2017 has been a rough year for traditional brick-and-mortar retailers. As many as 8,600 stores may close by the end of the year, shattering the previous record of 6,163 in 2008, according to a Credit Suisse report. This is due in large part to more than 300 retailers filing for bankruptcy halfway through 2017, a 31 percent increase from the same time last year, according to BankruptcyData.com. Gymboree, Payless ShoeSource, RadioShack, rue21 and Gordmans are all recent casualties of the changing retail landscape.
It's easy to point out the shift to online shopping as a reason behind these changes, but executing on an effective online retail strategy isn't enough to ensure success. Increasingly, consumers aren’t satisfied with online only or brick-and-mortar only. What consumers want most is a great experience, and it doesn’t particularly matter whether that comes online, in person or both.
The problem is that there's often a large disconnect between the experiences companies think they're offering and the experiences they're actually delivering. According to a study from Bain & Company, 80 percent of CEOs believe their companies deliver a superior experience to their customers, but only 8 percent of their customers agree. That’s what’s called the experience gap, and it’s one of the primary reasons some retail organizations are struggling, losing employees, customers and revenue. It's essential that organizations identify metrics that will help them close this gap.
For years companies have focused almost exclusively on operational data, also called O-data.This includes things like sales numbers, day-to-day operations, financial data, and human resources data. While essential to use and understand, O-data is about the past. Unless a company and market stays exactly the same — and that doesn’t happen in today’s world — O-data can’t be predictive about the future. Therefore, while O-data is very important, it’s no longer a competitive advantage.
Far more important than operational efficiencies are great experiences. That's why the winners and losers in today’s economy are determined by the experiences they provide, not just the products they sell or the services they offer. That means companies need leading indicators so they can be predictive about the future, not lagging indicators that only allow them to be reactive to the past.
That’s where experience data, also called X-data, comes into play. It’s the human factor data that indicates the beliefs, emotions and intentions people have. It tells you why things are happening, not just what is happening.
Most organizations are O-data rich and X-data poor. The end goal for companies is to build a product or service that people love. That’s easier said than done. It’s not easy to delight customers at every touchpoint, create a strong employee culture or build an iconic brand. Organizations need to manage the full experience if they're going to close the “experience gap.”
The iconic brands of the future are the ones that are delivering a quality product and implementing a successful experience management program. It’s about creating a community or experience to go beyond brick-and-mortar or online. Companies like Outdoor Voices, Warby Parker, Bonobos and Everlane are using pop-up shops, boutiques and meet-ups to build communities. For example, athletic brand Outdoor Voices has a passionate following because it uses its stores for things like “dog jogs,” community yoga and parties. Even online retail giant Amazon.com is creating customized, intimate experiences for consumers with new services like the Amazon Prime Wardrobe, which sends clothes to consumers to try before purchasing.
These brands are expanding because of their focus on experiences for customers. In this new retail landscape, customers expect more. It’s a world where organizations are disproportionately rewarded when they deliver great experiences, and punished when they don’t. O-data is no longer the key to advancing because it's not a competitive advantage on its own. The vital signs of a business are tracked with X-data to help organizations understand the experiences people have and why things are happening. Don’t get trapped in the past. If your company doesn’t look toward the future, it might not have one much longer.
Mike Maughan is the head of brand growth and global insights at Qualtrics, a research and experience software company.