New Age, New Tech The Stakes of AI Integration in Retail
From Our House to Yours Warehouse Technologies for Faster Fulfillment
Hashtags & Civics Why Top Retailers are Reshaping Around Politics and Culture
A Whole New Worldview Best Practices for Success in Approaching International Markets
MAKING THE PHYSICAL CONNECTION
FROM ONLINE TO IN-STORE Why Direct-to-consumer Retailers are Changing the Retail Landscape
ON OUR RADAR
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CONTRIBUTORS ALLIE EGAN // CEO, CYNTHIA ROWLEY Allie is the President and CEO of Cynthia Rowley where she oversees e-commerce, retail, wholesale, marketing, finance and operations. She’s held previous roles with L Catterton and Estee Lauder, and earned her MBA with high distinction from Harvard Business School.
DOUG STEPHENS // FOUNDER, RETAIL PROPHET Doug Stephens is the Founder of Retail Prophet, a leading retail industry consultancy. He is also a futurist, author of two groundbreaking books, a keynote speaker and business advisor on the future of retailing and consumerism. Stephens is a nationally syndicated retail columnist for CBC Radio and sits on multiple advisory boards.
JOHN BOLINE // VICE PRESIDENT OF STORE DESIGN, STARBUCKS Focused on bringing the Starbucks Reserve premium experience to life, John Boline is leading Starbucks’ growth with products and brand-forward designs that elevate the coffee culture to the next level, one store at a time.
ED KENNEDY // SENIOR DIRECTOR OF COMMERCE, EPISERVER Ed Kennedy is a thought leader in eCommerce. He specializes in platform design and implementation for consumer brands, B2B manufacturers and wholesale distributors. SHANNON RYAN // EXECUTIVE VICE PRESIDENT OF NORTH AMERICA, VALTECH Shannon Ryan is an expert in helping brands create digital and physical spaces to drive unparalleled connected experiences. Prior to joining global agency Valtech, Shannon was co-founder & CEO of non-linear creations.
TONY D’ONOFRIO // CEO, TD INSIGHTS Tony D’Onofrio is CEO of consultancy TD Insights and was previously Chief Customer Officer (CCO) of Tyco Retail Solutions (now Sensormatic), a $1 billion division of Johnson Controls (JCI). D’Onofrio is a futurist and recognized as a global top 100 influencer in the retail industry.
ADDITIONAL CONTRIBUTORS: HORST HANSHUR // VICE PRESIDENT OF RETAIL BUSINESS DEVELOPMENT AND CUSTOMER SERVICES, AUDI With over two decades at Audi, Hanshur is an expert in worldwide dealer qualification, sales strategy and international used car management. He also played an integral role in developing Audi’s sales network in China.
Joanna Rutter, Content Marketing Manager at DOR Tech // Dr. Bernd Schoner, CEO and co-founder of DeepMagic // Lionel Binnie, Author of “The Future of Omni-Channel Retail” // Leslie Pasquad, Senior Partner at Kantar Consulting // Colm McLoughlin, CEO and Executive Vice Chairman of Dubai Duty Free // Joel Kamm, Founder and CEO of Flexetail // Brent Paulsen, Managing Director, Head of Retail at UNTUCKit // Diane Ellis, CEO of DME Advisory Group // Dave Gilboa, co-CEO and co-founder of Warby Parker
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from your editors
JULIA RAYMOND HARE // EDITOR-IN-CHIEF
GABRIELLA BOCK// MANAGING EDITOR
Dear Reader, Writing this letter to you is emotional as it signifies the end of the beginning: This first issue of RETHINK Retail magazine marks the end of months of hard work from late nights and countless brainstorms to inspiring interviews with industry gurus who remind us why “we do what we do;” at the same time, this issue signifies the beginning of many issues to follow and new java-fueled journalistic endeavors to uncover stories that matter most for our audience. But, enough about us—the retail industry at large is also experiencing the end of the beginning of e-commerce, as best explained by our source Doug Stephens who says the party is just getting started. And what a party it will be! There is no better time to start rethinking retail.
In this inaugural issue, you will read about disruptive technologies, branding and leading examples of connected spaces and connected commerce, all tied together by global perspectives from top industry experts. You’ll discover exclusive insights revealed by retailers and brands alike, from Macy’s and Cynthia Rowley to Audi and Starbucks. If you’re reading this magazine, then you’re already rethinking retail and one step ahead of the competition. We applaud you. We want to know you. We encourage your feedback with open arms. Enjoy the stories enclosed.
RETHINK RETAIL MAGAZINE
Send your thoughts or feedback to our attention at email@example.com.
MAKING THE PHYSICAL CONNECTION TRENDING NOW: DISRUPTIVE TECH
NEW AGE, NEW TECH The Stakes of AI Integration in Retail
SCAMMING THE SCANNER Retail Self-Checkout Collides with Deployment Risks
By Brandon Sams // Staff Writer
SO, GOODBYE CREDIT CARDS YOUR DAYS ARE NUMBERED Consumers Embrace Facial Payment Systems
By Tony D’Onofrio // Contributing Writer
SMART STYLE Voice Assistants Give New Meaning to Fast Fashion By Gabriella Bock // Managing Editor
By Gabriella Bock // Managing Editor
24 FROM OUR HOUSE TO YOURS Warehouse Technologies for Faster Fulfillment By Michael Freeman // Contributing Writer
30 Q&A WITH EPISERVER’S ED KENNEDY As Told to Julia Raymond Hare // Editor-in-Chief
ON THE COVER: Audi City / Image Courtesy of Audi
32 THE FUTURE IS OMNI A Retail Exploration Lional Binnie // Contributing Writer
36 CREATING THE CONNECTED EXPERIENCE 44 BREATHING NEW LIFE INTO DEAD MALLS By Gabriella Bock // Managing Editor
56 DESTINATION SHOPPING: Luxury Retailers Land in Airports Around the Globe By Gabriella Bock // Managing Editor
FROM ONLINE TO IN-STORE
60 SIZING UP YOUR DATA The True Power of Your Data Lies in Your Sample Size
By Joanna Rutter // Contributing Writer ON OUR RADAR: TRENDS & INSIGHTS
62 SHOP ONLINE, PICKUP IN-STORE The Fast-Growing Trend Giving Retailers a New Edge By Michael Freeman // ContributingWriter
66 PRIVATE LABEL SHOWDOWN
70 RETAIL, ON A ROLL
Who’s Playing for Keeps in the Battle for Beauty
Mobile Stores Cover New Ground
By Shamontiel Vaughn // Staff Writer
By Shamontiel Vaughn // Staff Writer
Why Social Transparency is More Important Than Ever By Brandon Sams // Staff Writer
As Told to Gabriella Bock // Managing Editor
80 BRANDING WITH A PURPOSE Exploring Retail’s Feel-Good Awakening By Gabriella Bock // Managing Editor
78 Q&A WITH UNTUCKIT’S BRENT PAULSEN
84 HASHTAGS & CIVICS Why Top Retailers are Reshaping Around Politics and Culture By Brandon Sams // Staff Writer
THE GLOBAL PERSPECTIVE
88 A WHOLE NEW WORLDVIEW Best Practices for Success in Approaching International Markets By Natalie Arana // Staff Writer
74 IN BRANDS WE TRUST
THE STAKES OF AI INTEGRATION IN RETAIL By Brandon Sams // Staff Writer
TRENDING NOW: DISRUPTIVE TECH
Artificial Intelligence remains a predominant disruptor across industries from law and medicine to even retail. With reports projecting retailers saving as much as $340 billion through the implementation of AI technology, the benefits are evident—but the underbelly of this blossoming tech agent reveals a dark side, too.
Corporate Examples of Machine Learning Integration Amazon has been on the cutting edge of AI technology integration and through its new physical retail space we can see how future corporations plan to assimilate this practice into their consumer operations. On Jan. 22, Amazon opened its “Amazon Go” store in Seattle powered through self-checkout machines and AI technology. Customers simply scan a code on the Amazon Go app, items are tracked through the store, tallied and charged to a person’s Amazon account as they leave: no cashiers or checkout necessary. Artificial intelligence factors into this retail experience as the algorithms embedded in the camera technology can identify buyers and the items they are picking up. Dr. Bernd Schoner, CEO and co-founder of DeepMagic, an Artificial Intelligence and IoT technology company, told RETHINK Retail that unattended, automated POS will change retail in the same dramatic fashion that driverless cars will change transportation. “Visual SKU recognition is the next big technology in Auto-ID, following optical scanning and RFID,” Dr. Schoner revealed. “Frictionless shopping requires the seamless integration of SKU identification, payment processing and security. There is no doubt in my mind that computer vision and AI for SKU identification will play a major role in retail tech, as already evidenced by Amazon Go.”
66% of executives already utilizing AI say it increases the consumer experience while mitigating some of the more negative effects of the modern shopping experience. according to a study by IBM & The National Retail Foundation
Other retail conglomerates such as Walmart have a similar plan to bring AI to brick and mortar stores with its IRL, Intelligent Retail Lab design. While close in concept, the application between the two retail giants is very different. Walmartâ€™s smart camera technology is used to watch inventory and ensure freshness of perishables as well as guarantee appropriately stocked shelves, so customers do not have to worry about items being unavailable. These two examples exemplify the nuanced possibility of machine learning and AI-driven technologies to completely reimagine the retail experience on every level: from consumers to executives, workers and third-party benefactors.
Benefits of AI in Retail In January, IBM published a study in association with the National Retail Foundation detailing supply chain management and retail solutions born through the adoption of AI technologies and algorithms. Hoping to improve efficacy of retail practices and reduce costs, brands see dynamic AI automation as
the means to an end: expanding operational agility and improving the customer experience. Researchers found 85 percent of retailers were planning on utilizing artificial intelligence software for supply chain planning by 2021. Likewise, 79 percent had plans to integrate this advanced technology into their customer intelligence programs. Upward of 71 percent of executives already utilizing AI technology experience expanded business capabilities with an additional 66 percent saying it increases the consumer experience while mitigating some of the more negative effects of the modern shopping experience. Adoption of AI-driven services can also help revitalize a brick and mortar store by enhancing the customer experience; for example, with chatbots and tailored online experiences. In addition, AI technology has been heralded by current adopters as a potential reprieve for physical retail spaces amidst the retail apocalypse, which has resulted in thousands of store closures. AI has the potential to
enable robots or kiosks in physical retail spaces to help customers more readily locate in-store products or potentially work as virtual shopping assistants. Additionally, machine learning has carved out a unique space in market analysis and advertising content. Artificial intelligence research agency Emerj conducted a case study with an AI marketing platform, Albert, in conjunction with an Italian lingerie brand. The results were staggering. The lingerie company found that manual marketing and advertising were not cost-effective. However, with the integration of Albert in a single month overall ad spend was reduced by 12 percent, yet ROAS increased by 50 percent across digital media platforms with Facebook seeing a 565 percent increase. After three months of incorporation, ROAS expanded 336 percent with a 2000 percent increase in purchases generated through social media platforms. Integrating AI technology into digital marketing revitalized the entire brand. Researchers
extrapolate these findings to suggest businesses can use AI tech to scale productivity upwards without conversely scaling staff expenses.
consumers. Machine learning is foundational to artificial intelligence; however, this new wave of tech can be prone to bias and stereotyping.
Pitfalls of AI and Machine Learning
The way artificial technology uses machine learning often revolves around crawling through the internet to teach itself words, context, images and application. It builds this AI technology through understanding how images and words are often used in conjunction with others. A paper published in Science, a magazine by the American Association for the Advancement of Science, found that these programs displayed bias against black people and women. They’re often prone to gender and racial stereotyping.
With all the possibilities inherent in technological advancements such as intelligent-based automation and AI tracking software, there are pitfalls. While from a business standpoint the reduction in costs would mean more money for the company, it often comes at the cost of employee hours and in many cases their entire livelihoods. As automation looms over industry, projections by the Investor Responsibility Research Center concluded that upwards of 6 million retail jobs could be lost within the next decade to computerization through AI technology and other automation services, i.e., nearly half of all retail-related jobs. The report categorizes the displaced laborers as “stranded workers”. Aside from the ethical implications regarding workers, there are additional complications for
The prevalence of stereotyping in the traditional consumer space is well-known and documented. With as much as 80 percent of black consumers reportedly experiencing racism and stereotyping in retail spaces. As AI technology is influenced by its programmers and the history of space it is utilized in, the retail market may become a hotbed for machine-based racial stereotyping in unique ways.
Naturally, this is not to advise against brands looking to utilize AI technology, but rather to serve as a cautionary tale of the drawbacks associated with computer-based consumer interaction and the historical and contemporaneous reality that influences the way this technology learns from, and consequently interacts with, the world.
Conclusion As the technology matures, it opens the industry to new, innovative ways to improve quality, speed and overall efficiency even if this new tech comes with ethical and operational risks. To appropriately take advantage of this developing technology, brands must be honest about more than just the potential profit margins. With the rise of “Ethical AI” to mitigate some of the more prominent concerns, hopefully the 85 percent of corporations interested in integrating this technology into their business practices will be cognizant about its weak spots as much as they are positive about its benefits.
Your Days are Numbered CONSUMERS EMBRACE FACIAL PAYMENT SYSTEMS By Gabriella Bock // Managing Editor
As mobile payment platforms like Apple Pay and Google Wallet continue to gain popularity around the world, those staying ahead of trend are giving the digital payment system quite the facelift.
Already a major disrupter in retail and restaurant spaces across China, facial payment technology is gaining traction among European and North American consumers who are increasingly demanding—and since your face is the one thing you never leave home without, those who utilize the service will never again face the awkward moment of arriving to the checkout empty-handed.
