Tag Archives: online

The Future of Retail: trends to be aware of

The following is an anstract from a great article “The Future of Retail” by IDEO‘s Dana Cho and Beau Trincia published on “The Rotman Magazine”, Jan.2012. Full version available here. Enjoy and comments are welcomed!

“TOUGH ECONOMIC TIMES have hit traditional retailers hard, particularly in North America. Circuit City and Borders have filed for bankruptcy; Ann Taylor and Home Depot have closed hundreds of stores; and American Apparel is reportedly millions of dollars in the red, to name but a few. The official reasons for these failures range from overly-aggressive expansion strategies to unfortunate investment decisions – but, in reality, a big driver of this retail upheaval is old-fashioned belt-tightening

Store owners have long believed that the ‘thrill’ of shopping – that visceral, emotional rush that people get when touching or interacting with a product before they buy it – would uphold their popularity. But e-commerce Web sites are disproving this axiom by generating similar excitement online with concepts such as ‘flash sales’ and ‘social shopping’. For example, GILT Groupe offers its members daily flash sales, which feature luxury goods in low quantities for an extremely limited time, giving people only a few minutes to make purchase decisions. The site, which launched in 2007, now has a valuation of US$1 billion. Meanwhile,  Svpply has built a social network around shopping, letting its users track trends, including the items their friends buy. Its popularity has grown seven-fold since its introduction in late 2009.

As online retailers slash shipping times and costs to next to nothing, bricks-and-mortar retailers can no longer depend upon instant gratification as a competitive edge. Online giants Zappos and Amazon now send purchases overnight at a discount and provide second-day service for free. The success of these tactics suggests that virtual storefronts can be at least as effective as physical ones, if not more so. So, how can bricks-and-mortar retailers survive – and thrive – as consumer attitudes and buying habits change?

Although digital channels may be better positioned to provide short-term transactional value, bricks-and-mortar stores still give retailers the best space in which to establish long-term connections with customers. Let’s look at how a few companies are shifting their mindsets and moving from driving transactions to encouraging inspiration and discovery; from featuring ‘expert staff’ to ‘informed enthusiasts’; from targeting shoppers to targeting product owners; and from focusing on revenue generation to R&D.

During the 2010 holiday shopping season, 48 per cent of consumers who used a smartphone in some way said they purchased goods in retail stores, while nearly as many – 45 per cent – bought items online via computer. However, the majority also said that, regardless of how they ultimately acquired the product, they had visited an actual store to browse. This suggests that although consumers often opt for the convenience of digital channels to make purchases, bricks-and-mortar stores continue to play an important role in the shopping journey – primarily where product discovery and inspiration are concerned.

From Driving Transactions to Encouraging Inspiration

J.Crew’s Liquor Store provides a prime example of doing exactly that. J.Crew opened its first men’s clothing store in 2008 with the goal of inspiring exploratory shoppers – people who weren’t current customers of the brand. At the time, J.Crew’s menswear had little following, and the retailer sought to raise its profile through a dedicated storefront. It took over a historicwatering hole in New York’s TriBeCa neighborhood, and rather than focus on packing in as many items into the 935-square-foot.

Customers today want retailers to be less about well-orchestrated brands and carefully rehearsed answers and more about transparency, authenticity and passion.  Rotman Magazine Winter 2012 / 49 store as possible, J.Crew kept the bar’s atmosphere intact, stocking shelves with bottles and filling the room with vintage furniture and non-J.Crew brands such as Timex,  Red Wing and Mackintosh. Retailers who believe in conventional wisdom would consider this a waste of precious floor space that could have been devoted to as many sellable brand-specific products as possible. However, J.Crew’s goal was to raise awareness of its men’s line – and pique the interest of potential customers. The concept appears to be working: J.Crew has subsequently opened three more Men’s Shops, and although the company declines to provide sales figures for individual stores, CEO Micky Drexler recently told investors, “We are beyond thrilled with the performance of our stand-alone men’s stores.” J.Crew earned $44.7 million in the first quarter of 2010, up from $20.4 million during the same period a year ago. In addition, its chief menswear designer, Frank Muytens, was ranked among the top in his field in GQ’s 2010 Best New Menswear Designers competition.

