Embed Size (px)
Citation preview
The world is in a period of immense turbulence. Financial instability, along with demographic changes and immense technological advances, have changed both customer’s needs and behaviour, and the environment in which retailers are able to operate.
The retail sector has undergone huge upheaval over the last 20 years as sales have moved online and new, hugely successful entrants have changed the way we shop. Add the impact of the recession to this and the result is familiar high street names disappearing and many of the rest under extreme pressure. Retailers need to radically rethink their strategies for survival in a world where customer expectations, methods of transaction and supply chain relationships are all changing.
Statistics show how massively, and how quickly, these changes are taking place. Over 10% of purchases are made online in the UK – the highest in the world - and Forrester estimates that by 2016, half of all consumer purchases will incorporate some online or mobile component. A new study released by Deloitte reports that 9 in 10 shoppers know what they are buying before they even enter a store.
Changes in shopper psychology have also impacted quickly, with cheap but stylish now becoming the smart way to shop and individual consumers habitually shopping at all points on the price spectrum rather than the traditional divide between the well-off buying ‘expensive’ and the not-so-well off buying ‘cheap’. It’s tough to market to that audience and one retailer may require many approaches.
This combination of the ease and connectivity given by technology, the change in shopper behaviours resulting from the recession, and a shift in the value set of the younger generation is a potent one for all retailers. Only those who adapt their offer to meet the expectations of this new customer will survive.
Trends uncovered by TomorrowToday in this report include: !• Retailers will strengthen and protect their brand as channel becomes less relevant
and customers look for harmony with their own values.
“We see our customers as invited guests to a party, and we are the
hosts.“ Jeff Bezos, Founder of Amazon
INTRODUCTION
www.tomorrowtodayglobal.com �2
TOMORROWTODAY STRATEGIC INSIGHTS
About TomorrowToday TomorrowToday is a strategic insights company focused on the new world of work. We use keynote presentations, workshops, development programmes, research and consulting to help our clients understand the key trends shaping the world, and show them the keys to success in four critically important areas:
• Strategy development and execution
• Leadership and team development • Attracting, retaining & engaging
talented staff • Improving customer experience
and retention
Please contact us to request an appointment with us - we'd love to meet with you and share more about who we are and what we do.
We’ve been researching and making sense of the changing world of work for over ten years. Our frameworks and insights have been providing leaders around the world with the understanding of why the world is changing and the driving forces behind these changes.
More than ever, successful companies will be those who understand today the impact of the disruptive trends and with this understanding develop strategies that will give them competitive advantage tomorrow.
That’s where we come in.
TomorrowToday Strategic Insights provides forward-thinking analysis and reports specifically focused on the changing nature of business and work. We can help you understand what the ‘new normal’ will mean for you – in your business, in your industry, to your colleagues and to your customers.
These are some of the questions we can help you answer: !• What impacts will the changing world of work have within your business and
industry? • What are the likely impacts of new technology? • How might supply chains change? • How can you better connect with your new generation of customers? • What do you have to do to retain your staff as loyalty becomes a concept of the
www.tomorrowtodayglobal.com �3
This report has been compiled by the TomorrowToday Strategic Insights team. We have grouped our findings together under five key headings, based on TomorrowToday’s TIDES of Change model.
These TIDES are five key forces that are shaping the world of work today, and causing disruptive change in every industry and sector. They are:
Technology The power, speed and reach of computers is continuing unabated and the retail industry has been one of the first and most profoundly impacted. Retailers especially need to take heed of four growing trends in communication technology: user generated content (the desire that people have to engage and contribute), social media (the desire to interact and connect), augmented reality (the desire to make sense of the world by tapping into the data and information available) and mobility in a cloud (the desire to do all of these things anywhere on any devices using any platform at any time).
Institutional Change There is no industry currently untouched by dramatic and powerful changes that go right down to the foundations – to the very rules of success and failure in that industry. This includes changes to the nature of relationships, the means of producing profit, how companies are structured internally, the structure of the industry - the basis for success - and failure.
Demographics The world’s population dynamics will continue to change radically in the next decade. Trends to watch include an ageing population, rising life expectancy, shifting wealth, plummeting fertility rates, the potential for generational conflict, migration and diversity.
TIDES OF CHANGE MODEL
www.tomorrowtodayglobal.com �4
Social Values People’s expectations have shifted remarkably over the past few decades. What we define as “normal” is no longer certain – in everything from how we define a “normal” career to a “normal” family. The roles people fulfil have also changed – especially for women, teenagers and senior citizens. And generational change brings a whole new set of values and behaviours, which will impact how all businesses relate to their customers and staff.
www.tomorrowtodayglobal.com �5
TECHNOLOGY We are living at the genesis of a new golden technology age, driven by recent dramatic increases in computing processing power, storage capacity and bandwidth. A revolution in how we process information is happening before our very eyes. Consumers and businesses are changing:
• Where they access information • Who they trust to provide it • What they do with it • How they interact with information • Where they store it • What devices they use to access it!This revolution in how we process information is at the heart of all the change we see in the world. Think about it, if how we process information changes, then the way we interact with other people changes, relationships between people and businesses change. It is already changing how we buy things.
These changes represent a disruptive force that will continue to reshape the retail landscape out of recognition when compared to even 5 years ago. Opportunities abound for the brave and innovative. The astute retailer will use Big Data to build deeper customer relationships that result in sales – as opposed to sales that result in relationships – a subtle but massively important shift. Retailers that succeed in the future will focus on making customer’s lives easier and not manipulate behaviours in order to gain sales.
