As we race towards the end of the year, it’s timely to focus on the trends and issues that will have a major impact on the retail industry in 2018 and beyond. We asked Stephanie Atto, Senior Research Consultant, ACRS Research Unit of Monash University to share insights on how technology, changing customer expectations, and the emergence of new retail models and channels are shaping the Australian retail landscape.
The Australian retail sector has had more than its fair share of challenges over the past 12 months. As lifestyle and consumption habits change, we’re seeing a shift in where consumers shop, how they shop, and what they buy. So how can bricks and mortar retailers stay ahead of the game?
Stephanie Atto believes there are three real opportunities for retailers in 2018 – embracing omni-channel, using data analytics in intelligent ways, and optimising customer experiences and personalisation.
In 2018, bricks and mortar retailers should be thinking about connecting the dots between the physical store, the online store, and social media – to be everywhere the customer is and to pave the way towards a seamless transaction. We know that shoppers choose a bricks and mortar store at some point in their shopping journey – whether that’s learning about products in store, buying in store or picking up a product in store – so retailers who embrace customers’ demands for anything, anywhere, anytime by blending their digital and physical offerings will be the big winners.
With 38% of customers shopping through more than one channel, Stephanie suggests that we can expect retailers to “push their omni-channel strategies to really deliver a seamless shopping experience.”
“Research shows that if customers are engaged in multiple places they will spend three to four times more money than if we meet them only in one channel. The customer is looking for retailers in all channels, so retailers should be there. They are increasingly wanting to engage with retailers via their channel of choice whether it’s in a retail store, using a mobile app or a website.”
“As consumers are shopping, they’re searching online and they’re buying in-store, they’re searching in-store then buying online. So, the imperative for all retailers is bringing that integrated approach to market and doing it with mobile at the forefront.
There is also research to suggest that shoppers who research products online will spend more in retail stores and that omni-channel shoppers are loyal and will return to stores and are more likely to recommend the store to friends and family.
“It’s important that retailers are thinking about integrating every experience the customer has with the brand. Whether they’re in the store or whether they’re online, it should be a very holistic experience.”
Who is doing omni-channel well? H&M, EB Games, Guzman Y Gomez, and eyewear retailer Warby Parker get top marks for creating a seamless experience across shopping channels with integrated pick-up, returns and processing, encouraging in-store show rooming, and leveraging bricks and mortar stores as fulfilment centres. At EB Games, for instance, everything that is sold online can be collected in store in 15 minutes. H&M has implemented click & collect, scan & buy, online returns in store, mobile payments, next day deliveries and an H&M app.
Here are some tips on how to get it right:
Create a seamless experience across shopping channels
Customers should have one unified experience with your brand. The way that the brand is presented should be consistent across all channels, including colour pallet, fonts, imagery, language and product descriptions.
Encourage in-store show rooming
While it might be frustrating when those smartphones come out and a customer is comparing your prices to others while in-store, it’s going to happen. The evolved retailer is going to have great techniques to bring the customer into your brand. Whether it’s matching prices or providing complementary products and services or something else, let the customer be smart about what it is they are purchasing and then meet them in the middle with prices and solutions that meet their needs.
Integrate pick-up and returns processing
Evolved retailers that are integrating stores and online commerce are those that are offering buy online and pick up in-store. They’re bringing returns back and they are making it easier for the customer to have an integrated experience between the online and in-store. What we’ve learned is that the pure online retailer nets less in the dollar because of the very high cost of returns in the backend. Conversely, the retailer that has physical stores nets more because customers are bringing back the goods to return in-store and are walking around and buying other items while they are there. So, there’s an opportunity for retailers to leverage a store environment to increase the overall shopping basket that customers leave with.
Leverage stores as fulfillment centres
Taking a page out of Amazon’s book, retailers can use stores as a fulfilment centre, so that it gets retailers closer to the end customer and it makes it much easier for retailers to bring shipping down to a fewer days, which has become imperative in the retail industry.
E-commerce has given retailers the opportunity to grow customer experience, test new products, and offer customers countless conveniences. But how can retailers translate the lessons learned online to retail stores to drive growth?
Understanding the influence of digital on shoppers is the first step in providing experiences that matter.
