Last week’s NRF show made the digital imperative for retailers loud and clear – from analytics, AI, IoT, and chatbot demos to even the occasional robot, attendees were presented with the promises and perks of next-gen retail technology.
One common enhancement these technologies brought to retailers was the ability to improve their customer engagement by helping deliver a unified channel-agnostic customer experience. Most retailers already recognized the need for this, but the question these technologies were attempting to solve was the how. This typically involves a combination of omnichannel and eCommerce initiatives to make it happen, and requires retailers to think about themselves as a platform: to distil a set of capabilities that can be delivered in a consistent way through any medium (store, laptop, mobile, smart home assistant), any time a customer chooses (i.e. make a purchase, view order status, etc.) via any channel (traditional or third party partners).
It also requires retailers to acknowledge that retail isn’t just about the transaction anymore – it’s about consumers’ experiences with businesses.
The consumer lies at the epicenter of today’s retail industry. Millennials now make up the biggest group of consumers as they are in their prime spending years. They have also been the fastest group to adopt technological advancements. Ninety-two percent of Millennials own smartphones, compared with 85% of Gen X and 67% of Baby Boomers. This access to information has changed how they make purchasing decisions.
The 5 dimensions of a consumer’s purchase decision
Historically, consumers have focused on three dimensions when deciding what to purchase: cost, choice, and convenience. However, with higher technology adoption, consumers have changed how they are thinking about their purchasing decisions. Today’s consumers are now focused on five dimensions: evolved cost, evolved choice, evolved convenience, control, and experience.
Technology enables consumers to quickly compare cost across retailers, customize their order according to personal preferences, and demand services that are instantaneous and cater to their schedules. Consumers now expect to build the experience they want by sharing product reviews, making updates to an online order, and customizing their orders. To retain their customers, retailers must give consumers the control to define their experiences on their own terms. This includes meeting the customer where they are on their desired channels and personalizing interactions.
The platform-based business model
Retailers must simultaneously capitalize on the emerging revenue channel of eCommerce to capture the new market of online consumers, while transforming their in-store presence to continuously drive through their traditional channel, where the majority of sales revenue are coming from. From 2016 to 2017, eCommerce sales saw a 16% jump, which far eclipses the 3.6% growth in physical stores. Yet, despite the rapid growth of eCommerce, the majority of retail sales are still happening offline; in brick-and-mortar stores, offline retail still accounts for 90% of the US $3.5 trillion retail market. Retailers are scrambling to build and deliver a unified experience across in-store and online platforms. This has become increasingly challenging as a single transaction now touches an average of 35 systems. In an industry where product differentiation is challenging, delivering a subpar customer experience can mean loss in market share and potentially bankruptcy.
Rather than just building an eCommerce presence, retailers must think about creating consistent, pervasive digital experiences that align to modern consumers’ consumption behaviors through a platform-based business model. The evolution of the modern consumer in an overcrowded competitive retail market has forced a paradigm shift in how retailers seek to provide value to the consumers, and the role that technology must play to support the business strategy to become platform-first.
To learn how to build a new digital retail platform strategy within your business model, check out our four-step strategy whitepaper.
