In the news…
- What in the World is Causing the Retail Apocalypse of 2017? The Atlantic, April 2017.
- Retail Apocalypse: A Look at What Comes Next and It Isn't Pretty, Forbes, July 2017
- Retail Apocalypse Continues at Department Stores, CNN Money, August 2017
Judging by dramatic recent headlines, the complete demise of retail as we know it seems imminent, and that would seem to make this article obsolete. Why bother trying to plan for the shopper of tomorrow, if there won’t be anywhere to shop?
There is no denying the reality of hundreds of brick and mortar retailers filing Chapter 11 and a slew of legendary department store chains closing hundreds of locations across the country in the last 12 to 18 months, forcing the precipitous decline of that once treasured cornerstone of modern American culture – the local shopping mall. So, is the retail “apocalypse” upon us perhaps?
Interestingly, while “traditional” retail — especially large, physical mass-market department stores — is declining, a new wave of omni-channel retailers, many of whom are native online stores, have been experiencing real growth. Category disruptors such as Warby Parker and Birchbox have extended their online presence to physical locations. Brandless, an online consumer packaged goods retailer launched a few weeks ago, amid great fanfare, promising consumers access to high quality products, all under $3.99. And, of course, it’s impossible to ignore Amazon, the original retail disruptor who continues to transform shopping as we know it by launching its first physical retail location, testing cashier-free grocery stores, acquiring Whole Foods and offering Prime Wardrobe, allowing shoppers to “try before they buy.”
So, it’s not retail that’s dead, it’s our traditional — perhaps — dated definition of retail that is disappearing and being replaced by something entirely new, requiring a whole new rulebook for retail marketers.
The technology that made online shopping possible 20 years ago, has trained a new generation of consumers who consider 24/7/365 access, free shipping and returns, and on-demand customer service to be table-stakes when they click “buy.” The mobile phone on its own has done more than empower consumers when it comes to their buying decisions, it has placed them at the center of the experience, and in some cases, has enabled them to co-opt some of the roles that brands and retailers have traditionally played — from creating personalized beauty and fashion products to earning commissions on products they promote on social channels.
According to PSFK’s recent report on the future of retail, retailers have realized that the only way to successfully market to these incredibly powerful users is to throw out the old rules of marketing and merchandising and inviting shoppers to be collaborative, share and interact as a means to deliver more personalized, rewarding experiences that that go beyond mere transactions. For example, FarFetch, a luxury fashion brand, has implemented connected clothing racks, touch-screen-enhanced mirrors, and sign-in stations that allow the company to collect data about in-store browsing behavior. This data will then inform online targeting, which is critical to ensuring a seamless offline/online store experience and a high conversion rate.
Although traditional retailers were hard pressed to figure out how to keep their physical stores profitable in the digital age, savvy, native online retailers are reinventing the role of the physical store, treating them as extensions of one integrated “digital store” experience. Instead of filling locations with inventory, they transform them into highly curated, VIP-only sneak previews or as live “labs” where they can test new products with their best customers.
While this retail transformation can seem overwhelming, it is possible for retail marketers to compete and future proof their marketing efforts by adopting a new rulebook:
1. Make your advertising more addressable.
Know your customer across multiple dimensions (location, demographic, devices, and connectivity, etc.) and segment your audience using non-traditional customer-centric dimensions like consumer desires and affinity groups. Netflix chooses to segment its audiences by “taste communities” based on the diverse viewing behaviors of its audience.
2. Make experiences more personal
You can do this by understanding consumer motivations and creating messaging that leverages that intelligence. Our studies have shown that when consumer motivations are at the heart of an advertising campaign, the incremental lift in core KPIs is significant. For example, today’s millennial audiences are highly motivated about the social currency they can earn through their behaviors – leveraging that insight in the fashion and beauty space can be very powerful in driving response.
3. Manage customer relationships over time.
Although pricing and promotion will always play a vital role in retail marketing, to earn the ongoing loyalty of today’s shoppers, retailers must redesign their marketing ecosystem to deliver real value at every touchpoint in the journey. For example, 1800Flowers is experimenting with “conversational commerce,” leveraging its chat functionally, once limited to customer service, as a means to providing concierge-level assistance when shopping for the perfect bouquet.
Adopting even one of the principles from the new Retail Playbook will not only allow you to gain the favor (and share of wallet) of the shopper of the future, it can provide you with invaluable insights on how best to adapt these rules to create shopping experiences that are truly your own.