Category: E-commerce

Categories
Consumer E-commerce Retail trends Technology

2023 Predictions: A UK Retail Rollercoaster

‘Permacrisis’ was declared the word of 2022, so what might 2023 bring?

There are reasons for cautious optimism, but first retailers are going to have to buckle up and brace themselves for more turbulence.

Spending more to buy less

Let’s briefly recap on retail’s Golden Quarter. Christmas was not the wipe-out that many of us had expected. After a bumpy couple of years with Covid cancelling Christmas, consumers were determined not to let illness, inflationary pressures or industrial action hamper their celebrations.

There are some caveats here: soft comparatives (remember Omicron?); supermarket success came at the expense of the hospitality sector; and perhaps most importantly much of the growth we saw was fuelled by inflation – in December retail sales were up in value terms but volumes continued to fall. In other words, consumers are spending more to buy less.

Inflation might be starting to ease, but consumers are still a long way from feeling the benefit. This ongoing erosion of spending power makes for a pretty gloomy outlook: consumer confidence tanked again in January, returning to a near 50-year low. Looking ahead, the deterioration in consumer sentiment is likely to persist throughout the first half of the year, at least. A reminder to retailers that value will remain firmly top of mind, purchases will continue to be incredibly considered, and big-ticket discretionary buys will be delayed.

Trimming the fat

The spending hangover is here and while there’s never a good time for subdued consumer demand, it’s especially painful when retailers are simultaneously grappling with their own cost inflation. No one is immune: this dangerous combination of soft demand and rising costs is impacting even the most bulletproof retailers. Amazon, for example, is laying off 6% of its global workforce, closing warehouses and putting the brakes on bricks & mortar expansion. 2023 will be a year of operational efficiencies for retailers, in many ways mirroring their own customers’ behaviour by trying to do more with less.

The other immediate challenge for retailers will be shifting excess stock, the result of over-ordering during the supply chain crisis and exacerbated by the current consumer weakness. With a glut of inventory and sluggish demand, retailers are left with little choice but to slash prices. But wait, haven’t they been doing that for the past four months? Aside from the obvious margin implications here, there is also the risk that shoppers are becoming desensitised as promotion fatigue sets in – or even worse, that they forget what it’s like to buy at full price.   

2023 opportunities: bricks & mortar resurgence and immersive digital experiences

There’s no sugarcoating it: 2023 is going to be another year of instability and uncertainty. But the retail industry is nothing if not resilient and I believe there are reasons to be optimistic. Stores are back, they’re repurposed and better than ever. We’ve been thrust into the future thanks to the pandemic-induced digitization of bricks & mortar retail, levelling the playing field and shifting the industry’s perception. Stores were once considered liabilities in this digital era, but they’ve been reconfigured for 21st century shopping and are now essential assets.

When it comes to customer experience, I believe that ‘tech-enabled human touch’ will be the next battleground, as retailers recognise the many opportunities that come with equipping your staff with the right digital tools. Mediocre experiences have become a thing of the past. Meanwhile, automation will climb higher up the agenda as retailers look to achieve operational efficiencies, despite the initial outlay, while simultaneously addressing the current labour shortage. In 2023, we’ll see more trials of autonomous vehicles delivering our goods and robots working alongside humans in warehouses.

Shoppers will continue to abandon e-commerce in droves now that we have returned to some semblance of normality. Some categories like food, fashion and furniture will never transition online like the rest of retail has, but it’s clear that as an industry we have been propelled towards a more digital world. And over the next decade, new, immersive digital experiences will redefine our perception of e-commerce – this is going to be the next big thing in retail. I’m still a bit of a metaverse sceptic. I know barriers can be knocked down but right now how many of us really have a VR headset kicking around at home? However, it’s clear that e-commerce is ready to evolve. Sure, all of the friction has been sucked out and today the experience is wildly accessible, slick, effortless. But is it any fun? Not really. It’s still far too transactional, too one-dimensional. This will change.

The next stage of e-commerce is all about immersion, discovery, curation, hyper-personalisation and escapism. And it’s already happening with augmented reality, virtual showrooms, live shopping, social commerce, 3D product views/virtual try-ons, video shopping consultations, among others. In the future, we won’t know where the physical world ends and the digital one begins.

