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The Future of Retail is in the Stars (or is it the Cloud?)

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Will the future of retail be without physical outlets?

I had a very interesting discussion with a new client last week. Like many CPG companies, they are considering online retailing. They are already selling a little online, but haven’t seriously considered it until recently.

However, with the move of most major supermarket chains to offer online stores too, plus a few successful online only stores, such as Amazon in the US and Ocado in the U.K. they are now reconsidering just how big they could or should grow their online business.

 

Amazon Go is the future of retail
Source: USA Today

I remember participating in heated arguments in the past, between sales teams and retailers, about online stores. Retailers thought that it was unfair competition and threatened to delist a manufacturer’s products if they sold directly. No wonder my client had been scared to develop this area, as in fact are most other CPG companies.

 

Fast forward a decade or so, and supermarkets are scrambling to catch up as start-ups in many developed countries are giving this new type of freedom to consumers. So what is a poor manufacturer to do?

For me, it’s not so much a question of whether, as much as the how and when? With Amazon muddying the waters by testing their new Fresh delivery and Go bricks and mortar offer and Walmart retaliating with a competitive online offer of fast service and free delivery, this is a battle that has already begun. Whether CPGs like it or not, they need to join in or get seriously left behind!

 

The case for bricks & mortar stores

An excellent article published last month in Forbes entitled “Five Signs That Stores (Not E-Commerce) Are The Future Of Retail” concludes that physical stores are more valuable.

Of course, for me, planning for the future is simply a matter of taking the consumers’ perspective and what they (will) want. Am I being naive? Maybe, but I’m not so sure.

Personally, I’m happy to order my usual brands online and have them delivered, especially when they’re cumbersome, like pet food, drinks, tinned and paper products. However, for some items, particularly fresh produce, I like to be able to pick the leanest meat or the freshest fruits and vegetables.

Customers will always need to see and try before they buy in numerous categories. Offering free returns may work for apparel but not for electronics. In several industries, consumers will want to see, compare and appreciate items before they purchase something.

Several home improvement brands and stores are already offering apps which allow customers to see their potential purchases in their homes. Or their paint and fabric choices “in situ” but actually virtually. So are retail outlets really essential for every category?

Make sure the future of retail isn't a Kodak moment
Source: Brian Solis

Brian Solis wrote a great article on “11 Trends Shaping The Future Of Retail” based on a presentation he wrote back in 2015 – an eternity these days!

However, they remain as true today as when he wrote it.

He says that retail continues to suffer from what he calls the new “Kodak Moment.” This, he claims, is the moment when executives fail to see how customers and markets are shifting.

 

The new Kodak Moment is when executives fail to see how customers & markets are shifting #retail Click To Tweet

 

Here are the trends Brian mentions:

1. New (human) perspective is needed to see the actual future that is playing out.

2. Cater to “Accidental Narcissists” as I call them and compete in the on-demand economy.

3. Compete for customer experience…not CX…there’s a difference and one is customer-centered.

4. Become payments agnostic. Don’t impose false standards to compete against other systems to reduce fees. Be open.

5. Understand social commerce and design targeted initiatives that drive shared experiences, reviews and referrals online.

6. Invest in the trust economy, be transparent, and earn reciprocity through the facilitation of open engagement and commerce.

7. Balance web rooming and showrooming by investing in mutually-beneficial experiences and outcomes on both sides.

8. Explore new technologies to reimagine the in-store/online experience blurring the lines between digital/brick-and-mortar.

9. Study the digital and specifically the mobile customer journey to uncover friction, update ageing touch points and cater to mobile-first and mobile-only customers.

10. Invest in innovation teams or innovation centres to discover new competition and possibilities to test and learn in more rapid prototyping programs (outside of risk-averse culture).

11. Take a fresh look at space and consider it a blank slate. Ask yourself and your team, what if we could build a physical store that brought the digital and real-world together to deliver intuitive and indispensable experiences? That’s what Amazon is doing.

What I love about this list is that in the end it can be summed up very simply. It is essential to both know and understand your customers. It is fundamental to a business to treat the customer as you want to be treated. Isn’t that what business has always been about? And life too, come to think of it! So why should retail by any different?

 

The future of retail

What is sad, in my opinion, is that the vast majority of retailers – and CPG companies too – are playing a “wait and see” game. In so many areas, they think that adding a few technical gadgets or an app or two will enable them to continue to attract customers. Things have gone far beyond payment options or mere personalisation of the shopping experience.

I, therefore, decided to summarise some of the key changes which I believe are essential to answer customers needs already today, not just in the future:

Convenience: customers have busy lives and prefer less and less to go for the large weekly shop in out-of-town shopping malls and hypermarkets. This is why smaller stores in strategic localities will develop faster in developed markets.

There will also be a clear differentiation by category. The customer will decide on their personal preference between what they value most in terms of their time, price and convenience. For some products, and not just the more expensive ones, they will make an effort in choosing, for others very little.

