GDS International - The Future of Retail Through the Eyes of Digital Natives
Upcoming SlideShare
Loading in...5
×
 

GDS International - The Future of Retail Through the Eyes of Digital Natives

on

  • 733 views

By 2025 the first generation digital natives - those reared on all pervasive technologies will be ...

By 2025 the first generation digital natives - those reared on all pervasive technologies will be
the most connected retail consumers yet. Combining high digital literacy with immediate
access to all their favourite and most valued retailers, digital natives will be some of the most
powerful consumers the world has ever known.

Recent figures (from Verdict Research) calculate that the age group 15-24 years contributed
10.8% of the global consumer spend in 2010. Of the $14 trillion spent on global retail,
approximately $1.5 trillion came from this group, and combined with the age group 0-14 years,
digital natives contributed almost 20% of the global retail spend.
So what does this mean for retailers? What should retailers be doing to meet the expectations
of digital natives now and in the future when this generation really hit their buying potential?

Statistics

Views

Total Views
733
Views on SlideShare
732
Embed Views
1

Actions

Likes
0
Downloads
10
Comments
0

1 Embed 1

http://www.docshut.com 1

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

GDS International - The Future of Retail Through the Eyes of Digital Natives GDS International - The Future of Retail Through the Eyes of Digital Natives Document Transcript

