Retailing Faces a Brave New World

Stephen DeAngelis

November 7, 2012

“Retailers will have to rethink their position in the market,” writes Allison Cerra, “along with strategies they have used thus far, to keep themselves in the game.” [“‘One-size-fits-all’ approach doesn’t work for retail,” RetailingToday.com, 23 January 2012] At least, she reports, that is the conclusion reached in a Deloitte report entitled, The Next Evolution: Store 3.0. Cerra continues:

“The issue at hand, Deloitte said, is for retailers to differentiate themselves by reconfiguring talent, physical space and store operations to meet or exceed customer expectations and understand there is no ‘one-size-fits-all’ approach that will help drive business.”

The report insists that, in order to keep brick-and-mortar stores relevant and inviting for consumers, retailers must “deliver a tailored experience” for shoppers. The report states:

“It is an experience that begins before customers enter the physical store and continues long after they leave. Through the lens of the desired future customer experience, retailers should step back and ask themselves hard questions about where they are and where they need to go.”

Cerra reports that the study offers “four ideas should be kept in mind” by retailers. They are:

 

  • “Refresh your strategy: It is critical that retailers refresh their strategy so their operating model can quickly respond to changes and trends in the marketplace and among their customers;
  • “Improve the in-store customer experience: there is nothing more important for retailers than improving the customer experience now and into the future;
  • “Revive your talent management strategies: As customers increasingly demand a more personalized experience, your sales associates become even more critical in achieving that goal; and
  • “Connect your customers virtually from the physical store: As the lines between the virtual and the physical stores converge, retailers should consider opportunities that connect customers and extend the in-store brand experience through all channels. Blending a personalized in-store experience with a virtual connection to the brand can help retailers establish a lasting relationship with customers after they leave the store.”

 

Retailers are paying attention to such recommendations; especially, the recommendations to improve the in-store customer experience and connect customers virtually from the physical store. For example, Phil Wahba reports, “U.S. retailers believe [there is] life left in their brick-and-mortar stores and they’re trying new ways of making them more inviting by pampering customers.” [“Retailers rethink stores to fight online competition,” MSNBC, 21 May 2012] He continues:

“PetSmart Inc, for instance, will offer overnight dog accommodations at more stores. Macy’s Inc is offering a ‘virtual concierge’ kiosk, and handbag maker Coach Inc is opening up dozens more men’s sections this year.”

Wahba notes, “U.S. cities are littered with empty retail space, wreckage from aggressive expansion last decade that contributed to the demise of chains like Borders book stores and Mervyns department stores, and led to lower sales-per-square-foot for many that made it through.” Madison Riley, managing director at consulting firm Kurt Salmon, told Wahba, “We will always have stores. But they’re going to get smaller, they’ll have new technology and different services.” Wahba indicates that “retailers are trying to offer services available only in their stores.” Morningstar analyst Paul Swinand believes that is a good strategy. He told Wahba, “People are trying to think up stuff you can’t download.” Wendy Liebmann, CEO of WSL Strategic Retail, told Wahba, “If retailers aren’t experimenting, then they are doomed to fail.” If all of these analysts are correct, then consumers should look forward to experiencing physical shopping in an entirely new way. A couple of recent articles indicate that such future visions aren’t very far off.

 

Emily Steel, for example, writes about Quentin George, the chief innovation officer at Interpublic Group’s Mediabrands. In his media lab, “Posters recognize his face then personalize the messages he sees. High-tech wristbands monitor his physical activity levels. With the flick of a wrist, a new scarf appears around his neck on a digital screen that is designed to let people try on clothes virtually.” [“Fast forward to the future,” Financial Times, 11 October 2012] Steel continues:

“The lab hosts about 50 cutting-edge technologies that IPG executives say will revolutionize the way people watch television, read newspapers, buy groceries, shop for clothes and interact with friends. ‘Think of this as a stage,’ says the 43-year-old Mr George, as he begins a tour through the series of interconnected rooms decorated with quotations about innovation. ‘The future ain’t what it used to be,’ reads one from baseball player Yogi Berra. ‘Stay hungry. Stay foolish,’ reads another from Steve Jobs, the former Apple chief executive. Media and advertising companies have for years set up so-called future labs, designed to serve as crystal balls that would predict how people would consume media and respond to ads in the coming decades. The labs typically were filled with futuristic technologies – think robots, talking mirrors and coffee tables with built-in touch computer screens – that wound up prominently featured in science-fiction films but often were years away from reality. ‘The problem is that with most labs, you get people excited about the future but then reality sets in,’ he says. ‘We can’t deal with holograms … Everything in the lab, you can buy today.’ The IPG lab, which launched about a year ago in New York, showcases technologies available now. The company employs a team of digital experts who decide which items to showcase in the lab based on their likelihood of affecting consumer behaviours and business. The group has close relationships with technology vendors and technologists and sometimes gets early access to technologies before they are launched.”

