| FUTURE OF RETAIL
The Future of Retail
Silicon Valley may have an HBO show to
its name and be the synonymous home of
tech, but when it comes to e-commerce, the
UK holds true to its reputation of being a
nation of shop keepers.
eMarketer forecasts that UK retail e-commerce
sales will top £60 billion this year, cementing
our position as the world’s number one for
e-commerce on a per capita basis. This trajectory
of rapid growth is set to continue, and by 2019,
e-commerce is expected to make up 19% of total
retail sales.
While e-commerce has transformed the nation’s
shopping habits over the past 15 years, we stand
on the brink of even greater disruption as mobile
threatens to breakdown the distinction between
on and offline retail, and to collapse the consumer
journey. With the rise of mobile, the digital world
is infiltrating traditional stores, and consumers
are demanding a seamless retail experience. The
physical world around us is becoming ‘shoppable,’
whilst at the same time, pure play digital stores
are building real world, pop up experiences.
future_medialab, Mindshare’s futures
programme, has undertaken this study into
the Future of Retail to examine the forces
shaping this brave new world of retail, and
explore what it means for communications.
We’ve interviewed a series of experts from across
the retail world, and carried out primary research
amongst a sample of 1019 UK consumers from
our future_medialab research community.
In this report we identify five key trends:
Control Culture
The new, digitally empowered consumer
has gained control from the retailer,
accessing information, checking prices
and securing deals, anywhere, anytime.
Friction-Free Shopping
Technology is revolutionising how we
shop, smoothing out obstacles along the
shopper journey and resulting in faster,
easier and more impulsive shopping
behaviours.
Buying Thin Air
Retailers are finding novel and valuable
reasons for customers to step into
bricks-and-mortar stores by selling the
experience of shopping and creating
‘brand cathedrals’. Immersion is leading
the way to transaction.
Personalised Pricing
As the mobile helps create a single
customer view across the on and offline
worlds, we’re starting to enter a new
world of dynamic, personalised pricing
and discounting.
Delivery on Demand
Advances in logistics and infrastructure
mean order fulfilment is getting
ever faster, more flexible and more
convenient.
For more, contact us @future_medialab.
We hope you enjoy the read.
All stats:
Source: future_medialab,
June 2015.
N = 1019, UK nat. rep.
Control
Culture
Control
Culture
Consumers empowered by
technology take control.
“”
What is it?
The new digitally empowered consumer
has gained control from the retailer and is
reshaping the face of commerce. Readily
armed with multiple devices and access
to a plethora of information, consumers
are making decisions and buying things on
their own terms – anytime, anywhere and
anyhow that suits them.
There’s no doubt that retail is going through a huge period of disruption
and technology is at the heart of the change. The old borders have gone,
geographical borders are not what they were and the boundaries between
online and offline are reducing every day. The winners are those who
are thinking big, innovating fast, acting like disrupters and behaving
agnostically across channels to make it easier for the customer and,
ultimately, giving us consumers what we want.
Finlay Clark – Industry Head Retail, Google UK
67%
enjoy having all the
product information
they need at their
fingertips
Driven by the Millennial generation, with its low
tolerance for inefficiency, and expectations of a
more active relationship with brands, technology
has enabled consumers to access more knowledge,
data and information about the products they are
buying than ever before.
In particular, the rise of tablets and smartphones
has given consumers the ability to access this
information when and wherever suits, influencing
their decision making and giving them the ability to
shape their purchase in real time.
Control
Culture
Origins and key drivers
SnapUp is a free
mobile app allowing
customers to receive
automatic notifications
when products they want
to buy are discounted.
Users can create wish
lists of products by
taking screenshots of
items featured on any
e-tailer or shopping
app, and sort these into
curated lists.
Integrated features and technology such as Google
maps, GPS, QR codes and social networks not
only enrich and organise our lives but also help us
connect with each other and open up the potential
for closer connection with brands and retailers.
Mobile technology has become the provider of
instant access to endless information on anything
and anyone, accessible anywhere – a gateway for
connection and discovery.
“”
Customers don’t have a ‘device’ strategy – they have a shopping strategy.
They use devices interchangeably throughout the day, according to what’s
most convenient for them at the time. We encourage marketers to think the
same way – to create holistic experiences and campaigns rather than devicespecific programmes. We’ve seen that campaigns spanning more than one
screen perform an average of 18 percent better for advertisers than campaigns
running on PC only.
Alex Hole – UK Director, Amazon Media Group
23%
use their phone/tablet
to research products
whilst instore
Omni-channel shopping
Consumers have developed into omni-channel
shoppers with no differentiation between
online and offline platforms. Webrooming and
showrooming are becoming the norm - people
shop in the way that suits them best, driven by
convenience, experience and price. Amazon‘s
Firefly phone allows consumers to take a picture
of a product in a store which then generates a link
to that product on Amazon.com.
There are so many points of access, all dictated by
the consumer, across all number of touchpoints
in the purchase cycle. Technology enables them
to evaluate products or services, assessing things
like price comparison, ethics, delivery times and
stock levels. We can browse at bedtime from
our tablets, buy from our phones on the daily
commute and collect our purchases from our
most convenient store or have them delivered
directly to us, that day if we need.
Control
Culture
Different dimensions
Purchase on their terms
Retailers are also responding to the consumer
demand for purchasing (or not!) the final product
on their own terms. Final purchase is not
necessarily the end game anymore. We are seeing
a growth in temporary ownership, try before you
buy and the number of rental products available.
