What’s in store for the retail sector in 2020? First, let’s be clear about what’snotchanging. We’ll continue to see a bifurcation of winners and losers as the industry sheds itself of status quo retailers (translation: brace yourself for more doom and gloom). The ubiquitously connected ‘on-my-terms’ shopper is here to stay. We’ll see a continuation of the convergence of physical and digital retail. The race to stamp out friction and inefficiencies will only accelerate, and reinvention of the physical store will remain top of the boardroom agenda.
Now the fun stuff. In my latest piece for Forbes, I’ve highlighted 8 retail predictions for 2020. You can read more here.
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These retailers also recognise that traditional metrics for success are no longer valid in today’s omnichannel world; the future of retail isn’t solely online or in-store but a blend of both channels.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.
Subscriptions have become the holy grail for retailers as the sector moves away from competing purely on product and increasingly on service. Recurring revenue and driving loyalty with your most important shoppers—what’s not to like?
Tesco has become the latest retailer to jump on the subscription bandwagon. Britain’s biggest supermarket plans to bundle its grocery, mobile and bank offerings under a new scheme called Clubcard Plus. Here’s how it works: shoppers pay a £7.99 monthly fee in exchange for a 10% discount on two big shops in-store; 10% discount on select private label products; double data from Tesco Mobile and a Tesco Bank credit card with no foreign exchange fees abroad.
As lucrative as subscription models might be, they only work if customers see the value in them. Just ask Jeff Bezos. The aim of Amazon Prime, he says, is to provide so much value that shoppers would be “irresponsible” not to join. A scary thought for any competitor.
With Prime, the value is clear—sheer, unrivaled convenience layered with increasingly indispensable entertainment perks. With Clubcard Plus, the value exchange is a bit murkier. Firstly, if customers want low prices, they’ll head to Aldi or Lidl. They don’t need to fork over £8 a month and jump through a bunch of hoops.
Note: this is an excerpt. Continue reading Natalie’s full article on Forbes.
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.
I can count on one hand the number of UK retailers that can still get away with aggressive physical store expansion while broadly shunning e-commerce – Primark, Aldi and… yep, that’s it.
At a time when most retailers are re-evaluating portfolios and shuttering stores, Aldi has announced plans to open hundreds of new stores, including doubling its presence in London. By 2025, Aldi is expected to trade from 1,200 UK shops, up from just 840 today. The space race isn’t over just yet.
Note: this is an excerpt. Continue reading Natalie’s full article on Forbes.
In the second of a three-part whitepaper series fromRed AntandNBK Retail, we explore the rise of the experiential store, why retailers must adopt an ‘admission fee’ mentality, and how customer experience is fast becoming the new currency in retail.
Despite the high-profile casualties we’ve seen on the high street, it’s clear that shoppers still crave the experience of visiting stores. But the service they receive in store must surpass what they would find online. We’re currently in a moment of transition, where the physical store is shifting from transactional to experiential.
Kill the friction, not the experience
Today, there’s still a sense of novelty when shoppers encounter a frictionless store experience, but in the future, digitally enabled store experiences will become the norm.
The option to bypass the checkout, for example, will simply become an expectation. This will be ‘basic hygiene’ that retailers must follow to remain relevant to their customers.
While it’s essential to invest in the right technology to facilitate a seamless in-store experience, retailers must also ensure ‘seamless’ doesn’t translate as ‘soulless’.
Retailers are experimenting with a plethora of technologies to enhance their environments and to finally bring the physical store into the 21st century. However, they must guarantee that it’s friction that they’re killing, and not the experience.
Democratising the white glove service
Just as the role of the store must evolve, so must the role of the store associate. They must be able to demonstrate genuine expertise, offering advice and personal recommendations to become a ‘trusted shopping companion’.
“29% of consumers said they would spend more money if a sales associate recommended something to complement their purchase”
In the future, what was once considered a VIP service will be democratised as more mainstream retailers recognise the benefits of providing concierge-level service.
John Lewis has already begun sending staff to theatrical training to improve customer experience, and the department store chain is also giving employees a voice by allowing them to directly engage on social media.
Retailers must aim to provide that white glove service because customer-led clienteling pays. Being able to provide a one-to-one, face-to-face personalised service has the power to increase sales and drive loyalty.
In our own OnePoll survey, 27% of consumers said that having an expert to talk to would make going into a shop worth their while.
And 29% of respondents agreed that they would spend more money if a sales associate recommended something to complement their purchase (based on what they had previously bought or had on their wish list).
The value of human interaction
At the end of the day, the most important rule in retail is being relevant to your customers.
