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The continuous evolution of the retailing landscape forces retailers to operate in a highly dynamic and competitive customer-driven market. They’re required to constantly adapt to the changing expectations of consumers in order to keep them coming back.
From Industrial Age department stores to today’s multi-channel, ubiquitous environments, the evolution of retail business continues to change dramatically. But, despite how much the industry changes, retailers who remember that the ‘customer is king’ seem to persist. Now, let’s take a brief look at the past, present, and future focusing on three core areas of retail:
- The shopping experience
- Marketing
- Payments
The Shopping Experience
PAST: MARKETPLACE DRIVEN
Retail as an organized industry really began in the 18th and 19th centuries with the rise of urban covered markets, specialty shops, and department stores. Catalogs brought the opportunity to shop without leaving the home for the first time in the late 1800’s. Montgomery Ward allowed shoppers to mail in written orders through their mail-order catalogs, and the invention of the telephone empowered quicker impulse shopping, as customers could call in orders when their catalogs arrived.
PRESENT: CROSS-CHANNEL
Starting in the 1990’s, “computer stores” allowed consumers to view and purchase items online. Back in the day, this was seen as a risky and avant-garde concept, but online retail has now developed into a vital channel. As e-commerce grew in the early 2000’s, retail wars pitted brick and mortar shops against online retailers, but that battle has long-since ended, as most major retailers now employ cross-channel retail strategies to reach customers both online and in physical stores. In fact, it’s developed to the point where consumers no longer perceive a distinction between online and offline shopping. Shopping has become ubiquitous, and people are able to use mobile phones to complete transactions in the moment, whenever they’re inspired to make a purchase.
With product information and reviews now available online, shopper attitudes have morphed dramatically. No longer dependent on salespeople and catalog writers for information, shoppers now know as much as, or even more than retail salespeople. What’s more, retailers can now customize their product offerings based on the knowledge of a customer’s location and mobile device. This context allows merchants to provide offers that are best suited to the customer where they are in the moment. Retailers who create cross-channel retail strategies to harness this data effectively are able to deliver relevant suggestions and capture sales at the moment of intent.
FUTURE: OMNICHANNEL
One challenge for online retailers has always been the divide between the visual experience of viewing a product online, and the full sensory immersion that a store can provide. Customers still shop both in-store and online, and even if they use the internet for researching and comparing prices, they still want the experience of touching and trying on a physical product. Retail evolution is leading to an increase in the use of technologies like augmented reality, interactive video, 360 views, and gestural controls to bring products to life on shoppers’ screens, and this will only grow in the future.
Another disruptive technology on the horizon is shoppable TV ads. These were bandied about in the early 2000’s but have never really taken off on a large scale. That is changing, as large TV providers like NBCUniversal are implementing shoppable TV ads. Shoppers will now be able to scan their TV screens to access product pages and make purchases on their mobile devices. This adds a whole other layer to the omnichannel experience, with new opportunities for synergy between media and retail.
Retail Marketing + Advertising
PAST: PHYSICAL BRANDING
In the beginning, retail marketing was all about signage and packaging, the only true differentiators that could inform customers about the quality and style of a product. During the Industrial Revolution, innovators like Josiah Wedgewood started using direct mail, catalogues and traveling salesmen to raise the profile of their products. Matthew Boulton created the concept of “celebrity marketing’- providing products for free to members of the nobility in order to get publicity and raise the reputation of his products.
As retail marketing developed, retailers focused on the 4Ps – product, price, place, and promotion, to sell their products. Retail marketers used their experience and instincts, along with surveys and focus groups, to understand their customer. Billboards, radio ads, and magazine ads were later joined by marketing emails, online banner advertising and social media as retailers sought to entice shoppers with offers.
PRESENT: DATA-DRIVEN SEGMENTATION
Big data is driving changes in the way retailers market to consumers today. The union of purchasing data with customer preference information from CRM, search data, demographics and location data enables retailers to break down large customer profiles into much smaller segments. Segmentation of customer types lets retailers create omnichannel retail strategies, with more targeted advertising that speaks to the needs and experiences of different groups. Customers are empowered with information about products, pricing, and competition, and they want retailers to know them as well.
Smart retailers are harnessing their data for cross-selling with targeted product suggestions and retargeting, resulting in more effective email communication. For example, Williams-Sonoma merged their customer database with publicly available information about household income, family size, and home values. They design email segments and then craft custom messaging using insights. As a result, their marketing emails are 10 to 18 times more effective than before.