Using physical spaces to drive inspiration rather than transactions isn’t limited to the retail industry. In 2010 Crédit Foncier, a mortgage lender in France, invested in a high-profile store in Paris’s Opera district to inspire people to want to own a home. Most lenders make in-person visits from prospective borrowers as perfunctory and short as possible, gearing information toward people who plan to buy a home in the near future. In contrast, Foncier Home targets anyone who might be thinking about home ownership – even if it’s just a long-term goal or dream. The store includes a café, where people can meet casually with a real estate agent while looking over residential listings. It also includes a section with information about renovations and remodeling – services that Foncier Home doesn’t yet offer but are an exciting, aspirational aspect of home ownership. Although the company sells nothing tangible and has no real need to maintain a large retail space, Foncier is banking on the notion that a discoverybased experience such as the one made possible in its flagship store will encourage more people to become home buyers. And when they do, Foncier Home will be top-of-mind as the go-to lender. Crédit Foncier expects this concept to drive growth in the future and has plans for expansion.

From Expert Staff to Informed Enthusiasts

Powered by social media, peer recommendations are gaining ground in power and influence. The fact is, as consumers rely on friends, social networks and other independent resources for expert information, the role of the store associate is shifting dramatically.

The new purpose of a retail store lies in its ability to represent an organization’s actual culture and values, captured and rendered by its sales associates. Customers today want retailers to be  less about well-orchestrated brands and carefully rehearsed answers and  more about transparency, authenticity and passion. Store associates, therefore, need to evolve from ‘expert staff’ into informed brand enthusiasts who are proud of their organization.

The shift from being an expert to being an enthusiast – someone who believes in the brand and organization they work for and can speak passionately about the products at hand – has less to do with scripted service and more to do with organizational design. Many leading-edge U.S. retailers have taken similar personnel-oriented approaches. Perhaps the best known is Apple, which transformed consumer technology retail with its retail stores. For the Apple Store’s tenth anniversary ‘refresh’ this year, the company invested heavily in supporting its enthusiastic store associates with service-enabling technology rather than in a redesign of the bricks-and-mortar interior

From Targeting Shoppers to Targeting Owners

Retail stores have traditionally been designed for shoppers with the intention to buy and, perhaps as a result, retailers have long depended on in-store marketing and communications to sell the quality and other worthy attributes of their products. Under the new paradigm we are describing, bricks-and-mortar retailers have an opportunity to acknowledge the value of the  product owner’s role as a brand ambassador and key influencer on other shoppers.

As a result, designing the bricks-and-mortar store for the consumer who already owns your products (versus the consumer who is shopping) can have profound effects on a brand. By focusing on participation in the store – through education, trials and membership experiences rather than marketing, promotion and sales – retailers are positioning themselves for a longer-term, more open relationship with customers, helping them successfully evolve with the 21st century.

Nike’s branded stores pull in repeat visits from owners via its Nike+ Run Clubs, which meet at designated shops worldwide. Building on its platform of performance-tracking products and Web site, Nike+ is now the largest running club in the world, with more than three million members. In 2009 alone, membership grew by 50 per cent. Athletes of all skill levels train together and are privy to product trials and expert clinics. Nike motivates owners to use its products as a group, and the group inspires other curious runners to join them – and buy Nike gear – through camaraderie and knowledge-sharing. Taking the concept a step further, in 2010, Nike opened its first ‘category experience store’ dedicated solely to the sport, Nike Running Stanford, in Palo Alto, California.

