Retail in the Digital World Notes PDF

**Retail in the digital world** **[Historical context]** - 1st: Stream - stream - water and stream power - 1784 - 2^nd^: Electricity - electric power - mass production - 1870 - 3^rd^: Computing - information technology - automate production - 1960 - 4^th^: Ind...

**Retail in the digital world** **[Historical context]** - 1st: Stream - stream - water and stream power - 1784 - 2^nd^: Electricity - electric power - mass production - 1870 - 3^rd^: Computing - information technology - automate production - 1960 - 4^th^: Industry 4.0 - fusion and technologies - physical -- digital -- biological **[Opportunities of the fourth industrial revolution]** - lower barriers between inventors and markets - more active role for the artificial intelligence (AI) - integration of different technics and domains (fusion) - improved quality of our lives (robotics) and - the connected life (internet) **[Megatrends]** - Physical - autonomous vehicle - 3D printing - advanced robotics - new materials - Digital - IoT - sensors, RFID - blockchain - on demand economy - **Transportation and transportation:** With Uber, Lyft, or Bolt, users can order transportation instantly through an app. - **Food delivery:** Wolt, UberEats, or DoorDash allow users to order food at short notice. - **Hotel reservations:** Airbnb allows users to rent apartments or rooms for short term. - **Streaming services:** Netflix, Spotify, and other services allow you to access content instantly without having to make a purchase. - Biological - genetics - neurotechnology **[The key factors determining digitalization]** - product-information - exponential capacity growth - programmability **[Digitalization (6 D's exponential impacting industries)]** - The most important message of the 6D model, which describes the digitization of industries, is that **digital transformation follows an exponential growth pattern** that fundamentally disrupts traditional business models and industries. This transformation involves six distinct stages, each of which builds upon the last, ultimately leading to significant shifts in value creation, innovation, and market dynamics - deceptive - Initially, the impact of digitization is deceptive because exponential growth is often overlooked. Early stages of digital technologies may seem insignificant or slow, but the growth is building up momentum. - disruptive - As the exponential growth reaches a tipping point, it becomes disruptive, fundamentally altering or displacing existing industries (e.g., streaming services disrupting the DVD rental industry). The disruption occurs as new digital technologies outperform legacy systems. - digitized - Products, services, and processes become digitized, shifting from physical to digital formats (e.g., from books to eBooks). Once something is digitized, it can be easily stored, shared, and replicated at almost no cost. - dematerializing - Physical products and services are increasingly replaced by digital alternatives (e.g., smartphones replacing cameras, maps, calculators, etc.). Many traditional goods are no longer necessary as their digital equivalents offer greater convenience and efficiency. - demonetizing - Digitization drives down the costs associated with traditional goods and services. As information and technology become more widely accessible, industries experience demonetization---reducing the cost of producing and distributing products (e.g., free or low-cost digital content). - democratizing - Digital technologies become widely available and affordable, making them accessible to a global audience. Democratization lowers barriers to entry, allowing more people to participate in industries that were once exclusive or expensive (e.g., global access to education through online courses). - The core message of the 6D model is that **digital transformation is inevitable, exponential, and disruptive**. It not only transforms industries by reducing costs and creating new value but also democratizes access to technology, leading to a profound shift in how businesses operate and consumers engage with products and services. Understanding and adapting to each stage is crucial for companies aiming to thrive in a rapidly digitizing world. **[Diffusion of technological innovations]** - When businesses make strategic decisions, **considering the Diffusion of Technology Innovations Theory is crucial for understanding how new technologies or products are adopted by different segments of the market.** This theory, popularized by Everett Rogers, divides adopters into five categories: innovators, early adopters, early majority, late majority, and laggards. **Each group has distinct characteristics that influence how they approach new technology.** - To effectively use this framework in strategic planning, businesses should: **1. Segment the Market Based on Adoption Categories** - **Innovators (2.5%)**: The first to adopt new technology, these customers are risk-takers and tech enthusiasts. Businesses should focus on engaging this group early through pilot programs, beta testing, and offering access to cutting-edge products. - **Early Adopters (13.5%)**: Often influencers in their respective domains, early adopters are key to validating a new technology. They are socially connected and can help build momentum. Businesses should engage them with strong value propositions and be ready to share success stories or case studies to build credibility. - **Early Majority (34%)**: These are pragmatic customers who adopt technology only after seeing evidence of its success. For this group, businesses need to show proven benefits, offer testimonials, and ensure the product is reliable and easy to use. - **Late Majority (34%)**: More skeptical and risk-averse, the late majority requires proof that the innovation is stable and widely accepted. Businesses need to offer competitive pricing, emphasize ease of use, and potentially simplify the product or service for mass adoption. - **Laggards (16%)**: These are the most resistant to change and typically adopt only when they are forced by necessity or when the technology becomes a standard. Businesses should not focus extensive marketing efforts on this group but can prepare strategies for when market saturation is achieved. **2. Create a Product Launch and Growth Strategy Based on Diffusion Stages** - **Initial Rollout (Innovators & Early Adopters)**: Start by launching limited versions or MVPs (Minimum Viable Products) that appeal to innovators and early adopters. Collect feedback and iterate on the product based on their insights. - **Expansion (Early Majority)**: Once the product is refined and proven, businesses should scale up operations, emphasizing the tangible benefits, reliability, and social proof that appeals to the early majority. - **Mass Adoption (Late Majority & Laggards)**: For the late majority, businesses should focus on optimizing pricing, improving accessibility, and simplifying the customer experience. Mass-market channels and aggressive pricing strategies are key at this stage. **3. Leverage Influencers and Thought Leaders** - Early adopters and innovators often influence broader market adoption. Engaging with industry influencers, tech bloggers, and thought leaders who can validate and promote the technology is essential for accelerating diffusion, especially among the early majority. **4. Adapt Marketing Messages for Different Segments** The messaging should evolve as the product moves through the adoption curve: - **Innovators**: Highlight novelty, cutting-edge features, and the opportunity to be among the first to use the technology. - **Early Adopters**: Focus on the strategic benefits and the potential for competitive advantage. - **Early Majority**: Emphasize proven performance, reliability, and widespread adoption. Use customer testimonials and case studies. - **Late Majority**: Highlight ease of use, stability, and affordability. - **Laggards**: Emphasize necessity and compatibility with other established products. **5. Manage Resources for Each Stage of Adoption** - Businesses should allocate resources differently depending on the stage of diffusion. Early stages may require higher R&D investment and customer education, while later stages focus on scaling production, distribution, and price optimization. **6. Monitor the Adoption Process and Adjust Strategies** - The diffusion of technology is not static. Businesses must continually monitor market feedback and adjust their strategies based on the speed of adoption and competitive pressures. Tracking metrics like product usage, customer satisfaction, and competitor movements can inform whether to accelerate or adjust marketing and development efforts. **7. Ensure Product Compatibility and Reduce Complexity** - For later adopters, ensuring the product integrates well with existing systems and reducing complexity is critical. Businesses should work on making the technology user-friendly and reducing barriers to entry, such as offering tutorials, customer support, and simplifying setup processes. **8. Focus on Cross the "Chasm" Between Early Adopters and Early Majority** - Geoffrey Moore\'s \"Crossing the Chasm\" theory builds on Rogers\' model and highlights the challenge of moving from early adopters to the early majority. Businesses should focus on refining their value proposition for the early majority, ensuring product scalability, and emphasizing the product\'s reliability and practicality to appeal to this larger, more cautious group. - **Conclusion:** - By incorporating the **Diffusion of Technology Innovations Theory** into strategic business decisions, companies can better understand the adoption dynamics of new products, tailor their approach to different market segments, and enhance the likelihood of successful market penetration and long-term growth. **AI**  **[Applications of AI]** - oracles - routine activity, routine questions - chatbot, customer service - for a genie - autonomous action - self-driving cars, drones - rulers - operation of complex systems without human intervention - stock purchase **[Impact of AI]** - consumer - BIG DATA, modelling of purchasing decisions Big Data refers to huge amounts of data that can no longer be stored, processed or analyzed efficiently with traditional data management tools. This data can come from different sources and come in a wide variety of formats. Big Data can generally be defined by the following three properties (3V): 1. Volume:\ Big Data means an extremely large amount of data, ranging from several terabytes to petabytes. Examples of data sources include social media, sensors, mobile phones, e-commerce systems, etc.\ 2. Velocity (Data flow rate):\ Data is generated quickly and flows into the system continuously. For example, the flow of real-time data from online transactions, social media, or IoT (Internet of Things) devices. Big Data systems must be able to process this data in real time.\ 3. Variety:\ Big Data can come in many formats: structured (e.g. databases), semi-structured (pl. XML files), or unstructured (e.g. text messages, videos, images). The diversity of data sources is a major challenge when it comes to data processing.\ Additional features:\ Veracity: Big Data is not always reliable, so it\'s important for systems to be able to filter out worthless, inaccurate data.