Price comparison, review and aggregator sites mean that customers have a growing ability to determine seamlessly and in real time which companies are offering the best benefits, price and experience. The combination of the Internet, social networks and mobile devices has dramatically shifted the balance of power in favour of customers - and businesses are having to be more transparent than ever before.
TECHNOLOGY
www.tomorrowtodayglobal.com �6
your local supermarket and coming home to those groceries delivered to your door. This isn’t very far away from becoming reality.
Retailers have only just begun to explore the relationship between mobile technology, stores and customers, and we can expect to see a steady stream of innovations over the coming years. Imagine being in a store and just tapping a product with your mobile phone to pay for it – then just collecting it with any other purchases on the way out. Or taking a picture of a book cover or electrical product in one store and being directed straight to the Amazon checkout to have it delivered the next day with Prime…
Ultimately, though, retailers need to ensure that the investments they make in technology work for the customer. If the stock isn’t there, checkout lines are long or prices are out of step with quality, then the technology will be perceived as a gimmick, rather than exciting and convenient step forward.
augmented reality (AR) enables consumers to bring the real and virtual worlds together by overlaying digital information onto real products, spaces and places. This ranges from allowing shoppers to view 3D projections of products that aren’t physically present or allowing them to virtually try on clothes. It sounds futuristic, but this technology has been around as long as iPhones.
Image recognition on existing devices can identify consumers or objects based on their attributes. Consumers can perform visual searches for products they point their devices at, and more significantly, micro QR codes could replace barcodes and help retailers bridge the gap between tracking online and offline behaviour.
AR developers such as GoldRun and Aurasma are working with retailers to find innovative ways of connecting online and offline. A recent GoldRun campaign challenged Esquire readers to find the February cover girl Brooklyn Decker at Barnes & Noble bookstores. Participants downloaded GoldRun and visited the bookstore to find the virtual Decker in the magazine aisle.
Retailers have only just begun to explore the relationship between
mobile technology, stores and customers
TECHNOLOGY
www.tomorrowtodayglobal.com �7
Tesco are using Aurasma to showcase their F&F clothing line in the shop windows of stores that would otherwise be too small to carry clothing. Customers just need to download the app to see the virtual images and buy on the spot. Asos is using the technology to provide a seamless link between its print magazine and the sales process. The magazine’s 450,000 readers can access pages via their smartphones and then click to buy immediately from the Asos mobile site.
Fashion retailers are also at the forefront of using AR to enhance the in-store offering. UK retailer Topshop has introduced a virtual fitting room in its flagship Moscow store, using Microsoft Kinect and AR to let shoppers try on clothes. A built-in camera recognizes the customer’s body and superimposes virtual garments, which can be changed using simple swipes of the hand.
Swivel is another a virtual fitting room that lets retail customers try on and view clothes and accessories on their own image. Users can post their favorites to social networks and poll their online friends and followers about which looks work best.
In the home interiors sector, Sayduck has created an AR app that utilizes the liver camera feed of a smartphone to allow users to see how a piece of furniture looks in their home before buying it. For bricks and mortar retailers, the real bonus of this technology is that it actually draws customers in-store, rather than giving them another reason to stay at home.
Holition is developing the technology in the luxury goods market so that customers can not only try on virtual goods in front of their computer, but also to let them ‘feel’ the weight and texture of fabrics and jewellery.
Perch Interactive has developed a system which uses touch sensors and light displays to enhance the display of a product in-store by projecting additional information to the potential customer. This video illustrates how the display can show a shoe-shopper what other colours the style is available in, styling ideas, product details and price.
TECHNOLOGY
www.tomorrowtodayglobal.com �8
employing “pattern-based” data searches to develop promotional strategies and, more crucially perhaps, to understand non-conversion - why sales DON’T happen. Was it product, price, promotion or some new learning otherwise overlooked?
The potential for retailers to develop the use of data even further will continue to grow as:
• Gen Y customers are more willing to share data as they understand the ‘trade’ they are making.
• A growth in collaborative loyalty schemes link purchasing patterns across different retailers and service providers as never before
• Mobile technology allows this information to be collected and analysed in increasing detail. !
Segmentation strategy will need to be taken to a new level of detail to create differential offers and communications for each individual customer. Retailers must demonstrate to its customers that they truly ‘understand’ them to gain or build on their trust, and thus retain their custom and loyalty.
The volume of data will be huge – and the retailers that get ahead in the future will be the ones that are able to harness it best and convert it into clever solutions that benefit customers. And the trick is to use it to make interactions with customers more, not less human. US store Target, for example, uses analytics to predict when customers are pregnant in order to benefit from their upswing in spending – but got into trouble for sending coupons to a teenage girl whose family were not yet aware of her pregnancy. Since then, the store has found subtler ways to target these women without them feeling so intruded.
Other retailers are beginning to use video data from in-store cameras to understand better a customer’s path around a store, what they browse at and what they do and don’t end up buying. This data could be combined with other ‘external’ data from staffing and stock levels to whether to recommend optimum product placement and staffing. Luxury retailer Mont Blanc reports increasing like-
TECHNOLOGY
www.tomorrowtodayglobal.com �9
What if a retailer could anticipate what a customer needed before they even realised it themselves? Clever analysis of consumables purchasing frequency – from milk to gas barbecue canisters will give a retailer the power to get ahead of their competition and approach the customer with an offer before they have even considered shopping around. And, with sensitive execution, what a service to the customer!
Amazon uses its data to powerful effect – firstly, in pure merchandising terms, reporting that 30% of its sales come from its recommendation engine – that is, “Today's Recommendations For You”, “Frequently Bought Together” and “What Other Items Do Customers Buy After Viewing This Item?” It also uses data to give a seamless feel to customer service calls, meaning that customers are not repeatedly asked to provide details that Amazon already possesses and customer service staff have access to the data they need – a bit like a ‘normal’, human conversation in fact.