From Revenue-Generator to R&D Engine

The paradigm shift we are describing questions, at a fundamental level, the role of the physical store in a retail organization’s business. As the channels to buy continue to multiply – from new e-commerce models to mobile-phone payments – traditional retailers face more competition than ever before. If consumers can buy anything anywhere at anytime from anyone, bricks-andmortar stores needs to derive new meaning and value for their business in order to remain a strategic asset.

Fortunately for bricks-and-mortar, not all channels are created equal, and the traditional retail store maintains an important edge over the digital realm: the physical space provides a direct, personal connection with consumers. Smart retailers have begun using the storefront to foster relationships with people, which means going beyond selling products or presenting a well-orchestrated brand experience to understand existing and potential customers and their needs. In short, they are using the retail floor as a platform for learning.

These retailers realize that developing a new offering behind the scenes until it is exactly right is a slow strategy that doesn’t allow for quick adaptation in a rapidly-shifting market. Instead, they ‘beta test’ new offerings and experiences and quickly pivot the offering on the fly as dictated by actual customers. For example, at the height of the recession, Urban Outfitters opened an experimental store in Los Angeles called  Space 15Twenty, which aims to attract – and study – customers other than its typical college student. Brand collaborations with Santa Monica bookseller Hennessey + Ingalls and New York vintage shops What Comes Around Goes Around and Generic Man act as magnets for people who don’t typically shop at Urban Outfitters.

In a sense, it’s a store for tomorrow’s customer, rather than today’s sales. The store is an investment in market reconnaissance, rather than solely a means toward hitting revenue targets and achieving profitability; its primary goal is gathering customer information from which Urban Outfitters can learn. While recession has hit some retailers very hard, in the first quarter of 2010, Urban Outfitters saw a 72 per cent increase in profits.

CEO Glen Senk credits creativity and experimentation. “We don’t go about revenue and profit as a goal. Rather, we focus our energies on the customer experience: innovating, making beautiful products, really pushing the limits of our brand expression and constantly refining how we operate. Revenue per square foot is the result of that focus, rather than the starting point or motivation.”

A new open online platform to share knowledge on hotel sustainability by Accor

Accor, the world’s largest hotel group and operator of brands such as Ibis, Novotel and Sofitel, said it had launched the online platform to make information on sustainability, including, research, surveys and case studies of good practice, available to any operator, whatever their size, for free.

The move coincides with the completion of a major piece of new independent research by Ifop on behalf of Accor that shows the vast majority of hotel guests are concerned by sustainable development.

Research findings
Accor’s executive vice president for sustainable development, Sophie Flak, said the findings confirmed there could be no more excuses for hotels not taking action on environmental, social and economic development.

“Sustainability is a very well known concept among hotel guests,” she said. “Discovery has gone; it is time for concrete action.”

The survey of 7,000 Accor guests across six countries, including the UK, France, Germany, Australia, Brazil and China, found that eight out of 10 hotel guests felt sustainable development was important to them. It also revealed that guests had high expectations for hotels to take action across four key areas: water, energy, waste and child protection.

But Flak said one of the most important findings of the survey was that a majority of guests now expect a hotel that implements sustainable policies to be a comfortable one to stay in.

“66 per cent of guests said a responsible hotel was a comfortable hotel,” she said. “No one can tell me now that they can’t set up a sustainable hotel because it will not be comfortable.”

Environmental targets
Accor, which operates 4200 properties across 15 brands in 90 countries and employs 145,000 staff, launched its own five-year sustainability programme, Earth Guest, in 2006. The programme, however, has only been partially successful in meeting its objectives. Accor set itself a target to reduce its energy by by 10 per cent between 2006 and 2010 but missed it by 4.5 per cent, while it only reduced paper waste by 53 per cent against a 70 per cent target. But it exceeded its target on water, cutting it by 12 per cent against a target of 10 per cent. It has yet to set targets on carbon emissions, said Flak, but will be doing so in a new environmental strategy the company will be announcing in early 2012.

Common standards
The release of the data, early next year, will coincide with the planned launch by the £3.7 billion international tourism industry of common standards to calculate and report on the carbon emissions of the sector.

