14 May 2019   

15 min read
A lot has happened in the retail space in the past five years. We spoke to co-director of Swinburne University’s Customer Experience & Insight (CXI) Research Group, Sean Sands, about how the industry has transformed in that time and what’s ahead in the next five years.

Retailers have been trying to figure out how to use social media to connect with customers, build brand loyalty and influence the path to purchase for round five to seven years. According to Sean, there was a rush to “get on Facebook and Instagram” and many retailers aggressively marketed to their customers. Now, there’s a move to consider the cognitive load on customers – to be quieter and more considered in how and how often retailers interact with them.

“In the future, the use of social media will be much quieter, less frequent and focused on more powerful and personalised messages. Customers will be yelled at less by brands,” said Sean.

Five years ago, retailers were also struggling with the space between online and offline. Today, retail leaders are creating experiences using data, storytelling and tech trends to engage with their customers. In the future, more retailers will use their retail stores in creative ways to build loyalty, whether that’s with live concerts, yoga classes or non-profit partnership events.

The merged approach

Five years ago, retailers were beginning to explore traditional advertising and online advertising using YouTube. Now, the focus is on curated advertising for different customer segments and the six-second ad.

“The rise of micro-content, from the way we interact with others through Instagram stories or Snapchat to the way we digest our news, together with consumers’ impatience for interruptions to their digital experiences, means the short-form six-second ad works.”
In the future, we’ll see more achieve brand reach and online visits
Winds of change

Perhaps the biggest change the retail landscape witnessed over the past five years was overseas brands such as H&M, Zara and Uniqlo setting up shop in Australia, which was met by “fear and pessimism.”

Now retailers have realigned


Retailers started embracing personalisation around five years ago in a bid to boost sales growth and win new customers. Delivering personalised online customer experiences and product customisation helped retailers to create a differentiated proposition.  Customers became willing to share data in return for a more personalised product or service. In the next five years, Sean believes we will see a real push towards individual personalisation. Like food on demand.  

Open Meals, in conjunction with marketing firm Dentsu, will open a 3D-printed sushi restaurant in Tokyo in 2020 that will customise its sushi to individual dietary and nutritional needs. The customer sends the restaurant a biological sample saliva, urine, or a stool which is analysed to see what kinds of nutrients your body needs. Then, those specific nutrients are added to the customer’s food.

The next big evolution

Only five years ago, mobile shopping was seen as a challenge with ‘showrooming’ raising fears that the loss of sales to online and an inability to price match would make it difficult for bricks and mortar retailers to compete. But retailers adapted and figured out how their customers were using mobiles to shop and started to engage with them through apps, push notifications, on-the-spot checkouts, expedited delivery, in-store pick up and more.

In the next five to seven years, 5G will be what the internet was 40 years ago. It will transform the way people shop. Personalised digital signage, magic mirrors, augmented reality (AR), virtual reality (VR), voice recognition and interactive mobile apps will all grow as the 5G network grows.

Retail realities

AR and VR really arrived in the retail environment in 2014. Google launched Google Glass, Ikea gave us its augmented reality catalogue app and Top Shop gave their customers a VR experience in a fashion show. Although the take up of AR and VR may not have been as rapid as predicted, both will continue to give customers better experiences in the future helping to navigate a store, find a product or receive a product incentive or reward as they move through the store. Sean says AR will allow retailers to transform the customer experience by augmenting a customer’s physical experience and focusing on an emotionally immersive experience. He believes we’ll also see more mixed reality in shopping environments – where physical and digital objects co-exist – as customers become more interested in it.

Likewise, in the next five years we will see artificial intelligence (AI) continue to grow to offer customers the convenience and personalisation they crave. Virtually every device and application will be a way for people to communicate with brands. The challenge will be for retailers to build and use omnichannel AI solutions to communicate with customers to increase sales and improve customer experience.

Connecting the dots

Connected beauty is another growth segment. Digitally native consumers are increasingly relying on technology to meet their beauty goals and brands are answering that demand with innovations such as customised makeup, smart hairbrushes and apps that turn a mobile phone into a mirror allowing customers to virtually try on makeup. With its recent acquisition of Modiface, a Canadian tech company specialising in augmented reality and artificial intelligence, L’Oreal plans to reinvent the beauty experience.

Sean says we can expect wearable technology to focus on health and wellness as opposed to fitness, with devices measuring UV exposure and checking your body’s vitamin and mineral status. Wearable technology might also make its way from our wrist to clothing with advances such as Google’s Jacguard tech.

At the moment there are two extremes of retail – super premium and super budget – which suggests that retailers at either end of the spectrum are more in touch with their customers and are better at meeting their needs than the retailers in the middle. Take for example the rapid rise of discount chain Dollar General in the United States, which now has more stores than McDonalds and Starbucks.

“The lesson for retailers in the coming years is that you don’t necessarily need to build temples to retail such as Apple’s shiny concept stores or Nike’s House of Innovation flagship store.  The winners in the years to come will be those retailers that prioritise human experience and offer a proposition that aligns with consumer needs. A good customer experience can be as simple as a treasure hunt experience and giving customers something new to look at when they are in your store,” said Sean.

Sean says we’ll see more retailers thinking about their store’s proposition –  what they are and what they offer. They’ll also think more about the emotional experience of the store and how to fix the traditional pain points.

Of course, customers will still be in control – they can go online, they can price check – but in the future, technology will open up exciting new avenues for storytelling, immersive entertainment and for retailers to build more ‘play’ into their customer experience.