Retail in the digital age

RETAIL IN THE DIGITAL AGE 1

RETAIL IN THE DIGITAL AGE By Max Ryerson | 23.08.2013

Retailing in our technologically advanced world is greatly different than it was 25 years ago. Technology has had and continues to have a significant impact on retailing across the world and has caused some structural shifts in the way consumers shop and retailers operate. There is no going back and the future looks bright for those who are either starting out or who are ready to change and embrace digitisation.

ONLINE IS NOT A THREAT BUT AN OPPORTUNITY

It’s clear today that retail needs to be omnipresent and therefore accessible through multiple channels. Research shows that retailers with brick and mortar stores as well as an online store are seeing an increase in sales in both channels. In fact retailers with online stores see an increase in sales in their bricks and mortar stores from online visitors in the surrounding area. Online is not a competitor to offline retailing – it is a complimentary sales channel that only influences offline purchases and creates new sales. Yes,

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offline retail is perhaps seeing pressure on profits but this is likely due to other structural shifts in shopper behaviour than as a result of online shopping. After all online only represents at best 20% of overall retail sales.

No – the behaviour of shoppers is probably the key factor in changing in-store sales. This is due to the ability for shoppers to search, research, and increasingly purchase online and while mobile. There is a shift in time spent researching a purchase showing this has increased. Part of this research is coming in-store to test, feel, try, look, assess.

And many pure-play online retailers are also testing or seeking offline premises as an additional channel, realising that people still want to experience the good or service they are selling. The difference is that they are not necessarily looking to enter into traditional retail space deals and don’t necessarily need as much space. The showroom model seems to be most appealing where people can try, feel, touch, see and then either buy in-store to have it delivered or buy online.

In Australia, speaking to the APAC Sales Group (ozsale.com.au) they have expressed interests in a showroom type of opportunity at such a Sydney CBD location as the MLC Centre. In the US we’ve seen companies like Amazon and Ebay set up pop-up stores in physical locations. There is definitely a trend towards operating several channels and no longer thinking of physical versus virtual – It will simply be shopping and retailers who can deliver their service & goods to their customers’ preferred channels (I believe we will have a preferred buying channel depending on the situation we are in) will win. And this is where contextualisation will play a really important part in a retailers marketing & sales strategy.


SHOPPER BEHAVIOUR HAS CHANGED The internet has delivered the power to the shopper of being more astute and less emotional. This has created a shift in shopping patterns and so will it create a shift in the way retailers operate including how they use retail space. There is no

doubt that people will still desire to go into a store, visit a shopping centre, or walk up and down the high street. Humans are not only social but tactile beings. We enjoy sensory stimulation and the height of this is to be out and about seeing, touching, feeling, and interacting with things and people. We enjoy being entertained.

The combination of our psychological, emotional, sensorial needs & desires, and the power of the internet and multitude of technological channels has allowed us to behave in more personal ways towards our consumption activities.

IMPACT ON THE STORE SPACE This behaviour will likely impact the space used by retailers. It is likely that stores will become more like showrooms with a greater space being allocated to stock and possibly reduce all together as logistics improve with improvements in delivery (same day) and manufacturing technologies such as 3D printing.

In a recent study Jason Yetton, Group Executive of Westpac RBB outlined some key innovations and impacts from embracing digital across their business. The study identifies that digitisation has had major impacts on branch and channel design, technology and processes, people role design, mix and capability.


Branches (i.e. the bank’s retail outlets) have seen significant changes from digitisation including a reduction in footprint of 25% with larger front of house areas, no need for bullet proof glass, in-branch mobile technology, open and flexible layouts, and 24/7 self serve lobbies. Touch point activities are also shifting, with mobile increasing, online growing by 15%, phone decreasing by 5%, branch decreasing by 3% and ATM growing at a mere 1%. Face-to-face interaction has been identified as still critical for complex needs.

It is likely that we will either find the same type of changes at other retailers happening now or in the near future.

INSIDE THE STORE OF THE FUTURE

It’s likely that the store of the future will have numerous variations. Ultimately it will be all about helping the shopper find what they want and creating opportunities to grow sales through the use of digital technologies and across multiple channels all converging at the same time and in the same place. In order to achieve this retailers will need to continue to invest in technology, resources, skills and partners to help them better serve their customers.