Fashion retailer GU’s Shibuya outlet in Tokyo
encourages shoppers to try on outfits and leave
the store to test them in the public for a day.
Rental models have developed such as USbased Rent The Runway who have a launched a
subscription service where members pay USD 75
per month to receive three designer accessories of
their choosing. When they’ve finished with an item,
customers simply mail it back and are then sent
the next piece of clothing on their list.
Rent The Runway’s
‘unlimited’ service allows
users to pay a monthly
subscription fee to receive
three designer accessories
of their choosing.
1 in 4
will showroom
in store
Power to the people
Additionally, it is now easy to turn to others
instantly to seek opinions or recommendations.
Brands are starting to accept this and build this
into their offering. M&S now allow users to see
customer reviews on products on their website
(good and bad) to inform their purchase decision.
Not only can we discuss and review products with
our peers but this culture of consumer control
is also bringing power back to the people from
a collective perspective. Consumers can now
club together on a growing number of platforms,
gaining power which works in their favour to bring
prices down, open up new markets and even
influence how retailers and manufacturers have
to operate. We are also seeing a growing number
of peer to peer retail sites emerge, such as Etsy,
where consumers are happy to cut out the middle
“”
Control
Culture
Different dimensions
man altogether. Online bartering platforms have
also developed, such as eDivv.com which allows
its members to swap their unwanted beauty
samples with other users.
The OpenLabel app
allows its community
of people to share their
voices about products
– i.e. the ingredients
used, nutritional value,
a company’s regard for
the environment, ethics,
or any other facts or
opinions that demand to
be voiced.
Organisations that embrace the ecosystem and realise that the power of their
network is only amplified through connection to others will thrive whilst those
that cling to the fictional notion of the ‘walled garden’ will fall by the wayside
as we have seen with so many brands that were once thought of as permanent
features in our high streets. There are no organisational islands in the digital
world. Your competitor and all their competitors are in your customer’s pocket
as they contemplate a choice in your world.
Mike Lynskey – Retail Industry Market Development Manager, Microsoft UK
59%
often look at
product review
and opinion sites
As technology continues to develop at a rapid
pace, consumer patience will decline and
expectations of brands will mount, putting even
more control into the hands of the consumer.
More immediate tech developments in the area
of wearables and cashless payment will open
up opportunities for mobile to become an even
more sophisticated tool for consumer control.
Boundaries will continue to blur between new
devices and we will see true omni-channel
shopping. The retail process will be much more
open, rather than a dictation of how, when and
where a purchase can be made. Consumers will
dictate the terms of their purchase and as they
rarely think about one brand in isolation, we will
see more retailers collaborating with each other
to offer consumers exactly what they want.
The recent collaboration between Ebay and Argos,
offering Ebay products for collection in-store at
Argos is a good example. Rather than obviously
wrestle back control, retailers will adapt and
develop their offerings in response and as a
consequence will make Control Culture work to
their advantage.
Control
Culture
Where next
eBay and Argos have
teamed up to trial a
‘click & drop’ scheme,
allowing eBay sellers to
drop sold items at their
nearest Argos outlet for
packing and shipping.
Customers can then pick
up their purchases from
their own closest Argos
store.
Voyando is a travel
booking site which
allows users to set
preferences for their
trips, challenging a
network of experts
to arrange the most
enticing travel package
for the user.
61%
spend more time
researching products
they buy than
previously
Not only will brands need to use the data and
information they have available to deliver what
consumers need and want quicker, they will also
need to give consumers the tools to interact with
them in whatever form the consumer dictates.
These tools could be anything from in store
digital screens that recognise people’s personal
preferences, through to apps supplying real time
stock information. Tools might also extend to AI
chat bots or RFID tags providing more information
for individuals. In-store customer Wi-Fi will need
to be a given.
In order to satisfy and connect with this omnichannel shopper, brands will need to invest
in technology to understand their complete
consumer journey better. Pulling together data
from both online and offline sources to create
the bigger picture will be the challenge. Plus,
we will need to look beyond purchase history to
incorporate things like interests, habits, brand
preferences, need states and what they do in
store in order to predict likely intentions. DMPs
integrating all data sources will become a key
part of attributing value and understanding this
consumer journey.
Control
Culture
Implications for brands
Consumers will get used to seeing very honest
reviews and conversations about products and
brands, warts and all. Brands will need to adapt
to this, making their communications more
honest and transparent in their nature. In turn,
consumers are more likely to trust reviews and
recommendations from friends on social networks
in comparison to more official reviews. Brands will
need to embrace the importance of the customer
review, being more transparent and placing these
right up front and on platforms where consumers
can access them easily. Social networks will also
become increasingly important throughout the
customer journey in terms of influence.
Technology smooths
out obstacles along the
shopper journey.
Friction
Free Shopping
Friction
Free
Shopping
What is it?
The online and offline retail worlds are becoming
increasingly intertwined with shoppers now having
one shopping experience split across multiple
channels. The concepts of ‘showrooming’ and
‘webrooming’ are now well established behaviours
in the UK. High street stores are expanding their
presence online through social networks,
click and collect and the use of new technologies.
Meanwhile, online stores are exploring the
physical world with pop-up stores, partnerships
with retailers and new forms of delivery.
Integration and a seamless experience across
all these touchpoints are the ideal.