\ Value: Data itself is not valuable, the goal of Big Data analytics is to extract valuable information, new insights and business benefits from it.\ Definition summary:\ Big Data, therefore, encompasses the amount of data, data flow rate and data variety that exceeds the capabilities of traditional data management technologies. The aim is to process, analyse and extract valuable new information to support decision-making, business benefits or scientific research. - prediction of customer decisions, customization - protection of personality rights - supply chain - product, goods= data - tracking, efficiency, speed - organizational management - on demand resource use **Internet of things (IoT)** **[Applications of IoT]** - buying - start automatic procurement - logistics - communication between "self-driving cars" - improving asset utilization - product - tracking - "wearable internet" **[Impact of IoT]** - ubiquity - unlimited access and communication - data protection - data - goods - labour - triggering routine activities - on demand resource use **Other disruptive tech**  **Instant messaging (IM)** - digital communication technology - although it's not always considered a disruptive technology, instant messaging has revolutionized corporate and face-to-face communication by enabling information exchange in real time - disruptive effects: significantly transformed communication in the business world and everyday life, especially in the following areas: - **Work communication**: Platforms like Slack, Microsoft Teams, or WhatsApp Business enable instant messaging, file sharing, and group communication. These solutions have replaced or complemented email-based communication. - **Customer relationships**: The integration of instant messaging systems into customer service processes (such as chatbots and live support) has changed the way companies interact with their customers. - **Mobile workforce**: Due to integration with mobile devices, IM has enabled employees to communicate anywhere, anytime, which has contributed to the rise of remote work and flexible working. - **IM and digital disruption**: The disruptive nature of IM lies in the fact that it offers a faster, more efficient and less formal alternative to traditional methods of communication (such as phone calls or emails). In doing so, technology has not only changed communication habits, but has also contributed to the acceleration of digitalization in many industries. **[Application and impact of IM]** - a sharing economy - deviceless platform providers - purchase over usage - blockchain - system monitoring without dispatcher - reduction of transaction costs - virtual reality - experience-based shopping **TRENDS** **[Economy]** - growth - sluggish GDP/TFP **Total Factor Productivity (TFP)** is a measure of economic efficiency that captures how effectively an economy uses its inputs, such as labor and capital, to produce output. In terms of economic growth, TFP represents the portion of growth that cannot be explained by the accumulation of labor and capital. It reflects improvements in factors like technological innovation, efficiency, management practices, and knowledge that allow an economy to produce more output without simply increasing the input levels. **Key Points about TFP in Economic Growth:** 1. **Residual Growth**: TFP is often referred to as the \"Solow residual\" because it is the unexplained portion of growth in a production function after accounting for the contributions of labor and capital. 2. **Innovation and Efficiency**: High TFP growth usually indicates that the economy is improving its production processes, benefiting from better technologies, more efficient practices, or economies of scale. 3. **Sustainability**: While increasing labor and capital inputs can lead to growth, sustained long-term economic growth depends heavily on improvements in TFP, as simply adding more inputs has diminishing returns over time. 4. **Driver of Economic Competitiveness**: Countries or industries with higher TFP tend to be more competitive globally, as they can produce goods and services more efficiently compared to others with the same level of inputs. In summary, TFP reflects the efficiency and technological advancement of an economy and plays a critical role in determining its long-term growth potential. - uncounted service value **Uncounted service value** in economic growth refers to the economic contributions of services that are not fully captured or measured in traditional economic statistics like Gross Domestic Product (GDP). These services may not be directly reflected in formal market transactions or may be undervalued by current measurement methods. As economies evolve, particularly in the digital age, many valuable services fall outside the scope of traditional economic indicators. **Examples of Uncounted Service Value:** 1. **Household and Care Work**: Services like child care, elder care, and housework, which are often provided informally or unpaid, contribute significantly to the economy but are not included in GDP. 2. **Digital Services**: Many free digital services, such as search engines, social media platforms, and open-source software, provide substantial value to consumers and businesses. However, because they are often free or based on non-monetary exchanges (e.g., data for services), their value is not fully captured in economic measures. 3. **Volunteer Work**: Services provided by volunteers contribute to social well-being and support local economies but are generally not included in economic growth statistics because they are unpaid. 4. **Environmental Services**: Ecosystem services such as clean air, water filtration by wetlands, and pollination by bees provide economic benefits, but these services are often not accounted for in GDP calculations. **Implications:** - **Underestimation of Economic Value**: The exclusion or undervaluation of these services can lead to an underestimation of the true size and health of an economy. - **Policy and Investment Decisions**: If uncounted services are not properly recognized, policies may not reflect the real contributions of certain sectors, such as care work or digital innovation, leading to underinvestment in those areas. - **Changing Nature of the Economy**: As economies shift towards more service-based and digital activities, the challenge of accurately measuring economic growth becomes more pronounced, requiring updates to traditional accounting methods. In essence, uncounted service value highlights the limitations of traditional economic metrics like GDP in capturing the full breadth of economic contributions in modern economies. - employment - new skill - aging - nature of work - automation - new skill, new occupations **[Business]** - organization - reduction in life span - new forms of collaboration - customer - expectations - transparency - privacy - product - more data, information - product + service - performance measurement **[Government]** - efficiency - awareness - service provider state, agile governance - stay in touch -- digital platform - cooperation with the civil sphere - "everything" that is mot forbidden is free" or "everything that is not explicitly allowed is forbidden" **[The individual as a consumer]** - digital illiterates vs digital natives - artificial intelligence -- personalization -- freedom of decisions - The essence of Jeff Hawkins\' work on AI personalization and the freedom of decision revolves around understanding the **relationship between artificial intelligence, human cognition, and personal autonomy**. Hawkins, known for his contributions to neuroscience and AI, particularly through his work on **theories of intelligence** and **machine learning** inspired by the brain, emphasizes how AI systems can be designed to mimic human learning and decision-making processes. - Here are the key ideas: **1. Brain-Inspired AI Models** - Hawkins\' theory of intelligence, particularly outlined in his work on the neocortex, emphasizes that human intelligence arises from the ability to predict and model the world based on sensory inputs and previous experiences. This approach has influenced AI development, specifically in how machines learn patterns and make decisions. - AI personalization based on this model involves machines learning from users\' behavior patterns and preferences, much like the human brain predicts outcomes based on past interactions. **2. AI and Personalization** - In the context of personalization, AI systems adapt to individual users\' preferences, behaviors, and needs. This is central to many modern AI applications, from **recommender systems** to **digital assistants**. - Hawkins\' contributions suggest that AI can be designed to learn continuously from individuals in a brain-like manner, leading to **highly personalized interactions** that evolve as the AI accumulates more data about the user\'s preferences and behavior. **3. Freedom of Decision** - A critical aspect of Hawkins\' work touches on **how AI can influence human decision-making**. As AI becomes more personalized, it can begin to shape users\' choices by presenting them with tailored options, recommendations, or actions based on learned behavior. - While personalization improves the relevance of AI\'s outputs, it also raises questions about **autonomy and freedom of decision**. Hawkins\' work suggests that AI systems should be designed in ways that **augment human decision-making** rather than limit it by over-predicting or constraining available options. - Ensuring **transparency and user control** over AI recommendations is vital in maintaining personal freedom, allowing individuals to understand and, if needed, override AI-driven suggestions. **4. Ethics and AI Personalization** - One of the ethical concerns related to AI personalization and freedom of decision is the risk of AI creating **echo chambers** or **filter bubbles**, where users are continuously fed the same types of content or recommendations based on past behaviors, potentially limiting their exposure to new ideas or choices. - Hawkins\' brain-centric model of AI can address these concerns by designing AI systems that not only learn from individual behaviors but also **introduce novelty or variation** to encourage users to explore beyond their immediate preferences, maintaining a balance between personalization and freedom. **5. Augmentation Rather than Replacement** - In line with Hawkins\' broader vision, AI should function as a tool to **augment human intelligence** rather than replace it. This means creating AI systems that assist in decision-making by providing valuable insights and recommendations, while still leaving the final choice to the user. **Conclusion:** - The essence of Jeff Hawkins\' work on AI personalization and the freedom of decision lies in developing AI systems that closely mimic human cognitive processes, leading to personalized experiences that adapt to users\' behaviors. However, Hawkins emphasizes the importance of maintaining user autonomy, ensuring that while AI can predict and recommend, it should also enhance, rather than limit, human decision-making freedom. Ethical considerations regarding personalization, transparency, and user control are key to ensuring that