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IRUK Top500 The Customer Report: 2018

IRUK Top500 The Customer Report: 2018

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12 strategies to stay ahead

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The detail of international expansion always has to be worked on, for every one of the European Economic Area’s leading retailers (plus Switzerland). Offers and approaches that work in one country can be transplanted to another – but will need refining to be effective. Real innovation is also constantly coming through, and effective roll-out is challenging. Here Christian Annesley picks out 12 approaches that impressed us this year – some offering pointers to the future and some that are having an impact now

 

1. Reimagine the store – part one

 

The in-store customer experience is more important than ever, and stores need to be more than just places to transact. So some of the most innovative and compelling stores are making digital a core part of the store experience. Where Burberry, among others, led more than five years ago with its flagship Regent Street store closing the gap between the brand’s physical and digital worlds, others are now following with a range of moves.

 

The Spanish fast fashion retailer Zara’s recent use of augmented reality (AR) on its app to enable in-store shoppers to see the clothes they are examining ‘come to life’ is one example, as is its piloting of dedicated click and collect spaces, and its use of technology to help recommend items to customers with information screens embedded into mirrors triggered by RFID.

 

Less dramatically but very effectively, we also see a retailer such as Halfords embracing the role of the store in omnichannel retail, with 85% of online orders still picked up in store, which drives its burgeoning services offer for customers.

 

2. Reimagine the store – part two

 

Smarter use of the store environment takes us, ultimately, to Amazon’s re-imagined – and now open and functioning – store, Amazon Go. There’s still just the one, after teething problems, in Seattle, where Amazon’s HQ is, but it points us in a direction that others will soon travel in more incremental ways.

 

The Amazon Go ‘just walk out’ technology does away with the need for checkouts and can in theory enable unstaffed stores. Shoppers download the Amazon Go app on their smartphones, scan the QR code outside the store to alert the app that they’re about to start shopping, and dive in. Clever sensors track which items customers take off shelves and put into their carts. Once shoppers are done, they just walk out the door and the sensors automatically charge their Amazon accounts.

 

This kind of connected retail experience is possible thanks to the power of Amazon’s online profile and consumers’ ability to pay directly from its apps, but it really isn’t far away for many retail brands with loyalty apps and loyal online audiences.

 

3. Embrace mobile and the app

 

Apps are starting to dominate retail sales in the mobile space, and retailers need to understand the power of this trend. For many retailers, mobile traffic already equals or exceeds desktop traffic – but in the final quarter of 2017 mobile sales also represented the majority of total ecommerce for those with successful apps.

 

How are apps taking centre stage? Try this statistic: retailers that have both mobile sites and apps are seeing, on average, two-thirds of their online sales coming from mobile devices, according to recent research. As you might expect, conversion rates on mobile apps are much higher, as well – roughly three times greater than on the mobile web. This may be because the user experience is better in apps, including the checkout process, but it will also be because those who download and use retail apps are loyal and inclined to buy in the first place. For pan-European success with apps, there other aspects to the challenge here, since customers need an app in the right language with all the right sophisticated functionality for every marketplace.

 

The fast-fashion retailer Asos is a good example of where the trend is taking us. It is spending a big slice of its resources on developing its mobile app for multiple country markets. Built in-house, the app has had more than 10m downloads according to the company, and is home to features like AI-driven product search, mobile payments and an analytics function. Most recently, Asos rolled out a visual search tool app users that lets shoppers take a photo of a product they like in-app, to pull in similar items from a pool of 85,000 product images. The feature launched on UK iPhones and has since been introduced to Android and international markets.

 

Asos is betting among other things that visual search will help solve the problem of narrowing down its product assortment and getting customers straight to the products they’re looking for. For example, a search for “red shoes” on the Asos app generates hundreds of results, but when using visual search you get fewer and better-matched results.

 

4. Sell your vision on social

 

Social media is entering a new phase in retail. Those retailers that are working hard on social channels, tailoring messages to local markets and engaging customers on the right platforms, are amplifying their voice and raising brand awareness. But it means looking after a lot of social channels and feeds, across many languages – so needs proper resourcing.

 

What’s an example of a good use of social media? IKEA’s sharing of user-generated content that shows real customers creatively using IKEA products is one nice move. It not only promotes engagement but it’s a lot less work to put together than creating your own content from scratch. Plus it shows real customers using products, which serves as social proof. The most passionate fans and customers get a chance to shine and featuring them is an opportunity to give back and say thanks all at once. The use of images is also right out of social media’s current playbook for engagement – with video even more likely to be shared.

 

Things are also moving in social media, creating new opportunities. Earlier this year Instagram cemented itself as a direct-to-consumer ecommerce brand with the launch of Instagram Shopping in the UK – an update on the platform that lets consumers seamlessly purchase products directly from businesses.

 

Marks & Spencer is one of the first three businesses to take part in the UK test phase of the Shopping function, with M&S head of digital marketing Erin Roy heralding how: “[Instagram Shopping] offers us the opportunity to realise the huge potential of our 760,000 followers.
“Instagram has always been a great platform through which to showcase our products and engage with customers. Shoppable posts take this to a whole new level. They are simple to create, easy for our customers to use and enhance the Instagram experience.”

 

5. Get serious about automation

 

Everyone knows that market-dominating Amazon’s warehouses are seriously automated, but others are making strides, too.