The old linear shopping journey is no more. The
discovery and browsing phases have started to
merge into one another; payment has ceased to
be something you do at the end of your shop and
becomes concurrent and passive, with checkout
no longer just an area in store but an action such
as putting an item in your basket; and of course,
few consumer journeys now end when the goods
turn up on your doorstep.
Friction Free Shopping describes how each
element of the journey is becoming smoother,
simpler and more intelligent – making it easier
to both initiate, and complete, the purchase.
64%
of consumers agree
that technology
has made shopping
much easier
The retailer’s desire to guide the customer
through to purchase is innate. In this sense,
attempts to remove friction from the purchase
journey have been going on since we first started
shopping. The layout of a supermarket, the
ambience and experience of a department store,
the design of a window display and so many other
aspects of both on and offline retail have all been
created with the common aim of smoothing out
the route to the end purchase.
“”
Friction
Free Shopping
Origins and key drivers
Technology, as ever, has been the enabler for
this current wave of friction reduction. Online
shopping first brought the high street into the
home, and then mobile gave shoppers the chance
to see other stores’ offerings whilst in store, and
to buy anywhere at any time. The next wave of
technologically-driven Friction Free Shopping
will see media and the physical world around
us become ‘shoppable’. Meanwhile, a series of
behind the scenes innovations make customer
service, payments and delivery smoother, faster
and more seamless.
The opportunity cost of not having a slick process to get
your products into customers’ hands is severe – 44% of
people abandon their online carts due to shipping times.
Finlay Clark – Industry Head Retail, Google UK
48%
can see technology
enhancing their
shopping experience
in the future
Friction
Free Shopping
Different dimensions
The rise of Friction Free Shopping can be seen at every stage across the consumer
journey from inspiration and research through to purchase and delivery.
Shoppable World
A longstanding constraint on purchase is the
time, inconvenience or simple effort associated
with completing the purchase itself. Time spent
queuing, filling out forms online, or simply
waiting for a page to load, can lead to frustration
and abandoned purchases. While on and offline
purchase procedures are becoming increasingly
streamlined, we’re also seeing the ability to buy
breaking out from its traditional checkout areas.
Digital, and mobile in particular, are starting to
make the world around us ‘shoppable’. Mobile has
shortened the journey from brand touchpoint to
purchase, almost to the point of non-existence.
Traditional channels such as TV, outdoor, print
and radio can all lead directly to purchase through
a number of mobile driven mechanics, whether
that be Blippar, Shazam, QR codes or similar
apps. Twitter and Pinterest have also integrated
buy buttons enabling socially driven commerce.
And the physical world itself is increasingly
‘shoppable’ with Amazon leading the way, with a
series of innovations that enable consumers to
buy objects around them, including Firefly, the
Dash wand and the Dash button.
Amazon Firefly
makes physical objects
shoppable
Pinterest is rolling
out their ‘buy’ button,
which allows people to
buy products inside the
application itself, without
ever leaving the site.
30%
of consumers would
be interested in
‘shoppable media’
Intelligent customer service
Greater understanding of the customer is no
longer just the preserve of the online world.
As the ‘single customer view’ permeates both
on and offline stores, customer service is
becoming increasingly personalised and
sophisticated. In the online world as AI and
natural language processing capabilities
develop, we’re starting to see intelligent virtual
assistant shopping bots emerge. North Face
are using IBM Watson’s capabilities to help with
customer queries online. In the offline world,
beacons and similar technologies will empower
staff to offer more personalised service. The
French shopping centre Klépierre, for example,
recently unveiled the Inspiration Corridor, a booth
which uses facial and body recognition as well as
an individual’s purchasing history in order to make
personalised product recommendations.
Friction
Free Shopping
Different dimensions
Fluid’s Expert Personal
Shopper is a messaging
platform powered by
IBM Watson which is to
be implemented on The
North Face online store.
French shopping
centre Klépierre’s
Inspiration Corridor
uses facial recognition
and purchasing history
to make personalised
recommendations
All of which helps smooth out common customer
frustrations along the shopper journey, and move
people closer to the sale.
40%
think customer service
is constantly improving
due to technology
Payments
NFC, mobile wallets and cashless payments all
promise to reduce the time spent queueing and
carrying out transactions, thereby reducing some
of the friction associated with the current retail
experience. The recent introduction of Apple
Pay in the UK is likely to kickstart the sector.
Mobile payment solutions also allow purchases
to seamlessly take place anywhere in the store,
rather than at the till.
At the same time we’re seeing more
flexible payment models develop including
ways of trialling products before buying them,
or alternative means of payment.
“”
Friction
Free Shopping
Different dimensions
Delivery on demand
Fulfilment was once the Achilles heel of
e-commerce. But now we’re starting to see
greater innovation, faster and more seamless
delivery which is taking some of the brakes off the
shopper journey. New forms of click and collect
are helping e-commerce delivery fit into busy lives
- for example Volvo now remotely enable delivery
drivers to drop off packages in your car boot.
Amazon are also experimenting with ways to cut
down delivery times even further, whether that
be by ‘anticipatory delivery’ where goods are
moved before the purchase is even made or in the
longer term through drone or other autonomous
vehicle delivery.
Customers reward great experiences, and the best experiences can
be really simple. With customer experience at the centre of our
strategy, we see mobiles (or any device) as an entry point to Amazon.
