Reshaping Retail for the Future
A blend of digital and human for a forever changed customer
The pandemic has changed the way we live. Consumers have started purchasing heavily online and plan to continue to do so. What we purchase and what we care about when we purchase has also fundamentally changed. Two groups of needs emerge: safety, reassurance, convenience and low touch on one side, human connection, sense of belonging, meaning and personal touch on the other side.
Big retailers like Zara, H&M and Microsoft are closing hundreds of physical stores to focus on digital commerce. I believe that is not enough. The tremendous changes in habits, values, beliefs and behaviors that this pandemic brings offer the opportunity to work beyond the mere moving of traffic from physical to digital channels, and truly transform the retail system. It is time to reconsider the roles of digital and physical channels, to restructure organizations and processes, to strategically design the collaboration between technology and humans and to rethink experiences and customer engagement.
Where the purchase happens is not that important anymore, because every piece of branded media is now a store: we can shop from an Instagram post, a gaming app or a conversation with a brand advisor directly from a Google Search and Maps or a digital lookbook. The whole notion of productivity must be reconsidered, and measures of success redefined.
Five ideas to tackle change at a systemic level and build retail for the future
I can see five areas in which to focus, invest and experiment to craft a new retail system that can not only survive but thrive in a post-pandemic world:
1. Improve Listening and Analytic Capabilities, reorganizing for Enterprise Agility.
We don’t know our customers anymore, as I mentioned in a deep dive a few weeks ago. Needs and behaviors are changing at an unprecedented pace and unevenly across geographies, making legacy data of little use. The pandemic is forcing a change in habits, a reconsideration of priorities and a redefinition of value. Uncertainty raises anxiety and heighten the need for social connection, human relationships, feeling part of a community. A more conscious consumerism emerges and concerns for sustainability and social responsibility gain weight in the decision-making process.
Depth and speed of learning must increase. A highly tuned demand-sensing capability, that incorporates company and external data, will help generate the key insights that are needed to reevaluate product portfolios and service offers. Investments are required in AI driven customer data platforms, business analytic tools, activation capabilities and human capital able to respond to insights with aesthetic intelligence.
Agility is a key organizational capability required to respond in a fast and timely manner, bringing new ideas and solutions to market within months, getting feedback and continuing to test and iterate. A different governance is needed, together with leaner while still disciplined business processes and employees encouraged to use creativity when facing new situations. Being constantly tuned in with the world and responding with empathy and a touch of boldness is what will make organizations succeed during and post pandemic.
2. Humanize Digital Commerce and Create Seamless Experiences
How to build a relationship with customers that shop digitally? Eliminating points of friction in the online experience is important, of course, but relationship building is still the key to customer retention and loyalty. Customer engagement and personal approach are what makes the difference. Digital shopping needs to get less transactional and more human, personal, emotional and playful.
Focus on enhancing the product discovery and the product experience using now readily available top-quality image, video and immersive technology to show the product in its most intricate, differentiating details and bring it to life for the customer. Test ways to understand the customer purchase intent and tailor the experience to it — AI driven startups that play in this space are gaining traction, despite needing more work to prove success. Intertwine access to expert advice and human interaction to encourage the creation of a mutually valuable relationship. Add playfulness to the mix, experimenting with gaming, AR and VR.
Explore and intensify conversational commerce, clienteling, virtual appointments and livestream shopping, because they will become an integral part of the new retail system, a system that uses technology to facilitate human connections and create seamless experiences across space and time.
3. Transform Points of Sale into Points of Experience
We don’t need hundreds of cookie-cutter stores. We need fewer stores with a soul.
Safety constraints and change in customer needs constitute an invaluable opportunity to fully rethink the role of the physical store in the retail ecosystem. Back to the drawing board to design stores with a purpose, a distinct point of view, where more intimate and personalized experiences can take place. Stores that encourage not only product discovery, but also customer participation and engagement into something that matters. Points of action, of learning, of social connection, of experimentation and exercise of the imagination. Spaces that feel alive, lighter in cost and more flexible to adapt to changing needs.
Digitally and locally connected physical stores conceived to support digital commerce sales by building active communities, acquiring new customers through inspiring real-life experiences that move hearts and minds. Think Alo Yoga Sanctuary, as an example: stores where customers will want to go to rather than having to be pushed to.
4. Rethink Loyalty to reward new behaviors
What behaviors to reinforce and how? Who to consider as most valuable customer, who to invest on? What does the loyalty experience look like? What do customer value today and what will they value tomorrow?
Brands must clarify their loyalty strategic objectives and reconsider the members of their programs, the experience and the rewards they offer. Emerging physical and emotional values have to be taken into account, together with the digital nature of the shopping experience. Customers don’t want just immediate perks and rewards but value feeling part of a community, contributing to a cause or a mission beyond their own individual benefit. They care about what brands stand for and associate themselves with those that are worth it. Brands like Sephora have started the process, still rather tactically at this stage.
5. Use the crisis — this is the time to innovate.
Don’t cut your innovation budgets, crisis should not go to waste. This is the time to explore, experiment, trial and pilot initiatives that could turn to be the sources of long-term growth. Don’t let fear of failure or perfectionism block you, consumers will be forgiving of even scrappy executions when they can see the positive intention behind them. Be authentic to yourself and keep the focus on the customer, on how you can help them feel safer, healthier, more connected, in control and purposeful/socially responsible.
Choose to see this crisis as an innovation opportunity and empower your teams to use their imagination and test ideas, because this does pay back. We know that companies that maintained their innovation focus through the 2009 financial crisis, for example, emerged stronger, outperforming the market average by more than 30% and continuing to deliver accelerated growth over the following years (McKinsey).
Human imagination — as the capacity to create, evolve, and exploit mental models of things or situations that don’t yet exist — nurtured by data and understanding of the shifts in process, is a crucial factor in seizing new opportunities, and finding new paths to growth.
Looking Ahead
The future of retail is digital and human, dynamic and responsible. “Retail therapy” assumes new meanings beyond escape, entertainment and rejuvenation. Customers and brands learn from each other, explore, play, cooperate and experiment to make the world a better place to live, physically and emotionally. The pandemic offers a once-in-a-lifetime opportunity to shape it. It’s time.
Francesca Danzi is Founder and Managing Director of Danzi Consulting, a boutique customer strategy and digital transformation consultancy advising organizations on building a customer-centric mindset and designing insight-led customer experiences that drive brand loyalty and sustainable growth.
francesca@danziconsulting.com
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