FUTURE: A SEGMENT OF ONE
The segment of the future is a Segment of One. True personalization is the next step in the evolution of retail marketing. Individual consumers can now be identified and targeted based, not only on their consumer profile (including loyalty data and purchase histories) but also on their precise location (provided by GPS on mobile phones). The founder of the Location Based Marketing Association, Asif Khan, said it best: “Your location tells us more about your intent to take action than any other single data point.”
As much as some in the media try to hype up and scare consumers about privacy concerns, a personalized experience that recognizes and rewards their engagement, location and purchases is something that shoppers demand. New research from Accenture and the Retail Industry Leaders Association (RILA) found that 63% of consumers surveyed are interested in personalized recommendations, and that the majority of them are willing to share their data in exchange benefits such as automatic credits for coupons and loyalty points (64% of those surveyed), access to exclusive deals (60%), the ability to gain points and rewards (56%) or special offers for items that interest them (53%). Retailers who do not have the tools to harness data for personalization will be playing catch-up as this aspect of retail marketing zooms forward in the coming years.
Payments
PAST: CASH AND CHECKS
Whether people are paying with cowrie shells, gold coins, or bitcoin, the core of retail payments has remained the same: exchanging something of agreed-upon value for something that the customer wants. As retail developed in urban centers worldwide, cash, paper checks and manually maintained credit books were the way to exchange currency for products. Without payment vehicles and financing for larger purchases, people had to save up to buy things that they needed, and if they couldn’t, they’d have to go without. People had to carry cash and retailers had to physically deposit cash and checks to keep the wheels of commerce churning.
PRESENT: CREDIT CARDS
The first credit cards didn’t emerge until the 1940s, when banks and retailers started to introduce plastic credit cards. The Bank of America ‘BankAmericard’, launched in 1958, was the first successful modern credit card. Credit cards are convenient for customers and good for retailers, since consumers tend to spend more when using their credit cards. The concept of credit cards has remained pretty much the same since they were first introduced, but today there are new technologies making them more convenient for customers.
Contactless payments using credit cards are ubiquitous in Europe but have not yet taken off in the U.S. Visa CEO Alfred Kelly has said that this will be changing in 2019, as 100 million contactless Visa cards will be issued by member banks in the U.S. New ways of buying have also arisen to increase convenience and reduce waiting in lines. Click-and-pickup systems where orders are placed online and picked up in store, and the ability to pay via apps are reducing the friction of purchasing, but have not yet become commonplace.
FUTURE: CASHLESS/BLOCKCHAIN
Retail payments are today at the cutting edge of digital disruption, with consumer demand driving retailers to be first to adopt emerging technologies in digital payments. In the future, blockchain is expected to have a growing role in retail payments, as large banks learn how to harness distributed ledger technology. Mobile wallets for cashless payments are also expected to grow. Accenture research shows that 64 percent of North American consumers plan to use a mobile wallet in 2020—a 39 percent rise in the user base in three years.
The overall trend driving change in retail payments is that consumers want payment transactions to disappear. The less they have to think about paying, the less friction that the process entails, the more likely they are to complete a purchase and return to a retailer to buy again. Retailers who are savvy with digital payments can remove the logjam (long lines at the cash register) that cause shoppers to abandon their carts. This cart abandonment happens both in stores and online, as eighty-seven percent of online shoppers abandon their carts due to complex checkout. 55 percent of shoppers say they would not only leave their carts, they would never come back to that retailer’s site if the checkout process is too cumbersome. Cryptocurrencies and digital wallets are at the forefront of future efforts by retailers to make it as easy as possible for consumers to pay.
Moving Towards the Future: Retail and Technology
Due to the pandemic, consumer-retailer interactions will be defined by health and safety expectations, and it’s integral to meet these demands by providing contactless transactions. A new report from UBS’s retail analysts suggests that 80,000 stores will close in the U.S. over the next few years.
As online shopping will continue to accelerate, today and into the future, retailers need to continue to evolve along with their customers by moving their customer shopping experiences, marketing, and payments forward into the future.
Accenture calls it the four Rs of the customer-centric business model:
- Recognize me regardless of my entry point and device
- Remember my history of interactions
- Recommend relevant products and services
- Reward me for my loyalty. Bridging the gap between the physical and digital worlds, retailers must rise to the challenge of harnessing technological advances in ways that enhance the customer experience.
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