Our hybrid way of living is here to stay and while businesses may still be acclimatising to the consequent shifts in demand patterns, longer term this will present new and exciting customer engagement opportunities. Despite tight budgets, investment in sustainability will remain high on the agenda in 2023, while opportunities to tackle the often-neglected post-purchase experience and explore new revenue streams such as retail media and third-party marketplaces will accelerate. In summary, short-term volatility will persist while consumers batten down the hatches, but as always the future of retail is bright for those who are willing to evolve.

Categories
Consumer E-commerce Fulfilment Retail trends Technology

Recalibrating for the Next Normal

Sales Online. Working women at their store. They accepting new orders online and packing merchandise for customer.

Paid partnership with Manhattan Associates

Greetings from Germany! I’m here at the Manhattan Exchange in Berlin and am super excited to share with you a new report that I’ve authored for Manhattan Associates: Recalibrating for the Next Normal.

The pandemic may have accelerated digital transformation strategies, but what comes next? We spoke to 3,500 consumers and 700 leading retailers across the US and Europe to get a better sense of the consumer landscape and the capabilities required as retailers recalibrate for this next stage.

The findings of this international research study highlight the need for retailers to continue to keep up with the pace of evolving consumer expectations. It also revealed a retail landscape where the lines between physical and digital commerce are becoming increasingly opaque and complicated. 

Click here to display content from www.youtube.com

Open "YouTube video player" directly

Download the full report.

Categories
Amazon E-commerce

When Do We Stop Calling Amazon a Retailer?

Pisa: Prime Video is an Internet video on demand service that is developed, owned, and operated by Amazon. It offers television shows and films for rent or purchase. On December 7, 2017, it finally arrived on the Apple TV digital platform as a stand alone app. The image shows a TV connected to a recently updated Apple TV, 3rd generation, where some media-centric apps (Prime Video, Vevo, Young Hollywood, abc news, etc) are visible

A question I often get asked is what is Amazon? Amazon sells everything from nappies to treadmills, but it also produces hit television shows and provides cloud computing services to clients ranging from McDonald’s to NASA. Amazon is also a hardware manufacturer, payment processor, technology provider, advertising platform, virtual tour operator, ocean freight business, publisher, wi-fi system, delivery network, fashion designer, private label business and an airline.

Portland, Oregon, USA – September 2, 2019: An Amazon Air Boeing 737 landing at Portland International Airport on a sunny summer day.

It doesn’t stop there. Amazon is a supermarket (and now officially designated one here in the UK by the Competition and Markets Authority). It also operates America’s largest civilian surveillance network. Amazon is a pharmacy and healthcare provider and has dabbled in restaurant delivery, luxury goods and hair salons. It has even tried to cure the common cold (yes, really).

So, going back to the original question – what is Amazon? Certainly not just a retailer.

In fact, as Amazon continues to diversify its revenue streams, its retail division – as a percentage of sales – becomes less significant. In 2021, Amazon’s global net product sales amounted to $242 billion, representing 51% of Amazon’s total net sales (versus 87% a decade ago). 2022 will be the tipping point when most of Amazon’s sales come from services, not from shifting goods. Amazon is rapidly transitioning from merchant to infrastructure.

So let’s break that down a bit because, with the exception of Amazon Web Services (AWS), its services are heavily intertwined with its core retail operation. Remember, Amazon doesn’t own the majority of stuff that is sold on its marketplace, but instead takes commission on third-party sales and, in many cases, charges for shipping and fulfilment. This is by far its biggest “service” revenue stream: globally, sales from third-party seller services nearly doubled over the past two years to become a $104 billion business.

As third-party sales continue to grow as a percentage of total paid units, Amazon’s stated sales become less reflective of the gross merchandise volume moving through Amazon.

