NRF: Tech that capitalizes on physical retail’s strengths
At a keynote session Sunday at the NRF Big Show, Bill Simon, former president and CEO, Walmart U.S., said he believes pure e-commerce plays are "starting to see a peak." At the same time, arriving technology will finally help retailers capitalize on physical retail’s inherent strengths.
Mr. Simon spoke as part of a session entitled, "Brick is The New Black: Reinventing the Brick-And-Mortar Experience."
"It’s pretty one dimensional," he said of the e-commerce shopping experience. "You get what you want and you get it at some point in the future."
Indeed, he believes most of e-commerce’s robust growth in the last couple of years has come from its "interaction with physical retail" and that continued omnichannel pushes should play to the advantage of retailers with physical stores.
A major reason for e-commerce’s rapid gains over the last few decades is that pure-play e-tailers have "done a much better job than physical retailers in using and adapting technology."
E-commerce, he contends, is just a technology-pumped version of the catalog business started by Montgomery Ward and Sears. He added, "It’s just a faster, broader, more efficient, more effective catalog and it gets to your home much quicker. But from a customer perspective, it still has those inherent flaws. It lacks immediacy. It lacks sensory. It lacks that social interaction that you get from [physical] retail."
Still, the second major issue facing retailers is that customer expectations have "changed wildly" with shoppers expecting the same experience online as offline. He said omnichannel, with its ability to help customers reach consumers through mobile devices as well as to deliver products from varied locations, is already helping retailers use "technology to deliver great product, great prices and great customer service."
Mr. Simon admitted that search online continues to be "way better than it is in the store" with the ability to type in an item, sees pages of listings on that product, comparison shop across retailers, and find reviews. But he asserts "the technology is available today in physical retail to have almost the same purchase experience as you do online in the store. We just have to get ourselves up to speed to be able to deliver it."
Much of that technology will be driven by "the availability of data and the increasing sophistication of customers," including shoppers’ increased access to data. But, he insists, "The universal truth has not changed in thousands of years." Regardless of channel or format, "If you take care of your customers with good merchandise and service, you win the day."
Discussion Questions
Which technologies will do the most to help the physical shopping experience match and/or exceed that of online shopping? Which “inherent flaws” of pure play e-tailers should retailers with physical stores take advantage of?
Mr. Simon’s observations are spot-on. I especially like his reference to searching. The ability to find the right four-foot section where an item is stored is huge—at least for shoppers equipped properly. Physical stores have several additional inherent advantages over digital commerce, including the most efficient supply chain on the globe. Stores are much closer to homes. The issue is order picking. Someone will get this right soon.
Then there’s my favorite, the frequent shopper program. Hard to imagine a more robust and largely un-mined database of purchase behavior. Reason it’s my favorite: The opportunity to deliver automated replenishment to homes. We can do it to stores. Why let digital retailers have this connection?
“When will we ever learn? When will we eeevvver learn?” Peter Seeger didn’t hold up much hope back in 1955 when he wrote those lyrics, and when it comes to understanding the retail customer I’m not sure much has changed.
The last quote in this article is true enough, what isn’t is that somehow it’s technology that will provide the illusive “social interaction” we think essential to the brick-and-mortar experience. Treating customers as source code isn’t going to do it for you. Why on earth are physical retailers trying to out-technology their online competitors? I just don’t get it. Wouldn’t it be better to focus on creating something amazing that is impossible to duplicate online?
Look at what Mr. Simon apparently said: “The technology is available today in physical retail to have almost the same purchase experience as you do online in the store.” Could there be a more despairing comment about the future of physical retail? “Where have all the customers gone, long time passing … “
Let’s be clear here, layering more and more technology in the store (or more features for an omni-commerce site) without the underlying technology and business process foundation is a priority mismatch.
To deliver on exceptional customer experience you do need to know what your stock position is every second in every store and DC or the exact delivery time of that next shipment for that hot item your customer is asking for, or empower your customers to decide and track their deliveries to any destination they desire, 24/7.
So beacon technology, informational kiosks, digital signage, immersive displays, checkout payment options, loyalty programs, personalized selling, integration between the physical and digital—all these are awesome and worthy pursuits but do need to build on a robust real-time inventory foundation with a 360-view of customer interactions all wrapped in maniacal focus to deliver top-notch service to the customer.
