amazeConnected Retail - The Future of the High StreetJuly 2013

amaze.com

© Amaze 2013

Connected Retail – The Future of the High Street 2

A challenging start to 2013It has been a year of doom and gloom on the high street. Or so headlines would have us believe. The high profile demise of Blockbuster, Jessops and HMV has certainly had commenta-tors hotly debating which will be the next well-known brand that struggles to survive.

The odds have been stacked against the retail industry. Whilst Britain might have narrowly missed a triple dip recession, the unseasonably cold weather in the first quarter of the year – the coldest on record since March 1962 – did little to help the fortunes of struggling retailers trying to overcome pinched purses. With wage infla-tion at around 1% and headline inflation at close to 3%, the maths are just not adding up for consumers and belts continue to be tightened. These are formidable trading conditions and for the traditional retailers who are failing to inno-vate, the future is indeed bleak.

Yet despite such daunting times, here at Amaze we have seen something interesting taking place on the high street. We believe brands will be able to succeed on the high street if they invest in understanding the changing digital buying habits of their customers.

A retail renaissance is underway but it is digital And at its heart is the consumer. For retailers who are embracing technology and who under-stand how consumers are now using digital in all aspects of their lives, the future of the high street is filled with promise.

We believe that new channels should not be viewed as threats and that retailers who emerge out of the changing landscape will do so through using a mix of the online and off-line experiences for the consumer – making shopping more convenient and easier, whether online, in-store or through mobile applications.

Figure 1: The Connected Retail Landscape

Connected Retail – The Future of the High Street 3

Even Amazon is building its ‘offline’ capability through the use of Amazon Lockers, where con-sumers can take delivery of a parcel at a Locker location and pick up parcels at a time that’s convenient for them.

Deloitte predicts that “by 2020 the physical store will evolve into showrooms with the sole purpose of facilitating the research phase of the purchase journey”. Whilst we think this is an extreme view, it makes the point that ‘show-rooming’ is here to stay and retailers have little choice but to work out how to serve a growing group of customers who only want to visit a shop to experience a product but will ultimately purchase it online.

Let us ‘retailtain’ you!One brand that is spearheading this transfor-mation is Burberry. Walk into 121 Regent’s Street, Burberry’s flagship store, and you enter a multi-media experience combining the brand’s physical and digital achievements.

Digital is being used to enhance and extend the shopping experience throughout the store. From playful digital rain showers, designed to amuse the shopper as they browse, to smart augmented reality mirrors in the changing rooms that flip to show images of clothes on the catwalk as people try on different items, Burberry is using technology to facilitate product

discovery and enable cross-selling. It also has ‘retailtainment’ down to a tee, with a series of free live gigs hosted in-store featuring bands such as the Kaiser Chiefs. Burberry un-derstands what excites its customers and how to connect with them and this is reflected by its sales figures, which have beaten forecasts de-spite the snow and gloom, with total revenues rising 9% to £1.16 billion in its second-half trad-ing results. Burberry’s strategy involves moving the group from a ‘static wholesale model’ to a ‘dynamic retail model’. The retail experience is an important part of this and the strategy is clearly having success against a backdrop of disappointing figures from other luxury brands such as Prada and Louis Vuitton Moet Hennessy.

Burberry is far from being the only retailer that is using technology to transform its fortunes. Virtual fitting rooms featuring the latest function-ality in body-scanning and complex 3D imagery are also appearing in a number of retail outlets, providing shoppers with a digital replica of how they would look in an outfit and offering cus-tomers a progressive and experimental in-store experience.

What each of these developments has in com-mon is how technology is being used to connect with the consumer and extend and enhance a tangible branded shopping experience.

Connected Retail – The Future of the High Street 4

Getting ready for Connected Retail The speed with which new technologies are being adopted and taken up by consumers is breathtaking. The use of tablets and mobile is unprecedented. We have seen new customer touch points, such as Pinterest, burst onto the scene leaving retailers struggling to decide whether to prioritise social commerce, digitally enable stores or focus on mobile strategy.

We believe that understanding when and how to harness these technologies and how to com-municate via them is what Connected Retail is all about. The role of Connected Retail, is about linking consumers, devices and data for smarter shopping experiences.

Forrester predicts that by 2016, Connected Retail will influence 44% of retail sales. Within just three years it has the potential to revolution-ise the industry and will transform how retailers operate as a business just as much as it transforms how they connect with consumers. It has enormous capacity to improve operations, streamline processes and lead to greater effi-ciencies.

