Retail

Retail today and tomorrow: Innovating in the age of disruption

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Today’s changing retail environment is proving to be a major test of marketers’ agility.

It is no secret that the convenience of online shopping has drawn customers away from traditional brick-and-mortar outlets. Walking from store to store in search of the perfect outfit or gift has transformed, in many cases, into jumping from website to website, credit card in hand.  Along with this major transformation has come many difficult adjustments.

So where does this leave brick-and-mortar stores?

The role of the store itself is being re-defined in our modern age, as traditional storefronts turn into immersive showrooms and leisure destinations, and much more.  Retailers, and specifically mall operators, are aiming for more experiential elements, while foregoing traditional anchors for more entertainment-based locations like movie theaters and gyms.

GfK’s FutureBuy® data shows that people who shop in brick-and-mortar stores do so because they can physically see the product before they buy, they shop there routinely and they get “instant gratification” by getting the products much sooner.  When they shop online, however, the reasons tend to be saving money, better selection and the overall ease of shopping.

Given these dramatic changes, marketers need to play to the strengths of traditional retail stores – and keep a few key lessons in mind.

  1. Stay agile.  In today’s retail environment, marketers have to be flexible and creative to satisfy the evolving consumer.  We see a trend where shopping spaces are increasingly being integrated into traditional urban surroundings, like the shops at the Oculus of New York’s World Trade Center or in Chinese open cities, with stores and interactive park-like features (trees, water fountains, shops and screens) that create a new shopping “village”.  There are numerous new business models that brands can leverage in new ways.
  2. Capitalize on the online-offline experience.  Consumers desire rewarding experiences.  The latest data from GfK Consumer Life shows that experience is the #1 trend in the United States, and store shopping remains a key leisure pursuit. Three in four Americans agree that “it’s fun to browse stores and see what’s new and different”.  The current market is seeing big online players capitalizing on this trend as they open brick-and-mortar retail locations.  For example, Amazon bookstores allow you to buy books in-store or have a fun retail experience, but lighten your load by having the book delivered or letting you purchase a digital copy.  Warby Parker and Bonobos are popular online players who have showrooms.  At Bonobos, you can visit ether of the “Guideshops” get 1-1 attention from a “Guide” to get the exact fit and measurement of your clothing, but you walk out hands-free, without paying for delivery of your chosen items.  This can surely help personalize the experience, and alleviate some of the operating costs that physical retailers face to be more competitive with pure online players.

    On the flipside, customization can be a challenge for online-only brands.  Nearly four in ten Americans agree that they like to buy products that can be tailored to their needs.  Major retailers are starting to optimize their brick and mortar footprint to maximize the omnichannel fulfillment with click & collect and filling excess square footage with shop-in-shop concepts.  But the real challenge for brick and mortar retailers is how to keep up online without killing their margins.
  3. Use new technology to your advantage.  We are at the tipping point of the AI explosion, and Artificial Intelligence will surely enhance the online shopping experience.  In fact, almost three in ten Americans (28%) would try out new products before buying them, such as cars or paint colors, and a quarter (24%) would use a VR headset to shop as if they were in a real store.  Virtual reality in particular could be useful in a brick-and-mortar showroom.  AI is being used much more to improve product search effectiveness on retailer websites and in making product recommendations than from a virtual “trying out” process.

    Lowe’s has been using VR well, in helping customers visualize what decorating a room in their house might look like (along with augmented reality technology) and North Face for the outdoor experience.  AI will certainly help with product search and IBM’s Watson AI is paving the way to improve product recommendations.  AI is just the tip of the iceberg as a lot can be said for bots and drones, which as they are starting to play a much greater role to the retail environment and logistics.

Disruptive times call for staying attuned with consumers’ changing needs and lifestyles.  We are at the brink of the 4th industrial revolution, which will undoubtedly shape the future of many aspects of consumers’ lives, including how we shop.  Thus, the time for keeping a close eye on new technologies and innovating for the future has never been better.

Jola Burnett is a Vice President on the Consumer Life team at GfK. She can be reached at jola.burnett@gfk.com.

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