In other words, as far as the folks at the IPG media lab are concerned, the future is already here. Steel goes on to note that the lab is helping a number of sectors rethink how they will operate as well as explore options for products they might offer. She writes:

“Carmaker Chrysler, for instance, is exploring how to use cutting-edge window technologies that display images on the glass. A television network is working with IPG to reimagine morning TV. A newspaper publisher is exploring innovative ways to make money from articles and other content shared on social media sites such as Twitter.”

One trend that the IPG media lab is working on involves what they call the “quantified self.” Steel writes:

“The notion that people are harvesting data about their everyday lives to explore new approaches to health, sport and entertainment. Technologies on display include the Nike+ FuelBand and the Fitbit, which track physical activity. The FuelBand transmits this information back to a website, with the idea that the data can be used to set goals, break records and track progress. Also featured are GeoPalz, pedometers for children. IPG executives imagined how a grocery store could tie the activity-tracking devices to loyalty- card schemes, where consumers who met certain levels could redeem rewards for buying healthy products.”

This trend mirrors another trend in which Enterra Solutions® is involved — targeted marketing. By personalizing the kinds of offers that consumers receive, companies can get more bang from their marketing bucks and consumers receive only offers that fit their taste and lifestyles. All of this made possible by big data. In Seoul, Korea, shoppers at the new International Finance Center Mall “find their way around the four-story complex by approaching one of 26 information kiosks.” What makes these kiosks unique, is that while shoppers are using them to locate stores, the shoppers are “being watched” by the kiosks. [“Big Brother, Now at the Mall,” by Evan Ramstad, Wall Street Journal, 8 October 2012] It’s not quite as creepy as it sounds. Ramstad reports:

“Just above each kiosk’s LCD touch screen sit two cameras and a motion detector. As a visitor is recorded, facial-identity software estimates the person’s gender and age. The system’s makers, two companies from South Korea’s SK Holdings Co. conglomerate, plan to allow advertisers to tailor interactive ads on the kiosk by those attributes. A 40-something man looking up a restaurant on the kiosk may be shown an ad for a steakhouse in the mall, while a 20-something woman might get one for a clothing store. Shoppers will be able to interact with the ads with hand motions. The system, which is in data-collection phase now and will begin full operation early next year, is the first of its kind in South Korea and one of the first in the world.”

Undoubtedly, this kind of data collection stirs privacy concerns; but, South Korean privacy laws are fairly strict. “Executives at the companies said they won’t record interactions at a kiosk or store any of the images. They also won’t ask for any personal information from people as they use it. South Korean privacy laws prevent the companies from collecting personal information from customers without permission.” Won Sung-min, a Seoul executive who was interviewed for the article “said the kiosks would be considered too intrusive by consumers if they asked for personal information. ‘Honestly, I don’t think they should,’ he said. ‘It is a bit more personalized experience just as it is.'” And, of course, that’s the point of the technology: to provide a better, not a more intrusive, in-store (or in-mall) customer experience. The mall also features another technology aimed at enhancing the shopping experience. Ramstad explains:

“In the main atrium of the mall, SK M&C is already demonstrating what is possible with interactive advertising with a two-story LED screen that has cameras and motion sensors around it. The company developed brief videogames in which people in the atrium can interact with figures on the screen. In one, a woman appears to spray the screen with water, which people in the atrium can then wipe off by waving their arms.”

For many people, shopping is more than a necessity it is a pleasurable experience. Retailers are looking for new and better ways to make that experience even more pleasurable and personal. They understand that if you can’t get shoppers in the store they can’t sell them any merchandise. I don’t believe that stores will ever disappear; but, they are likely to provide a much different shopping experience than was found in stores of the past.