How is Retail Changing — What’s the Big Idea?

For the last 5 to 10 years, many companies and brands within the martech and customer experience space had a very specific objective — to create an online shopping experience that could mimic, match, or even outdo the in-store experience. The e-commerce industry represents a collective attempt to transition the experience of physical shopping to the online ecosystem.

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The argument can be made, though, that shopping at a physical retail store is no longer as rewarding as perhaps it used to be. Where we once had interpersonal exchanges, “know-you-by-name” greetings, and delightful experiences in-store, most brick-and-mortar customers today find themselves fighting large mobs, searching for the exact product they need, and lacking quality customer service interactions. Long story short, personalizing the in-store experience is hard.

twitter In the wake of #NRF19, @ARTimlin reflects on #retail – and says #shopping in-store just isn’t as rewarding (or #personalized) as it is #online CLICK TO TWEET

Retail stores are challenged to meet customer expectations

How can a minimum wage retail associate in a typical retail store access, attribute, and act on all of an individual customer’s data? By no fault of their own, they can’t even tell whether that person has even ever shopped with the brand before. But when that same person visits the website, the experience can be automatically personalized. Offers, product recommendations, inventory, and other specific customer preferences populate within milliseconds — all regardless of and responsive to the screen size of the device they’re using, when they’re connecting, their location, and language. Essentially the online journey is geared up to create an experience that’s pre-loaded with knowledge of previous browsing and buying behavior.

In an effort to retain more store associates, Amazon raised its minimum wage to $15 in the same fiscal year that Walmart, Costco, and Target announced raises of $11, $12 and $14 respectively. With unemployment at record lows, where would you rather be — in the stores or behind the screen? In what’s become a proverbial race to the bottom, too many retailers have been forced to slash prices, erect year-long promotions, and make difficult decisions about where to invest their time and money.

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In a typical retail setting, when a customer asks if you have a product in stock, what are the chances you know where it is — let alone that you also know other stores that might carry it, various color selections, whether it’s on the shelf or in the stock room, and specific features that may be beneficial for that exact customer?

There’s an underlying problem with brick-and-mortar stores: they’re ill-equipped to handle the multifaceted nature of today’s multichannel, connected consumer.

Stuck with point-of-sale systems — some of which are 20 years old and are no longer even sold by the vendor through which they were originally bought — that don’t connect with digital databases, no staff WiFi in-store, and no portable clienteling devices or applications, these retail stores are simply unprepared and incapable of competing with the contrast of superior, convenient online shopping options.

Opening more stores or an “innovation lab” probably won’t cut it, either — instead, businesses need to rethink their approach to customers in-store and focus on experience (not price or anything else). With time, it will become increasingly more difficult to compete with online-only retailers who don’t carry the overhead of a store. Customer experience, then, is a business strategy — not a marketing initiative or side project.

Online is easier

For the most part, creating an amazing customer experience and providing better customer service is easier done online than in-store. It’s also cheaper.

twitter “Creating an amazing #customerexperience is easier #online than in-store… it’s also cheaper,” says @OhadHecht CLICK TO TWEET

For example, when a customer calls for support, their cell phone number allows a brand to access the customer profile before the phone is even answered. The agent on the other end has access to stock, availability, a recommendations engine that shows what’s “also bought” or “bought with” certain products, and, most importantly, recent browsing history of the customer plus any products they were looking at before they made the call (or more likely raised a support ticket or engaged with a chatbot online).

This scenario goes beyond just Amazon. The average “live assistant” on a website provides more conversions and a better experience than the actual person does in the majority of stores. Is it surprising that so many traditional retail brands are struggling for growth?

Couple the ease of online shopping with the rise of mobile, and, for brands that are owning both, you’re creating an especially lethal arsenal. Brands that can “bridge the gap” between the online and offline world understand the value of data, and of selling through mobile. They understand the value of connecting the offline experience with the online experience — and in fact, bringing the offline world online. Still, too many retailers simply have a mobile app or they have a mobile-responsive website. They need a mobile strategy.

Physical stores aren’t doomed; brands just have to adapt

For traditional retailers, it’s not all doom and gloom… indeed, many brands in the retail sector are still thriving. These brands, though, are the ones that are innovating in extraordinary ways and bringing that innovation into their stores. They’re literally putting customer data in the hands of retail associates, better equipping them to provide thorough customer experiences and creating better outcomes.

Like I said, it’s not all bad news for physical stores: conversion rates for brick-and-mortar, on a bad day, are 10x what they are online, and 20x the average mobile conversion rate. Average order values are higher in stores, and return rates are lower. The cost of acquisition for an offline buyer is lower than an online purchase where the competition for attention is intensifying.

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Brands are moving, slowly but surely, away from multichannel initiatives into omnichannel or channel-agnostic initiatives oriented around the customer.

At our annual customer conference, Revolution, at the end of last year, we brought together more than 1,000 marketers to understand how they’re staying relevant in the digital age — and it was inspiring to hear not just how they’re “coping,” but also how they’re winning.

We heard from Sally Beauty Supply (a multi-billion dollar enterprise in the beauty sector with thousands of stores in many countries) talking about how their customer experience program uses online and offline behavior to create a single profile of customers with the purpose of improving outcomes. They’re connecting online behavior and digital marketing campaigns to their thousands of points-of-sale to ensure offers are personalized down to the individual (using past behavior to predict future outcomes).

We heard from a shopping village about how they’re not only staying relevant, but successfully using digital marketing to drive in-store footfall via Google and Facebook Ads. They also shared how their omnichannel strategy involves using their web and mobile properties to test new brands and product offerings before making that brick-and-mortar investment which would require resources to create new stores and transition inventory. They also shared how they use mobile techniques and loyalty strategies to reward customers by helping them plan their visit and make the most of their experience when they’re at the village.

Here in the U.S., one well-known retailer totally changed their omnichannel approach when they closed their centralized web fulfillment distribution center in 2015 to accommodate orders from more than 600 stores. This operational change has cut delivery time because customers now receive their orders from the closest physical location. They’ve also focused on using the stores as “experience centers” and educating their staff so that they, in turn, can better educate their customers. As a brand dealing with younger demographics — including those dreaded Millennials — it’s essential that they give people a reason to visit their stores and ensure the experience is fantastic when they get there.

NRF 2019: Bringing It Together

NRF 2019 is here… and it’s overflowing with bountiful stories of retail innovation and technological transformation. The common thread among all of the brands presenting? They all innovate around the customer, first. They start with strategy, then look for technologies that help them provide those better customer experiences as well as positive business outcomes.

More than 80% of commerce happens offline for a reason — and it won’t change dramatically in the coming years. For brands to remain relevant, we’ll need to see a collective, industry-wide shift towards encompassing omnichannel strategies that bring rich data from physical stores together with the abundance of available digital data. Brands need to keep on seeking opportunities to optimize their business approach with solutions that improve customer experiences, that drive and reward customer loyalty, and that induce customer retention for years to come.

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