Just 15 years ago, retailers were struggling to make sense of if and how the Internet would change their business. Fast-forward to today, and the role that the digital world plays in shopping dominates how retailers go to market and how consumers interact with brands.
This one dynamic shift — the rise of omnichannel buying — is ubiquitous across every country that considers retail core to its economy. Deloitte put it simply in its Global Powers of Retailing 2013: Retail Beyond report: “The retail paradigm has shifted from a single physical connection point with customers to a multi-pronged approach that crosses both physical and digital channels.”
Beyond this larger global trend, however, the shopping experience continues to evolve differently around the world. Some trends and innovations represent opportunities for retailers while others represent threats that require action in the form of anything from small adjustments to a complete overhaul of the business model.
The balance of power has shifted in favor of the consumer, who is more in control than ever. Retailers are left trying to understand the consumer mindset in this new omni-channel world; how, when, why and where consumers buy, what influences the purchase decision and channel, and how retailers can predict consumer demand. Unique retail models are popping up around the world. And their success or failure is up to the consumer.
Reimagining the In-Store Experience
In the U.S., some retailers are turning toward an interactive “retailtainment” store model, which delivers a dynamic customer experience through engaging and knowledgeable employees, in-store aesthetics and interactive technology. The open and monochromatic Apple stores — where consumers are encouraged to interact with products and engage with a staff of easily approachable “geniuses” — served as a popular precursor for this model.
In 2013, AT&T launched its “Experience” store in Chicago that eliminated the traditional store model in favor of a highly stylized, heavily digital store that emphasizes face-to-face support and hands-on demos. AT&T Retail Sales & Service President Paul Roth put it succinctly to the online outlet AllThingsD.com: “Transactions belong on the Web, and interactions belong in the store.”
More often, non-electronics retailers are using technologies such as touchscreen kiosks and digital signage to enhance brick-and-mortar shopping experiences. Staples launched its first omni-channel store in 2013 with “endless aisle” kiosks. These kiosks allow consumers to search for products in-store and online, and feature customer support tools, such as an ink-and-toner finder, to make shopping easier. This combination of online ease-of-purchase with hands-on experience and the option of live customer service is an interesting twist on the in-store experience that we’re likely to see more of in the future.
While retailers in some regions focus on the in-person experience, retailers in the United Kingdom are experiencing a windfall in online shopping using mobile devices.
In the second quarter of 2013, mobile devices accounted for nearly one-fourth of all online sales and more than one-third of all retail web site visits in the UK, according to Interactive Media in Retail Group (IMRG) and Capgemini. In 2010, computers accounted for 97% of all retail web site visits.
With this growth has come a burst of innovative uses for mobile devices across the industry. Harris + Hoole, a coffee chain with stores across England, has created an app that provides loyalty rewards (including a free coffee when the app is downloaded) and allows consumers to skip waiting in line. Using the app, they can check in, place an order and pay — all on their phone.
Contactless Payments Find Traction
While contactless, or “tap and go,” payment technology has not yet been widely adopted in regions like Europe and North America, both retailers and consumers are embracing the technology “down under.”
Major Australian supermarket chain Coles conducts more than half its credit card transactions using contactless technology, which uses programs like MasterCard’s PayPass and eliminates the need for consumers to enter a PIN or sign a receipt for small purchases. The chain conducted a trial of its Fast Pay system in more than 100 stores in 2011, and has since rolled the service out across more than 700 locations. The technology is omni-present throughout the country, including major supermarket chains, fast-food outlets and convenience stores.
Contactless transactions speed up the payment process as much as 25%, providing greater shopping convenience. It reduces cash-handling costs for retailers and can be integrated into rewards programs — eliminating the need to carry around physical punch or stamp cards — to help drive customer loyalty.
MasterCard reports that one in 10 card transactions for less than $100 in Australia are made using the PayPass contactless technology. Additionally, the National Australia Bank released research in May 2013 showing that retailers were increasing the number of contactless payment terminals across the country by 250% compared to the previous year, while consumer purchases using contactless payment increased 100% year to year.
South Korean workers annually rank among the top in the world for the number of hours worked per year, according to the Organisation for Economic Co-Operation and Development. So it shouldn't be a surprise to hear of the success that Tesco's Homeplus grocery store chain found when it introduced virtual stores in the country's subway stations.
These virtual stores aren't “stores” in the true sense of the word. Rather, they are printed graphics on subway walls that mimic a real store display, with a variety of products and brands stacked together just as they would be on a store shelf. Every item has a QR code for purchases. People can scan the code to purchase their products, and the food will be delivered to their homes.
This form of shopping redefines what a convenience store can be, reducing the need for Korea's working population to take time out of their busy day for grocery shopping. It's also helped Tesco Homeplus increase its online sales by 130%.
With these regional trends, consumers have a variety of ways to interact with retailers. And, retailers continue to innovate to provide more insight into consumers’ buying habits to improve shopping experiences.
Social media, for example, continues to be interwoven into people’s lives, including shopping experiences. Facebook recently began testing an online payment system that allows consumers to make online purchases from e-commerce partners through Facebook, which would allow shoppers to bypass the need to fill out billing information for every purchase. And as online retailers strive to speed up delivery times, Google Shopping Express and Amazon are both launching efforts to provide same-day delivery.
New technologies will continue to evolve and improve shopping experiences at physical stores. South Korean department store Shinsegae, for example, has created a virtual fitting room, in which a shopper gets a quick 3D body scan and can then view their avatar on a digital board wearing a full range of clothes available at the store.
Some technologies will require consumer acceptance before they can be widely adopted. Retailers should remember that being an industry leader or trend setter requires a certain degree of risk. They should also remember that using new technologies — or existing technologies in innovative ways — can mean the difference between being an industry leader and being an industry follower in this highly competitive landscape.
Mark Ledbetter is the Global Vice President, Retail Strategy at SAP. In his role, Ledbetter engages with SAP’s customer base to understand the market needs and directions, and align the software portfolio to best enable success. He has been with SAP since 2004 when the Retail vertical was launched in the North American market. He built the presales organization through 2007, and from 2008 through 2011 he was the industry lead for Retail in North America. Ledbetter has 25 years of experience in the software industry with a focus on Retail and supply chain. Prior to joining SAP, he was Senior Vice President for America’s Presales at i2 Technologies and was directly responsible for the retail vertical team. Mark has prior industry experience at Oracle and Manhattan Associates among others.