And once customers are here, we need to provide them with great
and seamless shopping experiences. For mobile, our goal is to give
customers the ability to go from ‘I need that’ to ‘I bought that’ in
under 30 seconds.
Alex Hole, UK Director, Amazon Media Group
Amazon’s Fire phone
gets consumers excited
– with 36% interested
in its Firefly productrecognition capabilities.
We can expect to see increasing strides made in
all aspects of Friction Free Shopping over the next
few years, particularly amongst those retailers
who put the consumer at the heart of the process.
In the area of the “shoppable” world, the greatest
progress will be made around the increased
ability to instantly identify, and then buy physical
objects around us, with just one click. Intelligent
customer service will be increasingly powered by
AI, expanding out of the online world to take on a
physical presence in store, in the shape of robots,
as is the case in Asia with Softbank’s Pepper.
Apple Pay is likely to be the catalyst for the growth
in mobile payments, and we can also expect to
see growth in the shape of other mobile payment
technologies whether that be through wearables,
jewellery or stickers (as Barclays have recently
launched with BPay).
Friction
Free Shopping
Where next
Apple Pay launched
July 2015 in the UK, and
with 2 million capable
iPhones and 250,000
pay points available,
the wider retail world is
taking ths seriously.
36%
of iPhone users
are interested in
The key features of the trend towards Friction
Free Shopping are speed, ease and simplicity.
A critical first step for brands looking to benefit
from this trend is to look at their consumers’
journey – where are there still friction points,
and how can technology be used to minimise
these and shortcut the journey? Is the experience
integrated and seamless across all touchpoints?
Reducing friction will facilitate instant gratification
for the shopper, and encourage more impulse
purchasing. As such it will challenge more
established brands who may have benefited in
the past from friction in the system that facilitated
shopper inertia, and passive loyalty.
“”
Friction
Free Shopping
Implications for brands
With purchasing becoming increasingly seamless
and easy, brands have never been more vulnerable
to switching on impulse. Brands need to create
‘lock in’, frictionless mechanisms to secure
loyalty – building a frictionless journey which is
based around rewarding and retaining more active
loyalty, and encourages repeat behaviours.
Equally, they have never had greater opportunity
to convert an immediate sale. Ensuring all
touchpoints are joined up, consistent and of
course “shoppable” will help brands cope with the
challenges of a world of Friction Free Shopping.
Retailers should invest in technology that reduces friction
in the product selection and purchase process. Ideally this
friction should be reduced down to zero. If your customers
still have to wait for anything, then you’re not done
innovating yet.
Intel Labs and The Store WPP – The Second Era of Digital Retail
Half
of consumers think
that retail brands will
have to keep up with
new technology to
improve their customer
experience
The rise of the in-store
brand experience.
Buying
Thin Air
Buying
Thin Air
What is it?
Driven by the recession of 2008/9,
high street retailers have been forced
to close their doors because of two key
factors; the boom of ecommerce, and the
increased cost of owning or renting retail
space. This has spawned a new role for
retailers on the high street as destinations,
resources and entertainment hubs.
The boundaries are blurring between
leisure and retail. Retailers are creating
environments that can’t be replicated
online and the store is becoming an
experiential centre as much as a space
to sell products.
55%
are more likely to
buy from retailers
with interesting
stores
Recession meant that retailers spent a lot of their
time focussing on price, rather than their individuality
or point of difference. They are now more focused on
driving brand loyalty and giving shoppers a reason to
enjoy their visit and shop with them. With the growth
of pure play internet businesses such as Netflix,
Spotify and Expedia, once key residents of the UK
high street HMV, Blockbuster and the traditional
travel agent no longer play a role for consumers.
With the ease of online shopping and price
comparison, consumers have started to spend less
time in stores and as a result all retailers were
pushed to create new, more interesting reasons for
consumers to visit, spend longer in store and part
with more cash.
“”
The dull retail experience where stores present
consumers with a product range and invite them to
make a choice, is evolving. Consumers now have
much more influence over the in-store experience
and they are being offered all kinds of unique
experiences, personal service and technology to
reward them for their visit. Stores are moving from
functional to emotional places in the consumer’s
mind, creating desire for the user to not only visit,
but repeat visit. Along with this, the importance
of customer service in-store is becoming even
more paramount. With the rise of functional online
purchasing, automated and quick services, people
are craving more traditional face to face service,
demonstrations of products and advice which they
can only get in store.
More than half of smartphone searchers (55%) visit a business to purchase
in store — according to ThinkMobile with Google — and now we even see
‘showrooming’ whereby the physical store drives online sales. So physical stores
are still important, and becoming increasingly so, as retailers look for a way to
engage with their customers and create meaningful, memorable experiences.
To do this, there’s a whole new generation of innovations at retailers’ disposal,
to help set them apart from the crowd and retain/attract customers.
Nicholas Russell – CEO, We are Pop Up
Buying
Thin Air
Origins and key drivers
Different dimensions
Brand Cathedrals
Safe in the knowledge that the transaction will
happen naturally online (or elsewhere), brands
are beginning to embrace the physical retail space
for its brand building potential. We are seeing an
increasing trend for flagship stores that act as
‘Brand Cathedrals’: Burberry, Nike Town, Apple
Store, Harrods. People from all over the globe travel
to experience these stores and to revel in these
brands. These high square footage destinations
create beautiful ways for customers to experience
their products from fashion shows, to floor to ceiling
interactive screens which show off the most recent
fashion week catwalk show. Customers carry these
shopping bags with pride as they are as prestigious
as wearing a Disneyland t-shirt to show off where
you have been.
