Future Stores

From the book “Gamechangers: Creating Innovative Strategies for Business and Brands; Lessons in Innovation from Those Winning the Game”

Cover image for Gamechangers: Creating Innovative Strategies for Business and Brands; Lessons in Innovation from Those Winning the Game

FUTURESTORE
CHANGING THE GAME OF RETAIL

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Futurestore, Rethinking the World of Retail

From Amazon to Etsy, ZaoZao and Zappos … through branded boutiques and online marketplaces, digital walls and mobile marketing, big data and personalized promotions … what is the future of retailing, in general, and for your business?

Walking around the Burberry flagship store on London’s Regent Street, with its beautifully arranged clothes, its magic mirrors that superimpose your image in the clothes of your fantasy and place of your choice, and the VVIP room on the top floor, it is a world of imagination, where emotions not rational desire prevails. It is the work of designer Christopher Bailey who has overseen the rejuvenation of the brand from its ‘chav’ ubiquity to its super premium status. The $100,000 limited edition white alligator skin jacket, not to everyone’s taste, perhaps demonstrates this stretch. It is a brand that is truly global, more Asian than European if measured by its custom, and more digital then physical, based on the focus of its innovations. Burberry showcases the future of retail – as a niche focused, premium branded, hybrid experience.

SMART SHOPPERS, SMART STORES

Online retail has grown rapidly over the last decade, from a marginal bolt-on, to major revenue stream in a multi-channel model. In the USA, it has grown by around 18% per year, and now accounts for 8% of all sales. But digital is more that this, it is not just another way but a fundamental capability that can enhance every channel. Search on your phone, buy online, pick up in store. Go to the store, use your phone to buy, delivered to your home. Retail innovation is about hybrids, combining physical and digital activities and options in a more experiential and valuable way.

Retail purpose, formats and incentives all change – whilst loyalty cards originally drove behaviour through points, people soon became wise that the rewards were trivial compared to special offers in store. Whilst stores have enhanced their shopper experiences, markets have fragmented with more space for discounters. In Turkey, for example, BIM has taken around 40% of the food market with low price, small outlets across cities. At the same time, online players have morphed into credible alternatives, where Amazon sells wines and eBay replaces physical outlet stores. More emotionally, technologies such as Synqera from Russia can ‘mind-read’ a shopper’s emotions, judging how to best engage them as they shop and how to make them smile.

DIGITAL HYBRIDS, DATA AND MOBILE

Mobile is already a huge factor: at upmarket fashion retailer Gilt, 50% of shoppers and 30% of sales are by mobile. It is the glue that brings together online and offline, creating more personal experiences, from individual promotions geo-targeted, to in-store research and navigation, price checks and comparisons, as well as fast and safe payment. As newspapers are replaced by digital news, TV is on demand, and online retailers never close their doors, the way retailers engage and serve consumers changes. We expect 24-hour access, we don’t tolerate stock outs, compare prices instantly, shop beyond our borders, and demand delivery in 24 hours.

Big data, the huge quantities of transactional data, mashed with other sources of personal and behavioural data through complex algorithms, means that marketing is highly personalized. Around 35% of all Amazon purchases and 75% of Netflix movie choices are based on recommendations. Of course these suggestions compete with the much more trusted recommmendations of friends and peers on social media, often valued around 10 times more highly than anything from a brand. A brand therefore needs to think laterally about how to influence communities, and give them the abilities and incentives to influence each other. Consumers also become much less tolerant of failures, unavailable products or poor service, they expect free and easy returns, and they immediately tweet their feelings, particularly the negative ones, to thousands of people like them.

Together, our gamechangers show how the variety of innovations builds a future vision of retail. The demand side is led by the engaging, personal experiences – driven by the passion of Zappos, the collaboration of Threadless. On the supply side, this is about the efficiency and speed of Amazon, the reach and richness of Aramex or Etsy, and the transparency of Positive Luxury. In between is the ability to match niche segments with lifestyle store experiences, and whilst the Abercrombie brand portfolio is not without challenges, it knows how to connect.

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