But in a time when privacy has been at the forefront of consumer concern, how many people would willingly give retailers access to their face?
technologies such as fingerprint sensing, facial recognition and retinal scanning.
meal in just seconds—a feature that saves time and helps prevent ordering errors.
With this number in mind, tech-savvy burger chain Caliburger partnered with NEC Corportation of America (NEC) to roll out facial recognition kiosks at its U.S. and Canada locations last year, a move that helped bring the new technology to the U.S. market.
CaliBurger’s Chief Technology Officer Anthony Lomelino told RETHINK Retail that, since its launch last year, 20 percent of CaliBurger’s customers have registered their faces with their PopID kiosks and nearly 70 percent pay with their face again on their next visit.
Powered by PopID, the AI-enabled kiosks work by taking a digital fingerprint of a face and matching it against a member database—meaning that, once registered with the kiosk, customers only have to walk up and look at the camera to access their account, complete with ordering and payment options.
If the technology continues to prove popular among customers, the company said it will install the kiosks at all its locations worldwide.
The kiosks also give customers access to their purchase history which then allows them to reorder a previous
The answer might surprise you. A July 2017 survey by Viewpost found that 80 percent of American respondents support futuristic payment
And use of the technology is certainly expanding: This year, Standford University and University of Southern California students will be able to smile for food and other products at certain campus eateries.
of respondents support futuristic payment technologies such as fingerprint sensing, facial recognition and retinal scanning. according to a July 2017 survey by Viewpost
Although some critics of facial payments fear that the technology could infringe upon privacy laws, NEC assures that the facial recognition program is specific to the kiosk and that customers’ information is stored securely—so, as one actress put it in an NEC promotional video, you don’t have to worry about stalkers finding your face. Back in China, tech retailer Lenovo opened a cashierless convenience store at its Bejing campus last year, using the space as a test site for trialing friction reducing technologies like facial-recognition, e-payment and preference-learning artificial intelligence.
According to Lenovo, the unmanned convenience store uses its tablets as store staffers that match customers with their mobile payment profiles, allowing them to find their goods and exit the shop all without having to pull out their wallets. But more importantly, the store acts as a pilot program for technologies that have the power to completely change the way we live. Case in point, Lenovo’s next smart store project: frictionless coffee. “[It’s a] cappuccino machine of the future, where you walk up and it knows your preferences and brews the beverage exactly how you want it—which requires a hefty amount of data gathering, and AI to build your profile and make relevant recommendations based on your preferences— all of which we’ve learned how to do with Lenovo Go.” said Daryl Cromer, Lenovo’s vice president of research and technology. Fen Boxly contributed to this story.
Image courtesy of Lenovo
Video screenshot courtesy of CaliBurger
SCAMMING THE SCANNER RETAIL SELF-CHECKOUT COLLIDES WITH DEPLOYMENT RISKS By Tony D’Onofrio // Contributing Writer Several data points in the early half of this year prompted the following update on the state of retail selfcheckout (SCO) deployments.
Included among these updates are: the increased openings of self-service stores (with Asia and North America taking the lead), the evolution from stationary SCOs to multiple variations of Scan & Go applications, and new research—some of which you will only see in this article—on the theft challenges with these new autonomous solutions; for example, a story posted in February by Retail Info Systems (RIS) indicated that Walmart was transitioning from a consumer to a store associate “Check Out With Me” Scan & Go model with shopper theft cited as one of the major reasons. In one case during the (consumer) Scan & Go rollout, a customer tried to leave a Walmart store with a cart of about 100 items, only 40 of which he had scanned.”
Self-Checkout is a Growth Retail Application According to Greg Buzek at the IHL Group, retailers with traditional SCO see about 40 percent of their transactions and 20 percent of their sales volume now taking place at self-checkout stations. About 20 percent of large retailers/restaurants are rolling out Scan & Go consumer options in the next 12 months and 44 percent will have that option through their apps by 2020. The SCO market is expected to exceed more than US $5 billion by 2024 at a CAGR of 10.3 percent in the forecast period. Sample North America retail chains either deploying or piloting the Scan & Go variation include Kroger, Dollar General and 7-Eleven.
With 10 stores opened so far, the Amazon Go selfservice store model could be a $4 billion business for the company by 2021. Over 500 Bingo Box self-service locations are already open in China.
The Categories and the Generation Gap Forty-eight percent of USA internet users believe that Scan & Go technology would make shopping easier and 43 percent would rather try Scan & Go than wait in a checkout line. Favorite categories are groceries, home goods, and fashion items. Sixty percent of internet users worldwide would prefer to shop at other retailers if they offered an Amazon Go-like experience. Not surprisingly in this digitally-connected era, this preference jumps to 77 percent for consumers aged 18-34.
The Retail Self-Checkout Challenge Late last year the Europe-based ECR Group published an extensive study quantifying the risk associated with selfcheckout. Among the key findings: • Data comparing stores with and without Fixed SCO found that levels of loss were higher in the former than the latter, with some grocery case studies recording losses in the region of 33 to 147 percent higher.
• Stores where 55-60 percent of transactions went through Fixed SCO can expect their shrinkage losses to be 31 percent higher.
on a framework featuring 11 themes that retailers can implement to manage the associated risks with the use of SCO technologies.
• For a store with 50 percent of transactions being processed through Fixed SCO, it can expect its shrinkage losses to be 75 percent higher than the average rate found in grocery retailing.
Why Is Self-Checkout a Theft Target?
• Stores using Scan & Go technology could see overall losses in the region of 0.96 percent of sales—a 43 percent increase. The ECR report concludes that the data was not clear in its theft conclusions. There are many who assert based on their experiences that the losses are more likely to be mistakes and errors. Valuable guidance is provided
The USA-based Loss Prevention Research Councils (LPRC) asked actual shoplifters “Why would you use selfcheckouts to commit theft?” They shared exclusive data for this article about the mind of a shoplifter, chart (A) shown above.
The Loss Prevention Cxx Moment As the data clearly indicates, SCO is a major growing retail application. From speaking to multiple global retailers, it is in fact a core element of their future
Retail Loss Prevention Disrupted
Digitally Empowered Consumer
Brand Value Differentiation
Easier to get away
Closer to exit
Immersive Unified Customer
Prescriptive Video / Data Analytics
In my globally delivered “The Disruptive Future of Retail” keynote presentation, I share this chart where I elaborate that this autonomous transition is a major opportunity to evolve the retail industry, chart (B) shown above. Digital transformation trends are leading to a collision between the technology empowered consumer and increased theft opportunities. For Loss Prevention,
AI / Machine Learning
Less Neutralize Harder to attention guilt prosecute from other customers
innovation roadmap that meets the “must have” criterion of new digitally-empowered generations.
LP Cxx Moment Brand Integrated Security Data / Visual Zone Deterrence
Smart Supply Chains Less attention from employees
Retail Theft Opportunities
Real-Time Consumer Loyalty
the SCO challenge is one of those unique Cxx moments to evolve to differentiated strategies and technologies that securely enhance the value of the retail brand. The solutions to the SCO deployment risks are more intensive engagement between the associate and consumer for proper utilization and a new set of strategies and emerging technologies focused on frictionless consumer experiences. For the original article including all research sources, please visit www.tonydonofrio.com
Approximately 44% of large retailers/restaurants will offer Scan & Go consumer options via their apps by next year.
SMART STYLE VOICE ASSISTANTS GIVE NEW MEANING TO ‘FAST FASHION’ By Gabriella Bock // Managing Editor In 1888, Richard Sears used a printed mailer to market his growing watch and jewelry business. A company built on overstock, Sears would soon learn that the time was right for his mail order business and, in just a few short years, the Chicago businessman would become a name known in nearly every household in America.
Over a century later, the once minted Sears, Roebuck and Company would find itself filing for Chapter 11 bankruptcy, following suit behind the laundry list of other retail giants that have fallen victim to changing times. As Sears himself knew, retail is a marketspace driven by convenience. In 2017, findings from a study published by the US Department of Labor’s Bureau of Labor Statistics revealed that the average employed American works 43 hours per week. As more Americans work longer hours in cities with immobilizing traffic, the way in which they purchase goods will continually evolve to meet the needs of an ‘on-the-go’ society. Such evolution includes emerging technologies in e-commerce that have created entirely new selling spaces thanks to advances in speech recognition software and its integration into the daily lives of smartphone users. Although voice recognition technology is still in its infancy, the impact that it has already had on the retail sector is fascinating and can be examined from two different angles: the consumer experience and, on the business side, customer acquisition through hyper-personalized recommendations gained through the software’s tracked purchase history. As a tool for consumers, voice recognition software allows shoppers to make online purchases via voice command, freeing up precious time wasted on clicking through retail web pages or filling out lengthy purchase forms. But how many people would actually prefer to task a robot with their shopping?
OK, Iʼve added the Davis Gingham Pant to your shopping list. The answer is: a lot, actually. According to findings published in Episerver’s 2019 global report: Reimagining Commerce, approximately 17 percent of consumers make purchases using voice devices multiple times each month; meanwhile, more than 1 in 5 consumers, or 22 percent, use voice devices for research. Compared to recent years, it’s safe to say that voice technology is growing in popularity. In fact, purchases made through voice-controlled devices are projected to leap from $2 billion to $40 billion by 2022, according to a recent study from OC&C Strategy Consultants, and legacy stores like Walmart have already made moves to cash in on the voice market. In April, the big box retailer introduced Walmart Voice Order in partnership with Google to allow customers to order grocery items from their Google Assistant-enabled smart devices. And it’s not just limited to digital platforms: Brick-andmortar shopping can also be made more efficient through voice activated software. We’re already seeing some apparel retailers integrating voice technology in their dressing rooms and, just last year, H&M installed a voice activated smart mirror in its Times Square store.
To be successful in voice, brands need to find real ways to connect and actually help consumers.” Allie Egan // CEO of Cynthia Rowley
The mirror offers customers personalized styling tips based on the items they selected and gives customers the option to view similar items or select coordinating accessories directly from their dressing rooms. After that, any items of interest can be purchased through the mirror by scanning a QR code.
and preferences, the best brands will come up with some great offerings.”
But like with any new technology, there is always a learning curve and, while remote voice shopping works well for tasks like grocery or office supply purchasing, questions of how offsite voice ordering will fare for fashion retailers remain unclear.
Those questions, however, may be answered soon: In a twist of irony, UK retailer Argos began trialing their voicecontrolled shopping service last year, giving customers the option to use a smart home speaker to order fashion or homeware items directly from their mail order catalog.
“Voice technology is bound to be important for fashion brands in the future as it’s meeting consumers where they are,” Allie Egan, CEO of Cynthia Rowley, told RETHINK Retail. “To be successful in voice, brands need to find real ways to connect and actually help consumers. There are few examples of this yet, but with technology and better understanding of individual consumers and their style
Despite still being in its blue sky phase, voice controlled technology has the opportunity to streamline the way consumers purchase goods in the same way e-commerce has transformed the retail landscape and, although these shifts may feel tenuous today, automation will leave its lasting impact on society—let’s just hope Alexa was programmed with a good sense of style.
FROM OUR HOUSE 24
TO YOURS WAREHOUSE TECHNOLOGIES FOR FASTER FULFILLMENT By Michael Freeman // Contributing Writer There’s no doubt about it: Amazon has set a high bar when it comes to order fulfillment. At a time when consumers are becoming more likely to make purchases from their smartphones than in physical stores, Amazon has set a standard for e-commerce and rapid home delivery that retailers can no longer ignore. And for consumers, the new normal is same-day shipping and two-day shipping—or faster.
The Good News: Amazon set another standard by merging automated warehouse robots alongside human employees to meet its fulfillment demand. While robots compile items for a customer’s order, ensuring that literally tens-of-thousands of orders can be sent out, humans still play a crucial role in supervising the process. In other words, investing in technology gives your workers the tools to fulfill orders using the
smartest and most efficient methods available. That’s how you maintain a high track record for assured deliveries.
Vision and Imaging Technology Let’s face it: Your warehouse requires a highlycontrolled environment. And while order fulfillment is a complex process, technology lets retailers streamline the process from point of sale to delivery. If Amazon can
demonstrate high-levels of efficiency in its warehouses through vision and imaging technologies like handheld image-based barcode readers, the same kinds of technology can also be used by retailers of any size. Today, cameras, sensors and imagers help maximize productivity in a host of ways. Vision technology, for example, helps retailers improve the checkout experience by eliminating the need to scan a product barcode. In this regard, vision technology lets workers access information more quickly—and with a higher accuracy rate.
Inventory Management Software Studies indicate that product availability is the second highest concern for customers, after price. It’s a major factor in their buying decisions, meaning it’s more important than ever for an e-commerce retailer to have the right item in stock. Struggling with inventory spreadsheets is a headache for any retailer, which is why technology can make the process of inventory management considerably easier.
39% of survey participants said one-day shipping was the No. 1 incentive when asked what would make them more likely to shop online. Walker Sands // Future of Retail 2019 Study
If you need to get products to customers through multiple channels and fulfillment options, new software will integrate your channels, locations and order processes using a single management platform. Inventory management software allows you to track inventory by serial numbers and instantly know when it’s time to replenish supply. You can ensure you’re carrying the right amount of stock to meet customer demand—and if you’re not, you’ll be able to quickly locate items at different locations and at the right place in the supply chain. A warehouse management system will help you coordinate your warehousing and distribution activities
while managing inventory and the flow of product. It can also help you expand your base of suppliers. There are onboarding programs to match you with new vendors when products are needed. For example, if a supplier notifies you that there’s a problem fulfilling an order, you can easily find a new supplier.
