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ON THE EDGE OF MASSIVE DISRUPTION IN-STORE

I’d like to preface this article with just a little bit of background.  We have been working with Logitech for over 10 years.  A big portion of our work with them has been with Irma Sandoval, applying our insights and creative solutions to their retail business.  Irma exudes fervor for retail.  Here’s what she says, “My passion for retail has always been about transforming ordinary spaces into extraordinary experiences for the customer. It’s never been about selling more, because if you can delight the shopper then the sale will follow. I’ve spent most of my professional career living my mantra of providing experiential, engaging and emotional connections at retail. I am excited by the new possibilities that lie ahead for retailers that can have a deeper connection with their customers.” I have to say that her enthusiasm for all things retail is mirrored by my own, and we get really fired up and highly creative when we work together.  Just recently, we collaborated on a thought leadership piece that was presented to retailers and press in Latin America. What follows in this post covers many of the topics that Irma and I have been discussing and those that shaped the presentation in Mexico earlier this month.

We all know that online retail sales are growing at an incredibly fast pace across the globe.  In fact, global retail e-commerce sales are expected to reach 4.9 trillion by 2021 (Fig. A). Even with this high growth, retail e-commerce represents roughly only 10% of total retail sales globally today and a bit over 17% by 2021 (Fig. B)

Statista Global E-Commerce Sales and Share 2014 - 2021

One of the drivers of online retail is the growth of internet access and users, but there are 4 other key drivers of online sales growth:

  1. Convenience.  Consumers can literally shop anywhere as long as they are connected to the internet.
  2. Selection.  Shoppers are not limited to the selection available in a physical store.
  3. Price Comparison and Deals.  Consumers can search around for the best prices and deals.
  4. Speed. With just a few clicks you can select what you want, pay and have your purchases shipped.

There is no doubt that the growth of e-commerce is stealing sales and foot traffic from the bricks and mortar retailers.  The pressure on traditional retail is enormous, and in some cases, forcing store closings.  Business Insider reported over 8,000 store closings in 2017 in the U.S. alone (Source).  However, and this is a BIG however, there are two huge advantages of In-Store over Online retail:

Advantages of In-store over Online Retail

Given the expansion of online and the powerful benefits of in-store, we see exciting things happening in retail.  It is our belief that we are on the edge of massive disruption in-store. Retailers who can be creative, think differently, be original and work hard to provide unique in-store experiences, capitalizing on the two advantages, will not only survive but thrive in 2018 and beyond. After all, the only way to justify a customer making the trip to your store rather than shopping online is to give them an experience that can’t be had elsewhere.

Here are a few key trends that support our thinking along with examples.

Clicks to Bricks

Yes, some traditional retailers are closing physical stores, but on the flip side, we are seeing digital native retailers opening bricks and mortar locations.  Brands like Zappos, Warby Parker, Bonobos, Amazon, Fabletics, Madison Reed, Birchbox, and Allbirds all have found the lure of a physical store irresistible.  Unlike their offline competitors, however, they are breaking the conventional paradigms of retail and vastly improving the shopper experience.  Check out what Amazon and Warby Parker are doing:

Real-Life Environments

It’s our job as marketers and merchandisers to allow the customer to see the full range of possibilities that are available to them– not just pieces and parts in separate areas, but the entire aspirational environment.  Some retailers have made this difficult by compartmentalizing buying and how products are featured in store, essentially losing the customer perspective.  Today, we are seeing kitchen and bath showrooms now install working faucets, showers, tubs and sinks in fully designed bathrooms and kitchens. Why? Because shoppers want to be inspired, they want to know how the products they buy look together, work together and fit their home environment.  IKEA is masterful at it.  The high end audio brand, Sonos, recently opened a flagship store in NYC employing this concept. Dimitri Siegel, VP of Global Brand at Sonos, explains in a Forbes article their customer-centric path to the store design, “Sonos, we’ve learned, is a product that you learn about best in somebody’s home. So we wanted to build a space that would recreate that experience, where you could play music and hear it in a way that’s totally different than how you heard it before. That’s why we ended on this design of having these little houses that you would go into. That was the concept behind the store.”  See what they’ve done for yourself:

