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Experts in Retail Weigh-In on What Stores Will Look Like in the Future

Photo: Courtesy of Clay Banks

We’re in the midst on an in-store technological revolution. As more consumers shop online, retail businesses need to integrate the data of an online interaction with the physicality of shopping in a store.

Nadir Ali

CEO, Inpixon

How do you foresee the retail landscape shifting in the next five years?

Over the next five years, we will see the retail landscape shifting towards intelligence – at Inpixon we call this Indoor Positioning Analytics to the power of AI (IPAAI). This movement will be towards shopping as a destination experience rather than just an outlet for a store. These destinations will infuse social media, AR and VR into that experience, blending the touch-and-feel appeal of a physical store with interactive social technology. Customers not only want to see themselves in a physical new outfit in the dressing room mirror, they want to share that with their online community and receive instant feedback. This is where the physical world begins to truly blend with the digital.

What is the most important area retailers need to focus on in 2018?

The most important area that retailers need to focus on in 2018 is simple: the customer. The trick will be to build an omni-channel persona for each customer and translate the success of their online stores to onsite locations. Online, if a customer abandons their shopping cart, the follow-up is automatic. But in a brick-and-mortar location, physical carts are left behind, items are picked up and discarded, customers browse and leave. There is no follow-up; those sales are lost. The beauty of understanding your customers and providing them with a destination experience catered to their persona is that it doesn’t matter where they end up making their purchase (in the physical or online store), what matters is that the retailer gets the business. The key is to connect to the customer, both online and offline.

How can retailers more efficiently engage with their customers across all channels in retail?

In order to more efficiently engage with their customers, retailers must create that omni-channel persona, learning their customers’ preferences and really getting to know them. The better that retailers are at knowing their customers, the better experience they’ll be able to provide, and the more successful they will be in return. Frequent buyer programs aren’t cutting it. Retailers need to extend bidirectional communication both online and offline, embracing analytics equipped with artificial intelligence and user preferences to engage with their customers on a deeper, more connected level.

What does an effective modern retailer look like?

The effective retailer recognizes this dual, modern reality that we’ve been discussing today — that meeting of the physical and digital world. Today’s retailers are engaged, not only providing fashion and trends, but also building relationships, establishing trust and becoming go-to sources for the best, most engaging shopping experience. Tomorrow’s retailers will take that even further, understanding and responding to their customers as part of their community, contributing the same personal experiences that one would expect from a high-end boutique. In the direction that we’re headed, anything less than that will be noticeable and absolutely unacceptable.

Keith Sherry

Chief Operating Officer, SATO Global Solutions

How do you foresee the retail landscape shifting in the next five years?

We’re seeing retailers begin implementing true omni-channel customer experience initiatives. After focusing on online channels for years, retailers are now reimagining the physical store’s role as a destination for experiences even richer than online. Many, like UNTUCKit, are starting by deploying IoT solutions that make connections across sales associates, fitting rooms and inventory to create visibility and opportunities for higher quality customer interactions.

They’re also addressing remaining paper-based processes, moving pricing changes and inventory audits to digital processes. With the help of IoT, this has become easier than ever. Tedious manual tasks can now be completed almost effortlessly in a fraction of the time.

What is the most important area retailers need to focus on in 2018?

Retailers need to focus on the in-store experience – evolving the store into a “destination.” Shoppers want to view and feel merchandise, but they also crave the type of personalized experience they get when shopping online. Connecting and serving up relevant information for shoppers, associates and managers, whether through IoT, smart fitting rooms or other digital tools, improves personalization and loyalty. Before this can happen, retailers must have accurate visibility into inventory across channels including online, in-store and at other store locations to optimize workflow processes.

How can retailers more efficiently engage with their customers across all channels in retail?