The pandemic has clearly cemented Amazon’s status as the indispensable route to market, as we’ve witnessed a swathe of shoppers, retailers and brands flocking to its platform. And, of course, as Amazon’s marketplace becomes more crowded, the need for visibility becomes more urgent. This has catapulted one of Amazon’s more nascent, but hugely promising businesses – advertising. For the first time ever, Amazon disclosed the size of its advertising business – at $31 billion it is bigger than the online advertising revenues of Microsoft, Snap and Pinterest combined.

It’s also worth comparing advertising to Amazon’s other revenue streams. Advertising, which is growing at around 60% annually, generates more sales than Amazon’s physical stores and it’s even bigger than Amazon’s Prime subscription business.

Prime, which is very much the glue of Amazon’s ecosystem, is a service that is about to get more expensive for shoppers, at least in the US. Amazon recently announced a fee hike of $20 annually, which should help to achieve two things. Firstly, it will soften the blow of rising shipping and labour costs that Amazon and the rest of the industry is grappling with. Secondly, Amazon has been in major spending mode recently, and in relation to Prime, the fees will help to offset Amazon’s extra investment in digital content in addition to some of the more logistically complex promises such as “free” same-day grocery delivery.

Prime fee hikes were inevitable and, in my opinion, are we are likely to see a similar hike here in the UK later this year. It’s a delicate balance at a time when household budgets are being so severely squeezed, but Prime has become a way of life for many. The nature of its bundle proposition has become wildly relevant for today’s shopper – Amazon added over 50 million new Prime members globally throughout the pandemic. We’ll see some attrition of those newly acquired, perhaps more hard-pressed Prime subscribers, but I imagine the vast majority of members are far too wedded to the brand and broader ecosystem to even blink an eye.

Of course, it’s not just the revenues generated from services linked to the success of its core retail division – third-party seller fees, advertising and Prime subscriptions – that are poised for solid future growth. But we have to remember that Amazon is a technology company at heart. AWS may only account for 13% of global sales but it remains the cash cow of the business. Its remarkable growth has been fuelled by the pandemic-driven acceleration of cloud adoption, and there is no sign of this slowing down with further expansion planned in the Asia-Pacific region and Canada.

With Amazon, things are not always what they seem. Amazon is quietly becoming the rails that the retail and many other sectors run on. Its moves are designed to strengthen other aspects of the business. For example, Amazon continues to explore the lucrative world of licensing its Just Walk Out technology to other retailers, such as Sainsbury’s. But its checkout-free systems are naturally underpinned by AWS so an increase in demand for Just Walk Out technology also bolsters Amazon’s most profitable business segment. 

So, no, Amazon is not a retailer but a tech company that is becoming increasingly reliant on services as a means of driving topline growth. It just happens to sell a lot of stuff in the process.

Categories
E-commerce

The Quick Commerce Boom Shows No Sign Of Abating

Hand to hand of Delivery food service sending delicious from restaurant to customer without having to leave the house receiver shipping deliver shopping online on yellow background isolated.

Quick commerce, rapid delivery, serving the ‘instant needs’ market. Call it what you’d like, but the uber-convenience boom has arrived and is here to stay.

What was perhaps initially seen as a pandemic pivot will have lasting implications for the retail industry and its supply chains. Forget same day or one-hour delivery; 15-minute delivery of groceries is rapidly becoming the norm in many urban areas around the globe.

But is there really a need for it? Are grocery orders really that time-sensitive? And how financially sustainable is this model? In this blog for Manhattan Associates, we delve into some of these topics and explore what 2022 might bring.

Disrupting the disruptors

First, let’s acknowledge that we live in a ubiquitously connected world. A world that is digitally accessible with amenities on tap. A world where we can while away the hours consuming digital content, a world of home comforts and infinite choice. A world with instant access to millions of products to buy, songs to listen to and movies to watch.

We may be living in an on-demand era, but when it comes to grocery shopping missions, up until recently, it was primarily the weekly food shop that was done online. The top-up grocery shop was still very much an analogue experience.  

The unparalleled disruption caused by the pandemic not only accelerated online grocery adoption, but it also created an entirely new channel – we are finally witnessing the digitization of the top-up shop.