Wal-Mart analyses its vast sales data in combination with weather data, economics and demography, to develop individualized product range stocking and promotion calendars for each store.
But recent research from Emailvision reports that 80% of UK retailers are failing even to collect the most basic customer information such as age, gender and address in their web sign-up forms, dooming any subsequent email campaigns to likely failure.
gadgetry in groceries The grocery sector is hugely competitive and having to grapple with enormous changes in customer behaviour (more on-the-hoof shopping with smaller ‘baskets’, increasing price sensitivity and ability to compare, ethical pressure) whilst having to invest in IT and technology and remain aggressive on pricing.
Essentially, the process of grocery shopping hasn’t changed greatly over the years. Yes, online shopping has become more user-friendly and flexible and most major
“Data is the new oil,” according to Andreas
Weigend, Head of the Social Data Lab at Stanford and the
former Chief Scientist at Amazon. “Unfortunately,
the technology has evolved faster than the
workforce skills to make sense of it, and
organizations across sectors must adapt to
this new reality or
TECHNOLOGY
www.tomorrowtodayglobal.com �10
But changes are just round the corner, as this video just released by Tesco illustrates. It shows how shoppers will be able to build shopping lists by taking photos of items at home, how interactive screens in-store can connect to a customer’s smartphone to suggest recipes and add the ingredients to the list. Lists, payment and loyalty points will all be stored in the same app and shoppers can scan their basket and pay all via their mobile with no need to pass through a checkout at all – easy for the customer and cheaper for the retailer, with a more promising outlook than the current frustrating and unpopular self-service checkouts. In the US, Wal-Mart is said to be testing a similar mobile scan-and-pay system.
In Korea, Emart has piloted their “SmartCarts”, which are trolleys equipped with tablets which provide accurate in-store information in real-time. Shoppers first create a shopping list on their smartphone, which is synched with the SmartCart when they arrive in store, so that they can easily see where the products are, stock levels and discount coupons.
The advent of Near Field Communication (NFC) will mean a host of new applications that retailers can use to drive sales. The most obvious perhaps is to track customers’ movements around stores more effectively to optimize layout. But what if retailers used this technology to present tailored offers to customers about the goods they are standing near to?
Well, at least one already does… US Grocery Retailer Stop & Shop has introduced a mobile app that allows shoppers to scan products in store. When they do, the system identifies them, knows where in the store they are and creates special e-coupons there and then.
Also at Tesco, the retailer has reached out to its very busy, but smartphone-literate customers in South Korea by bringing them virtual stores on subway platforms. Tesco has plastered the glass walls of stations with pictures of their products, laid out just as they would be in a traditional shop. The ‘shelves’ of virtual food and produce feature unique QR codes, which the commuter can scan on their phone to build up a shopping basket in the few minutes before the train arrives. It has since
TECHNOLOGY
www.tomorrowtodayglobal.com �11
Meanwhile, also in the UK, upmarket grocer Waitrose will be launching Waitrose TV, the first purely food-related online video channel from a retailer, later this autumn. It will feature 6 channels dedicated to food, drink, health, ethical sourcing and seasonal events such as Christmas, with recipes, how-to guides, ideas and interviews. It aims to solve the problem that cooks have in reproducing recipes from TV cookery shows after the event by allowing them to follow on their phones, tablets or laptops as they cook. Cunningly, the channel will also include the functionality to click though to purchase recipe ingredients or related products online.
Back at Wal-Mart, a new internally-built search engine is delivering the retailer a 10-15% increase in completed purchases. The new system uses semantic technology (using connections between words, people, places and products) to accurately “second-guess” what a customer is searching for. It also taps into the number of Facebook “likes”, Pinterest pins and user ratings and reviews to rank product results.
there’s an app for that It is amazing to think that the iPad is just 2½ years old (launched in April 2010), and yet today it is as natural as apple pie. The explosion in handheld, mobile, smart devices that are not just easy but delightful to use, is providing an array of real time engagement opportunities for loyalty companies. In April 2012, mobile devices accounted for 10% of all Internet traffic – a doubling from the same time the year before. Consumers are more and more expecting to be able to conduct every aspect of their life “on the go” and by 2020, mobile internet will be by far the dominant form of online usage.
Retailers will need to develop great mobile offerings enabling them to retain their own customers and defend themselves against new start-ups with innovative business models. In truth, mobile apps are a massive opportunity for retailers to connect with their customers anywhere and everywhere – in their homes, at work, even in competitors’ stores. Mobile solutions need to be designed and aligned to enhance and simplify customer’s life needs – highly successful apps will be those
TECHNOLOGY
www.tomorrowtodayglobal.com �12
Passbook will alert the shopper if they are near a store, and retailers can push new offers direct to the customer.
With Neiman Marcus’s new app, shoppers check in when they arrive at the store and the app tells them what specials are in store. They can see which sales associates are in store and message or make an appointment with their favorite, mark favorite products that will automatically be visible to the selected sales associates, and scan QR codes to view product information. The salesperson in turn has access to a shopper’s Neiman Marcus purchase history, is notified of the their arrival in-store and can even see a Facebook photograph to recognise them easily.