This has always been the case and is the reason why manufacturers strive for 100% distribution. But in the future distribution should be linked to convenience for the customer, not just mass presence.

Experience: while some shopping malls are in decline, especially in the US, those that survive will shift the emphasis from purchasing to experience. By incorporating cinemas, bowling alleys, cafes and restaurants, malls are hoping to attract customers by differentiating themselves and driving more traffic to them. But just how different they can be is relatively limited.

However, the retailers themselves also need to start selling differently. Apple, Nike and a few others have already done this. But most outlets appear to be oblivious to the change in their customers’ desires for experiential connections with brands.

Most outlets are oblivious to the change in their customers' desires for experiential connections with brands #retail Click To Tweet

Delivery: Whether we buy online or in-store, one thing is clear; we want it NOW! Fast these days is two-day or same-day delivery – if ordered before a certain time. In the very near future, we will want our purchase to be waiting for us when we get home. Already a quarter of shoppers, according to some L2 research said they would abandon their cart if same-day delivery was unavailable.

Why should shopping be any different from transport today? ]

Forget about standing on street corners in the hope of finding a taxi driving by. The success of Uber and Lyft lies partly in the fact that the customer can call a car and immediately know the waiting time based on a live map of their surroundings. They also know the plate number, driver’s name and what others think about the person. All this delivers trust in the experience.

Another aspect of delivery that is changing is its timing. As Lin Grosman says in her article The Future Of Retail: How We’ll Be Shopping In 10 Years: “Of course, that’s just the beginning.  Two-hour drone delivery is coming in the foreseeable future, and Amazon is already talking about  30-minute drone delivery.

Talk about near instantaneous gratification!

I’m not sure that this is a great direction for humanity. We all know that we value things more if we have had to work or wait for them. Is this the start of a new type of consumerism?

We value things more if we have had to work or wait for them #consumer #value Click To Tweet

Choice: We now all know what is available around the world, thanks to the internet. Our desires are no longer limited by what is available in-store or even in our own country. We want to have the choices that others have, wherever in the world we live.

Customers are already ordering online from far and wide; pet care from Australia, fashion from France and technology from China. It is then up to them to compare not only prices but delivery costs and timing.

According to research conducted by Walker, by the year 2020  customer experience will overtake price and product as the key brand differentiator.

Customer experience will overtake price and product

From that perspective, outlets have arguably an easier task to make the shopping experience more enjoyable and memorable. But will they? I believe they have to because no longer will it be faster.

Values: Both manufacturers and retailers are being held to higher standards that have far more to do with their values than their products and services. Millenials, in particular, are basing their choice of brands on things such as social responsibility, sustainability, transparency and authenticity.

Corporate reputation is being scrutinised and evaluated at each mention in the press or on social media. Organisations that don’t walk their talk will be rapidly found out and publically discredited.

 

Conclusion

So where is the future of retail? In the stars or in the cloud? With some retailers banking on the first and others on the second, it’s going to be an interesting ride. And the customer has everything to gain, at least in theory. Bigger choice in products, services and prices, for sure, but perhaps not always better. I believe that this is why organisations are pulling back their finance departments and care centres from India. And why China is in a race to transform itself from the manufacturer of the world to a global innovation hub.

Retail has always been about making sure that “the right product is in the right place at the right time at the right price.” The right place at the right time appears to be gaining ground over the other two. What do you think?

 

Do Your Shoppers Face a Purchasing Dilemma? How to Give the Right Customer Choice Every Time

I’ve just come back from a week’s course in Spain organised by the European Monroe Institute. The course was on consciousness, a thing all good marketers need to develop, especially when it comes to their customers’ choices.

The reason I am referring to this course, besides the fact that it was led by the brilliant consciousness expert Arkaitz, is because we spoke about a subject that is very relevant for shopper marketing. I did in fact already touch on something similar in last week’s post. I’m speaking about decision making and the difference between Polarity, Duality, Dilemmas and Trilemmas. For clarification, these terms refer to:

Polaritythe state of having or expressing two directly opposite tendencies, opinions, etc

Dualitythe state or quality of being two or in two parts; dichotomy, the division into two parts, kinds, etc

Dilemmaa situation requiring a choice between (equally undesirable) alternatives.

Trilemmaa situation, analogous to a dilemma, in which there are three (almost equally undesirable) alternatives.

Last week I spoke about the Trilemma as it relates to project work; in this post I want to review the different situations in which we oblige our shoppers to make customer choices and how we can make it a lot easier for them.

 

Customer Decision-making

Mark ZHow many decisions do you make in an average day? Tens, hundreds, thous ands, even more? It has been estimated that an adult makes in excess of 30,000 decisions each and every day. (>>Tweet this<<) From what to have for breakfast, to what to wear and the route we take to work, we are constantly making decisions. However, have you noticed that when you need to make a decision, having more choices is not always better? More choice can in fact make decision-making all the more difficult.