Accor said findings of its latest research were now available on its open platform, Earth Guest Research. It wants other hotels to use it to adopt sustainable policies and said it plans to release several pieces of new research a year. In return, it is calling on other hotels to share their research and methodology so the whole industry can benefit.

“Sustainability can’t be handled by people who know nothing about it,” said Flak. “That is why we need these documents and facts.”

In September, the UN World Tourism Organisation launched an online toolkit to help hotels evaluate energy consumption, find renewable sources and cut their cost through improved efficiency.

via accor news | Accor creates open platform to share knowledge on hotel sustainability.

Retailers, get ready for tablet computer shopping revolution!

Shopping search engine Shopzilla recently published a research showing that the “tablet revolution”, as online shopping via iPads and similar tablet devices is set to climb high in popularity, just as it has done in the US.
The research reveals that although the iPad was only launched 12 months ago, 6% of European shoppers already own a tablet and a further 20% are considering buying a device in the next year. The majority of owners said it was as easy to use for online purchases as a personal computer.
This trend is set to mirror the US where the iPad is driving a revolution in e-commerce.  A recent US Shopzilla study showed that 12% of consumers now have a tablet device, and a further quarter plan to buy one in the next year. In the European survey, an overwhelming 5-to-1 ratio name the iPad as their tablet of choice.

The Shopzilla research was conducted in Europe’s three largest online retail markets: the UK, France and Germany.  It also revealed that almost 80% of current tablet owners view their device as an addition to their technology arsenal rather than as a replacement for an existing device.
The research by Shopzilla of almost 5,000 online shoppers, also revealed:
– Nearly two thirds (61%) of iPad or tablet users said it was as easy to shop online with their hand-held device as it was with their personal computer;
– The majority, 71%, had bought or would buy online using their device;
– Dual-screen technology meant 70% of tablet users even watch TV while browsing shopping sites simultaneously, which is really interesting from a cross-platform marketing point of view;
– 53% of iPad or tablet users surveyed used their device to browse shopping sites and share shopping experiences with friends, showing that social shopping has extented its power in real life too;
– 27% of online shoppers currently used a smartphone to browse shopping sites with friends

Rachel Smith, business services senior director at Shopzilla, said:
“Since their launch in April last year, an astonishing 25 million iPads have been sold worldwide, and with one in five online shoppers telling us they plan to buy a tablet in the next 12 months, this is clearly set to be a huge trend for UK  shoppers.”
Smith added: “The year of mobile commerce, which has been predicted for some time, is finally here. With the explosion of the tablet market we are seeing a seismic change, and the opportunity will be for the retailers who are first to get it right.” (Source: The Retail Bulletin, image courtesy of The Belton Group)

Multichannel marketing and value proposition: how do customers perceive value?

I was reading a very interesting article by McKinsey about the value proposition to offer to multichannel retail customers: it does not only competitive price but also the degree of trust they have in a retailer, its product assortment, and their previous buying experiences. The article goes on presenting two exhibits, both related to a U.S. based research whose results I think can be easily applied to many other other Western culture countries. 

Essentially, what McKinsey researchers state is that:
– multichannel retailers can use certain pricing moves to play the value card, applied to key value items, priced competitively to create a public perception that a retailer offers good value across the many retail channels a consumer uses: stores, the Web, or catalogs;
-retailers also can carefully craft product assortments in ways that influence value perceptions;
– value “heroes” with low price points should be overrepresented in online, in-store, and external marketing;
– tactics such as free shipping, in-store pickup, generous return policies, and price-match guarantees are critical drivers of value perceptions.

Online shoppers welcome home grocery delivery

Though few retail grocers offer home delivery of web orders, a survey from the Food Marketing Institute, a grocery industry trade organization, suggests that consumers respond more to web grocers that offer to deliver online orders compared with grocers that require pickup at their stores.

