Consensus Advisors: Not in Kansas Anymore
Through a special
arrangement, presented here for discussion is a summary of a current article
from Consensus Advisors, a boutique investment and advisory firm specializing
in the retail industry.
The business of retail has certainly changed. Sometimes
it seems a tornado of technology has landed us in a place that seems strangely
familiar, but so fantastical it could only be a dream.
The folks at the National
Retail Federation offered up glimpses of the totally new world we operate in
at their Retail Innovation & Marketing Conference,
INNOVATE 2011. The following describes just seven of these changes:
- Retail is no longer a location; it’s an experience: It used
to be the in-store experience or the online experience or the service. What’s
different now is retail is everywhere, anywhere, anytime, in no time. Thanks
to digital technology, shopping is no longer a discrete activity. Shopping
happens. (How’s that for a new bumper sticker?!)
- Value isn’t created by purchase; it’s created from access: In
a world where practically every product you could ever want is available
on Amazon, retailers no longer make money by helping people buy things. Retailing
is more about curating collections, making recommendations, and helping people
navigate to the best selection for them.
- Customers no longer want to own; they want to subscribe: With endless
choices and new options always emerging, sampling has become more desirable
than acquiring. Business models in which customers can join clubs or buy
subscriptions in order to access content or experiences, rent products, or
replenish smaller quantities fit customers’ new sensibility.
- Stores aren’t just categorized by product type; experience type
matters too: Drug stores now sell fresh produce; book sales at apparel
retailers are on the rise; restaurants are a popular new store amenity.
Shoppers now organize their store options in terms of the experiences they
want to have — price driven or great atmosphere or an efficient errand
or easy transaction.
- A purchase isn’t just a transaction; it’s a communication: With
cashless payments, emailed receipts, and subscription purchases, the retail
check-out process has become more than a one-time transaction. When they
pay, customers now give retailers the ability to access personal information
and to engage in ongoing communication.
- Mobile phones aren’t simply devices for talking; they’re
the Swiss Army knives of sales enablement: Customers now have a device
that they paid for themselves and which they have with them at all times.
Through it, retailers can do hundreds of things that make shopping easier,
faster, better, more fun, and social — it’s the ultimate sales
enablement tool.
- Facebook isn’t just a social networking site; it’s a platform
for commerce: Facebook pages are the new websites. Facebook “likes”
are the new email addresses. Facebook friends are the new prospect pool.
Facebook “favorites” are the new recommendation engine. Facebook credits
are the new currency. It’s time to view Facebook for what it really is
— an integral part of business today.
These seven new dimensions paint a vivid picture of our new reality. There
is no yellow brick road and there is no going back home. But it’s clear —
we’re not in Kansas anymore.
Discussion Questions
Discussion Question: What trends — service, experience, mobile, social, etc. — touched on in the article will likely have the most meaningful effect on retailing in the years ahead?
6 strong points, one glaring leap of faith. Facebook as “an integral part of business today.” The problem is everyone I talk to tells me their own Facebook network has really grown quiet in recent months. People do not update nor visit as often as they used to. The Facebook honeymoon is over and while the company is going public and marketers are marching in, some say Facebook has in fact…peaked. The allure of Facebook was to connect with friends, not a “place to do business.” I may be alone in this but I have been very skeptical of Facebook as THE long-term business platform.
A combination of product and experience has always been part of the retailer’s value proposition. New technologies and their innovative applications are simply enabling retailers to deliver an expanded number of combinations of product plus experience. Physical constraints like space, time, and distance are significantly altered.
The key to all of these trends is that they are continually and swiftly evolving. The “location” of retail is cyclical. I remember in the ’70s when the supermarket where I worked in Chicago had food courts and seafood shops. Those items were taken out in the ’80s. Now they’re back with a vengeance. The shopping experience has never been more top-of-mind with retailers, CPGers and customers, as well.
The shopping experience is also driven by the channel(s) in which it is executed. That is the “access” piece. A major global retailer told me they no longer wish to be known as a retailers, but more as a “service provider.” Therefore, the “ownership” of the product is deemphasized. Again, this activity will drive the shopping experience and its outcomes. So the product category will also differ based upon the experience the retailers wants to create.
Communication, of all types, social media, the devices used, etc., will, more than any other aspect, continue to evolve quickly. I remember only a few years ago presenting to clients about how MySpace had become the 10th largest “country” in the world. Well, Facebook has far surpassed that and as this article states, may be showing signs of waning.
The key is to watch the trends, proactively drive the shopper behavior based upon those trends, and see these trends BEFORE they become popular trends! How do you do that? There are companies using some great tools right now, globally, and are changing their entire corporate strategies based upon their findings.
