27 February 2017 10 min read

Last year there was a lot of talk about evolving customer preferences and how to satisfy them. In 2017, the conversation will be around how the connected customer will continue to shape retail.

Group Executive and CEO Commercial Property Stockland, John Schroder believes retail has always responded and adapted to the prevailing economic and social environment. Today that means responding to the disruption caused by new technologies and changing consumer expectations. 

“It’s fair to say that the transformation of retail is being largely driven by the ‘internet of everything’ and to respond to the challenges and demands of the connected customer, retailers will need to be agile and innovative to create a connected retail experience,” he says. 

The digital revolution has created a new consumer who wants more customised products, services and experiences. They also expect to move seamlessly and quickly between the physical and digital worlds. That means it’s time for retailers to get ‘phygital’ and merge the online and in-store customer experience. 

Inside Retail has identified phygital as a leading trend for 2017 suggesting that the merger of bricks and mortar and digital could increase sales by up to 30%.

More than ever, consumers want to connect with a brand. Many pure-play retailers such as Australian fashion retailers Stylerunner and Beginning Boutique are opening brick-and-mortar stores, which combine the service consumers expect from a physical store with the information, flexibility, and customization they get through digital. Birchbox is another example of an e-retailer getting ‘phygital’ with a retail space, creating a seamless shopping experience, improved service offerings and stronger relationships between customers and the brand. 

Paul Greenberg, pioneer of successful online discount department store DealsDirect, says Amazon is no longer just an online retailer but “more like a diversified conglomerate, including a big web services business and a marketplace arm”. Amazon recently opened its first bookstore in Seattle, where customers can browse books and also read customer reviews. 

He suggests retail businesses can use technology and data to create a distinctly individualised service where the appeal lies in what’s unique, trusted and authentic. 

It’s an approach that has led to the growth of personalised retail businesses such as Mon Purse, which lets customers design and personalise their own leather handbag. 

In 2017 consumers will continue to engage with brands across multiple devices. It’s predicted that by 2020 there will be over 100 billion connected devices globally. A recent study by Ovum suggests that by 2026 consumers will be living in a hyperconnected, high-speed world where the Internet of Things (IoT) will be part of the everyday fabric of life. 

Experience-led retail 

A key challenge for retailers in 2017 will be humanising and personalising their brand with phygital experiences. 

A 2015 report from ACRS notes that retailers need to manage relevance, experience and expectations. The global cosmetics retailer Sephora has done this with its in-store digital beauty workshops. Canadian sports store Sport Chek has blended in-store touchscreen kiosks, RFID sensors and 3D holographic displays to connect with its customers in the phygital space. 

The connected customer is now also a content creator and a brand ambassador ready to share their experiences so retailers need to understand how to make their interactions more relevant and more valuable. 

As smartphones get smarter and social networks become more sophisticated, it will be easier for consumers to share their opinions about products and services. Consumers are communicating with each other through live stories and short, raw content on platforms such as Instagram and SnapChat and retailers can’t afford to ignore these social media conversations. They need to explore how they can make room for their customers to share personal and instant stories about their brand.

“As a landlord, we have an important role to play to ensure our centres provide richer experiences that can’t be replicated online. We’re working closely with retailers to make this happen and we’re using data to understand how our customers behave, where they spend money, and to better predict future shopping behaviour. This allows our retailers to refine their offers to make them more attractive to customers,” says John.

As a landlord, we have an important role to play to ensure our centres provide richer experiences that can’t be replicated online. - John Schroder, Group Executive and CEO Commercial Property Stockland

Compelling new experiences, digital technology and the right leisure and dining opportunities are at the heart of Stockland’s strategy to create relevant shopping destinations for retailers and consumers. 

One of the challenges for retailers in 2017 will be to understand what consumers want and what they are willing to pay for and how they can use those insights to shape their products and brands. 

The focus will continue to be on the environments in which we spend our time such as shopping centres and unique in-store experiences – ‘retailment’, a mix of retail and entertainment – and personalisation will be important. Retailers will need to find a unique selling point and a sustainable point of difference to encourage shoppers to come into their stores.

Building experiences 

Customer experience is the new battlefield for retailers who want to differentiate themselves. Personalisation, service and speed are the new currencies in the age of the connected customer. Retailers need to walk in the shoes of their customers so they can really understand how they can build experiences and boost entertainment in-store. 

A recent Forbes magazine article explored how a customer’s online digital lifestyle shapes their preferences when they visit a retail store. For many, the physical retail experience is about interaction and experiences rather than transactions. Samsung’s new multi-story flagship store in New York – Samsung 837 – is an example of how modern brands are relating to customers in the connected age. Samsung 837 isn’t a retail store at all – it’s described as a “digital playground” and a “cultural destination” where customers can experience the products. 

Co-owner of Hudson Meats Jeff Winfield believes one of the most important touch points for retailers is still good, old-fashioned service. Microsoft’s 2016 State of Global Customer Service Report backs that up with 55% of customers reporting higher expectations for service now than they did a year ago. 

The retail landscape will continue to change and evolve in 2017 and beyond and this change will be driven by the growth in digital technologies and the ‘always on’ customer. Retailers that understand the shifts in customers’ thinking and preferences will continue to thrive.

Top five ways to reach connected customers 
  1. Explore new technologies to re-invent in-store and online experiences 

  2. Get closer to your customer so you can anticipate their needs and respond quickly 

  3. Build experiences around your customer’s journey 

  4. Think great customer service first and then add technology 

  5. Make it real – customers don’t want digital gimmicks