Yearly Archives: 2018

2019: A Transformational Journey

In 2017, retail analysts bemoaned the imminent retail apocalypse. But, by mid-2018 many saw an unexpected upturn in their businesses resulting from a surging economy, smaller stores, better digital marketing, improved omni-channel capabilities and increased traffic. Retailers seem to be finally understand that fickle digitally savvy consumers have increasingly high expectations and the old playbook won’t ensure future success amidst rapid change. A recent PSFK Study cites that 54% of consumers expect retailers to be able to institute change within 6 months. While digitally native brands are imbued with an agile mindset and a customer-first, digital-first philosophy, most established traditional merchants are not, and can’t move that quickly. 

E-commerce will continue to grow faster than bricks & mortar and is estimated at 21.5% growth for 2019. However there are inherent limitations to pure-play formats which is spawning a new generation of digitally interactive store concepts. Highly-engaged D2C brands are rapidly expanding with innovative physical spaces and immersive customer-centric digital experiences that are redefining the face of retail. However, most traditional retailers are approaching digital innovation as a “test and learn” add-on to their existing formats, outdated operating models and siloed reporting structures. Not surprisingly, many of these “tinkering” projects are not seeing the anticipated ROI. 

Digital Transformation starts with a clear vision what “good” looks like and codifying how customers want to engage across channels — ultimately digitizing those engagement touch points to create lasting customer value. Here are five ways that retailers are transforming in the year ahead. 

If retail is being reinvented, then the winners of tomorrow must reconsider how products are bought, sold, delivered and serviced and what new operating models, business processes, management practices and technologies are required to nurture extraordinary customer relationships and optimize every part of their business. 

Phygital Discovery and Curated Bricks & Mortar Experiences

Stores aren’t going away and consumers will continue to enjoy discovering new products in exciting environments. Hot digitally native brands like Casper and Allbirds are expanding physical locations as chain retailers “right-size” with fewer and smaller stores. An emerging real estate and co-working concept coined “Storefront as a Service” is popping up in major cities. Showfields in NY, Re: Store in SFO and WeWork’s WeMarket are three examples of innovative next gen spaces designed to showcase digital native brands by leveraging interactive displays, knowledgeable mobile-enabled staff and a well-executed customer engagement strategy. These spaces allow the brand to control the narrative and gain real-time market feedback. Similarly, creative niche brands are being discovered in carefully curated, constantly renewing spaces like STORY in NY which was recently acquired by Macy’s. The department store also invested in B8ta, another “storefront service” that showcases unique tech products in 80 locations. Big retailers are trying to decode the formula on how customer-centric thinking wrapped with technology is making these young innovators successful, as evidenced by Walmart’s acquisition of Bonobos.

AI & Machine Learning Get Personal

AI and machine learning are expected to be one of the greatest transformational forces in retail for 2019 and beyond. A recent study indicated 55% of retailers plan to leverage AI over the next 3 years. Historically, AI has been most prevalent in consumer insights, inventory management and price optimization. However, AI is now becoming the engine that enables personalized 1:1 interaction and expert product recommendation. For example, one startup leverages AI to visually recognize fabric patterns and marry that with key body and garment measurements to display individual wardrobe recommendations based a customer’s career/lifestyle, desired fit and budget. IBM’s Watson platform has applications as diverse as curating home décor to selecting jackets at North Face. 

ChatBots and Conversational Commerce

Retailers are always exploring innovative ways to engage consumers. Those wanting a personal touch are deploying ecommerce ChatBots powered by AI learning algorithms that enable human-like interactive dialogues and real-time predictive recommendations. Voice controlled shopping assistants on Alexa and Google Home are also gaining momentum. Currently, these “skills” are usually limited to simple replenishment tasks and promotional messaging. However, as voice search evolves, we’ll see mobile location-aware search enhancing in-store shopping journeys. 

Personalized Experiences and Associate Empowerment 

Deploying mobile devices for associates continues to gain momentum, however most retailers haven’t fully monetized benefit from their investment. Mobile POS, Order Management and Training remain the most common mobile use cases, but Clienteling has been proven to make the biggest long-term business impact to frequency, ATV, and customer loyalty. While more vendors are selling solutions, customer success is often illusive. In the year ahead we’ll see more retailers stop “tinkering” and leverage industry experts to start upgrading their Clienteling and Assisted Selling practices and training as part of a broader retail transformation initiative. 

Transparent, Efficient and Ethical Supply Chains

To reduce costs and enhance product availability, retailers, suppliers and logistics partners will continue to collaborate to improve visibility and efficiency in their retail supply chains. In the year ahead expect to see more pervasive use of IoT sensor networks and greater investment into blockchain technologies that improve how retailers track shipments, authenticate luxury goods, and ensure safety of food products. New supply chain solutions will also meet growing consumer demand to know that goods are sourced ethically.   

If retail is being reinvented, then the winners of tomorrow must reconsider how products are bought, sold, delivered and serviced and what new operating models, business processes, management practices and technologies are required to nurture extraordinary customer relationships and optimize every part of their business.

