“What is the future of retail?”
As an oft-repeated question that has had its share of the spotlight in retail conferences and boardroom discussions across the globe, posing this question here could seem a bit been there done that.
We’re not strangers to the image of e-commerce monsters gobbling up traditional brick-and-mortar stores. eMarketer states that e-commerce sales will increase at four times the rate of retail sales this year bringing the yearly estimate to 23.2% for 2017. That is a disturbing statistic if you’re at the retail end of the spectrum.
But, wait a minute.
The very same numbers don’t appear as ominous when you note that online sales currently only account for ten percent of total retail sales.
So, who emerges victorious in the battle between e-tail and retail? More importantly, are they really at war?
E-commerce Killed the Retail Star
Though brick-and-mortar stores continue to be Walmart’s focus, its acquisition of brands like Jet.com, Moosejaw, and Bonobos among a list of other online brands signaled how one of the biggest retail giants sat up and took note of the challenge posed by e-commerce.
The results speak for themselves. Walmart’s e-commerce sales increased 63 percent in the first quarter of the year, as opposed to 29 percent in the previous quarter.
Walmart isn’t the only retail brand that has woken up to the reality of online shopping. Nordstrom’s acquisition of Trunk Club, a bespoke style service for men and women, and Unilever’s billion dollar acquisition of Dollar Shave Club are prime examples of how retail brands are making inroads into e-commerce, thus making it a major part of their overall strategy.
However, acquisitions aren’t the only indicators of the change in priorities for retail. The growing importance of ensuring an omnichannel presence by traditionally offline brands through online marketplaces and data-driven personalized selling also show how the times are a-changing.
An ideal example is legendary toymaker Toys ‘R’ Us. After a decline in store sales that resulted in a $164 million loss in the first quarter of 2017, they recently announced plans for the future included the launch of an online marketplace in 2018.
The Reality of Retail
There’s a flipside to the onslaught of e-commerce acquisitions. Amazon’s much-discussed takeover of Whole Foods for a whopping $13.7 billion and Alibaba’s interest in building physical experience stores by investing in brick-and-mortar players indicates a reverse trend, too.
China beat US as the world’s largest retail market last year with total sales reaching $4.9 trillion. 80 percent of these sales still happen in physical locations. Alibaba invested over $8 billion in retail establishments across China within the last two years.
The spate of brands combining the ease of online shopping with the experiential uniqueness of physical touch-and-feel shopping indicate that the convergence of online and offline is the future.
And how are the traditional retailers doing that? Popular furniture retailer Ikea is doing it through augmented reality. With Ikea Place, Ikea’s in-house AR app, shoppers can use their smartphones to envision how a chosen piece of furniture would look in their homes.
The app allows customers to view 3D visualizations of over 2000 products from the Ikea store and imagine how a potential bed or shelf would look in their home. The customers can then move to the Ikea site to complete the purchase.
Brands like Deborah Lippman and Ashley HomeStore incorporate the features of Unbxd’s Smart Engage Platform to enhance product discovery and recommendations on their sites. Ashley HomeStore, for instance, saw a 35 percent increase in site orders and a 28 percent increase in revenue after implementing Unbxd’s site search feature on their website.
The Age of the Customer
What these online and offline innovations and partnerships indicate is an increasing importance of the customer in commerce. The age to come — across industries and businesses — belongs to the customer. In fact, according to Forrester, we are already five years into the ‘Age of the Customer’.
This new and empowered customer has more information than ever before, has a slew of options to choose from, and is exposed to messages from various media and channels. What brands need to do is to find a way to intercept those purchase decision journeys irrespective of whether the customer is online or in-store.
The priority is no longer where the customer is but in understanding who the customer really is. Customer data gleaned through artificial intelligence and machine learning techniques allow brands to map customer purchase journeys better and showcase better product recommendations, ultimately helping brands sell better.
The Coming of New Retail
The future of retail is about being more than omnipresent.
Retail innovations like Alibaba’s chain of Hema Supermarkets speak of a seamless shopping experience that is offline but incorporates features that are attributed to the online experience.
Customers at the 13 Hema stores — located in Beijing, Shanghai, and Ningbo — browse through a range of carefully curated products from over 100 countries, order on their mobile phones, make payments on Alipay, and get the product delivered within 30 minutes of placing the order (within a 5-kilometer radius).
Last year, Alibaba’s Jack Ma announced that the priority for the online behemoth was New Retail — a term that denoted “the integration of online, offline, logistics and data across a single value chain.”
There’s more to e-commerce than just online purchase. Research suggests that the influence of online browsing spills over to retail sales as well. Timberland’s Head of Retail and and E-commerce Marketing, Rachel Panetta, states that around 60 percent of the retail sales in US are influenced by digital tools in some way.
As per a survey of US digital shoppers conducted by Accenture, 78% of respondents engaged in ‘webrooming’ — the act of researching and browsing for products online before making retail purchases. Similarly, the same study showed that 72% of respondents made digital purchases after browsing for the products in stores.
Customer centricity should to be at the core of the product strategy for brands, across online and offline. They need to combine industry insights with brand-specific intelligence so customers are served better.
The truth remains that influence here works both ways. The real issue to contemplate over is not the future of e-commerce or retail. Neither is it about deciding which side is winning. It is to ascertain what brands need to do to keep the customer coming back for more.
Find out how Unbxd can help you serve your customers better through strong site-search, category pages, and accurate recommendations. Get a free, custom-made report that shows how you can enhance the shopping experience on your site. Sign up, today!.