Retail is Dead, Long Live Retail: A Peek Into the Industry’s Data-Driven Future
There's no doubt that retail is changing, but brands and retailers that meet the challenge are thriving. That’s because data personalization and a multichannel approach are creating opportunities for the smartest brands and retailers to acquire, delight and retain customers for life.
That last point — “for life” — may seem dramatic. It’s not. Given the high cost of convincing a new customer to try your product — through advertising, through stocking and maintaining a store in a high-traffic area, promotions, discounts, etc. — it should be no surprise the economics work best for consumer brands and retailers when their customers return over and over again.
This has been a major point of discussion. The Lead Innovation Summit brought together more than 1,000 brands and retailers, digital natives, tech startups, investors, dealmakers, analysts, creatives, academics and media over two days this past July. It served as a timely reminder that actions today decide who trades tomorrow.
Why Brick-and-Mortar Isn't Dead
Before the internet, when shopping experiences were limited, primarily, to mail-order catalogs or physical stores, the foremost metrics for retail success were sales per square foot, sales per location, and same-store sales growth. By starting with or abandoning brittle legacy technologies and embracing the idea that just about everything can be digitally connected, the smartest brands and retailers have reimagined the purpose and potential of brick-and-mortar stores.
This starts with reimagining the function of physical retail. First, the store itself is more often becoming a customer acquisition channel instead of — well — a store. Curated, well-designed spaces are a great way for brands and retailers to introduce themselves and their design aesthetic to new customers. Online menswear brand Bonobos, which has been purchased by Walmart, famously introduced the concept of “Guide Shops,” where customers could try the company’s many sizing options and styles over a cold beer before placing online orders with one of the shop’s “ninjas.”
Digital Brands Group, the owners of DSTLD Premium Denim brand, called out this use case for physical retail stores explicitly in an investor presentation, describing the purpose of its physical footprint as “customer experience not driven by sales per square foot” to “integrate store purchases into online shopper profile.”
Digital Brands Group further observed that, according to its data, in-store customers made larger initial purchases and had return rates three times lower than online customers. Meanwhile, A.T. Kearney research shows that customers spend 40 percent more than planned when shopping in-store.
The Store as Part of Logistics
It's probably time to stop thinking of stores as just that. The future of physical spaces must offer more. So along with a strong order and inventory management system in place, brick-and-mortar stores can also become a place to fill orders.
Zumiez, the global apparel and accessories brand, uses a fully localized fulfillment strategy to reduce shipping costs by shipping online orders from the closest store location. This strategy dramatically reduces shipping costs and delivery times, not to mention reducing the company’s environmental impact. Zumiez saves on supply chain resources as well as improves customer brand management. This win-win encourages environmental and operational efficiencies, something sure to appeal to any retail manager out there.
Putting the Customer at the Center
The store is changing, and so is companies’ understanding of the customer. Much has been said about the need for brands and retailers to offer “personalization at scale,” but to execute on that vision, they must first ensure that customer data is tracked, accurate and accessible.
In-store associates and managers should be trained to identify and create customer records at the point of sale that can eventually be merged into an online shopping account. Similarly, the online experience should automatically create a customer record accessible at the point of sale.
With that data in hand, operators in stores and corporate offices can begin to automate digital promotions and marketing efforts along with in-store suggestions from complete customer histories. Furthermore, product design or buying decisions that align with customer preferences and personas will increase turnover and reduce markdowns. A recent survey by Salesforce showed that connected processes are an important factor in buying decisions for 70 percent of consumers.
Today and Tomorrow
The times certainly are changing. Malls are closing and e-commerce is rising, meaning that brands and retailers must act today to protect their tomorrow. So, what does that mean for retailers going forward? Should they forego physical spaces completely? Do they invest heavily in customer-centric data processes?
Before making those longer-term calls, it's important to start small. Make sure you're clearly defining the desired results, customer experience, and associate experience across your sales channels — this means your website, your physical stores, and wholesale.
Then, build an optimal technology stack to achieve those results by integrating best-of-breed cloud solutions. As Warren Buffett said: “If there’s one thing to remember: Delight your customer!” The only way to do that at scale — and ensure that you keep doing it — is with flexible, real-time insights into how customers get engaged, and stay engaged, with your business.
Retailers today are best advised to study their data and make business decisions accordingly. The retail ecosystem changes every year, so recognize the trends and ensure operations are rigid enough to move with the data. This is the only way that businesses today will not only survive, but thrive, tomorrow.
Slater Latour is vice president of finance at Springboard Retail, a POS and Retail Management software solution that gives retailers the tools to thrive.