From our work with companies across the retail spectrum — from U.K. grocery to U.S. apparel — we witness the ongoing transformations taking place. Here are our perspectives on what 2019 might have in store, and some key questions to ask when evaluating existing and new retail strategies.
Social Commerce Boom
Increased usage of Facebook, Snapchat, Pinterest and Instagram to shop has been of keen interest to many retailers. What's interesting is that consumers don’t mind being advertised to, as they know they're there for buying. With YouTube and Twitter being actively used to influence, engagement has become more important than advertising.
Some retailers have been experimenting — and seen positive results — with chatbots. In 2019, we could see increased use of chatbots on apps, websites and messenger platforms to provide a differentiated experience to consumers. With an understanding that consumers are likely to spend more on brands they interact with on social media, retailers are likely to see an increase in share of sales coming from social commerce.
Key Questions for Retailers: What channels will provide the highest return on investment? Any avenue to expand the social commerce footprint beyond the usual suspects?
IoT Driving Two-Way Benefits
The Internet of Things (IoT) is helping retailers follow customers through their journey, from search and exploration to making a purchase. With rapid advancements in software and increased adoption of wearables, IoT is helping deliver the right message (communication/promotion) at the right time (on location/closer to purchase) to the right audience (those having considered the brand).
Consumers aren't complaining either, with retailers using technologies to make it easier for customers to find the right product and access product information "on the go" or while in-store, making the shopping experience more streamlined and less overbearing. The challenge for retailers will be to make sense of all the data to achieve a higher ROI. This can be accelerated by marrying data science with specialist retail experience to provide actionable insights.
Growth of Experience Stores
While there has been much talk of a retail apocalypse, there are brands that have found a way to grow by focusing on their core proposition. At a time when mundane, impersonal department stores are falling out of favour, retailers such as Nordstrom and Sephora are coming up with smaller stores. These smaller-format stores carry limited products and provide superior customer service through well-trained sales associates and additional "beyond retail" services.
It's not surprising that people prefer e-commerce for transactional buying, and offline stores for emotional or personal purchases. No matter how fast online may be growing, almost 90 percent of retail purchases still occur in brick-and-mortar stores. Retailers need to tap into the segment which still needs that physical experience. Brands that can go beyond transactions and offer experiences are likely to stay in consumers’ minds for much longer, as well as realize greater loyalty and average order size.
Some retailers are moving to small-format stores because identifying locations that can generate high ROI through traditional formats is becoming increasingly difficult. Others are being driven by the focus on service as a value proposition, minimizing inventory and optimizing the usage of online and offline channels.
Key Questions for Retailers: How do you go about selecting store locations for new initiatives? Which products do you choose to stock in a space-starved layout? How do you assess ROI across various store locations?
Decoding Multichannel Consumers
The realization is growing that consumers are channel agnostic. While there may be a situation-specific preference for a particular channel, the customer doesn't mind switching, and has no specific mental barriers across the purchase journey.
Customers can be browsing online and purchasing offline, or purchasing offline and getting it delivered at home. Twitter, Facebook, Instagram, Amazon.com, brick-and-mortar stores — these appear in the customer journey in no particular order.
And where the purchase takes place should be the least of a retailer’s worries. Rather, it should focus on maintaining the right balance by understanding its customer. By having a multichannel strategy, it's easier to have an in-depth view of the customer and engage with them at the right time to increase not just awareness and consideration, but purchase intent.
In an age when apps are giving customers fashion advice, and then directing them to stores, retailers need to make sure they're decoding all the signals that come in from all touchpoints, and use them to gain a competitive edge.
Evaluating Second-Hand Apparel
With more and more women opting to purchase second-hand, many big brands are jumping on the opportunity. What started as a niche concept by some startups is quickly scaling up into a multibillion-dollar opportunity. Resale disruptors are growing at over 20 times the overall apparel retail growth, and retailers have suddenly woken up to a latent demand which they haven't previously addressed.
Millennials, while discarding items in up to five wears, are also less wasteful — becoming a good prospect for retailers. They're the driving force behind this change, also bringing along the sustainability challenge that retailers must act upon. Although it may be easier for department stores of multibrand retailers, high-end brands face a conundrum on how to plan for the future.
Key Questions for Retailers: How do you price a product, which doesn't become mass at launch, but is likely to become mass (through resale/second-hand) in the future? How do you keep your core customers engaged, and make them see value in your offerings?
Raman Sharma spearheads the retail analytics practice for The Smart Cube. In his role as Associate Vice President, he develops analytical solutions for business teams within retail clients, including marketing, CRM, and operations.
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Raman Sharma spearheads the retail analytics practice for The Smart Cube. In his role as Associate Vice President, he develops analytical solutions for business teams within of retail clients, including marketing, CRM, and operations. Outside of work, Raman enjoys reading books, watching cricket and spending time with his family.