Shoppers are changing and so are stores
The surge of Millennials as influencers or purchasers is creating a shift for retailers; they love their mobile phones and being Digital Natives, the journey starts with technology and in almost 50% of the cases ends with technology. It is not that they don’t like conventional retail, their choices are strongly influenced by their network and references. The concept of loyalty is alien to Millennials as they flirt with brands and expect instant gratification rather than long drawn programs by retailers that expect consumers to shop over time. Technology driven stores are frequented by them often in comparison to standard stores of the past.
According to Barbara Kahn, Marketing Professor at Harvard Business School, “Any retailer that doesn’t understand the changing shopping behaviour is going to be at a loss.” The majority of customers between people now in late 50s (referred to as Baby Boomers) and the Millennials or those born after the turn of the century, have been classified as Digital Migrants who have more or less successfully adopted technology in their daily lives. They have high disposable incomes and are willing to explore. For retailers, it is important to do customer segmentation and map customer journeys to understand how, what, when and why are customers buying from them.
Mark Cohen, Director of Retail Studies at Columbia University Graduate School of Business states of the recent demise of ToysRUs, “Company leaders became complacent after years of sitting at the top of the toy-store game, and they did nothing to improve stores, adapt to technology or tackle competition head-on. They never reorganized their stores to become more attractive, appealing and experiential. And they decided they didn’t have to be price-competitive, which was the last straw, if you will.”. Similar behaviours seem to be manifested at other categories of retail too.
Stores have started experimenting with different models, such as showrooms that hold a limited inventory or pop-ups that exist for a limited time. Cohen also talks about “Twenty years ago, customers had very little choice. They had to shop locally. Today, customers can shop anywhere in the world, effortlessly,” Cohen said.” These legacy formats who just don’t get it – and there’s quite a few – are in for terrible trouble as we look toward the future.” With business changing, IT must adapt to the new way of working and create models that can be tailored to the new reality. This would apply to not just the basic processes of merchandise selection and replenishment for such stores, it would also impact the billing and integration back into the corporate systems.
No company is an island and connecting the upstream and downstream supply chain –suppliers, logistics partners, malls, within and outside the organization requires an ecosystem of technology vendors and partners who can work with the Technology team to keep the systems agile. The partner ecosystem typically would comprise large tech providers, system integrators, startups, and consulting or research companies who can keep retailers abreast of upcoming trends and provide a local and global perspective. IT and business teams also need to participate in technology and industry events and conferences to learn from different perspectives as well as showcase their company’s vision.
Retail has been working in parallel linear tracks: improve store experiences, transform digitally, and connect the two pieces. Those parallel tracks are hard enough. But that’s not the mandate: The mandate is to leverage physical and digital assets differently. Retailers will need to consider how to work with intelligent agents that will take a greater share of how customers discover and order; create immersive, dynamic store experiences; use physical stores as logistics nodes for intraday fulfilment; expand the digital catalogue to match platforms like Amazon; and harmonize all of this in a graceful, differentiated journey for customers.
Key takeaways for IT: Stay connected to the industry, consumers, and technology, balancing one with the other to craft solutions, and sell them internally to stakeholders. Keep learning and influence your team to do the same. Have industry conversations on what others are thinking about, try to leverage the collective ecosystem for higher probability of success.