Buying
Thin Air
Retail evolves into leisure time
Stores and the places that house them are becoming
popular leisure destinations. What began as simple
cafes integrated into Waterstones has now evolved
into something even bigger and more sophisticated.
Tesco Extra in Watford is now utilising its space
more creatively to include not only a Harris and
Hoole coffee shop, and Euphorium bakery, but also
a Giraffe restaurant and a standalone F&F clothing
section designed to feel like a fashion store. The
growth and success of destination shopping centres
such as Westfield are also a great example of how
shopping and leisure time are becoming increasingly
intertwined.
Apple’s eponymous
flagship store in Covent
Garden, the largest
in the world when it
opened, boasts spaces
for children, training
facilities, and stocks the
most kit than other of its
stores in the world.
Adidas launched the
Homecourt in Beijing,
an interactive retail
experience which is
designed to bring
shoppers closer to the
‘passion of sport’ and the
brands heritage.
68%
think that
flagship stores
are a good idea
Different dimensions
Brands like Specsavers are embracing technology
to ensure their stores are more interactive and
absorbing – they are starting to provide digital
retina photography with every sight test, and
the latest iPad technology shows customers 3D
graphics of their new frames and lenses.
Rebecca Minkoff, a high end high street retailer in
the US, allows each customer to select items from
digital screens to be delivered to their dressing
room in their size, as well as any refreshments they
might want whilst shopping.
Brands are also now turning showrooming and
in-store mobile usage to their advantage
and using the technology to create unique
experiences for their customers. With the
emergence of beacon technology and near field
communications, there will be the potential to
target consumers with personalised messaging
to entice them in-store and reward them for their
time there, although this type of communication
should be used creatively and usefully or there is
the possibility of customer alienation.
Rebecca Minkoff has
created the ultimate
personalised in store
experience, boasting
curated collections for
each customer displayed
on interactive screens.
Buying
Thin Air
Technology enhanced experiences
Technology is also being used to enhance the
in-store experience and provide a point of
difference. In-store iPads or digital screens provide
access to a wider range of products and exclusive
limited edition ranges that are only available instore. Virtual mirrors, augmented reality and digital
mannequins can show us what products would
look like on or in our own environments and multisensory experiences and interactive displays are
becoming more popular.
Jamie Oliver’s high
street cook shop
Recipease offers a
place for customers to
learn how to make his
signature recipes (and
afterward purchase the
means to do it at home
at a discount).
45%
think technology
enables stores
to stand out
from the crowd
Different dimensions
Pop-up culture is likely a precursor to a more
transient approach to retail space. Instead of
signing a straitjacket multi-year lease, brands are
looking at temporary spaces as an opportunity for
customers to experience their product in a way not
possible online. Or in the case of FMCG, to immerse
customers in brands away from the shackles of
major supermarkets. For brands, it means less risk.
For shopping centres, it means a constant dose of
freshness. For customers, it means far more variety
and convenience.
Lynx Black Space is a
pop-up store showcasing
facets of the brands
personality that they
would be unable to
show without a real
life experience; music
events, inspirational
talks and a male
grooming salon.
Buying
Thin Air
Pop-Up Personality
Although they have been around for a while, pop
up shops have also now evolved to become part of
this brand building strategy. They offer presence to
FMCG brands or other categories for which there
is no role for a store front. Pop-ups allow these
brands to show off brand personality traits or to
align themselves to topics of interest to consumers
such as music or comedy. Lynx is a great example
which has opened “Black Space” a rich 3 month
pop-up experience in Shoreditch where they host
exclusive music and entertainment events as well as
a traditional male grooming salon to show off their
credentials in a way that offers value and appeal to
the target audience.
35%
have shopped at
a pop-up store
Where next
The amount of actual transactions that take part
in-store will likely shrink considerably, fuelled by
easier online shopper experiences and innovations
in delivery options. Retailers will be using a blend
of e-commerce and experience based physical
retail. Collection of product in-store will be elevated
into the centre of this experience, products will
be personalised, questions can be asked, and the
consumer will see their purchase demonstrated.
We will see more experiences akin to the current
Apple store model – rows and rows of Apple products
to play and interact with and knowledgeable Apple
staff there to demonstrate and advise.
Buying
Thin Air
Stores are becoming more important than ever,
demonstrated by the fact that online pure play
brands such as Amazon, Google and Ebay are
opening their first physical stores to provide
consumers with an offline experiential presence.
Some brands are relying on technology to enhance
that in-store experience and some are relying
on heightened exclusivity and member focused
rewards. Either way, the future will see the function
and role of the traditional ‘store’ as we know it
change dramatically.
The format of the store as we know it will also
change dramatically. Pop-up stores will become
the norm on the high street. Smaller format
stores will also thrive. Those retailers with larger
store footprints will likely reduce their footprint or
redistribute their space to introduce new offerings
or brands. With emerging technologies such as
cashless payment, customer service and advice
in-store will be paramount. The role of the sales
assistant will change dramatically. They will need to
become more informed about the products they sell,
and take on the role of a product advisor. Stores will
basically need to offer what the internet does not,
but will need to provide this as part of a wider multichannel offering.
