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Discussion about the future of retail has never been more lively and opinions around what’s to come are diverse. The headlines on any given day offer much to think about, and questions have no simple answers. Is ecommerce killing the traditional shopping model? Is retail dying? While the conversation runs deep and is highly nuanced, at the end of the day experts agree that online shopping continues to grow while in-store buying appears to be declining. But it’s worth noting that if you look at the numbers through a different lens, ecommerce still only accounts for about 8 percent of all sales in the U.S. So what gives?
These topics and many others fueled interesting chatter last month, as Las Vegas flooded with everyone and anyone in the marketing and/or retail industries, attending conferences from Adobe Summit to Shoptalk and IBM Amplify. I met with and listened to panels of retailers, brands, technology vendors, consultants – you name it. The question of the week was, “is retail dead?” My resounding conclusion: absolutely not. It just needs a new blueprint.
Retailers are at a crossroads. Sixty-four percent of shoppers still prefer buying from physical stores to buying online, but consumer expectations have evolved. Retail is no longer simply about price or availability, it’s about experience both online and off, and excellent customer experience cannot be achieved without seriously switching gears. We’re at an inflection point of disruption: adapt or die. No longer does size matter – behemoths like Sears, Macy’s and JCPenney are closing doors while smaller retailers such as Madewell and vertically integrated brands, like Bonobos and Warby Parker, thrive. The differentiator between success and failure? The ability to seamlessly deliver a unique consumer experience. Adobe’s 2017 Digital Trends report, which surveyed 14,000 marketers to better understand market trends, found that exceptional experience is the way companies, brands and organizations will stand out over the next five years. And no company is exempt.
Some other key takeaways from Shoptalk include:
Redefining the role of brick and mortar
“We think about alternate distribution methods as alternate marketing channels,” said Galyn Bernard, co-founder of Primary.com. This is is brilliant. Retailers need to look beyond what brick and mortar has historically represented and start to focus on how it fits into a new, customer-centric definition of retail. How can stores get the most ROI from their real estate if sales revenue doesn’t pay the rent? Staples uses its physical footprint as fulfilment centers, showrooms and shipping depots. Luggage brand and retailer, Away, thinks of its stores as profitable billboards. This shift in business model has allowed them to achieve store-level profitability within one week of launch and use its physical space as showrooms, event space and as a venue for driving meaningful engagement with consumers. Away takes it a step further by mandating each store associate to write a summary of every customer interaction, which is shared across the company.
Experience is the new black
The sports industry is a fascinating case study. Big box retailers such as Sports Authority and Vestis Retail Group (parent company of Eastern Mountain Sports and Bob’s Stores) have called it a day, beaten by the very brands they carried, like Nike. Despite a rise in sports participation and an increase in overall sports apparel spend, Vestis blames the company’s failure to respond to consumers’ changing shopping preferences for its demise. Sports Authority thought it could win the sports category simply through store expansion, while other companies such as Lululemon, Athleta, and even Target and Forever21 doubled down on the emerging “athleisure” category to compete. Other sports apparel retailers have survived and grown as well. Tami Mohney, CMO at Modell’s Sporting Goods, says it goes back to being laser focused on who your target customer is and injecting your brand’s mission and values into that in-store experience. Modell’s doesn’t compete against high-end luxury brands; instead it focuses on reaching its local, value-driven customer. Modell’s capitalizes on its physical stores by using them for events and causes customers care about, driving meaningful interaction and engagement – priceless for building brand loyalty.
Another way to drive overall experience and ultimately, brand ambassadors, is for brands and retailers to align themselves for greater success. Together, brands and retailers can help each other in myriad ways; below are a few examples:
One of the most interesting panels at Shoptalk included Steph Wissink, senior analyst at Piper Jaffray, who interviewed a group of high school kids – AKA ‘Gen Z’ – on their buying habits and preferences. When asked whether they’d prefer to spend money on material goods versus experiences, every single one chose the experience. Similarly, when asked to choose between getting a car or keeping their phone, all but one chose the phone. As a generation that makes up 25 percent of the U.S. population (more than baby boomers or millennials), retailers should be paying attention. Experience matters, customer-centricity matters – and will continue to shape the retail landscape for the foreseeable future.
More than 50 percent of organizations will prioritize customer experience within their business models by 2018, according to Gartner. Amazon has blazed this trail with its inordinately successful business platform which relies on delivering maximum convenience for online shoppers. It’s now expanding its unique value proposition to physical stores with Amazon Books slowly popping up in major cities, and the alleged opening of convenience and grocery stores, run primarily by technology (as opposed to humans). While convenience is Amazon’s trademark with its “Just walk out” technology, the truth is that this company was simply the first to uncover that the secret sauce for success is based on delivering exceptional customer experience. This doesn’t mean every retailer should do what Amazon does and expect a winner. It does, however, indicate that a laser-focused customer experience and a well-researched and thorough customer-centric approach to retail is what bridges the gap between buyers and sellers. The theme for 2017 and beyond? Customer experience.
If you’re in Boston on May 9, Ascent Venture Partners is hosting our next forum on Customer Experience In The Age of Innovation. RSVP here.