The 15-minute supermarkets – the likes of Gorillas, GoPuff, Getir and Zapp – have come in all guns blazing, boldly debuting their new brands and elevating the customer experience to new heights, seemingly unfazed by the crowded, low-to-no-margin nature of this industry.

These rapid delivery platforms are essentially acting as a 21st century version of the corner shop, catering to those convenience/crisis-led shopping missions – shoppers who need an ingredient or two for tonight’s dinner, who have run out of nappies or beer, or perhaps are quarantining and struggling to get a suitable slot with one of the big grocers. They are disrupting the status quo and redefining immediacy. Niche, but highly relevant in the current climate.

While shoppers will always say yes to faster delivery and better service, you do have to wonder whether this small segment of the grocery channel is worth disrupting? And I say “small” for three reasons:

1) As above, 15-minute grocery delivery caters to niche shopping missions – top-up, ‘for tonight’ and food to go;

2) Let’s face it, this kind of model requires significant population density and will therefore be largely limited to cities;

3) Despite best efforts to democratize it, ultra-fast delivery is a premium service catering to time-poor, and often cash-rich, shoppers.

According to IGD, the quick commerce sector is currently worth £1.4 billion in the UK, with the opportunity to more than double in size to £3.3 billion – still a distinctively small slice of a £200+ billion sector.

Boom or bust

So is the hype around quick commerce justified? Or will this become another pandemic innovation that quietly fades away as we settle into yet another new normal?

My view is that rapid delivery, in some shape or form, is here to stay. In recent years, the supermarket price wars have been superseded by the delivery wars. Fifteen-minute delivery takes this to the next level, one in which the mainstream supermarkets – and even Amazon – would not historically venture towards.

Why not? Because this model is messy. You are promising customers the moon on a stick and one bad experience can be detrimental to the brand. It is an unproven and wildly capital-intensive model, requiring hyper-proximity to the customer (if you’re going to deliver within 15 minutes, you’d better be within a mile or two). Not unlike the hard discounters, you also have to significantly sacrifice on range in order to make the economics stack up.

But time is a precious commodity and the ultra-fast delivery providers have now ripped the plaster off. This is convenience on steroids. It’s a deepening of the democratization of white glove service, a trend that had long been brewing pre-COVID.

To some, quick commerce perhaps represents a dystopian future where we never need to leave our sofa when we run out of bread. To others, it’s a case of going back to the future – the milkman of the digital age.

Regardless, it would be difficult to wean customers off now that they have had a taste of this uber convenience, leaving the market with no choice but to follow. We have already witnessed the start of the inevitable consolidation within this nascent sector, as well as an increasing number of partnerships with the grocers themselves. In 2022, we could very well see the acquisition of a rapid delivery provider by one of the major supermarkets.

Quick commerce will remain a niche segment of the online grocery channel, but certainly one not to be ignored with much wider implications for retail supply chains.

Whether it’s the practical processes associated with microfulfilment (such as automation and the integration of man and machine), transportation modelling for the ‘last mile’ or the broader concept of moving supply chains closer to consumers, the impact of quick commerce may be felt far beyond its immediate sphere of operations into 2022 and beyond.   

Categories
Amazon E-commerce Technology

New Book Explores Amazon’s Pandemic Power Grab

Sydney, Australia - 2020-10-17 Amazon prime boxes and envelopes delivered to a front door of residential building

The COVID crisis has upended shopping habits and forever changed the world of retail, according to the second edition of Amazon: How the World’s Most Relentless Retailer Will Continue to Revolutionize Commerce. Authors Natalie Berg and Miya Knights argue that while COVID sounded the death knell for many businesses, one retailer in particular has come out stronger: Amazon is hands-down the undisputed winner of the pandemic.

With crisis comes opportunity – for Amazon at least. While many retailers muddled their way through the pandemic, Amazon propelled itself into new industries, made blockbuster acquisitions, launched new products and brands, and doubled down on technology. The retailer hired hundreds of thousands of employees, unveiled new store formats, turned disused malls into warehouses, and even added a couple of new markets to its roster. A key theme of this crisis is that the strong will emerge stronger.

