2. 2
The retail landscape is changing rapidly, driven by factors
ranging from mobile ubiquity to changing customer expecta-
tions to the rise of social media. The rapid pace of digital and
mobile innovation is shifting the retail landscape in ways both
future of retail. Some are near term, while others are farther
out on the horizon, but all will deeply impact a retailer’s odds
of success.
Users expect an integrated experience between
online and in-store.
A digital experience shouldn’t be merely transactional. For a
retailer to succeed the online experience needs to match the
in-store experience. While online shopping is convenient, it
lacks key elements of real world shopping: the ability to touch
products, try on a pair of pants, or walk through the aisles.
Smart retailers invest in bridging the physical experience with
the digital – connecting visitors to a personal shopper via live
chat (as seen on J. Crew) to duplicate their in-store customer
service, or streaming videos of clothing to get a sense of how
a garment moves (as Asos has done), or even providing an
online store soundtrack (Valentino).
For retailers, combatting “showrooming,” (the practice of
checking out products in the store then buying them online
for less) is a challenge but some are addressing it by adding
pickup locations, web return centers and payment booths.
As a result, retailers like the Container Store allow consum-
ers to buy items online and pick up the same day in-store.
The company has also added drive-through services for busy
shoppers. Both Nordstrom and Macy’s have aligned their
step of enabling customers to search an individual store’s
inventory.
Key Takeaway:
bring customers into the store. Digital interfaces and capabili-
ties should mirror the in-store experience, which means repli-
cating not just the look and feel but also integrating inventory
management and merchandising.
Today.
3. 3
The border is breaking between physical
and digital spaces.
The physical and virtual are no longer distinct entities. The
emergence of touch-screen interfaces and mobile POS are
revolutionizing the in-store shopping experience. Additionally,
augmented reality apps on smartphones (and the not-
quite-ready-for primetime Google Glass) will bridge the gap
between these worlds.
Today, Sephora has rolled out a new technology within some
of its stores that allows salespeople to scan someone’s face
Depot have followed in Apple’s footsteps, providing employ-
ees with mobile POS devices to check out customers from
store in Portland, Oregon, a touch-screen interface allows
customers to design their own sneaker and walk out with it in
a matter of minutes.
Key Takeaway:
Customers are increasingly expecting seamless shopping and
purchasing experiences within physical retail stores. Retailers
should invest in POS technologies today to provide superior
customer service and unique browsing experiences.
Mobile devices are now ubiquitous, driving the
growth of mobile shopping.
Mobile commerce is quickly gaining traction. A recent Pew
Internet and American Life Project report says that a majority
of American adults (56 percent) are now smartphone owners.
Likewise, nearly a quarter of Americans own a tablet. Not
surprisingly, the growth of smartphone ownership and tablets
has also bolstered mobile commerce. According to PayPal,
mobile payments on their platform rose from $141 million
in 2009 to $4 billion in 2011. Likewise, eBay’s mobile GMV
(gross merchandise volume) grew from $600 million in 2009
to $5 billion by 2011, an 800% increase in just 3 years.
With this kind of growth, retail brands must integrate mobile
into all aspects of their business, keeping in mind that shop-
pers will be using mobile devices both inside a physical store
and sitting on their couch at home. Retailers should strive for
simplicity for the user and ensure that the digital technology
used is lightweight and scalable.
And they should have a comprehensive mobile strategy that
considers their customers’ behavior and use of smartphones
versus tablets. Above all, their approach to mobile should be
driven by a desire to serve the customer’s needs and experi-
ence.
Key Takeaway:
Mobile should lead, not follow, the desktop.
Today.
4. 4
Content drives users.
Retail success today requires more than a functional, easy-
to-use e-commerce site. The digital experience should
engage users beyond simply shopping, with a steady stream
of compelling and relevant content. For lifestyle brands in
particular, content drives engagement and loyalty. Blogging,
lookbooks, Instagram, Pinterest and Tumblr provide multiple
touchpoints for customers eager to consume great content.
For instance, Vans has built a robust content platform for its
lifestyle brand that includes news articles, events focused
on skateboarding, art and music, background on designer
partnerships with musicians like Metallica, episodic videos,
constantly updated stream of content is always on message,
supporting the skateboarding lifestyle that is strongly associ-
ated with Vans.
It’s critical for retailers to prioritize their content efforts since
it’s impossible to be perfect on every social and distribution
channel. Retailers need to make sure they’re tracking acquisi-
their analytics packages - just as they would with the rest of
their digital marketing.
