The basic retail experience hasn’t changed much over the years: go into a store, look for the right product and make a purchase. Artificial intelligence has the potential to completely transform the traditional retail experience and take it to the next level with personalization, automation and increased efficiency. And it’s already happening.
Companies from Nordstrom to J. Crew have invested in loyalty programs. Some removed barriers, others added them, but the changes all said something about the strategy. In the past year, the space was reshaped when a slew of retailers reinvented, upgraded and dropped loyalty programs. The multi-retailer Plenti program shut down in July after Macy's and several other important participants bailed. And several retailers have tweaked or added internal loyalty programs. Program changes have ranged from department stores, including Macy's, Nordstrom and Kohl's, to big-box and specialty retailers like Target, DSW and Lululemon. While some of the changes are likely just the result of natural investment in that part of the business, retailers also face pressure from higher shopper expectations.
These days in brick-and-mortar retail circles, it seems all anyone can talk about is experiential retail. Immersive, interactive, technology-enhanced — these are all adjectives that get tossed around when executives are talking about what the store of the future needs to look and feel like. What does experiential retail really mean? For some it may be a swimming pool full of sprinkles or meditation pods. As design becomes a more intentional factor of the store experience, it's changing consumer expectations, especially for younger generations. As Doug Stephens, CEO of Retail Prophet, recently put it, "Millennials don’t suffer from shortened attention spans. Rather, they simply have a much higher sensitivity to things that are boring." But in reality, how many stores are actually as experiential as these out-of-the-box ideas? In a country with roughly 22.5 square feet of retail space per capita (more than any other country), the answer is: not many.
“Trust has become the connective tissue between brands and loyalty. Expectations for trust are up across all product, service categories, and brands an average of 250+% year over year. Meanwhile, customer concerns regarding privacy, security, and brand transparency have reached a tipping point. Today, loyalty is a fusion of emotional engagement, trust, and an ability for a brand to engage; to meet or exceed expectations consumers hold for their Ideal product or service. The brands on top of this year’s category lists know that, and more importantly, they know how.”
As retail went digital and consumers began shopping online more, retailers and brands raced to integrate fancy in-store technology and apps, as well as onboard back-end systems to support the omnichannel experience. But the question remained – how to evolve in-store associates to leverage the continuous rise of technology in the retail industry. This is mission-critical now that connected consumers enter the store armed with more information than the associates. At the same time, evidence supports the need for store associates. As retailers and brands look to keep pace with industry evolution, they must begin to integrate the front of the store with the back.
With every Facebook like, Amazon browse, Instagram post, or Google Maps query, we’re being watched, monitored and targeted. The internet has become a surveillance state and each of us a data set, where companies — known and unknown to us — are cataloguing, monetising and leveraging our data, often in ways to which we didn’t (at least knowingly) consent. The bottom line is we’re being tracked online, and to a large extent, we’ve come to accept it as the price we pay for a wide range of digital services. Today this same degree of surveillance is coming to the real world, as brick-and-mortar retailers attempt to fight back against online rivals who use their data supremacy to consistently outpace the growth of their offline competitors.
Digital transformation matters enormously. Digital giants such as Amazon, who are overtaking rivals in multiple industries (retail, supply chain/logistics, media, etcetera), are succeeding through a business model designed to take advantage of the most advanced technologies to continue to change and disrupt their industry. It is driven by the rise of the Internet of Things, which is forecast to have a trillion things connected to the Internet by 2050. At a macro level, marketing continues to be transformed by data and technology in significant ways. Marketers now have the ability to more accurately target and engage customers and have an array of new tools and technologies at their disposal. The classic right message to the right audience at the right time idea is now driven by data and delivered with sophisticated technology.
Buy online, pick-up in store is often heralded as the future of retail: Customers shopping on their own terms, as efficiently as possible. But it might end up being a bigger lift than expected for retail stores. Large retailers like Target, Walmart, Kroger and Home Depot are using store pickup to cut delivery costs, encourage customer interaction with associates, and drive in-store sales growth. Using stores to fulfill online orders lets retailers add supply chain muscle to their e-commerce businesses. But it does come with risks. As demand grows for in-store pickup, in-store fulfillment could put pressure on traditional store operations.
Wounded from the so-called retail apocalypse that defined 2017, some of the nation's most established brands have been faced with the fact that they either have to adapt or die. As a result, many have been forced to take lessons from trendy young startups that have swooped in and redefined the way we shop. From Gucci and Balenciaga to Crocs and Glossier, these are some of the most explosively successful brands of 2018.
Here’s how former big-box stores transform into seasonal Halloween pop-ups. Despite the brick-and-mortar retail apocalypse taking place across the country, Halloween pop-ups like Spirit have endured. When traditional retailers file for bankruptcy and leave empty big-box stores in their wake, they also give Halloween retailers more potential locations to choose from. Shockingly, even the rise of online shopping can’t seem to kill the Halloween store. All of this would be impossible without the existence of vacant retail properties in need of tenants, even if those tenants only plan on being there for a few weeks. What’s bad for retail is good for Halloween pop-ups, at least to a point. These companies need vacant spaces to fill, but they also need nearby stores to draw in consumers.