“Amazon’s business model may not have been intentionally built for a pandemic, but it has turned out to be highly relevant in such a climate,” said co-author Natalie Berg. “Amazon is seemingly invincible these days. The pandemic-induced shift towards a more digital world has strengthened every aspect of its business – retail, cloud computing, advertising, Prime and Alexa.”

Amazon is now firing on all cylinders. It has woven itself into the fabric of our everyday lives and, in the absence of regulatory intervention, will continue to benefit from post-pandemic tailwinds,” concluded Berg.

The authors argue that the pandemic has afforded Amazon a unique opportunity to tighten its grip on consumers and bolster its broader ecosystem by:

  • Reinforcing its status as the indispensable route to market
  • Further embedding itself in consumers’ homes
  • Accelerating its vision as a technology vendor

Co-author Miya Knights added: “The second edition underlines Amazon’s seismic digitally-enabled impact on the retail landscape. Technology has always moved at breakneck speed, but the added catalytic effect of the pandemic has only spurred Amazon’s ambitions to use its tech advantage to consolidate and grow its dominant market position.”

Knights continued: “This is a crucial time of transition for new CEO Andy Jassy as he is tasked with convincing lawmakers that Amazon’s ubiquity is good for the economy – and for democracy as a whole. His number one job will be ensuring Amazon doesn’t go from disruptor to disrupted.”

The book also advises how retailers can co-exist with Amazon and identifies six key retail trends being accelerated by the pandemic:

  1. The demise of ‘status-quo retail’
  2. Digital transformation: COVID will finish what Amazon started
  3. The digital store: frictionless shopping and no-touch checkout
  4. The store as a fulfilment hub: the future of e-commerce is stores
  5. The democratisation of white-glove service
  6. The shift to conscious consumption

With the first edition now translated into more than a dozen languages, Amazon is an invaluable resource for discovering the lessons that can be learned from the retailer’s unprecedented rise to dominance.

To arrange an interview with Natalie or Miya, or to request a sample chapter, please email hello@nbkretail.com.

About the authors:

Natalie Berg is a Retail Analyst and Founder of NBK Retail, a consultancy specialising in retail strategy and future trends. Regarded as one of the world’s Top 20 retail influencers, Natalie has led research and given talks on a range of industry topics including: reimagining retail for the post-pandemic digital era, store of the future, the convergence of physical and digital retail, customer loyalty and discount retailing. She is a regular TV and radio commentator and her views on retail have been published in the FT, Guardian, BBC and The Times, among others. Natalie is also a guest contributor for Forbes and Retail Week.

Miya Knights is Global Content Strategist at poq Commerce, with 25 years’ experience as an analyst, journalist and editor specializing in retail enterprise technology use. Based in Sussex, she is the owner and publisher of Retail Technology magazine and has appeared on the BBC, Channel 4 and Euronews and commented in The Telegraph, The Times and The Financial Times among others, as well as regularly speaking at or moderating industry events. She has also been recognised as the 2021 Arts & Media Senior Leader by the Black British Business Awards. 

Additional files:

Amazon book cover (high res)

Natalie Berg headshot

Miya Knights headshot

–ENDS–

Categories
E-commerce Fulfilment

Rethinking Returns 2021

Online store selling clothes on website working on laptop ecommerce business from home. Woman packing new clothing fashion purchase in shipping packages for delivery. Panoramic banner.

Let’s talk returns. The industry’s perennial problem has been exacerbated by the pandemic and retailers can no longer afford to avoid the post-purchase experience. In this latest report with Klarna, Rethinking Returns: From Returns to Retention, we explore the power of returns as a customer acquisition and retention tool, and the repercussions of getting them wrong. 

Based on a survey of over 2,000 UK consumers, our research found that over eight in ten (84%) online shoppers would turn their back on a retailer after a bad returns experience.  

With 39% of consumers* having done more shopping online since the pandemic, an increased reliance on returns means people’s patience is waning when it comes to clunky or costly returns processes. 83% of online shoppers** admit to getting frustrated by retailers which have an inefficient returns process, while 82% agree that retailers in general need to improve their returns capabilities.

