By Jonathan Marek, APT, a Mastercard
company
It is
no secret that retailers are facing headwinds due to increasing online
competition and shifting consumer preferences, among other factors. In
response, they are growing their offerings, from implementing new technologies
like augmented and virtual reality (AR and VR) to revamping the in-store
experience.
With
these new formulas for success come new considerations and pitfalls for
retailers to consider as they innovate and strive to understand how different
channels and customer touch points interact. Based on experience working with
leading retailers globally, here are four retail trends to watch.
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Give Shoppers A Reason To Visit The Store
Retailers need to think like Disney World: it is the
experience that people pay for. You can buy goods in a variety of ways, but in-store
is the only way you can truly experience them. In response to online
competition, brick-and-mortar retailers are ramping up their experiential
merchandising strategies to drive traffic. For example, Nike recently dedicated
space
in 5,000 stores to their new Nike Pants Studio, and supermarkets like Bristol
Farms have added butchery services, while other retailers are offering
personalized experiences.
While retailers hope to drive traffic to stores, grow
baskets and build engagement with their brand by introducing elements that are
only available in person, as with any initiative, success is not a guarantee.
Retailers must ensure that new experiential strategies drive incremental sales and
justify the space tradeoffs — and carefully determine how these initiatives
affect business decisions around staffing levels, employee specialization and
personalized outreach.
Retailers Blur The Lines Between Online And In-Store
In addition to turning physical stores into experiential
destinations, retailers are blurring the lines between online and brick-and-mortar
retail by enhancing omnichannel offerings with faster delivery options. For
example, to accelerate growth in China, H&M is collaborating with Alibaba
to make H&M
available on Tmall, China’s largest e-Commerce platform.
While only 40% of retailers have merged online and offline
channels so far, an additional 34% plan to do so in the coming years. Any new
service or product has implications across all channels, yet measuring the
omnichannel impact of new initiatives is challenging. Without accurately
analyzing the total channel impact of new innovations and deciding whether a
collaborative or in-house strategy works best, retailers risk losing share to the
competition.
Retailers Subscribe For Success
On the heels of subscription pioneers such as Netflix and
Blue Apron, retailers like Stitch Fix have followed suit, creating new
recurring revenue streams in the process. Most recently, Under Armour is
introducing ArmourBox,
and Rent the Runway continues to refine its subscription programs with lower-cost
options.
Subscription services necessitate focusing on key
performance metrics beyond sales comps, including customer acquisition and
retention, making strong customer analytical capabilities a key ingredient for
success. To win in this space, retailers must use these capabilities to tailor
customer outreach for new, current and lapsed customer segments. With many subscription
boxes offering a discounted rate, retailers also must measure the long-term
effect of these services on customer loyalty and customer lifetime value. Subscription
retailers who come out on top will know how to best maximize total sales,
design customer outreach and build basket size.
Private-Label Brands Become Highly Publicized
With 68% of retailers growing their in-store assortment,
according to a recent report from APT, a Mastercard company, incorporating
research and analysis from the Economist Intelligence Unit, many retailers are
turning to new private-label products to drive their businesses forward. For
example, grocers like Lidl
and Kroger
are offering apparel brands in a move that can provide a halo effect across the
store.
In these new endeavors, retailers will need to reevaluate
their merchandising strategies. What is the optimal mix and space allocation
for private-label products in stores? Do new offerings cannibalize or build
add-on sales for other products, both online and offline? To answer these
questions, retailers must look at customer baskets over time to analyze both
what customer segments are buying today, and how new products will affect their
total basket in the future.
These four trends are just the start — new channels and
customer touch points will continue to emerge, and each one will bring new
operational and analytical considerations. For each new opportunity, retailers
must understand the impact on profits, customer metrics and channels to truly
drive growth for the business.
Jonathan Marek, Senior Vice President at APT, a Mastercard company, leads
engagements with casual dining, quick service restaurant, specialty retail, big
box retail and banking clients. He has helped clients improve performance
through better capital strategy, new concept development, emerging media
strategy, media optimization, store labor planning and site selection.