Key Takeaway:
Retailers need to develop the ability to create and distribute
an ongoing stream of content across multiple channels, and
track the impact of these efforts.
Today.
5. 5
Tomorrow.
Millennials will reshape retail.
Millennials (born between 1980 and 2000) represent a
trillion-dollar demographic and are poised to transform retail
expectations. They are a generation 79 million strong, and
by 2030 the number of Millennials in the U.S. will outstrip
non-Millennials. They are platform-agnostic and expect a
seamless shopping experience in every channel, including the
desktop, mobile and in-store.
all, second. They’re looking for a sensory, shareable and ex-
pressive shopping experience. For Millennials, their purchases
express that with their peers. Finding a deal is less important
than participating in a social event. Retailers need to create
an immersive shopping experience for this generation – they
prefer browsing over buying and local items instead of mass-
produced goods.
Key Takeaway:
To attract Millennials, even mass retailers need to think like
niche brands, developing unique shopping experiences and
fostering ways for younger shoppers to express their personal
buying preferences.
Retailers are drowning in data. Big Data has the potential to
profoundly change the way retailers innovate and develop
products and services. They have good reason to invest in
Big Data – a 2011 McKinsey study estimated that retailers
could increase their operating margins by up to 60 percent
by using data-driven insights. Retailers stand to improve their
merchandising, streamline their supply chain and inventory
management, optimize pricing and product placement, and
discover better ways to personalize the customer experience.
The problem today is that retailers are still struggling to unlock
actionable insights from the massive amounts of data they
collect. One of the more promising trends is that data visual-
ization tools are getting better and will be able to help retailers
track the activity on their sites in real time and improve mer-
chandising. But that is just one part of the Big Data equation.
Retailers also need to invest heavily in building an analytics
team, since data is meaningless without human intelligence
to make sense of it.
Key Takeaway:
actionable insights. Investing in analytics – both a team and
tools – is key to unlocking intelligence.
6. 6
Alternative payments are gaining traction.
PayPal is now nearly 14 years old. In the past few years,
multiple alternative payment companies have tried to revo-
lutionize how users pay for products. In addition to PayPal,
upstarts both new and old, such as Square, Google Wallet,
Amazon Payments, Clover, Dwolla, and Chirpify, are trying
to simplify payments online (and sometimes off). Accord-
ing to a recent Forrester report, by 2016 nearly a quarter of
online spending will happen through an alternative payment
provider.
While most of these companies are linked to bank transfers
or credit cards (no wonder Visa has invested in Square, Trial-
Pay and its own V.me service), for consumers the advantages
are easier checkouts, greater convenience and potentially
better security. For retailers, alternative payment methods can
help improve conversion rates and lower transaction costs.
As mobile commerce continues to grow, providing alternative
payment options such as PayPal reduce cart abandonment.
Key Takeaway:
Allowing consumers the option and convenience of alterna-
Alternative payment options should be featured early in the
Subscription models remain a retail niche for now.
In the past 18 months, there has been an upswing in
subscription-based retail, ranging from pet items (Bark Box)
to children’s clothing (Wittlebee) to jewelry (JewelMint). It’s not
a new model – media including magazines and music have
long relied on subscriptions to generate revenue. But the
kinds of retail categories that have jumped on the band-
wagon is new. Investors love the model because it provides
a recurring revenue stream, a long-term relationship with the
customer, and better inventory management. Manufactur-
ers love the opportunity to get samples into the hands of
potential customers. For retailers, there is an opportunity to
create a secondary revenue stream that includes not just
the subscription but also captures promotional dollars from
manufacturers who pay to be bundled into the package.
not of their choosing? The appeal to customers is conve-
nience and curation. The biggest opportunities lie in catego-
ries that are recurring necessities (such as pet food) or have
a passionate consumer base (such as cosmetics custom-
ers). Successful subscription services are mostly pure-play
startups today but expect larger retailers to invest or acquire
these companies as they grow. One of the advantages to
established retailers is the ability to gather consumer intel-
ligence on product preferences. For now, though, these
models only augment traditional retail business models rather
than replace them.
Key Takeaway:
Subscription retail provides multiple advantages to retailers
including recurring revenue, lower inventory management
costs, and opportunities for learning. However, retailers need
to ensure the value proposition is also there for potential
customers before investing heavily in the model.
Tomorrow.