Meeting 2-Day Shipping Expectations Being able to meet customer expectations similar to Amazon’s same-day shipping is no longer just an option to ponder. Customers expect it. Being able to demonstrate quick delivery times will help solidify customer loyalty.
That’s why offering same-day shipping on your product page gives your customers more reason to shop with you, even as it forces you to locate the shortest delivery method possible. Other retailers are asking suppliers to meet e-commerce orders on the retailer’s behalf, or simply fulfilling orders through a retail store closest to where your customers are. Some retailers are opting to open distribution centers in cities that get the most orders. But most importantly, you must give your customers a strong sense that you care about their package and its delivery by using technology to communicate with them while the package is en route. Systems like Globegistics can improve communications between you and your customer during shipping, and you can use carrier integration software to share shipment updates and send a status notification from the carrier to the customer. This enables you to notify the customer if there’s a delay in shipping, and to provide information for all customer inquiries.
The Takeaway: Emerging order fulfillment technology and software can help reduce the number of decisions that need to be made by warehouse staff per order, enabling your workers to be more productive and more efficient. And because e-commerce sales are expanding rapidly, handling e-commerce fulfillment in a timely and cost-efficient manner is going to be a key to your future business success.
Article images courtesy of Amazon
ONLINE SHOPPING EPISERVER FINDINGS: FROM REIMAGINING COMMERCE 2019 REPORT
TOP 3 MOST WANTED FEATURES:
said that shipping tracking should be a second feature/priority for brands and retailers
of online shoppers said that free shipping should be a top feature/priority for brands and retailers
would like information about returns
FINAL PURCHASES REQUIRE GUIDANCE:
SOCIAL MEDIA DRIVES ENGAGEMENT AND PURCHASES:
1 in 5
have clicked on a social media ad
who use social media have clicked on an influencerâ€™s post
pre-plan all online purchases
DIGITAL COMMERCE OVERWHELMS CONSUMERS:
1 in 2
fail to complete a purchase because there were too many options to choose from
1 in 10
view an item at least 5x before purchasing online
VOICE TECHNOLOGY GROWS IN POPULARITY:
17% use voice devices to make purchases multiple times a month
use voice technology for research multiple times a month
1 in 3
of those shoppers reported directly purchasing from a post
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T U C K i t . COM
at your most casual.
with Episerver’s Ed Kennedy As told to Julia Raymond Hare // Editor-in-Chief With the release of the Episerver study “Reimagining Commerce 2019,” we were more than eager to sit down with the Senior Director of Commerce at Episerver, Ed Kennedy, to dig deeper into the topic of commerce. Where is e-commerce going in the next few years? What is shaping the future of how we shop online? Imagine a world where content is always relevant and everything is shoppable. Read the full Q&A below: Rethink Retail: How have consumer shopping habits changed in the last 10 years? Ed Kennedy: Today’s consumer shopping habits are barely recognizable from what they were 10 years ago. While some early adopters took advantage of the online stores that emerged in the early 2000s, shopping was primarily done in store. Fast forward to where we are today and people tend to think online first, brick-and-mortar second. Episerver’s survey of more than 4,500 global online shoppers indicates a quarter of online shoppers shop online at least weekly, and 62 percent shop online at least monthly. They’re benefiting from free and fast shipping, the ability to check out with one click, personalized recommendations and their preferences being
stored by retailers for seamless experiences not offered in-store. What’s more, they are in a constant state of browsing. In fact, one in four online shoppers research products on their smartphones daily— something that was difficult if not impossible in the early days of ecommerce.
RR: How can new brands and retailers earn customer loyalty in an environment dominated by Amazon? EK: It’s true the online shopping space is dominated by Amazon, but there’s tremendous opportunity for retailers that understand how people shop. Our data indicates 87 percent of
global online shoppers compare what they find on a brand or retailer’s site to Amazon. Knowing only a small fraction of customers do not use Amazon to compare products can certainly be a downer, but retailers can drive interest and, ultimately, sales by doubling down on experience-driven commerce. Product education, personalized content and site search, purchasing ease, promotions on multiple channels, peer reviews and performance of the site itself can all make a difference to earn customer loyalty. RR: What are Amazon’s vulnerabilities and how can smaller brands use them to their advantage?
Ed Kennedy Sr. Director of Commerce for Episerver
EK: Amazon is not perfect and what makes it valuable to consumers is also what makes it vulnerable as a business model. Marketplaces are dynamic and not all sellers offer the product quality, content or service that customers expect. While Amazon has checks in place, such as downgrading feed placement, smaller brands can differentiate from Amazon by competing with their brand experience versus price and selection. To go back to our data, incorrect or incomplete content on a brand’s website and/or mobile app has stopped 98 percent of online shoppers from completing a purchase. Content is a good start, but contextual content is even better so customers can experience a retailer’s brand as if it was made for them because, with personalization, it can be. Finally, two-thirds of consumers (66 percent) say it is important for brands to take public stands on social and political issues. In other words, people are open to shopping with individual retailers, but the retailer must show how they are different than the behemoth of Amazon. RR: What social strategies can brands use to grow relationships with shoppers? EK: Social commerce has matured rapidly in the last couple years with influencers playing a primary role. Brands are using influencer marketing with great success to introduce their products to target audiences from people they like or trust. In fact, Episerver’s survey shows that the majority of online shoppers who use social media (52 percent) have clicked on an influencer’s post, and a third of those shoppers (31 percent) have gone on to make a direct purchase from the post. While influencers are a wildly popular strategy for brands to grow
Episerver’s survey of more than 4,500 global online shoppers indicates a quarter of online shoppers shop online at least weekly, and 62 percent shop online at least monthly. relationships with shoppers on social media, ads are too. Sixty-three percent of our surveyed audience have clicked on a social media ad. Retailers, however, need to be mindful of that post-click experience as a click doesn’t guarantee a conversion if a consumer’s expectations for how a site should look and feel are not met. RR: What social platforms are the most effective for consumer engagement and customer acquisition?
EK: Instagram is the hottest social platform for commerce at the moment, because of how easy it is to shop within the platform. People who were simply swiping through their newsfeeds find themselves shopping without ever leaving the app. RR: What does the future of retail look like to you? How might the shopping journey change in the next 10 years? EK: From a shopper’s perspective, the future of retail is a connected retail experience where everything is shoppable and can be subscription based, from the shoes you’re wearing to the doorknob you use to open a door. From a retailer’s perspective, they have to be able to deliver content and commerce on devices and IoT applications not even yet considered and with a tremendous degree of personalization. Since most products will be connected to the Internet, the amount of data that will be created is mind-blowing. Consumers will expect that data to be used to better serve them in their everyday lives. As such, security and data compliance will generate all-time challenges for retailers and their vendors not considering those future implications today.
About Ed Kennedy Ed Kennedy has spent the last 9+ years designing and implementing ecommerce platforms for consumer brands, B2B manufacturers and wholesale distributors. As the Senior Director of Commerce at Episerver, Ed is responsible for successful adoption of the Episerver platform by customers. Previously, Ed held leadership positions at e-commerce agencies implementing Episerver Commerce. About Episerver Episerver connects digital commerce and digital marketing to help organizations create unique digital experiences for their customers, with measurable business results. The Episerver Digital Experience Cloud™ combines content, commerce, multi-channel marketing and predictive analytics in a single platform to work full-circle for businesses online—from intelligent optimization and lead-generation through to conversion and repeat business— with unprecedented ease-of-use. Founded in 1994, Episerver has offices in the US, Sweden, Denmark, Norway, Finland, Germany, the UK, the Netherlands, Poland, Spain, UAE, South Africa, Australia, Singapore, and Vietnam.
By investigating the new ways e-commerce and brick-and-mortar retail are working together, we can better understand what physical stores are â€˜forâ€™ in this new, omni-channel world.
THE FUTURE IS A RETAIL EXPLORATION By Lional Binnie // Contributing Writer Call it ‘channel-fluid’, ‘channel-agnostic’ or whatever you like. I’m happy with the term ‘omni-channel’ retail to describe the blend of online and offline shopping that has emerged as the prevailing form of retail in our current era. This article is a brief exploration of this (very) large topic, which I address in more detail in my book “The Future of Omni-Channel Retail: Predictions in the Age of Amazon.” (Emerald Lake Books, 2018).
Not Quite What We Thought We are 25 years into the era of e-commerce. It’s something we’ve definitely noticed. We all shop; it’s how we live and (sort of) why we work. We tap ‘buy now’ on our phone, and our new shoes or phone charger or (fill in the blank) appear on our doorstep in short order. But things haven’t developed exactly how we thought they were going to. For the first time, the mist is lifting. We can see with greater clarity than ever before. We can see further down the road of how e-commerce and brick-and-mortar retail are developing than we could have even just a short time ago. Since the 2001 dot.com boom-and-bust, and subsequent rise of Amazon, Google and Facebook, we’ve been fed a one-sided, scared narrative about the death of brick-andmortar stores. The ‘retail apocalypse’. And of course, there’s a whole lot of truth to these scenarios. Witness the utter disappearance of chains like Toys R Us, Radio Shack and Payless Shoes. But it is an incomplete narrative; one which deserves to be filled out. There are a lot of reasons for this overly simplified view of how retail is developing. Too many to explore in detail here. Among them may be the nagging idea, that because
For perhaps the first time, we’re in a position to take a closer look. We’re in a position to develop a more thoughtful, nuanced view of the present, and possible futures, of retail—a $3 trillion part of our economy (U.S. figures) that supports one in four jobs.
The first framework takes a simplified look at what people are actually doing when they are shopping. It’s a reductive view that explains how all retail value-creation comes from two key functions: discovery and fulfillment (that’s fulfillment in the supply-chain sense of how they transact purchases, not in the sense of how happy they are). Our second framework, illustrated below, goes deeper, and takes a close look at many types of consumer products and shopping occasions.
Through a closer look at how e-commerce and brickand-mortar retail are actually developing and working together, one can find numerous opportunities to identify new ways of seeing what consumers want. And new roles for retailers, both online and in-store, for product brands, downtowns and shopping centers.
Theories & Frameworks Using the ‘jobs-to-be-done’ framework (from Tony Ulwick’s ‘Outcome-Driven Innovation,’ popularized by Clayton Christensen of Harvard Business School, and author of ‘The Innovator’s Dilemma’), retailers, both online and brick-and-mortar, need to understand what ‘job’ consumers are ‘hiring’ them to do. What consumers want from online shopping—mostly, convenience—and what they still want from physical stores; discovery and information. Interaction and entertainment. In my book, “The Future of Omni-Channel Retail: Predictions in the Age of Amazon” I delve into and explain some of the classic marketing theories that explain different types of consumer shopping.
Time Well Spent
Sameness • Search Goods
This can unlock a lot of hidden value for business actors of many types, as well as those supporting them in finance, academia and government. There is the potential for new business models and investment hypotheses. And opportunities for generating whole new paradigms and paths forward for our communities; our towns, shopping centers and public spaces.
By investigating the new ways e-commerce and brickand-mortar retail are working together, we can better understand what physical stores are ‘for’ in this new, omni-channel world.
Rewarding • Shopping and Specialy Product
Unique • Experience Product
But things are actually playing out differently from what we thought even a couple of years ago.
I then build on those models, and offer three new, related frameworks that illuminate what aspects of shopping consumers want to do online, in stores or in combination. And why.
consumers can order anything online, they will. Or even, they should. And the suspicion that all physical stores, shopping centers and downtowns are outdated. And that if we harbor any attachment to old retail modes, we’re merely nostalgic. Of course, no one wants to look foolish.
Time Well Saved
Functional • Convenience Product
Binnie’s 2-Axis Retail Framework
This 2-Axis Retail Framework points us to how consumers want to achieve discovery and fulfillment in different ways. Based on the different characteristics of the products they want and their different motivations for shopping. From the mundane to stimulating. From chore to adventure. Finally, we use the concepts of time-well-saved and time-well-spent (used by Joseph Pine, author of ‘The
Experience Economy’) to summarize whether consumers view a particular shopping mission as a chore or a reward, and the implications of that for online and offline shopping. Together, these frameworks help us understand and predict what consumers want from different types of shopping, both online and offline, and more importantly, why. And how these can be different for different types of products (Binnie’s 2-Axis Retail Framework) and for different kinds of shopping missions.
New Paths Forward With the passage of time, and the new retail models that are actually being tried, we can now see that omnichannel retail is what consumers want. Or more exactly, consumers don’t actually think about online or offline separately - they are agnostic about channels. They simply want what they want. Again, using the ‘outcomedriven’ perspective, mentioned above, consumers want to ‘hire’ a retailer to solve a particular problem, to do a ‘job’, in different ways. At different times. Depending on the product, their situation and their mood. Here are a few examples of channel-fluid retailers and brands; there are many more in the book. Direct-to-consumer brands like Everlane (apparel) and Warby Parker (eyeglasses) are channel-agnostic. They’re as strongly committed to stores as to e-commerce. Best Buy, not always given the credit they deserve, have forged a solid path to being a successful omni-channel retailer. Their stores are within fifteen minutes of 70
percent of the U.S. population. And 50 percent of their online orders are shipped from those local stores. Product brands like Thule (bike racks, etc.) don’t sell to consumers online, but work closely with their brickand-mortar retail partners by guiding online shoppers to their stores. These are just a few examples of retail businesses that offer both online and offline experiences that put the consumer in the center. And there are many examples of retail real estate developments, shopping centers and downtowns (The Grove in L.A., the Ponce Center, Atlanta) that understand what consumers want from in-person shopping that are also forging successes in this omnichannel world.