OmniChannel to Unified Commerce

OmniChannel is all about seamless and effortless, high-quality customer experiences that occur within and between touch points.  It’s not all that new, but it has largely been executed in a siloed manner, which manifests itself in consumer confusion and a disorderly shopping experience.  Smart retailers are changing their internal structures, bringing physical and digital together to get even closer to their customers and create a unified commerce experience.  TotalRetail explains, “while omnichannel was a step in the progression from the retailer standpoint, ‘unified commerce’ is the next step from a consumer standpoint. It’s time to focus on unifying all channels for a better customer experience. Unified commerce makes the customer experience the No. 1 priority. With this approach, selling channels work together to provide a cohesive shopping experience and path to purchase.”

Tony Rogers, Walmart’s CMO, continues to publicize the retail giant’s continuing transformation into a digitally savvy enterprise. “Our customers tell us they want a retail partner who not only helps them save money but helps them save time,” he says. “So we’re bringing stores and digital together to serve people–and in the process, we’re strengthening our relationship with our customers. They can trust us to be there for them no matter how they choose to shop.” Recently, he launched a multifaceted campaign to support omnichannel shopping, focusing on two-day shipping, easy reorder, pickups and other services. Internally, he unified Walmart’s marketing team, which previously had been split between stores and online sales, into a single unit.

Human touch and knowledge

Even with online chat and/or chatbots, it’s just not possible to duplicate a highly knowledgeable store associate in a retail store. Consumer expectations around service continue to rise. When shoppers were asked what they value most in retail associates, the number-one answer is smart recommendations. When store associates provide value, shoppers actually spend more time and money in-store. Here’s what TimeTrade’s survey discovered.  When consumers aren’t sure of what to buy, and actually get the help they need:

  • 93% are more likely to buy
  • 86% buy more than they expected
  • 84% leave more satisfied
  • And nearly 90% would shop at the same store the next time

Retailers who realize that their store associates are an important element to a great shopper experience are actually investing in them and changing roles and responsibilities.

Innovative Personalization

An article by Retail TouchPoints reads, “It’s no secret that today’s shoppers want their favorite retailers to tailor promotions and communications to their individual purchasing habits. In fact, 86% of consumers — and 96% of retailers — said personalization has at least some impact on the purchasing decision, according to a study from Infosys. The study also found that almost one third (31%) of consumers wanted more personalization in their shopping experiences.”  We are starting to see retailers embrace this notion in really unique ways. Nordstrom has a long history of customer-centricity, and not being complacent. Shea Jensen, SVP of Customer Experience at Nordstrom’s says, “Finding new ways to engage with customers on their terms is more important to us now than ever.  We know there are more and more demands on a customer’s time and we wanted to offer our best services in a convenient location to meet their shopping needs.”  Consequently, Nordstrom recently launched “Nordstrom Local.”  A tiny store in comparison to their traditional locations, that blends digital and physical, and provides a unique, highly personal experience. 

We are excited by the future of retail because we can see and feel the disruption that’s happening– all in favor of the shopper.  We encourage retailers to think differently about their businesses.  Don’t accept status quo.  Also, retailers need to turn to their brand partners for assistance  There’s no need to “go at it alone.”  Logitech, for one is “masterful at executing on the touch/try experience and providing retailers with associate training and education,” says Irma, “We’re here to support retailers in delivering world class customer experiences.”

In closing, all of us in retail are buzzing about the latest headline, this month: “Toys ‘R Us is Closing Its Door After 70 Years In Business.”   We say, what a shame.  We have lots of creative ideas of how this retailer could have survived the highly competitive retail world.  After reading this and watching the videos, don’t you too?