Retail Digital Transformation

The advent of technology has brought about many changes in the way beauty brands operate. From the ways in which brands design and create products, to how and where they interact with customers, and the channels on which their products are sold – in this day and age, there are digital solutions for everything.

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While the majority of beauty sales still take place offline, a large part of the research and discovery process happens online. This gap is slowly expected to close as an increasing number of factors further drives the growth of digital retail. This transformation will mean that beauty brands need to keep up with the latest trends in in order to survive.

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What Is Driving Retail Digital Transformation?

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Several factors have led to the increased digitisation of the retail industry, some more related to changing customer attitudes, and some, to the development of digital retail infrastructure. The main factors driving this trend in the beauty industry are:

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Evolving Customer Needs: With an increasing number of customers demanding personalised experiences in-store and online, brands need to find a way to meet these needs. Beauty brands have proliferated over the past decade, which makes it more difficult and more expensive to capture and retain customer interest.Brands need to be more innovative, more targeted, and listen carefully to their customers in order to survive.

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Changing channels for interaction: Customer interactions are slowly but surely moving online. As per Newzoo’s Global Mobile Market Report in 2019, the UK stands first in the worldwide ranking for smartphone penetration. The ONS also reports that 87% of adults in the UK use social media every day.These numbers indicate that the primary channels of communication on which brands have opportunities to connect with customers are changing, which is correspondingly accelerating retail digital transformation for beauty brands.

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The development of digital infrastructure: While customers and brands going online is a large part of digitisation, the infrastructure for digital retail is, in itself, becoming more sophisticated, enabling further innovations on online channels. The emergence of smart technologies like artificial intelligence and machine learning, as well as enhancements in online payment systems, search, and recommendation engines, are all contributing towards building end-to-end online journeys that are faster, smarter, and better for users.

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What is the impact of retail digital transformation on beauty brands?

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The digitisation of beauty retail is changing the ways in which brands operate at every step. This includes them finding new ways of:

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Segmentation and Targeting

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One of the most important changes the digital age has introduced is the power of data for beauty brands. Digital retail channels provide brands with a wealth of insights on their customers, which enables them to segment and target them more effectively.

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Through data, brands can not only market products in a more meaningful and personal way, but also use this to inform future product decisions and business strategy.

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An example of a company that has made good use of data is Sephora. Based on how much customers spend each year, Sephora categorises customers into loyalty tiers, and sends customised email communications which contain product recommendations based on previous purchases. Campaigns like these have been highly effective in building additional brand loyalty for Sephora.

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Positioning

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The advent of technology has also enabled some brands to differentiate themselves in terms of customer experience and position themselves as leaders in digital retail.

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Purchase drivers like price and quality, while initially of the utmost importance, are now taking a backseat to factors like experience and social referrals. This transformation is giving beauty brands new dimensions on which to compete and capture their own niche in customers’ minds.

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Urban Decay, for example, prides itself on its strengths in both website and social media marketing. The brand highlights its popular loyalty program on its website, and also includes features like an expedited checkout and special rewards for members. Urban Decay is also extremely popular on social media like Instagram, where it garners a high level of engagement on its feed and is also highly active on Instagram Stories.

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Operations

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Technology has allowed brands to become more flexible with the way they operate and the channels they choose to operate on. With more and more people becoming digitally and mobile savvy, brands need to improve the flexibility of their operations to meet customer needs more quickly. New formats such as flash sales, subscriptions, same-day-delivery and more have become increasingly popular, leading to the transformation of digital retail as a response.

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Glossybox, the beauty subscription service, is the perfect example of how a beauty company can fully divert from the traditional beauty store format while achieving maximum operational flexibility. This innovative company has completely changed the way in which people consume beauty products, and also shifted the main source of value from the products themselves to the convenience and experience of receiving the products at home.

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Business Model Innovation

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Digitalisation is not only changing the way in which companies operate but changing the companies themselves. Though business models tend to evolve over time, the simultaneous convergence of a number of technologies such as mobile adoption, social media, big data, and analytics has accelerated the pace at which beauty brands are evolving, as well as the degree to which they innovate, operate, and serve customers.

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From start-ups to established brands, digital interventions are revealing opportunities for retail digital transformation, new customer ecosystems, as well as building brand loyalty and engagement.

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