Unilever-owned
Brazilian haircare
brand Seda converted a
female-only car on the
metro into a hair salon,
where participants could
choose from a range of
styles completed using
Seda products.
1 in 2
visit stores even
if they have no
purchase intent
Implications for brands
Being able to recognise, and then connect with these
various shopper needs, and the new rituals and
routines that surround them, will be key for retailers
moving forward. For fast paced shopper journeys in
store, retailers will need to provide efficient, friction
free processes to get them in and out as painlessly
as possible. For more leisurely visits, brands will
need to provide more fun, sensory, entertaining
and educational experiences that can only be
experienced by going in-store.
“”
Brands need to find ways to create experiences instore that encourage shoppers to share their data
and enhance the single customer view. In-store tools
that enhance the customer experience, such as WiFi, digital touchscreens and apps will provide these
data points. In-store location data will also combine
with this to enhance this customer view, helping
brands understand what people are engaging with in
store and where.
Buying
Thin Air
Shoppers are increasingly in different frames of
mind when they visit a store, with fast and slow
shopping missions emerging. For some purchases,
shoppers will want to get in and out
of store as conveniently and quickly as possible.
At other times shoppers are looking for more of an
experience, more of a leisure activity, irrespective of
their need to buy.
One thing that stores are able to offer versus online,
is that face to face contact, help and advice from
a sales assistant. This will become an ever more
important part of the in-store experience and as
a result sales teams will need to be upskilled and
supported by technology, enhancing their knowledge
of both products, and the consumers that are buying
them, in order to offer that personal touch. We will
see growth in data driven tools such as wearable
tech offering individual customer profiling and also
specific training to help demo products.
Now arguably, retailers have more tools at their disposal than ever
before to improve upon even our grandmothers’ hyper local and deeply
personalised retail experiences. As an industry, we need to move
beyond basic targeting, tracking and demographic segmentation to
drive deeper, permissioned engagement with consumers, where we
deliver valuable and personal experiences in and out of the store.
Anita Carra – Head of Global Consumer Insights and Advertising Partnerships, Microsoft
62%
value the in-store
experience just as
much as the products
being sold
The rise of dynamic
pricing in both the online
and offline worlds.
As digital technologies evolve, brands
will be increasingly able to tailor pricing
to the value of individual customers. In
the digital world, this trend is already
established – with airlines such as Easyjet,
or e-commerce companies such as
Amazon, capitalising on flexible pricing
over key periods. However, as the mobile
wallet and the Internet of Things evolves,
we will see this trend become increasingly
personalised and sophisticated.
The connected car will know for example,
if you are a dangerous driver, and your
insurance premium will be adjusted
automatically, or your mobile phone,
connected to Apple Pay, will know how
frequently you visit a certain shop, and
tailor pricing accordingly to reward your
past loyalty.
Personalised
Pricing
Personalised
Pricing
What is it?
Personalised pricing has long and well
established origins. A market trader would size
up a prospective customer based on a range of
variables such as how they speak, dress or carry
themselves, determine the potential value of
the sale, and then deliver the line: “for you, five
pounds”. In the world of e-commerce, however,
the law of one price, is still prevalent – when a
product is sold by multiple retailers, it is largely
expected that the cost will not vary by more
than the differences in shipping, taxation and
operational costs. In a free market economy,
where supply equals demand, and prices can be
instantly checked and compared, if a vendor’s
price is excessively high, then consumers will
quite simply shop elsewhere.
“”
The UsherU app allows
cinemas to send out
alerts when a screening
has empty seats, and
users will be tempted
with a cheaper ticket/
free pick ‘n’ mix.
The UK will begin to see more and more of matching rivals’ prices
dynamically, particularly in the grocery and electrical sectors. Real
time pricing is likely to affect anything where the product is largely
commoditised, and in instances where the only way retailers can
differentiate that product is by being really keen on price.
Simon Spyer – Conduit (extracted from Marketing Magazine)
Personalised
Pricing
Origins and key drivers
However, we are increasingly seeing online
retailers returning to the tactics of the market
trader. These tactics have their origin in the first
dot com boom. We’ve all experienced it when
we’ve checked the price of a flight, only to return
24 hours later and it has increased. This is not
new, but the technique has been evolving in recent
years. Now, prices do not just rise following the
drop of a cookie – brands are also able to profile
their customers and adjust pricing based on
multiple factors. For example, retailers know
where you live based on your IP address. They
know where you commute based on the GPS in
your phone, they know the sites you’ve visited prior
to your visit, and they know your internet access
method - are you on your expensive Macbook, or a
cheap Android device?
Using data points such as these, it is possible for
retailers to predict what products a consumer
is interested in buying, when they are likely to
buy them and, critically, the price they would be
willing to pay. A wide range of retailers are using
this kind of data to target individual shoppers with
personalised offers and promotions. However
it is not a big leap for this approach to be used
to similarly determine differentiated pricing in
the future, with many of the online retail giants
already testing this approach currently.
Take Amazon as an example. Over the Christmas
2013/2014 period, they adopted a flexible pricing
approach and were able to increase their revenue
by +12%. And as early as 2012, a Wall Street
Journal investigation found that companies
including Staples, Rosetta Stone and Home
Depot were showing customers different prices
based on “a range of characteristics that could
be discovered about the user.” Staples, as an
example, showed different prices to customers
after estimating their locations, and working out
how close the person was to a competitor’s brickand-mortar store. In that instance, customers in
locations with a higher average income were then
generally shown lower prices. As retailers secure
a more detailed capture of multiple consumer data
points this practice will only increase.
