I was happy to read this recent story in Forbes about “Retail’s New Dawn” where, despite some vexing challenges, retailers are pioneering a new, highly personal, customer-centric landscape “deeply rooted in technology and powered by customer data and aided by machine learning.”
This, the article notes, will result in brands’ discovery of new models and experiences that are not only personalized but are “distinctively human.” I couldn’t agree more, and in fact authored an article for WWD in November that pointed out everything that’s going right in retail.
I believe there’s more going right in retail, right now, than there has been in years. Need proof? 2017 was the strongest year for retail sales growth since 2014; in addition, retailers had their best holiday season since 2010. There are several factors driving the retail renaissance:
Retailers are realizing and acting on the fact that brick-and-mortar and online retail are distinctions without a difference. Shoppers just shop and they want the same connected experience whether that’s in stores, online or on their phone. I led a panel discussion where Wijnand Jongen, co-founder and chairman of e-commerce Europe, put a fine point on this. In his new book, “The End of Online Shopping,” he argues that neither brick-and-mortar nor online can independently keep up with changes in consumer behavior and that the impact of digitization into every aspect of our lives will lead to the end of online shopping as we know it today.
Further, at last Fall’s Shop.org conference, Steve Dennis of SageBerry Consulting noted that “Speakers mostly ignored online shopping as a stand-alone concept. Instead many emphasized the importance of brick-and mortar-stores in delivering a remarkable customer experience. Many retailers are offered solutions that were very much anchored in online/off-line integration, not e-commerce optimization.”
We will be on the lookout for further evidence of this at ShopTalk (come check us out there!) later this month.
Retailers, shocked out of complacency, are finally making the investments required to meet consumer expectations. Gartner forecasts worldwide retail IT spending growth of 3.2 percent this year to $208 billion, outpacing 2.4 percent overall spending growth. Further, it is forecasting CAGR of 3.8 percent until 2021.
As IHL noted in a recent report, progressive retailers have decoupled IT spending growth from their previous year’s revenue, “In some cases growing spending seven times faster than the weakest competitors in their segment to better compete.” Retailers, IHL notes, “do not need to outspend Amazon and Wal-Mart but need to outspend their weakest competitors.”
Stores have never been more exciting. Retailers and brands have gotten the message and are investing in transforming the shopping experience in many ways such as right sizing and closing underperforming stores and experimenting with smaller footprints or in some cases, no merchandise at all.
Some retailers including Ralph Lauren and Rebecca Minkoff are piloting cool technologies like magic mirrors to enhance the experience. Other retailers are focusing on community like Nespresso with its immersive coffee experience.
Compelling partnerships such as Birkenstock and Barney’s on a “pop-up box” concept in New York, Germany’s Englehorn and its Tesla showroom, Neiman Marcus and Rent the Runway and even Kohl’s and Amazon show that the industry has in large part abandoned the “stack ’em high and let ’em fly” strategy and is embracing experiences and hospitality as they reimagine their formats and the best way to serve not shoppers but consumers.
Brands are digging deeper. It’s tempting to think that consumers, especially younger ones, have no brand loyalty and will simply buy whichever brand is cheapest and delivered fastest — and that is surely the case for some. But we see strong evidence that the emotional connection a consumer has with a brand persists. REI, Ashley Stewart, Tom’s, Starbucks, Warby Parker, Patagonia — these brands represent something that their customers can relate to, and it’s not low prices and free shipping.
When measured against retailers, individual brands accounted for far more traffic and orders from social media channels, a primary vehicle for brands to engage with their customers.
To be sure, these are challenging times in retail, with new winners, losers and disruptors emerging constantly. But it’s also the most exciting time with the pace of innovation, depth of customer engagement and personalization happening faster than ever.
Check out our guide to commerce in the cloud, which explains how cloud is a key enabler of innovation.