Westfield has introduced an app to help shoppers make the most out of a visit to their massive malls. It offers users a concierge service, search for shops and navigation around the mall, as well as price comparisons across retailers within the mall.
mobile payments and the “digital wallet” eDigital Research reports that 64% of smartphone owners are now using their phones to shop online, a fourfold increase since June 2010. Around half of these sales were via an iPad. Mobile payments have well and truly ‘arrived’ and are increasingly becoming the most convenient way for shoppers to pay. Even cash is becoming increasing marginalised as these mobile options make small value purchases just as convenient as large. Which could signal good news for bricks and mortar retailers as there is no need for customers to be in front of their laptops to shop online. Sometimes, it’s just the convenience of buying an item with no queue and the one-click checkout from PayPal or Amazon that is the driver.
Checkout by Amazon, Google Checkout and Paypal Access are competing in much the same territory – enabling customers to use either their Amazon, Google or PayPal accounts to check out across any number of unconnected, signed-up e-tailers. The benefit to the online customer is not needing to verify their identity or
TECHNOLOGY
www.tomorrowtodayglobal.com �13
A mobile wallet is a smartphone app that supports multiple payment options, including credit cards, loyalty cards, coupons and any other “plastic” that might be in a physical wallet. It puts everything in your physical wallet into the cloud, available to the user in any number of formats and across multiple platforms.
Google Wallet was developed in partnership with Citibank and MasterCard and allows users to store payment information in the cloud and pay for goods at participating retailers by tapping their phone at the point of purchase. The Google Wallet mobile app securely stores your credit cards and offers on your phone. When you check out at brick-and-mortar stores that accept Google Wallet, you can pay and redeem offers quickly just by tapping your phone at the point of sale.
NFC will probably allow these solutions to become even more powerful, and this must surely be what NFC adopters aim to do with the technology: link NFC to digital wallets. The question then will not be “will customers use them?” but “how will they use them?” Will they hold several digital wallets on their phone and swap between them, or, more likely, prefer a single solution that will hold all their accounts in one place and offer benefits from this aggregation?
PayPal’s wallet, for example, will allow consumers to choose which account or card to purchase from, or even use coupons, loyalty points and air miles - and recommend which would be the most valuable way for the consumer to make a particular purchase. It will also give you 5 days to change your mind about how you wanted to pay for an item you have already bought. It will keep virtual lists and budgets, and help you not to overspend on certain categories of expenses.
In the US, JC Penney’s new flagship store is already utilising this technology by introducing self check-out. Each item has an RFID chip so that customers can just walk through an airport-style gate that registers what has been spent.
TECHNOLOGY
www.tomorrowtodayglobal.com �14
social media A recent study commissioned by eBay predicts that £3bn of retail sales will be influenced by social media by 2014. Shoppers are using social media sites to discover items, to make decisions based upon recommendations, and to report back on their own purchases and in turn influence others. Less often, the social media sites are actually being used to make the purchase (although this will surely grow, and soon), but they are able to facilitate sales and drive customers to retailers’ websites.
Social media particularly lends itself to the fashion industry, with its trend and tribe-led frequent purchasing. And apparel retailers lead the way in innovation in this space.
Topshop continues to innovate and managed to attract an incredible 2m viewers from over 100 countries to tune in live to its London Fashion Week show. And what was really clever was how it utilised Facebook to do it. Viewers could take a picture of the catwalk action at any point and post it to Facebook, encouraging friends to join in and watch too. Viewers could also buy any of the clothes on show as they watched – leading some items to be sold out within an hour.
In Brazil, clothing retailer C&A has taken a more literal approach with its “Fashion Like” innovation. Special in-store clothing hangers display the number of ‘likes’ an
TECHNOLOGY
www.tomorrowtodayglobal.com �15
INSTITUTIONAL CHANGE In essence, for customers, the business of shopping won’t change. A combination of price, convenience, urgency and emotion will determine where a shopper chooses to spend on any given occasion. What will change is the level of information available to the consumer to make these choices. We’ve moved from ‘traditional’ to ‘multi-channel’ to, now, ‘hyperchannel’ – with customers using an almost endless permutation of routes to discover, research, buy and report on their purchases.
The distinction between offline and online sales will blur as retail shops become showcases for products and service and the customer can make the purchase there and then or later, online or off, to take home then or be delivered later. Price visibility will become critical, as will the ability to build a relationship with the customer that leads to them making a positive choice to shop in that store. John Lewis and Amazon most probably do not offer the best prices 100% of the time, but customers return Another result will be the growth of private label brands – tying the customer to the retailer by reducing the ability to directly compare prices – or at least giving them no compelling reason to shop elsewhere.
The impact on the High Street will be that large retailers reduce the number and size of stores as both coverage and in-store stock become less important.
However, manufacturers may well increase their bricks-and-mortar presence as ‘direct touch’ becomes obligatory. Apple is manufacturer, retailer and service provider to its customers, who don’t distinguish or care which bit they’re dealing with.
High Street rents will fall, which may then encourage the big players to move back in - although requiring less space as large stock levels will no longer be required – and also offer an opportunity for smaller businesses to reach their local markets more sustainably.
For the retailer, however, perhaps the biggest upheaval to be made will be a
INSTITUTIONAL CHANGE
“...price transparency could encourage people back to the High Street
because they know they don’t have to be sat in front of their laptop to
get the best price” !