In a recent article about Mark Zuckerberg, it was mentioned that he, as did Steve Jobs, wears the same clothes every day. A sort of uniform that enables him to make one less decision that he considers to be less relevant and unimportant to the success of his business. In the post he reveals that he wears the same clothes over and over again, because he wants to limit the time he spends making “frivolous” decisions, so he can concentrate on real work. As he says:

“I really want to clear my life so that I have to make as few decisions as possible about anything except how to best serve this community. I feel like I’m not doing my job if I spend any of my energy on things that are silly or frivolous about my life, so that way I can dedicate all of my energy towards just building the best products and services.”

Retail Decision-making

It has been proven that shoppers can end up leaving a retail outlet or online e-shop without making a purchase, when faced with too much choice. (>>Tweet this<<) This so-called “choice overload” was first mentioned in the book  The Paradox of Choice, by Swarthmore College professor Barry Schwartz.

Schwartz co-authored a study that supported his theory in the context of Web search  and other research has documented choice overload in contexts as wide ranging as gourmet chocolates  and retirement plans.

Choice overload is also one of the major reasons, besides price, for the success of hard discounters. They take away those “frivolous” but hard decisions we usually have to make whilst out shopping, by offering just one or at most two br ands or sizes of each article. We then have to make the choice between buying one of the two on offer, or purchasing neither (a trilemma). If you have the time, you might then go elsewhere to buy what you were looking for, but if the choice is of lesser importance or we are lacking the time, we will accept the limited choice and buy one of the two on offer (a dilemma).

Therefore choice is not always a good thing. So what can you as a marketer do to help the customer make the “right” decision in favour of your br and?

 

Know your Customers

The 4 Ws of customer underst anding

If you’re a regular here, you will know that everything you do should start with the customer and from the customer’s perspective. Underst anding their needs and desires, both stated and unstated, will enable you to better meet them. A satisfied customer is unlikely to spend time in choice and will automatically go for your product or service. You can read more about getting a deeper underst anding of your customer in another post entitled “How Well do you Know your Customers? Can you Answer these 12 Questions?” here. 

Portfolio Management

Many retailers and some consumer packaged goods companies have noticed that consumers today are suffering from “choice overload”.

Unilever LogoBoth P&G and Unilever have done some radical pruning of their br ands over the years. They have understood that most of their business comes from just a small number of all its products. P&G has around 300 br ands today, a third less than just a decade ago. Unilever has been even more ruthless. Since introducing its “ Path to Growth” initiative almost fifteen years ago, the number of its br ands has been culled from 1,600 down to just 400.

Retail organisations too are no longer willing to offer increased space for ever-exp anding br and portfolios. They often use the “one in, one out” rule and need strong evidence to add a new line from manufacturers. This has been especially true in recent years with the increase in the number of supermarket chains offering smaller, urban outlets, such as Tesco’s Metro and Walmart’s Express. You can read more about current retail trends here.

Walmart LogoWhat both retailers and manufacturers have realised is that Pareto’s Principle is highly relevant to the success of their businesses. The “Pareto Principle” or 80-20 rule, helps a lot in reducing the number of trilemma (or worse) type decisions that shoppers are faced with.

It therefore makes a lot of sense to regularly review your own portfolio and cut the “long tail” of slowest movers. Unless you have recently launched it or have a solid recovery plan in the pipeline, it is better to delete them.

 

Product Display

Another very good reason for reducing the numbers of br ands and variants in portfolios has to do with innovation. Today’s consumers thrive on novelty and constantly dem and new products and services. They quickly become bored or are satisfied for far less time than in the past.

In response to this, many companies have increased their level of innovation and new launches. However, neither retailers nor consumers want an ever increasing choice of products to sell or purchase. Therefore it makes good sense to have a “one in, one out” policy as mentioned above.

Identifying the best products and variants to put on shelf at each retail outlet or at a minimum by region, will enable customers to make those all important choices more quickly and easily. You will make the sale and the retailer will not be faced with stock that sits on their shelves, not moving; a definite win-win-win. (>>Tweet this<<)

Coming back to the issue of polarity, duality, dilemmas and trilemmas, I hope you can see that the situation in which a customer finds him/herself at the point of sale, whether they are facing a dilemma, trilemma or worse, will have a huge impact on whether or not they purchase.

Do you have something to add to this article and the customer choices we offer when they are faced with making a purchase decision? Please add a comment below. And if you enjoyed the post, then please share it with your friends and colleagues, so they too can be inspired.

If you would like support in reviewing your br and portfolio to identify the 20% of br ands and variants that may need to be deleted, contact me here and let’s discuss your situation. I know I can help.

C³Centricity used images from Microsoft, Unilever and Walmart in this post.

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