We have identified three core areas where Connected Retail can be intelligently applied to improve the in-store experience, breathing new life into the high street.

Improving service delivery – by effectively linking consumer data and research to pur-chase phases.

Delivering a personalised experience – by tailoring products to consumers to support sales.

Enhancing the brand experience – by cre-ating meaningful experiences that move the consumer from transacting to conversing with brands.

The role and impact of Connected Retail in these areas is already reaping benefits on the high street and can be understood better by tak-ing a look at what leading brands are achieving.

The new retail normThe wave of digital and technological innovation that is sweeping across the high street is creat-ing a shopping environment with the connected consumer at its heart. We predict that the new norm will be a high street that is never closed, which provides a truly personalised service and encourages the shopper to explore and enjoy a brand. So far, the industry has only dipped its toe in the water but it will not be long before many retailers are left behind. The very real benefits of Connected Retail are here now for the taking.

Selling smart, with connected customer service

Improving operations and processes through the use of new technology not only leads to a better customer experience but many retailers are realising operational benefits and an im-proved bottom line by:

Empowering employees By linking customer data and mobile and tablet devices employees can be empowered to build better, more meaningful customer relationships. Apple is excelling at this. Mobile POS, product demonstrations, customer consultations and

Figure 2: Delivering Connected Retail

Connected Retail – The Future of the High Street 5

access to real-time inventory in-store, has es-tablished it as a leading player in the field with the authority to build valuable, life-long custom-er relationships.

Neimen Marcus is also breaking new ground with its location positioning iPhone app which enables employees to quickly access a custom-er’s purchase history, facilitating service based differentiation in-store which helps the customer make more informed purchasing decisions and therefore, delivers a more personalised service.

Smarter selling New technologies mean that retailers can pro-vide a wider range of products without having to physically stock everything. We have seen how Adidas’ AdiVerse interactive wall display of product inventory provides a strengthened service and builds connections between eCom-merce and the physical store, giving customers access to a complete product range in an inter-active and fun way.

Advances are also taking place in payment processing. Nordstrom’s mobile POS checkout app is a good example of this. The app reduces the cost to serve by enabling staff to checkout customers from the aisle and also eliminates queues improving the shopping experience.

The rise of ‘me-tailing’Whether via mobile, tablet or desktop we know the consumer has the potential to always be connected. Enabling customers to research products anywhere, purchase anywhere and

fulfil customer needs anywhere is a challenge many retailers have as a top priority over the coming months.

Communicating with the constantly connected customer Tapping into this ever-present marketplace and providing customers with the tools to connect with a brand anytime is a careful balancing act between empowering customers and invading their digital space. New Balance has achieved this well with its in-store only iPad app which serves as a customer engagement tool and presents informational content for product dis-covery whether the store is open or not.

Adidas’ Neo interactive window display also facilities product discovery, research and pur-chase for the ‘Always On’ consumer. Under-standing how to enable customers to interact 24/7 at their own convenience will mean a high street where the shops are never closed, but the challenge for retailers is how to encourage consumers to visit out of hours.

‘Me-tailing’ in practice Retailers are vying to deliver ever more creative and personalised shopping experiences as they try to develop connections with their cus-tomers and ‘Me-tailing’ is growing in momen-tum. Burberry and Diesel are examples of how brands have really understood their customers and use the right channels and technologies to interact with them. ‘Me-tailing’ is personal so it can quickly backfire if the wrong proposition is delivered, no matter how exciting the technolo-gy. The success of these initiatives lies in their execution and an understanding of the individu-al customer.

Connecting customers with brands Connected Retail is about far more than just transactions. We think one of the biggest op-portunities that the new era brings is to develop meaningful relationships with customers by helping them to discover and understand more about a brand.

Connected Retail – The Future of the High Street 6

Capturing customer interest Understanding the preferences of custom-ers, their shopping habits and their lifestyles is crucial to fostering an ongoing relationship. Interaction is a key element in securing this and in developing conversations where cross-selling can take place.

Tommy Hilfiger does this well with its interactive window display, which elicits brand discovery by capturing and stylising customers’ profiles. Nike is another brand that is capturing customer interest with its Nike+FuelStation. It uses motion sensitive mirrors that film local runners wearing products from the store.