“Remember, customers aren’t always just trying to chase down the lowest possible price. If retailers know how their customers use their mobile devices for shopping, they can turn those devices into engagement tools. For example, opt-in apps enable retailers to push special offers to customers. Such apps can also issue rewards for purchase, if linked to a loyalty program. Retailers should continue to think of creative ways to bring digital in-store to improve the customer experience,” suggests Stephanie.
It’s been said that smartphones represent the biggest disruption to retail since commerce went digital. Stephanie agrees that smartphonesare incredibly disruptive, but they are here to stay and will be increasingly important in 2018 and beyond.
“Look along the aisles of any retail store and you’ll see how many customers are looking at their smartphones. Nearly eight out of ten shoppers turn to their devices to help them when shopping in physical retail stores. Millennials spend over four hours a day on their phone, with non-Millennials hot on their heels,” she says.
Right now, 70% of social media happens on smartphones and 23% of customers have purchased a product on a social media platform.
“Research tells us that they are looking at product reviews. It’s one of the most critically important influences to today’s customer. They are also reading the product detail, so it’s imperative that retailers give customers access to product details and data while they are in the store.
“Customers also want access to any coupons or discounts, and they are comparing prices to others. In some cases, they want to place orders for goods they can’t find on your shelf,” says Stephanie.
To optimise mobile, you need to think about:
Ease of navigation
Research tells us that customers are finding it difficult to find goods on their mobile phones.
Make it easy for customers to find what it is they need. We know that they are looking for product reviews, they are looking for product details and data, they are looking for pricing, and they’re looking at whether goods are in-store. Therefore, retailers should optimise the search function on mobile devices to ensure products are easily available for customers.
Instantaneous page loads
Research shows that customers will leave a page if it takes more than a few seconds to load.
Retailers should have as many payment options available to meet the specific needs of customers.
In-store mobile usage stats
Most retailers are shifting their focus to creating a better in-store experience for customers – the retail store in 2018 will not just be a place to buy things. It will be a place to create an emotional connection with a customer that is enjoyed and remembered.
There’s no doubt that in-store shopping behaviours have changed - 23% of customers use store visits to tap into the knowledge of the sales associate; 45% love the thrill of hunting for and finding great deals; 34% use store visits to gather new ideas for future in-store purchases, and 30% use store visits to get ideas for future purchasing that is ultimately done online. The good news is that 45% of avid online shoppers agree that shopping in stores is still a major part of their shopping routine.
As retailers explore new ways to bring customers into bricks and mortar experiential spaces, the need to personalise the products, content, and service is becoming more important.
Creating more intimate, interactive and exciting in-store experiences – whether that’s free nail art, sports classes, personal styling, a book club, a coffee bar or virtual reality – is a way to bring back customers that retailers may have thought were lost to online shopping. Making your store a place that customers want to ‘hang out’ and interact with other brand loyalists bridges the gap between digital and physical. Stockland also recognises the importance of the customer experience and will continue to focus on offering exciting shopping, dining and entertainment in its centres to drive footfall and provide customers with unexpected moments. Stockland will continue to work with our retailers to help them entertain and connect with customers.
“Customers no longer want stock standard. They expect retailers to deliver unique customer experiences and personalised or customised products. In the future we’ll see evolved retailers embracing artificial intelligence to offer greater personalisation. Customers now have longer digital footprints, including shopping histories, social media profiles and interests. This gives retailers an easier pathway to offer a tailored selection of products and improves the overall experience with the brand,” says Stephanie.
STORY and Bonobos are two retailers that Stephanie believes are offering something different.
Located in Manhattan in New York, STORY is a retail store that completely reinvents its design and its merchandise every four to eight weeks with a new theme, trend or issue. STORY highlights emerging digital retailers and has created concepts such as Colour, Making Things, Love, and Made in America. What stays constant at STORY is that the experience is everything and that retail goes beyond the transaction.
Bonobos is an online retailer of men’s clothes that has been around for a number of years. They discovered that men like to go in and try on clothes and once they have tried on something, they buy it almost immediately. So, they decided to open ‘guideshops’ and invited men to come in, touch the clothes, determine the size and style of goods, and then give customers the opportunity to go and buy the goods online or at kiosks in the store.