Technology can help retailers augment the human touch, allowing them to adapt and thrive in the digital world. Today’s consumers may be hyper-informed and accustomed to shopping on their terms, but they still value human interaction – particularly when it comes to advice and inspiration.
“Employees are retailers’ most valuable resource”
With so much change afoot, it may be overwhelming for retailers to know where exactly to begin but they should start with their most valuable resource – their employees.
Retailers can democratise the VIP experience by equipping staff with the technology they need to offer specialist, personalised advice and information.
Consumers are no longer tolerant of mediocre service, so retailers must raise their game if they want to differentiate from online rivals and survive in this digital era. Clienteling and consultancy should not be beyond the reach of any retailer that wants to build an experience.
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.
We all know it’s only a matter of time beforeAmazon Go reaches UK shores. Trademarks have long been registered, the rumours have been flying and, havingdebuted in New York Citylast month, it’s fair to say that Amazon has an appetite for urban expansion.
This explainsSainsbury’s recent scramble to open the first till-free store in the UK, a PR coup ahead ofAmazon’s inevitable incursion.
And they’re not alone – pretty much every grocer from Tesco to Marks & Spencer is trialling scan-and-go technology, self-ordering kiosks are now the norm at McDonald’s and Argosquietly launched its first self-service digital store last month. Time is the new currency.
Checkout-free shopping will particularly cater to busy city workers on their lunch break and it will undoubtedly hit travel retail hard – till-free will become the norm in airports and train stations five years from now. But is this really the future of retail?
The customer experience is paramount, but today ‘frictionless’ often translates as ‘soulless’. Most shoppersstill value human interaction in-storeand, as we’ve witnessed with self-checkout, there will be resistance among some shoppers to do the heavy lifting themselves.
Source: Sainsburys
Take the new Sainsbury’s trial, for example: for a store that’s all about reducing friction, there’s certainly a lot of it initially as shoppers have to download the app and get used to scanning QR codes.
Let’s not forget that, a few years ago,Morrisonsscaled back its self-checkout ambitions in response to customer feedback. There has been a lot of hype about automation, but when it comes to responding to disruption, retailers must not lose the human touch.
Defending cash
Checkout-free stores can be controversial. Not only because they will accelerate the number of retail job losses (according to the Office for National Statistics, 25% of supermarket checkout jobs disappeared between 2011 and 2017), but also because going cashless can be seen as discriminatory towards customers without bank accounts or smartphones.
This summer, Philadelphia will be the first US city to prohibit cashless stores, and a growing number of cities are considering a similar ban. Amazon has had little choice but to begrudgingly adapt, and its shiny new Manhattan store is the first Go branch to accept cash.
Lastly, we must acknowledge the elephant in the room: theft. Today, it feels unnatural to bypass the checkout, and Amazon says it takes customers several visits before they no longer feel like they’re shoplifting.
But theft is a genuine concern and was one of the reasons Walmart shelved its scan-and-go programme in the US last year, with a former executive joking that the scheme should have been simply called “‘go’ because the customers can’t seem to ‘scan’ anything”.
The biggest retailer in the world is now embracing a mobile point-of-sale solution. Equipping more staff with handheld devices so shoppers can pay on the spot is a solid compromise – you still provide a frictionless checkout experience while taking the onus off the customer and alleviating concerns over shrinkage.
I don’t doubt that the digital store is the future of retail or that checkout-free shopping will appeal to certain customers and shopping missions. But consumer adoption will be slow, and they will never replace manned checkouts entirely, which is why the hysteria over till-free stores is unwarranted.
Automation is coming but, in the process, retailers must ensure they don’t kill the experience they are working so hard to improve.
According to Next’s CEO Lord Simon Wolfson, a partnership with Amazon is one of the ways they can stay “relevant” to shoppers.
And I have to agree. In the UK, Amazon is the 5th largest retailer. Nearly 20% of retail sales now take place online and, although we don’t have official data, I would estimate that Amazon accounts for 40% of that spend.
So how do you evolve?
How do you repurpose your physical space? I’ve said time and again that stores need to become: 1) frictionless; 2) experiential; and 3) a hub for fulfilment. Ticking that last box, hundreds of Next stores will now allow shoppers to collect their Amazon parcels instore through a new program called Amazon Counter.
It’s not dissimilar to Amazon’s US partnership with Kohls, which has been wildly successful and is now being rolled out across the entire store estate. Kohl’s stores however also handle Amazon returns and I imagine this will come in time as they look to address what is very much the Achilles heel of e-commerce.
Meanwhile, in France, Casino recently announced plans to expand its partnership with Amazon by adding 1,000 collection lockers to its supermarkets. Next isn’t the only one willing to dance with the devil.