Richard Cuthbertson Säid Business School
Sa
www.tomorrowtodayglobal.com �16
The type and level of in-store staffing will change radically as well. Mobile technology will mean that fewer cashiers are required, but increasingly, sales assistants will be there to provide real, hands-on customer service. They will need to be better qualified, better trained and quite likely more numerous, despite the movement of sales to online. Take Apple as an example – in 5 years from 2007 to 2012 its average number of employees per store has increased from 37 to 112. During the same period, the average number of customers per store has doubled, from 125k in 236K- but more tellingly (and astonishingly), by 2012 Apple Store’s sales per square foot were 17 times better than the average US retailer.
in-store experience The challenge for most retailers who have been around more than a few years is to keep bricks and mortar relevant in the face of a tidal wave of competition from new online entrants, manufacturer websites and even their own online businesses. And wherever you operate in the world, each percentage point of growth for online could mean a percentage point less retail floor space is needed. With eBay and Amazon already trialling same-day delivery in the US, if a store doesn’t offer more than product, why wouldn't a customer just stay at home and buy online? More positively, and perhaps surprisingly, ABI Research reports that users of retailer-branded smartphone apps visit those retailers’ stores more often than consumers without the app – indicating that good use of technology can strengthen the relationship between retailer and customer. The retailers who succeed will be the ones that adapt their online and offline offerings to complement, rather than fight, with each other and provide an in-store experience based on more than just products.
Many well-known names are already offering ‘extras’ to shoppers to entice them to spend more time in their stores and perhaps generate some affiliation or ‘loyalty’. John Lewis and Waterstones, for example, offer free Wi-Fi, and fashion retailer White Stuff has hosted book clubs and found space for charity sweet counters.
Selfridges, on the other hand, has leant on its luxurious and theatrical heritage in introducing seven themed “Personal Shopping Salons”, each inspired by a past
“A store has got to be much more than a place to acquire merchandise. It’s got to help people enrich their lives. If a
store just fulfils a specific product need,
it’s not creating new types of value for the
consumer. It’s
INSTITUTIONAL CHANGE
www.tomorrowtodayglobal.com �17
Recent innovations have utilized technology to turn these assumptions on their head. Why not take what’s best about online and integrate it into bricks and mortar to give customers a truly holistic brand experience?
Timberland has invested in an interactive system to be rolled out to stores globally that aims to “transform the shopping experience into a dialogue between the brand and the customer”. What this means is that the customer can learn more about the products by ‘playing’ with the interactive screens and provide location-specific feedback to Timberland about its products. This video shows how it has been done.
The Audi City showroom is situated in prime London real estate and is too cramped to display its range to effect. So Audi have created an innovative showroom experience. Potential customers can create their own customised vehicle using multi-touch displays to select choices from all possible combinations. That bespoke car is displayed to the customer in photorealistic 3D, which can then be ‘tossed’, full-size, onto one of the floor-to-ceiling digital “powerwalls". Kinect technology is then utilised to allow the customer to explore the vehicle inside and out, from each angle, at distance and in detail.
Mike Jefferies, International Business Development Director at Razorfish, creators of the Audi City store, says "Digitally enabled in-store experiences are the new battleground for the leading high street retailers. More and more retailers are looking to build multi-channel, multi-device retail ecosystems that recognize customer behaviour as well as context to deliver a truly responsive brand experience. Retailers see this new intensity of customer service as the next level of differentiation.”
Burberry’s new flagship store on London’s Regent Street has the very aim of bringing online and offline worlds together. The store has been modelled on the structure of the website and has some impressive experiential innovations including interactive mirrors, virtual rain-showers and screens displaying catwalk shows in real-time. See a short video here. CEO Angela Ahrendts has said that the company is “going the way of Minority report” by embedding mobile across all its
INSTITUTIONAL CHANGE
www.tomorrowtodayglobal.com �18
The potential risk of these ground-breaking technologies is that they offer no long-term substance and will date as quickly as technology advances. Generation X and Y customers will be quickly bored and these huge investments have to pay in terms of delivering both customer experience and sales uplift.
The pressure will mount to stay ‘ahead of the game’ – and do it cost-effectively with purpose. In the meantime, and for the near future, shopping will become a
“Digitally enabled in-store experiences are the new battleground
for the leading high street retailers”
Mike Jefferies, Razorfish
INSTITUTIONAL CHANGE
www.tomorrowtodayglobal.com �19
economic growth, globalization and the middle classes The shape of world wealth and power in 30 years time will look very different from the world today. Perhaps we’re so used to being in a recession that it’s hard to envisage the massive economic growth that lies in the near future. The global economy in 2011 was estimated by CIA to be worth $79 trillion USD and is to rise to $180 trillion by 2030 and $377 trillion by 2050.
There will be major changes in the source of this wealth, with China expected to outstrip the US as the world’s largest economy as early as 2017. With the exception of China (where population will peak and decline) and North America (where it will continue to rise), predicted population growth is generally higher in the developing world than the developed. Africa’s population will exceed China’s by 2025 and India will follow by 2050.
The BRICS countries (and many others labelled ‘emerging’) currently find themselves in an upward spiral – as GDP per capita grows, this creates more wealth and spending, which in turn creates more growth. This leads to a sudden surge in the middle classes as populations ‘tip over’ into increased incomes. Goldman Sachs estimates this group will have increased by 2bn by 2030 to 30% of the world’s population. 80% of this growth will come from Asia-Pacific, but also from Central and South America, Africa and the Middle East.
The Economist describes the middle classes as having paid for basic needs such as food and shelter and having enough income left over to spend on healthcare, education, consumer goods and leisure. This ‘discretionary spending’ has become the most defining feature of the global middle classes and has driven consumerism in the developed world for the last half century - and the trend will continue. We are already seeing an explosion in demand from China for consumer goods and luxury items, which will expand, and quickly, to other developing nations.
