any other point of contact with the customer. Every change has a purpose, and every change is designed to improve the user experience. Even minor adjustments, such as page design tweaks, improved navigation options, and simpler checkout processes, help streamline the purchasing journey and boost the possibility of a purchase.
Using CRO techniques, you can understand how your customers think, feel, and behave. You can assess your current conversion rates to gain a better understanding of performance, whether you want more get-to-know-you form fills or more purchases from your store.
- OROS is a winter gear retailer that has to attract new customers immediately. Therefore, they have dedicated their efforts to redesigning the website for excellent first impressions. The result was an increase in sales by 60%.
- Make changes based on data, not intuition. Poor-quality data, according to Gartner, costs firms $15 million a year. Rely on insights from services like Google Analytics, which offer an actionable, real-time perspective of site behavior, to uncover high-quality data. You can use Google Analytics to track metrics like bounce rate, exit pages, cost per conversion, and more to find ways to improve conversions.
- Understand how customers respond to A/B testing. A/B testing is great for checking how real users respond to new page elements like headings, sales copy, and calls to action (CTAs), helping you understand which changes will bring your customers closer to conversion.
- Use customer experience management (CEM) tools. One of the possible digital transformation services that will help you implement CRO can be customer experiences management tools such as Gainsight, Qualtrics, Genesys Engage, and Zendesk. These tools help you track and organize all interactions with customers.
#6 Mobile commerce
Most of us, particularly Millennials and Gen Zers, depend on our gadgets 24/7. The average smartphone user spends 3 hours and 15 minutes each day on it. This time is spent on social media, email, phone conversations, mobile games, and, of course, shopping. That is why mobile commerce will become a major channel for shopping.
- Purchasing by using a mobile device is far more convenient than using a computer, especially when considering the emotional components of the purchase process. When it comes to finding information and search results, mobile apps give 1.5 times faster results.
- With the aid of mobile commerce, companies are able to deliver the appropriate message to their customers at the appropriate moment. By sending a push notification, you may inform users that a new version of an item will be ready in a few days, for example.
- Mobile app UX/UI design is simple and functional. This method generates greater responses from users.
- Mobile applications and browsers capture more information about the user than desktop retail versions. They are capable of detecting changes in position. It greatly helps to develop the most appropriate personal suggestions, which enhance conversions.
- Lancôme is using mobile technology in its flagship stores to improve the shopping experience for customers. This includes mobile check-out, contactless payments, and shorter lines, as well as beauty-specific apps like shade finders.
- Gucci is using an in-store mobile to give customers access to information about goods that aren't available in the store, to offer more personalized service options when in-store staff isn't available, to make purchases, make wish lists, and set up deliveries.
- Nike. Customers engaged in Nike's loyalty program may use the app to access shop-specific features when they enter a Nike store. Customers may scan goods to send them to a fitting room, check size and color availability online and in-store, make Nike shoe fitting reservations, earn additional points, and pick up online orders.
To discover more use cases, take a look at the list of top 10 mobile commerce applications that provide great features relevant to their target audiences.
A straightforward and practical design for mobile applications is important. Use visuals instead of words to appeal to the customer's emotions. Don't overlook the shopping cart, either. On mobile devices, more than 90% of mobile carts are abandoned. That's because mobile shopping carts are full of things that aren't needed and have too many screens that get in the way of the transaction.
#7 Headless and API-driven E-commerce
Headless commerce is a type of architecture in which a website's front end and back end are separate and connect to each other through APIs. On the backend, you can still save some types of data, like prices, product catalogs, and order details. But there is no need to integrate Product Information Management (PIM), Customer Relationship Management (CRM), and sometimes even an inventory management system into the backend.
By breaking the mold of standard E-commerce websites on the front and back ends, you can build unique customer experiences that are suited specifically to your items and brand. Furthermore, because of the strength of composability, you can tackle a wide range of challenging business problems and assign various tasks to distinct headless architectures.
- Butcher of Blue is a super-smooth and customer-centric business, but its software structures have become "merely" mediocre. Converting the company's website to a Progressive Web App was a natural step in its hunt for opportunities for improvement. Now, the website for Butcher of Blue is headless and designed with Vue Storefront and Magento 2. This allowed the organization to develop unique UX elements and provided the necessary stability to finish the project without incurring significant delays.
- Zadig & Voltaire was the first to embrace Magento in 2008. This E-commerce standard-setting technology suited the French company for nearly a decade. But then the company decided to rebuild the front-end layer to unify the UX across markets. This needs a new tech stack, and decoupling the front end from the backend and embracing Progressive Web Apps was the solution. Now it's a headless website with Vue Storefront PWA and Magento 2, which increases speed and flexibility and offers customized discounts in all markets.
Take into account these cases when headless commerce really matters:
- PCI compliance minimization. As the SaaS provider handles the risk, you will have less work for IT personnel in this situation.
- Checkout security and fraud prevention. Similar to the above. As the SaaS supplier absorbs the risk, IT staff have less work to do.
- Architecture with flexibility and accessibility. Utilize pre-built interfaces with ERPs, CRMs, and other systems, or create your own using additional APIs and SDKs.
Headless commerce can be used in almost any situation, whether you use WordPress, Bloomreach, Drupal, Adobe Experience Manager, another CMS or DXP, a Progressive Web App (PWA), or your own custom solution built on top-of-the-line technologies like Gatsby. To separate the platform's visual layer, all you need is an API connection. The platform can then be plugged in where it is needed to work.
Digital transformation doesn’t have an endpoint; it is an ongoing journey. That’s why it is important to constantly keep track of and evolve based on shifts in customer expectations and behaviors so that your products and strategies can meet and exceed the needs of this demographic.
At the same time, digital transformation in E-commerce doesn't have to mean implementing a major upgrade from day one. Depending on the sector, available resources, stacks, and individual needs, it can be of a different sort. Since transformation is a process, the nature of its perception changes.
We hope that the digital transformation trends mentioned in this article will support your journey toward digitization. If you run a business that could benefit from digital transformation, investing in it right now is a smart move. The Wise team can provide you with custom E-commerce development as well as support on how to implement and get the most out of a digital transformation strategy.
Сontact us to discuss your specific business context and goals ahead.