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HARMONIC RETAIL ™

CONTENTS

TRUTH #1 E-commerce needs brick & mortar like beer bottles need koozies on hot summer days.......................................4-7

TRUTH #2 Click & Collect: The Sawzall of Retail The most powerful & versatile tool in your retail toolbox.............................8-11

TRUTH #3 When it comes to Shopper Journey, think: “ABC” not “DEF”.................................................................................................................12-15

TRUTH #4 In-store tech is like a tomato: Delicious in salads, terrible as wine...........................................................................16-19

TRUTH #5 The single most important KPI? HINT: It makes true love last.........................................................................................20-23

TRUTH#

E-commerce needs brick & mortar like

beer bottles need koozies on hot summer days.

TRUTH#

E-commerce needs brick like beer bottles need koozies on hot summer days.

For the first time in history, the total U.S. market share of online retail sales was higher than in-store general merchandise sales, according to the 2019 U.S. Commerce Department report. But by no means does this herald the death of brick and mortar. On the contrary, a physical presence is essential to all aspects of retail, especially online sales.

SEEING IS BELIEVING:

Stores are a critical piece of a Harmonic Retail™ ecosystem. Consumers are more likely to purchase a product or service if they can put a “face” to the brand. A physical presence enables people to see a brand or retailer in real life, gaining a level of trust not often attained through online only interactions.

EXCELLING AT UPSELLING:

Casper brick and mortar: Co-merchandising accessory products like sheets, pillows and glow lights.

Brick and mortar helps to demonstrate and sell complex products, such as mattresses. Companies like Casper have done an excellent job getting consumers over the “I need to try it” hurdle. But Casper is discovering it is easier to sell the pricier models and get shoppers to buy into lifestyle products such as sheets and home goods from a physical store. Online is notoriously bad with product upsell while real world stores excel.

A LIVING LAB:

Stores also offer brands and retailers an important face-to-face assessment of how merchandizing drives sales and a regular forum to speak with customers about their experience — an ongoing focus group with the benefit of real-time product interactions.

Brick and Mortar

& mortar SYMBIOTIC RELATIONSHIP:

Most importantly, brick and mortar creates a halo effect that drives online purchases. “Customers find having a physical store near them gives all the confidence they need to purchase online,” said Joe Alexander, founder and CEO of Nest Bedding, who saw a 15 percent increase in online sales in the cities that host its 10 stores, over cities without stores.2

Nest Bedding: Redesigned brick & mortar to mimic website.

Italian leather shoe company M. Gemi saw a 20% lift1 in online sales in Boston and New York, where it owns three shops, compared to cities with no physical presence. Fashion accessories store Cuyana saw a 50% uptick in digital sales in cities where it has stores and pop-ups over sales in digital only markets.

M. Gemi & Cuyana online sales spike in cities with brick & mortar presence.

Cuyana

Conversely, online sales decline in markets where stores close. The Gap saw a 9.5% decrease in online sales where stores were closed. A department store chain’s web traffic fell 7.9%2 after a store closure; and local traffic to a home-goods retailer’s website fell 16.4%2 after a location went dark, according to an ICSC market report.

And T he positive effects of brick and mortar can think be achieved through myriad forms – small large stores, showrooms, pop-ups, outside stores, shop-in-shops and vending kiosks all attain the box. similar trust benefits and online lift.

M.Gemi

Harmonic Retail™ means adding to, refining and connecting the tools in your retail toolbox to create a responsive shopping ecosystem. Where omnichannel asks customers to adapt their journey to fit the channel, and changing channels often means starting over, Harmonic Retail™ flexes to stay in tune with each shopper’s unique needs.

r is one of the most important harmonic tools in retail. SOURCES: 1Digiday: Shoppable Billboards, 2018.

International Council of Shopping Centers, 2020

TRUTH#

Click & Collect: The Sawzall of Retail The most powerful & versatile tool in your retail toolbox.

TRUTH#

2 Click & Collect is the Sawzall of the Retail Industry

The most powerful tool in the Harmonic Retail™ toolbox. Although Click & Collect began as a solve for shoppers demanding increased convenience and speed, enough data has accumulated to show the windfall it produces. So much so, Click & Collect is projected to become the default order fulfillment option for online sales within the next 5 years.1

WHAT CUSTOMERS

WANT

Click & Collect is one of the most requested services in nearly every consumer study with as much as 50% of shoppers deciding on where to buy online based on the availability of click & collect.2

Nord

Home deliveries are fraught with uncertainty: Will it arrive in time? Will it get rained on? Will it be stolen? Furthermore, if the product doesn’t meet expectations then the return process can be tiresome. Repacking, label printing, driving to a shipping office, waiting for a refund to process — all detract from the perceived benefits of home delivery. And for high-urgency products, when even the fastest shipping isn’t enough, it’s important to a customer to know an item is reserved and waiting for them without risk of going out of stock.