Everyone in retail, it seems, is playing in the toy game this year after the country's biggest toy store liquidated. But will there really be any surprises about who wins? The retail market for toys, on the whole, is worth $36.8 billion in revenue and covers more than 60,000 players. Store-based retailing of traditional toys and games is worth nearly $4.8 billion, down from about $6 billion in 2012.
It made shopping a national pastime, long before Amazon and big-box stores. Even though it’s easy enough to dismiss Sears stores, with their bare shelves and empty parking lots, as an irrelevant relic of retailing’s past, the fact is that Sears was a pioneer, a household name that wasn’t just America’s largest retailer until Walmart overtook it, but a company that changed how Americans shopped and set the stage for the eretailers that would follow.
Retail is changing faster than ever. New technology is increasingly being infused into stores, and the results are finally starting to show. Though there has been a lot of talk about how online shopping is changing the retail landscape, forcing traditional shopping centers like malls to close, it's only now that the future of the industry is truly coming into focus. And yes, it's digital, just as we were promised. Amazon and, more recently, Nike, have debuted store concepts that put their digital smarts front-and-center as they offer new experiences to customers. The advent of tech-focused physical stores proves that brick-and-mortar retail isn't going anywhere soon.
Soothe me, heal me, while nourishing my mind, body and soul, said the masses. As everyday consumers push the health-and-wellness movement from the earthy-crunchy margins to the mainstream, retailers are going beyond selling Fitbit wellness trackers and organic, gluten-free bread. Ushering in the next iteration of healthy-living consumerism, merchants are taking on the overtones of the medical, psychotherapeutic and fitness communities. They’re wrapping the sale of “better for you goods” in services and experiences that aim at a kind of holistic, mind-body-soul approach to wellness, from a “Soul Lounge” that sells custom-orthotics at DSW to meditation workshops at Eileen Fisher stores.
These brands shift their marketing-strategy investments from pre-promotion and sales to after-purchase brand loyalty. This builds brand-value advocacy in their consumers' lives, rather than accomplishing the short-lived benefit of a one-off sale. All have started thinking of new ways to provide value and build ongoing relationships with their customers, treating them more as members or users than one-time purchasers. Digitally savvy startup brands, in fact, obsess over experience, not revenue.
Look around your town and think back to what it looked like 10 years ago. Chances are, the stores that line the streets or anchor the malls are different. Circuit City, Linens-n-Things and Radio Shack are all gone. In their place are names like Nordstrom Rack, Saks Off Fifth and Zara. It's a physical representation of how the consumer has changed over the last decade. The financial crisis of 2008 left an indelible mark on consumer behaviors that still affect how Americans spend today. There may be new reckoning to face as the advent of online shopping allowed for a new cohort of retailers to multiply. These new retail companies launched their businesses online and built their brands unencumbered by costly stores and past debts. Among them, Bonobos, Warby Parker and Allbirds, used the internet to grow their reach. Now established, they are chartering new territory by launching stores slowly and methodically.
Loyalty comes through experiences and creating memories. The last several years have challenged retailers to become digital and then mobile brands. They’ve had to shift their focus from selling products to creating memorable experiences for consumers. Now the time has come for all brands to prioritize the user experience (UX), designing every customer-brand interaction with the user’s emotions and exact needs in mind. The UX mindset is more software developer than salesperson, and it works. Retailers today must treat visitors as ongoing users instead of merely potential buyers. Brands including Nordstrom, Sephora, Glossier and Warby Parker have implemented UX practices in retail to increase long-term customer loyalty.
From Anthropologie to Walmart, old-school chains are starting to get a handle on this whole shopping-in-the-digital-age thing. The clearest signs of strength have come from the big-box category, where Walmart posted its best comparable sales growth in more than a decade and Target roared with its biggest increase on this metric in more than 13 years. Nordstrom Inc. saw solid results at both its department stores and off-price concept, and Urban Outfitters Inc. saw eye-popping double-digit increases in comparable sales growth at its namesake chain as well as Anthropologie and Free People. Just look at some of the pleasant surprises.
The bazaar, the souk, the forum—wherever it emerges and whatever it’s called, the market has long served as the center of society. When the invention of agriculture brought the need for trade, towns grew around central gathering places where people could exchange not only goods and services but also ideas and inspiration. Along the way, the market became the mall, the mall became a Costco and the Costco became Amazon. As commerce increasingly became a commodity, the social functions of the authentic, community-making aspects of the market largely retreated behind shelves promising unlimited choice and convenience. As a result, a new paradigm emerged, one where community building and shareable, physical experiences serve as the foundation of commerce.
Amazon is schooling the retail industry on how to turn "1+1" into science. Hopefully, retailers are taking notes. Prime Day has pushed up the shopping season by nearly a month. More important: The report finds that Prime Day back-to-school shoppers spend 17% more at brick-and-mortar stores and 16% more at combined brick-and-click stores, compared with shoppers who don’t participate in the event. A major contributor to the earlier kickoff of the back-to-school shopping season is that other retailers, such as Target, have responded to Prime Day with their own earlier promotions. In addition to higher sales, however, several studies reveal that how shoppers buy their clothes, backpacks and dorm-room furniture is shifting in important ways that could predict the course of school shopping in years to come.