According to MasterCard Inc., retailers received a huge gift of the greatest rise in sales (excluding automobiles) since 2011, of 4.9 percent from Nov. 1 through Christmas Eve, compared with a 3.7 percent gain in the same period last year.
This includes both online and brick-and-mortar stores, with e-commerce leading the increase, rising 18.1 percent. Customer Growth Partners is predicting a 5.7 percent sales growth during the same period, the biggest increase since 2005, which was 6.1 percent. Regardless of who wins the growth predictions, retailers will have had a big reason to break out the bubbly on New Year’s Eve. So will 2018 “make retail great again?”
Of course, one single year is not enough. Regardless of a potentially better retail climate, consumers will once again prove that it’s a share wars industry. So only those retailers who focus on continuing the pursuit of six strategic and structural challenges and opportunities will win the tech-armed, new world consumers.
The Power of the Consumer and Redefinition of Personal Value
The rising power of consumers began during the late 1970s and early 80s, coinciding with the early shift of supply outpacing demand. As consumers gained increasing access to more goods and services, retailers and brands had to win a consumer’s purchase over the hundreds of equally compelling competitors.
The boomer generation was historically the biggest lump of consumers who had big wallets and loved stuff. But as they seek experiences and well-being over stuff, retailers must opportunistically take what they can get from their shrinking wallets. Simultaneously, as retailers say goodbye to the boomers, they must quickly transform strategies, structures, merchandise, service, and experiences to the larger numbers of incoming millennial and Gen Z consumers who have smaller wallets and who are also less interested in stuff.
So, retailers are asking the obvious question: how in the world am I going to know who each shopper is and what he or she demands so I can satisfy them beyond their simple needs? This begs the more obvious question: How am I going to do this? How am I going to deliver each individual consumer’s wishes, especially since they are demanding that you don’t just fulfill their needs, rather, you must satisfy each of their dreams. For the new world young consumers, their dream determinates are product or service newness; where, how, and with what ingredients products are created; how responsive is distribution/delivery; how it’s presented; and the entire holistic, frictionless, and personalized experience.
Personalization and AI
Some may say that the terms personalization and AI are overused. I will not stop pounding their importance into the heads of every executive in the industry until they have understood and embraced the strategy of identifying and profiling every single one of their consumers. These executives must implement and deliver personalized products and services.
Big data and predictive analytics must be every retailer and brand’s strategic priority to drive customer personalization. Amazon is leading the way, ranking on top of the one-to-ten personalization scale, while the industry at large ranks at about two. Ultimately the ability (or not) to respond to, and deliver personal dreams will determine the future winners and losers.
Amazon’s analytics are on steroids: the company knows when you will run out of toothpaste and will have a package on your porch before you know you even need it. On another level, the predictive analytics of subscription model Trunk Club, Birchbox, and Stitchfix deliver a personally curated, regularly scheduled delivery of items the recipient will love. Smaller mom-and-pop neighborhood retailers have forever personalized their offerings because of their intimate knowledge of every one of their customers. Retailers now need to deliver that knowledge at scale.
Fluidly Ubiquitous, Laser-like Distribution
The commonly used term omnichannel is too often mistaken to mean the integration of digital and physical distribution platforms. A fluidly ubiquitous, yet laser-like distribution strategy is more accurate in defining the winning model for this century. Every brand, retailer, or service must be operating on, or distributed through every relevant digital and physical distribution platform possible to provide quicker and easier access to all current and targeted consumers. These liquid supply chains must be demand driven (pull), vs. the old forecasting models (push).
So, let’s talk about the word “platform.” This should replace the word retail. By replacing retail with platform, and understanding liquidity and fluidity, we can unlock our minds from being trapped inside a physical store or on a website, both of which “store” stuff.
Platforms can also provide great personalized experiences. Integrated digital and physical platforms provide synergies. Research has found that consumers who have several platforms to choose from spend three to four times more than when they only have one. Also, consumers who buy online and pick up on platform purchase additional impulse items when they’re on the platform for pick up. These synergies, in addition to consumers demanding ubiquitous, immediate and experiential distribution, is driving pure e-commerce players to launch physical platforms and vice-versa.
Again, in the physical world, the need to follow the consumer (the new POS) wherever they may be, requires all kinds of flexible, agile and even temporary distribution platforms: small neighborhood platforms; kiosks; pop-ups; airports; mobile vans; etc.
Finally, competitive or compatible platforming provides a huge synergy and will continue to accelerate.
Co-Created Experiences
The word experience is overused and in danger of eyes-glazing-over syndrome, but it is the key ingredient for personalization. It must be on the top of all consumer-facing businesses priority lists. Every step in the consumer’s digital or physical journey, from search to discovery to purchase, must be embedded with experiences.
Subscription models like Birchbox, Stitchfix, and others offer a personally curated experience. And then there are the “treasure hunt” experiences at TJ Maxx and Costco in the physical world.
Co-created experiences take the concept to another higher level. Consumers proactively co-create Lululemon’s yoga classes. Apple customers proactively co-create a meaningful educational experience with Apple’s geniuses. And Starbucks is not just a coffee shop, it’s a co-created community for coffee lovers to hang out in.
Co-created experiences can be addictive. Each time the consumer proactively engages in creating the experience of these brands, they are indelibly shaping that experience to their mood of the moment. Obviously, this increases the value of the platform and everything on it. Furthermore, these addicts will travel miles to get their fix when there may be a generic competitor just across the street.
RetailTech
In addition to all the tech required for e-commerce, inventory control, supply chain management, analytics, and databases, augmented reality is an engaging strategy that creates frictionless, co-created, entertaining shopping experiences. New AR gizmos and gadgets enhance the shopping journey with interactive touch screen kiosks or windows, virtual fashion mirrors, interactive dressing rooms, games, and bar code scanners that open AR storytelling videos of a product’s inspiration, creation, and production.
Beacon technologies further facilitate personalized experiences, interacting with the customer by sending coupons, upselling, cross-selling, etc. Associates equipped with iPads or tablets containing personal information can engage more intimately with the customer and is an imperative strategy for winning. These devices also provide the sales staff with inventory transparency for immediate access wherever the product may be in the supply chain.
Sales Associates
And finally, an essential imperative for both physical and digital platforms will be the elevation of the most important link in the value chain–the human link. This human being, currently called an associate, should be educated to earn a master’s degree in customer engagement or in brand ambassadorship. With the cold, non-human advancement in technologies across the consumer’s shopping, discovery, and purchasing path, the most important asset in danger of being lost is the human social experience. Consumers cherish the proactive intimate engagement with a personally knowledgeable and human “master.” Businesses who want to win big will provide this level of service.
In closing, I welcome you to 2018. The clock is ticking and telling all old-world consumer-facing businesses that time is not on their side. There are hundreds of entrepreneurial upstarts that are leapfrogging over all old-world strategies and structures, and embedding all of the six principles into their models from the get-go.
Robin Lewis
CEO, The Robin Report
212-750-5405
www.therobinreport.com
robin@therobinreport.com
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