Demonstrating the need for retailers to keep up with consumers’ changing needs, some of Brits’ biggest frustrations with returns stem from the inconvenience of slow, out of date or inflexible returns processes. Over a third (36%)** cited slow refund processes as the most frustrating element of returning items bought online, highlighting the importance of flexible payment options. Other frustrations include having to print off return forms when they don’t have a printer (25%), the inconvenience of queuing to return at the post office (23%) and not being able to return items in store that they’ve bought online (21%).

Exacerbated by COVID, these frustrations with the returns process are the driving force behind emerging shopping trends, as people find ways to avoid inconveniences. Over the past 12 months, a fifth (21%) of online shoppers say they have reluctantly kept an item they were unhappy with because it was too much effort to return it, 12% have avoided returning items at the post office because it’s difficult to social distance, while 11% have gifted and 9% have resold items they don’t want instead of returning to the retailer. In the long run, this could mean people avoid buying again from retailers that don’t meet their needs.

For those retailers that get returns right, this can serve as a competitive advantage, helping to attract new customers, and boost customer loyalty. 84% of online shoppers agree they’re more likely to buy from and 86% are more likely to come back to online merchants who offer free returns. However, even a little added inconvenience can come at a cost: over two thirds (70%) of online shoppers state that if a preferred retailer stopped offering free returns, they might not shop with them.

Alex Marsh, Head of Klarna UK, said: “Nobody wants to be out of pocket as a result of items they don’t even choose to keep, so it’s no surprise that slow refund processes are the top frustration factor when it comes to returns. As reliance on returns grows, retailers need to ensure they’re offering a smooth, seamless process that meets the needs of today’s customers – considering everything from effortless logistics to flexible payment options. As our research suggests, those that fail to adapt will lose customers in the long term.”

The research also uncovers a consistent trend of rising consumer expectations when it comes to returns services. Compared to 2019, a greater number of online shoppers now believe that returns are a normal part of online shopping today (80%, up from 77%) and expect that every retailer they shop with offers free returns as a minimum standard of service (81%, up from 75%). And, as customers increasingly demand free and easy returns, more consumers also now state they’d never shop with a retailer that didn’t offer free returns (57%, up from 53%), and that all their preferred retailers offer free and easy returns (73% up from 70%).

Natalie Berg, Retail Analyst and Founder of NBK Retail:

“Consumers often expect a returns policy to mirror that of delivery – fast, frictionless and free – but that’s not always the case. The pandemic has thrust the issue of returns into the spotlight, exacerbating the disconnect between the effortlessness of placing an online order and the inconsistent and often friction-filled experience of making a return. Returns are fantastically out of sync with an otherwise seamless e-commerce experience.

“As we reimagine retail for a post-COVID world, retailers must accept that returns are part and parcel of 21st century shopping and, if managed well, can encourage conversion and drive loyalty among their most valuable shoppers. Retailers can no longer afford to ignore the post-purchase experience.”

You can download the full report here.

NOTES:

* consumers that shop online

** consumers that shop online and return items

 

Categories
Amazon E-commerce

They know exactly what you want. Can anyone stop Amazon’s domination?

Fort Collins, CO, USA - March 31, 2020: Brown bags with groceries and fresh produce delivered to house from Whole Food Market and order through Amazon Prime. Online shopping during coronavirus pandemic concept.

What is the secret to Amazon’s success in a nutshell? A relentless dissatisfaction with the status quo. Love or loathe it, we have to credit Amazon for stamping out complacency in retail. Fast and free delivery, one-click shopping, user-generated reviews, checkout-free stores, voice shopping, the list goes on. If Amazon didn’t exist, shoppers today would be far more tolerant of mediocre retail experiences.

Covid-19 has further fuelled its appetite for disruption. This week Amazon hit the nuclear button. By offering free delivery of groceries, Amazon is capitalising on a once-in-a-lifetime opportunity to acquire market share. This is the boldest move it has ever made on this side of the Atlantic, and the worst possible news for the supermarkets who were finally getting comfortable with online deliveries in the middle of a pandemic.

Read the full piece in the Evening Standard.