Finally I’m genuinely excited about the new potential all this offers. Yes, the retail landscape has forever changed, no one doubts that. E-Commerce is the friction-free standard against which all other retail experiences are measured. As they should be. But once we understand and accept that, brands, retailers and consumer-facing businesses of all types can forge new paths to consumer relevance. Through understanding how their online and store offerings allow consumers to carry out discovery and fulfillment. Through understanding what ‘job’ consumers are ‘hiring’ them to do, at different times and for different situations. And finally, through understanding what stores are ‘for’ (and what they are not for) in our current era.
We’re in a position to develop a more thoughtful, nuanced view of the present, and possible futures, of retail —a $3 trillion part of our economy that supports one in four jobs.
CREATING THE CONNECTED EXPERIENCE When I’m talking about creating a connected consumer experience, what I’m not talking about is basically having the same old store but putting in a virtual reality installation for you to get mixed up in parlor tricks. What I’ve found is that truly remarkable experiences tend to be surprising in nature. There’s usually something within the experience that you didn’t expect to happen -something that catches you off guard and leaves an imprint. It’s about giving the consumer an experience that involves their mind, their body and more of their senses. So, it’s really all about building an architecture and infrastructure for an experience that is engaging, meaningful and memorable for consumers.
I think connected seamless experiences are a must. We have customers who know us online and we as a brand want that omnichannel experience. We want you to go to our website and have a similar but more broughtto-life experience when you go into one of our shops. [For us] stores are really meant to be an extension of our website. And so, it does need to be seamless. But on top of that, on top of aesthetic and the product that we’re offering, that seamlessness continues with the customer service that we’re offering, our mission statement and our commitment to inclusivity, our commitment to not doing photo retouching; we expect to give you that in real life just as we would on the website. And so, I think that in order to remain true to your brand and what you’re telling your customer that you stand for, you need to be able to represent that in both spaces. Monica Scholes // Director of Retail at Modcloth
Doug Stephens // Futurist and Founder of Retail Prophet
Ultimately there is still a tremendous people component to what makes brick-and-mortar unique. The customer wants interaction. They come to a store expecting a level of service and it is our mission to provide that. Brent Paulsen // Director of Retail at UNTUCKit
As a digital presence continues to grow, there’s still that human need to interact and engage. The social element of shopping is still important and still something that people desire, but it has to be interesting and fun and not transactional and boring. I think that’s where the opportunity is for retailers to really become the ‘retailtainment’, in essence. Diane Ellis // CEO at DME Advisory Group and 35-year C-Suite Retailer
Increasingly, large brands are looking for their retail footprint to “do more”—to drive learning and engagement with customers. Historically, retail was primarily focused on fulfillment and transactions. Today, there is widespread recognition that the retail store needs to engage, build community, drive loyalty, inspire, socialize and entertain. No easy task. Shannon Ryan // Executive Vice President of North America at Valtech
People are looking for something that’s different. They want something they can connect with. And if you stay the same old retailer offering the same old clothes and same old promotions, [consumers] are not going to want to come to you because someone else down the mall is offering something cooler, something more exciting and something that they’re connecting with. Mary Immer // Project Manager of Store Operations at Express
Image courtesy of Warby Parker
WHY DIRECT-TO-CONSUMER RETAILERS ARE CHANGING THE RETAIL LANDSCAPE By Gabriella Bock // Managing Editor Born out of the Instagram-era, direct-to-consumer (DTC) brands have left their mark on the retail industry. Over the past five years, DTC darlings like Warby Parker, Dollar Shave Club and Casper Mattresses have transformed the way people purchase beauty and skincare products, home goods and even prescription eyewear.
They’ve even impacted huge legacy brands: Companies like REI and Under Armour are all finding success by expanding their direct-toconsumer channels and global sportswear retailer Nike projects that its DTC sales will reach $16 billion by 2020. As a retailer, you may be wondering why the DTC model has become such a successful sales strategy. Luckily, a few industry experts broke it down for RETHINK Retail during the 2019 National Retail Federation’s (NRF) annual conference and expo.
They Own the Purchase Journey By severing ties with retail intermediaries, DTC brands have direct control of their supply chain, allowing them to better engage consumers, provide quality customer service and build a trusted brand image that drives sales and creates loyal customers. Warby Parker’s co-founder and co-CEO Dave Gilboa told RETHINK Retail that, now more than ever, retailers should be focused on finding and leveraging the ways customers are connecting to, and interacting with, brand experiences.
And Gilboa would know: After its 2010 launch, Warby Parker’s digital engagement strategy was so attractive to consumers—particularly millennials—that 20,000 people were waitlisted after just a few days.
They Make a Connection
“I think the core tenets of retail remains the same,” Gilboa said. “[Where] customers want value, they want convenience, they want expertise, but the way that they engage with brands is changing dramatically.”
With the rise of mobile and social technologies, consumers are demanding more personalized and streamlined shopping experiences.
Nearly a decade later and the estimated $1.75 billion eyewear retailer has opened over 90 brick-and-mortar locations, with another 30 stores slated to open over the next year—an achievement that has placed the “Warby Parker model” at the top of every DTC retailer’s vision board.
Today’s top brands know that trust and loyalty can no longer be bought.
As evidenced by Warby Parker and the cache of other legacy brands adopting aspects of the DTC model, a crucial benefit of social sharing is that it creates a gold mine of significant first-party data that can be used to guide changes that make for a better shopping experience, both online and offline.
As we looked across what was available in the industry, we didn’t see anything that really delivered the experience that we wanted for our consumers, in particular those who were engaging with us online and offline.” Dave Gilboa // Co-founder of Warby Parker
Gilboa attributes much of Warby Parker’s success to the company’s “intense focus” on creating memorable customer experiences and investing in the technology to do it. “We built our own point of sale in our stores, which we didn’t want to do,” he revealed. “But as we looked across what was available in the industry, we didn’t see anything that really delivered the experience that we wanted for our consumers, in particular those that were engaging with us online and offline.” “I think that’s a huge opportunity for brands and retailers, just to invest in technology in stores to enhance that experience for customers.”
According to Elina Kazan, an omnichannel communications consultant who’s worked with big brands like Macy’s, those customer relationships are key to bringing DTC retailers off the web and onto the pavement. “It really is to, I think, surprise and surpass the expectation of the customer. And if you do that you will retain them and get that brand loyalty,” Kazan told RETHINK. “Because right now, with all of the generation Z coming onboard, there’s so many brand and channel agnostic consumers out there. You really have to catch them and keep them.”
Image courtesy of Warby Parker
Image courtesy of Casper Mattresses
They’re Coming to a City Near You After finding their stride online, many digitally native brands are trading in clicks for bricks as they shift toward a more physical future. Over the next five years, digitally native retailers are forecast to open 850 brick-and-mortar locations throughout the United States and Canada while many others plan to expand their brand through pop-up shops and placement deals with big-box retailers. For Warby Parker and other previously DTC-only retailers—like Casper Mattresses, who are now
Warby Parker’s Flagship Store located in SoHo’s Cast Iron District on Greene St. Image courtesy of Warby Parker
slated to open 200 stores across North America, for example—the addition of physical spaces was a strategic move to help to reinforce online sales by educating the public about their products and gaining their trust. But for others, brick-and-mortar was always the end goal. Take the Lip Bar, for example: the eco-friendly and racially-inclusive beauty brand opened their flagship store earlier this year after their social-grown lipstick line successfully transitioned into 500 Target locations, a huge leap for a company that got its start in a lipstick-themed conversion van—how’s that for direct-to-consumer?
Image courtesy of Lip Bar
As more retailers pursue the DTC sales strategy, brands that can best recognize their audience while using customer data and feedback to build more personalized experiences, will find that the road to success is more direct than ever before.
BREATHING NEW LIFE INTO
By Gabriella Bock // Managing Editor
When the Rolling Acres Mall in Akron, Ohio first opened its doors in 1975, it was considered the region’s crowning achievement.
Anchored by retail giants like Sears and Montgomery Ward, Rolling Acres was the first mall to bring multilevel retail shopping to Summit County and served as a symbol of the industrial region’s arrival into middleclass modernity.
was opened. JCPenney and Macy’s moved in and, in 1995, the mall became home to one of the first Target stores in Northern Ohio.
By the mid 1980s, the mall was bustling with its 140-something stores and a three-screen movie theater
Forty five years later and Rolling Acres Mall, like so many others, is a ghost of its former glory. The shopping
And Then the Shopping Mall Met its Fate
center’s last store officially closed in 2008 and, for nearly a decade, all that remained were memories of the life it once housed. Where potted plants and sunkissed wishing wells once attracted tired husbands and afterschool meetups, Rolling Acre’s main atrium—now blanketed in debris —was left to catch the fallings of neglect. The mall was eventually leveled in 2017 and, after two years of rumors, Amazon confirmed in Jan. 2019 that it would be building a new 695,383-square-foot distribution center on the site, a move that is emblematic of a new era in retail. And it’s not just Rolling Acres that has fallen victim to retail apocalypse. During the first months of 2019, retailers shut down 23 percent more stores than they did in 2018 and, according to analysts at Credit Suisse, as many as 25 percent of all U.S. shopping malls are expected to close by 2022.
But Internet giants like Amazon aren’t solely to blame: a great recession, changes in fashion and a trending shift away from unsustainably-sourced products are all major culprits of the shopping mall’s fall from grace. However mournful it may be, the rapid decline in the traditional mall’s relevance leaves a unique opportunity for developers to repurpose the 300-plus malls expected to shutter over the next three years. Some, like Rolling Acres and nearly two-dozen others, will be turned into industrial warehouses for Amazon while other former shopping complexes may become working centers for tech companies that have outgrown their Silicon Valley office space—Google, for example recently leased the building that once occupied LA’s West Side Pavillion and has plans to turn the 600,000 square foot former mall into a one-of-a-kind creative working space. Other dead malls may be the answer to a growing shortage of affordable housing—one abandoned mall
In the 1990s, the number of American malls peaked at a high of 1,500. Today, there are fewer than 1,100 left.
in the DC Metro area was given new life after a local nonprofit acquired the property and rehabbed it into a homeless shelter.
So, It’s Not All Bad News Not all malls are failing—or even coming close to it —and those that are doing well seem to be tailored specifically to upscale clientele rather than retired power walkers and teenagers hoping to find a date at the food court. California real estate developer Rick Caruso had the right idea when he opened the luxurious Palisades Village on the westside of Los Angeles last year. The spacious, $200 million shopping complex is home to a number of designer retailers as well as several restaurants, an
upscale movie theater and, concededly, an Amazon Books occupying a prime corner lot. And there are more large-scale developments currently underway, including the Pennsylvania Real Estate Investment Trust’s Fashion District project that is scheduled to open this fall. Spanning three city blocks in the heart of Philadelphia, the massive retail space will be home to an arcade, bowling alley, karaoke bar and, of course, dozens of high-end shops and eateries. The project is another example of how operators have begun to shift their focus more on experiences rather than just shopping—meaning that, while trips to Spencer’s Gifts and Sbarro’s Pizza will likely soon be but a memory of the past, Jimmy Choo and VR sushi bars are waiting right around the corner.
By Gabriella Bock // Managing Editor
Audi City | Image Courtesy of Audi
Audi City | Image Courtesy of Audi
In May 2001, Apple opened its first two retail locations in Fairfax County, Virginia, and Glendale, California. With little public awareness in a nation where the year’s most quotable catchphrase belonged to the ‘Dell Dude,’ Apple’s leap onto the brick-and-mortar landscape was widely derided by press and industry experts.
Fortunately, what Apple knew early on—before “experiential retail” became a trendy, yet somewhat nebulous, industry buzzword—was that consumers, now plugged in to a brand-new stream of consciousness, wanted to continue experiencing the rush of connectivity, even when offline. The result was a sleek, modern and minimalist store design that nixed the idea of traditional customer service queues and instead offered personalized services. And as year three rolled around, the Apple Store made history by reaching over a billion dollars in sales. Since then, the Apple Store model has set the template for physical store experiences as retailers around the globe rebrand and remodel their brick-and-mortar locations to meet the Apple-standard expectations of omnichannel shoppers. And as technology becomes less of a novelty and more of an appendage for today’s connected consumer, retailers taking the biggest creative leaps will see their brands succeed far into the future. Here are a few key experience strategies that the world’s most innovative brands are implementing in their stores today:
Educating Through Tech-Prominent Showrooms We’ve all heard the numbers: Approximately 9 in 10 consumers will check Amazon before making an online purchase. Interestingly, those numbers are consistent even in the auto buying market. It may not be on Amazon—or not yet, at least—but 9 out of 10 consumers
thinking of buying a new car will first do some fact-finding online before heading out to a dealership. In 2012, global car manufacturer Audi launched its first Audi City concept in Berlin as a pilot project for new digital showroom experiences. Through augmented and virtual reality technologies, Audi customers and curious passersby could walk into the showroom and customize their dream car and then experience it on a 1:1 floor-toceiling mega-screen. The concept proved to be attractive to fans and customers of the brand and, since its launch, Audi has been bringing its future forward showrooms to top city-center locations throughout Europe, Russia and Western Asia. Horst Hanschur, Vice President of Retail Business Development and Customer Services at Audi, told RETHINK Retail that the VR experience explains Audi technologies intuitively and offers customers the opportunity to immerse themselves in extraordinary moments from the world of the four rings. “With our interactive VR solution, customers can get an extremely realistic experience of their individually configured car, down to the last detail,” Hanschur explained. “Audi City stands for our philosophy to connect digital innovation with the strengths of stationary trade—and our customers appreciate that there is no ‘either-or.’” Audi City locations also offer live consultations where, with a simple click, the customer is connected with a
Physical retail is becoming a media channel and I would argue that it’s actually going to be, if it isn’t already, the most powerful and measurable media channel that a brand has at its disposal.” Doug Stephens // Retail Prophet
NYC House of Innovation Lab | Image Courtesy of Nike
live consultant in Audi City Berlin, who uses augmented reality goggles to transmit live images to the customer from inside the vehicle. “Of course, the new technology means that the dealer has to make an investment, but the dealers invest in their future,” Hanschur said. “We offer tools that create a win-win situation for customers and dealers.” On a global scale, Audi concentrates on a combination of digital experience and sale functions. At the same time, Audi City forwards the roll-out of digital customer elements for their dealers. To date, more than 950 dealers worldwide are equipped with digital retail modules that provide many benefits including: A better shopping experience: More transparency, safety and technical understanding for the customers at the purchase decision. Additional turnover potential: On average consumers spend more for extra equipment at digitalized sites. Significantly reduced investment: Costs for digital innovations decrease as Audi absorbs development achievement costs: ITcompetence network and scaling. “We have seen the demands of our customers change with megatrends like electric mobility, urbanization and digitalization,” Hanschur said. “Therefore, we have to continually improve our offer, the shopping experience and the technique to impress our customers and create an extraordinary experience.”
