The holiday season may be over, but in the world of retail nothing stands still for long, and it is straight into the next promotional push or the never-ending seasonal planning.
The recent NRF Big Show gave me a great chance to not only speak with a whole host of retailers, but also to reflect on the key trends that will drive decision making in the year ahead. Time and time again executives talked about the three areas below, but of particular interest was the acknowledgement of the role that technology has to play in helping to deliver each.
1. Focus on experience
This may seem obvious, but when many retailers speak openly and honestly, they admit that they often zero-in on one area of the experience, either because it is their personal passion, or because price has been the big pull for consumers for so long. Once retailers have better systems in place to maintain their pricing strategy relative to competitors on key items, the impact of price on the long-term relationship a customer has with a retailer diminishes in favor of the experience mix.
2. Curate your offering and augment with service
So many retailers’ web sites have become a graveyard of endless aisle products that don’t fit the retailer’s brand, image or customer goals. Curate the assortment and augment with real service. For example, show your customers a complete outfit and allow them to easily add all the items to the basket with an offer to see an in-store style coordinator. It is easy to see how these “graveyards” emerge when retailers are constantly looking to add the “next big thing” to their assortment offering. It is here that having the right assortment management software can play a key role in identifying opportunities to optimize the offering, by analyzing shopper behavior. This allows you to automate the process of curating and managing your assortments, so you can remove the deadwood and keep your customers excited with new lines.
For the modern retailer, a technology platform that presents a single version of the truth and connects information in real time is the secret to giving customers the best possible experience. It should be channel agnostic, and able to connect each customer across the channels they use: they channel hop, and you must be able to do the same. Taking this approach to building the technology that supports your operations gives you the greatest flexibility and opportunity to innovate.
Retailers are already seeing the benefits of this, and in 2018, we will start to see the industry leaders develop service offerings that excite existing customers and attract new customers to their brand experience.
3. Dial back promotional intensity
With retailers pushing digital/email offers very hard over the holiday season, they will need to take a step back to re-evaluate their strategy. The deluge of offers really deadened the impact, with many retailers offering hot promotions nearly the entire season. Unfortunately, hot promotions have become the quick fix drug for retailers, and while this can be an effective short-term strategy, retailers also need to ensure they are resolving the underlying issue.
Ultimately you need to look at your promotions, assortment offering and experience and consider what is causing declining market appeal for a category or the brand. Consumers are price sensitive, of course, but only up to a point, and once it loses its impact what are you left with? This is being recognized by retailers, and 2018 will be a year when companies start to really measure the impact, or not, of their promotional efforts, and take a much more analytical and scientific approach to improving the customer experience through personalized promotions.
2018 marks the start of when retailers begin to get a new balance in the way they use technology, and get smarter about the way they engage with their customers, putting customer service, rather than price and promotions, back at the center of the experience. It is on this battleground that retailers will win and retain the loyalty of their customer base. The race to the bottom on price is coming to an end, and customers expect a lot more. It is time to get back to the basics in combination — focus on assortment and personalized experience built on a foundation of appropriate mass pricing and promotion activity for your brand positioning.
Brian Elliott is the managing partner of Periscope® By McKinsey. As an entrepreneur and inventor, Elliott has grown and led the Global Consumer Pricing practice for eight of his almost 20 years with McKinsey. He is a founding Board Member of Periscope®, and has served as its managing partner since 2012. During his leadership, Periscope® scaled from a startup environment into one of the top global revenue growth solutions in the market with accolades from Gartner, Forrester, IDC, ALM Intelligence, Promotion Optimization Institute, and CIO Review. Elliott holds a PhD in materials science from Northwestern University as well as two bachelor’s degrees in mechanical and materials engineering from Cornell University.