By Scott Doniger, Executive Director, Strategy and Planning, [wire] stone
Retailers are reeling. Prolonged recession, a shrinking middle class, global competition, Groupon, LivingSocial, Amazon Prime, “every-when” enabled consumers, smart phones and smarter devices, sensing technologies, cloud-based gaming, virtual clothes-changing programs, 3D showrooms, social commerce and gaming, Level-Up, Foursquare, Etsy, Gilt, Pinterest, NFC and mobile wallets, digital coupons, device-enabled sales staff, LiveChat customer service…the list grows every week. Optimists see opportunity. Most see trouble.
Has e-commerce already dis-intermediated the physical store, like online has in newsprint? Some are right to think so. There is growing evidence that digital channel commerce just might displace brick and mortar. Among others, here’s a recent study validating that the motivation to shop in-store is decreasing:
"Digital usage and ecommerce increase when women become moms. Two recent studies show that women spend less time with media outlets such as TV and magazines—but more time online—during pregnancy and after becoming a mom. An Eric Mower and Associates survey, for example, found that more than half of new mothers spend less time watching TV (59%) and reading magazines (55%), and that 59% spent less time shopping in stores as a result."
Sure, new moms will actually shop more and will be less inclined to go to stores. But do retailers want to make the risky assumption that this data is not a harbinger of a major fault line trend that confirms the question "if the experience shopping offline continues to get better, will people ever really need to shop in-store?". We think this risk isn’t worth taking.
Brick and mortar sure seems broken – see Blockbuster, Borders, Kmart, Comp USA -- who’s next to file chapter 11? But we are bullish on brick and mortar because our vision of the in-store future (unfolding on a few beachheads already) is that, done right, digital in-store is the game-changer. Retailers who don’t sprint to their own digital future will soon realize it’s game over if they don’t.
If the pace of chaotic, rampant disruption is roaring ahead, can retailers run fast enough? They can – IF they go “all-in digital”. We urge retailers to completely re-think how customers use digital devices to connect, share, and buy today – and how they’ll do so in the future. We propose that winning retailers will create their own scalable, sustainable, personalized, and digitally enabled path-to-purchase models, engagement platforms, and technical infrastructures, all driven by evidence-based learning specific to their domain. Here’s a short list of guiding principles as we see them today retailers of all types should embrace to go “all-in digital”:
- Define the role of your physical store in an all-channel world
With so many new ways to connect with customers, one of the first things big box and brand retailers have to define is what each channel is best at delivering, based on real insights into consumer “need states” – outcomes that deliver utility, entertainment, information, rewards and recognition. Determine what your branded web site does better than your Facebook page, for example, and re-think the role of the store inside the matrix of how your specific customers want to transact before, during, and after a store visit. Retail is one part of a broader customer centric business strategy. For most organizations, the greatest barrier to hatching an integrated multi-channel consumer experience strategy is achieving cross-functional alignment on business objectives. It’s more important now than ever to work across organizational silos.
- Focus on people, experiences, and outcomes -- not technology
“All-in digital” retail isn’t really about technology. It’s about meeting individual shopper need states through memorable, friction-free, informed, and engaging immersive digital experiences. Re-programmed by online e-commerce models like Amazon Prime, shoppers already expect the brands they like to know who they are, what they want, how they want it, and enable them to share it with friends when they walk into a store. Cool technology in and of itself is only half the game so simply using a 60” multi-touch screen to show music videos or building a mobile app that’s little more than a brochure isn’t enough. Success will be measured by how effectively technology facilitates and exceeds need states for every store visitor.
- Technology should enhance human interaction, not replace it
Nordstrom and Ritz-Carlton know well how the investment in sales, service, and management staff can pay off with increased customer satisfaction, loyalty, and revenue. Apple, on the other hand, has pioneered the use of technology to re-think the role of sales associates and the entire sales floor experience. And we’re seeing the integration of technology and human interaction successfully employed in e-commerce — done right, live-chat increases online sales and reduces abandonment. Winning retailers are figuring out that technology is best used to augment human interaction rather than as a replacement for human engagement. Instrumental to the deployment of technology is training – it’s one thing to give sales associates a tablet, but enabling them to use it to enhance the shopping and purchasing experience is another challenge.
- Awe like Disneyland and drive like Amazon
Whether you are Best Buy or Levis, your digital in-store strategy needs to make the most of what the physical store can offer – a unique, memorable destination that provides experiences shoppers can’t get online. Since people browse and buy anywhere anytime, shouldn’t the store visit deliver more, something bigger than the ability to touch and feel products? Brand “wow”, delivering unexpected, unique, and immersive experiences should be core of your vision. At the same time, consumers expect in-store to be very much like online – frictionless shopping and checkout preceded by personalized recognition and service that comes from learned behaviors, level-ups, rewards, and loyalty programs, informed sales and customer service staff, and the ability to purchase everything anything in your catalog even if that particular store doesn’t have it in stock.