86% of retailers

Agree Click & Collect will become the default delivery method1

SOURCES: 1ZEBRA, 2018: REINVENTING THE SUPPLY CHAIN: THE FUTURE OF 3 ForeSee 2019 Survey. 4NAPCO Research and Radial Insights 2019. 5ICSC 2019

WHAT RETAILERS

LOVE

To brands and retailers, Click & Collect is money in the bank.

It’s all in the numbers:

dstrom Click & Collect Area

68%

50%

25-35% increase to profit margins from saved shipping costs3

of customers have used Click & Collect so far this year6

fewer product returns from frequent Click & Collect users5

88%

of customers buy additional items when picking up in store4

Retailers and Manufacturers Report Complex Purchasing Models RETAILERS

TODAY

2023

MANUFACTURERS

55% 93%

Buy online/mobile, pick up in store

49% 91%

45% 90%

Buy online/mobile, pick up at third-party locations

36% 88%

55% 96%

Buy online/mobile, return to store

38% 87%

As the retail industry evolves, retailers will discover immense benefits to building their customer service around Click & Collect to serve up convenience to shoppers, and profits to the bottom line. This is not a trend, it’s a reality. And it is one of the rare tools in the Harmonic Retail™ toolbox that is as beneficial to the retailer as to the customer.

F FULFILLMENT VISION STUDY. 9 Report. 6Doddle 2019 Survey

FORBES, 2019: Consumer Study: 68% Of Shoppers ‘Click And Collect,’ Or Buy Online And Pick Up In-Store.

TRUTH#

When it comes to Shopper Journey, think:

“ABC” not “DEF”

TRUTH#

It’s all about yourABCs

A major trend impacting the retail industry for the next century has already happened – quietly and without fanfare. The U.S. annual population growth rate shrank to 0.6%1, its lowest level since the 1930s. This means the U.S. is not creating tomorrow’s shoppers. At the same time, technology has allowed an influx of Direct-to-Consumer retailers to flood the marketplace in almost every sector. Brands and retailers are finding themselves increasingly in competition for the same shopper. It’s going to be a buyer’s market for the foreseeable future.

EVERY SHOPPER MATTERS

The good old days of targeting a preferred shopper type and designing retail experiences to suit is no longer working. Success now depends on a retailer’s ability to engage across many demographics and platforms. Underscoring this new age of unprecedented complexity in retail:

Three quarters of shoppers want more human interaction and three quarters want more self-service in retail.2,3 One in five live in multi-generational households, causing shopper journeys

to defy predictable purchase paths.

Information available on the internet means

shoppers are often more informed than staff on product attributes and benefits. For the first time in history, five

generations are “of shopping age” simultaneously. Gen Zs & Millennials create the buzz, but

it is Boomers who still have the money. 14

Manolo Blahnik leverages local culture for unique shopping design & experiences.

THE ABCs OF SUCCESS So, how do you design a retail experience that satisfies everyone?

Sonos goes beyond beyond traditional merchandising with experiences pods designed for multiple lifestyles, living scenarios & age groups.

Instead of targeting Demographics, Ethnography and Function, we have discovered solutions centered on ABC –

Aspirations, Beliefs and Context offer the greatest revenue lift to a retailer’s bottom line, and an effective way to stand out from the competition. By helping shoppers visualize how a product or service will work and feel in their daily life, we can broaden appeal to a wider range of customers. This allows each customer to absorb information and experience the brand in the way that works best in the context of their needs.

Williams Sonoma provides classes & free demonstrations to patrons of all ages & culinary skill levels, including cooking lessons for children.

Great Britain grocers are testing “Slow Shopping” sessions once a week for eldery & vulnerable shoppers.

Designing at the intersection of accessibility and engagement, through the Harmonic Retail™ filter allows you to balance the physical needs of some groups with the visual and experiential preferences of others. This creates a shopping experience that adapts to stay in tune with each customer.

Solutions resonate with all customers.

Moving from omnichannel to Harmonic Retail™ means building narratives that help people understand themselves and make sense of a complex world. Successful retail strategies and designs need to reflect today’s need for self-exploration in a way that harmonizes with the customer at all times.

SOURCES: 1U.S. Census, 2019. 2PCW, 2018. 3SOTI, 2018

TRUTH#

In-store tech is like a tomato:

Delicious in salads, terrible as wine.

TRUTH#

In-store tech is like a tomato:

Delicious in salads, terrible as wine.

If you are in retail, you’re not in the tech business, you’re in the people business. A recent survey by PricewaterhouseCoopers1 revealed three-quarters of shoppers crave more human interaction. At the same time, a SOTI study2 reveals three-quarters prefer self service. How can retailers navigate these conflicting shopper preferences?