AI benefits users without compromising their autonomy. - digitalized communication / MIT study - The essence of the **MIT study on digitization in communication** focuses on understanding how digital technologies are transforming the way people and organizations communicate, and the implications for efficiency, collaboration, and the future of work. The study explores the **impact of digital tools, platforms, and AI-driven communication technologies** on personal and professional interactions, as well as the broader social and economic effects of this transformation. - **Key Takeaways from the MIT Study:** **1. Enhanced Communication Efficiency** - **Digital tools** like emails, messaging apps (e.g., Slack, Teams), video conferencing platforms (e.g., Zoom), and collaboration tools have made communication faster and more convenient. The study emphasizes how digitization has reduced geographical barriers and made real-time communication accessible globally. - **Automation** of routine communication tasks, such as scheduling meetings or providing customer support through chatbots, enhances productivity by freeing up time for more complex or creative tasks. **2. Collaboration Across Boundaries** - Digital communication technologies have enabled **remote work** and global collaboration, allowing teams to work together across time zones and locations. - The MIT study highlights how cloud-based collaboration platforms like Google Workspace, Microsoft 365, and project management tools enable teams to communicate, share files, and work on documents simultaneously, enhancing the ability to collaborate without physical presence. **3. AI-Powered Communication** - **Artificial intelligence** is increasingly integrated into communication systems, such as **natural language processing** (NLP) algorithms for real-time translation, sentiment analysis, and personalized responses. - AI-driven insights, such as analyzing large volumes of communication data to identify patterns or optimize customer interactions, allow businesses to communicate more effectively with their clients and partners. **4. Shifts in Organizational Dynamics** - The study underscores that digitization has transformed **organizational structures**, shifting from traditional, hierarchical communication channels to flatter**, network-based structures**. Digital platforms foster a more decentralized communication flow, allowing employees at all levels to interact directly. - It also suggests that this shift requires companies to rethink their **management and leadership strategies**, as leaders need to foster open communication, manage virtual teams, and encourage a culture of transparency. **5. Challenges in Digital Communication** - The study points out challenges like **information overload**, where the sheer volume of digital communication can overwhelm employees, leading to reduced productivity. - Issues related to **miscommunication** are more likely in digital channels due to the lack of non-verbal cues (e.g., body language, tone of voice) that are present in face-to-face interactions. - Security and privacy concerns also emerge as more sensitive information is shared digitally, requiring robust cybersecurity measures. **6. Social Implications of Digital Communication** - On a broader societal level, the study examines how digital communication technologies have reshaped **social interactions**. Platforms like social media and messaging apps have changed how people build and maintain personal relationships. - Digitization has also played a role in **democratizing communication**, giving a voice to previously marginalized groups and enabling mass mobilization (e.g., political movements). **7. The Future of Communication** - The study predicts that the future of communication will be driven by even more advanced **AI tools, immersive technologies** (like augmented reality and virtual reality), and further integration of **IoT** (Internet of Things) devices, leading to more seamless and context-aware communication. - It suggests that businesses and individuals must adapt to these changes by **upskilling**, fostering digital literacy, and adopting new communication platforms to stay competitive and connected. **Conclusion:** - The MIT study on digitization in communication highlights how digital technologies are revolutionizing how we interact, collaborate, and organize both in professional and personal contexts. While offering significant benefits like enhanced efficiency and global collaboration, it also presents challenges such as information overload and miscommunication. The study emphasizes the need for organizations to embrace these changes strategically, adapting leadership, processes, and tools to succeed in the increasingly digital communication landscape. - Quasi (?) real-time availability / local marketing - privacy and data protection - owner vs user **[The attention economy]** **[AI based decisions]**  **[Avatars in the changing room]** - **Virtual fitting room solutions** are gaining more and more attention in the e-commerce and fashion industries, as they allow shoppers to digitally \"try on\" clothes, accessories, or even makeup without actually having to enter a physical store. These solutions build on a broad spectrum of technologies, including artificial intelligence (AI), augmented reality (AR) and virtual reality (VR) - **Success elements:** - **Better customer experience**: Virtual fitting rooms help shoppers better understand how a particular piece of clothing or accessory would look on them. This is especially useful for online shopping, where trial and error is lacking.\ By enhancing the user experience, they contribute to customer satisfaction and increase customer trust. - **Reduce returns:** The ability to try can reduce returns due to incorrect sizes or styles, benefiting both retailers and shoppers. - **Brand innovation and competitive advantage:** For brands, this is an opportunity to attract customers in the digital age with innovative solutions and differentiate themselves from their competitors. - **Challenges:** - **Technological limitations:** Accuracy: Although virtual fitting rooms are constantly evolving, it is often difficult to accurately reproduce how a dress looks in real life. Scale, fabric movement, and accurate rendering of shadows and lighting can be challenging.\ Hardware requirements: Virtual fitting rooms often require advanced devices such as AR-enabled smartphones, cameras, or even VR glasses, which can limit access. - **User propensity:** Not all customers are comfortable using virtual fitting rooms. Technology access and levels of digital skills may vary, hampering wider acceptance.\ For some, virtual fitting rooms are still less intuitive than traditional trying, so it may take time for it to become widely accepted. - **Apparel category limits:** Virtual fitting rooms currently work better for products like tops, clothes, or accessories. For garments where a precise fit is critical (such as shoes or trousers), technology is still limited. - **What would help further adoption:** - **Technological developments**: The development of more accurate dimensioning and simulations would help consumers to see more accurately how a product would look on them. This would require further development of AI and 3D modeling. With the development of AR and VR technologies, more and more accurate virtual trials can be realized, which better reproduces the texture and fit of clothes. - **Wider access and integration:** For wider accessibility, the technology should be optimized for platforms that are accessible to most customers, such as smartphones or laptops. Integration into popular online shopping platforms such as Amazon or Zara would also increase adoption. - **Improve user experience:**\ Simplifying technology and improving the user experience (e.g. seamless use of AR-enabled applications) could encourage customers to make wider use of virtual fitting rooms. - **Social media and Marketing support**:\ Features that allow shoppers to share products they have tried on virtually on social media platforms could increase the attractiveness and use of technology. - **Summary:** Virtual fitting room solutions are becoming increasingly successful, especially when it comes to online shopping, but they still face many challenges before becoming widespread. Technological advancements, improving user experience and broadening access will be key to their future success. **[Robotization]** - RAISA - Robotics - Artificial Intelligence - Service Automation - Check in, cleaning, concierges, chatbot - 3D (dirty, dull, dangerous) - repetitive tasks - labour saving (?!) **[Digitized sensing]** - The digitalisation of sensations and tastes is still a relatively new field, but in recent years there have been an increasing number of technological innovations aimed at making sensory experiences such as taste, smell or touch transferable in the digital space. These solutions are becoming more advanced with advances in virtual reality, artificial intelligence and sensor technology. - Digital taste perception - based on attempts to recreate human taste at biological and chemical levels using various technological means - Electrical stimulation:\ Researchers have developed devices that activate taste buds through electrical stimulation. These devices apply different electric currents to the tongue to create flavors such as sweet, salty, sour, or bitter.\ One example is the prototype called Taste Display, which uses electrostimulation to simulate different flavors, although these are far from perfectly reproducing the real experience. - Digital Lollipop:\ This is an experimental device that works on a similar principle: it tries to transmit flavors to the language with electrical impulses. The goal is for the device to be able to evoke different taste sensations in the user\'s language without having to eat real food. - **Digital fragrances (sense of smell**) - The digitization of fragrances is based on the use of olfactory sensors and fragrance emitting devices, which can transmit fragrances in the virtual world. - Olfactic displays:\ Olfactic displays are devices capable of emitting fragrance molecules to users while they are in a digital or virtual environment. These devices use fragrance cartridges or chemicals that can produce different fragrances based on their composition.\ An example is the Feelreal VR mask, which can be connected to VR headsets and is able to convey different scents to the user to enhance the virtual reality experience. - Scentee Machina:\ It is a smart fragrance diffuser that can be controlled via app and is able to emit different scents, for example, based on the user\'s environment or mood. This creates a digital fragrance experience, even while listening to music or watching movies. - **Digital touch (haptics**) - The purpose of digitizing touch is to be able to feel different surfaces, textures and movements in virtual space. - Haptic technology:\ Haptic technology develops devices that try to mimic real-world touch experiences with different vibrations or mechanical pressure. These devices are used with VR glasses or AR environments so that users can perceive the texture, temperature, and shape of objects.