For the last several weeks, Time magazine has been running a series of articles on the "Future of Retail". Following are the four topics highlighted to date:
- (Retail) Companies That Profit By Investing in Employees - http://ow.ly/dK1rQ
- Will Amazon Take Over the World? - http://ow.ly/dK1uu
- Reports of the Shopping Mall's Death Have Been Greatly Exaggerated - http://ow.ly/dK1wB
- How Companies Can Employ Big Data to Create a Better Shopping Experience (My favorite post this week) - http://ow.ly/dt3V4
Summarizing the key ideas reported in each of these articles.
1. (Retail) Companies That Profit By Investing in Employees
- Highly successful retail chains --such as QuickTrip convenience stores, Mercadona, and Trader Joe's supermarkets, and Costco wholesale clubs -- not only invest heavily in store employees, but also have the lowest prices in their industries, solid financial performance, and better customer service than their competitors.
- A study at the now defunct Borders, found that one in six times, the merchandise in the stores was misplaced.
- Investing in employees is even more important now for brick-and-mortar stores. Poor customer service, poor knowledge of products in the stores are key reasons for buying the products online.
- Retailers such as Lululemon and Apple have highly trained employees who offer unique expertise that motivate shoppers to shop in their brick and mortar stores.
2. Will Amazon Take Over the World?
- Amazon is the 56th largest company in the United States, the 15th largest retailer by revenue, and THE largest internet retailer -- growing at 3X the rate of e-commerce overall.
- As a retail focused company, Amazon unique approaches / innovation that place it ahead of Google, Facebook, and Apple in being able to integrate into current / future consumer lives.
- Whenever a customer buys something from Amazon or logs in without buying something, Amazon is collecting all kinds of information about that person. There is lots of data that can be mined about how consumers peruse the website, what they put in their cart, what they abandon, and how the customer actually goes about searching for a product.
- In the long run, 90% of all media sales will be digital (hence Kindle & Kindle Fire).
- Retailers that use Amazon as a store front now account for 35% to 40% of all units that Amazon sells per year.
3. Reports of the Shopping Mall's Death Have Been Greatly Exaggerated
- Mall of America which is 20 years old, has 520+ stores, features an amusement park, is now adding a $200 million expansion.
- Malls that cater to affluent customers with stores such as Bloomingdales or Nordstrom's are actually doing quite well. Malls that service middle or low income communities are struggling.
- Shopping is a cultural activity for USA consumers. It's how individuals come together, interact, and socialize.
- The goal for brick and mortar retail stores is to figure out how to capture the desire for interaction and socializing and turn it into sales.
4. How Companies Can Employee Big Data to Create a Better Shopping Experience
- Amazon has had tremendous success by using data it has collected to discover what additional products its users are likely to buy. A McKinsey study noted that 30% of sales were due to Amazon's recommendation engine.
- New video analytics technologies can show how many customers are in the store, where they go in the store, what items they spend a lot of time looking at. This data can be combined with staffing levels, weather, product assortment and placement to boost sales. Mont Blanc, American Apparel, and Family Dollar are some of the retailers already using these technologies.
- Consumers are no longer bound by geography -- the handful of stores offering a specific product within a driving radius -- when searching for the best price or service.
- Smartphones can bridge the gap between the online and offline world.
- It's possible that traditional retailers could one day have a better understanding of their customers than ecommerce firms do.
The great recession, emerging technologies, globalization, basic socialization needs, are all key drivers for retail headed "Back to the Future". Retail has a come a long way through history from the single store owner that knew all the customers by name, welcomed them in their store, and personally provided full service. It was inevitable that mass production industry evolution led to the creation of retail chains and the ever chasing spiral of greater operational efficiency.
More on emerging technologies and global trends that are driving the evolution of retail in future posts, but for this week, let's close with some lessons from the Time magazine articles.
- The future of retail is about having employees that are knowledgeable and engaged with the increasingly tech savvy consumers that can leverage the web to instantly gather information and make buying decisions. A key tactic to combat showrooming is an informed / motivated / engaging store employee. Emerging technologies can bring back the personal interaction between employees and good customers.
- The battle of online versus brick and mortar stores will be interesting to watch. As the Time article points out, other retailers such as Macy's and Nordstrom are stepping up to successfully deploy onmichannel strategies. Will Amazon's cost structure eventually cause it to slow down? Re-read the previous Macy's post on their technology transformation.
- Just like stores, malls that focus on creating a positive customer experience and adjust their store mix to attract a broad consumer audience will win.
- There are risks that privacy will emerge as a consumer concern as Big Data, video analytics, mobility, and other emerging technologies grow as retail strategies to drive greater connectivity to consumers. Opt in approaches and clarity on how the data is being used are important elements that retailers need to consider / implement as part of the deployment of these new technologies.
The journey back to the future of retail starts by focusing on employees, effectively deploying onmichannel strategies, focusing on the customer experience in the stores, and leveraging emerging technologies to more effectively connect with consumers.
The time to "Carpe Diem" back to the future of retail is NOW.