- Master the creation of layered digital experiences that generate stopping power and immersion
Today’s direct-to-consumer (DTC) retailers are challenged with the burden, and opportunity, of telling a lot of stories within the physical store. Visit a Nike store and you’ll see a global leader simultaneously telling brand, athlete, social good, product, service, and history “stories” throughout the store. A tall order in the analog world, but here’s where going “all-in digital” can change the game. Creative retailers are figuring out how digital technologies weave various messages and storylines into seamless, multi-layered, immersive experiences. Leaders are delivering them through innovative applications, device interfaces, and social / mobile channels ranging from personalized smartphone alerts, to multi-touch display walls, to near field communication at check out, to image capture and social integration, to exterior surface projections, to augmented reality experiences that bring static displays to life. Similarly, content for these stories must be at the same time informative, entertaining, technologically innovative AND easy to use. And, at the end of the day, it has to drive to purchase.
- Build and enhance community
Whether you're a global brand with DTC stores or a big-box retailer, it’s never been more important to understand your role as a community leader. Re-envisioning the store environment as a community hub means creating a place where people can escape from the challenges of daily life with experiences that exceed to potential of strictly online social interactions. The largest brands have a unique opportunity to make their customers feel an enhanced sense of community by letting them participate in activities that accent their place in the community. Because social connection has become so prevalent, smart retailers will turn the shopping and buying experience into socialized events that enable customers to connect to their social networks and properties. Best Buy, for example, might consider using a large multi-touch display to show a map of the local area with pinpoints that indicate new Wi-Fi zones, or indicate traffic snarls so shoppers take the fastest route home, or build a mosaic of customers who’ve contributed to the store’s local charity, or pictures of sales staff who’ve just completed advanced smart phone training. Stores can use digital tools and techniques to create and amplify community, differentiating from competition and solidifying bonds with customers.
- Commit to invention and innovation
Unilever gets it. The massive CPG leader is hell-bent on “getting to the future first” by institutionalizing digital innovation through a new Digital Advisory Board, a group of non-Unilever digital leaders tasked with helping them navigate the future digital consumer. Ralph Lauren, whose marketing leader recently stated that their investment in digital is “all-in”, is another good example of a brand dedicated to running to the digital future because they know that keeping pace with evolving consumer behavior and technology change is a non-trivial endeavor. RL and a growing number of leading brands have committed to the processes and resources required to foster ongoing innovation, invention, and, yes, even failure. Here are some of the priority steps to consider:
- Partner with a company who thinks and bleeds digital to build a digital lab—a dedicated team of retail strategists, social/creative technologists, designers, and engineers. Most retailers and DTC brands struggle to dedicate visioning resources.
- Challenge your lab to focus on rapid digital experience ideation, exploration, and testing. Center the effort on the building blocks of great digital experiences; visioning, strategy, playbooks, pilot executions, and scalable implementations.
- Concentrate on pilots, not prototypes. Why prototypes? Because they are technology exercises that typically don’t enter the market. A good pilot is designed for testing in retail environments; it's a more efficient spend and effective proof point for new digital experiences…even when the proof points don’t work exactly right the first time out.
- Think platform
We define platform to mean an amalgamation of consumer path-to-purchase behavioral models, physical store cartography, technology architectures and applications, and the influence of human interactions that influence the purchase path. The platform stretches across consumer touch points from brick-and-mortar interactions to out-of-store experiences. Retailers that are digitally enabled need to offer an API, among other tools, to truly be a platform of greater scale. “Sharing buttons” are table stakes – retailers must develop a platform of connectivity and intelligence so can consumers easily help spread word about the retailer within and between all digital touch points. Platforms are big systems -- Start small; Think long and large; Scale fast. Here’s how:
- Think and act “lean”. Yes, it would be nice to shed a few holiday season lbs. But that’s not quite what we mean here. Modern business is pure chaos – those prepared to adapt and invent are better poised to succeed. Lean planning and lean development – see lean strategy and tech innovators like Eric Ries and Farrah Bostic – is a philosophy for moving at Internet speed. Thinking and acting lean enables your company to iterate and fail versus wall flowering until a group of consumers “asks you to the dance.”
- Plan for the technical backbone -- “the piping” – so that as new technologies and use cases emerge and evolve your company can simply change “faucets” versus redoing the entire plumbing system every time a new device becomes hot.
- Control your own “big data”. Prioritize a customer intelligence hub – it’s the engine that aggregates consumer and retail data and produces re-marketing, loyalty, and overall business optimization. Capturing and optimizing shopper behavior metrics from every channel into a customer intelligence center enables smart retailers to re-market with extreme precision to meet shopper need states.
Eight easy steps, right? What are you waiting for, walk-ins?
Scott Doniger is Executive Director, Strategy and Planning, at [wire] stone. Contributors to this blog were co-strategists Paul Marobella, Neil Michel, Jon Baker, Greg Rattenborg, Norman Guadagno, and Jason Michels. You can find us all at [first] dot [last] @wirestone.com. Subscribe to our blog for a steady stream of digital retail insights.