\ For example, HaptX gloves, which allow users to \"touch\" virtual objects while feeling their texture and shape. This technology can be particularly useful when testing virtual fitting rooms and products. - Ultrasound-based palpation:\ Ultrasonic tactile technology is another new approach that uses ultrasonic waves to create sensations on the skin. One example is Ultrahaptics, which provides contactless, airborne tactile feedback, which is especially useful in virtual and augmented reality applications. - **Digital taste and smell experiences in marketing** - These technologies have the potential to provide new consumer experiences in marketing and e-commerce. - Digital food marketing:\ Imagine that an online restaurant menu not only shows the image of the food, but also uses digital fragrance technology to convey its smell, or you can taste food with virtual taste detection devices before ordering.\ Challenges and opportunities: - Technological limitations: The digitisation of perceptions is still in its infancy and it is difficult to accurately capture the complexity of tastes, smells or touches.\ Data security and ethical issues: The use of such technologies increases privacy and ethical issues, such as how users\' sensory preferences are collected and used.\ Availability and usability: Greater adoption of technologies will require lower hardware prices and further improvements to the user experience. - **Summary**:\ The digitization of sensations and tastes is an exciting, emerging field that opens up new opportunities in e-commerce, marketing and entertainment. Although these technologies are still evolving, electrical stimulation, haptic devices and digital fragrance diffusers are already promising. Their wider uptake will be facilitated by technological developments, lowering prices and increasing user acceptance. **[Interactive advertisement]** - Interactive advertising is a form of advertising that allows users to actively participate in the advertising experience, thereby increasing engagement and a positive relationship with the brand. Interactive advertising has become increasingly popular in recent years, especially with advances in technology and competition for user attention. Here are some examples and related technological solutions: - **Interactive videos**\ Interactive videos allow users to enter the flow of content, make decisions, and influence the course of the story. - Example: Netflix\'s interactive movie \"Black Mirror: Bandersnatch\" allowed viewers to make choices at different points in the plot, shaping the end of the story. - Technology: Video streaming services use advanced interactive platforms that can track user choices and modify content in real-time based on feedback. - **Augmented reality (AR) advertising**\ AR commercials allow users to experience a mix of the real world and the digital world, interacting with virtual objects - Example: The IKEA Place app, which allows customers to use their smartphones to test how a piece of furniture would look in their own home. - Technology: AR ads use a smartphone camera, special applications, or built-in AR features of social media platforms to integrate virtual objects into the user\'s environment. - **Virtual reality (VR) commercials**\ VR advertising offers a fully immersive experience where users are transported to a virtual space where they can interact with different products and brands. - Example: The Coca-Cola VR experience during the 2014 FIFA World Cup, where users could virtually tour the stadium and participate in various virtual events. - Technology: VR ads use different devices, such as VR headsets (e.g., Oculus Rift, HTC Vive), and connect to user interactions with VR-enabled content. - **Gamified advertising**\ Gamification refers to advertisements that incorporate playful elements so that users interact with the brand in a fun way. - Example: McDonald\'s Monopoly campaign, which annually uses playful promotion to motivate consumers to buy. Users earn game pieces by purchasing different foods, which can be redeemed for prizes. - Technology: These campaigns take place on mobile apps, social media platforms or the company\'s own website, with game elements, points and prizes. - **Interactive social media ads**\ Social media platforms are offering more and more interactive features for advertisers to create direct contact with users. - Example: Instagram Stories interactive stickers like surveys, polls, quizzes allow brands to engage their followers. Brands can take advantage of this feature to get feedback or create entertaining content. - Technology: Social media platforms like Instagram, Facebook, TikTok, and Snapchat provide advertisers with built-in interactive tools to trigger real-time interaction from users. - **Interactive banner ads**\ Interactive banners are advertisements that offer higher levels of user participation than traditional click-based ads, such as quizzes, games or other interactions. - Example: Toyota\'s interactive ad, where users can customize cars from color to accessories and view the result before requesting more information about the purchase. - Technology: These ads are built on HTML5 and CSS3 to provide a dynamic and responsive experience, no matter what device or browser they\'re served on. - **Voice-controlled interactive advertising**\ With the proliferation of voice assistant technologies, more and more brands are using voice-controlled interactive ads that allow users to engage in advertising through voice interaction. - Example: A Nestlé voice ad that uses Amazon Alexa to suggest recipes while allowing users to ask questions about food and create shopping lists. - Technology: Using voice-based digital assistants like Amazon Alexa, Google Assistant, and Siri, advertisers create interactive campaigns that respond to user voice commands. - **Chatbot-based advertising**\ Chatbots allow brands to interact directly with users and provide real-time, personalized information or offers. - Example: Sephora\'s chatbot, which makes product recommendations to users, gives makeup tips, and even handles appointments in Sephora stores. - Technology: Chatbots are controlled by artificial intelligence and natural language processing (NLP) systems that can manage user interactions and provide customized responses. - **Summary**: The technological solutions of interactive advertising are evolving rapidly, and the combination of different user experiences (videos, AR/VR, social media, gamification) allows for deeper user engagement. By increasing user engagement and personalizing the ad experience, these solutions make ads more effective and memorable. **[Trends (e-commerce retail)]** - Rebirth of brick and mortar - new breed of retail stores and in-person experiences - The disruption of B2B eCommerce - changing B2B buyers' expectations are pushing the need for B2C-like functionalities - Augmented Reality - visualize items in their home or office before purchasing - Measuring the in-store ROI of digital ads, finally - ROPO: Research Online, Purchase Offline - Mobile ecommerce's biggest challenge - Mobile checkout will become a convenience - Machine Learning + AI - AI will create the perfect, customized customer experience - Role of voice and picture - change the ways they communicate and search - Internet-of-things (IoT) - browser will become one channel among many - Ubiquitous players - amazon, Alibaba the quintessential marketplaces **[Summary]** **[Corporate value chain and supply chain]** - Porter\'s value chain model - **Primary activities**: - Purchasing, manufacturing, sales, marketing, logistics - **Secondary activities**: - Tech Development, HR, Infrastructure - The value chain of **suppliers**, **buyers** and the **company** should also be taken into account - The result of the right coordination of the ecosystem of activities of several companies - Competitive advantage: **integrating** them Effect of environmental change - Purchasing and sales markets are expanding as a result of globalization - The experiment is becoming more volatile and sophisticated, with customers demanding ever stricter requirements in terms of quality, price and delivery time - The product life cycle is shortening, continuous innovation is required, and faster product development is required - The role of knowledge-intensive activities is increasing, information is an important factor of production - New infocommunication systems bridge geographical distances and enable efficient management of increasingly complex systems Key features of the supply chain - **Objective**: to serve consumer needs, balance them with costs and return on assets - **Scope**: covers the entire process, from the production of the product or service to its delivery to the final consumer - **Systems** **approach**: Integrates all actors and processes into a unified system - **Collaboration**: relationships that transcend organizational boundaries, both within and between organizations, are of paramount importance - Means of **implementation**: Cooperation and coordination are implemented through an information system in which members share information that has been kept secret until then. **[Expanded supply chain model]** **[Role of IT]** - Information is the driving force that serves as a bridge to create a coordinated supply chain. - The information must have the following characteristics to be useful: - Exact - Available on time - The information must be of the appropriate type - Information provides the basis for supply chain management decisions - Inventory - Transport - Establishment **[Use of information]** - Inventory: demand patterns, shipping costs, warehousing costs, order costs - Delivery: costs, location of the customer, size of delivery - Facility: location, capacity, timetable of the facility; They need information on trade-offs between flexibility and efficiency, demand, exchange rates, taxes, etc. **[IT's role in the supply chain]** - Information Technology (IT) - To collect and analyze information about hardware and software used throughout the supply chain - Records and transmits the information needed to make good decisions - The effective use of IT in the supply chain can have a significant impact on supply chain performance **["Importance" of information]** - Relevant information throughout the supply chain enables managers to make decisions that take into account every stage of the supply chain. - It allows you to optimize performance for the entire supply chain, not just for one stage -- it leads to higher performance for each company in the supply chain **[IT elements of the supply chain]** - Supply chain macro processes - Customer relationship management (CRM) - Internal Supply Chain Management (ISCM) - Supplier relationship management (SRM) - Also: Transaction Manager - Macro processes applied to software evolution **[Macro processes]** **[Customer Relationship Management]** - The processes that take place between the business and customers in the supply chain - Main processes: - Marketing - Sales - Order management - Call/Service center **[Processes within the company]** - It includes all processes involved in the planning and fulfillment of the customer order - ISCM processes: - Strategic planning - Demand planning - Care planning - Completion - Field Service - There should be strong integration