The Top 5 Trends Shaping the Future of Retail Stores
Walmart is testing inventory-checking robots…
Nike is focusing on just 40 of its 30,000 partners in a stand against “undifferentiated, mediocre retail”…
Amazon showed us a human-less retail store in 2016, which JD.com is now rolling out…
This year we saw some bold moves towards reshaping the retail store. But, technology is growing at an exponential rate and today’s consumer is a fast-moving target with an increasingly complex path to purchase. A recent Google study, found that one consumer’s journey included over 900 interactions across a host of different touch points. So, with all this complexity, where should you focus?
Here are the top 5 trends that will shape the future of the store:
- Forget Quarterly Research, Stores Will Become “Living Databases”
According to a 2017 Deloitte study, CMOs plan to spend 376% more on analytics to improve customer experience over the next 3 years. At the heart of their customer experience problem is the store, where consumers are increasingly frustrated with the shopping experience that they say offers little of the convenience of online counterparts— four in ten going so far as to say that shopping in-store is a ‘chore’, according to a Capgemini study. To meet these needs and keep pace in today’s new landscape, yearly, quarterly or even monthly shopper intercepts and store research will no longer be enough. And, relying on intuition-driven thinking and past purchasing behavior data will be unsustainable. Instead, retail leaders will use in-store analytics technologies to collect daily consumer insights that they can quickly act on to constantly measure and adjust their in-store experiences just as they do online.
With this technology in hand, brands and retailers will be converting many more browsers into consumers and reducing marketing and advertising spending through increased personalization and targeting effectiveness. PSFK recently released a report that calls this kind of technology, “ambient assistance,” using “infrastructure… to provide shoppers with access to always-on information, support and navigation.” PSFK also talks about the store’s potential as a “living database,” a retail sales floor that’s a “data-rich environment” providing timely information on “customer behavior and feedback as well as sales and merchandising strategies.” Other uses for this technology include: designing products based on aggregated consumer browsing data, restocking inventory more efficiently, reducing shoplifting, eliminating checkout lines and making the supply chain more efficient—the possibilities are limitless.
So, how far out is in-store analytics? It is already here. Many retail leaders are already testing and rolling it out; they know that stores have an important role to play and can offer a positive competitive differentiator to online-only retail not just for their traditional tactile benefits, but also as a rich source of consumer data. The big change that makes all this technology a reality is advances in software that can look at video and data and make human-like decisions instantaneously, allowing you to see and react to what products consumers are looking at, what messages get them to stop, what they’re picking up, how these metrics compare to other stores and more. Combined with loyalty data and soon artificial intelligence, you can see what works and what doesn’t. Needless to say, in-store analytics technology has the potential to rewrite the retail landscape—creating an entirely new wave of retail winners and losers.
- How Much Stuff Consumers Walk Out With Won’t Matter
Craig Menear, the CEO of The Home Depot, recently said, “The front door of our store is no longer at the front door—it’s in the customers’ home, in their pocket.” With that in mind, why does sales per square foot matter when consumers are researching products online or getting them delivered via Shipt, Uber and Prime Now? In fact, according to a recent report 75% of online sales, excluding Amazon, were from brands with a brick-and-mortar presence.
As stores continue to evolve amid this new retail landscape, the focus will be less about where the sale is coming from, and more about optimizing the valuable moments we have with consumers to ensure the highest conversion. Further, the divide between physical and digital will continue to dissipate in lieu of a sophisticated mix of both and KPIs to measure their performance in tandem. Some of these newer in-store KPIs will include: opportunity to convert per category/product, repeat visitor ratios, merchandising engagement, time to purchase and buy online pick-up in-store or buy in-store order online metrics. Understanding the full 360 degree view of the consumer, online and in-store, will become the new goal.
- Real-Time, Intelligent Personalization Will Find Room In-Store
Many reports are heralding personalization as the number-one ecommerce trend of 2018. In an increasingly cluttered ecommerce space, personalization is one of the few differentiators retailers can use to stand out among the crowd. In fact, a recent Linkdex survey found that more than 70% of U.S. consumers expect some sort of personalization from online businesses, and according to the Boston Consulting Group, retailers that implement personalization strategies see sales gains of 6-10%. Amidst declining store traffic, increasing customer acquisition costs and increasing consumer expectations, stores will also need to figure out how to leverage personalization—and not just on mobile devices.
An Accenture study properly described personalization today as, “often static and time-lagged”, delivered at the point of purchase in response to shoppers’ past purchasing behavior and relatively fixed attributes, such as their address or number of children. Others have introduced personal services, both on- and offline. Nordstrom, for example, opened a store this year that holds none of its own inventory but is geared towards hosting personal styling sessions.
These things are not what we are talking about when we say intelligent personalization—the next step for stores is learning about, engaging and responding to consumers all in real-time. In this way, stores will deliver hyper-relevant experiences based on an understanding of consumers’ interests in context of the situation. This next-level personalization will leverage both digital screens and mobile in-store to turn generic, mass-marketing into consumer segments of one—where every experience is a unique response to each consumer. Oh, and did I mention that this responsive technology is already here too?
- Stores Won’t Look Like Stores—Think Smaller, Convenient Communities
Yes, we’ve heard a lot about the death of stores, after seeing many retail heavy weights take some hits. But, 90% of all retail sales still take place according to the U.S. Census Bureau and physical retail will not simply disappear. The narrative of apocalypse will soon shift to evolution, as the purpose of just pushing product becomes obsolete and brands and retailers discover new ways to respond.
We’ve already seen some progress here:
- BOPIS kiosks by Walmart and Zara
- Inventory-less showrooms to meet needs to test the product before purchase online by Nordstrom and Bonobos
- Pop-up shops to build more intimate relationships, generate excitement, deliver unique experiences, test pilot initiatives and capture rich shopper insights, used by Amazon, Target and countless others (According to PopUp Republic, the pop-up industry has grown to approximately $10 billion in sales.)
- Smaller-format, neighborhood stores with curated, localized experiences to satisfy changing shopper preferences by Target, Walmart and Publix
- Local community gathering places in lieu of commerce centers by Apple
- Destination-type concepts focused on food and entertainment by several malls
- Competitive retail partnerships—JCPenney and Sephora, IKEA and Sonos, Amazon and Kohl’s
These are just a few of what we’ve seen so far, but from a big picture standpoint, these strategies tend to focus on smaller-format neighborhood stores, convenience-focused tactics, curated products, competitive mashups, new retail frontiers and more experiential, destination-type concepts.
- Automation Will Streamline Operations
This year Amazon announced a new human-less grocery concept, Amazon Go, where consumers can walk in, pick out the items they like and leave without ever going through a checkout line. Instead, sensors, computer vision, and machine learning quietly do all the work to capture, calculate, and charge you for your purchases. While they continue working to get this concept off the ground, JD.com the second largest online retailer in China (after Alibaba) just announced plans to rollout hundreds of these unmanned convenience stores and make their technology available for other retailers to use as well. Many retailers are also shifting in this automated direction. Walmart, for example, is using machines to count cash and update stores’ books, experimenting with autonomous vehicles to clean their stores and testing robots to count inventory. According to research by the McKinsey Global Institute, over half of all retail work activities could be automated using existing technologies.
What are you focused on right now? What do you think the future store will look like?
Image Copyright: wavebreakmediamicro / 123RF Stock Photo