Physical stores have a single fundamental advantage that online e-tailers will never be able to match—physical stores can deliver full sensory experiences. Touch, smell and taste will never be replicated online. It is these senses that brands and retailers alike should leverage to their fullest potential.
Re-designing and activating new immersive retail experiences that meet and exceed the expectations of the digitally empowered shopper while leveraging the sensory advantages will maximize, optimize and reinvigorate the store. Building this new store on the foundation of providing your customers with good products and excellent customer service will, as Mr. Simon stated, win the day.
The emergence of proximity targeting (through Low Energy Bluetooth [BLE] and other connective technology) within the physical store has plenty of potential provided that the retailer owns the initiative. Currently there are a good number of third-party providers that can bring brand content to the shopper via shopping app or in-store display, but without retailer support and content, the programs will have very limited appeal due to lack of relevant content.
On the flip side of the equation, brick-and-mortar retailers still have the “visceral advantage,” in that shoppers can touch, feel and in the case of grocery, sample the product before purchase. Accordingly I think there remains significant opportunity for physical retailers to value-add the shopping experience through trained associates, suggestive selling and the right mix of new technology to hasten the shopper’s purchase process.
Mr. Simon asserts that online has “done a much better job than physical retailers in using and adapting technology.”
Could it also be that e-commerce has simply done a much better job of serving consumer needs and providing value that they can not get in stores? Like much wider assortments, products in stock, good/best prices, service to your door and great service after the sale!
Yes, there is a great opportunity to apply technology to improve the experience in stores. It is a necessary component, but not sufficient to create an experience that differentiates stores. The ability to interact with quality, friendly, knowledgeable staff trumps technology every time.
Bill Simon says “If you take care of your customers with good merchandise and service, you win the day.” The real challenge for retailers is to define service. Is it access to “immediacy” or information or reviews or the best price?
I have yet to see the analysis that differentiates categories by which channels deliver greatest success—so far. Of course we know that home electronics sales are very connected to knowledge delivered by the internet (at home and mobile), but maybe less so by in-store sales people. And retailers can use that information to better direct their marketing strategy.
But other categories evolving with mobile may require their own unique strategies to engage consumers and influence where they purchase. It makes sense to me for retailers to acknowledge that the days of one size fits all doesn’t cover their marketing efforts.
Here I go banging the research drum again. I am convinced that if retailers understand what makes their customers and prospects shop where they shop, for specific categories or products, they can align their technology tactics accordingly.
Indeed, “If you take care of your customers with good merchandise and service, you win the day.” Technology can support and influence shopper behavior. But to deliver a great experience within the framework of both online and in-store you have to know what makes your customers feel they are receiving good service from you.
I believe that technology might aid and facilitate the customer experience but the key to in-store success is going to be in designing experiences.
Experiences that start with the customer’s path to purchase, take into consideration exit points as well as touch points and ask the question, “What can we do or what can the product/service do at each point to keep the customer moving along?”
… And that is still my two cents.
Start first by paying attention to how different consumer segments are making use of technology. As Simon points out, e-commerce has done a more complete job of helping the consumer through “search.” The December 2014 Prosper Insights & Analytics Monthly Consumer Survey points out that 44.1 percent of adults regularly search online prior to buying. Males register at 46.6 percent and females at 41.7 percent on this scoring.
Other segments who search regularly before buying—married Generation X (51.6 percent), married Millennials (56.8 percent), African-Americans (43.8 percent), Hispanic males (48.1 percent), Asian-Americans (51.0 percent). Whether that search happens on a PC/laptop or digital device such as a tablet or smartphone, retailers have to remain engaged with the consumer, and be prepared to influence their purchase decision, if they are to impact sales prior to or within stores.
Technologies that mimic the online experience with products that are immediately available will make the biggest difference for retailers. Such technologies as real-time search, inventory look-up, personalized offers and online customer service have the potential to reconnect a specific customer segment (those who wish for immediate gratification and have a higher technology comfort) with stores.
Not happening yet, but there are fewer and fewer reasons why stores will not venture into this realm.
There’s a reason Mr. Simon no longer occupies his former office.
Old warning: When retailers speak of retail, they usually have a segment bias—if you sell low risk merchandise or commodity/branded products that can be replenished on a schedule, it’s going to be tough
Now to your questions.