Categories
E-commerce Fulfilment Store of the future Technology

Great customer experiences can only be delivered with top-notch operations

The final whitepaper in our series with Red Ant explores how bricks & mortar stores must evolve to become genuine hubs for fulfilment. 

The most successful retailers today are those that view their stores as assets not liabilities. As contradictory as it may sound, they understand that the key to growing e-commerce sales is leveraging their physical infrastructure.

These retailers also recognise that traditional metrics for success are no longer valid in today’s omnichannel world; the future of retail isn’t solely online or in-store but a blend of both channels. A OnePoll survey shows that nearly 40% of shoppers use online and store channels equally.

So, the store estate is actually an asset, but problems arise if they are not fit for their new purpose. As 20% of UK retail sales now take place online, less physical shelf space is required. Instead retailers need to dedicate more space on the shop floor to fulfilment services.

Store fulfilment plus points

When asked what types of experiences they would like when in store, the top three answers from shoppers all related to fulfilment:

  • 48% want simple returns of online purchases
  • 42% want click & collect
  • 35% want to be able to order online while in store when items are out of stock

There’s no denying that the rise in online shopping has come at the expense of physical retail sales, but we can’t overlook the many opportunities it has also created for those retailers willing to evolve.

One of the main draws of click & collect is the ability for customers to ensure product availability before heading in-store, as 40% of shoppers surveyed say that knowing what you want is in stock is a factor in choosing one retailer over another.

Over half (51%) cite not having to wait for deliveries as a reason to shop in store versus online. Customers coming home to the dreaded “sorry we missed you” note adds a lot of friction to an experience that is intended to be anything but.

Holistic customer experience

Click & collect is, therefore, a no-brainer for retailers, and many have been quick to recognise that in-store collection and returns can improve footfall and consequently incremental spend. Countless studies have shown that shoppers often purchase something else once in store and herein lies the opportunity: retailers must engage with shoppers at the point of collection in a bid to cross-sell or upsell based on the items that have been reserved.

Making the most of this, however, depends on equipping store associates with the right technology. The aim should be to establish staff as trusted shopping companions rather than simply someone who gives the customer their order and ticks it off on a list.

The data is there, but retailers need to connect the dots to offer that holistic customer experience.

Download Store of the Future: The Store as a Fulfillment Hub now to get the full picture and read more of Natalie Berg’s expert insights.

Categories
E-commerce Fulfilment Store of the future

Next gets that the future of e-commerce is stores

To be relevant in retail today, you have to acknowledge that stores are no longer purely about selling. I believe most high street retailers are on board with this concept, but few are comfortable implementing it. And that’s because for decades, we as an industry have obsessed over metrics such as like-for-like sales growth whereby success is confined to a shop’s four walls. But it’s 2019 and we all know that’s not reflective of actual consumer behaviour.

Next is one of the retailers that gets it. They have hundreds of stores with a presence on most high streets – yet the bulk of their sales take place online. They’ve accepted that stores are never going be as productive as they were before the advent of e-commerce, and while there is certainly a need to redress the balance through select closures there is an opportunity to redefine the very purpose of bricks & mortar stores. 

Next understands that, as contradictory as it might sound, shops now play a critical role in growing online sales. If you don’t believe me, just look at the tsunami of online retailers now opening physical stores. Having a bricks & mortar presence means online retailers can offer shoppers additional choice in fulfilment while reducing customer acquisition costs, generating that elusive halo effect.

Customers want to shop on their terms, they want the best of both physical and digital worlds. They want to marry the ease of buying online with the convenience of collecting or returning items instore. It’s no surprise that half of Next’s online orders are collected instore, while stores also process over 80% of e-commerce returns.

Another example of online and offline working in harmony at Next is through same-day click & collect. Shoppers can now view and reserve local store inventory for collection in under one hour. This might not be a gamechanger (I can’t imagine many Next orders are that time-sensitive) but it shows how retailers can leverage their stores in a digital era.

