We are now living in a world dominated by the consumer—a “golden age” for consumers, if you will. Nowhere is this more obvious than in the retail industry. Shoppers are in control, looking for merchandise online, buying through e-commerce websites, and even checking competitor prices while they are in your store.
How do we win in this golden age of the consumer?
First, we must understand what it is that today’s consumers want from brand engagements. They are demanding connected experiences when it comes to interacting with your brand.
Customers expect fluid experiences.
Consumers want their experiences with retail brands to flow from one channel to another, just like they flow from one activity to another. Last year, Ed Nardoza, editor in chief of Women’s Wear Daily, commented “The best retailers don’t really differentiate physical from digital shopping. They need to offer whatever experience and convenience the shopper demands, when they demand it.” Very true!
Today, consumers are looking for a fluid experience on their journey with your brand. At each stage of the customer journey, they encounter different touchpoints. The path is not always linear, they may advance and retreat along the journey. And these days, touchpoints are emerging, such as Internet of Things devices, that introduce new challenges for marketers. Those touchpoints must be connected in a way that provides a fluid brand experience without treating the journey as moving in a single direction.
While the physical store is still a critical part of the fluid experience, the digital journey is now contributing to a significant part of the buying process. In fact, the physical and digital experiences are happening simultaneously. In fact, PriceWaterhouseCoopers found that over one-third of global shoppers compared in-store prices with competitors while they were in the store. This behaviour should compel all retailers to focus on delivering a fluid experience.
Retail experiences will be more “conversational.”
To compete, we must also understand what retail experiences will look like in the future. We can expect a continued rise in e-commerce, according to eMarketer, which expects double-digit growth through 2020. Use of voice-activated household devices like the Amazon Echo provide another interaction point—one that can be expected to drive e-commerce sales, if the experience is good. And it opens another channel to provide the fluid experience throughout the customer journey.
In the future, consumers will expect a conversational, convenient brand engagement, powered by artificial intelligence and machine learning. According to Forbes magazine, Sonar (the research unit at J. Walter Thompson) revealed that 72 percent of US millennials and 64 percent of UK millennials believe that “as the technology develops, brands using AI will be able to accurately predict what they want.”
Brick-and-mortar retailers will need to address the elephant in the room: decreasing store footfall. Deloitte believes that in-store experiences will “increasingly focus on one of two things: inspiration or convenience.”
Retailers compete with others serving fluid experiences as a loss leader.
Retail margins have gotten razor thin. In Deloitte’s Global Powers of Retailing Report 2017, the top 250 retailers average a net profit margin of 3 percent. So they don’t have a lot of options when it comes to investing in creating fluid experiences. Those experiences must be prepared, tested, and delivered using an efficient approach that leverages data in an optimal way.
Amazon, an early entrant in creating fluid experiences, started with online shopping with home delivery, then moved to two-day delivery, then to one-day delivery, and now to one-hour delivery in select locations through its Prime service. They have changed the rules of the retail game by improving the shopping experience continuously. Every such improvement in the shopping experience requires investment and is not necessarily profitable, but Amazon uses this as a loss leader.
The company is delivering experiences at a loss, predicting that if the experience is good, it will encourage customers to remain within the Amazon ecosystem, and consequently transact more with Amazon. With Amazon Echo, the company has bypassed most common customer engagement points, such as a Google query, product search on Apple, or Android devices, and now it owns the end-to-end interaction exclusively. Amazon is expected to lose approximately US$930 million over 2016 and 2017, according to the Financial Times, from its investments in Amazon Echo.
And despite the losses in this project, Amazon has taken a further step in creating the fluid experience by opening its first Amazon Go store, an expensive way to reduce checkout lines!
Key principles drive the future of retail.
Retailers must now understand what it takes to bring the fluid experience to your customers. The overarching principles that must be addressed include:
- Experience-driven commerce—having a mentality that focuses on providing the experience first, before satisfying commercial demands (if the experience is right, the financial rewards will come)
- Connected experience—bringing together device-specific channels and platforms in a way that supports fluid transitions between online and offline interactions
- Customer intelligence—combining native data with second- and third-party sources to complete a 360-degree view of your customer
- Predictive analytics—leveraging artificial intelligence and machine learning in a way that delights and satisfies
Technology and innovation will continue to make addressing these overarching principles easier and more cost efficient. Retailers like Amazon have made the early investments to provide the fluid experiences customers crave. And the consumer expectation for seamless movement between touchpoints will further define how we engage with them.
It’s an exciting time to be a consumer. But it is also exciting for retailers who address the need for fluid experiences. The rewards for those who meet consumer expectations include higher market share, broader sales, and greater brand loyalty.
The state of retail is strong, but constantly evolving. Stay tuned!