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Mar 01, 2017 @ 02:03 by Max Finne

Future of retail: How digital enables new brick & mortar concepts

Retailers need to provide customers with a seamless omni-channel experience to compete against digital pure players. They have to find a way to merge the online world with successful offline store concepts

The store is now the biggest product we produce […] (Ahrendts, 2016). This statement posed by Apple’s Senior Vice President of Retail indicates what many industry experts believe to be true: The role of retail, now often part of an omni-channel concept, has changed. Retailers have to find a way to merge the online world with offline experiences to provide consumers with a seamless experience along the two channels. This development is motivated by the fact that consumers are more and more empowered by their mobile devices and have fast access to information. Also, consumers’ expectations raise towards more personalized and convenient shopping experiences along which they can seamlessly switch between online and offline channels.

A legitimate question that can be raised at this point is concerned with the role of digital. How can digital (technologies) support retailers in connecting online and offline channels and thus help creating a seamless customer experience along different channels? Possible options range from a simple in-store touchscreen to a fully integrated backend with one customer account and shopping basket. In the following, we intend to provide three insights regarding the role digital plays in the implementation of an omni-channel concept, how digital supports the provision of more convenient and personalized customer experiences and lastly, how analytic tools can add value to retail businesses and help mastering the fusion of online and offline channels.

Shopping and augmented reality

Integrated omni-channel is gaining ground

Spotify users often use various devices to access their music. For example, they might start listening to their music via a laptop and then switch to their smartphone while changing the physical location. Spotify has made the transition between devices seamless and intuitive. When opening the smartphone app, the user is prompted with the option to continue listening on the smartphone (or even use it as a remote for the laptop) and the music continues directly on the chosen device.

In this regard, Spotify takes on the role of a best practice example for retailers aiming to develop a truly integrated omni-channel concept. Thus, retailers should use digital technologies to connect their on- and offline channels in a similar way to allow users the seamless integration they demand. Products placed online in a shopping cart are made available for try-on (fashion) or testing (electronic) upon entering the store. Receipts of products purchased offline are directly uploaded to the customer account, enabling easy returns (in-store or via mail) or reclamation in case of defect.

One retailer that already started to provide customers with a seamless online and offline experience is the U.S. based DIY retailer The Home Depot. U.S. customers have the opportunity to create an account on their laptop. They can then start placing items into a newly created shopping list. In case customers decide to shop for the items in a store, they can re-open the list via the app on a mobile device upon entering the store. For each item, the customer can view the current inventory level and furthermore has the opportunity to open a detailed store plan with the location and the fastest route to the item desired. Upon completing the store purchase, the keypad (when paying by credit card) asks customers whether they would like an eReceipt and can proceed by entering their email addresses.

Retail needs to become more convenient and personalized

Next to focusing on providing consumers with a seamless switch between devices, the provision of more convenient and personalized experiences along the customer journey has become another focus of attention. Recommendation engines are fed by online user behaviour and big data, which can foster cross- and upselling. Brick and mortar stores do not offer comparable features these days, with personalization being mostly limited to advice from store assistants. Digital technologies can remedy this situation. The global furniture store Ikea provides an example for a retailer who has taken a step towards providing personal shopping experiences by applying Beacon technology . Consumers who have the Ikea Family app installed on their mobile device and have their Bluetooth turned on, receive particular personalized push messages upon entering the store or while moving through the store. Like this, customers are either encouraged to check-out a certain product or take a coffee-break when being close to the in-store restaurant. This technology enhances the consumer experience as it connects preferences developed and expressed online with an offline shopping experience. Thus, retailers are enabled to offer customers a unique shopping experiences along both channels.

In addition to turning the customer experience into a personalized journey, enhanced consumer convenience has become a focus of attention. The international coffee chain Starbucks is currently undergoing a beta testing phase of its new ‘My Starbucks Barista’, a digital assistant embedded into the app. ‘My Barista’ allows for customers to verbally place and pay for an order, which can later on be picked up at a close-by store. This technology is also to be integrated in Amazon’s ‘Alexa’, which enables customers to order their standard morning coffee-combo, for example. This service makes it more convenient for consumers to get to a product that is part of their daily life, and adds value as it safes waiting time.

Get to know your customers

In the end, the idea of providing consumers with a seamless online and offline experience that is more convenient and becomes more and more personalized, breaks down to getting to know the individual consumer. Brick and mortar stores are often operated based on high level data and assumptions. Revenues (per category), in some cases traffic counters and feedback from store assistants are the basis for deciding on a store layout and products displaced. Meanwhile online, companies have endless possibilities to track their customer’s behaviour online and constantly optimize their offering via A/B testing. Consequently, it becomes highly relevant for retailers to also collect consumer behaviour in the offline world.

Businesses like the analytics company RetailNext or the cloud computing giant Salesforce have recognized this situation and provide retailers with service packages to collect consumer data and analyse it in order to gain insights. This is done by making use of physical and digital resources like Video Camera Feeds, PoS Systems or Workforce Management Systems. Thus, collecting data like a consumer’s physical positions and movements through the store, taking into consideration external conditions like public holidays or weather conditions or the use of RFID technology allow to create a detailed customer profile. The data of one consumer can be aggregated with the data of various other consumers, which enables a retail store to for example place popular items at visible places in the store, place not so popular items next to it to push sales or gain insight on products that can be cross sold.  

Retailers need to play the digital instrument

In conclusion, digital serves rather as an instrument or a mean for the omni-channel purpose. Retailers that intend to neatly connect online and offline need to adapt their business concepts and understand the role digital should play in a particular part of the customer journey. Overall, digital is barely able to serve as a benefit as such and relies on the deep integration into an overall business concept in order to deliver real value. If you want to learn more about successful omni-channel strategies or need help in this area, please get in touch.

Max Finne is a Consultant at dgroup. His expertise lies in digital business transformation, with a focus on retail.

Carina Thum is a Digital Analyst at dgroup. She has experience in digital business transformation and online marketing.

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