Looking back at the past 12 months, it’s fair to say that 2017 hasn’t been an easy year for the retail industry. Against a global backdrop of economic and political instability, some of the biggest players – such as New Look and M&S – have seen profits dive, and reports of redundancies and store closures were monthly, if not weekly, occurrences.
Despite this volatility, some brands have flourished. ASOS revealed in its annual results that pre-tax profits had jumped 145%, having upped the pace of investment in both technology and implementation. Shop Direct is another retailer that saw pre-tax profits climb by 10.2%, following investment in digital, data and personalisation.
What many of the retailers that came up trumps in 2017 have in common is a culture of innovation and investing in state of the art technology, as well as a customer-first approach in their DNA.
Experience is the product
In March 2017, the CEO of clothing retailer Next blamed poor sales figures on a generational shift among British shoppers. He warned shareholders that customers were moving away from buying ‘things’, and instead were spending more of their money on ‘experiences’.
Over the course of 2017, we’ve seen a number of businesses respond to this shift, and 2018 is going to see a growing focus from retailers on ‘experience’, not just product. This concept has been coined ‘experience is the product’ by author and experience design executive, Peter Merholz, wherein products and experiences become one.
Apple was one of the first companies to understand this, but the majority of businesses now recognise that customer experience is as important as the product. Every single customer touchpoint is an opportunity for building loyalty and advocacy.
To achieve this, companies need to have a single customer view – something that many businesses have been striving for and investing in for several years.
Modern, fully integrated business applications are now making it possible for businesses to get a single real-time view of their customer, and we’re going to see this evolve to the next level where a customer will be instantly recognised at any touch point.
As retail applications such as responsive face recognition are becoming more advanced, accessible and affordable, we’re going to see retailers offer more interactive and personalised experiences
Next generation digital billboards are already using personalisation and big data to display one of a number of adverts, taking cues from age, gender and expression ; and, in China, diners at a KFC restaurant can now pay by scanning their face.
Technology isn’t just changing customer recognition at an individual level – it’s also using satellite data to look at mass behaviours. Some retailers are already using this to help forecast revenue by understanding and monitoring the amount of traffic at their stores.
As this data becomes more affordable, it’ll become more common for retailers to track customer movements.
Next best action marketing
Linked to these trends, I expect to see accelerated growth in ‘next best action’ tools.
These use predictive analytics to consider the different actions that can be taken for a specific customer, and decide on the best one.
That might be giving the customer a particular offer, or it may be recognising a set of products they’ve bought and offering them bespoke services; or perhaps it’s ensuring they get the appropriate responses back via a chatbot. Companies such as Boxever are doing this successfully in the travel industry today, and I expect them to become more prevalent in retail in the coming year.
As such, technology is going to be the missing piece of the puzzle that provides the complete customer experience that retailers are seeking, and that they’re beginning to recognise as being equally important as the product itself.
Defending marketing share against Amazon
All of these trends come down to the fact that retailers are having to defend their market share against the powerhouse that is Amazon. There’s no question that Amazon’s offering has prompted shoppers to demand more from retail in general.
To compete, brands must be niche to differentiate. It’s very much about what retailers can do to offer a specific experience that isn’t possible for a juggernaut of Amazon’s size.
A retailer that’s doing this successfully is Sigma Sports, a specialist cycling shop, which began in 1992 as a single bricks and mortar store, and has transformed into a rapidly growing multichannel retailer.
It’s quickly built up a loyal clientele by providing an offering that’s built around delivering great service, selling the right products, and remaining exclusive. To that end, it’s unstocked some of the mainstream brands from its store and replaced them with niche brands from Australia and Denmark.
It’s also installed a personalised bike fitting service in its store, which has proven so successful that it’ll shortly be adding a second. Cycle events that start and finish at its store also enables the retailer to engage with its customers and deliver an experience, not just sell a product.
Finally, we’re also going to see an evolution of marketplaces. Microservices are giving retailers the ability to build discreet technology services that allow their businesses to take certain elements of eCommerce systems; as such, marketplace 2.0 will likely be an amalgamation of existing data or marketplaces.
Some examples of this are new solutions being built by retail intermediaries or affiliates where they enable building a virtual wardrobe from multiple retailers without those retailers being aware of their products being in a new channel.
This extends to building a listening service to monitor certain products to know when prices may change and where to buy them; or being notified of where certain influencers are buying certain products and being able to get discounted purchases based on who you’re following.
This evolution will change the marketplace as we know it today from being a platform where you go to buy something to one that extracts data from a variety of retailers and curates it in a specific view for customers at an individual level.
So, while there’s no certainty in what the future will hold, I have no doubt that 2018 is going to see the boundaries pushed in how data is used, personalised and exposed to enhance the retail experience, while providing interesting opportunities for some retailers to stand out from the crowd.
This article was previously published in our 2018 Predictions Magazine. With 12 articles spanning paid media, display, SEO, content and engagement, creative, data insights and affiliate marketing, there’s plenty of content to inspire you in the year to come.