RE: Tech that helps physical v. online
RE: “inherent flaws” of pure play e-tailers v. Physical
General
Apparel
Big ticket
Of course Mr. Simon is right. The “online world” as a discrete sphere is ceasing to exist… it’s just becoming part of the world. That is, it used to be to “go online” I’d have to go make a concerted effort to sit in front of a computer. That meant online retail was a choice of what channel I wanted to use. To those of us over 40—or over 30 for that matter—we probably still have some residual from thinking that way.
But it isn’t the way the world works anymore. The effort to interact with apps or mobile/tablet search is minimal and it just becomes part of every interaction. There’s no barrier (I think about how many times I use search on my phone to look up facts real time during a conversation!). So it’s just part of the normal interaction pattern in the world.
That’s the beauty of “omnichannel.” It’s not about integrating online channels and offline channels. It’s about the fact that people are constantly getting information and making decisions using lots of different media. And my children will think it weird to make any distinction.
Brick & mortar retailers have a bias toward an attitude that this isn’t worse than it feels. Millions of consumers are becoming more accustomed to, familiar with, and predisposed to shopping online for a large majority of their purchases. Shopping is NO LONGER an essential part of life today, nor will it be in the future. And the option of shopping is being taken less often. Sure there will be retailers that make it through along with brand new ones, but there will be many fewer in total.
Let’s look around. Same store sales in categories where younger people buy are suffering the most. Toys, younger fashion clothing, electronics. This is not a reversible trend. Food is increasingly being ordered online whether picked up or delivered.
Total online revenue may still be a small part of total retail sales and that is like the iceberg that sank the Titanic. It was seen too late and did much more damage where it couldn’t be seen. Everything was fine for a while, then when it was too late they realized that it would sink, it sank.
The last chapter of retail may have already been written. Just because we haven’t read it doesn’t mean it isn’t happening.
I think that the in-store and online shopping experiences both have a lot to learn from one another. Target is on to something with its Cartwheel app. While it primarily serves to provide discounts to savvy shoppers, it also has the potential to provide extra product information and even help shoppers locate items.
The most obvious flaw of pure play is lack of interaction—with the products and the consumer. You can only build so much loyalty with an email and live chat, compared to knowing an employee by name and consistently providing great service and recommendations. Going back to Target as an example, retailers with physical stores should take advantage of face to face interactions and really acknowledge their shoppers. Say a shopper has a REDcard and makes a purchase; have the sales associate thank them by name to improve the interaction.
Future retailing will be online focused and a merger of online and brick and mortar when appropriate (like test driving a car). Perhaps the biggest flaw of pure etailing is that you cannot get the product immediately. Thus restaurants, QSR locations, gas stations, etc. are protected from a pure etail play, but all retailers should take advantage of the ability to target their markets better, and differentiate their products from all of their competitors.
I agree with most of Simon’s sub-points: improving the overall experience through the smart integration of technology and experience across channels is the healthy way forward for almost any retailer with existing stores.
The problem is that very few retailers are doing omnichannel well and many pure plays continue to excel at eCommerce, so I would not call a “peak” on the growth of eCommerce any time soon.
Augmented reality apps that interact between physical and virtual retail channels, such as Slyce and Shopper, are available on smartphones for consumers to use, and work to enhance and expedite the physical shopping experience.
Using advance visual recognition technology, these apps allow shoppers to take a picture of product they like with a smartphone and then be presented with the item, or a similar item, in a retailers stock. Neiman Marcus recently integrated Slyce into their native mobile app. So, say you are with a friend and like their jacket. You can take a photo of it, through the Slyce app, and see similar jackets available at Neiman instantly.
These apps will pave the way for augmented reality shopping in the future through Google Glass and Oculus Rift.
The greatest value to the consumer of omni-channel and the physical to virtual seamless shopping experience is something that brick and mortar retailing can no longer provide, it is adaption. Consumers can adapt retail to their needs, they can personalize, create, share and curate, 24/7.
I know we all get all jiggy about online shopping, however, as I see recovering economies around the world and their key shopping zones, I don’t think physical stores as a “species” have anything to worry about. People still need to touch and see and smell the environments of human presence while shopping. The key is to continue to generate compelling reasons for these shoppers to shop YOUR store.
I think the key is to enable the employees technologically or use technology to enable shopper to talk to a human in the store, plus make the products available to the customers inside the store with great supply chain. Putting more touch screens, Wi-Fi, and make the store a giant kiosk isn’t going to help because you are just moving the online experience offline. I don’t need to talk to Siri when I am in the store, I want to talk to a competent live person.