The Evolution of Retailing - Anywhere and Everywhere

“It’s not the strongest or smartest that survive but those most responsive to change”, said Charles Darwin, and never has that been more true than in retailing. During the past 5 years, while so many businesses focused on mere survival, the explosion of technology has transformed the world of retail, while social media has changed consumer relationships. Many have sounded the death knell of retail, as high street shops close, but retail is far from dead, it’s just changing. Had this surge in technology come at a different economic time the pace of change in retail might have been different, but ultimately the direction would be the same. 

Mobile at the heart of everything

At the heart of this change is mobile technology, the smart phone in particular, resulting in the store and the customer being everywhere, anywhere and at any time. Critical for every brand and business is to fully understand the implications and opportunities of this and to stay close as it develops, as developments will be fast. The challenge and opportunity now is to be a shop or brand in every consumer’s pocket. Ultimately this means that if an item is in stock anywhere in the business it should be available to everyone everywhere.

At the same time, the proliferation of social media has radically altered consumers brand relationships, and how they browse, source and buy. Consumers can use their phones to find a store, scan codes, browse comparisons while in the aisle, make purchases and collect loyalty points via apps like the Irish Reep, but we’re still only scratching the surface of what’s going to be possible. If you use Hailo you’re already used to e-receipts, and near field communication (NFC) is opening exciting in store prospects like couponing, loyalty rewards, easy fast payment, communicating at shelf etc...

Shoppers don’t see channels just relationships

One way of comprehending this new environment is breaking it down into pre-tail (search and comparison), retail (the purchase) and post-tail (sharing opinions and experiences via social networks). Omniretailing is another term being used to describe the multitude of communication and distribution channels. But ultimately these are all short term phrases to help us grapple with the speed of change, because the consumer does not see multi channels they just see it as a relationship. One customer and one retailer, the experience is the same. Shoppers experience a single brand across all contact points both virtual and real world. The challenge is integrating the physical and virtual channels to personalise a streamlined customer experience, as we shift from physical to virtual experiences and transaction to relationship based interactions. We talk about m-commerce, e-commerce and off line commerce, but need integrated commerce. Seamless integration is the central retailing challenge and currently where a real point of difference can be gained.

Not dead, just different

A big discussion point is what will happen to those empty high street shops, with some predicting many will revert back to residential, reinvigorating city and town centres. However, consumers still want to touch, feel, interact and experience brands but having large stocks in expensive high street retail is increasingly unnecessary. Showrooming is becoming more common, either consumers buying online while in store or where they experience and buy in store but their purchase is delivered from elsewhere.

For other sectors the reverse of this is the case, where you purchase online but can pick up from the store or other locations (click and collect), so the stores becomes a fulfilment centre. Both of these trends show a growing separation between the product experience and the product purchase. In this new world inventory control is also even more important.

So as a business you need to be very clear as to which strategy is appropriate as knee jerk reactions to trends can be very costly, as many don’t stand the test of time. Knowing which will persist and which are critical for your business is clearly vital. Macy’s have been rolling out online fulfilment from their stores, giving their brick-and-mortar business a leg up. In Ireland, parcel lockers are already popular as is click and collect with some Multiples. In the UK Asda have just announced click and collect at 1000 locations, with lockers in their petrol stations starting in 2014. Broadly, retail footprint is starting to look very different and certainly the trend is smaller.

A strong brand is still key

Amongst all this change there is much that will still be familiar and many retail and consumer behavioural principals that remain. Brand strength is still a corner stone to success, as well as surviving the online transition, where consumer demand proves strong enough to pull volume through the trade. Digital is also resulting in companies supplying more and more specialised products, having closer, more personal and intimate relationships with customers. In principal, very like your local store of old where technology also allows marketers’ to treat consumers as individuals rather than segments. But there is a growing extreme, where at one end the retail offering is increasingly premium and tailored to specific individual needs and at the other end an indifference category based on price. The middle ground is possibly where the greatest challenges may lie.