In 2010, 32% of consumers responding to an FMI survey said their primary grocery store offered online ordering, and 28% said they had done at least some online ordering at those grocers. 4% said they shopped online at those grocers one to three times per month, and 2% said at least once a week. But 22% said they shopped online at those grocers less than once a month, with another 73% saying they never shopped there online.

By comparison, the FMI survey showed that only 17% of respondents said their primary grocery store offered home delivery—but 13% said they ordered home delivery one to three times per month, and 5% said they did so at least once a week, higher figures than for when home delivery was not an option. 17% said they ordered home delivery less than once a month, leaving 65% saying they never did.

Regardless of the demand for it by consumers, however, home delivery of groceries isn’t for all retailers, experts say. “Home delivery is only going to work for really big folks with profitable online grocery operations offered in places where the retailer has a reasonable density of customers,” says Jack Horst, a retail strategist at retail industry consultants Kurt Salmon.

The category of “really big folks” surely includes Amazon.com, the largest web-only retailer, and Wal-Mart Stores Inc., the world’s largest retailer and the leading U.S. grocery merchant. Both Amazon and Wal-Mart are experimenting with home delivery of groceries.

Amazon’s program, dubbed AmazonTote, has been tested by the company’s employees in Seattle for the past six months or so. In its infancy, the service entails weekly delivery of groceries and other items to the user’s home, with the groceries bagged in reusable tote bags, all free of charge.

According to The Financial Times, the service is linked to Amazon’s Fresh grocery delivery service, which currently only operates in the Seattle area but is available to all consumers in that area.

Fresh offers fresh produce and meats in addition to non-perishable grocery items; the service goes beyond food, too, ranging from pet supplies to beauty products and other Amazon.com categories. Granted, the convenience is reflected in the price — would you pay $2.50 for a single grapefruit under any other circumstances? — but you get what you pay for, which in this case amounts to a lot of time and energy saved.

On the other side, the “Walmart To Go” test , just launched in California last Saturday, allows customers to visit Walmart.com to order groceries and consumables found in a Walmart store and have them delivered to their homes, a company’ spokesman said. Products include fresh produce, meat and seafood, frozen, bakery, baby, over-the-counter pharmacy, household supplies and health and beauty items. Wal-Mart also offers a Pick Up Today service, which is limited to select electronics, video games and appliances.

What Amazon also needs to fear is a new initiative from the company called @WalmartLabs.  According to GeekWire, this new Silicon Valley-based arm of the company is stating it has pretty lofty goals: “Walmart plans to expand the @WalmartLabs team and expects this new group will create technologies and businesses around social and mobile commerce that will support Walmart’s global multi-channel strategy, which integrates the shopping experience between bricks and mortar stores and e-commerce.”
In other words, exactly what Amazon does, except with the integration of brick and mortar stores.

Walmart seems to be turning its collective eyes towards technology more and more as of  late, the only real question is what took them so long.  If the discount store giant starts pouring its massive resources into more technology integrations, releasing its own products and taking on the likes of Amazon, we could see the company slowly take over eCommerce just as it did with the retail world.

The majority of grocery retailers still prefer store pickup of online orders, as MyWebGrocer* CEO Rick Tarrant says. But if the Wal-Mart and Amazon test will prove to be successful, we are pretty sure that at-home delivery will be the next big trend.

*MyWebGrocer, a provider of e-commerce and digital marketing technology and services to more than 110 grocery retailers, has supermarket clients including ShopRite that offer home delivery in some markets

Retail, web 2.0 and sustainability:an analysis

A recent Zumer and Sustainable Life Media research is helping medium to small size retailers to better understand what is the connection among sustainability, consumers and web 2.0 tools.

The survey analizes the behaviour of 50 of the biggest companies leader in sustainability, at a worlwide level. Names such as Chevron, McDonald’s, PepsiCo, Coca-Cola, Campbell’s Soup, Microsoft, Toyota, Starbucks appear in the list of the companies whose online conduct on the three top social media, Facebook, Twitter and YouTube was analyzed for six weeks between December 2010 and January 2011.

