The explosion of mobile applications has resulted in new, more complex buyer journeys and purchasing behaviors. Today's digital shopper often leverages the in-store and online shopping experience simultaneously. For example, they may browse through merchandise at a physical store while at the same time use their smartphones to compare prices and produce reviews, and have their family and friends instantly weigh in on shopping decisions via social media. Once they decide to make a purchase, they expect instant gratification, often paying more to receive their merchandise on the same day.
The ongoing changes in buyer behaviors have led a number of industry observers to forecast the demise of brick and mortar retail locations as we know them. Some predict that retail will change more in the next five years than it has in the past century, and that the extinction of physical stores isn’t far off. While our view is less dramatic, we anticipate significant changes are inevitable, and that retailers must act now to stay competitive.
To understand the current and future state of the retail, we must look closely at four key trends that are driving and, in some cases, disrupting modern retailing:
1. Mobile and related technologies
In addition to making purchases, comparing prices and locating stores, consumers can now use their mobile devices to redeem coupons, access loyalty programs, scan QR codes and receive or provide recommendations for a particular purchase. Mobile devices are used to help make a purchasing decision if not to actually make the purchase in the store, thus Mobile Point of Sale (mPOS) is becoming more popular with retailers. A report by Infogroup indicates that the number of retailers using mPOS systems will triple by 2018. Since consumers are using their mobile devices throughout the shopping journey, they expect retailers to help enable their journey via enterprise mobile devices, like providing real-time inventory availability and order completion.
2. The proliferation of social media networks
Interacting through social media has become a global way of life. More than 52% of global respondents to the Price Waterhouse Coopers survey indicated that they regularly use Facebook as part of their shopping experience. This is forcing retailers to learn how to navigate the social media landscape. Retailers have to optimize their mobile web presence, improve search engine rankings and know how to use different digital platforms to maximize the overall shopping experience with their brands. They must also carefully track consumer actions and share information across platforms to provide a seamless experience.
3. Demographic shifts to 'digital natives’
Shoppers aged 18-24 interact with retailers via social media for everything, from following favorite brands, to discovering and researching brands, to purchasing directly through social media. These interactions tend to make these shoppers spend more on products, relative to non-digital natives. Therefore, retailers not only need to have a social media presence, but they must be able to engage with these digital natives in the moment. More and more, this is occurring on a mobile device, which digital natives prefer. However, a great deal of economic power still resides with the older population. Therefore, retailers need to continue to engage those shoppers in the way that they are most comfortable with, which tends to be more traditional in-store customer services such as couponing or rewards programs.
4. Need for more customer intelligence
As an extension on customer loyalty programs, many retailers are significantly expanding their customer intelligence programs as there is an increasing need to understand customers and their preferences. The aim is to better match promotional efforts with customers’ buying needs, and better engage with customers overall. Additionally, as retailers move into their omni-channel initiatives, customer intelligence programs become more important as they look to understand how customers behave and buy across a variety of channels.
Amazon pioneered this ability and now many other retailers are building their customer intelligence capabilities. Behavioral targeting enables retailers to transform websites into a personalized sales environment with unique content displayed for every site visitor. This means that Amazon knows what you want to buy even before you do sometimes. The data they collect allows them to build powerful recommendation engines that increase basket size and compel users to buy products they otherwise wouldn’t have come across. Retailers can take this information and use in the in-store environment for example offering discounts on the right product at the right time.
Retailers are leveraging new technologies like "Big Data" and advanced profiling to better understand customers, personalize promotions and customize offers. This intelligence also allows retailers to better manage merchandizing, inventory levels and shrinkage.
The result of these disruptors is an omni-channel model in which the physical and online stores converge. Retailers must provide consumers with an always on, always available shopping experience. In order to do this, retailers are going mobile, equipping their employees with mobile devices and services, and using their physical stores as distribution hubs to expedite the supply chain process. Coordination is critical for retailers to succeed with these new programs and distribution models.