It’s not either or, it’s both

For some, bricks and mortar will remain key to maintain a presence in their local community. We also already see some online businesses looking to reverse into retail, while businesses that could be purely online are reluctant to drop their high street presence. So knowing the role your bricks and mortar and online presence play in your customer relationship is key before changing anything. Recently Thompson holidays have relaunched their bricks and mortar offering to be a far more experiential offering. Another example is Tesco’s virtual shops in Gatwick and Korea, where shoppers fill up a virtual shopping basket in a digital store, and the produce is delivered to their home. So rather than close stores, many are realising the opportunity to reinvent the store by creating a brand story to engage and involve shoppers in a brand experience. Burberry’s Regents St London store is a good example, aiming to bring what it considers its richer online experience onto the high street, giving the consumer a very different and engaging brand experience.

If you can’t control it, join it

Another challenge has been grappling with fragmentation, as social media and technology proliferate, and the number of consumer touch points increase. But this complexity also has opportunities along the ‘research to purchase’ path, as the length of an average purchase increases with more browsing, researching and comparing, more opportunities to communicate and be more targeted than ever, as well as influencing the decision process and build deeper relationships. This fragmentation has meant that it is not just getting consumer’s attention that is challenging but holding it. This is driving companies to track purchaser’s behaviour, deliver relevant messages and manage relationships, all in real time. It’s estimated that by 2017 heads of marketing will spend more on technology then the company head of IT.

It is also leading to more knowledgeable and demanding consumers who are very aware of the power they now hold. As you can’t control the conversation, it’s about joining it which has been a steep and sometimes difficult learning curve, but leading to a far greater involvement of consumers like in co-creation of product and service development i.e. don’t dominate, co-create. So ask yourself, do you really understand your consumer and the type of conversation you need to be having? In addition, this more informed and empowered consumer is tuning into companies ethical and social policies to determine whom they wish to associate with. 

An old adage, but size isn’t what it used to be

Technology has been a great leveller as size is not the advantage it once was, or can even be a hindrance as corporations struggle to change, or quickly find that a large retail portfolio is a financial drain which is difficult to back out of. The smallest business can now sell, as can the consumer buy, globally. And as the recession comes to an end having a retail bricks and mortar strategy of being large and selling cheap is increasingly risky as change comes fast and from unexpected directions.

How would you like it?

Technology is allowing companies to change strategy, markets and product lines faster. This, coupled with being less dependent on their domestic market, is allowing them to spread risk and potentially be more recession proof. While in advanced internet based economies like the UK only c15% of retail sales are currently online, in 3 years that is expected to be c25%. The rapid roll out of fast broadband, smart phones and now 4G, and over 55’s rapidly joining e-commerce, greatly support this growth trend.

Technology has blurred the lines and created a retail industry open for business anywhere, anytime and anyway the customer prefers. It is transforming the way consumers shop and the way businesses trade and operate. JC Penny has vowed to get rid of physical tills by 2014, and the start of a cashless society is upon us. Already a third of shoppers use their mobile when grocery shopping and whether shoppers are comparing prices or scanning QR codes to access information, the line between traditional and digital is gone. This technology is also permitting a very personalised in store experience. Some say that the retail store of the future will be a hyper-efficient, digitally enhanced showroom that serves as a physical storefront for online retail operations.

Big data – get used to it

All this technology and social media naturally produces a vast amount of data, which increasingly powerful computing and complex algorithms can churn through and provide valuable information and insight. So retailers need to get comfortable with big data. This is leading to personalisation and mass customisation or ‘me-tailing’, which is really full circle back to where your local retailer knew you intimately and what you liked and wanted. It also allows the consumer deal directly with an expert or niche specialist producer. An interesting consequence of this is the ‘filter bubble’, where what consumers are increasingly exposed to is reflective of their past digital behaviour, resulting in them being filtered into an increasingly narrow world, when originally the internet was thought to herald the opposite.

While the current issue of data privacy will settle, as we become more used to it, mobile has brought it to a privacy tipping point as one single device increasingly tracks and conveys an awful lot of information about you as a consumer – where you are, what you’re looking at, what you’re spending etc… But fundamentally consumers are smart and understand the trade-off between giving companies access to their details and receiving better products and services. One thing that remains constant however is having honest and transparent conversations and relationships with consumers. It’s a quid pro quo. Treat them with respect and you’ll get loyalty back. So not that different after all!