This is a great look into the future that must scare the pants off of most retailers. There will be more of a change in retail as we know it in the next 10 to 15 years than there has been in the last 100 years. It will be driven by technology and the points highlighted by the folks at the National Retail Foundation.
Which of the points is most critical? #2! Value isn’t created by purchase; it’s created by access. The reason #2 is most critical is because it applies to the other 6 points.
When on thinks about it retailing has always been driven by access. At one time it was a Woolworth in every small town. It was the Sears catalog. It was the Malls of the 60s. Today it is online and on my way. Even today almost no one ever needs to make a special trip to purchase what they want. They either drive past it or order it from home and have it delivered.
What a great line, “Thanks to digital technology, shopping is no longer a discrete activity. Shopping happens.”
We might not be in Kansas — but we can still see it from here.
Let’s take these points in order:
(1) Not all consumers are looking for an experience. Some of them just want diapers. That said, location as a way of accessing experience is also still important. We’re not quite all digital yet.
(2) As the success of Aldi, dollar stores and Walmart attest there are still plenty of folks out there looking for value.
(3) I think there is a lot of power in subscription models but again it depends on the product and the consumer.
(4) The fact that everyone seems to be trying to be everything to all people doesn’t make it right.
(5) Please–every transaction has the potential to be a MEANINGFUL communication, but most fail because not everyone is looking for meaningful communication when they buy a newspaper, grab a cup of coffee to go or even rush in to a store with a specific purchase in mind.
(6) No argument other than to say we’ve just scratched the surface.
(7) Facebook is the tip of a digital iceberg that will redefine how we live. It’s a step along a much more robust journey, not an end in itself.
These seven capture the essence of the profound changes that are occurring at the retail level. The one that I found most enlightening was that shoppers want subscriptions rather than the transaction experience. Shoppers at all levels and in all demographics seem to be looking to establish their team. The team used to consist of their insurance agent, their broker, and their pastor. Now folks want help in how to dress, how to pursue their hobbies, how to decorate my home, how to give the right gift, how to entertain, and how to plan for a family vacation. Each of these is inextricably linked to retail and to the retail experience. Smart retailers will earn the trust to subscribe their best customers. The outcomes will be staggering to the best subscribers.
I am largely sympatico with these tenets. But the question at this point is–what’s different here? I feel like we have seen this already.
Nevertheless, the conversation about Facebook is interesting. I believe that the web is the new public stage for action and interaction. It is the new version of the agora, including the promenade and social spectacle. Consumers feel that face-to-face interactions are more private (fewer people to see what’s happening) and cyberspace is the public space, because it is essentially broadcast.
Because of this, I believe that there is some longer-term relationship between commerce and Social Networking, but I am not sure that the current manifestation of Facebook Commerce is it.
The experience the I and most time-starved consumers that I know desire is to be able to acquire desired products at a value-appropriate price in a time-window appropriate for my need and that product. Technology including smart phones, improving web product presentation, improved inventory management (think advanced merchandising apps) and infrastructure strength (including security, networking, mobility, storage, etc) are the Yellow Brick Road that will enable superior retailers to deliver that experience in Toto. (OK, total…but I wanted to keep with the YBR theme.)
These are useful observations. And Ralph and Liz are right…They provide evidence of longer term meta-trends more than new trends themselves. The uber points are about channel convergence, platforms as retail, and data breakthroughs.
First, channels are converging. Points 1 and 4 about “experience” are really new evidence about channel proliferation and trip missions. Mass merchants like Meijer, Walmart and Target entered into grocery decades ago. Starbucks added game sales and booksellers added cafes in the 90s. Even category killers need new categories to grow.
Second, platforms have become retail. Points 2, 6 and 7 speak to omni-channel. Mobile phones do enable retailers to make shopping easier and faster. But PCs do this for a more habitual audience. Facebook migrated from social to commerce just like Amazon migrated from commerce to social. Platforms become retail when user bases reaches critical mass.
Third, data is enabling breakthroughs. Points 2, 5 and 7 are the offspring of databases and digital channels that ingest and produce data. But while new retail checkout processes and new storefronts like Netflix and Amazon enable relevance, they are further milestones in the longer loyalty trend that yielded direct mail offers and grocer club card programs.
It’s much harder to synthesize an entire conference into 7 points than to boil 7 trends down to 3. Thanks to Denise for a thought-provoking article.
I am next in line at Starbucks. The fellow ahead of me orders a coffee, leans toward the laser scanner with his cell phone and swipes it. Coffee paid for! See #6 above.