What is the future of retail?
Hint: The answer can be summarized in one word
The future of retail is online.
Brick-and-mortar retailers have announced more than 3,200 store closures so far this year, and Credit Suisse analysts expect that number to increase to more than 8,600 before the end of the year. For comparison, 6,163 stores shut down in 2008, the worst year for closures on record.
But what does online even mean?
To answer this, we need to understand how customer behaviour and expectations are changing. Consumers raised on the on-demand economy (Netflix, Uber, Amazon) demand instant gratification. They want the right product, right place, right now. They are also more savvy and well-informed about products in the market.
It is not enough to develop a compelling product or service at competitive prices. Retailers need to think about the whole process consumers undergo when interacting with the brand. In an age where disruptive platforms like Netflix, Uber, and Amazon promise instant gratification to customers, it is more true than ever that the customer is king. Consumers of the future expect the world to revolve around them. It is the job of retailers to launch their products and services into the orbit of the self-obsessed, narcissistic generation.
And it’s not just millennials. Research has shown that regardless of age, exposure to technology and disruptive apps like Netflix and Uber makes us more likely to want instant gratification. With apps serving at our beck and call, we have grown to expect a high level of service and convenience from every shopping experience.
Retailers need to evolve in the following areas to remain relevant:
1. Best overall customer experience (CX).
In the future, competitive advantages in retail will be built and eroded based on differentiation in customer experience (CX).
It is not enough to develop a compelling product or service; retailers need to think about the whole process consumers undergo when interacting with the brand. This begins with using customised marketing to draw in customers, continues with harnessing the internet of things to make checkout and purchasing a breeze, and is sustained by robust customer service.
Since price or product features will be less relevant than the totality of the customer experience, the advertisements of tomorrow will focus less on promotions or functionality. In fact, advertisements will be supplanted by infomercials and genuine content which aim to strengthen brand loyalty and promote brand values.
Tech savvy and well-informed, consumers of the future will base purchasing decisions on their own research and recommendations from the community. Direct advertisements will be viewed cursorily. Hence, retailers will have to offer engaging content that is not overtly brand-affiliated to appeal to consumers.
2. Tapping into social commerce.
Smart retailers will use data from social networks and their customer databases to engineer word-of-mouth marketing, which is still the most effective marketing technique. Social networks are the marketers’ dream for a few reason: people (especially those who have high levels of disposable income) spend a large amount of time on them, and they are a treasure trove of information about a customer’s interests and friends.
3. Connecting into the trust economy.
The well-informed consumer is skeptical of advertising slogans — they place more faith in user feedback and reviews. Retailers of tomorrow will increasingly participate in the trust economy by responding to reviews/feedback on online forums, and producing genuinely useful and entertaining content that builds trust between consumers and the brand.
4. Automation of business decisions with AI and big data.
Retailers will use AI and big data to understand and act on consumer preferences and behavior in a real-time manner. Analysis on where consumers are spending most of their time within a store, for instance, can guide decisions to streamline the shopping experience and make it as frictionless as possible. Within physical retail spaces, beacons can track human movement, and detect which products are drawing the most attention. Customer IDs can be tracked by the wearables on each individual, allowing for personalised marketing in the physical realm (imagine billboards that update themselves based on the demographics of the crowd, or smart mirrors that show you how you’ll look wearing this season’s latest offerings). And brands will use customer purchasing data to structure more targeted marketing campaigns and form better estimates of future sales.
5. Reimagining the physical and online retail experience.
Retailers of the future will recreate the entire physical store experience from ground zero. With the host of enabling technologies, retailers will be able to create a retail experience that is drastically different from before. This is what Amazon is doing with Amazon Go. The physical and online retail experience will merge, achieving a true omnichannel experience. Research indicates millennials tend to browse and research about products online, before heading to a physical store to complete the purchase. The reason? It cuts out the waiting time for delivery, and allows consumers to directly handle the product before finalising the purchase decision. Retailers will be investing in ways to make the entire offline-to-online or online-to-offline experience as seamless as possible.
6. Abstraction of payment and checkout methods.
The checkout process will be made so convenient that customers can checkout immediately with the payment method of their choice. Payment and checkout will be abstracted into a seamless part of the shopping experience that just works. Innovation in payment methods will making queuing at the counter a thing of the past. In particular, there will be greater integration with mobile and wearables to facilitate cash-free payments. Consumers are increasingly trusting services like Apple Pay, Samsung Pay, and PayPal with their credit information, providing an opportunity for retailers to leverage such services to make payment hassle-free.
Over to you
The emergence of ecommerce platforms is certainly a threat to brick and mortar retail stores. But retailers can turn today’s technological revolution into growth opportunities by learning from what makes ecommerce compelling to customers — integration into social commerce and the trust economy, seamless payments, and the use of big data to deliver an engaging, personalized customer experience.
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