Digital transformation is a term on the lips of many a retail CEO. There are a lot of ways to digitally transform a business, especially in retail. With its staggering size and reach, the retail industry is one of the few business sectors that has a tangible impact on the daily lives of average consumers. But the industry is famously slow to adopt new technologies, and many retailers wind up sticking to legacy operations for fear of upending painfully tight profit margins.
“The impact of AI on business as a whole is poised to be more dramatic—and disruptive—than the Internet.” As the Cannes Lions International Festival of Creativity kicks off today, bets are high that the realization that advertising is broken and humans alone can’t fix it will be top of mind among the nearly 20,000 marketers, advertisers and tech companies set to descend on the event. Indeed, there is no overlooking the numbers that underline a dangerous disconnect in what brands want to say and what people want to hear. Millions of ads are ignored every hour by consumers and evidence is mounting that people crave meaningful experiences, not marketing speak. However, the work required to deliver personalization at scale has moved beyond human capacity.
Supplements and aromatherapy aren’t just for Goop anymore. Traditional retailers want in on the wide-ranging, $3.7 trillion, so-called “health and wellness” category. Today’s consumer is far more informed and therefore plays a far bigger role in dictating the nature of new products. That shift is changing how retailers position and market themselves. “This is just an extension of everybody wanting to live a healthier life in general, companies are just trying to target multiple facets of people’s lives. Beauty is not just for the sake of vanity anymore. Companies are trying to provide an additional benefit to consumers.”
U.S. retail is definitely not dying, but it is certainly evolving at an accelerated rate. Week by week, the brick-and-mortar retail landscape is changing rapidly—and, in some cases, belatedly—in response to shifts in how and where consumers shop. The mall of the future is coming, and it promises shoppers a richer, more varied experience than they have seen in the past.
For years, augmented reality has been posited as the new frontier in retail innovation. The visual technology, which went mainstream in the industry around a decade ago, offers an array of benefits to businesses, whether in the form of product visualization, enhanced customer service or concept testing. Now, an increasing number of brands and retailers are investing in immersive tech for customers who crave something more than the average shopping experience. From A to Z — that is, from Adidas to Zara — FN rounds up 10 fashion names that are moving toward an AR-enabled future.
Global mobile commerce will hit $1.8 trillion in 2018 after 40% growth last year, and almost 60% of traffic to retailer's sites is mobile. Does that mean actual physical stores are toast, and desktop is dead? Absolutely not. In fact, brands like Citi, Home Depot, Walmart, Unilever, and eBay are finding new and powerful ways of melding mobile commerce, ecommerce, and innovative in-store experiences to create retail experiences that surpass both digital-only stores and bricks-and-mortar only retailers.
In most stories about retail these days, private equity is depicted as the bad guy—dooming operators by piling on debt. And not without reason. Buyout firms have been behind many of the industry’s biggest bankruptcies. In fact, 10 of the 14 biggest retail bankruptcies since 2012 were buyout-backed chains. The roster of buyout busts includes a host of familiar brands such as Gymboree, Sports Authority, Payless ShoeSource, and Nine West Holdings. More carnage is on the way. The retail reckoning continues. But as the example of Canada Goose shows, private equity investors can offer retailers a huge boost when things go right. PE firms have helped speed up the evolution of dozens of companies in ways that now seem to be helping them stay competitive in the much-changed, Amazon-disrupted landscape. The sheer number of struggling retailers linked to private equity today, however, reflects a burst of optimism about retail in the PE industry more than a decade ago.
“Digital brands have been experts at getting in front of a consumer, understanding them, capturing data, messaging to their consumer, but it’s an expensive endeavor. It’s increasingly expensive to acquire customers through Facebook, Instagram, Google or retargeting—these companies have been relying upon raising a lot of money at high valuations but not necessarily building sustainable businesses.” Retailers also are experimenting with virtual reality, chatbots and augmented reality as new ways to show off products. But unlike other retail categories, like consumer packaged goods, there’s a larger onus on retail to make sure those tests prove worthwhile for consumers and are not overly gimmicky.
Malls are at an inflection point. The old mall business model is in the scrap heap, and reinventing a new type of mall out of the old bones of yesteryear’s mall takes significant investment, creativity and time for planning. The way to find that “never looked better” future for malls is to reimagine and reengineer malls and shopping centers as “Consumer Engagement Spaces” or CESs. The now outmoded idea of malls as places for retailers to push out product offerings into a mass market must be replaced by a pull-marketing approach where the mall is designed around the needs and interests of an increasingly
With the ability to open multiple browser tabs, shoppers today have zero tolerance for high markups and experiences that haven’t been updated in decades. The store has become obsolete. However, despite declarations of a retail apocalypse, the reality is that brick-and-mortar has a genuine shot at survival, but only if it abandons its traditional ways. Retail must embrace a different mindset, one that blends physical space with digital technology and keeps savvy consumers on their toes. Enter the flagship experience, the next generation of brick-and-mortar retail.
