E-commerce has now reached over a decade of maturity and we all use services like Amazon Prime and now we're starting to shop on our phones through Facebook, Instagram, and Pinterest - not the retailer's website. Even though digital changed the way we shopped forever, brick and mortar innovation has been stuck in the late majority of the diffusion curve. Could 2017 be the year that physical locations regain their mojo? We've already seen hints of it as Amazon opened their first transaction-less store and traditional e-commerce retailers opening up physical locations. As retailers are still exploring ways to make the omnichannel experience, well, omni, we're predicting dramatic changes in brick and mortar to catch up to the ease of online shopping in 2017.
Despite the news of many retailers closing physical locations, stores aren't going away any time soon, but how we shop at those stores is starting to change dramatically and retailers who push the innovation envelope for the future of retail are poised to be long-term winners.
In-Store Assortment Changes With Millennials & Boomers
For the past 40 years, big box retailers revolved around the sudden population flux out to the suburbs, but recently millennials and baby boomers are moving back to cities and buying a 24 pack of paper towels and a case of bottle water doesn't fit well on a subway or the walk home. Stores are right-sizing their assortment and the focus of localization reflects how consumer live near their store. Target, for example, is opening more and more of their smaller foot print store and reorganizing internal buying and planning teams to focus more on localization.
Services Beats Products
Uber can't disrupt everything, but the convenience is forcing retailers to rethink the value that's offered in store that goes beyond the products it sells. "At the highest level, you have more physical retail going into service," says Sucharita Mulpuru, former Forrester retail analyst and chief retail strategist at the commerce festival Shoptalk. Examples include a sporting goods store moving away from just selling hockey skates, but offering services like sharpening or partnerships with training organizations. Retailers are using services to make their brick-and-mortar locations more valuable in the face of online shopping. Jacobs Marketing Sr Director of Business Development, Kevin Spight, snapped this photo at Starbucks which offers mobile ordering and pick-up - no need to stand in line anymore.
Be Consumer Focused (really)
The digital revolution brought business to the extremes and those who have failed were caught trying to play in the middle. Nobody likes their coffee lukewarm - you either want it steaming hot or poured over ice and the same goes for retail. We will start moving to buying the majority of our commodities through mobile, subscriptions, or smart digital technologies like the Amazon button, but other areas like fresh produce and apparel will need the surprise and delight aspect of using all senses of look, touch, smell, etc that for now, can only be presented in the store. Whole Foods recently launched a Produce Butcher in the store where shoppers pick out their fresh produce and bring it to the butcher to be cut or chopped for meals.
Artificial Intelligence (AI) is a trend we will see more of 2017. From personal shopping to predictive learning, companies are using cutting edge technology, like IBM’s Watson, to power artificial intelligence. For better or worse, retailers have treated social media as a critical customer service tool, catering to cranky customers who tweet their gripes. That willingness has led to a deluge of issues for customer service to address — and created the need to automate it. Take Dutch airline KLM. In a typical week, KLM has to respond to 15,000 social conversations in a dozen different languages. There is no programmatic solution here: KLM has a 235-person social media team. But KLM is exploring ways to combine artificial intelligence and humans in providing customer service that’s somewhat automated but still has a personal touch.
Retail companies like the North Face have started implementing AI in interactive shopping. AI uses a dialogue-based approach to help customer shop. Called “Expert Personal Shopper”, it asks where and when the product will be used, who will be using it, and suggests products based on the data gathered.
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