between ISCM and CRM macro processes **[Supply chain management]** - These processes focused on the interaction between the company and suppliers upstream in the supply chain - Main processes: - Design cooperation - Source - Discussion - Buy - Supply cooperation - There is a natural fit between ISCM and SRM processes **[Transaction management]** - Enterprise Software Systems (ERP) - Previous systems focused on automating simple transactions and creating an integrated method for storing and viewing data throughout the company - The fair value of TMF exists only if decision-making improves - The extent to which TMF allows the integration of the three macroprocesses determines its value **[The future of IT in the supply chain]** - At the highest level, the three SCM macro processes continue to drive the development of enterprise software - Software focused on macro-processes will account for a larger share of the overall enterprise software market, and companies producing this software will become more successful - The key to success is functionality, the ability to integrate into macro-level processes and the strength of their ecosystems **[IT development in practice]** - Choose an IT system that addresses the most important success factors of your company - Take action and measure the value\ Match the level of sophistication to the need for sophistication - Use IT systems to support decision-making, not to make decisions - Think about the future **E-logistics** **[Logistics]** - The Logistics Management Council (CLM) is defined as: - \"Logistics is the part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption to meet customer needs\" **[Definition of e-logistics]** - Internet-based logistics - E-business logic - Using information and communication technology (ICT) to manage information flows in the supply chain - E-logistics is a dynamic set of communication computing and collaboration technologies that transforms key logistics processes into customer-centric ones by sharing data, knowledge and information with supply chain partners. - Ultimate objective of E-Logistics is to deliver right products in right quantities at right place and time to the right Customer. **[E-logistics development]** Four basic processes - Flow of goods - Information flow - Payment turnover - Ownership flow Advances in information technology - Communication plays an important role in the flow of information Faster order fulfillment process A holistic view of the supply chain process  Interfaces in the value chain - suppliers - consolidation centre - production sites - transshipment points - distribution centres - regional distribution centres - clients **Order management** **[Different levels of „Order management"]** - Freight - The freight forwarder acts as a shipping agent - Companies act as recipients - Passive ordering/freight forwarding - The forwarder passively handles order management - Companies contract with third parties to control the flow of information - Proactive ordering and shipping management - Upload a purchase order with proactive vendor management - It focuses on the effective execution of a certain purchase volume - Collaborative order fulfilment - Leading logistics provider optimizes transport between different carriers and logistics providers **[Types of purchase orders]** - On-time ordering - One shipment from specified pickup location to delivery location and specified item number - B2C, e-commerce - Periodic purchase order - The total quantity of SKUs shipped within the specified period, quantities are determined by the buyer, the seller activates releases - Purchase blanket order - The buyer allows the seller to select SKUs, quantities, and dates within a specified time frame **[The complexity of the order from order initiation to delivery execution]** **[Order management process]** **Disruptive technologies in logistics** **[Cloud computing]** - remote servers hosted on the Internet for storing, managing and processing data - third party operates the ICT system - reducing barriers to entry for SMEs - offers flexible technology for the freight transport sector - Technology Service Providers (TSPs): e.g.: - Global Positioning System (GPS), - infrastructure as a service IaaS), - software as a service (SaaS), - platform as a service (PaaS) **[Social Media]** - a digital platform for people to interact to create, share and exchange information and ideas - communication with external parties and internal employees - strengthening links between actors in the supply chain - offers free text and multimedia messaging, video calls, PHOTO sharing - for example: radio frequency identification (RFID) can be integrated with Twitter (X) to record the movement of goods - corporate social media or organizational social networking system (OSNS) **[All-round computing]** - Pervasive computing includes: - ubiquitous computing - environmental intelligence\* - \"sentient computing\*\* - Internet of Things (IoT) - microelectronic sensors - wireless communication\ \*Ambient intelligence (AmI) is a concept that refers to integrating technology into an environment to create intelligent, responsive and adaptive systems that can improve the quality of life and well-being of individuals.\ \*\* Sentient computing is a form of ubiquitous computing that uses sensors to detect the environment and respond accordingly. **[Internet of Things]** - Various things, objects are connected to each other through wired and wireless networks and are able to interact with each other. - Introducing IoT to your supply chain: - product tracking - Real-time routing - dynamic vehicle scheduling - container handling\ RFID tags allow you to track individual devices, temperature, humidity\ Shelf sensors ensure inventory is visible\ Mobile payment reduces queuing **[Big data and analytics]** - Big Data Attributes - volume: data scales - speed: analysis of streaming data (speed of arrival of data and time required to process and understand data - Variety: OD data in different forms -- structured and unstructured - Credibility: data certainty -- data quality - Possible applications of big data in logistics - forecast - inventory management - transport management - Human resource management **[Artificial intelligence]** - Things and machines acquire the ability to know and think like humans. - Key applications of AI in the supply chain, examples: - robotics and autonomous vehicles - computer vision - language detection - Virtual agents - machine learning - To automate trucks, you need: - spatial recognition and - understanding of the vehicle\'s immediate surroundings, - ability to predict the behavior of other vehicles, pedestrians - Robots in the warehouse: - collection of pallet loads and containers - order fulfillment, robotic picking (e.g. in online e-commerce) - \"goods-to-picker\" mobile robot exercise - AI in retail, examples: - forecasting the development of needs, - optimize the product range - dynamic pricing - personalized promotion - Provides immediate assistance with virtual agents - automate payment in store - \"Last mile\" transport by drones - AI-based conversational technology in customer service **[Immersive technologies]** - Immersive technologies blur the boundaries between the pysical and digital (or simulated) worlds to create a sense of immersion: - virtual reality (VR) - augmented reality (AR) - mixed reality (MR) - Application of immersive technologies in logistics: - on-the-job training - real-time process instruction (e.g. AR-based picking system via head-mounted system) - navigation and wayfinding aids - digital interaction with customers and partners **[Distributed ledger technology (DLT\*)]** - DLT allows: - decentralized currencies - digital \"smart contracts\" (smart contracts) - economic transactions between the parties involved, - recording, tracking, transaction of digital assets - Types of distributed ledgers based on access control mechanisms: - Public ledger: Public and users can remain anonymous (e.g.; Ethereum) - Authorized ledger: participants must obtain an invitation **[Typical use cases for blockchain in the supply chain]** - Product origin and traceability based on product \'digital footprint\' - Process and operational improvement (e.g. digitisation of document transfer and acceleration of data flow) - Automation and smart contract - Trade finance (e.g. faster credit risk assessment, instant monitoring) - Anti-corruption, transparency **Fintechs in trade and commerce** **[Why?]** - Unbanked - Profitability - CX - Share of Digital engagement **[What?]** - Fintechs - a portmanteau of \"financial technology,\" it refers to the use of technology to provide innovative financial services and solutions. - encompasses a wide range of financial activities, products, and services that leverage cutting-edge technology to improve and streamline traditional financial processes and enhance the overall customer experience. - Revolut, Alipay, Paypal, Wise - In what business segments do they operate? - How are they different from banks? - Latest trends **How are fintechs different from banks?** +-----------------------+-----------------------+-----------------------+ | | Fintechs | Banks | +=======================+=======================+=======================+ | Business Model | -technology-driven | -offer a wide range | | | companies that focus | of financial | | | on providing | services, including | | | innovative and often | savings accounts, | | | specialized financial | loans, mortgages, | | | services or products\ | wealth management, | | | -typically operate in | and investment | | | specific niches | banking\ | | | (payments, lending, | -have a broad | | | wealth management, or | presence in both | | | insurance)\ | consumer and | | | -often leverage | commercial banking | | | digital platforms and | and are known for | | | data analytics to | their extensive | | | offer more tailored | brick-and-mortar | | | and cost-effective | branch networks | | | solutions | | +-----------------------+-----------------------+-----------------------+ | Technology and | -known for their | -adopted technology | | Innovation | agile and | and digital channels, | | | technology-centric | they tend to have | | | approach\ | legacy systems and | | | -prioritize | processes that can be | | | innovation, often | less agile | | | using cutting-edge | | | | technologies | -innovation in | | | (blockchain, | traditional banks can | | | artificial | be slower due to | | | intelligence, and | their size and | | | data analytics) to | complex regulatory | | | enhance user | requirements | | | experiences and | | | | streamline financial | | | | processes | | +-----------------------+-----------------------+-----------------------+ | Customer-Centric | -often place a strong | -have long-standing | | Approach | emphasis on user | customer | | | experience, | relationships and | | | simplicity, and | offer a broad array | | | customer-centric | of services | | | solutions | | | | | -However, their size | | | -known for their | and legacy systems | | | mobile apps and | can sometimes lead to | | | user-friendly | a more bureaucratic | | | interfaces | approach, potentially | | | | resulting in slower | | | -aim to disrupt | response times and | | | traditional financial | less innovative | | | services by providing | customer experiences | | | more accessible and | | | | efficient options for | | | | consumers | | +-----------------------+-----------------------+-----------------------+ | Regulation and | -must navigate | -have | | Compliance | financial regulations | well-established | | | and licensing | regulatory structures | | | requirements, which | and compliance | | | vary by jurisdiction\ | processes\ | | | -the regulatory | -they are heavily | | | environment is often | regulated and | | | evolving as | required to adhere to | | | authorities adapt to | strict standards to | | | the rapidly changing | ensure financial | | | industry | stability and | | | | consumer protection | +-----------------------+-----------------------+-----------------------+ | Scale and Network | -tend to be smaller | -have a significant | | | and more specialized, | advantage in terms of | | | focusing on specific | scale, with large | | | market niches | customer bases, | | | | extensive branch | | | -they may collaborate | networks, and | | | with traditional | diversified financial | | | banks or financial | services | | | institutions to scale | | | | their operations | -they often offer a | | | | one-stop-shop for a | | | | wide range of | | | | financial needs | +-----------------------+-----------------------+-----------------------+ | Risk and Credit | -often use | -typically rely on | | Assessment | alternative data and | traditional credit | | | advanced algorithms | scoring models and | | | to assess credit | extensive historical | | | risk, making it | data for credit | | | possible to provide | assessment | | | credit to underserved | | | | populations or | | | | businesses | | +-----------------------+-----------------------+-----------------------+ How? - Banking as a service - the provision of retail or wholesale banking products and services, in context, as a service using an existing licensed institution's secure, regulated infrastructure with modern API-driven platforms - the BaaS value chain consists of four key players - consumer: end user of the financial product delivered through BaaS ecosystem - distributors (embedders): organizations that embed banking service directly into their existing customer journeys for retail or corporate customers (retailers, e-commerce businesses) - enablers: usually bigtechs and fintechs that help to embed financial services into third-party platforms and apps - providers: financial institutions holding a banking license and offering regulated and complaint financial products - Trade finance example - Use cases (Sole trader, Automotive) What's next? - Key themes  - Future trends - Generative AI - Stripe is already using GPT-4's enterprise beta to carry out operational tasks such as streamlining UX, triaging customer issues, and combating fraud - In the future AI will - facilitate so-called digital financial concierges, which will complete tasks such as paying bills, sending remittances, checking budgets, disputing charges, and the like---in lieu of human interaction. - simulate cyberattacks and generate decoy data that will help train models to protect FIs. - enable the hyper-personalization of financial products and services, - analyze vast swaths of data to identify patterns, and - facilitate human decision-making - bring significant efficiencies to customer-service and administrative centers in labor-intensive industries such as insurance and wealth management. - API based connectivity: - Open banking 2.0 has the potential to create seamless modular access and permit the standardization of interfaces for banks, corporates, and governments. - Such entities will be able to plug in through APIs to gather customer data, access and provide advanced f inancial services, and facilitate collaboration between FIs worldwide. - APIs could also be used to amass data from various unrelated sources such as social media, news, and personal devices to create highly accurate risk assessments for use in credit underwriting, fraud detection, credit scoring, insurance underwriting, and the like - Distributed ledger technology - As a global block chain-based infrastructure, DLT can be used to create a worldwide transactional and settlement platform using stablecoins---akin to an alternative payments network. - DLT also offers a secure, tamper-proof, global identity-verification system that protects the privacy of the individual while also facilitating Know Your Customer (KYC) authentication. - Decentralized supply chain platform that enables businesses to obtain financing more efficiently through a shared ledger of transactions that reduces the risk of fraud. - Tokenization of complex, real asset classes (including regulated digital currencies). - Self-executing (smart) contracts can verify and execute the terms of an agreement between a buyer and a seller. - Central Bank Digital Currencies (CBDCs), on top of DLT, can provide a standardized and interoperable digital currency that can be used across different countries and currencies. CBDCs can thus help blaze a trail for real-time settlement infrastructure that enables instant ac count-to-account (A2A) and cross-border payments. - Quantum and Edge Computing - Enables to solve extremely complex problems in a fraction of a second, benefiting portfolio selection, asset allocation, and overall business optimization programs. - Ultra-sophisticated underwriting, anti-money-laundering initiatives, anti-fraud neural nets in real time, - synthesis of massive amounts of global data, and the development of next-gen encryption and financial cybersecurity technologies - Embedded-Hardware IoT and Biometrics - energy-efficient mortgages and home insurance - advanced smartwatches can monitor health statistics, with the resulting behavioral changes by users leveraged to tailor health insurance policies down to the risk of specific diseases - IoT devices can also be used to trigger automatic financial transactions, which can be especially practical if combined with smart contracts. - Facial recognition for example in supermarkets, where the software is plugged into consumers' bank and credit card details at checkout counters How Fintech could be applied to Automotive? - **In-Car Payments:** payment processing infrastructure can be integrated into connected car systems to facilitate in-car payments. This can be used for services such as parking, tolls, fuel, and even in-car purchases, making the payment process more convenient for vehicle owners. - **Ride-Sharing and Mobility Services:** Companies in the mobility and ride-sharing sector can use fintech to handle payments for ride services, including fare collection, subscription billing, and payouts to drivers. - **Fleet Management:** Businesses that operate vehicle fleets can leverage Fintechs to manage payments for vehicle rentals, maintenance services, and fuel expenses. - **Electric Vehicle (EV) Charging:** Fintechs can be used in EV charging stations to enable customers to pay for electricity usage. This is particularly relevant as the electric vehicle market continues to grow. - **Subscription-Based Services:** Automotive companies that offer subscription-based models for vehicle access or related services can utilize Fintech for billing and recurring payments. - **Marketplace Payments:** If an automotive platform or marketplace connects buyers and sellers of vehicles, parts, or services, Fintechs can facilitate transactions and payouts within the marketplace. How fintechs help in Trade Finance? \ Impact on digitization on trade Several steps in the process presentation: supply chain, procurement, inventory management, are there any online communities **[What is omnichannel marketing?]** - When you interact with your customers over whatever channels they prefer---at a brick-and-mortar store, over the internet, via text, or through social media---that's omnichannel marketing. - The prefix "omni" means "all," and "channel" is a reference to the many ways customers might interact with a company---in physical stores, by surfing the web, on social media, and in emails, apps, SMS, and other digital spaces. And this omnichannel approach can be a powerful way to meet your customers where they are, providing them good service in line with their preferences and needs. - More and more, customers move across all channels---in person, online, and beyond---to get what they want. But not every customer is looking for the same thing, and omnichannel marketing acknowledges that. Some people want more services for certain transactions; others prefer low-touch, 24/7 interactions. - Companies provide a set of seamlessly integrated channels, catering to customer preferences, and steer them to the most efficient solutions. **[Why is omnichannel important?]** - More than half of B2C customers engage with three to five channels each time they make a purchase or resolve a request - Omnichannel customers shop 1.7 times more than shoppers who use a single channel. They also spend more. - The average customer looking to make a single reservation for accommodations (like a hotel room) online switched nearly six times between websites and mobile channels. - Consumer expectations are dramatically changing. While price and convenience are still primary considerations, customers are increasingly weighing them against a demand for competence in specific categories and customer experience. - This dynamic is especially true for categories that are highly fragmented or in which advice to customers plays a large role in sales---such as furniture, do-it-yourself (DIY), apparel, pet care, and even more concentrated categories such as consumer electronics. **[Omnichannel vs Multichannel]** - The key difference is the focus at the center of all efforts. - Omnichannel is a **customer-centric approach** in which all channels are integrated so the customer has a unified and **consistent experience** whether they are at a physical store, using an app, or on a website. - Multichannel, in contrast, tends to **revolve around products** instead of customers. It aims to inform as many people as possible about the product or brand, and the channels are not linked, so the customer experience is often different for each channel. - **Starbucks**: Starbucks provides an exemplary omnichannel loyalty program where customers can earn rewards, place orders, and customize drinks on the app, website, or in-store. Their app allows users to order and pay ahead, saving time and adding convenience, while rewards seamlessly sync across all platforms. Starbucks also uses its app to gather data to personalize offers and improve customer experiences. - **Walmart**: Walmart's omnichannel strategy includes options like curbside pickup, in-store returns for online purchases, and Walmart+ subscription perks for both online and in-store shoppers. Their app and website allow customers to access services like "Scan & Go" for quicker shopping and "Delivery Unlimited" for home delivery, blending the digital and in-store shopping journey.7 - **IKEA**: IKEA offers services like the IKEA Place app, where customers can visualize furniture in their home before buying. Their online and in-store services are tightly integrated, allowing customers to track inventory, schedule deliveries, and manage purchases across platforms. IKEA's "Click and Collect" option lets customers order online and pick up in-store, while personalized home styling services add further value. **[Shoppers behaviours change]** - Customers want a compelling and personalized omnichannel user experience with robust digital capabilities, both online and offline.  - About 60 to 70 percent of consumers research and shop both in store and online - Over 1/3rd of Americans made omnichannel features---think buying online and picking up in store or curbside---part of their regular shopping routines since the COVID-19 pandemic emerged. - Nearly two-thirds of those individuals plan to continue doing so. - And younger buyers, like Gen Zers, embrace omnichannel enthusiastically; these customers don't think in terms of traditional channel boundaries, and they expect brands and retailers to provide a seamless experience, no matter where they are. - As a consumer, when I go on the retailer's website or app, I expect to see availability, a connection to what's in the store, and a way to order things that I can pick up in store. I also expect to be able to stand in the aisle in the store and research a product. Today, consumers are figuring out workarounds to do all those things: they're switching over from the app to Google, looking up the product, and searching for reviews. - Organizations that [make shopping a seamless omnichannel experience](https://www.mckinsey.com/featured-insights/the-next-normal/shopping), or provide an app that helps customers find their way or see what's in stock in the store, are already creating [experiences that are a win for omnichannel customers](https://www.mckinsey.com/industries/retail/our-insights/adapting-to-the-next-normal-in-retail-the-customer-experience-imperative). **[Trends]** - Today, most Gen Zers begin their shopping journey online, highlighting just how important digital channels are for marketers looking to court their spend. - **Social media** is a **shopping** destination for Gen Zers, with 53 percent saying they've used "buy" buttons on social media networks. - Gen Z ranks **online reviews** from other shoppers as the most important factor when shopping, with many of those reviews published directly on social media via influencer and peer posts. - Gen Z consumers begin their shopping journey online and are heavily influenced by social media, their **share of mass merch (in-store)** dollars is higher than every other generation before them. - Together, their **in-store** mass merch and grocery **purchases** make up almost **50 percent** of their share of dollars, proving that brick-and-mortar shopping remains vital, and that Gen Z will be the purest "omni" shopping generation to date - They're digital, they're in-store, they're looking to social commerce, and they're direct-to-consumer. They're also **informed and influential**. - In the T&D space, Gen Z is **spending** **more on electronics** than on household appliances. Headphones/headsets and mobile computing are their most purchased categories, with a spend comparable to Millennials and Gen X. - **On social media**, health **and beauty is the most popular category** for Gen Z. This year, 81 percent of TikTok dollar sales are expected to come from health and beauty, solidifying it as a key Gen Z category for both brands and retailers. - Other **health and nutrition** categories also matter a great deal to Gen Z, having a large impact on both T&D and CPG. T&D - Despite their youth, members of Gen Z rank "**good health**" as No. 1 among the definitions of the "Good Life" and recognize that natural ingredients are healthier. - There's never been a generation more worthy of **omnichannel** investment (and garnering the correct data to fuel your omni strategy) than Gen Z. **[Customer experience drivers]** omnichannel leaders are adapting to the next normal in customer experience by taking initiative across five key actions - DIGITAL: - Dial up the acquisition engine and drive traffic to digital assets - Extend digital-channel presence and engagement (Apps, online communities) - Ensure that the digital experience is truly 'zero friction.' (UX design) - Innovation: - Bring an in-store feel to the digital experience (personalized virtual appointments, content livestreaming, community building, virtual fitting rooms, AR...) - Launch or diversify delivery mechanisms. - Partner across retail to enhance convenience. 1. double down on digital - ***Dial up the acquisition engine and drive traffic to digital assets.***  - investments in online acquisition, reallocate funds for offline media to digital channels. - paying closer attention to paid search (for example, looking at not just keyword performance but also consumer intent) - improving the "shoppability" of social channels (for example, through featured products and clickable content on Instagram). - ***Extend digital-channel presence and engagement. *** - Prioritize a mobile app or point-of-sale experience, - Building and nurturing online communities. Retailers are augmenting direct customer interactions with engagement in apps and other relevant channels. Nike China, for example, activated its digital community by offering virtual workouts and saw an 80 percent increase in weekly active users of its app. - ***Ensure that the digital experience is truly 'zero friction.' *** - Designing web pages that are optimized for digital shopping. For example, making the highest-selling (and ideally highest-margin) products easy to find helps to make the customer journey more seamless. The first page of Amazon listings receives nearly two-thirds of all product clicks. - Increasing load speed to best-in-class levels is also paramount: the ideal load time for peak conversions is no more than 2.7 seconds (and every 100-millisecond delay above that can reduce conversion by up to 7 percent). - Additional priorities include high-functioning landing pages and consistent marketing messages. - With more customers now engaging through mobile devices, retailers must ensure that all digital channels are integrated and offer consistent services (such as payment options) and experiences (such as shopping carts updated in real time across devices). 2. inject innovation int omnichannel - ***Bring an in-store feel to the digital experience.*** - Virtual appointments, where sales associates use videoconferencing platforms to offer personalized attention to customers. Sales agents help individuals find products that meet their needs while learning ways to better serve customers online. - Livestreaming to engage with customers and increase revenue and loyalty by sharing experiential content. Trained staff can create content that addresses customer challenges in an entertaining way while promoting current products and new launches. - Virtual Try-On, which uses augmented-reality (AR), machine-learning, and computer-vision techniques - ***Launch or diversify delivery mechanisms.*** -  Reassessing store formats to support third-party delivery services - creating "speed zones" near the front of the store and stocking them with the most popular items to enable delivery companies to accelerate pick, pack, and delivery of orders. - ***Partner across retail to enhance convenience.*** - Footwear retailer DSW, for example, has partnered with grocery chain Hy-Vee to offer products through the grocer's extensive network of physical locations. 3. transform store operations and win on "SafeX" - Online and offline channels are no longer substitutes or competitors. Instead, they are increasingly complementary; online channels provide convenience to consumers, but offline channels offer important opportunities for consumer engagement, brand building, and pickup. - Clearly, physical stores still have a crucial role to play in omnichannel networks. The optimal configuration will be unique to each player and environment. - Omnichannel players can choose from three main approaches when reconfiguring their stores - Archetype 1 retains the current layout of the physical store, with online picking and pickup services layered on top. - Archetype 2 repurposes a portion of the floor layout for order pickup. - Archetype 3 involves a full transformation of the retail space into a dark store. - 3 key dimensions to consider - Consumer: - *What consumers are buying---and how (*physical size and weight of individual item) - *Consumer experience inside the store* (queue management,  store size, layout, average online-order basket size, and consumer in-store expectations) - *Target last-mile delivery speed* (delivery time expectations: immediately? Next day? Pricing,) - Infrastructure - *Density of stores and local last-mile network (*end-to-end click-to-ship delivery in two hours or less) - *Store layout, fixtures, and signage* - *Fast, integrated IT systems and inventory transparency (*accurate inventory levels must be available in real time) - *Capital availability* - Store operations - *Assortment size against operational considerations* - *Costs per order and target delivery speeds* - *Employee upskilling for in-store excellence* - The evolving customer journey - Jonathan arrives at his favorite grocery retailer, - The store recognizes him, its systems alerted to his presence either as his smartphone connects to the in-store Wi-Fi, or perhaps by a facial-recognition technology that he has signed up to use. - The store accesses the shopping list he's been building at home by scanning items with his phone as he uses them up. - As he walks the aisles, smart shelf displays illuminate to show the location of those items, while also - highlighting tailored offers, complementary items, and regular purchases that didn't make it onto the list. - Jonathan is tempted by a new, personalized promotion that pops up on his phone as he approaches the prepared-meals aisle. But because he prefers organic foods, he wonders about the product's ingredients. - As he scans the package with his smartphone, an augmented-reality display reveals the origin of its contents, along with its nutrition information and even its carbon footprint. - His bag full, Jonathan leaves the store. There was no need to check out: RFID scanners and machine vision systems have already identified every item he packed, and his credit card, already on file in the retailer's systems, is debited as he passes through the doors. - The evolving Associate journey - David works part time as an associate in the store's fresh-foods department, fitting in shifts around his studies and family life. - He negotiates his schedule each week using a mobile app. The store runs a bidding system, and staff can earn a premium by volunteering for busy or hard-to-fill shift. - The technology also makes it easy for David to trade shifts when he has a conflict. - David loves working there because he is passionate and knowledgeable about food - His duties include some manual tasks including stocking or picking for online orders, but the work is light. Sensors on and above the shelves monitor the status of stock, a machine-learning system plans the replenishment schedule, and items are delivered or taken away by robot carts that glide silently and safely through the store. - David spends most of his time interacting with customers, offering advice on new products and recipes, or answering their questions. - He has a hand-held terminal that he can use to call up information on each customer's preferences and shopping habits. If a customer can't find something on the shelves, he can pinpoint the location and real-time stock level of every item at a glance, or suggest different items based on that customer's shopping habits. - The evolving Associate and manager journeys - Rebecca, the store manager, is thinking about plans for a big new promotion that starts next week. The project will involve significant changes to the range of items on display including setting new fixturing in the produce area. - The store is always adapting its stock and presentation, and Rebecca spends most of her time working with colleagues to improve and fine tune its offerings - It helps that many previously time-consuming tasks, like associate scheduling and reporting, are now handled automatically by artificial-intelligence tools. - Her phone alerts her when a situation needs real attention in real time, such as a promotion that's not selling as well as in other stores. That means she can focus her efforts on performance and service improvements, aided by the store's sophisticated performance-analysis systems. - David and Rebecca already have a pretty good idea how the new promotional set will work because they've tried it out in virtual reality, using an interactive digital twin of the store. Conversations with customers have given them an idea for tweaking the offer's presentation, and they are discussing the possible changes now to boost sales, rather than rigidly adhering to a formula devised handed down from above. 