What Does the Future of Retail Look Like?
By Jamie Homer, Partner at Princedale Partners
Retail has changed a lot since the turn of the century. Companies are constantly faced with new challenges which they have to overcome in order to attract and retain customers, but also a new level of complexity which only makes it harder to focus on what is important for each organisation.
A good early example is Apple. Walk down Regent Street in London and you’ll know their store by the huge atrium and trees inside, not by a logo. If you do peer through, it looks more like a coffee shop than hard-nosed retail, with people milling about on benches and the conventional layout of a shelves and tills not so much turned on its head, but totally absent.
This complexity is borne from the digital and physical way in which brands form a relationship with their customers: from an email, app, website and mobile site to an advert on the side of a bus, and the smell of the store as you walk through the door. With some retailers now earning 25-35% of revenue through their online stores, and the best ones doing 50% of their business this way, the stakes have never been higher.
At the same time, some organisations which began their activity online are now opening bricks-and-mortar stores. Research revealed that 71% of customers would still prefer to purchase an item from a nearby bricks-and-mortar Amazon store rather than their website. The same study also revealed that 85% of people prefer touching and feeling a product before deciding whether they’d like to complete the purchase or not.
Taking all these challenges into consideration, how can retailers stay a step ahead of the competition whilst delighting their customers?
There have been examples of organisations venturing into the unknown and investing a lot into new technologies, which allowed them to collect data about the way customers interact with their products. Retailers have learned from this data, and then used the findings to personalise the in-store experience of customers.
Five ways in which the future of retail could be shaped are as follows:
1. Big box retailers would offer more local alternatives
Big box retailers have built their businesses using chain-wide marketing and merchandising. The stores would allocate a large amount of floor space and the presentation of their products would be based on the store’s geographic location.
However, in recent years retailers have switched to a more localised perspective by focusing their spotlight on local, favourite brands and sourcing local products as well. Through this localised approach, retailers are able to leverage marketing strategies more effectively.
Another way big box stores have been making use of advanced technology is by implementing back-of-house infrastructure which would help them personalise the customer experience in online stores and bricks-and-mortar business as well. Such infrastructure upgrades include implementation of analytics, tracking product location, sales, as well as systems for inventory and personnel management.
Some retailers such as Topman, River Island and Footlocker have adopted a smarter e-stocking system which allows their workforce to process orders and check inventory using a mobile device whilst on the shop’s floor. By collecting data in real time, these retailers are then able to alter the prices of particular products, and have specific items delivered into individual local stores based on the demands of their customers.
2. Retailers will offer a more personal experience for both shoppers and employees
By now retailers have become well aware that each customer’s needs and experience may vary. The retail industry has completely changed during the past 20 years. As the world became more interconnected through globalisation, different cultures have been shifting around the globe.
This created an opportunity for retailers to tap into unexplored niches and create new trends by adopting elements from different cultures around the world to create a more personal experience for people looking to learn more about other cultures.
Furthermore, with the advent of social media during the past 10 years, retailers have been able to approach new thought leaders such as YouTube personalities in order to raise awareness towards their brands. YouTube allows people to share their personal experience with a product by submitting a review. Retailers have used this to their advantage by sending free products to have them reviewed and exposed to a new audience.
Additionally, the development of Virtual Reality (VR) has opened up even more opportunities for retailers to craft a new experience for their customers. For the first time ever, retailers are able to transport their customers around the store through the use of a VR headset.
Some retailers such as Ikea have been experimenting with VR technology and allowed potential customers to visualise a furnished kitchen. Volvo have used the Google Cardboard headset to show their customers different features of their cars and allow them to go on an experimental test drive.
The beauty industry has also recently adopted the VR approach in offering their customers a truly personalised and unique experience, L’Oreal are currently leading this push with their Makeup Genius app. Users can take a selfie and the app can apply the full L’Oreal range of makeup to the picture in real time. Showing them how they’d look with different shades and tones. This innovation was followed by Sephora who launched their Virtual Artist app, that allows users to have a live video experience when interacting with the Sephora products, as opposed to just a picture.
Away from cosmetics, several retailers are continuing to offer a bespoke and personal experience for their customers. Warby Parker, the prescription glasses company have taken this a step further. Under their Home Try On scheme, they allow their customers to select five frames and try them at home for five days to see which ones they prefer before purchasing – this service is free of charge.
The apparel brand Kit and Ace have implemented a no cash policy in their stores. Fitting with their minimalistic interior design, the brand seeks to create a seamless shopping experience for their customers. This has made way for alternative forms of payment such as contactless, mobile and smart wearable payment.
3. Omnichannel is here to stay
Retailers have realised that building an omnichannel presence is key to bridge the gap between their online and bricks-and-mortar stores. Furthermore, retailers have invested heavily across each channel in order to help create a seamless experience for their customers, factoring in the various devices consumers use to interact with the brand.
A study conducted by Harvard Business Review revealed that omnichannel shoppers have registered 23% more repeat shopping compared to single-channel shoppers. Also, omnichannel shoppers were more likely to recommend the brand to friends and family.
For example, Starbucks have implemented an omnichannel strategy by launching a reward-based mobile ordering app to optimise the consumer’s journey and interaction with the brand. Its sharp and simple interface makes ordering online or in-store seamless and allows users to check their balance, refill it, and use their mobile device to pay.
Starbucks has utilised omnichannel marketing by making a mobile device the hub of all activity for their customers, and created unique and personalised rewards based on information collected to make their customers feel special.
With primary, secondary, and tertiary competitors all adopting an online presence, the challenge for businesses now is to truly adopt an omnichannel approach. The trend can almost be seen to shift from countless online retailers migrating to the offline world.