2018: Expanding Engagement While Shrinking Stores

2017 Retail Recap

Retail doom and gloom dominated the headlines in 2017 as the press declared retail dead! Undoubtedly, we are in the midst of a seismic shift in consumer shopping habits, driven in part by changing tastes, economic influences, over supply, and the impact of “always-on” digital commerce. While reduced footfall has resulted in some notable retail casualties, retail is not dead yet. However, if trends continue, we can expect the number and size of retail stores to shrink dramatically while tomorrow’s leaders navigate a daunting transformation to their formats, engagement points, business models, and underlying technologies.

As a longtime observer of retail, I’ve noticed that historically “when times were good, retailers didn’t think they needed to invest in new innovative approaches and when times were bad, they couldn’t afford it.” Until recently, retailers were reticent to invest in innovation, but in 2017 that all changed. Digital enablement is transforming virtually every aspect of consumers’ day-to-day activities and shoppers expect merchants to make their shopping experience convenient, entertaining, and to deliver extraordinary value. Most retail CEOs now realize that surviving in an era of technological change requires that malls, stores, business models, experiences, and organizational structures be redefined to exploit new digital opportunities. 

In 2017, many legacy retailers watched customer-centric digitally native brands like Bonobos, Warby Parker, Casper, Interior Define and others and are now experimenting with creative “digitally-infused” retail formats. These innovative retailers have learned how to engage, excite, and educate shoppers before, during and after the visit. Last year we saw retailers testing better personalized communication and curation, elevating the level of service and advice, streamlining payment, and exploring other technology-enabled practices that improve customer experience and help to maintain top of mind relevance. Finally, in 2017 we saw what could be a major inflection point for retail; conversational commerce, driven by Amazon and Google in-home devices.  

In the year ahead, we’ll likely see high-service direct-to-consumer formats expanding with small “flagships” that curate and educate while traditional multi-brand merchants close stores. Retail leaders will be hyper-focused on brand engagement and customer journeys, leading to the kinds of shopping experiences and discovery opportunities that motivate customers to visit. In 2018, we’ll also see new retail entry points as connected vehicles, IoT and conversational commerce devices expand retail’s footprint well beyond the store.

Here are a few key trends and capabilities we’ll see in 2018:

Bridging Online with Digitally Enabled Retail Stores

Expect to see new omni-channel strategies and technologies as retailers acknowledge that blending digital consumer engagement with the physical store is the best way to address evolving needs and desires of their customers. We can expect to see retailers continue to explore ways to “follow the cookie”, tracking online behavior and making those insights and preferences actionable to associates with mobile engagement and clienteling tools. In some formats, retailers will directly engage with consumers either on their devices, or through digital display walls in the store.  Another area of continued growth in 2018 is built on extending the reach of human communication, particularly when consumers aren’t in store. Retailers are deploying chat tools in their ecommerce sites to allow consumers to engage directly with in-store staff, in hopes of providing advice and curating products/outfits to help drive conversion. 

As brands try to intersect with “digital native” lifestyles, we should expect to see exciting new “pop-up” concepts and smaller store footprints, where retailers display a representative assortment of products in an immersive lifestyle brand experience. These formats allow retailers to control their brand narrative while gaining direct consumer feedback, and are enhanced with video, self-directed curation, and social sharing technologies. While in its infancy, we should also see more AR and VR projects as retailers explore, creating a “digital layer” in their physical store environment. All of these technologies and initiatives share a common desire to engage customers at each stage of their shopping journey and to provide relevant personalized communication.  

Curation & Personalization

With an infinite amount of online choice, consumers demand relevant, personally curated shopping experiences, whether in-store, online, or by subscription. If Spotify, Netflix, StitchFix and Amazon can know what they want, shouldn’t all merchants? In recent years, retailers have invested in building actionable back-end data repositories with a single view of the customer, inclusive of all available data “signals”. In 2018 we’ll see them leverage that investment with AI and predictive technologies, analyzing implicit and explicit data, and moving from segmented targeting to true “record level” personalized interaction, regardless of channel.  

Pervasive Connected Commerce:

As the “physical boundaries” of commerce dissolve, in 2018 we’ll enter the age of “Pervasive Connected Commerce”. In a new retail paradigm where connectivity is ever present and payment credentials are stored in the cloud, consumers will seamlessly interact with a host of “gateway” devices for digital and physical commerce. Amazon Alexa and Google Home are the early leaders in this area and are simplifying shopping for common household purchases in ways we didn’t imagine a few years ago. Similarly, we’ll see an uptick in smart appliances like refrigerators and printers, infused with IoT or Internet of Things capabilities that sense “inventory levels” and automatically replenish without human intervention. One of the more exciting connected commerce initiatives for 2018 is GM’s connected car initiative. Connected Car enables riders to engage with an in-dash marketplace containing localized offers from restaurants and retailers, with order ahead & pay ahead capabilities; integrated with the consumer’s mobile loyalty apps and personal preferences.  GM expects their retailer connected technology to be available in a few million cars in 2018.  

There will undoubtedly be retail winners and losers in the months and years ahead, but those that thrive will do so by building innovative business models on a foundation of technologies that meet customer-centric demands of a digitally-enabled store experiences.