More digital capabilities, better outcomes
The more digital commerce capabilities companies adopt, the better they perform. We created a measure of adoption based on a weighted average of capabilities adopted, with each capability’s impact changing based on its difficulty to adopt.
For example, adopting verified reviews is weighted less when compared to adopting digital twins due to complexity. We further grouped respondents based on this measure and calculated the average performance score for each group (Figure 2).
Finally we used multivariate analysis to determine the effect of adoption on performance.
Figure 2: More digital commerce capabilities adopted = higher performance score
Performance score was calculated by assigning points to how companies reported performance on their chosen top-five desired outcomes in the past fiscal year. The five-point scale of performance ranged from worsened significantly (-2 points) to improved significantly (+2 points), making the summed-up performance score range from -10 to +10 for five outcomes. The adoption tiers are as follows: Low = Bottom 30% of adopters, Middle = Middle 40% of adopters, High = Top 30% of adopters.
Source: Infosys Knowledge Institute
We found that a 10% increase in adoption correlates with a 3% increase in performance on customer, financial, and strategic outcomes, when controlling for outside factors. Figure 2 illustrates that the top 30% of capability adopters outperformed the rest on customer, financial, strategy, and operations outcomes.
While our data shows that the more capabilities a company adopts, the better it performs, it’s clear that some capabilities deliver more than others. To investigate this, we identified 38 digital commerce capabilities along the five stages of the customer journey: discover, evaluation, purchase, after sales, and engagement. We then aligned these capabilities with three horizons, based on the sophistication required to adopt:
• Horizon 1 (H1) capabilities represent the baseline for digital commerce, encompassing the most adopted fundamental capabilities. Although crucial for digital commerce delivery, these capabilities alone do not offer a competitive edge.
• Horizon 2 (H2) capabilities are what companies should focus on now. These are more sophisticated capabilities that many are in the process of implementing.
Several of these capabilities, notably those focused on personalization, are providing correlate with higher performance in customer, financial, strategic, and operational outcomes.• Horizon 3 (H3) capabilities are what companies must prepare for in the future. These are more of the cutting-edge capabilities, adopted at a lower level in many cases, and often have yet to prove their worth in terms of delivering business value.
There are a lot of capabilities which are believed to be helpful for the business, but most companies find it difficult to ascertain the actual value when implemented. While the impact of some capabilities is easier to determine, it is extremely hard for others such as personalization where there are less defined means of measuring.
Depending on the maturity of the digital commerce organization, companies may want to tackle easier H1 capabilities first.
But more complex capabilities such as personalization, or AI agents, can lead to better performance on business objectives in the long run. Our analysis also indicates that an organization gains on performance with every additional capability implemented. H3 capabilities, primarily automation and artificial intelligence (AI), improve overall performance by 1%.
As a final note on horizons, it is important to understand that digital commerce capabilities don’t build upon one another across horizons. These capabilities do not build sequentially.
Figure 3: Digital commerce experiences by adoption level and likelihood it increases performance tier
H1 capabilities are the table stakes for digital commerce. These include channels of selling (websites and apps), and foundational capabilities required for marketing, pricing, customer assistance, and digital supply chain management (Figure 3).
However, verified reviews and self-service chatbots or voice bots for customer assistance correlate with better performance, making them must-haves for every organization.
Most companies have already enabled e-commerce through brand websites and mobile apps.
The following are widely implemented: traditional and social media marketing; search engine optimization); chatbots or voice bots for customer assistance; and automated taxation, invoicing, and pricing systems.
90% of respondents indicated that they plan to adopt most of these capabilities within the next two years.
Companies should add as many digital commerce capabilities as possible, but personalization has the highest impact.
We found that implementing personalized customer service, personalized offers, and co-browsing to help customer experience products, correlate with top performance (5%, 8%, and 7%, respectively).
Personalization spans beyond in-person and online experiences to 3D immersive environments. It enables customization of ads, product recommendations, pricing, and even user interface, catering to each stage of the customer journey.
Companies primarily focus on personalization, along with customer assistance and loyalty management initiatives (Figure 3). However, most companies still implement personalization in (a) customer service with context persistence across channels (46%), (b) offers and pricing (58%), and (c) content delivery (56%).
Personalization is no longer a luxury, but a necessity in today's digital experience landscape. By tailoring customer interactions and anticipating their needs, businesses can not only improve customer satisfaction, but also increase conversions and loyalty. The ability to deliver a personalized experience can be the difference between a one-time customer and a lifelong advocate.
Personalization capabilities are only as good as the technology driving them: data and systems that generate that data, analytics systems that draw insights, and the tools that drive actions on those insights.
The first step is to get product recommendations right through behavioral assessment and targeting relevant content.
For example, an online travel agent (OTA) can track attributes of a user’s search process, including location, family size, age groups, and trip timeline. If the user has bought a summer trip, the OTA might recommend winter trips to encourage repeat purchases.
Customer assistance is also a top priority, with significant companies currently investing in co-browsing, like remote screen sharing by sales representatives to assist customers in experiencing and using products or services (45%).
Co-browsing helps businesses instil confidence in their customers.
For instance, IQGeo is a geospatial software company that uses co-browsing to walk their customers through the functionality of their products.
H3 capabilities focus on raising performance. Targeted and automated programmatic ad buying increases the likelihood of an organization being in the top quartile of performers by 6%. However, H3 capabilities are still in their nascent stage. Less than one-fifth of our surveyed companies have implemented most of these capabilities (Figure 3). Immersive technologies, such as 3D virtual environments, avatars, digital twins, and devices (headsets), evolve continuously and uncover value- driven applications across industries.
These applications primarily revolve around realistic 3D product trials based in virtual reality (VR) and augmented reality (AR) that help reduce returns and increase customer engagement. With advancements in AI, the digital commerce space will likely become automated. while over 80% indicated they will implement each capability (except voice commerce) within the next few years.
While, the least implemented capability is voice commerce, or purchases powered by voice commands given to AI-based agents, with 46% not even planning to implement it.
Current market signs indicate that voice commerce isn’t meeting expectations. In 2022, Amazon was reportedly set to make $10 billion in losses from the business unit that Alexa operations fall under.9
H3 capabilities have less adoption now. However, some, such as 3D product trials and support, will be among the most widely adopted capabilities in the next two years.
Other capabilities besides personalization affect digital commerce performance and outcomes. We used linear regression analysis to understand the relationships of all 38 digital commerce capabilities. We found that capabilities can have both positive and negative effects on one another.
Below are the most prominent examples of the correlations that we discovered:
Verified reviews of products increases the chances of improving footfall or traffic to a website; expanding product portfolio and/or markets; and reducing costs of customer acquisition, fulfillment, and returns.
Delivery within two hours of order placement can negatively impact customer retention and marketing ROI, but correlates with expanded product portfolios.
Automated order placement via customers’ IoT networks can strengthen payment capabilities and reduce cost.
Personalized offers and pricing improve customer retention rate and increase footfall or traffic.
Please see the comprehensive table of these relationships in Appendix A.
It’s difficult for us to give our customers something to play with. We’re now trying to figure out how we can, in a more controlled way, expose them to our software so they can engage with it without giving them a sandbox. 70% of the customers' research happens online, and we want to provide them the opportunity to see it, feel it, and approach us with a positive outlook.