  • An Oracle White PaperSeptember 2011The Future of Retail:Through the Eyes of Digital Natives
  • The Future of Retail: Through the Eyes of Digital NativesIntroduction ........................................................................................... 1Survey Overview ................................................................................... 2Analysis of Key Findings ....................................................................... 3Key Findings ......................................................................................... 3 The role of stores remains an important element of the shopping experience for young consumers today and will continue to be in the future..... 3 Price is the most important element of the shopping experience for digital natives ............................................................................................... 4 If price is the primary motivator, product range is second ............... 5 Despite the growth and importance of social networking, using these networks for purchasing is relatively rare......................................................... 6Methodology.......................................................................................... 7Conclusion ............................................................................................ 7 Differentiated and personalised customer interactions .................... 7 Differentiated products, pricing and services based on their preferences .......................................................................................................... 7 Differentiated interactions based on how and when they want to interact .......................................................................................................... 7 A seamless, connected experience where the retailer is aligned across all business operations and decisions: ................................................. 8Appendices ........................................................................................... 9
  • The Future of Retail: Through the Eyes of Digital NativesIntroduction“Digital Natives...are all „native speakers‟ of the digital language of computers, videos gamesand the internet.” - Marc Prensky, Digital Natives, Digital Immigrant (2001)By 2025 the first generation digital natives - those reared on all pervasive technologies will bethe most connected retail consumers yet. Combining high digital literacy with immediateaccess to all their favourite and most valued retailers, digital natives will be some of the mostpowerful consumers the world has ever known.Born in the digital age of the 1980‟s onwards, digital natives‟ adoption of technology isinstinctive and easy. This generation is used to immediate results, thrives on instantgratification and frequent rewards. They can effortlessly multi-task and function best whennetworked. Although environmental factors like reaching economic maturity during a recessionand the issues of online security and identity theft become a reality, their consumerism isunquestionable.Digital Natives are as familiar gathering in malls and shopping centres with their friends, asthey are with using the internet to shop. The growth of online shopping is rapid and ongoingbut digital natives can also be seen queuing for hours to get hold of the latest productphenomena or regularly visiting their favourite stores to purchase the latest outfit or accessory.Recent figures (from Verdict Research) calculate that the age group 15-24 years contributed10.8% of the global consumer spend in 2010. Of the $14 trillion spent on global retail,approximately $1.5 trillion came from this group, and combined with the age group 0-14 years,digital natives contributed almost 20% of the global retail spend.So what does this mean for retailers? What should retailers be doing to meet the expectationsof digital natives now and in the future when this generation really hit their buying potential? 1
  • The Future of Retail: Through the Eyes of Digital Natives“Digital Natives...are all „native speakers‟ of the digital language of computers, videosgames and the internet.” - Marc Prensky, Digital Natives, Digital Immigrant (2001)Survey OverviewIn July 2011, in an attempt to understand this group for the first time and inform tomorrow‟sretail strategies, Oracle commissioned a survey to examine the attitudes of digital nativeconsumers between the ages of 19 and 23, to current shopping needs - both in store andonline - and their expectations of these needs in the future. The study asked digital natives inthree European countries: the UK, Germany and France, about the role of retail in their lives,how they use technology and channels when shopping, the importance of new media in theshopping experience, and how they feel retailers, technology and stores must adapt to bestsupport this group moving forward.The goal was to identify how this current generation interacts with retail today, the role oftechnology in facilitating these interactions and how they perceive this will change by 2025.Specific topics covered by the first part of the survey included the following:• The role shopping plays in the lives of digital natives today• How this group use multi-channels and retail technologies• How digital natives want to interact with retailers• The importance of price, choice, service, stores, advertising and personalisation• The role of social media and mobile phones in the shopping experienceThe second part of the survey revealed digital natives‟ perceptions and expectations of theirretail environment in the year 2025 exploring:• Time pressures that will effect store and channel choices in 2025• The factors that might contribute to stores dying out• The role of technology in making retail businesses successful• Those retailers digital natives expect to develop well with technologyThe results of this research are presented in this white paper, along with the critical findingsthat will enable retail organisations to market their products and services more effectively todayand inform their plans for the future. 2
  • The Future of Retail: Through the Eyes of Digital NativesAnalysis of Key FindingsContributed by Daniele Pederzoli, Professor of Marketing at Rouen Business Schooland member of the Research Centre in “Consumer, Retail & Supply Chain Management”The results of this study concerning young consumers in the three biggest consumer marketsin Europe are very interesting, not only because they allow us to analyse the future of retail,but also because it shows relevant differences in shopping habits among the three countries.One important result is that all retailers should operate a cross-channel presence now, but thiswill be critical in 2025. The cross-channel presence helps retailers to build a strong brandawareness and reputation, creating a clear differentiation and allowing them to extendrelationships with their customers. Social networks, even if they remain predominantly aboutsocialising, are an essential part of this relationship strategy for retailers.The function of shopping as a leisure and entertainment activity is clearly confirmed by thisstudy, but in this field too we can find relevant differences among countries. Brick and mortarand online retailers should carefully consider this leisure dimension of shopping in theconception and design of their physical stores and the construction of online sites. Stores mustprovide the customer not