 

The UK online grocer Ocado is poised to open a warehouse in north London that will mostly by run by dedicated picking robots and other automations. The robotic system can pick many of the 50,000 items available on Ocado.com, using a computer vision system designed by the retailer’s robotics team to calculate the grasping points for a given item. This offer is also the basis for Ocado’s outsourced technology platform and physical infrastructure offer, Ocado Solutions. The automation game is hotting up, clearly. [See our Ocado case study for more.]

 

6. Let’s talk about voice search

 

Voice is coming up fast as an alternative form of product search. Buying through voice is now possible in some contexts, with conversational AI tools like Amazon’s Alexa and Google’s Home, which open up a whole new presentational layer around buying. How do you sell online if a consumer never visits or sees your website? It’s a challenge that retailers, merchants and brands are having to work fast.

 

Alongside voice, image search is, as mentioned, also gaining ground via apps in particular. As image analysis automation becomes standard in mobile devices, consumers will be able to take a picture of an object then search for that exact product or a similar one. eBay’s visual search tools are already in play, and Pinterest has invested heavily in visual search technology in order to turn the smartphone camera into a search engine for products. For retailers, being optimised to take a slice of this emerging market should be a priority.

 

7. Extend reach via new channels

 

Increasingly there are options for brands and retailers to reach sellers via third-party websites, even if the complexity of the space in a European context poses challenges.

 

Such sites – including Allegro, Bol.com, Fruugo and Zalando – each have their own sweetspots in terms of country reach and product specialisms, but are collectively a useful way to raise brand awareness and to reach new markets.

 

For customers, the lure is often convenience. Buying in a single marketplace is simpler and cuts the cost of delivery. It’s a principle that Amazon has leveraged with its successful marketplace, of course.

 

8. Evolve those customer reviews

 

Virtually all of the IREU Top50 encourage customers to leave product ratings and reviews, with more and more encouraging feedback on specific parameters. Argos, for example, asks customers to reviews specific relevant features on products – for a self-assembly bookcase it seeks star ratings for design, quality and capacity, while for an HD-ready smart TV it seeks scores for design, connectivity, sound quality and picture quality. The point is to make the process as meaningful and useful as possible, to improve the confidence of future customers and thus improve sales conversion.

 

9. Look again at digital labelling

 

After plenty of false starts down the years, there’ s evidence that electronic shelf labelling could soon go mainstream. The big four UK grocers are trialling ESL in a variety of pilots, prompted in part by improved technology. Morrisons is testing a colour LCD video shelf-edge system, for example, which is a lot more sophisticated that previous trialled displays.

 

The ESL devices of today are full colour that have a much higher quality image than previously, allowing them to display more information than price alone. Battery life has improved significantly, alongside the ability to communicate and integrate with a retailer’s inventory and pricing systems. The change in use case for ESL is being driven in part by regulations in the UK around pricing, and EU-wide requirements for the display of food information at the shelf.

 

10. Take steps to nurture innovation

 

Retail tech innovation doesn’t have to take place beyond retailers in start-ups, as department John Lewis shows by expanding its JLAB retail technology programme. Up till now the programme, which was started in 2014 and sees technology teams develop relevant software within the John Lewis environment, has run for 12 weeks at a time. Now the programme is rampint up: it is to run for a year, offering three chances for established businesses, as well as start-ups, to prove their technology, with opportunities both at Waitrose and at John Lewis.

 

“As more and more businesses face digital disruption, it’s increasingly important for the Partnership to stay committed to the ideals of our founder, John Spedan Lewis, by experimenting and nurturing innovation both inside and outside our business,” John Lewis Partnership resident futurologist John Vary has noted. “This is exactly why we have created a completely new JLAB for 2018. We wanted to take the programme to the next level by launching more events but with a focus on themes we feel are most significant to our customers as well as the future of retail.”

 

11. Be local for every customer

 

For retailers selling across Europe and the world, delivering the right mix of country- and language-specific sites is key. That means a site that intuitively takes the visitor to the right homepage, and in the most likely language.

 

Many use flags with drop-down picking to swap between languages or between country sites – and global players like H&M offer more than 60 site options. But delivering a local experience extends beyond those site choices, because it’s inevitable that not all country offers are created equal. Is the retailer offering a full online shopping experience for a particular market or providing some other offer – showcasing products that can be bought in a local store, for example?

 

Delivering on local also extends to the return options available to customers. In Europe, typical terms for return are 14 days from receipt of goods, but many retailers offer 30, 60 or even 90 days to return. Out in front here we have the furniture and homewares giant IKEA, which boasts a “365 days to change your mind” policy on most products, even including assembled furniture if it’s re-saleable.

 

12. Aim to get personal

 

Every customer likes to feel special, and personalisation holds the key. What was once just an aspiration for retailers has shifted mainstream, with sellers using “predictive intelligence” and deploying experience management tools to deliver experiences that are a fit for each individual customer. The tools also allows merchandisers to observe customer behaviour and, with every action taken, to build a profile of customer preferences against which to get personal – usually by offering customer-specific content and products in real time. Today the tools are often fully automated, which saves a lot of manual work, while the personalised approach can also be applied across the different channels – so email, SMS campaigns and more, as well as a personalised website experience.

 

Automated personalised merchandising tasks include the configuration of site elements, cross-selling and upselling to customers plus the set-up of discounts and promotions. The offers are usually based on basic available data like the customer’s age, gender and postcode, plus search behaviours and completed transaction.

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