Your Store, Your Media Channel New York Times Bestselling author Jay Baer once famously said, “Content is fire, social media is gasoline.” And although social sharing via the internet is a relatively new concept, media itself has always been retail’s strongest supporter—It’s the reason why Disney opened 12 amusement parks and thousands of retail shops around the world. Through connected storytelling, retailers now have an opportunity to share their brand narrative both online and in store. Macy’s, for example, recently acquired STORY, a narrative drive retail concept, that allows customers to explore new brands in a colorful, ‘Instagrammable’ store setup that changes every few months. The products, which range from children’s books and accessories to stationery and kitchen gadgets, are personally curated, color coded and arranged on store shelves to appear as though they might belong on the pages of Vanity Fair.
Nike, too, has opened its NYC House of Innovation Lab where, upon entrance, customers are shown the brand’s most immersive, seasonal and sport-inspired storytelling moments. From there, customers are free to roam though the building’s six-levels of personalized displays, curated collections and can even visit the fourth floor Sneaker Bar to co-create their own custom shoe. And as they explore, shoppers using the Nike App can scan QR codes on mannequins to check color and size availability, and can even have the items instantly sent to a fitting room.
Thoughts and Feelings Drive Business Outcomes A recent Forrester study revealed that how customers feel holds 1.5x greater of an impact on business outcomes than how they think. So, what does this mean for retailers without time to access the psychotherapy couch? For brands like Starbucks, finding the right balance between providing warmth and inspiration is what sets them apart from others in their category, especially when it comes to their gorgeous, premium Reserve Roastery locations. The immersive coffee experience, which typically spans across thousands-of-square-feet of retail space, gives customers a birds-eye view into the roasting process while simultaneously indulging them with artisanal, hand-crafted beverages. “For us, providing a better experience really comes down to knowing how to engage consumers in their many different facets of life,” John Boline, Vice President of Store Design at Starbucks told RETHINK Retail. “So, providing a premium experience is about consistency and care, dependability, warmth, being accessible and inspiring customers with our innovative approach to those key elements.”
But Ultimately, It’s All About the Community You Create Once again, Apple is already ahead of trend as they rebrand its retail locations for a new generation of iShoppers. But instead of revamping the cyber-mod look that put them on the map, Apple will focus, quite literally, on its namesake as the brand follows Millennials and Gen Z consumers into a more holistic future.
So, the next time your phone needs a new battery, or a quick charge port clean out, you’ll be able to book an appointment at a Genius Grove location where, instead of a room full of white and shiny screens, you can wait for your software updates among live ‘Apple’ trees and communal seating spaces. And other innovative retailers are bringing new valuebased community-building content into their stores, whether that’s by building pizza stands at Urban Outfitters or creating public laundry facilities for NYU college students at American Eagle. Diane Ellis, CEO of DME Advisory Group and former C-suite executive at The Limited and Brooks Brothers, told RETHINK Retail that communal-based store design is going to become the norm as retailers, especially apparel retailers, fight to get consumers through their doors. “The pivot I see retailers making, and those who are really innovative, are making strategic changes out of deep understanding of their target consumer, versus chasing a technology that is a new shiny object or a new technology in search of a fit in the store,” Ellis revealed. “Consumers will then begin to see the store beyond just a place to transact, but as a third place, meaning a community; a place where they can hang out and interact with other like-minded people.” So, no matter which experience route your brand decides to take, one thing that’s for certain is this: Consumers are logged in and connected—it’s up to you to determine how to best capture their hopes, dreams and heart emojis.
Apple Genius Grove in Bangkok | Image Courtesy of Apple
For us, providing a better experience really comes down to knowing how to engage consumers in their many different facets of life.â€? John Boline // Vice President of Store Design at Starbucks
Starbucks Chicago Wrigleville Reserve Bar Image Courtesy of Starbucks
DESTINATION SHOPPING: LUXURY RETAILERS LAND IN AIRPORTS AROUND THE GLOBE By Gabriella Bock // Managing Editor As consumers become increasingly more convenience-driven, luxury retailers who want to catch new customers should look to the sky—or at least toward the airport terminal.
Dubai Duty Free | Image courtesy of Dubai Duty Free
Airport shopping is no longer just about periodicals and duty-free beauty products: It’s about adding a new Cartier watch to your collection or picking up that Charles and Keith bag you’ve been eyeing since Camille Caharriere debuted hers on Instagram last month. Taking off in metropolitan cities across the world, premium retail spaces have moved in and made over Rome’s Leonardo da Vinci–Fiumicino, London’s Heathrow and Dubai’s international namesake, with luxury brands like Chanel, Louis Vuitton and Hermes bringing high-fashion glamour and niche shopping experiences to formerly featureless travel terminals.
Dubai Duty Free is currently undertaking a multi-million dollar investment in upgrading and enhancing its online ‘Click and Collect’ offer, which generated around US$ 21.7 million (Dhs79 million) in sales in 2018.
Leveraging Delays 2018 saw a record number of global flight delays, with some countries reporting triple the number of travel disruptions compared to the previous year. In the United States, the Bureau of Transportation revealed that 21 percent of all flights were delayed by inclement weather and other aviation system and security issues last year, leaving more travelers stranded with time to kill and money to spend. And they certainly are spending: Capital expenditures at U.S. airports grew by nearly 24 percent to $12.7 billion in 2017 from the previous year and, according to analysts at Credence Research, the global airport retail market is expected to reach $90 billion by 2023. In 2017, Pittsburgh International was the first airport in the country to reopen their boarding terminals to the public after years of demand by shoppers. Home to high-end boutiques not found elsewhere in the city, PIT’s AirMall is the largest airport shopping complex in the United
States. Non-flying shoppers must still pass through a security check point but, for those looking to try on a new pair of Armani jeans or grab a drink at Bar Symon, the lines are well worth the wait. While PIT’s AirMall is finding success by becoming a more inclusive retail space, other transportation hubs are leveraging their exclusivity. To accompany the dozens of luxury boutiques popping up in its terminals, London Heathrow piloted its complementary Personal Shopper service in 2014, where more than a million travelers have put an experienced shopping assistant to work while kicking back in the airport’s multiple private lounges.
sense that Dubai’s airport would cash in on the Gulf nation’s most bankable attraction. Last year, Dubai Duty Free (DDF) renovated 6,235 sqm of retail space in its B and C Concourses and added new retail areas for luxury fashion, gold, perfume, cosmetics, electronics and gifts. And if reaching sky travelers wasn’t enough, DDF also opened a retail shop on the Queen Elizabeth II (QE II)—the first floating hotel in the Middle East.
Retail’s Holy Grail
Hermes bags and floating boutiques aside, Dubai Duty Free is currently undertaking a multi-million dollar investment in upgrading and enhancing its online ‘Click and Collect’ offer, which generated around US$ 21.7 million (Dhs79 million) in sales in 2018, and has also launched a major customer engagement initiative as part of its ‘Road to $3 billion’ project.
Travel retailers, take note: With premium retail spaces that include VR playgrounds and aquariums, Dubai draws in millions of annual tourists who come just for the shopping alone—so it only makes
In an interview with RETHINK Retail, Dubai Duty Free’s Executive Vice Chairman & CEO, Colm McLoughlin, revealed that the airport’s recent digital innovation projects come as part of the operation’s cardinal
But, as any well-traveled shopper will tell you, nobody does retail quite like Dubai.
commitment to better engage global travelers. “We consistently looked at ways of improving our retail offer to an increasingly diverse passenger mix,” McLoughlin told RETHINK Retail. “We have collaborated more with our suppliers to ensure that we are delivering the right products at the right prices in the right location.” “This combined with a series of strategic promotions, both in the physical stores and online, has seen an increase in sales in core categories. In 2018, we have rolled out over 6,000 promotions across Dubai International and Al Maktoum International airports.”
Dubai Duty Free | Image courtesy of Dubai Duty Free
DDF has also introduced a variety of mobile payment solutions such as Apple Pay and Samsung Pay and, most recently, Alipay and WeChat pay—two of China’s most widelyused cashless payment providers. “While we continue to improve the in-store experience and assortment, we also know that it is important to be relevant by providing an omnichannel experience and frictionless payments, which make shopping a pleasant experience,” McLoughlin said. “Especially in this part of the world where visiting the mall and shopping serves as a part of social and leisure activity for most adults and children alike.”
Heathrow Airport | Image courtesy of Heathrow Press
Heathrow Airport | Image courtesy of Heathrow Press
Dubai Duty Free | Image courtesy of Dubai Duty Free
WWW.RETHINK.INDUSTRIES Dubai Duty Free | Image courtesy of Dubai Duty Free
YOUR DATA THE TRUE POWER OF YOUR DATA LIES IN YOUR SAMPLE SIZE By Joanna Rutter // Contributing Writer
Retailers are only as successful as the data they collect, own and enrich over time. The starting point is knowing whether in-store initiatives are working. For that, retail brands need the full picture of their store fleet’s performance.
Full coverage is having foot traffic data in every single revenue-generating doorway in your business. No data point is missing or compromised. It’s knowing not just a sample size of your performance, but the whole picture.
The Danger of Sampling Your data is an asset. If you collect quality data in the first place—focusing on which metrics actually matter—then allow it to appreciate over time, your data will grow in value year over year. Last week’s foot traffic counts can’t help you plan a tactical holiday marketing strategy, but last year’s can, if they’re reliable. Likewise, your data can depreciate over time. Only collecting data for a handful of stores, and using an inaccurate system to do it? That data depreciates
exponentially in value over time, becoming less relevant to your actual business needs and slowing you down from capturing what matters.
Why Don’t Retailers Have Performance Data for all of Their Stores? Retail tech is, historically, notoriously difficult to roll out to stores. Outdated technologies like cameras deploy too slowly to make full coverage, and therefore true accuracy, possible in the first place. Most store tech projects never see 100% deployment, meaning that even the most innovation-minded retail
in 20% of your doorways is like only tracking eCommerce conversion rates between 2 and 7pm: Useless for actually understanding the health of those assets. Incomplete data sets are unusable and ROI negative.
a more holistic picture of brand performance.
Sample sizes can also lead to bias. It can be tempting, when rolling out a limited deployment of retail tech to a certain set of stores, to select locations with highly-engaged associates in order to ensure a quick and easy deployment—capturing data at a healthy store, while missing data in other locations where more troubling signals could be caught and addressed before it’s too late.
Traffic: How many people showed up at each location & when?
100% coverage of your stores leading to optimized, engaging in-store experiences is the only true actionable data set.
leaders are stuck making fleet-wide decisions using only a subset of store data.
What’s Wrong With Just a Sample Size? Anyone can calculate sample sizes for surveys using basic formulas, but that’s just what it is—a survey. Not the actual full data analytics over time. Only having people counters
Three Metrics Every Retailer Needs but 90% Don’t Have With revenue as your traditional north star metric, you may close down a store with lower sales while other important metrics, such as average conversion rate, might signal location health. So although revenue is undoubtedly essential for the long-term health of your brand, several key metrics help provide
Truly actionable data should be captured through these essential metrics:
Conversion: What is the value of that traffic? Marketing attribution: What did you pay to get that person in the doorway? These three key metrics are the pillars of any data-driven retailer managing their locations for success. With these KPIs captured, you can actually begin to color in your customer’s experience. According to the experts, the experience you want to create should drive the data you gather. “The experience that you set out to deliver will dictate the degree to which you lean on data, technology, media, content or any other ingredient shown to be relevant and valuable,” wrote Doug Stephens on his Retail Prophet blog. “The meticulous definition and visualization of experience become the bricks of your brand’s foundation,” he added. “Data, content, technology, media and every other input become the mortar binding them in place.” The only truly actionable data set is 100% coverage of your stores leading to optimized, engaging instore experiences. Don’t settle for less—your customer won’t.
At a time when retailers are feeling the heat from Amazon, and while consumers increasingly shop from their smartphones, Target handled 60% more items through online order pickup.
ON OUR RADAR: TRENDS & INSIGHTS
SHOP ONLINE, PICKUP IN STORE: THE FAST-GROWING TREND GIVING RETAILERS A NEW EDGE By Michael Freeman // Contributing Writer
With a sharp increase in online shopping trends leaving plenty of brick-and-mortar retailers feeling anxious, thereâ€™s a new trend that combines bothâ€” and with it comes a new relationship between retailers and online shoppers.
