IFS’s Global Industry Director for the retail sector, Ulf Tillander, predicts how three key trends will be impacting the industry during 2016.
Shoppers will reject retailers who don’t offer a true omni-channel retail experience
The retail industry is experiencing a shift – the customers are switching between online and physical store contacts as they see fit on their journey towards a purchase. With an increasing number of customer touch-points, that path is also growing more complex.
From a customer point of view you want to be able to find information about a product, approach the company and make the purchase in the channel of your choice – and you want to be able to create your own customer journey with channels of your choice. The analyst firm, Gartner, is saying that,
“Multi-channel retailing is becoming business as usual.”
This means that customers now expect it rather than it being a luxury option.
So how should retailers address this development?
The main change is that companies cannot dictate how customers ought to buy a product through one specific process anymore. Customers will not allow that. Companies must improve the planning for different types of customer journeys and also have the right technology backbone to support them. Different customer journeys also give the opportunity to personalize discounts and special offers according to where in the process the customer is.
According to IDC,
“by year 2017 fully integrated omni-channel platforms will get selected 2X more than platforms that require “custom” integration between store, online and mobile commerce capabilities.”
One company that has been very successful in delivering a true omni-channel experience is, of course, Apple, who succeeded in not just bridging the gap between physical and digital, but also connecting browsing for information to the actual purchase process in an intuitive way. The Apple TV is a good example: Apple recently released an updated version of its Apple TV live video streaming device. Apple TV now includes its own App Store (already with almost 3,000 apps), featuring apps for a number of activities, including shopping. Touch-enabled remote control and voice commands activated by the Apple Siri service will make shopping directly from TV easier than ever.
So what can we learn from this? In order to compete, the retailers must embrace the true omni-channel experience quickly, analyze what the typical customer journeys look like and then bridge the gap between the customers’ touchpoints to deliver one seamless brand perception and one effortless purchase journey.
Convenience shopping will become a must-have for large retailers
The retail customer is getting used to convenience. The concept “click-and-collect” means that you can buy a product online and then pick it up in a spot that is convenient for you – often at a subway stop or other highly available spot. This trend emerged in the US and has spread throughout the world and especially to the UK where it nowadays is getting to a click-and-collect version 2.0 with collection inside the stores to ensure complementary sales.
Gartner is predicting,
“an increasing choice of fulfillment options for the retail industry.”
Expanding the number of fulfillment options to provide a number of different ways of retrieving a product can now be seen regularly in large cities – and it is actually becoming a competitive advantage as customers grow more convenient. For the really large companies, like Tesco, Marks & Spencers and Waitrose, click-and-collect is already a central part of the Consumer offering. Offering the widest possible array of fulfillment options is crucial to succeed as a high-volume player.
The analysts predict that this will become even more visible the coming years. According to IDC,
“by 2017, the next wave of omni-channel retailers invest in fulfillment “your” way, driving dozens of tier 1 & 2 retailers to make new supply chain analytics, planning and execution investments.”
For retailers, this means that segmenting the market based on shopper habits and patterns of commuting will be a new opportunity. Mapping the shoppers’ behaviors and developing offers based on people’s daily routines will become more common.
Waitrose has been one of the pioneers to grasp this concept and started offering temperature-controlled lockers where they sell chilled or frozen food. This has been done in London for instance, where lockers were placed in tube stations and on Gatwick Airport.
We will see more of these concepts as companies are exploring new ways to adapt to the everyday lives of the customers. However, retailers will still try to get people into the stores to create loyal, brand-aware customers, so there is a fine balance between just pushing volumes and at the same time developing the brand.
Retailers will need to be more transparent regarding sustainability in the design and production process
The trend that shoppers grow ever more environmentally conscious is creating a significant footprint on the retailers’ businesses today. Retailers must now think about sustainability in a number of ways: the use of water and chemicals is of concern of course, as is the product design process, actual use of the product and take-back and disposal of the product.
Retailers have a lot to do in the area of lifecycle sustainability. Manufacturing processes must be documented and proved. We can see a trend in high-welfare countries that customers are getting more willing to pay a premium price for sustainable products. This started in the food industry but, but is also getting more common in fashion and electronics.
As a result, both processes and technologies for measuring and documenting sustainability in the production process are getting more important for fashion and electronics companies as well.
The traditional view of sustainability is to reduce offsetting of carbon emissions for examples. In recent years, “insetting” has become a concept a growing number of companies are considering. The idea is to look at how to make the supply chain itself more sustainable, as described here: Forget carbon offsetting – insetting is the future.
A number of companies are catching on to the opportunities of insetting. The Bodyshop and Ben & Jerry’s are two of them.
For some companies, sustainability is becoming a fluffy marketing term that they are having a hard time proving. The challenge is to prove sustainability when you lack control of the production process with a great number of sub-contractors in several different regions of the world. You must have processes and software that can bring all the information together and enable you to prove that your production processes are in fact sustainable.