This represents a massive opportunity for the retail industry. Where demand in
DEMOGRAPHICS
www.tomorrowtodayglobal.com �20
that these ‘traditional’ outlets can account for as much as 98% of grocery sales (in India) through to just 38% in China. Some nuts will be harder to crack than others, and the retailers who are able to approach each market with local knowledge and sensitivity will be the ones who succeed.
generational shifts Every single country in the world has an ageing population – in fact, people over 60 will contribute 80% of the increase in the world population over the next 30 years. Because of the relatively much stronger population growth in developing countries, this is where 90% of this “greying” will happen. But lower birth rates and increasing life expectancy mean the impact will be felt more acutely in developed countries as a declining working population is asked to support an increasing retired one.
In the shorter term, this means two things for retailers:
Don’t forget the ‘grey market’ It will be expanding massively. People are living 1 day longer every week, with life expectancy creeping constantly higher. The median age in Europe is now 40 and is projected to rise to 47 by 2050. In Great Britain, there will be nearly 3 million more people aged 60 years and over in just the next 10 years. But these are not ‘old’ people in the way we are accustomed to think of them. These are Baby Boomers, and they will be expecting to live and spend in just the way they always did – they like to ‘think young’. They are comfortable with technology (Deloitte reports that 47% take part in Social Media) and three-quarters of them are likely to maintain a good income by continuing to work either part-time, consulting or even setting up a new business.
DEMOGRAPHICS
www.tomorrowtodayglobal.com �21
Create careers for the young The younger labour that retailers generally employ will become a relatively rarer, and more expensive commodity, particularly in the developed nations. Retailers will have to become much smarter in attracting a cohort of young people who will be in a much stronger position to base their career choice on what they actually want. Generation Y will be looking for the following when they choose a career:
• Access to up to date technology • Ongoing development and opportunities for personal growth • Great balance between work, outside interests, friends and family !Fewer unskilled cashiers and shelf-stackers will be needed as the majority of sales are handled electronically (either online on in-store) – in fact, internet investor Yuri Milner has recently predicted the loss of up to 40 million retail jobs globally by 2020. Retail has a history of cost-cutting by staff reduction, so on the surface this may sound like music to the industry’s collective ears. But the likelihood is that there will still be sales positions, and these will be more skilled, require better-qualified people and demand investment from the retailer. The good news is that these positions are far more likely to offer young people the career they demand. Of course more skilled staff in increased numbers is going to be expensive – but Richard Cuthbertson, Senior Research Fellow at the Oxford Institute of Retail Management, is confident these costs will be met by savings in rent and properties as big retailers move to fewer, smaller spaces focused on delivering customer experience rather than holding stock and processing transactions.
Behind the scenes, the growing career will be that of “data scientist”, who will make sense of the vast amount of data available to them to drive product planning, marketing and customer service. The potential cloud on the horizon is the current lack of the skilled analysts needed to work on these complex datasets. This infographic at Mashable illustrates this skills shortage.
A study by the McKinsey Global Institute found that the United States is currently running a deficit of 1.5 million data analysts and managers. This is because the
“….the people serving us will be better educated, better
trained…” Richard Cuthbertson Säid Business School
DEMOGRAPHICS
www.tomorrowtodayglobal.com �22
ENVIRONMENT AND ETHICS “In recent years business increasingly has been viewed as a major cause of social, environmental and economic problems. "Companies are widely perceived to be prospering at the expense of the broader community”, says Michael E. Porter the Bishop William Lawrence University Professor at Harvard University, and Mark R. Kramer co-founder of FSG, a global consulting firm. Whilst the Financial Services sector perhaps takes a clear lead in the unpopularity stakes, the retail sector has not been short of bad PR, with the clothing sector in particular facing increasing pressure regarding the working conditions and pay of workers in developing countries.
A research study by AMP Agency amongst Generation Y shows that:
• 83% will trust a company more if it is socially/environmentally responsible. • 74% are more likely to pay attention to a company’s marketing when they see
that the company has a deep commitment to a cause. • 89% are likely or very likely to switch from one brand to another (price and
quality being equal) if the second brand is associated with a good cause. • 79% wants to work for a company that cares about how it impacts and
contributes to society. • 64% say their company’s social/environmental activities make them feel loyal to
that company. • 56% would refuse to work for an irresponsible corporation. !The retail industry needs to get to grips with this and fast in order to both recruit talent and attract new customers by developing (and living) Corporate Social Responsibility (CSR) and Creating Shared Value (CSV) programmes, and getting their green policies right. The environment has taken something of a back seat during the recession, but the concerns and issues are here to stay and will become increasingly important in the next decade.
For now, social responsibility is not a positive selection factor, but is rather a
ENVIRONMENT AND ETHICS
www.tomorrowtodayglobal.com �23
policies and marketing mean nothing if these values and practices don’t extend throughout the whole company – even the Finance Department.
But this will change as the population grows older and the less ethically-sensitive Boomers make way for Generation Y and Z beyond. 61% of Generation Y feels personally responsible for making a difference in the world and they will be choosing their associations very carefully.
For an example (and there are others, but few.) of a global retailer that ‘lives’ its CSR programme, take a look at IKEA, which decided to address the problem of child labour in its suppliers some 20 years ago. It has a partnership with UNICEF to tackle poverty, hunger and illiteracy in developing nations and which now reaches more than 500 villages in India’s “Carpet Belt”. It also supports self-help groups that encourage and assist women to build up their own financial security. On the environmental front, IKEA has installed 250,000 solar panels on its global properties and over 100 wind turbines help power its European outlets.
With 80 billion garments being produced from virgin materials by a global workforce of 40 million, clothing retailers have a difficult task to turn around their “fast fashion” model into something more sustainable and acceptable for the next generations.
H&M is positioning itself as the retailer aiming to bring ethics into high street clothing, by providing education for Bangladeshi workers, reducing water usage and employing low-impact solvents and organic cotton. But it has a long way to go to reach the standards set by Honest by, which was launched in January 2012 and claims to offer 100% transparency with its customers by sharing the full origin and cost breakdown of its products.
