Retail has changed forever — we must adapt
Retail will never be the same and we need to get used to it.
I have attended two retail transformation conferences in the last few weeks and the message is clear: retail IS disrupted.
This is not a downturn. Forever the expectations of consumers (i.e. people) has shifted.
In the past, retailers used to look at three basic parameters: speed, value and quality. And if they met two of them, then they had likely met customer expectations. These three are now table stakes and in fact, if you don’t deliver on speed, value and quality, then there is no way that you will be able to grow beyond the industry norms.
Customers now expect:
- Value — Amazon, through its autonomous pricing algorithms, reprices 30 million times a day. Gone is the notion of peaks and troughs in pricing — discounting, promotions, sales to drive demand and full price periods to drive margin. Google enables instant price checking in real time either online or in-store on a mobile device, which means that it is almost impossible for retailers to keep up with shifting prices. The answer for any retailer is to move away from looking at individual transactions and move towards a true understanding of the lifetime value of a customer.
- Convenience — Which really means… removing the barriers to purchase. Customers want the ability to find exactly what they want, when, with minimal friction — whether that is in store or online. Retailers know that if they can keep people in store longer then they are likely to buy more. However, trapping a customer in store without a clear path to purchase will only reduce sales and basket size. In the online world, this equates to the number of clicks to purchase and how products are delivered. (I understand that 20% of all purchases on Amazon, in its first month of trading in Australia, resulted in a poor product review, primarily because of delivery).
- Differentiation — Having listened to the CEO of JC Penny talk about its turnaround, a key component of that positive change was introducing different and exclusive products. Range is essential too — it is very hard for people to compare online if they are the only stockist of the product. Each retailer (no matter if they’re online or have a storefront) must know what it stands for, have a brand story and clearly and simply communicate with its customers about what it can be counted on for. Differentiation will also drive down the cost of acquisition because people will be attracted to what you are offering and are far more likely to purchase if they know who you are in business and why you exist.
- Intimacy — There has been much talk about customer centricity and personalisation. In reality, there are only a few retailers that are anywhere near getting it right. A loyalty program is not the answer to intimacy. As retailers — whether online or not — our challenge is to know our customers well enough to be able to predict and curate on their behalf. We must become the trusted advisor to our customers in our area of specialisation.
One of the conferences I attended recently opened by saying that the department store business model has not evolved, and as such, no longer meets customer needs. They have not kept up with the disruption of the fast fashion houses like H&M and Zara who, by turning stock so regularly, give customers a reason to come back. Nor have department stores captured the essence of the luxury brand stores (which is a growing retail segment) in their ability to know who you are as you enter a store, offer you a glass of water and let you know what they have that could suit you.
Retail will continue to change and there will be more casualties. Monash Business School reported that between 2014-2016 there have been 3600 retail businesses close (and many more last year).
Each retailer must choose to either be a disruptor or be disrupted.
Across all the Big Red Group’s retail businesses we are looking at invention — trying new things. Some may have noted the new shop front and customer journey on RedBalloon.
Here is a checklist of the sorts of technologies we are looking at or trialing. Maybe some will interest you…
- Analyses & Big Data – looking at the world through customer’s eyes
- RFID (Radio Frequency or beacons)
- Omni Channel
- Personalised customer experience
- Social Media Intimacy as a listening tool
- Digital Marketing – not just search but really valuable content
- Aggregators & Online Marketplaces as partners
- Mobile Platforms in store
- Showrooming & Pop-Ups
- Digital Wallets & Fintech payment options
- Augmented Reality & Virtual Reality
- Internet of Things – wearable tech.
Some will work for us and some won’t. But what I do know is that this time next year, retail and in store experience will be more different than ever before…
I intend to be out front, leading the Australian retail experience… care to join?