This month saw the world’s top retailers and service providers gather at the National Retail Federation Big Show in New York City. This is was my second stint at NRF and there was definitely a big difference from 2018. This year the industry has dialled back on the sexy stuff, so less around experiences and robots, and more of a renewed focus on understanding the customer and getting the basics right.
Here’s BJSS’ view on the five key retail themes that are disrupting the sector:
The basis of retail as we know it is evolving and brands are being pushed to their limits to innovate in order to meet consumers’ changing expectations. Today it’s not about simply leading on product and price, but now retailers have the added pressure of elevating the consumer experience and offering superior product knowledge.
Despite high street store closures in 2019, there’s no doubt that physical stores can still be highly effective consumer touchpoints, but retailers need to reimagine the role of the store, way beyond its four walls. Blending the in-store experience with online will help drive online sales for retailers and simultaneously offer unique experiential features that delight and surprise customers to keep them coming back for more.
We like how Italian furniture brand Natuzzi is taking its store experience to the next level by offering customers a white-glove service. At NRF the brand talked about how it’s launched an augmented showroom so customers can visualise their own home and decorate it with Natuzzi pieces. It’s a great example of how to get customers to fall in love with your products by forming an emotional connection to their choices.
If you dislike change as a retailer, you’ll dislike irrelevance even more, so it’s about being bold in your approach and testing and learning what works in-store that truly compliments your offering.
A hot topic this year was process automation. In a hyper-competitive retail landscape, automation is a key differentiator between the winners and losers. Our understanding of machine learning and AI is advancing at pace, and retailers are starting to understand how these technologies can be used to create flatter organisations, with a better trained and trusted workforce.
We’re also seeing the Internet of Things (IoT) revolutionise certain categories as retailers leverage its capabilities to deliver convenience for shoppers. Connected devices are reshaping the consumer decision journey with a big focus on automatic replenishment. For example, laundry care, currently considered a product need, will soon become a subscription-based service model, automatically replenished by the washing machines themselves.
The retail ecosystem is no stranger to partnerships, but lately they seem to be popping up left, right and centre. A great example we saw at NRF 2020 was Zalando announcing their partnership with Nike. This power partnership allows Zalando to offer customers a truly seamless experience with world class customer experiences on offer to customers, regardless of the channel they engage through.
But what’s driving this increase? The whopping growth of the big players, Amazon and Alibaba, are putting increased pressure on traditional retailers to step up their game, but often they lack the technology capabilities and financial backing to keep up.
Retailers are thinking horizontally and are collaborating with companies from other industries. This means increased consumer touchpoints and access to new consumer data and insights that would normally be out of reach.
It’s about identifying the right partner to compliment your strategy and ultimately delivers return on investment.
The stats around Gen Z’s spending power are staggering – by next 2021 they’ll make up 40% of all consumer expenditure. But it’s more than their purchasing power that’s a cause for concern. Gen Z has a more active voice and they want to align themselves with brands that share common interests and beliefs.
While it’s debatable whether Gen Z’s spending power will drive meaningful shifts in what retailers offer in the short-term, in the next three years it is highly likely consumers will be holding retailers’ values in higher regard than product value.
Patagonia is one of the best examples of retail activism in action. The brand’s positioning is sustained, authentic and committed to the cause and isn’t deemed as a marketing gimmick. However, consumers are cynical and if a brand’s activity seems disingenuous then consumers are just as quick to condemn as they are to congratulate.
It’s clear from this year’s NRF, the most successful retailers have embraced technology as the primary driver of commercial effectiveness and cost reduction. Although NRF’s innovation stage is a good example of the confusion retailers face: row after row of exciting and tantalising new tech, but how to choose which technology will truly deliver results at scale?
The stakes are high, and retailers have everything to play for. Just treading water and keeping the lights on just isn’t enough. Retailers must adopt a forward-thinking approach to understand how consumer behaviour, emerging technologies and competitors will evolve in three years or more. The winners will be those who recognise the risk areas and react quickly.
Put simply: adapt or die.
David Gore is head of retail at BJSS
Main image: Adobe Stock
Author image courtesy of David Gore/BJSS