Personalised
Pricing
Origins and key drivers
Origins and key drivers
Given the practicalities associated with showing
differentiated prices to a broad audience all in
one physical space, personalization is more likely
to be steered by mobile led offers or discounts,
which adjust pricing discreetly. However, some
stores such as B&Q are testing electronic price
tags that change the amount shown based upon
the profile of the customer, using a chip in their
mobile phone for guidance. And developments in
smarter shelving led by the Internet of Thing, may
make this type of flexible pricing more common in
the future.
B&Q tests digital price
tags in store, which
change via interaction
with smartphone devices
Personalised
Pricing
As smartphone penetration rises, as people shop
more on their mobile devices, and as the mobile
wallet gains traction (Apple Pay has now launched
in the UK, with Samsung Pay and the Google
Wallet hot on its heels), then an additional layer
of profiling will be added into the knowledge mix
which may help advance personalized pricing
in the physical store as well. Smartphones are
location aware, and may finally help close the
data gap between the online, and the bricks and
mortar, shopper identities. Having the ability to
create unified on and offline profiles will give new
ammunition to retailers to tailor pricing in ever
more sophisticated ways.
Tesco has trialled
Electric Shelf Labelling
to give its physical stores
the ability to employ
dynamic pricing on a
minute-to-minute basis.
29%
have paid for
an item using
a contactless card
Where next
“Businesses need to be clear if they are using
personalised pricing. If they are using it and
it’s not clear, that could erode trust in online
markets,” says Chris Walters, economics director
at the Competition and Markets Authority (CMA),
which absorbed some of the responsibilities of the
OFT after its closure in April.
Walters adds: “We wouldn’t be concerned
generally with price discrimination, of which
personalised pricing is a form, as it’s usually quite
benign, but it’s not benign if the losers lose more
than the gainers gain.”
Personalised
Pricing
In the UK in 2013, the now defunct Office of Fair
Trading (OFT) ran a report into personalised
pricing, which detailed disappointment in the
level of transparency by businesses about
what information they collected and how it was
used. It claimed the lack of transparency may
harm consumers’ trust in traders and business
practices and found that businesses could do a lot
more to make their practices more transparent.
For any sustainable long term growth to be
achieved in the area of personalised pricing,
greater transparency is an essential development
required of retailers. Companies need to become
far more open about what data they are collecting,
and how they are using it. Fundamentally,
shopping is about trust, and retailers need to
ensure they build and protect the belief that
shoppers have in them, otherwise it could
translate into destroyed brand value.
Uber employs surge
pricing to incentivise its
drivers to connect to the
app, using an algorithm
to match supply and
demand for its services.
Foot-Trade is a web
app which adjusts the
price of teams’ jerseys
in real-time depending
on the progress of each
game, encouraging fans
to support their club
even when they underperform.
55%
think brands
should not
vary prices
The implications here for brands are both positive
and negative. Through clever use of these data
sets, there is an opportunity to drive the maximum
value from each transaction, and accordingly,
increase profits. However, the manipulation of
what many consider to be personal data is also
a political hot potato. With the growth of social
networks, brands are now more accountable to
consumers than ever before. Personalised pricing
will need to be handled with sensitivity and respect
to avoid damaging brand value – whilst everyone
loves a bargain, conversely no one wants to think
they have been over charged.
“”
There will be an increased focus on highly
targeted campaigns at all stages of the shopper
journey. This will be used to deliver dynamic
creative and messaging which is adapted around
consumer needs, or particular trigger points, in
order to optimise the personalised price offering.
A unified shopper identity across all customer
access points will become an increasingly
important priority. Improved identification of
the in-store shopper identity, and in particular
their subsequent in-store location, will open up
opportunities for bricks and mortar dynamic offers
and discounts in the short term, and with the
growth of smart shelving, personalised pricing in
the longer term.
We could move to dynamic pricing and mimic the model used by
EasyJet. Yield management techniques are not new - it’s just that
they haven’t traditionally been used in retailing.
Ian Cheshire – chief executive of B&Q, owner Kingfisher
Personalised
Pricing
Implications for brands
Even faster,
more flexible delivery.
With more people purchasing products
outside of traditional retail channels and
the improvement of logistical supply chain
management, consumers’ expectations of
delivery times has rocketed. The mindset
of shopping has evolved to encompass
an on-demand culture, and retailers are
bringing their products and services to
consumers at the earliest convenience
and efficiency.
Delivery
on demand
Delivery
on demand
What is it?
38%
are interested in
product deliveries to
convenient places
Origins and key drivers
“”
The history of Delivery on Demand is a rather
straightforward one. Since the emergence of
e-commerce, the delay between ordering items
online and actually receiving them has reduced.
The dawn of e-commerce saw retailers estimating
delivery at between 8 to 12 weeks. Streamlining
of supply chain management has reduced this to
a couple of weeks, to an afternoon, to a one-hour
slot. Now, we see delivery at convenient collection
points other than households and workplaces.
Innovation in delivery methods is also key, with
deliveries using the London Tube tunnels and
drone technology being developed.