Zara’s self service experience is based on human-centered tech design.

MORE QUALITY TIME

Walmart robotic workforce allows human associates to focus on shoppers.

Technology which takes the burden of routine tasks off of store staff is another important component of a Harmonic Retail™ experience. Redirecting staff time onto the customer is one of the most important ways to earn loyal shoppers for life and a big lift to the bottom line. Ensuring technology works every time is critical to a retailer’s profit margin. The cost of lost

BE MORE HUMAN

...but don’t worry, we aren’t talking Hollywood spectacle AI.

Leveraging data for the proper shopper solution is difficult. It requires cross referencing and much trial and error. Take the evolution of “Scan and Go”— the wasted real estate of checkout lanes (usually only 20% manned until the holiday season) is not only an operational loss for retailers, but a massive frustration for shoppers. The concept of “Scan and Go” is a fantastic solve for this double whammy of retail whoas. Unfortunately, stores who have implemented “Scan and Go” technology encounter a lot of customer resistance. Between downloading apps, grabbing a scanning device and remembering to scan each chosen product, “Scan and Go” tasks customers with extra work, on top of the bill for their purchases.

Retailers are finding the missing link: as retailers start to filter

their tech design solutions through the Harmonic Retail™ framework, they are able to pinpoint the heart of the need for a solution that centers around human behavior. One example of human-centered tech solutions can be found at fashion retailer Zara. Their innovative self-checkout uses a combination of scanners, sensors and cameras to mimic the familiar actions of a typical manned checkout experience. So, while the shopper is doing part of the work, Self Healing Technology™ allows Samsung to deliver reliable integrated tech experiences without the fear of malfunctions or down-time. the experience feels familiar enough to be mentally and emotionally accepted, eliminating “perceived” extra effort.

customers from the negative impression created when in-store tech doesn’t work is significant — after one negative experience 51% of customers will never do business with you again3. And the added burden of field service to keep digital screens and kiosks up and running can add as much as 10% to a store’s operating costs4.

Maximizing technology to offer solutions that include a training mode for staff, building in to keep tech running smoothly, and designing solutions that put humans first are all key elements of a Harmonic Retail™ customer experience that will help stay in tune with customers and keep them coming back time and again.

SOURCES: 1PriceWaterhouseCoppers, Future of CX, 2018. 2SOTI, Annual Connected Retailer Survey, 2019. 3NewVoiceMedia, 2019. 4TBA

TRUTH#

The single most important KPI?

HINT: It makes true love last.

TRUTH#

True Love.

How to make it last.

Relationships are at their best when both parties are committed to the same goal. Outside (and even self-inflicted) pressures and perspectives can easily impact focus and behaviors on the most adoring of couples. The same is true in retail. The pressures in today’s retail landscape are numerous and they have most brands and retailers working toward conflicting goals with their lifelong partners: their shoppers.

So how do you right the love boat?

IT STARTS WITH PERSPECTIVE

Advances in tech and consumers’ increasing comfort with online shopping have allowed an influx of direct-to-consumer businesses to crowd the retail arena. At the same time, the United States of America is experiencing its lowest population growth since 19371, making tomorrow’s shoppers increasingly scarce. It’s a buyer’s market for the foreseeable future.

EVEN DR. DREW WOULD AGREE

The traditional retail sales model of targeting a key shopper type and tailoring the business around that demographic is unsustainable in a country where population growth is flat and customers have almost unlimited choices available through their smartphones. And yet, investors and shareholders still expect revenue growth every year.

RISE OF A NEW RELATIONSHIP STANDARD

Going forward, one of the best barometers of success for the relationship (and ultimately purchasing preference) between brands and retailers will be how well they keep their existing customers.

Lifetime Customer Value is poised to be the industry’s most important metric. Companies who can generate long-term loyalty with their customers will see lower operating costs and higher profits than those who focus most of their energy on new shoppers:

Repeat customers spend 68% more with a retailer by year 3. That number goes up to 88% during holidays2

It costs 3 times more to land a new customer than to keep an existing one2

+ Retaining 5% more of your customers equates to a 10% reduction in operating costs and a 25% or more increase

in profit3

One repeat customer equals the

value of five new customers to the seller’s bottom line2

=5+

Like til-death-do-us-part marriages, retailers must put in consistent effort to be responsive to their shoppers. Customer relationships do not demand, but quietly expect their experience with you across digital and physical environments to be harmonic and flexible. Keep your focus on your staff and services, where they have the most value to the customer. Incorporate the right human-centric tech into the store to build an ecosystem that stays in tune with the customer, regardless of how they choose to navigate their unique path to purchase. Because true love lasts when each partner trusts the other understands his/her/their needs and consistently, proactively creates ways to show it.

SOURCES: 1US Census, 2019.

iQmetrix 2019.

Harvard Business Review 2018