“What’s interesting about this model is that Bonobos has one centralised inventory store and customers are still buying online. Having ‘guideshops’ has given the brand more exposure and lowered Bonobos’ digital marketing costs,” she says.
“Another interesting store concept, launching 31 December in the US, is the Amazon and Calvin Klein partnership which will open pop-up stores for the holidays. The new stores will offer exclusive Amazon-only Calvin Klein underwear and Amazon Echos that can answer questions about the products, change the lighting, and play music in dressing rooms. Customers will be able to use the Amazon mobile app to make purchases and request embroidery customisation on the spot.”
In 2018, the role of social media will continue to grow in importance. Social media, says Stephanie, has become a critical component of the customer experience.
“It’s become important for customers to have a relationship with brands and so retailers really need to be there. Many customers follow retailers on social and if they aren’t following retailers directly, they are following social media Influencers who are interacting or commenting on brands. We are also now seeing customers starting to buy through social media channels.”
Importantly, customers use social media as a way to influence their purchases – they like to share posts with friends, family and followers and ask them what you think. If their audience likes it, then they may well buy the goods. In fact, 42% of customers that interact with brands online are likely to purchase from them and leave a review on social. Reviews influence purchase decisions of other customers.
“We also know that 28% of online shoppers will comment on social media if they are dissatisfied, so that’s something retailers need to think about,” says Stephanie.
Stephanie says there are four ideas that retailers should focus on in the physical store experience to appeal to consumers evolved expectations - the role of staff and service, ambience and physical store elements, store layout and navigation, and marketing and promotions.
1. Staff and service
One of the key brand touchpoints that customers are likely to encounter is frontline staff so it’s important to have well trained and specialist employees to deliver exceptional, personalised service, which includes everything from brand recommendations to solving customer problems.
“Customers know within minutes whether they are dealing with an engaged and committed staff member or not, which can greatly affect their willingness to participate or be involved in an experience. Some retailers have even begun to offer free Wi-Fi to customers to encourage customers to do show rooming and to actually interact with a brand.”
2. Ambience and physical store elements
The physical environment includes ambient and design elements that influence a customer’s experience in-store. Lighting, colour, fragrance, music, store design, and other elements create an atmosphere that can either positively or negatively influence the customer experience.
“Customers are looking for a sensory experience when they are in-store. They want ‘experiential retail’ where they can interact and truly engage with a brand.”
3. Layout and navigation
Store layout influences where the customer goes on their in-store journey.
“Effective layouts and navigation systems allow customers to easily identify where products and services are located in-store, improves the flow of traffic and contributes to seamless customer journeys. On the other hand, poor layouts and navigation systems can cause confusion and frustration or even ending the customer experience prematurely,” says Stephanie.
4. Marketing and promotions
Marketing material and promotional offers help to drive customer experience satisfaction, engagement, and behaviour. Brands need to have a clear and consistent marketing message across all customer interactions.
“Digital marketing is one sure way to leverage millions of eyeballs and communicate with segmented and targeted audiences. With over 3.5 billion Google searches a day, 1.3 billion daily active Facebook users, and 250 million daily active Instagram users around the world, it’s a big marketplace.”
Understanding customers will continue to be a key focus area for retailers in 2018 and beyond. Using data in intelligent ways will be a big factor in growing retail businesses in 2018. Stephanie believes that retailers need to focus on ensuring that digital and physical touchpoints work together flawlessly – yet also do what each touchpoint does best on its own.
“Retailers must unify disparate datasets to develop deep customer insights. Gathering customer data from various sources and touchpoints helps retailers to understand why customers do what they do. This data can reveal brand preferences, pattern shifts and category price sensitivities, which can be parlayed into experiential offers that stretch the value proposition beyond price.”
So what’s the take home message for 2018? Customers are no longer passively consuming products and services. They want to connect with brands; they want to have a relationship with brands that reflect their own personal brand. Stephanie says retailers must:
1. Truly know your brand and what it stands for
2. Be authentic and transparent
3. Understand what sets you apart from your competitors
4. Be bold and continually innovate and try new things
5. Have a deep understanding of your target market so that you can create experiences to connect with your customers