Retailers must create more points of connectivity – personalize the shopping experience to engage with customers, get to know them and understand their shopping behavior to be true advisors. With IoT in an apparel store, for example, retailers can use a network of sensors such as RFID, Bluetooth and video to gain visibility into inventory movement, customer behavior and store operations in near real time. These behavioral insights can empower store associates and enhance the in-store experience – in turn, increasing store footfall and brand loyalty. They can improve operations by helping retailers optimize labor and task management to better match store needs.

What does an effective modern retailer look like?

The effective modern retailer can provide shoppers with a seamless brand experience whether they are shopping online, via a mobile device or in the store. Modern retailers meet the consumer’s needs regardless of where they are. They understand how to leverage the benefits of each channel to create a deeper connection with consumers on an individual, personal level. They also use data, analytics and insights from each channel to inform their business decisions around inventory, merchandising, store layout, interaction opportunities, marketing and more.

Elizabeth Bramlage

Head of U.S. Marketing, Klarna

How should retailers use technology to differentiate themselves? 

A smooth user experience throughout the customer journey is paramount to sales conversion. Friction must be eliminated along the purchase path. This may be achieved through implementing technology that enables features such as a streamlined browsing experience, single-click checkout or instant financing at the point-of-sale.

Why is diversity in your business important for organizational success in retail? 

Individuality is highly valued by the younger generations, especially among millennials and Generation Z. Greater diversity in the employee workforce increases the chance a retailer can deliver on the unique assortment and experience today’s customers have come to expect.

From your current vantage point, what does the future of retail look like? 

Consumers will expect even the virtual and physical world to operate in an entirely omnichannel manner, with physical stores increasingly becoming “showrooms” to represent portions of the assortment available online. At Klarna, we have already enabled instant financing offline as well as online to support this model.

What would be your message to a retail business looking to provide the best experiences possible for their customers? 

It is about having a wide assortment of product that is fun and easy to purchase, without fear of commitment. This is especially important online, where a customer cannot touch and feel the merchandise before making a purchase. One way to address this is to allow customers to try before they buy, or “Pay Later” as we refer to it an Klarna. Customers can replicate the dressing room in their bedroom. They can try all the items they choose, and only pay for those items they ultimately decide to keep with no risk to the retailer.

What is the biggest challenge retailers will face in the next five years?  

Experience is the new loyalty. Loyalty is a key challenge for retailers today and in the future. The smoother the shopping experience, the more likely customers will return to purchase again.

Patti Hester

Chief Strategist, E-commerce & Retail Distribution Platinum, Circle Partners

How should retailers use technology to differentiate themselves?

Personalization is the best ROI in retail, and will become increasingly important for growth in the future. If someone starts shopping on their laptop and wants to finish on their smartphone, the experience needs to be seamless or the retailer risks loss of sale. As the lines between where we live and where we work….and how we live and how we work continue to blur, consumers will continue to use technology to create personal convenience and style.

Technology is changing the world of retail shipping. Increased consumer demand for decreased handling times and faster, more reliable deliveries. Smart technology lends to real-time delivery data sharing. Information triggers pulsed at the right cadence integrate the retail experience deeply to the consumer habit. Blockchain is also starting to be used in the shipping industry for logistics tracking and to reduce delivery times by simplifying databases.

Technology is also enabling new modes of sustainability in retail. Retailers can differentiate utilizing technologies such as 3-D printing and augmented reality. Investments in clean energy such as driverless trucks are paying off for retailers.

In the globalized economy, customer data security is of paramount importance for all size retailers. Integrating blockchain, tokenization and decentralized data storage may offer ways for retailers to ensure data security, transaction transparency while increasing transaction speed. If a major hacking incident happens, and customer data is stolen, lack of investment in online security can break the trust of an otherwise loyal customer base.

Why is diversity in your business important for organizational success in retail?

McKinsey research finds that companies in the top quartile for gender or racial or ethnic diversity are more likely to outperform their national industry medians. The U.S. Census Bureau reports that people of color will become the majority by 2040.

