Beyond Seamless: Retail’s Integrated Future

Close Up Of Man Reading Shopping List From Mobile Phone In Supermarket

RETAIL UNDER SIEGE

Retail today is a paradox. Store traffic is declining, yet over 90% of retail sales still occur in physical stores. Chains like Radio Shack are closing while successful internet retailers like Birchbox are opening locations. We are in the midst of an upheaval in retail that is caused by the ubiquity of the internet and the smartphone. New ways to acquire the things we want and need are undermining the tried and true business models and tactics of traditional retailers, not unlike how “cord cutting” is shaking the foundations of the television industry.

NEW BEHAVIOR

Today the internet has given consumers a massive virtual store, making shopping in the physical store less convenient and limited. Consumers end up visiting physical stores less to shop, and increasingly only to buy. This turns the role of the store, merchandising, and retail design, upside down. How retailers deliver value, stores are designed, merchandise is presented, and customers are served will need to be rethought. There is real risk of things getting worse for store traffic. The recent fear of “showrooming” has now given way to “webrooming”- where shoppers narrow their choices or find offers online before buying offline.

An article on declining retail traffic in the WSJ last summer nails it: “Instead of wandering through stores and making impulse purchases, shoppers use their mobile phones and computers to research prices and cherry-pick promotions, sticking to shopping lists rather than splurging on unneeded items.” Additionally, replenishment and stock-up trips could be increasingly threatened by the emerging “internet of things”; creating in-home technology that, combined with same-day delivery and subscription, promises to automate the repurchase of basic consumables. Over time, these solutions could siphon off categories like diapers, pet food, and detergent that generate traffic for food-drug-mass retailers.

These new risks are the unintended consequences of technology, and are driving the need to reinvent what makes a brick and mortar retailer relevant. It is a push toward extinction for those who stick with the status quo. How retailers create value will need to shift away from competing on the current right product, right price approach. Retailers today must differentiate on emotional and personalization dimensions, by knowing their customer better, using the very technology that is changing consumer behavior to their advantage. This shift is already underway, and requires the blending of the customer’s online and offline retail journey with shopper data to create something that is greater than the sum- an integrated experience.

INTEGRATED EXPERIENCES

Addressing “omnichannel” is a requirement to be efficient. It provides what customers are already expecting: continuity of promoting, selling, and returning merchandise across a retailer’s ecommerce and physical stores. But it is not a differentiator or guarantee of ongoing success, it only creates parity. “Seamless” goes a step further and ensures that moving from digital to physical channels is not a bumpy ride. Both are important, but not sufficient. Integrated experiences are more powerful: blending the physical and the digital to create a way to not only shop and buy, but also experience a brand.

Enabled by technology that did not exist 5 years ago, shopping and buying can merge under a bigger idea that is not a place, but a brand idea, fostering a two-way relationship that is valuable to the customer and the retailer. Brands like Lowe’s with their “My Lowe’s” approach to managing home projects, and Macy’s industry-leading digital efforts deploying iBeacon technology, are at the forefront of experience integration that successfully moves beyond omnichannel. Integrated experiences don’t have seams at all- they are fluid. The role of the store is to be the confluence of the digital and physical worlds.

NEW EXPERIENCE BENCHMARKS

The new breed of internet retailers like Nasty Gal and Warby Parker see the need for their experiences to have a physical component to better connect with their current, and better communicate with potential customers. For these brands, the physical store is unlikely to usurp their digital store as the driver of revenue, but instead create realness to the brands in ways that a digital experience alone can’t. Not unlike a performer who goes on a concert tour to promote a new album you will download on iTunes, physical stores  for these retailers provide an opportunity to create an experience more interpersonal, more sensorial, and thus more memorable. The physical stores that these online retailers are opening don’t have the same financial motive or ROI as a typical retailer. They should be viewed as brand building efforts- delivering the brand idea in ways it is best experienced and embraced. As such, they do not have the same sales productivity pressures and can seemingly over invest in technology and “brand ambassador” staffing. As the physical component of an integrated experience, they serve as spiritual centers that believers of the brands can make pilgrimages to, and in which new believers are converted. As a result, traditional retailers face a higher benchmark for their own experiences, despite the different business model.

GETTING IT RIGHT

For traditional retailers, getting mobile right is the first battle, but needs to be approached with the physical store in mind. Many retailers are getting the idea that mobile is not a threat, but a tool. More than half (55%) of retailers believe that the main purpose of mobile marketing, point of sales, and other activities is to drive sales at stores, according to a study from retail systems analysts company RSR Research. But all too often this tool is insulated from overall customer experience in the store itself, and not integrated into a unified experience that builds the brand. Retailers need to evolve to offer customers an integrated experience that maintains a robust role for the physical store, wherein mobile is an indispensable shopper resource AND a means to stay meaningfully engaged with the customer. This goal of an integrated experience will require a re-assessment of the business model, different organizational design, new skill sets, new retail design strategies and technologies, and a passion to understand and manage the customer journey.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

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