Change is on the horizon for retailers. We are seeing the impacts already with multiple big name retailers falling into bankruptcy and disappearing from our streets. This can be attributed to a number of different factors, there are financial (mis)management aspects and market forces, but for this article, we will focus on the impact of technology and its evolving influence on consumer behavior is changing the purchase journey, and look at the winners and losers from this evolving space.
Digital disruption to the retail space has happened in distinct phases. Firstly, we saw the rise of showrooming, where consumers would check products in-store on their mobile device to look for comparable options online (usually checking price options as their principle decision factor) and would then determine their purchase path based on that factor.
Showrooming is a traditional retailer’s worst nightmare.
Showrooming hurts a retailer because it squeezes margin out, forcing competition on price alone with online alternatives who do not share the same overhead, while customers are actively utilizing your space to test and review the product in person, often even seeking expertise from in-store staff before then applying a lowest price decision path and purchasing through online.
An additional factor that has enhanced the impact of showrooming is also enhancements to product Search that have been introduced to many Apps. Image based Search, Voice Search & Barcode Scanning all have had an impact in the ease of finding comparable products from multiple sources quickly.
However, there are tools within a traditional retailer’s arsenal to combat showrooming.
These include:
- Strength, knowledge and ability of sales associates.
- Refund & return policies.
- Loyalty and rewards programs.
Digitally savvy retailers can also rely on a number of other tools to combat showrooming. These can be referred to as ‘webrooming’, and below the case study, we will explore these
Showrooming most heavily impacts products at the pricier end of the spectrum, and where brand specialties apply (i.e. the product is 3rd party manufactured by a known brand, not sourced from the retailer directly). Product dimensions can also be of impact. Am I more likely to buy a product that will not fit into my car from a store or online? The question comes down to price and immediacy of availability (and cost) for delivery options, over all other factors.
Smart retailers should be looking category by category to assess the risk impact of Showrooming, assess their vulnerability in this space, and respond with their own strengths accordingly.
Case Study – Buy Buy Baby : Response to Category Vulnerability
If I’m looking to purchase diapers or formula for my infant, I am less cost conscious, and the immediacy of need for the product takes precedence over other factors. However, if I’m looking to purchase a baby stroller in the months before my baby is born, the purchase decision process is completely different. Multiple tactics have been employed by Buy Buy Baby to ensure they retain ownership of the purchase decision. These include:
Category specialty staff
Staff focused on specific product areas around the store, with advanced knowledge and ability to guide the purchase process. If I approach a staff member who is not an expert in this space, they will typically fetch the category expert to assist me. This engagement alone is often enough to encourage the purchase to remain with the vendor in question. At Buy Buy Baby, there are specialists for every product are, and if you approach another member of staff, they will bring in the specialist to ensure you get as much knowledge as needed to make the right decision.
Gift Registries & Loyalty Programs
This is rather unique to the example, as only certain retailers are focused on events that are appropriate for explicit gift registries. However, specialty staff are on hand to help at Buy Buy Baby to facilitate setting up of gift registries and to lock in the purchase decision to the company.
Returns Simplicity
This is an area that is emerging as a weakness for Amazon as a competitor who leverages many third party sellers, each of which will respond differently to requests for returns or issues with products. This lack of consistency harms them as a choice for higher-end purchases. Going through a major retailer directly often gives piece of mind that the product can be returned or at least, store credit received if issues arise. Buy Buy Baby offers a 1 year return policy with receipt for any item. This is much better than online player alternatives and is a definitive value for sticking with the retailer.
Offering Best Price Matching
Offering to match prices of online competitors is another tool that retailers can use to lock in a purchase, though this is one of the weaker propositions in the sense that it actively invites customers to ‘showroom’, but will more likely retain the sale.
Life for retail after Showrooming – Webrooming & other factors!
Now that showrooming is a reality, smart retailers have looked at their position in the market, the strengths they offer, and a few broad strategies have emerged to mitigate the impact of pure-play digital competition, and bolster a retailer’s presence in the customer path to purchase. These include:
Mobile Optimized Sites & Mobile Apps
This is a pre-requisite for retailers now to compete in the digital landscape. By locking customers into a strong mobile experience, the retailer can offer unique information that an online-pure play cannot. The most important information for customers that retailers can often offer in this space includes:
- Local store stock availability for immediate reservation and pick-up
- Location of item within store in question (encourages App usage in store context)
- Loyalty & Rewards associated data
- Specialist assistance with deep contextual knowledge (specialist live chat)
Moving from ROPO to Click & Collect/BOPS
Many retailers have adapted to capture greater share online by evolving their proposition from ‘ROPO’ (Research Online, Purchase Offline) to Click & Collect (Buy Online, Pick-up In Store). This approach by retailers brings a combination of convenience and locking in purchase in advance. There are some factors that influence the impact of this approach:
Distance Vs. Speed of product readiness
If a consumer lives closer to the store than the length of time it takes to make the product ready for collection, I will be less likely to use the Click & Collect service). One exception to this is items that have low stock availability. In this circumstance, the ability to lock in your purchase provides an additional value
Specialty/Nature of product
Many consumers are less likely to utilize click & collect type services for products that have high variability (ex: Fruit & Vegetables), or those that require additional assistance in-store (ex: Finding a correct matching screw size from the giant array at a hardware store).