With the plethora of sales and deals, it’s no surprise that the holidays are when Americans get to enjoy their favorite pastime — and Easter is no exception. Apart from the more hyped-up Black Friday, the holiday, which falls on the first of April this year, has long marked a shopping tradition. Easter spending is expected to reach $18.2 billion in 2018 — the second-highest level on record, trumped only by last year’s $18.4 billion. “Despite a modest drop, the Easter forecast is still very positive and nearly as high as last year’s record,” NRF president and CEO Matthew Shay said. “Consumer spending remains healthy both for this holiday and this spring, and that paints an optimistic picture for the U.S. economy in the year ahead.”
Macy’s and peers like Nordstrom, big box retailers like Target, and other traditional brick-and-mortar stores like Ulta are repositioning as they figure out what they can leverage in the age of Amazon to keep customers from straying. They may not be able to beat Amazon, but, the goal is, they can prove that Amazon hasn’t squashed their ability to stay in business. The strategy is to invest in private-label and other inventory exclusives, turn physical stores into fulfillment centers, position in-store employees as category experts and drive participation in loyalty programs, while continuing to invest in e-commerce and mobile commerce capabilities.
Macy's Inc. (M - Get Report) knows it'll never be the hot new boutique in town, so instead, it wants to be your next hangout spot. Parties within stores? Cashier-less checkout? Macy's is going all-out with its brick-and-mortar turnaround. Under its North Star strategy unveiled in May, the department store is upping its brick-and-mortar appeal by spiffing up product offerings, revamping stores and rolling out innovations for customers, all the while riding the momentum of its positive comparable sales growth in the fourth quarter — the first time in 12 full quarters.
Call it the Snapchat effect. For the consumer, the experience is an extension of what they’re already come to expect from online shopping - an interactive and social experience with convenient, seamless checkout. Smart mirrors do double duty, offering countless styles to try on, while also functioning as a checkout system for speedier transactions. As technologies improve, brick-and-mortar retailers will be making a comeback. “We always hear about the big store closings,” but we are seeing more retailers turn to technology to improve customers’ in-store experience.”
Being agile is the key to survival. Brands like Gap know that new tools and terabytes of data aren’t enough; to survive in this brave new digital jungle, they need to reinvent how they do business. When it comes to digital transformation, most brands have the digital side down. They’re using Adobe or Salesforce marketing cloud, Sprout or Sprinklr for social engagement, RedPoint or Segment to manage customer data, and so on. It’s the transformation that’s the hard part. “Because it’s not just about having the right tools, it’s about having the right kind of organization, operating model, talent and mindset, says Jason Heller, partner at McKinsey & Co. “Most companies are technology rich but insight and execution poor.”
The commercial opportunity exists because we need belonging at a fundamental level . We have a crisis of belonging–and great brands will step into the vacuum created by social isolation. And, some for-profit brands are now identifying this opportunity. Thinking beyond “customers,” “fans,” or “followers,” the next frontier for great brands is stepping into the cultural need and market opportunity for deeper, real-world person-to-person connection. Companies that can help their customers remake the social fabric have an enormous opportunity.
In an age where customers are increasingly trusting robots to make recommendations, order toilet paper and ship packages to their door, differentiation should be grounded in what kind of a relationship retailers can offer. And for many, that means starting by investing more in stores associates, and getting them easy-to-use technology that allows them to better personalize the in-store shopping experience and build loyalty with customers. Here, executives from Best Buy, The Home Depot and MM.LaFleur share their visions for the future of retail.
The apparel industry has a big problem. At a time when the economy is growing, unemployment is low, wages are rebounding and consumers are eager to buy, Americans are spending less and less on clothing. The woes of retailers are often blamed on Amazon.com Inc. and its vise grip on e-commerce shoppers. Consumers glued to their phones would rather browse online instead of venturing out to their local malls, and that’s crushed sales and hastened the bankruptcies of brick-and-mortar stalwarts from American Apparel to Wet Seal. But that’s not the whole story. Apparel is being displaced by travel, eating out and activities—what’s routinely lumped together as “experiences”—which have grown to 18 percent of purchases.
As brands and consumers alike increasingly embrace personalization, one-to-one marketing that engages individual consumers based on their unique interests and preferences is on the rise. The new year is a time of reflection and planning for the year ahead. With 2018 underway, staying at the forefront of the rapidly evolving digital marketing landscape is top of mind for marketers. One topic that continues to come up as a priority for our industry is personalization.
With consumers seeking personal, faster and easier shopping experiences, retailers are increasingly looking to technology for solutions on the front end and the back end of their operations. With improving business trends and tax cuts, companies will have more money to spend on technology. But the challenge is there’s a morass of emerging technologies complicating where to place their bets. Here’s a sampling of several of the technologies exhibited at the Innovation Lab.