A very notable example: Big Box retailer Target had one of its best years in more than a decade in 2018, with sales at their stores increasing by 5 percent. A particularly strong holiday shopping season helped boost those numbers. But dig a bit deeper. Target shined a bright spot for retailers through a contributing factor: growth came from in-store pickup for online orders. At a time when retailers are feeling the heat from Amazon, and while consumers increasingly shop from their smartphones, Target handled 60% more items through online order pickup.
TRENDS & INSIGHTS
Customers are getting more comfortable with searching for an item online, then doing a “Drive Up” option at the store closest to them. Target’s digital sales increased by 29 percent during the holiday shopping season in November-December. So why are customers suddenly jumping at the option of online orders with in-store pickups? E-commerce research firm Marketplace Pulse believes it was spurred by last-minute holiday shoppers who didn’t want to risk a delayed mail delivery and found driving to their local store more convenient. Target isn’t alone. Home Depot, Walmart and CVS are investing in this approach as well. Walmart’s digital sales shot up 39.4 percent in 2018, and a recent Zebra Technologies poll of retailers found 86 percent of them
are increasingly confident that “buy online, pickup in store” is the new user-friendly delivery method for shoppers. Fred McCoy, business unit director of Jabil Circuit Inc., agreed that retailers have taken notice of the trend—and they’re embracing it. “We’re seeing a lot of movement in the buy online, pickup in store and in other alternative business models that stores are trying to enable,” McCoy told RETHINK Retail. “Having accurate inventory, having other delivery mechanisms—like intelligent vending platforms—and having electronic shelf labels, enable a better experience for both the consumer and for third parties that are fulfilling orders.”
of retailers are increasingly confident that “buy online, pickup in store” is the new user-friendly delivery method for shoppers. according to a poll by Zebra Technologies
Images from top to bottom: Target Mobile Checkout Target CEO Brian Cornell (center) chats with a store team member at the Order Pickup Counter Images courtesy of Target
TRENDS & INSIGHTS
Why is the Trend Becoming More Popular? One reason why store pickup for online orders is becoming more common is that customers are offered “free” pickups on their digital orders—which helps retailers appeal to consumers eager to avoid shipping fees from online-only sites. That appears to be a smart strategy. Data from Adobe Analytics notes that Buy online, pickup-in-store spending went up 47 percent from Nov. 1 to Dec. 19 compared to the same period in 2017, making it the biggest holiday on record for online pickups. Besides avoiding shipping fees, customers can avoid long checkout lines and simply get their items at
customer service. And it gives the customer the option of picking up the item at their convenience—after work, on the way to an evening out, while out doing chores, etc. It also gives consumers the option of making additional purchases if they so choose. A recent e-commerce study reported that 40 percent of in-store pickup orders result in additional in-store sales. Some retailers are getting creative with this trend. Old Navy partnered with Lyft to offer customers free rides to stores for online pickups. And consumers like the option. Surveys indicate that 57 percent of online shoppers picked up an online order in a store last year.
Having accurate inventory, having other delivery mechanisms—like intelligent vending platforms —and having electronic shelf lables, enable a better experience for both the consumer and for third parties that are fulfilling orders.” Fred McCoy // Business Unit Director of Jabil Circuit Inc.
The question now is whether in-store pickup will become a major trend that boosts bricks-and-mortar traffic.
What are the Challenges of Buy Online, Pickup in Store? Retailers taking this approach have to think about customer expectations. Once orders are made online, retailers need to be certain their item is on the shelf and ready for pickup. If not, the system gets a black eye. That puts a lot of pressure on retailers to develop a disciplined inventory strategy that includes proper monitoring.
It also means retailers may have to revisit the process of getting a package from a warehouse or a vendor to a local store. Still, in an age when so many shoppers make purchases online, this option satisfies the customer’s desire for instant access to what they want. And just as technology has created some anxiety for brick-and-mortar stores, it now appears that the digital world may let them embrace changing consumer demands and demonstrate they can move quickly to satisfy orders.
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Generation Xers and baby boomers can recall strolling through department stores, being sprayed by fragrance sales representatives and enjoying free makeovers in the beauty aisles.
But with the popularity of the Internet in the early 2000s, online consumption was bound to influence the beauty market. By 2018, more than 3,800 stores were scheduled to close. And with major department stores such as Sears, Carson Pirie Scott, Macy’s and more closing their doors, the beauty industry was left to fend for itself. Enter the era of Ulta: a sleek and modish beauty emporium that rose in popularity during the mid-2000s. Part of Ulta’s appeal, other than falling into a highly-demanded niche market, is its partnerships with beauty brands that would otherwise only be found online.
WHO’S PLAYING FOR KEEPS IN THE BATTLE FOR BEAUTY By Shamontiel Vaughn // Staff Writer
Now with nearly 2,000 stores across all 50 states, every Ulta location is equipped with a salon, a Benefit brow bar, and a Dermalogica skin bar—along with thousands of cosmetics open for testing.
The Rise of Private Label But now, some brands lesser known to the beauty industry are challenging big name beauty stores like Ulta and Sephora. Online marketplaces and retail stores—including dollar stores— are introducing their own beauty lines, adding both convenience and lower prices.
TRENDS & INSIGHTS
Believe Beauty by Dollar General Image courtesy of Dollar General
Amazon has Fast Beauty Co. and a premium skincare line called Belei. Belk has Belk Beauty. Saks Fifth Avenue has Fifth City. QVC has Carmindy Beauty. And Dollar General has Believe Beauty. And that’s just the beginning of the laundry list of retailers that have jumped into the cosmetics lane this past year. So should high-priced beauty stores be concerned about Amazon and other discount stores selling their own lines of beauty products? It may be too early to tell. While Family Dollar was once identified as “Amazon-proof,” 390 locations are closing this year. And while Dollar Tree now owns a total of 13,000 stores after buying Family Dollar out, other discount stores such as Dollar General may still want to take note of e-commerce competitors that offer free shipping.
Why Cruelty-Free Products are Getting an Extra Boost A casual scroll at descriptions of these new beauty products lets consumers zoom in on what they need to know. In the case of Fast Beauty Co., Amazon’s animalfriendly and eco-friendly stance is front and center. The brand’s face and neck masks are 100 percent biodegradable sheets; vegan; cruelty free; and have no-GMOs, parabens, phthalates, formaldehyde, chlorine or alcohol. With the increasing popularity of environmentalism and vegetarianism, Amazon knows exactly what it’s doing. It’s paying attention to conscious consumers, and so are celebrities. Well-known names such as Beyonce and Jay-Z are already getting into the habit of promoting vegan-friendly
Fifth City from Saks off Fifth | Image courtesy of Saks off Fifth
lifestyles. And this power couple separately spent more than two decades of fame not really discussing health and diet topics; their own fragrances (Heat, Rise, Gold, 9 IX) sat in department stores without much discussion regarding animal friendliness. But just as the Internet is winning over consumers, so are socially conscious buyers. The vegan food industry already skyrocketed to a 20 percent growth ($3.3 billion) in food alone last year. While Leaping Bunny Program has been a front-runner in guiding consumers to friendlier beauty products since 1996, other beauty brands have finally come around. Mintel’s Global New Products Database (GNPD) confirmed that vegan beauty products have grown by 175 percent between July 2013 to June 2018. Beauty manufacturers (ex. Unilever, the parent company of Dove, Axe, Dermalogica) are starting to reevaluate their own product lines to match what consumers want too. With newer beauty lines like Fast Beauty Co. introducing themselves as animal-friendly from first glance, this may arguably sway consumers in their direction.
Consumer Habits for Beauty Buying While it’s still too early to tell whether these new beauty lines will beat higher-priced, tried and true names, there are some early signs of what and who these companies should pay attention to. In a 2018 TABS Analytics report, millennial women reportedly are the heaviest buyers of beauty products in the $13 billion cosmetics market. They account for 47 percent of the most popular buyers.
TRENDS & INSIGHTS
And while Dollar Tree now owns a total of 13,000 stores after buying Family Dollar out, other discount stores such as Dollar General may still want to take note of online retailers that offer free shipping.
Hispanics and non-Hispanic African-Americans topped the list as the heaviest buyers (more than 10 cosmetic purchases annually). Mascara and foundation are doing well. However, other cosmetic items (blush, concealer, lip liner and gloss, eye shadow and artificial nails) are seeing significant drops. This is partially due to less interest in makeup overall and going makeup free. The #NoMakeUp movement may have something to do with it. The Internet does have a downside though. Social media and video streaming channels have arguably made cosmetic consumption feel oversaturated. How many makeup tutorials can one person watch? Other consumers are more interested in a more economical deal on cosmetics versus whatâ€™s considered trendy on Instagram. While regular cosmetic purchases overall took a nosedive of 19 percent and a widespread decline of 14 percent, e-commerce continues to grow on sites such as Amazon (11 percent) and Walmart.com (15 percent).
But brick-and-mortar beauty stores wonâ€™t be shutting up shop any time soon, though. According to the same TABS report, 80 percent of beauty products are still purchased in physical stores. Whyâ€™s that? Because unlike the Internet rage of online shopping and communication, the heaviest beauty consumers are still standing strong in a world of physical touch. They want to feel, hold and test their beauty products before they buy. And if surviving malls, boutiques and discount retailers keep an eye on this large majority, they may be able to stick around for the long haul. While the Internet and economy continue to grab ahold of new customers, some consumers still want to (literally) grab onto their beauty bags.
Belei Beauty by Amazon | Image courtesy of Belei Beauty
TRENDS & INSIGHTS
TRENDS & INSIGHTS
RETAIL, ON A ROLL MOBILE STORES COVER NEW GROUND By Shamontiel Vaughn // Staff Writer
Move over, pop-up shops: There’s a new retail trend in town. Flexetail x Local Maker | Image courtesy of Flexetail
From rolling beauty bars to grocery stores-on-wheels, mobile boutiques have been making a name for themselves in 2019. And as consumers become more convenience driven and less easy to impress, these retailers-to-go may find themselves in it for the long haul. Their appeal is pretty easy to grasp: Instead of having to travel to a distant shopping center to try on luxury clothing or crossing your fingers in hopes that your online purchase will look the same in person, a gorgeously outfitted airstream or modern smart trailer shows up in your town readily stocked and waiting to dazzle you—all you have to do is walk outside.
Inspired by Asia In the United States, people may be more likely to find a food truck than they would a retail trailer. But in some cities, such as Boston and Chicago, retail trailer companies are challenging this idea. “When you look at Asia, almost every corner has street vendors or pop-up shops,” said Joel Kamm, the founder and CEO of Flexetail, a leading retail trailer design firm. “This is also the difference between food trucks and retail trailers. The latter creates an urgency to buy now because the trailer
TRENDS & INSIGHTS
own. However, those same items could end up buried in the back or associated with store displays that artisans may not feel is the best fit.
Tweaking the Customer Experience
Flexetail x Sh_t That I Knit | Image courtesy of Flexetail
may not be there next month. Food is every day and consumable. Retail trailers provide an on-demand space that stores in shopping malls simply don’t. They’re contracted to be there for 10-15 years. There’s not the same level of novelty.” It’s not all good news though, and Kamm does admit that municipalities haven’t quite figured out how to treat retail trailers as a business. There’s also the matter of keeping them honest. For example, it can be quite difficult to confirm recordkeeping and tax revenue for a store that can drive away. Because street vendors can come and go as they please, operation hours are completely up to them. And in some neighborhoods, there may be questions of safety. Well-lit areas with plenty of foot traffic are ideal. However, blocking traffic or hard-to-find parking areas could upset passersby more than intrigue them. Luckily, organizations like the National Association of Street Vendors of India are helping trade unions, community-based organizations (CBOs), nongovernment organizations (NGOs)
and other professionals be able to network and learn from each other on a more professional level.
Reigniting the Brand Outsourced marketing may not be doing the intended job. It may be cheaper or faster, but sometimes the message gets lost in translation. And stores that are not owned outright may be losing control of their brand. “Rather than sitting back and waiting or hoping for customers to come to them, brands are starting to invest in mobile retail that allows them to be in front of the consumer,” said Justin Potts, marketing & business development manager of Advantage Trailer, an Illinois-based mobile store designer. “This includes where they eat, where they work and where they play. Those unexpected touchpoints keep a brand top of mind and— when done well—help create brand affinity.” Of course, fashion designers and other creative artists can sell their items on consignment or work with larger retail stores to sell on their
But what happens once a customer is in the trailer and wants to buy an item? In this cashless environment, a customer can easily purchase an item through a number of means, including pay-it-later options such as Klarna, credit cards through smartphone apps or even cryptocurrency. The goal is to not just provide convenience for customers to window shop. These trailers provide an opportunity to make everything be right at their fingertips from the pavement to a payment. Of course, that idea is already evolving, too: Mobile markets have found their way into a few U.S. cities and are bringing fresh meat, produce, dairy and other necessities to neighborhoods that would otherwise be known as food deserts; and driverless vending machines are currently being piloted in the United States after Pepsi tested its selfdriving Smart Cart during last year’s STEP conference. But despite their current novelty, mobile shops will likely not fizzle out in relevancy any time soon and, with some businesses finding themselves next to entirely too many competitors—or in neighborhoods where their products go ignored— a mobile option may be exactly the boost they need. Gabriella Bock contributed to this story.
TRENDS & INSIGHTS
Retail trailers provide an on-demand space that stores in shopping malls simply don’t. They’re contracted to be there for 10-15 years. There’s not the same level of novelty. Joel Kamm // Founder & CEO of Flexetail
WHY SOCIAL TRANSPARENCY IS MORE IMPORTANT THAN EVER By Brandon Sams // Staff Writer
In the realm of brand marketing, quantifying transparency is crucial.