only with range, value and services, but also with a shoppingexperience.Another result of this study clearly shows that consumers like technology, but they wanttechnology to be user friendly and convenient. The role of technology should be to helpconsumers to find and buy products at both brick and mortar and online retailers; and thisresearch reveals some online retailers have built a strong reputation in this field, especially forBritish and German consumers.Key FindingsThe Future of Retail: Through the Eyes of Digital Natives survey results reveals the following: The role of stores remains an important element of the shopping experience for young consumers today and will continue to be in the futureFor the digital natives group, shopping is a leisure activity and a form of entertainment, seen asboth relaxing and a means of socialising with friends. French respondents most stronglyidentify with shopping as a leisure experience (69% to the UK‟s 64%) and as a way to relax(59% compared to 39% in Germany) (Figure 1). The role of stores in the shopping experienceis still important, exceeding preferences to shop online, with 92% of French respondentstopping the list of those preferring to shop in store over other channels.Although respondents of all three nationalities use multiple retail channels vociferously,researching products and getting the best deal is a natural extension of internet searchbehaviour that this group has been reared on. German respondents are the most internet 3
  • The Future of Retail: Through the Eyes of Digital Natives„savvy‟ with 81% choosing to shop online (Figure 2). This result can only serve to strengthendemand for an „always-on‟ approach to retailing. If consumers are using a mix of store andonline channels to search, compare and buy products at a time that is convenient to them,then retailers must ensure that their businesses operate in a 24/7 environment. The shoppingexperience must become seamless across channels.When it comes to online retailers and their use of technologies to support the search andpurchase process, it was perhaps unsurprising to see global pure-play retailers heading thepack, particularly in the UK and Germany, while in France the preference is for local onlineretailers. When it comes to fashion, a more equal mix of multi-channel and pure-play retailersdominate the online world of this group.While technology is important to the experiences of young consumers online, the survey alsorevealed that technology is equally important in the store. FNAC, Media Markt, H&M, Tescoand Ikea were all listed as retailers considered to have the best technologies and the use oftechnology in the store environment differs by geography. French and German respondentsare most likely to use in-store promotions technologies, with over two thirds of Frenchconsumers using in-store technology for coupons, loyalty programmes and promotions (Figure3). More recent innovations like QR codes and electronic shelf labels have yet to bewholeheartedly accepted by this generation with generally less than 10% usage acrossnationalities.To this end, technology would appear to expedite the shopping experience. If consumers canfind information on product, price and promotions from their mobile phones or informationkiosks within the store, then retailers must take responsibility for optimizing their operationsand delivering an experience in store that is fit for purpose – whether that be through improvedefficiency, better product availability or empowering sales associates to facilitate sales.These results suggest that as retailers develop their multi-channel capabilities, it is importantnot to de-emphasise the store environment and the role of technology within it as a keyfacilitator of the shopping experience. Although pure-play retailers can remain focused onselling extensive ranges of goods, multi-channel retailers need to focus on providing aseamless connected experience across channels to support stores and drive their businessesforward. Price is the most important element of the shopping experience for digital nativesThis group of young consumers has financially come of age during a period of economicdownturn. How much this has affected the importance of pricing in their minds is unclear butfor them, price remains a critical component of any shopping experience (Figure 4). This groupclaims to be more financially independent with generally less than a fifth relying solely on theirparents for income support. 51% of UK and nearly half of French respondents have little or nofinancial help from their families describing themselves as financially independent. Thisindependence is perhaps backed up by the importance these consumers place on pricing. It 4
  • The Future of Retail: Through the Eyes of Digital Nativesalso may explain why the top five retailers visited across Europe were all grocery retailers –Tesco, Carrefour, Auchan, Aldi and Lidl.That said, the survey revealed considerable differences in the use of channels and inparticular, online channels to research products for purchase (Figure 5). 46% of youngGerman consumers use the internet for this purpose, compared to only 31% in the UK andonly a fifth of French respondents search for the best deal online before visiting a store to buythe product. Digital natives in Germany are most engaged by the products from their favouriteretailers (Figure 6), while the French are motivated by a combination of best price, product andchoice. British respondents are more driven by pricing, and uniquely, are more motivated byseasonal sales, something of little importance to other regions.While this group is currently focused on price, looking forward to 2025 and they see service asbecoming a more important factor in the shopping experience as they mature. Two thirds ofFrench and British consumers believe that online security and identity theft fears will still be amajor concern in 2025 while only 40% of German respondents felt they will not be concernedabout these threats.As stated previously, stores remain important in the shopping experience of the future, witharound 40% of all respondents estimating they will spend the same amount of time in stores asthey do today, while only a third of Germans believe they will spend more time shoppingonline. Product price and range are perceived to be the main factors influencing the choice ofoutlet, while the most important purchasing criteria in 2025 is thought to be price andpromotions (Figure 7).Over three quarters of consumers can envisage purchasing directly from manufacturers in thefuture to save money, stated by more than two-thirds of respondents. Around 10% felt that thiswould give them a closer relationship to a particular brand and give them more immediateaccess to products. To remain competitive, retailers must customise their offering better. Itsuggests that consumers believe that retail in 2025 will become just as much about price, as itis about assortment, range and product information and that retailers need to focus on theseelements in order to interact more effectively with customers. This type of actionable insightcan help retailers make smarter decisions around merchandise, planning, supply chainmanagement and marketing. If price is the primary motivator, product range is secondThe survey asked respondents to consider purchasing a pair of trainers from universally well-known, aspirational, quality brand favoured by both genders (Figure 8). The goal was toestablish whether this group would buy this item in an outlet that offered multiple brands;purchase on a website that offered multiple brands; buy from the particular brand‟s store; or topurchase on that brand‟s website, which provides options for personalisation andcustomisation of the product.Overwhelmingly, feedback from the majority of respondents was that consumers would chooseto go and try the item on in an environment that carried multiple brands and a wide range and 5