We have found three key points that can be summerized as follows:

1. Authenticity: sustainability must permeate the whole company and must involve the company’s stakeholders so that ensure an authentic online communication, a more effective management of external reputation and brand perception. This is perfectly in line with the Cone research we have posted a while ago: consumers DO PUNISH not authentic communication about sustainability.

2. Sustainability helps acquiring new market share: almost three quarters of the professional interviewed stated that sustainability-themed social media are the channels to be in in order to get the attention of new market segment and reinforce the company’s position in the more traditional ones

3.Mix platforms to get the best results: although Facebook is still the most favourite platform among the big 50 companies in the survey, with investments rising in 2011 too. Tweeting about sustainability is becoming very common too -investments will double by 2015, as well as are CSR dedicated company’s websites, while YouTube actions are still fragmented. Blogging about sustainability might be a very powerful tool, not yet fully implemented by companies (1-2% of total blog posts).

Business Retail: a global view

Retail is big, but how big it is and is it equally distributed worldwide or are there countries where retail is at its best?  

The last CB Richard Ellis Survey  about the business of Retail, reveals how fluctuating this market is, measuring how the most important 323 retailers changed their strategies in 73 countries during the last year.

The survey findings are very interesting, showing us that Dubai is the most favorite city for both American (61%) and European (63%) retailers, while only 23% of retailers from the Asia-Pacific area are present in that city – not because of lack of interest, but just because the Asia-Pacific consumer market is the fastest growing, therefore retailers from those countries do not need to branch out abroad.

Retail expansion rate saw a decrease during 2010, only a 2%, compared with 4% in 2009 and 12% in 2008, with new target countries being India (8 new retailers) and Turkey (7). United Arab Emirates (UAE), Kuwait, Ireland, Romania, and Belgium all attracted six new retailers.

Online retail is becoming more and more important for retailers: 82% of the brands in the survey do have an online catalogue, even though only a smaller percentage (46%) offers to consumers the chance to purchase goods online, with Value&Denim being the most active (43%) followed by mid-range fashion  (26%) and Luxury & Business Fashion (32%). To have an online retail shop is the favored choice by those brands who already have a physical store (46%), while in more advanced market such as the U.S.A., there is a slight percentage of online seller (24%) who do not have a physical store, and that are using online sales platform to test the market before opening a physical point of sale.

The state of retail online shopping in UK: January 2011 report

Shoppers in the United Kingdom spent 5.1 billion pounds ($8.3 billion) online in January, up 21% from one year prior, according to the latest figures from consultant Capgemini and Interactive Media in Retail Group (IMRG), a web retailing industry association.The travel sector generated some of the largest growth, as more shoppers took advantage of seasonal discounts on vacation packages. “Travel is one of the sectors of the U.K. economy that saw the earliest adoption of the Internet as an initial point of purchase and this trend shows no sign of abating,” says Phillip Rinn, director of advertising partnerships at eBay Advertising.

January travel sales were up 31% compared with the same month in 2009, and the average value of trips purchased was 886 British pounds ($1,439), the highest recorded in over two years. Many of those winter-weary travellers also bought luggage online, says Russ Carroll, U.K. managing director of comparing shopping site Shopping.com. “Shopping.com saw sales of luggage rise by over 20%,” Carroll says, “as many consumers decided they needed to get away from the miserable British weather.”

Hefty discounts offered by furniture chains also contributed to strong results for online home and garden retailers, as shoppers spent 56% more at these e-commerce sites in January than the year prior, according to IMRG results. “Home, on the back of our Clearance offer, had a very strong month with sales up over 30% on 2010,” says Jonathon Brown, head of online selling at general merchandise retailer John Lewis.

Alcohol sales dropped 67%, which IMRG attributed to shoppers’ desire to cut back after holiday excesses in December (Source: Stefany Moore for Internetretailer.com)