Retailers who embrace diversity gain competitive advantages through a more comprehensive understanding of their customers’ current and unmet needs. This applies to retailers of all sizes in all segments. Brainstorming retail offerings with diverse teams results in stronger value propositions. Companies that commit to a diverse leadership & workforce have greater insight to the products, service and solutions required and desired of an increasingly diverse population. They are best positioned to optimize growth potential by relating and connecting to a broader base while attracting new customers.

From your current vantage point, what does the future of retail look like?

Drone deliveries? Robot deliveries? Flying warehouses? Same day free home deliveries? Ultrafast and free returns? The Amazon Effect has raised the service expectation for most consumers-increasingly they require their purchases to be delivered fast and free. An astounding 59 percent of cart abandonments are due to shipping costs.

Consumers abandon carts if they believe they can find from alternative source with discounted or free shipping. This puts significant pressure on retailers to keep up with this demand, as shipping costs can range from 7-21 percent of a retailers’ bottom line.

We can expect shipping costs to continue to rise with the tremendous E-commerce demand and the strain this volume is putting on traditional carrier networks like UPS and FedEx. These costs include annual rate hikes, peak season surge pricing, endless accessorial fees and demand active management of a retailers’ distribution program.

It’s crucial retailers secure lower costs with traditional shipping partners as well as consider alternative carriers and solutions that drive down costs while maintaining required service levels. Retailers need to know that everything in their agreement is negotiable. There are opportunities in most programs. It is imperative their agreement specifically addresses the retailers’ custom shipping footprint. The devil is in the details and retailers must manage them actively to maintain competitive advantages and healthy margins.

What would be your message to a retail business looking to provide the best experiences possible for their customers?

Customer expectations are soaring. With fierce competition, you want to avoid a price fight by providing additional motivations to shop with you vs. another retailer. Customer loyalty programs along with fast and free shipping and returns drive customer allegiance. First impressions matter, be it on the retailer’s website or when they walk through the doors of the store.

Customers want individualized, personalized experiences that offer tailored suggestions based on what’s meaningful to them. Curate product and service offerings to fit customer needs and desires. Customer-centric solutions to both online and traditional shopping experiences increase average order values while building brand loyalty.

Consistent, responsive customer service in everything from initial engagement to product delivery helps you stand out from the competition. This may be an obvious statement but some retailers miss the mark. It starts with employee engagement from the top down, as well as continual training on products and the customer experience.

Today’s customer listens less to what the retailer is telling them about their product and more to customer reviews with heavy influence from social media.

What is the biggest challenge retailers will face in the next five years

Big data drives metrics, metrics drives information, information drives intelligence and intelligence drives decisions across everything in the retail supply chain. If you don’t have the right expertise to help you manage the data and metrics in key areas such as small package shipping you are setting up for failure. In one national retailer E-commerce model, interrogation of the data lead to a focused effort to reduce E-commerce related shipping expense by over $28 million.

Retail is constantly evolving with increasing disruption in recent years. The stores of the future, be it brick and mortar or online, are being shaped by increasing customer expectations and behaviors: needs and demands for faster, higher quality, cheaper, custom, kinder, sustainable and seamless shopping experiences.

It’s most important for retailers to understand the psychology of their customers. One size does not fit all, differentiation is crucial. Retailers who successfully engage with millennials, Xers, and GenZ will survive and thrive. These groups are also increasingly loyal to generous retailers who embrace the act of buying as a force of good. Retailers will have to provide products and services with relevance and personalization to the divergent needs of customers, creating distinction.

Transparency and authenticity build brand loyalty. It’s an increasing driver in all segments of retail relationships and the retail process- from pricing to ingredients to manufacturing to recalls to shipping and returns. Customers now research not only about the product, but retailer’s history and mission. Customers care about where and how products are made and want a retailer’s values to align with their own. While concerns of the customer base will vary, operating retail organizations without absolute transparency is not an option for retailers who want to succeed.

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