Lastly, Next is rethinking the role of its stores by doing something most wouldn’t dream of – teaming up with Amazon. Six months ago, Next became Amazon’s UK partner for its launch of Counter, a service that lets shoppers collect their Amazon parcels from staffed pick-up points in Next stores. Again, this is about the following the customer: according to Mintel, 90% of UK shoppers use Amazon and I would estimate that Amazon accounts for just under half of e-commerce sales in the UK. The partnership is a win-in. No one can do fast delivery like Amazon, but often it’s predictability over speed that consumers are after and this is where stores come in. Meanwhile, Next benefits from the additional footfall and opportunity for incremental spend.

Retailers can take inspiration from Next’s strategy, understanding that stores are an essential component to facilitating e-commerce sales. We have to stop treating e-commerce as the death knell for the high street. We have to ditch those metrics that pigeonhole retailers and start valuing our stores based on their ability to enable digital purchases.

This article originally appeared on Retail Week.

Categories
Amazon E-commerce Technology

How to compete with Amazon

How can retailers compete with Amazon? This is the question that my co-author Miya Knights and I get asked most since publishing our book earlier this year.

First, let’s address the myth that Amazon is a retailer. It’s not.

Amazon is a technology company with deep pockets, an appetite for disruption, and a constant dissatisfaction with the status quo. Amazon is a fierce competitor not only because it is infatuated with its customers, but also because it has the advantage of playing by its own rules, shunning short-termism and other traditional constraints faced by public retailers.

From a CX perspective, Amazon has made online shopping completely and utterly effortless. The ability to access millions of products and have them magically turn up on your doorstep the same or next day is pretty powerful, and Amazon has gone to great lengths to ensure that the experience is as seamless as possible. They continue to reduce friction by shortening the path to purchase – this will be a key focus in the future as Amazon relies more heavily on its own devices to funnel purchases through to its platform.

Ultimately, it’s the ease of buying through Amazon or, as Miya often says, it’s how Amazon sells rather than what it sells that distinguishes them from their peers.

Amazon is the ultimate friction killer, but that inherently makes them somewhat of an experience killer. Amazon is functional, it’s transactional. It’s great for ‘buying’, but pretty awful for ‘shopping’. So how can retailers remain relevant in the age of Amazon?

Firstly, there is an element of keeping up with the Joneses. Most of Amazon’s innovations catch competitors on the back foot, leaving them in the undesirable position of reacting to rather than leading change. Ceaseless innovation from Amazon raises customer expectations which in turn leads competitors to raise their game and ultimately results in a better experience for the shopper. What would retail look like if Amazon didn’t exist? In a nutshell, customers would be far more tolerant of mediocre service.

No one can out-Amazon Amazon, but retailers must prioritise investment in the areas where Amazon is genuinely disrupting customer expectations – frictionless e-commerce experience, delivery speed and choice, voice shopping, auto-replenishment, checkout-free stores and, increasingly, a digitally enabled instore experience.

That’s just basic hygiene. The real opportunity for bricks & mortar retailers is to focus on WACD – What Amazon Can’t Do. That’s experience, curation, discovery, inspiration, human touch, community. It’s time to inject some personality and soul back into stores, to make them desirable places to visit, places worth ditching our screens for.

Amazon taken the touch and feel out of shopping and there is a massive opportunity for retailers to distance themselves from this by offering customers an immersive, memorable experience that simply can’t be replicated online. But this requires a titanic cultural shift and an entirely new set of skills from store associates who must transition to become genuine brand ambassadors. Stores must go well beyond the product, beyond the transaction. They must become places to eat, play, work, discover, learn and even rent stuff. In the future, retail space will be less about retail.

In summary, there is no single formula for competing with Amazon but retailers can take lessons from the tech giant itself by starting with the customer and working backwards. Think of your stores as assets and not liabilities. Reposition them as fulfilment hubs to cater to growing demand for same-day delivery and instore collections, while potentially beating Amazon to the chase by addressing the ticking time bomb that is returns. The instore experience must be frictionless to emulate the convenience of buying online, but also experiential to differentiate from Amazon’s transactional nature. The rise of Amazon will also make for strange bedfellows – collaboration, in some cases with Amazon itself, should be viewed as an essential component of retail strategy in a bid to stay relevant to customers.

This post originally featured on RingCentral’s blog.