Six Actions Retailers Can Take to Remake the Future Store
Michelle Evans, Senior Head of Digital Consumer Research, Euromonitor International
In recent years, store formats have blurred, with consumers turning to the digital channel across the path to purchase. As a result, the fundamental purpose of physical and digital channels continues to evolve. Coronavirus (COVID-19) accelerated this transformation, giving a temporary preview of a world where consumers only visit stores to transact and turn to digital to shop. This is unlikely to be the new reality, as social-distancing measures loosen; however, the intensity of the crisis brought these shifts into greater focus.
Retailers operating brick-and-mortar outlets will need to rethink long-term strategies to compete as the percentage of goods bought in store will continue to fall. While not a retail apocalypse as some postulate, the essential role of a store is being redefined. The first wave of digital disruption was focused on how stores could compete with e-commerce, but this next wave will hone in on integrating and uncovering synergies.
The following text explores six actions that retailers can take to remake the future store.
Find new sources of truth
In recent years, e-commerce giants Alibaba and Amazon have transitioned from operating only online to also having a physical footprint – a move that was as likely about getting access to new sources of consumer data as it was to grow revenues. Alibaba also serves as a source of data for brands selling into China. The marketplace shares data like search terms, price performance and return rates to help brands bring better products to market faster. In an era in which data in plentiful, it is important for companies to seek new sources, whether that be from new channels or new partners.
Generate real-time feedback
The key advantage direct-to-consumer brands have over legacy ones is their feedback loop with customers. Unilever’s acquisitions of Dollar Shave Club and Graze was as much about access to rich consumer data as it was new revenue streams. In 2019, 7-Eleven launched a new store concept called Evolution, which enables it to test concepts, products and services tailored to its customers. In this fast-changing era, companies need to establish real-time feedback loops to stay relevant with consumers and to enable them to pivot offerings to align with these changing demands.
Build smart supply chains
Mountains of food and clothing are destroyed annually due to the difficulty of predicting what consumers will want. Companies must integrate artificial intelligence across their supply chain, which will enable them to predict future demand more accurately. This shift will reduce waste, thus lowering both operational and environmental costs. These advancements will also reduce the distance between the manufacturer and end-consumer, leading to shorter product development cycles, which will limit the guessing game as to what consumers might buy in six months.
Target a segment of one
Accurate consumer data is a gold mine. One of the challenges in delivering an omnichannel experience is the inability to create a single view of the customer. Besides driving a seamless experience, data help with product launches. Given the challenges in obtaining data, brands have shifted to business models to provide more access to consumers, launched loyalty schemes or turned to data streams like social media for R&D fodder. The aim should be to foster an intimate conversation with consumers to ultimately cultivate a store or website for that individual shopper or put another way, a segment of one.
Know your inner circle
Both retailers and brands must carefully evaluate who is in their inner circle. Building an ecosystem with either traditional or non-traditional retail partners can be a way to accelerate a transformation but also comes with risk. Leaders must consider their existing capabilities and business strategy to determine if it makes sense to join forces and from there what role they might play. Are they an orchestrator, a provider or merely a participant? Companies must choose an approach that ensures they don’t compromise on their brand integrity while delivering on shareholder value.
Adopt a laser-like focus
The job ahead for any retailer or brand is not about trying to do everything discussed here. Instead, it is about choosing what makes the most sense for the company’s brand and customer base. There is no need to blindly imitate competitors as there will be many paths to victory. Retail tech for one is a very individualised experience. Investing in any new technology requires a cost-benefit analysis. In fact, the top reason that retail professionals give for not investing in a particular technology is that there is no clear use case for their specific business.
Watch our Commerce 2040: The Future of the Store in a Digital World event to explore how evolving consumer expectations, new competitive realities and the accelerated digital transformation will impact the future of the store.