Everyone who’s anyone is at Shoptalk. That’s what they say about the Las Vegas conference. It was my first time there and I admit: it is absolutely true. If you want to know everything there is to know about the present and future of retail in less than a week — you go there.
In this article, I’ll outline the main takeaways about customer-centric global retail from the event which gathered over 8,000 retailers, vendors, brands, tech companies, and journalists.
1. Offline retail is booming. Defying numerous media articles reporting the upcoming funeral of brick-and-mortar retail, offline retailers are nowhere near going down. What’s really happening is that the market is reshaping: while some stores are closing, others are popping up.
2. Amazon is not a death sentence. “People ask me how do you compete with Amazon and sleep at night? I always answer that I sleep at night like a baby. I wake up every two hours and cry. But I don’t focus on Amazon. Every retailer is a competitor. We focus on our strengths,” said Jim Donald, CEO at Albertson’s. In fact, online retail has yet many hurdles like delivery to overcome. For an established offline retailer with a developed distribution network and local audience, online retailers are not direct competitors.
3. Diversified shopping mall traffic: average check down, revenue up. The US is becoming home to the increasing number of immigrants that have less money and different spending habits. In the meantime, shoppers with higher income are moving from cities to suburbs, which also affects the average check in formerly booming shopping malls.
4. Customer behavior and spending habits are changing. According to Deloitte, in 2017 buyers spent by 2% less on apparel than in 1997. Also, buyers no longer agree to spend hours getting to and browsing huge shopping malls. They want to get what they want now while making next to no effort.
5. From shopping malls to smaller shops. Traditional methods and formats are not efficient anymore. Therefore, new practices are emerging: for example, migration from shopping malls to smaller boutiques with a curated assortment, and technology.
6. The customer comes first. Although the concept is far from new, it is getting a slightly different meaning. As the power in the market is shifting from sellers to buyers, putting the customer first means building more rewarding and personalized customer experience. It is vital for retailers willing to remain relevant now and in the future to stay in the market or even ahead of their competition.
7. Building the right price perception is essential. The price of a product is at the top of the customer experience. It is something which we compare our overall shopping experience with even long after the purchase is made. Also, the price is what catches the customer’s eye first and what helps immediately differentiate between retailers before anything else happens. That’s where a customer journey starts.
8. From products to experiences. Shopping is no longer a purely purchasing activity. It has to do with the overall experience the customer has when entering a physical store. The latter is becoming a destination of spending some quality time rather than simply exchanging money for an item. Some retailers already use AR and VR, as well as invite restaurants for collaboration as a means to upgrade customer experience. Re-imagining customer experience also means ensuring that shoppers get what they want as quickly as possible wherever they want it. Shoppers expect a frictionless scan&go experience. According to 7 Eleven, Americans spend 37 billion hours waiting in lines. It is not an option anymore.
9. Artificial intelligence and machine learning are the next big thing. In fact, these are not “nice to have” attributes anymore. No one doubts AI and ML are necessary to keep an edge today. The question is where and how to implement them. For example, in Competera’s latest market test, the retailer has used the machine learning algorithms to boost revenue by 16% and keep profit margins. Others still need to figure out where technology would benefit their businesses the most. Just like Big Data a couple of years ago, AI and ML have become buzzwords making it difficult to differentiate between real tech-powered solutions and those which offer AI and ML as the icing on the cake.
10. Personalization per customer and store. Shoppers are ready to share their data with retailers in exchange for personalized experiences. Irrelevant and poorly timed offers irritate and deter customers. Therefore, the first thing retailers need to do is to find a way to analyze all the available data and constantly come up with relevant offers. Retail winners agree that AI and ML are a perfect fit for the job. Another major task to use the technology for is defining the assortment for new smaller stores. AI and ML allow calculating the best assortment in terms of sizes, colors, models, basically, anything, by store. This lets retailers meet the expectations of customers that want to find everything they need quickly and spend less time shopping.
11. Focus on innovation. Retailers have realized that they do not have to do everything alone. According to Sonja Moosburger, Chief Operating Officer at MediaMarktSaturn N3XT, nine out of ten best innovations of the company came from startups in 2018. Although many retailers claim to cooperate with startups, in reality, they do not have an internal ecosystem to let startups experiment with the audience and use their data to innovate. However, retail winners have already built their startup labs. Dick’s Sporting Goods’ VP and Head of Data Science, Analytics and CRM, Vimal Kohli, has advised defining the core competitive edge and engage the in-house team to improve it. The rest of the processes can and should be outsourced to a third party.
12. Speed differentiates winners from losers. Eddie Garcia, Vice President of End to End Member Experience at Sam’s Club, pointed out that even a five-second difference in barcode scanning lets retailers win customers. Another speaker who emphasized the importance of speed was Sonja Moosburger of MediaMarktSaturn N3XT: “For our innovation team, we believe in speed before perfection, reduce complexity, small and simple, test and learn. We strive to be part of the organization but be different. For us, speed and freedom are key.”
13. Retailers that deliver quicker grow quicker. In 2017, delivery took 5.2 days, in 2018–4.3 days. That being said, Amazon has reduced its delivery time from 3.7 to 3.2 days, while the rest of retailers managed to cut delivery time from 7.2 to six days. In the meantime, customers expect same-day free delivery. Another delivery trend is using the network of stores as a system of pickup points. In this case, the time for delivery is next to zero. In the meantime, competing with giants when it comes to delivery may not be a feasible option for many retailers. Another way to grow is to offer customers a unique assortment (retail winners will develop their own private labels) or truly amazing customer experience.
14. Timing matters. It is no longer enough to show customers relevant products. It is the matter of when it is better to do and whether it clicks with the customer’s current needs. This calls for the next frontier of personalization — contextual personalization which means that retailers can predict the next step in the preferences and wishes of their customers.
15. Voice shopping market is growing rapidly. OC&C Strategy Consultants Study projects there is a total addressable market for voice shopping of 40$ billion across the US and UK by 2022. Shopping is “migrating” to voice assistants like Amazon Alexa, Apple’s Siri and Google Assistant. Currently, voice shopping is mostly used for repeated purchases and search. The experience is getting even more engaging and productive since the voice assistants are learning to understand the context of a purchase. Therefore, it is taking even less time to buy something using just your voice.
It’s just the tip of the iceberg. This article wouldn’t be enough to tell you about all the behind-the-scenes discussions or even everything presented by the speakers. Let me wrap up with the topic our company cares about the most. Rewarding customer experience is no longer possible without the means to translate the myriads of data points into customer-centric strategies. And that’s where artificial intelligence and machine learning come to play in everything — from warehousing, to store management and pricing.