Now that the busy holiday season is winding down and we’ve turned the calendar, retailers are refocusing their attention to driving sales in 2017. Retailers are always keen to hear what their peers and competitors were doing to improve customer experiences and drive sales. Here are five things those in the retail industry should keep top of mind in 2017:
1.) Amazon is setting the pace.
Whether you compete directly or peripherally with Amazon, it’s clear that the Amazon marketplace plays a huge role in all retailers’ strategic thinking. With the steady decline of physical store visits and revenues over the past five years, ecommerce is the primary source of growth for most omnichannel retailers. Amazon is setting customer expectations in terms of shipping costs, delivery times, return policies, notifications, and other non-product-related competitive factors. This is causing others to react.
- Retailers are experimenting with ways to reduce their shipping costs and delivery times. One big trend is BOPIS – buy online, pick-up in store. Leveraging their stores to deliver goods as soon as the customer can get there often means faster delivery than Amazon Prime’s free, two-day service. Stores are also piloting apps that notify store associates when customers arrive in the parking lot so that purchases can be delivered directly to their vehicles.
- Becoming more cost-efficient and being able to quickly deliver to customers wherever they are means implementing better inventory tracking and management, and improving forecasting with predictive analytics. Advanced retailers are also moving to a “just-in-time” low inventory model where they push stocking back onto their suppliers. Wayfair, the furniture and home décor retailer, is one example. They now rent space in their fulfillment centers to their suppliers to avoid holding inventory on their own books.
2.) Seamless customer experience now a necessity.
According to Forrester, the digital distinction (between virtual and real) is dissolving and leading retailers are making the transitions seamless. For example, now fans can book “courtside” seats to athletic events so that they can watch the games and see their sports heroes close up without ever leaving home—but unlike the traditional TV experience, the virtual courtside seats give viewers control of where they look on the court. Some retailers are now offering virtual dressing rooms where you can see yourself dressed in the different outfits you’d like to try before you need to put them on. Similarly, cosmetic brands are allowing customers to “try on” different shades of lipstick or other products virtually to find the perfect shade before purchasing.
Forrester calls the new era of digital expectation “post-digital” meaning most of us are now digitally connected more often than not. For retail marketers, this reinforces the idea of micro-moments or one-to-moment marketing. Forrester suggests that there are three important characteristics for success: Be human (empathetic, not robotic), be helpful (solve a need, don’t sell a product), and be handy (be agile and adaptable). A great example of the seamless one-to-moment idea is Under Armour’s MapMyRun app and Gemini 2 running shoes. The shoes have a built-in pedometer chip and work with the app to remind you (the “one”) when they need replacing (the “moment”), among other stats, so you can reorder online and never miss a step. Of course, the app also provides Under Armour with tremendous situational and contextual insight into the habits of the runners who use it.
3) Customers’ time and effort is a highly valuable asset.
Price and availability have always been major competitive factors for retailers, but as more products and services become available online, they have become harder to use as differentiators. To better distinguish themselves retailers are focusing on two other critical components.
a) Creating a unique customer experience has always been important but was often thought about in terms of how to best provide customer support either in the store or when they called for assistance. In today’s world, a good customer experience is one where the consumer is excited to engage with the retailer, where the experience is akin to entertainment, not just an adjunct to shopping. We’re used to thinking about the fun of window shopping on 5th Avenue during the Christmas season. Today the experience is going even further, leveraging virtual reality to allow you to “walk around” a state-of-the-art store that is actually still under construction, or “try on” a new pair of jeans without actually having to put them on.
b) Delivering greater customer value. Retailers are recognizing that minimizing the time and effort required to buy is extremely valuable to customers. Houzz, a platform for home remodeling and design, uses a 3-D imaging app that allows you to take a photo of the room(s) in your home you’d like to update and then virtually place furniture or appliances in the space so you can see how they will look and determine if they will fit. Houzz currently provides over 11 million images that you can select from and buy. It is estimated that being able to visualize how items look and fit can eliminate up to 6 months from home refurbishment projects.
4) Retail agility makes money, reduces cost.
The pace of change in retail and the need to continuously improve the customer experience means that the relatively static approaches to store merchandizing are no longer as attractive. Stores need to be constantly innovating and changing their approaches, not only to maintain consumer engagement and generate interest but to take full advantage of their micro-moment planning and strategies. Simplistically, if it’s raining can you create an umbrella display, then tear it down when the sun comes out? Retail space is expensive and maximizing the return per square foot requires innovative use of space. This means anything from a mobile pop-up display that can be driven from place to place to a short-term lease on a store front, perhaps to display and sell seasonal items.
On a grander scale, organizations like JCPenney have geared their entire organization to be able to respond to major changes in demand or strategy extremely quickly. They recently decided to get back into the appliance business. Within 4 months, they renegotiated contracts, redesigned store layouts and merchandizing, revised their ecommerce pages and pricing (adding thousands of SKUs), stocked a large number of stores with appliances, trained store associates, and worked out shipping and delivery options. Not only did this exercise get them back into the appliance business; it sharpened their focus in many different areas. For example, now it only takes a day or so to add completely new items to their web/ecommerce catalog.
5) The continued rise of social will have an enormous retail sales impact.
Once upon a time, social networks were just a place to communicate with friends and share news, interests, and activities. But sharing information also raises interest in knowing more about where to find products, about pricing and availability, and about planning other fun experiences. Of course, the social media sites have recognized this and facilitate advertising to their users, but they aren’t ready to stop there. Seeing massive online growth and recognizing the tremendous advertising opportunity, social media companies also want in on ecommerce. For example, Facebook is significantly increasing their merchandizing capabilities. Retailers can now place video content on their pages, link to product content, and sell directly via the online channel. In addition, Facebook has recognized the power of micro-moments—those decision-making moments when consumers are deciding what to buy—and will be sharpening its advertising capabilities to allow retailers to take advantage of an estimated 300 billion micro-moment opportunities per year. It will be interesting to see who follows suit, or if Amazon will introduce a social channel!
2017 will see retailers continuing to push the envelope when it comes to customer experience, loyalty, and satisfaction. We’re excited to see who comes out on top and who thinks of new, innovative ways to keep up with the ever-changing demands of consumers. Are you a retail organization with a data-driven initiative this year? Let’s talk about how we can help you succeed.
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