Co-opetition: it’s only the beginning
Co-opetition was a key theme throughout our book. In Chapter 2: Why Amazon is Not Your Average Retailer, we wrote:
“In the future, more retailers will run on Amazon’s rails. Retailers themselves are increasingly content to overlook the huge competitive threat posed by Amazon to take advantage of their physical and digital infrastructure. Some may consider it playing with fire – certainly retailers like Toys R Us, Borders and Circuit City would. They were among Amazon’s very first ‘frenemies’ in the early noughties when they outsourced their e-commerce business to the giant – all three have since gone bankrupt. But we believe more retailers will cozy up to Amazon if it helps them to achieve greater reach (marketplace), drive traffic to stores (Amazon pop-ups, click & collect, instore returns) or improve the customer experience (same-day delivery, voice-activated shopping). The unique dual role of competitor and service provider is becoming more apparent by the day. ‘Co-opetition’ is a key theme for the future.” [Berg & Knights. Amazon: How the World’s Most Relentless Retailer will Continue to Revolutionize Commerce, p23, Kogan Page.]
Later in our book, Miya and I predicted that Amazon would team up with a retailer like M&S or Debenhams; Next is actually a far better fit so consider this a coup for Amazon.
More than half of Next’s sales now take place online and a good chunk of those are collected instore. They recognized early on the importance of repurposing their stores to cater to today’s ‘on-my-terms shopper’.
Despite falling like-for-likes, Next is yet to embark on a radical store closure plan. They understand that the store’s role is no longer purely about selling and that having a strong physical presence is an incredibly valuable way to engage with shoppers, let them try stuff on, collect and return orders (as evidenced today) and also offer an experience they can’t get online. I’d argue prosecco bars and hair salons may be a step too far (Debenhams is closing its instore gyms, anyone surprised?) but certainly coffee shops and collaboration with other retailers like HEMA, Paperchase, Mamas + Papas is the way forward for a high street retailer like Next.
Amazon is not a credible fashion destination
Next’s willingness to partner with Amazon is also a sign that they don’t see them as a threat, despite Amazon building up its own arsenal of fashion brands. Never underestimate Amazon, of course, and I certainly don’t doubt that they can sell ‘clothes’ but I just can’t see them cracking ‘fashion’. But more on that another day.
I’m so excited to launch, in partnership with retail technology leader Red Ant, the first of a three-part series of whitepapers to explore how the retail industry will have to embrace the digital store and seamless shopping to survive, from frictionless checkout to hyper-personalisation and clienteling. There’s no doubt that the industry has undergone seismic change in the last few years, and it’s not over yet.
Why the
store is not dead
Over the past decade, we’ve witnessed the birth of the
‘on-my-terms’ shopper and the seemingly unstoppable rise of e-commerce. Today’s
ubiquitously connected shoppers are firmly in the driving seat, and retailers
are scrambling to keep up with dramatic shifts in both customer behaviour and
expectations.
It’s clear that not all retailers have been equipped to deal with
the accelerated pace of change facing the industry. As such, we’ve seen
high-profile casualties on the high street as well as record numbers of job
losses and store closures. And we should be bracing ourselves for more short-term
pain as the industry reconfigures for the digital age. Although it’s not quite
a retail apocalypse, there are a couple of important points that we must
acknowledge:
We have an oversupply of retail space. According to the Office for National Statistics, online sales accounted for less than 5% of UK retail sales in 2009. Fast forward to 2019 – a whopping 20% of retail sales now take place online. Although e-commerce shouldn’t be viewed as the death knell for the high street, retailers must streamline their store portfolios to better reflect consumer demand. The future is fewer, more impactful stores.
There is no room for mediocre retail. In today’s climate, you have to be on top of your game. The retailers that are struggling right now share some common traits – they lack agility, differentiation, relevance. They try to be all things to all people. They don’t have a compelling purpose. And having an iconic brand doesn’t make you immune to the broader challenges facing the high street. This is retail Darwinisim – put simply, you evolve or die. But, for those brands willing to adapt, this is a fantastically exciting time to be in retail.
Stores will undoubtedly continue to play a critical role in retail
for decades to come, but, in a nutshell, customers will expect to shop on their terms, not the terms dictated to
them by the retailer. This means that high street retailers need to ensure
they’re saving customers’ time or enhancing it. There is no longer a middle
ground. We believe that stores of the future will be:
Frictionless
– to keep up with online retail
Experiential
– to distance themselves from online
retail
Ahub for fulfilment – to bridge the gap between online and
offline worlds
Those retailers who use the right
digital platform to transform and tailor in-store experiences will be able to
ensure differentiation from rivals and relevance to customers.
