By Mercedes M. Cardona
Image Attribute: Flickr Creative Commons: Caden Crawford
Retailers have to refocus their marketing from driving traffic to stores to closing sales and managing loyalty, according to insiders at the National Retail Federation’s 2017 Big Show, earlier this week in New York City.
“We’re only as good as the last transaction,” said Greg Foran, CEO of Walmart U.S.
E-commerce is now setting the bar for the in-store experience, and that, in turn, is changing expectations for the customer experience and technology deployed in stores, speakers said. Retail fundamentals will always be required, but merchants also need to master technological skills, said Bill Brand, president of direct retailer HSNi.
“Technology is changing the way we shop [and] the way we enjoy products. Even the definition of what a store is changing ” said Brian Krzanich, CEO of Intel. “Data analytics will separate those retailers who will take the next step and those who won’t.”
From cart abandonment to sales completion to browsing behavior online, e-commerce has benefited from large stores of data. That same data, however, has been absent in the store channel, limited to cash register data, said Joe Hnilo, VP of Fujitsu America’s software business. But now merchants have an increasing store of knowledge built from new technologies—such as beacons, eye tracking, and video heat-mapping—that can help them better understand how shoppers move about the store and what captures their attention. Tools such as interactive displays and push messaging are helping them build on that knowledge, as well, he said.
“There’s very little that retailers understand about how shoppers are interacting with store space,” Hnilo said. “That’s important because, depending on whose numbers you believe, more than 50% of retail revenue still comes through the physical space.”
Retail is moving to the world where sensors can help predict what shoppers will want next and algorithms are increasingly in control, thanks to the use of digital assistants such as Echo and Alexa, said Gwen Morrison, CEO, Americas, and Australasia, at WPP’s The Store. Retailers are increasingly marketing to algorithms, not to demographic segments, and marketing is becoming truly personalized, she said.
“Consumers say, ‘I want the great product,’ but it’s not only about the product. It’s about the environment,” said James Rhee, CEO of apparel retail Ashley Stewart. “The product better be right ... [but] you have to differentiate yourself, as well.”
Merchants need to focus on leveraging technology in-store to get shoppers down that last mile in the customer journey, speakers said. Intel’s Krzanich noted shoppers already have as much data about products on hand before they come to the store as the stores themselves. Merchants need to leverage data and tools such as machine learning, artificial intelligence, and virtual reality to improve their store experience, he noted.
The store of the future is taking shape and will continue to develop for years, Krzanich added. For example, he noted that Walgreens is now using virtual reality to refine the planograms that work out store layout for optimal product placement.
Indeed, the show floor at the NRF meeting featured robots and drones, beacons, and everything from virtual reality applications to apps to gamify the shopping experience. Even technologies that had failed in earlier incarnations—such as RFID tags, which did not catch on much when applied to inventory management in the 1990s—are being reapplied to improve the store experience by allowing better tracking of products in-store and streamlining sales.
“The world today is a world of little bets and trying to figure out which little bet means the most to my customer and accelerate that little bet,” said Bill Lewis, EVP of consumer products, retail, and distribution at CapGemini.
Store traffic may be declining, but Levi Strauss & Co. discovered purchase intent of consumers visiting stores has been rising when it piloted new technology in-store, said Carrie Ask, president, global retail, at the apparel merchant. Merchants have a higher opportunity to drive the in-store conversation, but it can all collapse if the store experience does not deliver, she said, noting “out of stock” and “couldn’t find my item” were the biggest barriers to purchasing cited in Levi’s research.
“The opportunity and the stakes are higher now, not lower,” Ask said. “Not only do we lose in the moment if we have no stock, but a frustrated and disappointed consumer may decide that their trip and energy wasn’t worth it.”
The economy is now in a slow-growth mode, so an increase in sales will require merchants to focus on sales completion, said Rod Sides, a retail practice leader at Deloitte. The in-store sales experience is all about completing the end of the journey, and while brick-and mortar stores still account for 90% of the aggregate annual retail sales, digital channels are setting the pace, he said. Deloitte polled shoppers just before the last holiday season and found fewer than ever are satisfied with what they see in-store, such as quality and availability of product, compared with what they find online, Sides explained.
Since shoppers don’t come to a store unless they have already decided to be there, and products are largely commoditized, closing sales in-store and building loyalty and customer advocacy are paramount, insiders said.
That focus becomes even more imperative as Millennial and Gen Z shoppers, who increasingly expect in-store technology to keep up with what they see online, comprise more of the public.
Young digital natives are even more demanding of in-store technology than their elders, noted Lee Peterson, EVP brand strategy, and design at retail consultancy WD Partners. The agency released a white paper about the store of the future that noted Gen Z shoppers assume much of the technology they read about should already be deployed in-store; 43% of them would use a beacon-enabled mobile checkout, such as the Amazon Go app being piloted now, compared with 19% of “digital immigrants.”
Additionally, service in-store has to be on a completely different level, Peterson said. Young shoppers’ expectations are driven by the on-demand economy of Uber and Airbnb, so “to have crappy employees at the store ... is a death knell,” he said.
Retail will change more in the next five years than it has in the past 50, HSNi’s Brand said. “If you think we have experienced massive change, just think what we’re in for,” he added.
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