4. reimagine the physical network - **Evaluation of stores and optimization of their network**. - Cutting-edge data sources can be used to get a detailed view of micro traffic patterns. - Determine if store performance is the result of underlying intrinsics or just the physical store location - Four-wall profitability should be a comprehensive and holistic measure that takes into account the cross-channel sales contribution of the store. - If a retailer exits a market, will there be a loss in online sales? If a store is added, what is the halo effect on online penetration? - Retailers can use four-wall profitability and cross-channel strategic importance to cluster stores by the potential actions: transform and grow, reopen as usual, reassess their role, and renegotiate leases or consider closure - **4-wall profitability** refers to the profitability of a business or operation when you consider only the direct costs and revenues associated with a specific location or unit, without accounting for broader corporate overhead, shared services, or other central expenses. - In the context of retail or franchising, the \"4 walls\" are the literal boundaries of a store or location---everything that happens within those walls. **4-wall profitability** focuses on the following: - **Revenue**: The sales made directly at that location. - **Direct Costs**: The costs directly tied to running that specific location, such as labor, utilities, rent, and inventory. - By calculating 4-wall profitability, businesses can assess whether a specific location or unit is profitable in its own right, without considering other corporate-wide expenses like corporate salaries, marketing, or R&D. - The formula for 4-wall profitability might look something like this: - **4-wall Profitability = Revenue from the location - Direct Costs of the location** - It helps businesses make decisions on whether a specific location is contributing positively to the overall financial health of the company or if it's underperforming. - To accurately account for the **cross-channel sales contribution** of a store, you need to assess how its physical store activities drive or are impacted by sales in other channels (like e-commerce, mobile, or social media). This is especially important in today\'s retail landscape, where customers often research or purchase across multiple touchpoints before making a final decision. - Here are several ways to measure and incorporate the cross-channel sales contribution of a store: **1. Attribution Models** - **Last-Click Attribution**: This model gives full credit to the last interaction before a sale, often the last touchpoint (e.g., a customer making a final purchase online after visiting a physical store). It helps to measure how the store visit influenced an online purchase, but it may underrepresent the role of other touchpoints. - **First-Click Attribution**: The first interaction gets the credit, helping to determine if a store visit was the initial step in a customer\'s journey. - **Multi-Touch Attribution (MTA)**: This more sophisticated model attributes a percentage of credit to each touchpoint across the customer journey. This would include physical stores, online ads, social media interactions, emails, and more, providing a more holistic view of cross-channel influence. - **Time Decay Attribution**: This model assigns greater value to touchpoints closer to the point of purchase but still gives credit to earlier interactions. It helps measure how a store visit may influence a later online purchase. **2. Store Visit Data Integration** - **Foot Traffic Analytics**: Modern technology, such as beacons, geofencing, or mobile apps, can track customer visits to a store and correlate them with online purchases. By integrating foot traffic data with e-commerce and CRM systems, you can measure how many online purchases were influenced by physical store visits. - **Click-and-Collect/Buy Online, Pick Up In-Store (BOPIS)**: Track sales where the customer places an online order but chooses to pick up the items at the store. This is a direct indicator of how physical stores contribute to online sales. **3. Unified Customer Profiles and Loyalty Programs** - **Customer Journey Mapping**: Integrate data from various customer touchpoints (in-store, online, app) to create unified customer profiles. By linking their physical store visit data with online browsing or purchasing behaviors, you can more accurately attribute cross-channel sales. - **Loyalty Program Data**: Loyalty programs can offer deep insights into how in-store purchases contribute to future online or omnichannel buying behavior. By monitoring points earned or redeemed both in-store and online, you can better understand the cross-channel interaction. **4. Online-to-Offline (O2O) Metrics** - **Webrooming (Research Online, Purchase Offline)**: Track customers who browse products online, either via a website or app, and then visit the physical store to purchase the items. This can help measure how much your online presence drives foot traffic to stores. - **Showrooming (Research Offline, Purchase Online)**: Track cases where customers visit the store to check out products in person but purchase them online. You can use this data to assess whether your physical store is helping drive online sales, especially if the store has a limited selection or if the customer finds a better price or convenience online. **5. Omnichannel Revenue Sharing** - Develop a **revenue-sharing model** that allocates a portion of online sales to the store based on factors like the location of the store, its role in the customer journey, or the geographic proximity of the customer. For example, a customer who buys online but is located near a physical store might result in that store receiving some credit for the sale. - Use tools like **store-specific promo codes**, **geotargeted marketing**, or **click-to-call tracking** to measure how often a store visit (or store-related interaction) contributes to a purchase in another channel. **6. Point-of-Sale (POS) and E-Commerce System Integration** - By linking your **POS system** with your **e-commerce platform**, you can track how many sales originated in-store but were influenced by online interactions (such as browsing the website before making a purchase) and vice versa. For example, a customer might place an online order and later make an in-store purchase to complement their order. - Similarly, ensure your **inventory management system** can track both online and offline stock levels, especially for items that might be ordered online and fulfilled in-store, or vice versa. **7. Customer Surveys and Feedback** - **Post-Purchase Surveys**: Ask customers how they discovered the product or what influenced their decision to buy. Including a question like \"Did you visit our store before purchasing this product?\" helps identify the role of in-store interactions in driving online or multi-channel sales. - **Exit Surveys for In-Store Shoppers**: Similarly, when customers are in the store, ask if they've visited your website, app, or used social media to research or check prices before making the in-store purchase. This helps to track how in-store visits correlate with online activities. **8. Sales Channel Hierarchy** - **Segmentation by Channel**: Segment sales data to assess the contribution of physical stores relative to other channels. By tracking sales by channel (e.g., direct in-store sales, online, mobile), you can gauge how in-store experiences influence other channels. - **Cross-Channel Promotions**: For example, if you run a promotion in-store (e.g., \"Buy in-store, get a discount online\"), you can track how those promotions drive traffic and sales in other channels. **9. Customer Behavior Analysis Tools** - **Google Analytics**: For stores with an integrated online presence, tools like Google Analytics can show the interaction between in-store and online behavior. You can track which locations or campaigns result in greater online engagement and purchases. - **Heatmaps & Session Recording**: Tools like Hotjar or Crazy Egg can track how customers interact with your website after visiting your physical store. Understanding where customers click or how they browse post-store visit can offer insights into cross-channel behavior. **10. Sales Conversion Tracking** - Track how many visitors to your website or mobile app (who are located near or in proximity to a physical store) convert into sales after a store visit. This helps you understand if your physical store is acting as a **conversion catalyst** for online sales. 5. embrace an agile operating model - Moving beyond surveys as a mechanism for customer input and toward near-real-time tracking of consumer trends and behavior shifts - Generate insights from customers' data and construct targeted retention plans, messages, and offers to maintain the customer relationship in this era of brand switching and cost consciousness - Monitor social media and identify real-time trends - Bring customers into the design process to share feedback as ideas develop - Develop new offerings: A rapid approach to tests and trials can enable retailers to launch offerings at scale more quickly and avoid losing share in the face of shifting consumer behavior **[Omnichannel supply chains combine best practices with digital innovation]** **Essential questions for each of the building blocks of omnichannel excellence** - **Consumer-centric supply chain strategy** - How many supply chain segments are required to deliver the supply chain mission, and what is the objective of each? - What is the customer offering across different segments, and how can