Inventory management systems will need to be upgraded to be more integrated with all other technologies used (social, mobile, ecommerce, wifi, content management, order management, shipping and handling, analytics).

In September 2011, Cognizant published their perspective on the store of the future and this is still very valid today as few retailers have gotten there yet. It identified that:

• Mindsets would have to change from seeing stores as point-of-sale and shift

towards being point-of-service.

• Smartphones are now offering store retailers the ability to communicate an

abundance of detail to customers in-store: product information, special pricing

combinations, related items of interest.

• Store retailers are still important in shopping decisions even amongst the

digital natives.

• Consumers between the ages of 18 and 45 where more receptive to mobile

services offering a wide ranging audience to support implementing

digitisation.

• Shoppers preferred dynamic store displays to online feedback as source of

information, demonstrating the persuasive powers of electronic media at the

point of sale.

• Sales and product information on mobile was driving a significant trend of

people price comparing bricks-and-mortar prices with online options for the

same products while in-store.

• In the minds of today’s consumers, physical boundaries no longer exist –

shopping happens at any time anywhere – retailers need to take their stores

to where their customers are.

• As mentioned above, distributed order management is vital to manage orders

across multiple channels. For this to happen inventory and order

management will have to be tightly integrated into CRM and supply chain

solutions. I would recommend retailers interested in exploring this to explore

solutions offerings from companies such as Order Management System

(OMS).

• Mobile In-Store Shopping – beyond accessing websites and information on

mobile phones, m-commerce takes consumers to the next level with the


enablement of NFC technology, barcode readers, device triangulation to allow

for contactless payment, product & pricing information, streamlining checkout,

and receive contextually relevant recommendations. I see a future where a

shopper in a store looking (either searching online or scanning a barcode or

NFC tag) at a product and price comparing online will receive an offer from

the store management offering a price match if the shopper will buy it now in-

store and will also receive recommendations for related items that

complement the product the shopper was ‘looking’ at.

• Converting Point-of-Sale into Point-of-Service – as channels of distribution

and service grow, there is an increasing need for retailers to adopt a single,

cross-channel view of customer purchases and available inventory.

• Bringing social media and product development together – using social media

in product lifecycle management offer important new opportunities improving

product relevance. It follows the design thinking school of thought and

ultimately will create better products.

A great example is the Burberry flagship store in London:


Looking further into the future it is not difficult to imaging a retail in-store environment where a consumer would come into the showroom, touch, feel, see, experience the product and it would then be customised to fit to the customer’s exact sizes and preferences (color, finishing) and 3D printed for the customer to walk out the store with it or 3D printed and delivered to the customer’s desired address (or conveniently located locker).

Another big disruptor will be the improvement in logistics around delivery. Same day delivery is likely to increase online sales as a percentage of total retail sales. Retailer like The

Iconic are already providing this service in Sydney (same day 3hr delivery) and companies like Google are exploring ways to repurpose their Google Street View vans to create a same-day delivery service.

The expansion of locker networks as delivery options will also satisfy the demand by consumers to have goods delivered on the same day at a convenient location of their choosing. Today, more and more companies are creating new policies limiting the delivery of personal goods to workplaces. As such lockers become an

attractive alternative to having to call in sick to be able to be home to receive that highly anticipated parcel.

THE FUTURE OF RETAIL MARKETING Everything today points to the incredible importance of contextualisation as a means to compete and be relevant in the future, for any brand and in particular retailers. From content, social, SEO, display, SEM, mobile, responsive design, EDM, analytics and big data, these will be core elements that intertwine with physical technology to successfully deliver contextual relevance (time & place) to the consumer.


Retail marketing will be about building niche communities around passions not around platforms. Community management will become another important skill in the success of marketing to consumers. It will be about building relationships not campaigns and consistent commitment will drive greater social value. This will lead to retailers sustaining steadfast, everyday conversation with their community.

Max Ryerson Global Digital Strategy Consultant [email protected] @maxryerson

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Retail in the digital age