Roozt taps into every new value going by making it "fun, easy and rewarding to discover, shop and share the trendiest cause-related brands and products under one roof." The brands stocked have strong ethical credentials and for each new member who joins, Roozt provides a meal to an American in need.
79% of Generation Y wants to work for a company that cares
about how it impacts and contributes to
ENVIRONMENT AND ETHICS
www.tomorrowtodayglobal.com �24
SOCIAL VALUES
collaboration and curation Generation X and Y are part of a ‘tribe’ (be it friends or ‘people like me’) that are more important to them than elders, ‘experts’ or what the ads are telling them. Their development and uptake of online innovations has effectively allowed them to cut out the ‘middle man’ and do it all themselves, a trend that been a huge disrupter in the Travel and Publishing industries and is increasingly so in other businesses that have traditionally relied on an agent or broker, for example Financial Services, Insurance.
The manifestation within retail is at its simplest a shift to searching and shopping online instead of the high street. But this has brought with it its own frustration for shoppers – how to recreate a realistic shopping experience and find things when you don’t know exactly what it is you want? How do you effectively ‘browse’?
This dilemma of “social discovery” is not being solved by Google or Amazon with their hierarchical search systems – a customer has to pretty much know what they are looking for. Facebook’s efforts to introduce shopping into its social networking platform have not generally taken off, with some major retailers such as J.C. Penney and Gap shutting down their slow Facebook shopfronts.
Younger shoppers have been moving onto more visual platforms like YouTube and Pinterest to share ideas with friends and also to see what the blogosphere is recommending (yes – experts, but experts ‘like them’). The beauty of this was that they could just easily click through to the retailer’s website to buy.
And this ‘sharing’ element to shopping highlights a value-set shift which is that the reasons Generation Y are purchasing at all are moving away from the simple pleasure of ownership. Each purchase only has a value in how it connects the buyer to others – either technologically (the ‘means’) or virtually (the ‘tribe’). It’s in essence a reflection of this generation’s highly collaborative value set, and brings
SOCIAL VALUES
www.tomorrowtodayglobal.com �25
And now a new generation of e-retailers are leveraging this new method of social browsing either to ‘curate’ or disseminate their own sales offer.
Half of Fab's new members find them by clicking on links to its merchandise that their friends have shared on Twitter and Facebook. And earlier in 2012 it added a “Fave this” button that when clicked, not only adds the product the user’s Fab.com favourites but shares the product in their Facebook friends’ news feeds.
Lyst is a “social shopping site” - effectively a collaborative online store where bloggers post their articles and partner retailers and brands post and merchandise clothing. Users can follow their favourite brands, add items and buy via the site.
Etsy focuses on handmade, vintage and arts and crafts products and has been at the forefront of utilization of social media to boost sales and exposure since its launch in 2007. In 2009, its own users organized an “Etsyday” Twitter promotion that gathered a lot of ‘buzz’ and raised Etsy’s profile and increased traffic to the site by 40%. More recently, it has incorporated its own social network “People Search” which connects buyers and sellers and helps them build relationships.
Poshmark takes the social element a stage further by holding themed mobile “parties” with real-time streaming of 40-50 products for sale during each 2 hour slot.
Launched in 2011, Copious is an integrated social-network and marketplace where the buyers and sellers actually befriend and follow each other, giving each transaction a high degree of trust and connection, pushing all the Gen Y ‘buttons’! It even includes a ‘signal’ to display how close the connection between buyer and seller. As with the other sites, it’s also highly integrated with Facebook, Pinterest and Twitter, allowing users to reach their friends and connections, buy, sell and share.
Currently in beta stage, Buyosphere aims to help cut out wasteful internet-trawling time and assist social discovery in providing a forum by which users can find what they need by asking other users.
SOCIAL VALUES
www.tomorrowtodayglobal.com �26
customer service and loyalty Loyalty is a thing of the past. The younger generations, Gen X and Gen Y, are naturally less loyal, believing in instant gratification. At most, these generations are concept loyal, not brand loyal, and they have grown up cynical and jaded by the attempts from companies to woo them with glossy adverts and false promises. Baby Boomers have also wised up. They have learnt, through failed pension plans, medical schemes that don’t deliver and bank foreclosures, that even though Boomers now run the show, it does not mean that they are getting things the way they wanted them.
The combination of the Internet, social networks and mobile devices has dramatically shifted the balance of power in favour of customers, who now have the ability to determine seamlessly and in real time who is offering the best price. Retailers either need to compete solely on this basis, which will surely be a downward slope, or offer something above and beyond in the way of service and experience.
kind of a big deal The impact of the recession and growth of auction sites such as eBay and daily deal sites such as Groupon, have made it a point of honour with customers not to pay more than they need to.
A new breed of price comparison apps pose a potential threat to retailers who are not smart on price or with their offer to shoppers – and an opportunity to those that are…
Founded in 2008, ShopSavvy was the first mobile shopping app to use barcode scanning as its primary search mechanism. In the latest version, shoppers not only can scan the product to find the best price, but can also check out related deals and coupons and use the app for easy payment.
Users of the NetPlenish website or app can make their household and groceries
“While there once was a stigma attached to
bargain hunting, the only thing consumers
seem to be embarrassed about is paying the full
price” Allen C. Questrom
JC Penney Company
SOCIAL VALUES
www.tomorrowtodayglobal.com �27
Decide.com not only shows where a product is cheapest, but it also predicts if these prices are likely to change, a confidence rating in this prediction and an indication of when new models are to be launched. So a shopper can decide whether to shop now or wait for a better deal or upgraded product. And Decide.com even backs up its predictions by offering to refund the price difference if it falls unexpectedly.
it’s all a game The convergence of aggregators, geolocation and AR will mean that a customer can walk down a street and see on their AR smartphone exactly what deals are available at retailers in the vicinity and also where in the locality their various reward points can be collected and redeemed.