Multi-channel fashion retailer, Missguided, recently opened their first standalone bricks-and-mortar store at the Westfield shopping centre, Stratford in 2016. This was followed by opening three more stores across the UK in early 2017. Prior to these initial store openings, Missguided had several boutique concessions in the Manchester and Birmingham Selfridges.
Smaller brands have taken this concession approach too, like Etsy for example, the peer-to-peer ecommerce website. They too successfully partnered up with giants Selfridges in the UK and Macy’s in the US by creating pop-up stores for a limited time. Like Missguided, they too benefited from the footfall and positive brand perception this came with, as less mainstream online retailers.
In the past sales and returns only took place via one channel, the store. Today however, the growth of omnichannel retail has meant that customers now almost always expect a buy anywhere and return anywhere service. Orders are now placed online, delivered either to the customer’s home, store or centralised collection point, and can be returned in an affiliate store. Social media has given these retailers another means to communicate with their customers – via brand and help pages on Twitter and Facebook.
Retailers like Nordstrom and Toys’R’US have turned to SMS and Live Chat services to communicate with their clients and customers. Talking to a live agent, customers can view order receipts, make enquiries and process returns.
A survey conducted by Idealo found that users who interacted with retailers using live chat and instant messaging platforms had 73% customer satisfaction compared to email and phone communication that had 61% satisfaction
4. Mobile monetisation will be used more consistently
Mobile platforms have been leveraged by retailers to help them increase brand awareness and engagement. As customers use their smartphones to search for specific products, retailers have been exposed to numerous opportunities to capitalise on this through location based targeting for example.
It has allowed them to reach out to potential customers using geo-fencing; an element in software programs that allows businesses to set up geographical boundaries through the use of GPS. Businesses can send content to devices as they enter or exit these specifically chosen boundaries, including personalised ads for local offers and news, or one-time-only exclusives based on the location of the user.
Mobile technology has allowed brands to increase the targeting on their audiences through platforms such as Google AdWords or Facebook Ads. These platforms allow retailers to collect data which reflects customer behavior and would allow companies to enhance the shoppers’ experience.
Facebook offers different ads for varying purposes, for instance carousel ads that allow customers to view an entire clothing collection for example by swiping through several products. There are also canvas ads that focus on click through and web conversions by swiping up or interacting with the content.
Facebook’s powerful Dynamic Ads are excellent for website conversion and generating potential sales as they are based on website cookies, and the user’s general shopping history. Online retailers like ASOS and Boohoo have taken full advantage of Dynamic Facebook ads as they can track a shopper’s action on their main site, giving them a list of items the shopper is potentially interested in. This then enables the retailer to target more effectively on Facebook.
This final step allows ASOS and Boohoo to target the secondary and tertiary shoppers by showing them relevant items they might have not seen via through the Dynamic ads, adding another facet to their advertising approach and increasing sales.
In store, Walgreens are taking advantage of the monetisation capabilities that mobile advancements have presented to them. Using the Walgreens app which instore or in a vicinity of a store, a customer can renew a prescription by simply scanning their prescription barcode or entering their account number – all whilst shopping. The pharmacists will be immediately notified and before leaving the store, the customer can pick up their prescription.
5. The Internet of Things Will Connect All Devices
The term Internet of Things (IoT) can simply be defined as the connectivity of all objects via the internet, enabling them to collect and exchange data. In today’s modern world we interact with a plethora of IoT devices on a daily basis, from our cars, household appliances, and wearable technology.
In 2016 there were over 3.9 billion IoT connected devices worldwide, and this figure is set to grow exponentially to over 21 billion by 2020. As this interconnected ecosystem of devices continues to grow, businesses will be able to interact with their customers in immersive and exciting ways.
One notable pioneer is Amazon who on December 7th 2016, successfully trailed their Prime Air Delivery drone in Cambridge, UK. The success of the trial hinted at a drone powered future delivery service via IoT devices as it was ordered on a tablet, tracked by a PC and delivered by a drone. Although the service is only available to a handful of customers. Amazon plan to deliver to dozens of customers in the coming months.
Another innovator is Samsung who launched the Family Hub 2.0, which is an exciting new range of smart fridges that build on 2016’s successful first series. Users can now interact with their fridges in a whole new way from voice command, to socialising and watching TV, there is even a mobile app that allows you to use cameras inside the fridge to check content and shop online. With the aforementioned examples we can deduce that the IoT is still very much in its infancy and we’re only just beginning to explore its potential.
Enhancements in networking technologies like wi-fi, bluetooth and superfast broadband has meant that more devices are now connected than ever before – with faster speeds. As well as allowing us to connect to each other, more and more devices are communicating with each other to form what is now referred to as connected homes. Within the internet of things, devices across our homes are sharing information, transferring data and media files, and allowing users to have remote access and control to appliances and fixtures in their homes.
British Gas’ Hive and Nest’s Protect have pioneered the connected home revolution with their in home systems. They both allow the user to monitor and control central heating remotely via a mobile phone. Other products such as the LightwaveRF range also allow remote mobile control of lighting to security systems
Who truly knows what the future of retail, never mind business, will be in the next 10 years. The way things are moving these days, I think it’s pretty reasonable to assume that 2022 will be a drastically different experience that 2017 has already been for most retailers. I’d argue that ¼ of the current UK high street won’t’ be around by then, simply because they haven’t begun investing wisely today to be relevant in 5 years.
Not only in terms of the future stores, but also the ways in which businesses are beginning to personalise an individual’s experience at each step of the consumer decision making process from the first they see to the method of payment.
The future of retail remains unclear as we’ve only just begun to scratch the surface of the technological capabilities and how to best optimise them, but one thing we can all agree on, is how immersive and exciting it will be.
To learn more about how Princedale Partners can help you with key digital leadership hires please contact Jamie on firstname.lastname@example.org for an initial confidential discussion.