The battle for the final mile has some distance left to run. Google Express, a
partnership we’re running with a number of American retailers offers same day
delivery to over 7 million people across seven US cities – delivering everything from
groceries and alcohol to toys and apparel. Amazon might even be taking it one step
further, having registered a patent for “anticipatory shipping” earlier in the year
which suggests that the online retailer might take its already efficient supply chain
and amp it up another notch by boxing and preparing for shipment orders that
customers haven’t placed yet.
Alex Hole – UK Director, Amazon Media Group
Delivery
on demand
With increasingly saturated and busy lives,
consumers crave instant gratification, and with
that, the desire to shop anywhere, anytime and
on any device. Assisted by the growing availability
of internet access and mobile-friendly sites,
delivery capabilities have gained speed and
efficiency, matching the desires and expectations
of consumers hungry for e-commerce.
42%
of consumers make
purchase decisions
based on
delivery times
Different dimensions
Shortening delivery times
Since their inception as an online book store,
Amazon continue to push the boundaries of
sourcing and delivery. The launch of Prime is
no different. As part of the annual subscription
service, members have access to next-day delivery
at no additional cost for a multitude of products.
It doesn’t stop there - PrimeNOW offers one-hour
delivery costing £7 or same-day delivery within a
two-hour slot for free. Although it is only currently
available to members with delivery addresses in
specific postcodes, it gives us a glimpse into what
we can expect in the future. Much like Uber, Prime
deliveries also give consumers the ability to track
a courier in real-time.
Delivery
on demand
Click and Collect
The most visible development in recent years
has been the significant rise of click and collect
services. By cultivating a network of collection
points spanning the retailer’s brick-and-mortar
shops, corner shops and commuter stations, click
and collect allows consumers to order online and
pick up their purchases at their convenience. Click
and collect is especially useful to those who may
not have the luxury of waiting at home to receive
big-ticket items, such as full-time workers.
Pioneered by retailers like Argos, click and collect
is quickly becoming the norm, aiding the rise of
e-commerce and Delivery on Demand.
Starbucks click and
collect: the largest coffee
chain in the UK now
offers people the chance
to skip the queue and
order a coffee on their
way to a store using their
Barista’s app
Amazon are rolling out
1-hour delivery across
the capital with their
service Prime Now.
Delivery drivers can be
tracked on the Prime
Now app and the service
covers 27 departments,
including electronics.
64%
have used
Click & Collect
Where next
Automated delivery looks certain to advance.
We’ve already seen Amazon trial delivery by
drone, and Mole Solutions are in talks with
London Underground about repurposing existing
underground tunnels to build an automated
delivery network under the city. Mirroring
consumers’ lives, in which everything from
checkouts to motorway tollbooths are becoming
automated, it makes sense that retailers will
leverage the expanding acceptance of such
technologies and automate delivery.
Delivery
on demand
Imagine if courier services could connect to a car’s
sat nav via the Internet of Things, and assessed
the best point of delivery based on the planned
travel route of the consumer. A scenario like this
not only allows smooth delivery for consumers,
but also maximum efficiency for courier services.
Over the next 5 years, we expect to see such
examples of how delivery services can be more
fluid and resourceful. Vast amounts of consumer
data and more useful ways of interpreting it will
soon allow brands to begin the delivery process in
distribution centres before the product has even
been ordered.
Lockers at commuter
hubs: network rail plan
to put redundant ticket
offices on the London
Underground to use
as collection points for
commuters on their way
to and from work.
Amazon have already
trialled delivery via the
drones within the UK.
Avoiding the hassle of
traffic, they offer faster
and more concisely
timed delivery.
1 in 4
are interested in
drone deliveries
Implications for brands
“”
As click and collect grows in adoption, retailers
also need to consider the consumer experience
upon collection. Shop assistants at the collection
point at Selfridges, for example, will unbox
purchases in front of the customer and allow
them to look over the goods. Once customer
satisfaction is agreed, the goods are repackaged
into the department store’s iconic yellow bags,
creating a moment intrinsically about the brand
at the conclusion of the shopper journey. This
is particularly challenging at points outside of a
brand’s brick-and-mortar stores. Whilst they have
less control over the brand experience here, there
are still opportunities to create brand identity.
Branded storage lockers, for example, will give
consumers an experience of the brand beyond
online storefronts.
Many large stores could be refitted to become click and
collect or home delivery hubs. This could prompt the rise
of “drive through shopping”, the ultimate choice for the
time constrained consumer.
David McCorquodale – Head of Retail, KPMG
Delivery
on demand
Clearly, the first task retailers have to address in
relation to this trend is ensuring their own delivery
offering is as seamless and slick as it can possibly
be. As this area becomes increasingly competitive,
consumer expectations will only grow and as a
result a more sophisticated, ‘human’, response
is required when things go awry. Late deliveries
demand explanations on the part of the retailer, as
consumers may lose trust in the retailer’s ability
to fulfil orders. Therefore, balancing automation
with thoughtful customer service will be a key
challenge.
One-third want the
option to have
things delivered
24/7
Thanks go to all report contributors: Sophie Harding, Irina Lim, Sam Barton,
Julia Ayling, Drew Scrymgeour, Jeremy Pounder, Darran Snatchfold, Neil Bruce,
Hannah Mahood, Emma Hurst, Lavinia Weir
For more, contact us on:
Jeremy.Pounder@mindshareworld.com | Sophie.Harding@mindshareworld.com
@future_medialab.
http://futuremedialab.com
| FUTURE OF RETAIL