These are brands that know and understand their customer base and what is important to them, whether this is being part of a local run-ning community or keeping up with the latest fashion styles: we can see how they are con-necting with their customers in ways that matter.

Telling the brand story Once a customer is engaged, a whole spectrum of opportunities opens up for a retailer to tell its brand story in more detail and take the cus-tomer relationship to a deeper level. Burberry’s Smart Personalisation technology is a clever example of this. It promotes personal stories of craftsmanship moving the customer from brand discovery to brand preference.

This is achieved through a ‘Made to Order’ service that includes personalised nameplates with built-in technology. The service allows a customer to scan a nameplate sewn inside clothes on display in-store with a mobile device to unlock video footage retracing the creation journey of the product. Pure ‘retailtainment’ ‘Retailtainment’ is one of the most impactful ways to grow advocacy through play and in-volvement in brand experiences and we believe that Burberry is again leading the way in this field. It understands the importance of using the right technology in the right way to reach the

right consumers. Burberry currently stands out from the marketplace in its use of Connected Retail but the well executed, ‘connected’ expe-riences that it delivers are set to become part of the everyday high street scene.

The high street of the future

An experience wrapped around the individual, with mobile at its heartDeliotte sees mobile as one of the biggest drivers of today’s ‘Connected Consumer’ in the retail landscape and predicts that mobile will represent 19% of total store sales by 2016. With the imminent roll out of 4G networks across the UK about to make mobile browsing even easier for consumers, we know that mobile strategy has already become the top priority for the high street in the coming months. The future high street will be a sea of data, with mobile at its heart. To win in this complex environment, brands need to understand where mobile fits into their retail offering. Anticipating when and where consumers will want to interact will be fundamental to offering a personalised, relevant service that delights rather than annoys. This means spending time with consumers to un-derstand what they expect from a brand across multiple touch-points – the alternative, a ‘me too’ approach, is more likely to fail than suc-ceed.

The store as brand ambassadorStores will be just as much about conveying and selling a brand as they will be a means to shift products. Expect rich digital in-store ex-periences that flow seamlessly from the online brand environment. Today’s in-store experience is often divorced from its digital cousins, the store of tomorrow will need to feel not only part of the same family but intimately fused with the online experience. It will be a natural progres-sion of the consumer journey - connected not only visually but through the intelligent use of an individual customer’s previous interactions with a brand.

Connected Retail – The Future of the High Street 7

Pop-up brandsWe also believe that there is the opportunity for pop-up brands to flourish. Analysts estimate that throughout Britain 28 shops every day are shutting their doors for good. With one in ev-ery six retail premises lying empty, this might sound dire but where there are vacancies we are seeing a ‘pop-up shop boom’ fuelled by fleet of foot start-ups, that were previously selling online taking advantage of good rents. Short-term we will see a much more agile high street where shops come and go quite quickly, providing fresh, temporary experiences that will rejuvenate town centres. Larger retailers are also getting in on the ‘pop-up act’ with Liberty’s announcing last year that it was looking for sites for pop-up versions of the store to attract a new generation of shoppers.

Branded high streets Where could it all end? We may start to see branded high streets as independent retailers join forces and brand a particular shopping area, collaborating to make an area a ‘destina-tion’ - either through classic clustering or the alliance of non-competitive shops that offer, for example, only locally produced or sourced goods.

Collaboration will enable these independents to provide a multi-channel experience akin to that of their large chain cousins. We could also see more collaboration than before in this area as these independents join forces so that the digi-tisation of their offline presence also becomes possible.

About Amaze Established in 1995, Amaze was born out of academia with an aim of exploring the impact of digital on learning and communication. This vision manifests itself in the company’s purpose today- to inspire original thinking through a deeper understanding of technology and human behaviour.

Amaze is consistently ranked as a leading full service marketing and technology consultancy with proven strength across the entire digital stack from strategy through to solution design and global implementation. The company’s work spans 104 countries in 28 languages.

Amaze’s ability to integrate the creative mindset of an agency with robust consulting and tech-nology implementation skills has enabled it to build a strong reputation in global design and build and eCommerce, and has helped drive recent growth.

The company has an impressive client list which includes Lexus, Toyota, ASICS, Coats plc and Unilever.

To find out more about how your organisation can benefit from Connected Retail please contact Amaze on +44 (0)20 7440 0596 or info@amaze.com.