18 February 2020
By Drew Smith
Drew is the Director of Product Strategy at Upp and focuses on how technology can help brands and retailers deliver what their customers want.
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The world of retail is changing. What’s more, it’s changing at a faster rate than ever, with the retail experience evolving exponentially over the past 20 years. The rise of ecommerce has played a large part in this. So too has the wealth of opportunity created by selling through known and trusted channels like Amazon, Google and eBay.
Whatever you sell, and whether you sell it online or in a brick or mortar store (or a combination of both), your business model sits atop an ever-shifting and potentially uncertain landscape — a landscape where innovation and transformation is essential if you are to keep your footing. In this context of perpetual evolution and revolution, retailers should look to the top performers in the field and learn from their example.
Here are some key takeaways that will help you maintain best practice and gain a competitive edge in 2020 and beyond.
In an era where consumers are spending more and more of their time online, digital needs to be a priority. The digital-first approach is vital both to emerging online brands and established high street retail presences.
The digital realm is a frontier. One that retailers need to explore if they are to have any hope of engaging with their target audience and staying relevant in a turbulent and competitive market. A healthy digital presence across multiple channels is key to converting visitors (wherever they come to you from) into buyers.
That said, there’s more to the digital-first approach than simply having an online store.
It’s about providing customers with a complete customer journey online. Customers in 2020 expect a complete and highly personalised customer experience. This means product suggestions, deals and special offers should be tailored to their previous experiences with your brand (such as previous purchases or pages visited).
Levi’s big digital “Customization Studio” campaign is a great example of this in action, leveraging new technologies to allow customers to personalise their own online retail experience. Sportswear giant Nike has launched a similarly ambitious campaign with their “Nike By You” initiative, which allows users to create their own unique custom-made training shoes.
The increasingly prohibitive costs of maintaining a physical store have seen big brands further dominate the high street. Nonetheless, the wealth of opportunity online ensures that both established retailers with physical stores and ambitious but low-budget startups can find their fortunes online. Without the cost of a physical retail startup.
Still, where there’s opportunity, there’s also stiff competition. If you’re to stand apart from the crowd, you need to develop an innovative mindset. Invariably, this means taking advantage of emerging technologies and using them in novel ways that will appeal to your target market.
AI is one obvious example. Retailers have been using algorithms to make personalised recommendations to customers for so long now that it’s becoming almost old hat. In the smartphone era, a number of retailers have begun using augmented and virtual reality to enhance their in-store and online experiences. IKEA, for instance, has been using AR for a few years now via its IKEA Place app. This fun app allows users to see how their products will look in their home by imposing the furniture’s image onto the image from the user’s smartphone camera.
If you’re going to stay relevant and appealing to your customers, you need to give them more of what they want. And leveraging your customer data is the key to achieving this.
Simple ways to use customer data include making recommendations based on past purchases and viewed product pages. However, in recent years pioneering retailers have experimented with much more innovative ways of using data.
These include “emotion tracking”, where cameras are used to track and record customers’ emotional state as they move through the store. It also includes sensor-based recommendations, where recommendations are made based on customers’ biometric data and used to create ergonomically customised products like insoles and clothing.
Data is playing a bigger and bigger part in all kinds of businesses, but for retailers, it can mean all the difference when trying to build customer loyalty and ensure relevance.
No matter the way you choose to use customer data, it’s important to be respectful and sensitive. After all, nobody wants to feel as though the brands they buy from are spying on them. Be open and transparent about the kind of data you track and how you’re using it to enhance their experience. In the post-GDPR landscape, customers are more aware than ever of the value of their data. That said, most consumers are fairly open to the collection of their data if they know that it’s going to help give them a more personalised and satisfying retail experience.
Of course, it’s not just the power of customer data that can help make you a top-performer. The better you understand your brand data, the easier it is to ensure healthy profit margins and harmonious operations.
One of the problems with retail is that organisations and departments work in silos and keep their eyes fixed squarely on their own KPIs. As such, they lack a holistic understanding of how their departmental actions impact the overall profitability of their products. Although it may appear that your products are doing well when looking at departmental KPIs such as ROAS, Return Rates, Conversion Rates or Average Sale, when looking at the product performance at a SKU level, they may appear to actually be in the negative margin. This is due to the lack of visibility across these departments, something that retailers need to be aware of and aim to reduce this lack of overall visibility.
A good example of a brand making the most of their brand data is H&M who used AI to make its supply chain more sustainable to tackle their issue of excess inventory. You can use AI-driven platforms to provide actionable insights and minimise margin erosion at the SKU level.
Of course, leveraging your customer data is not the only way to better understand your customers. This is why market research is such an important part of success in retail. Lots of retail startups invest a lot of time and effort into market research when they’re building their brands, but fewer make it an ongoing part of their operations.
Because of the rate that the retail industry is changing, understanding your customers is vital.
What’s really important is understanding how customers are buying, what they are buying and what channels they’re using. This can be done with exit surveys once you’ve monitored customers closely — check for session times and conversion rates so you can better understand your customers’ needs and take actionable steps to help increase sales and profitability.
One thing’s for sure, however: if you stop taking the time to understand your customers, you can expect them to gravitate towards someone else who will. Say what you will about Amazon, for instance, they are the world’s most trusted retailer for a reason. They created Amazon Prime as a reaction to customers’ need for faster delivery and reduced delivery spending while creating Amazon Local and Amazon Go to make their products more available and their brand more immediate.
Even if you have a brick and mortar store, you can still benefit from a “bricks and clicks” approach which blends the best of the online and in-store experiences to create a seamless customer journey. Even if you don’t sell your products online, the online experience is a key part of the research phase that today’s digitally-savvy consumers tend to carry out. Now that everyone has the internet in their back pocket, online research isn’t just for big purchases like cars or white goods. It’s also often carried out for smaller, more everyday purchases too.
Ubiquitous brands like Disney are a great example of an omnichannel approach to their retail and tourism. Their approach encompasses physical spaces, websites and their own mobile apps to create a consistent customer experience across multiple platforms.
If you want to remain competitive in the world of retail, you need to ensure that you’re always adding value to the customer. If you want to turn a profit, you need to make sure your marginal performance is optimised. By delivering on this dual goal of improved customer outcomes and increased profitability, you’ll be able to drive a competitive advantage, and grow in 2020 and beyond.
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