This elusive, yet predominant, concept holds social capital in a world that has grown interconnected through technological advancements in communication. Itâ€™s why apparel lines like Everlane and Patagonia have continued success and why Brandless, a directto-consumer household and kitchen retailer, has it written directly in their mission statement. From the sourcing of products to the role of influencers, transparency can make or break even the most traditionally successful brands.
Data and Digital Transparency In the industry report Social Media & The Evolution of Transparency, researchers at Sprout Social found consumers, particularly millennials, are demanding brands show transparency in all facets of marketing, but particularly on digital media platforms. Consumers want to see transparency in action, not just as a modifier used by marketers. Transparency is a verb, not an adjective and, according to 54 percent of online
Image courtesy of Everlane
9 in 10
people said they are likely to stick by a business during a major crisis if it has a history of transparency. according to The Sprout Social Report
consumers, it means a brand is actively open, clear and honest. More importantly, increased levels of noticeable transparency can result in very positive business outcomes. Fitbit, the worldâ€™s most popular activity tracking brand, knows transparency is a key factor in any healthy relationship.
This serves as a feedback loop: brands increase audience connection and community standing and consumers pay back these brands with loyalty. Nearly nine in 10 people said they are likely to stick by a business during a major crisis if it has a history of transparency. Conversely, 85 percent said even if they have a bad experience, they will
give the business a second chance and are more likely to regain trust when lost if they perceive them to be trustworthy and transparent.
Transparent Marketing Through Social Media Historically, brands have seen transparency as a risk management issue: showing too much could mean alienating consumers; however, as trust in corporations continues to decline, consumers want personality, identity and value associated with the products and services they enjoy. After all, 86 percent of people say transparency in the age of social media is one of their top consumer priorities. Brands often wonder how they can signal to consumers that theyâ€™re transparent enough. The term seems a bit amorphous, but there are real, tangible ways to show authenticity.
First, being cognizant of the fact that consumers do not want social media to simply be another advertbased broadcast channel. Indeed, they want increased sincerity. When asked which areas consumers expect more transparency from brands, admitting mistakes and offering honest responses were the top two responses, by a significant margin. Additionally, communicating a stance on political/social issues, financial performance and employment diversity round out the best ways to illustrate transparency on social media, which speaks to the 38 percent of respondents who believe companies are morally obligated to be transparent online.
The Unique Role of CEOs
Image courtesy of Patagonia
Relationships between businesses and buyers are the crux of American enterprise. The desire for digital
transparency extends not only to the products, but to those who lead them as well: the CEOs. These industry leaders play a unique part in this equation. According to the data, more than a third of consumers believe that a CEO who illustrates transparency on social media would lead them to purchase additional products or services. As the faces of their company, CEOs can lead the charge by lending their voice and identity as a marketing tool. In the social media era, failing to be transparent can lead to a decline in business. Eighty-seven percent of people say they’re likely to take their business to a given brand’s competitor if they lack an air of transparency. Comparatively, 53 percent consider brands based on their social media presence. Economically it makes sense, just think of it as psychological supplyand-demand. As consumers demand transparency, corporations that supply it see huge benefits in buyer engagement, which can even mitigate bad PR and brand crises. Eighty-five percent of consumers say they’re likely to give transparent businesses a second chance and stick by them during times of corporate disasters.
The Takeaway Brands are fighting a difficult battle trying to recapture the trust and attention of modern consumers. As skepticism takes hold in every sphere of society, demands for increased transparency through more pronounced channels such as social media will remain robust—and the brands willing to listen and evolve will be the ones to survive. Image courtesy of Brandless
with UNTUCKit’s Brent Paulsen As told to Gabriella Bock // Managing Editor
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Rethink Retail: Why did UNTUCKit decide to integrate into physical retail? Brent Paulsen: UNTUCKit was founded in the digital space. We had four years of learnings interacting with customers and developed some very loyal customers during that timeframe. We opened our first retail store as a pop up in NYC’s SOHO in 2015 and I think very, very quickly the owners saw a need for a retail, physical brickand-mortar (B&M) presence longer term. This first pop up gave us an indication of what the opportunity would be. RR: Can you describe what it’s like to shop in an UNTUCKit store? BP: The typical store is around 1,500 sq. ft. and almost 2/3 is dedicated to the customer selling experience. When you enter an UNTUCKit store, you’re greeted by an associate whose primary mission is to engage the customer and determine if they are familiar with the brand. Our mission is to get them into the fitting room and help them shop. After they’ve been fitted, customers have the luxury of shopping the merchandise assortment in store primarily via sample displays. They can then shop the various categories—whether it be wrinkle-free or performance, flannel or a short sleeve shirt. Next, they select the pattern of the item they’re interested in and the associate retrieves the item from the back of the store. That brings the transaction through our point of sale system (POS) and the customer is happily on their way. RR: What tools are you equipping associates with to provide exceptional customer service?
Despite a streamlined website and active social media presence, a quick Google search of the UNTUCKit brand reveals pages of praise for the custom apparel retailer’s quality customer service. To further explore how an untucked shirt company created an army of brand-loyal customers who flock to their niche-category showrooms, RETHINK Retail caught up with UNTUCKit’s Head Managing Director of Retail, Brent Paulsen.
BP: Our POS device includes all of the customer’s history relative to that customer’s prior purchases. The associate’s mobile device shows what a customer has purchased, what size they purchased, and all their inventory. That connectivity of prior purchase history and what’s in their closet is readily accessible in our handheld POS equipment. RR: How has technology helped UNTUCKit create better, more connected experiences for its customers? BP: A lot of retailers are dropping technology into their buildings, whether it be screens, touch or various devices to interact with the customer. We don’t envision doing a lot of that. Our focus is primarily kept on the customer and using technology to make it easier for them to interact with our associates in the building. Our stores don’t have typical cash wraps where you would go and transact because we’re wireless and use mobile devices. We transact with the customer shoulder-to-shoulder, wherever they may wish to purchase. We have a small seating area adjacent to the fitting room that is kind of a social gathering point for friends and family of the shopper as they’re trying the product on. When transacting with the customer, we’re sitting next to them on a sofa or somewhere comfortable in the store. Our intention is to provide a comfortable environment, almost as if they were at home shopping from their sofa or living room. Our intention is not to jazz the store up with lots of bells-and-whistles from a technology standpoint. We focus on making the transaction and fitting room experience as efficient and convenient as possible for the customer.
Brands recognized for purpose grow 2x as fast as those who aren’t.” Leslie Pasquad // Senior Partner at Kantar Consulting
BRANDING WITH A PURPOSE EXPLORING RETAIL’S FEEL-GOOD AWAKENING By Gabriella Bock // Managing Editor
No longer just a movement for granola moms and self-identified spiritual gangsters, the eco-revolution is here—and it’s greener than ever.
Ten years ago, most Americans would scoff at the notion of labeling 7-Eleven or Walmart a healthy or environmentally-responsible brand. But as rising sea levels and expanding waistlines continue to turn consumers toward demands for health and environmental improvements, brands that were once driven solely by low prices and convenience are now finding themselves under a public microscope. In result, many legacy retailers are incorporating a Sustainable Development Goal (SDG)—or two—into their brand identities.
Creating Heathier Humans Leslie Pasquad, a senior partner at Kantar Consulting with over ten years of experience helping brands achieve sustainable category leadership, told RETHINK Retail that companies that are overperforming in 2019 are more likely to be “humancentric,” and that brands recognized for “purpose” grow “2x as fast” than those who aren’t.
“A growing number of consumers recognize the need to address the challenges we are facing as a species,” Pasquad said. “These same people are acutely aware of the power of brands and businesses to address the pressing issues that society faces and have increasingly high expectations that they do so.” The United States is notoriously home to one of the unhealthiest populations in the Western world, much of which is attributed to poor eating habits and a culturally-normalized sedentary lifestyle. Diabetes, heart disease and obesity round out the top chronic diseases facing Americans today, and after years of unhealthy, brand-created diet fads, American consumers are now demanding their favorite foods come without additives, GMOs or harmful pesticides. That’s why giant companies like General Mills, Kellogg’s, Nestle and Mars have all made commitments to remove artificial food dyes from their products while quick-stop chains like 7-Eleven are
Image courtesy of 4Oceon
Image courtesy of Walmart
testing out new platforms and products like all-natural and organic Slurpee flavors.
GoodWeave in support of its mission to end child labor in the rug industry.
“Good health is definitely on the American radar more than ever. We saw in the 2018 elections that this issue was driving voting decisions,” Pasquad revealed. “It is also driving purchases but at more of a personal than a societal level. Brands that show a commitment to improving health, whether it be CVS’s ban on tobacco or the Kind Bar’s transparency around ingredients are winning.”
Cleaning up the Environment
Improving Working Conditions As an extension of the health and wellness trend comes the advocation of the mental, physical and financial health of employees and partners. The retail industry is currently undergoing major shifts in calls for higher wages and benefits for store employees while social outcries for improved working conditions for factory laborers and farmhands have reached a near-global consensus. Fashion retailers have caught major flack in recent years for the sourcing of their fabrics and dyes after media reports revealed that many clothing suppliers, like H&M, Gap and Urban Outfitters were purchasing cotton from Uzbekistan, where much of the cotton was being harvested by child laborers. Since then, H&M and Gap initiated their own sustainability campaigns—H&M launched its flowy, Earth-mother inspired Conscious Collection—and both have signed on to the Better Cotton Initiative, which advocates for the use of organic, recycled and verified American and Australiangrown cotton. Adidas, Levi Strauss Co. and Nike have all signed onto that initiative as well. Other big-name retailers like Ikea, Pottery Barn and Target are working with nonprofit partners such as
In 2018, data retrieved by Pew Research Institute revealed about six-in-ten Americans said that global climate change was affecting their local community a “great deal or some.” And while political pundits continue to argue over how to best address the issue of climate change, consumers are reframing the way they view their dollar as they seek out brands that incorporate environmental sustainability into their products and company ethos. Cause-based brands like 4Ocean have found overnight success in their business model. With a near neverending supply of materials, 4Ocean turns their customers into cash activists when they purchase their products. Each made from a pound of recycled plastics retrieved from the ocean, the brand’s line of bracelets sells for $20 each and fund the company’s mission to clean the ocean and coastlines “one pound at a time.” Founded in 2017, the company claims to have removed nearly 6 million pounds of plastics from the ocean and placed a New Guinness World Record for Largest Under Water Clean Up in June 2019 which included 633 divers. Even retailers that were previously accused of greenwashing their brands with unsubstantiated claims about their eco-friendly credentials are now making strides in bringing forth new brand transparency regarding where their products are sourced from and how they impact the planet. Once caught purposely hoodwinking environmentallyconscious shoppers with their “sustainable,” recycledtube, paper towel rolls, Walmart reportedly diverted 81 percent of unsold products, packaging and other waste
We believe business exists to serve society, and that when business engages to be part of the solution not only can we help accelerate progress in the world, we make our business better, too.” Kathleen McLaughlin // Chief Sustainability Officer at Walmart
materials from ending up in landfills last year and recycled more than 430 million pounds of plastic film and rigid plastics globally. The retail chain currently has more than 460 renewable energy systems installed at their stores, clubs and distribution facilities worldwide. These onsite clean energy systems, which include solar and fuel cells, provide direct power and heat to Walmart’s buildings. In June 2019, Walmart announced an agreement with US Solar to subscribe to 36 of the company’s Minnesotabased community solar gardens. With the first solar gardens already constructed, next year’s targeted completion will generate enough clean, renewable energy to provide energy savings for Walmart locations in 13 separate state counties. Now on track to reduce 1 billion metric tons of emissions from global supply chains by 2030, the big box retailer has committed itself to supplying its global operations with 50 percent renewable energy by 2025, on the path to 100 percent renewable energy by mid-century. “We’re engaged in efforts to source responsibly, create economic opportunity for retail associates and people working in supply chains, take action on climate change, and help improve sustainability of the products we sell,” Kathleen McLaughlin, Walmart’s chief sustainability officer said in a company statement. “We believe business exists to serve society, and that when business engages to be part of the solution not only can we help accelerate progress in the world, we make our business better, too.” The Conscious Collection | Image courtesy of H&M
84% of young respondents say they neither like nor trust traditional marketing tactics.
Image courtesy of H&M
according to a study published by advisory firm McCarthy Group
Image courtesy of The Coca-Cola Company
Image courtesy of Converse
WHY TOP RETAILERS ARE RESHAPING AROUND POLITICS AND CULTURE By Brandon Sams // Staff Writer
As the American ethos becomes increasingly polarized, corporate culture is having a revolution of its own to keep up with the times: enter brand consciousness.
As a salient form of communicating to younger, more ad-resistant generations such as post-80s millennials and the emerging Gen Z demographic, social media has compounded the importance
of corporate responsibility. Naturally, corporations would want to take advantage of this new mode of communication, but the most pressing question becomes “how.”
Members of the digital generations are more hesitant to marketing and explicit advertisements compared to their older counterparts, according to a study published by advisory firm McCarthy Group. In fact, 84 percent of young respondents said they neither like nor trust traditional marketing tactics. The operative word here is “trust,” which is the
This idea most immediately emerged after a general culture shift toward LGBTQ acceptance. The corporate incentive to signal visible support to the LGBTQ community became nearly as ubiquitous as the national conversation itself. Many of the world’s largest brands ranging from Coca-Cola and Skittles to Converse and H&M have special,
made off with a 61 percent increase in sold-out merchandise and second quarter numbers that far exceeded expectations due to the success of the Kaepernick campaign. Contrary to the belief that Nike was alienating its consumers, the successful inbound marketing tactic of engaging younger, more socially conscious consumers mitigated potential losses and increased revenue.