Ability to utilize cross-channel customer data
If I have previously purchased an item offline or online and that purchase has been correctly tied back to my user profile, if I need to buy again, the convenience of checking through my purchase history and locating the item in question can be very valuable. This is a strong driver for Click & Collect, and smart retailers are connecting their customer data profiles to provide this added value.
So What is Coming Next For Retail?
Concierge Services / Last Mile Services
Concierge Services are a very new area for most retailers, and most have adapted into this space through third party partnerships. If I need an item shipped to my house same day, and I am willing to pay for the convenience, third party shipping services are now being offered by many retailers through ‘gig economy’ workers.
This is a fragmented and still growing space. Services such as Instacart effectively offer personalized shoppers to travel around the store, make the purchase on behalf of the customer, and handle the ‘last mile’ element of product delivery, for a fee. In some countries, shipping to customer from the store happens directly. In the UK, multiple supermarket retailers have taken this approach, equipping their own fleet of delivery drivers, as to cut out the encroachment of third party services where possible in this space. How this space continues to evolve will be interested to see.
Direct From Warehouse & 24/7 Collect
US Grocer Stop & Shop has announced that it is creating small, automated warehouses that can be visited directly by customers (and presumably third party delivery services also) to speed up delivery times and add additional options to customers.
Although this hasn’t been seen widely yet, I would not be surprised to see a number of retailers begin to offer 24 hour collection and delivery service availability through a combination of in-store picking & placing, and warehouse based fulfillment & delivery.
Recently, I spotted in a Walmart in Dallas, the testing of a new fully automated Pick-up at Store solution, that although located inside the store space, is clearly designed to be an option to be presented through an external interface similar to an ATM on the side of a store (or possibly warehouse) to collect goods that have been ordered online.
To facilitate such a service in a retail environment, some staff would remain in-store outside of regular opening ours, and would be pulling orders for collection as they come in. If handled by a warehouse environment, further levels of automation can be employed and the possible elimination of much of the requirement for human interface to prepare the goods for collection.
Autonomous Vehicle and Robotics Impact
Walmart and Ford have just announced a partnership to test autonomous grocery delivery services. Deliveries to cars trunks and in-home are also being rolled out by Amazon Key . Things are changing faster than ever, and to compete, retailers need to assess their value position, their product offer, category by category, and look at where their threats and opportunities lie.
The Future Means Fundamental Changes to the Retail Model
What if retail turns into a showroom only? What if traditional retail disappears for certain categories? It is scary to me to imagine a future where I can’t walk into a shop to browse and purchase on site, and would be expected to entirely research online and purchase for home delivery for every product. However, as capabilities keep evolving, it is inevitable we will see continued shifts in the methods employed by retailers to stay competitive.
One example of a tectonic shift in approach towards product marketing is to look at Tesla versus other car manufacturers when it comes to the dealership model. Tesla’s showrooms are sparse; with usually a single model of each their car on display, and some locally stored cars for test driving. Admittedly, Tesla has a much tighter product range than brands such as Ford and Chevrolet, but compare this to the acreage that is filled by car dealerships holding many millions of dollars of inventory of new and used vehicle stock. The benefit of the traditional model certainly can be seen in the used car market (Personally, I could never see myself buying a used car without having tested it thoroughly and inspected in person), but for new cars? The difference is trans formative, and most often, people are willing to wait for delivery, as long as they can test the same model, it doesn’t matter if the test vehicle is red instead of black. In response, many dealers are now rolling out (excuse the pun) Delivered cars for extended test-drives, as well as innovative leasing programs that let you swap out car models at leisure for a subscription price. Pressure on the industry is driving change, and in general, this is good for the consumer and for business, as long as it is responsive to the changes it is seeing.
Final Thoughts for Retailers
The importance of looking category by category at risk cannot be understated, as technology is changing the world around us at such a rapid pace that failing to do so will lead to obsolescence. Investors should think the same way, looking at the landscape from the perspective of the value proposition of immediacy of need, competitiveness of customer loyalty tactics and drivers, and uniqueness or ubiquity of product. All these factors will influence the rate and strength and weakness spots when it comes to competing in the new digital world, and the ability to maintain share and place in it. Creating a blended environment is a must, creating the ability for customers to interact and purchase in whatever ways they want (either through partnerships or internal innovation) is also a must, but to be successful, while innovating, Retailers should also consider the core elements of their value proposition over online alternatives, and play to those strengths across the board.
Horizon of Digital 