These technologies are turning shopping into a game. In his 2010 talk "When Games Invade Real Life", Jesse Schell predicted that games will become a medium for life as digital sensors let us earn points for our everyday behaviour. That may be a while off yet, or seem a little far-fetched, but companies like Badgeville are showing businesses how to use “Gamification” for all manner of customer retention strategies. There is a massive potential for retailers to tap into this technology and trend to appeal to their younger customers.
A great example in the US recently was Wal-mart, which tied up with Angry Birds to offer customers the chance to unlock exclusive new levels of the game by going in-store and scanning Angry Birds merchandise.
A survey by Aimia in 2011 survey found that 77% of U.S. Millennials participate in loyalty programs and 78% are more likely to choose a brand that offers a reward programme over a brand that doesn’t offer one. What they also like is to be able to earn points from a variety of sources rather than single brand or retailer schemes.
Retailers that are prepared to collaborate in reward schemes that utilise technology in a way that fits into that customer’s lifestyle seamlessly will tap into this desire
SOCIAL VALUES
www.tomorrowtodayglobal.com �28
and a dedicated online fashion store (Nectar Fashion), which includes a “MyWardrobe” basket area to save and view items and associated reward points from multiple retailers before purchase.
All is not lost for retailers who run proprietary schemes, but they have to be offering real value. Both Generation X and Y demand and expect instant gratification. Competition and technology have converged to deliver this to them in most transactions and a few clever retailers have managed to structure their loyalty programmes to reward on the spot and give customers a reason to keep coming back.
Starbucks, for example, has introduced a sophisticated mobile app and payment system that lets customers load cash onto their mobile phones, which then display a barcode baristas can scan at the register. This app also keeps track of Starbucks rewards so a customer can seamlessly and instantly choose payment method and earn or redeem points – and all without reaching for a wallet!
In the US, Panera Bread's loyalty program uses a traditional card but customers don’t collect points. Instead Panera tracks members' purchasing habits and regularly surprises them by offering free pastries and perks when they aren’t expected. This spontaneity is very popular with customers and ties in with the gamification trend by making an everyday experience just that bit more fun.
community Another aspect of Tomorrow’s Retail is an increasing trend towards valuing the local – be it domestic manufacture or support for small local businesses. Much of this is a backlash against the banking crisis and Great Recession, which has made consumers distrustful of corporate giants and some aspects of globalization.
The growth in Farmers’ Markets is an illustration of this, but there is a more general need for the big retailer to ‘think local’ to connect with its customers and communities. Some big retailers have managed it in a reasonably authentic fashion – for example, although receiving some of the harshest backlash from
SOCIAL VALUES
www.tomorrowtodayglobal.com �29
IN SUMMARY - TOMORROW’S TOP 5 RETAIL TRENDS
Channel is irrelevant but brand is not. Successful retailers will build the brand and protect the brand by making it meaningful and helpful to customers and in line with their values.
Gen Y has a unique ability to sniff out authenticity. Customers can check out a retailer’s supply chain, its environment credentials, how it treats its staff and suppliers. Retailers need to ensure all aspects of their business are working together to the same set of principles and externally projecting a harmony of values.
The high street is not dead yet. Nor will it be. Instead it will take a new shape as rents fall, with larger chains returning to smaller spaces and offering a new opportunity to small and local businesses to run niche businesses and still turn a profit.
Bricks and mortar stores will become less and less about shifting product and more and more about delivering experiences. Customers will browse and engage with goods with actual merchandise scarce. Amazon will enter this territory, launching amazing concept stores to stave off savvy competitors encroaching on its turf. It will use the strength of its distribution to leverage the brand and bring a truly multi-product, multi-dimensional shopping experience.
Fewer, but more highly skilled people will work in bricks and mortar retail stores. Brilliant data scientists will be critical to the success of large retailers to make sense of the vast input of customer data. All these people will be harder to find as retailers compete for talent amongst entrepreneurial, ethical, and relatively scarce, Gen Y.
Technology will add fun, transparency and convenience to shopping and transform the in-store experience. But the real revolution will be in how, where and when transactions are made – bringing in new expectations for price transparency, speed of delivery and changing the purpose of stores forever.
1 2 3 4 5
www.tomorrowtodayglobal.com �30
AND BEYOND TOMORROW..... 5 PREDICTIONS FOR THE FUTURE OF RETAIL
The curation and collaboration model pervades all selling spaces, with individuals creating their own "virtual shops", reviewing and selecting items that others then buy from. These "curators of retail experience" will be famous, wealthy and hugely influential.
3d printing will allow people to buy "product recipes" and print them out at home.
For basic transactions, customers will interact with 3d holographics technology – this may be in store or, eventually, in their homes.
Shelving will disappear from bricks and mortar shops, allowing for more open, clean environments where the emphasis is on the experience and brand relationship. Customers will use smartphones and increasingly smart glasses to interact with the products - testing them out, tasting their flavours, learning about and engaging with the products at a real and virtual level simultaneously.
All in store purchases will be delivered to your home within a few hours of purchase. Robots will busy themselves behind the scenes, fetching and carrying goods as customers order them in the stores. Watch this video to see how diapers.com are already transforming the retail delivery of goods.
1 2 3 4 5
www.tomorrowtodayglobal.com �31