Gen Z & Millenials lean strongly toward more progressive ideas, so when brands assess the benefit of signaling new marketing strategies to these more liberal demographics in a culture that is already politically divided, they often find it benefits them more to make a hardline, progressive stance. according to the Pew Research Center first step to achieving brand loyalty among consumers. To connect to this key demographic that no longer “trusts” traditional marketing tactics, a successful business must meet them where they are.
Political Marketing: The New Normal Since 2014, we have seen an emergent corporate strategy: “woke,” or otherwise politicallycharged, marketing. “Woke” is a neologism that essentially refers to a person, or in this case entity, that exhibits a high degree of progressive social consciousness. According to the Pew Research Center, Gen Z and millennials lean strongly toward more progressive ideas. So when brands assess the benefit of signaling new marketing strategies to these more liberal demographics in a culture that is already politically divided, they often find it benefits them more to make a hardline, progressive stance.
rainbow-themed products during Pride Month and have even gone as far as sponsoring citywide Pride events. Benign “progressive marketing tactics,” such as LGBTQ virtue signaling, has proven to be a successful endeavor for brands. Of course, until it becomes less anodyne and more explicit.
Selling Cultural Controversy Nike’s controversial Colin Kaepernick ad is an example of this new, explicit “woke” marketing strategy. Kaepernick is a former NFL football player who gained national attention when his kneeling protests during the national anthem, a protest meant to combat police brutality, drew the ire of many watchers and conservative pundits. Kaepernick would become one of the most divisive contemporary cultural figures, yet in September 2018 Nike decided to make him the face of its 30-year anniversary “Just Do It” campaign. Nike took a gamble—and it paid off. The multi-national conglomerate
Of course, there exists an antipode, yet complimentary version of this phenomenon where smaller companies seek to reach a more traditional, conservative demographic often on the backs of these controversies. For instance, after Gillette’s ad targeting “toxic masculinity” polarized some consumers, small business Edgard Watch Company released a response ad to target the reactionary demographic displeased with Gillette’s approach, which garnered them increased media attention, millions of views on their ad and free promotion.
Liberal v. Conservative: Pinpointing Audiences On the other side of the coin, when it comes to consumer purchasing decisions these liberal and conservative patrons are further differentiated by how they’re activated with a brand’s messaging. Conservative shoppers prefer messaging that centers around cultivating a superior sense of self, while liberal shoppers prefer messaging that indicates they’re different from other people. This phenomenon was illustrated through a report by the Journal of Consumer Research, which sought to understand how different political
Image courtesy of Nike
Nike took a gamble—and it paid off.
ideologies impact shopping habits and the salience of marketing techniques. Asymmetrical polarization led to a shifting political landscape which, in turn, has impacted the ways in which consumers shop. Data compiled by Walker Sands Communications in its 2019 “Future of Retail” report found that respondents were increasingly more likely to pay attention to a brand’s social awareness, up 53
percent from 40 percent in 2017. According to the report, consumers have been largely influenced by President Trump’s administration: putting added pressure on businesses to choose sides and take a stand. American corporate culture is becoming more aware of its role in society and the importance of corporate responsibility. As emerging demographics capture
the zeitgeist of this cultural moment while developed ones seek to combat their approach, brands must adapt to reach these savvier audiences who seek to be placated. After all, culturally salient marketing campaigns increase brand engagement and, by proxy, profit margins. What business doesn’t want that?
A WHOLE NEW WORLDVIEW
By Natalie Arana // Staff Writer
BEST PRACTICES FOR SUCCESS IN APPROACHING INTERNATIONAL MARKETS
of Chief Marketing Officers say local market intelligence is “just okay.” according to a 2019 CMO Council research Report, Reshaping Global Engagement Operations
which have a revenue of at least $3.5 billion—have foreign operations, according to the STORES Global Power of Retailing report. When expanding a brand globally, the first thought of a successful company may be to reuse the methodology that brought it success in its country of origin. But the right approach goes beyond that. For most retailers, having an internationallyrecognized and successful brand is a dream come true. Brand-building in growth markets of distant lands, however, may not always be a walk in the park—even if the retailers are already well established in mature economies like the U.S. and Western Europe.
Tapping into unfamiliar worlds may be a daunting task but becoming a household name and being accepted into the cultural fabric of foreign countries makes it all worth it. Expanding internationally is a step in the right direction for most as 66 percent of the world’s top 250 retailers—
Balancing Operations and Localization When entering new markets, retailers must acknowledge that there will always be varying languages and dialects—and most importantly, behaviors driven by the cultural settings. These behaviors will ultimately affect the consumers’ wants, needs and expectations. It is necessary for retailers to present themselves accordingly to ensure that consumers will have the best possible interactions with them and accept this new brand in their homes. In fact, Forrester reports that 49 percent of global retail and wholesale business and technology purchase influencers regard improving customer experience as a critical business priority for their firms—second only to increasing revenue. Still, some brands continue to ignore the impact of strong localization strategies, or lack thereof, on customer experience.
Doug Stephens, futurist and founder of Retail Prophet, told RETHINK Retail, “Culture is a significant part of branding strategy and we know that because we also know that many companies have failed to take culture into account when they’re putting together international strategies.” He continued, “the failure to properly understand the nature of a culture has, in many cases, led to a catastrophic miscalculation.” So, what is missing? It’s likely that missing pieces of the localization puzzle relate to knowledge gaps. A June 2019 CMO Council research report titled “Reshaping Global Engagement Operations,” revealed that 82 percent of CMOs say local market intelligence is just “OK,” and 10 percent admitted to having “horrible local market intelligence.” While those statistics are striking, it’s important to dig deeper into why companies are missing the localization mark at a time when our world is more connected than ever before. The research suggests that organizational structures could be part of the knowledge gap problem. Retailers and brands are struggling to strike a balance between the effectiveness of localization and efficiencies of centralization.
Tailoring Your Brand Story Localization tactics include tailored brand stories. Today’s top global brands have taken careful steps to craft parallel stories under their overarching brand messages— stories for each market that may be similar but not identical. This brand-building process is structured from thorough research and strategy to create culturallyfocused implementations of brand positioning, voice, appearance, and promotion.
Pictured above: adidas Performance Eddie Huang YOTP Social Image courtesy of adidas L’Oréal ColourMe | Image courtesy of L’Oréal Pictured above right: Apple Bangkok | Image courtesy of Apple
Retailers must be willing to experiment while also being open to the fact that their ‘formula for success’ might need to be significantly altered in order to be successful in a given market.
Even if a culture may appear alarmingly foreign, understanding it and intertwining the brand’s story with the society’s story will deepen its relevance in the new setting and nurture trust with the new audience.
to go into international engagements with a tremendous degree of flexibility.”
In an interview with RETHINK Retail, Stephens explained that brands should first study and appreciate aspects of a region’s culture, then engage with the elements in a logical and authentic manner.
Market research allows retailers to determine if their offerings are relevant to the society. This research also prepares retailers to invest in educating consumers who may not be familiar with the offerings yet but would accept the introduction of a new concept, and potentially view the brand as a market pioneer.
“We can’t just assume on the surface of things that we understand what’s happening within a culture,” Stephens revealed. “It takes time on the ground and time to iterate within a given culture, and retailers need to be prepared
After overcoming the hurdles of initially exploring the new cultures, retailers are able to position themselves within a region’s cultural distinctions and associated consumer behavior. Positioning a brand appropriately and with
a deep understanding of a foreign market will lead to rewarding results. Barilla pasta is positioned as an exotic ingredient in China, essential to a family brunch in Brazil, and a homage to Italian heritage in the United States. And while Honda represents speed and vivacity in Japan, in the U.S. it stands for reliability and quality—as quality should be a given in cars in Japanese culture. Adidas’ Top City Strategy 2020, which began in March 2015, focuses on pushing its sporting goods brand in six major international cities including London, Paris, Shanghai and Tokyo. With the goal to double its sales by 2020, its 2017 sales of $25.31 billion showed a sales growth of 18 percent and profit growth of 41 percent along with an increase net income of 32 percent. And in the first six months of 2017, Shanghai alone made $1.1 million of revenue—surpassing Austria and Switzerland combined.
Opportunities in Every Corner Aside from the significant factors of demand, competition, regulations and distribution, growth opportunities cannot be overlooked—including emerging
markets that welcome new retailers that are willing to adapt. With comprehensive awareness of the new surroundings, retailers can shape their brands and be able to purposefully integrate into countries in different hemispheres. The Chinese market currently provides KFC with more revenue than in the U.S.—and by 2020, it will be McDonald’s second largest market. Additionally, China and India will have a larger GDP than the US by 2050— becoming the only mature markest among the world’s top seven economies, according to Forrester. While only 25 percent of U.S. adults are influenced by fashion trends, urban consumers in China and India are very likely to be influenced by what is new and stylish—59 percent and 58 percent, respectively—and search and pay for the best brands to boost their image. Latin American societies in countries like Mexico and Brazil have high uncertainty avoidance—leading to more rigid, hierarchical societies. Consumer behavior, however, leans toward seeking spontaneity and fun—juxtaposing selfexpression with societal organizational structures. When it comes to downloading brands’ apps, urban consumers in Brazil, China, India and Mexico are more
THE IMPACT OF LOCAL MARKET INTELLIGENCE
of CMOs believe lack of localized market insight has had a negative impact on success
of CMOs believe the lack of local knowledge is partially to blame for stalled efforts to drive profitable relationships
of CMOs admit to having “horrible local market intelligence”
2019 CMO Council research Report, Reshaping Global Engagement Operations
likely to engage than those in the U.S. Additionally, traditional elements in Asian growth markets do not prevent its consumers from continuous early digital adoptions. There are significant opportunities for digitalfirst brands to succeed at engaging with these audiences. Digital payments are prominent in these markets as consumers in China, for example, are twice as likely to use these methods than U.S. consumers. Apple, on the other hand, has been able to introduce its brand and products, and disrupt an array of industries, throughout the world without the need of a niche customer-base. It has successfully shaped an emotional, borderless connection with its consumers by placing its vision behind every product it unveils. Apple’s growth in the international landscape was also catapulted by the frequency with which tourists bought products in the U.S. and then brought them back to their home countries. Consumer trends may lead retailers to explore and decide to expand into international markets when the sales are analyzed methodically.
Talk the Talk
beyond the beliefs and norms—and dive into using the right words across all messaging. One success story is L’Oréal, the world’s largest beauty brand. Together with digital agency Valtech, it streamlined digital processes across 60 countries and consolidated its 15 brands onto one platform. This investment resulted in the ability for efficient localization strategies supported by local employees, in addition to cost-savings, more employee interactions between countries and an increase in consumer satisfaction by 40 percent. Through detailed studies, retailers will discover the best way to implement localization rather than just translations from the country of origin. Adapting the messaging with region-specific features and context will prove to be more successful than direct translations that may not resonate with the consumers. Ultimately, the opportunity to captivate growing mass markets with new brands will always be present—and the opportunity to do so successfully can be achieved. Retailers that cultivate a relationship with local flair will encourage consumers to welcome them into their homes and lives.
Brands must become active listeners of the communities they are courting. Understanding the culture may also go
of CMOs report increased understanding of local customers
59% of CMOs attribute this structure to “crystal clear vision of goals and strategies”
37% of CMOs say a challenge is slow moving approvals due to local and global processes
THE BENEFITS OF A BLENDED GLOBAL ORGANIZATION
THE LAST WORD
COURTING THE CUSTOMER OF TOMORROW Take a walk through the streets of New York, London, Tokyo or Shanghai and witness a phenomenon not seen in decades. Line ups – not for night clubs but for retail stores. After nearly two decades of retailers hearing woeful whisperings about the demise of brick-and-mortar stores and mass store closings, retailers are finally punching back. Retail has returned…sort of. Around the globe, retailers, at least those who have figured out how to make the “trip to the store” worth it, are seeing consumers flock to their physical stores.
From mattresses to baby apparel, beauty to booze, the desire for retailers to get close to their customer, both on-line and in physical stores has fueled a sort of renaissance for the physical footprint of a “store”. However, as retailers and brands strive to understand their mix, there is widespread agreement that their retail footprint needs to “do more”. Historical focus on fulfillment and transactions is not enough. Today, there is widespread recognition that the retail store needs to engage, build community, drive loyalty, to drive learning and engagement with customers, inspire, socialize and entertain. No easy task.
continuum. It is not easy. Valtech’s connected experience practice focuses exclusively on crafting physical digital experiences that drive value, build brand and show real ROI. Our key learning for any retailer would be to: • Obsess about the level of knowledge you have about your customer. • Build journeys with a complete omnichannel integration. • Rethink the metrics used to evaluate success and think more about subscribers than customers. • Kill what’s gimmicky. Focus on utility for the customer.
Retailers must offer a seamless, connected experience that engages customers regardless of where they might be in the time-space continuum. And it is not just retail that is riding this wave of resurgence. Retail may be the metaphorical “first battle ground” when it comes to a merging physical-digital customer journey, but others are already claiming territory in the realm of connected spaces and connected experiences; more specifically, a strong foothold has taken place in shadow retail, such as car dealerships, theatres, and theme parks, with airports, hospitals and other public spaces all racing to build connected experiences. Winning and keeping customers in today’s omnichannel world is no easy task. Retailers must offer a seamless, connected experience that engages customers regardless of where they might be in the time-space
• Introduce technology seamlessly. • Take a data-driven test-and-learn approach. • Find the proper balance between brand and transaction. Our world is real. It is physical. Winners and losers will be separated by those who understand and leverage the opportunity and accept the challenge to think differently about their retail footprint. The revival of the physical store is an opportunity for new wins shaping the future of how we connect, consume and cultivate relationships with the brands we love.
Shannon Ryan Executive Vice President North America, Valtech