Strategies for Surviving the Retail Apocalypse: Personalization at Scale and the New Business Model
In our first, second and third installments, we examined how companies are using Customer Experience Design, Convenience, and Customization as strategies to survive the “Retail Apocalypse.” In this final installment, we look at the how companies are providing Personalization at Scale and are adapting to a new business model to become truly customer centric.
Personalized VIP service used to be reserved for the very wealthy. However, technology is the great democratizing force in the market including allowing more customers to enjoy personalized services at scale. Loyalty programs, subscription services and special V.I.P.-only events are driving the customer experience. Customers enjoy data-mining loyalty cards, but the successful loyalty programs provide more than just a discount. Loyalty points that customers can cash in for special rewards are not a new idea, but smart retailers are adapting their programs attract the kinds of customers they want. Customers are not completely averse to being targeted: 49 percent of customers are amenable to having retailers track their data in exchange for more personal, experiences.
UK retail chain Oasis provides a personalized experience with their complimentary personal stylists and easy returns. Their business model provides for personalization at scale seems to be a winner for the 26-year-old retailer.
Nordstrom also provides stylists on demand and special sales-preview shopping events and smaller stores bring in special off-hours wine-and-cheese-style shopping events to get customers in the door. Online retailers do the same, sometimes with special limited-time access to pop-up stores or special online discounts. Similar subscription clubs like athleisure wear company Fabletics and clothing company Just Fab keep customers coming back with VIP-only deals for a recurring monthly subscription payment. On-demand styling companies like Stitch Fix and Trunk Club provide styling and easy returns. Now, Amazon is jumping into the fashion fray with Prime Wardrobe. This might just be the way that Amazon is able to be competitive within the retail clothing market by appealing to customer’s desire for lots of choices and easy returns. Analysis firm Cowen & Company have predicted that Amazon will overtake Macy’s this year to become the top apparel seller in the US. But, without the personalization aspect, will Prime Fashion be a financial failure? Time will tell.
Within the ecommerce space, 48 percent of customers spend more when their experience is personalized and will volunteer personal information in exchange for a more personalized experience. For retail in general, 64 percent of customers feel that a great customer experience is more important than price.
Big Data helps retailers know their customers and eliminates the need to be everything to everyone. Retailers can now know who is coming in the door or coming to their site and can collect data from social media sites, email campaigns analytics, and in-store beacons, RFID and other Internet of Things (IoT) devices. These technologies and the data they capture can help even the smallest retailer create personalized experiences and programs for their customers which aids in brand loyalty and customer retention. The data also provides valuable insight to where customers drop out of the sales funnel and allows retailers to tailor programs to aid in conversion.
Customers want competent, knowledgeable sales staff who can guide them through the purchasing process. With technology, retailers can capture the data from loyalty programs and can help gauge brand sentiment. Inexpensive tests with new products or services can be done without setting up much more than a sales associate survey or a coupon code.
The New Retail Business Model
Not having a customer-centric business model, rather than price, is increasingly becoming a barrier to sales. Perhaps this Retail Apocalypse is a retail evolution. Some of the big dinosaurs unable to adapt will die off, but that will leave room for the more innovative, customer-centric retailers to thrive. Sears relied on an outdated business model even as they closed stores and lost revenue. In 2012 they had revenues of nearly $40 Billion and in 2016 had revenues of only $22 Billion. Their total assets in 2012 were $19 Billion, and that has dropped to $9 Billion today and they have closed nearly half their stores in just four years.
Contrast this with companies like Amazon who are in a constant state of innovation. Amazon is an example of using customer-centric strategies for to survive the changing retail landscape. Jeff Bezos, Amazon CEO, says that their vision statement is their guiding principle:
“Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Because of this, Amazon is a data-driven company and is always innovating for the customer. They are working from a large cache of data and they use that data to test, learn and innovate. When they innovate, they may not even have a viable product but they learn from their failures. The motto “Fail Fast, Fail Often,” is employed at Amazon and permeates everything they do. When companies are afraid to fail, they are also afraid to innovate. But when you are collecting the necessary data and using that to test new initiatives, the bar for success is lower than if you are innovating in a vacuum. Of course, Amazon reinvests profits into innovation which no doubt has prompted Walmart to change focus from low prices to a more customer-centric mindset, investing into training and education for their associates, and diverting profits into investments in ecommerce and automating and optimizing their supply chain to get the right products to their customers faster.
When you look at the successful retailers with customer-centric business models, with what is happening to Sears and other established retailers, perhaps it is because they lost site of the adage: The customer is always right. Retailers that innovate on behalf of their customers and use new and emerging technologies to provide customers with what they demand will thrive in today’s environment. Jeff Bezos is famous for stating that it is always “Day 1” at Amazon, because “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.” He wrote this in his 2017 Shareholder letter. He further stated his clarification for the company to remain customer obsessed as a business model:
There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality. — Jeff Bezos, Amazon.com CEO
Being customer centric means knowing that customers will demand more customized, personalized, and convenient shopping experiences and they want them in spaces and places designed to immerse them in the customer experience. This set of strategy alternatives make up the base for the new business model for successful retailers.
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