  • The Future of Retail: Through the Eyes of Digital Nativesassortment of goods. The second most popular choice was to visit the brand‟s own store.Around one fifth of German and British respondents would prefer to purchase the item from anonline site with multiple brands, while 72% of French consumers would much prefer to try ondifferent brands in the store, compared to only half of UK consumers and 56% in Germany. Aswe‟ve demonstrated above, the results suggest that brand is less important than price, rangeand assortment to this generation.Reinforcing the message that the store maintains the magic for this group, it is still perceived tobe the place to purchase items, providing the price is right. Interestingly, retailers shouldconsider that this is the group that has grown up with the breadth of range offered by the likesof Amazon and therefore, they enjoy a broad product assortment. For retailers, the challengeis in balancing assortment expectations with physical space in store and profitably managinginventory holding costs on slower moving lines. Technology, yet again holds the key to helpingretailers to manage these challenges and better optimize their operations by delivering real-time visibility to inventory throughout the process, from planning to the point-of-service. Despite the growth and importance of social networking, using these networks for purchasing is relatively rareWhile shopping is a social activity in that it is a way of spending time with friends, the surveyrevealed that only 15% currently purchase through their social networks. Today, socialnetworking is for socialising with friends, particularly in the UK with 82% respondentsconfirming this is their purpose for using social media (Figure 9). UK digital natives discussproducts, trends and gossip on social networks, sharing information and opinions but continueto purchase goods in a relatively traditional way. At least half of consumers share productinformation with friends but fewer than a fifth of them do so regularly. And despite the oldadage that bad news travels faster, twice as many respondents admitted to sharing positiveexperiences more than negative experiences (Figure 10).While the UK sees more communication between young consumers and retailers throughsocial networks, email is the preferred communication channel between stores andconsumers, though French respondents are open to being contacted by text message (Figure11). Only a small percentage use mobiles to purchase goods currently.Only half of respondents are receiving or responding to personalised promotions today, andmerely a fifth feel that personalised recommendations are generally useful, although more thanhalf indicated that they are sometimes useful (Figure 12). These responses suggest thatconsumers are not yet receiving that personalized experience at every touch point, whichraises questions about what retailers are missing when it comes to personalisation of offers?Do retailers simply not have the actionable insight on customers to make and executedecisions to target offers and communications, and to give consumers better visibility to storeinventory and order information? 6
  • The Future of Retail: Through the Eyes of Digital NativesMethodologyResponses to the Future of Retail Through the Eyes of the Digital Natives survey weregenerated from 1,514 European consumers aged between 19 and 23. The survey wasconducted using Redshift Research in July 2011 using its online consumer panel. The studycompiled online responses from 506 respondents in the UK, 503 in Germany and 505 inFrance.ConclusionThe findings of this survey reveal that the expectations of the digital natives generation are thatshopping experiences should offer: Differentiated and personalised customer interactionsEach consumer is an individual with their own requirements, preferences and opinions.Retailers can no longer offer a „one size fits all‟ approach and expect consumers to accept this.In a highly competitive retail environment, consumers can choose where to shop. So retailersmust interact with their customers in the way the customer chooses. The findings suggest thattechnology plays a key role in helping to deliver that differentiated customer experience –whether by using in-store technologies for coupons, loyalty programmes and promotions or inability to compare similar items from several retailers on a mobile. And the relationshipbetween technology and customer satisfaction can only become stronger as the technologyused become more personalised, intuitive and insightful. Differentiated products, pricing and services based on their preferencesThis generation of consumers has shifted from the mass consumption of the early 21stcentury. They are making choices based on quality, price and differentiation and areconsidering each purchase more carefully than ever before. This group researches andevaluates products, considering a number of factors including price, range, brand, channel etcbefore making purchasing decisions. While retailers may not necessarily be gettingpersonalised promotions and interactions quite right yet, if they can gain actionable insight intohow their customers make and execute purchasing decisions, the technology is available tobetter interact with customers through targeted offerings. Differentiated interactions based on how and when they want to interactThe continued growth in online retailing is nothing new but it is the way in which retailers mustnow operate, providing an „anytime retailing‟ shopping experience that has changed. Anytimetime retailing is always on, enabling the consumer to browse, evaluate and purchase goodsthrough the channel that is convenient to them and at a time that is convenient to them. By 7
  • The Future of Retail: Through the Eyes of Digital Nativesaligning every aspect of their business to gain efficiencies and economies, retailers canoptimise their operations and work in support of customer priorities. For some, it might becrucial that the latest dress be bought and delivered within 24 hours. For others, priorities maylie with transparency of pricing and ranges across channels. Whatever a customer‟s focus,retailers must be „fit for purpose‟ and able to understand their product and how it is consumed. A seamless, connected experience where the retailer is aligned across all business operations and decisionsThe growth in online, not only as a channel in its own right, but also in the influence onlineactivity has in driving sales in retail outlets, means that retailers must offer a consistentshopping experience. The provision of a cross-channel retail model is no longer enough –digital natives in particular are now blending retail touch points. Customers can be in-storecomparing the pricing of retail competitors on their handheld devices or they can check productratings online before they purchase a product. It has become even more vital that retailerstranscend individual channels to ensure that each customer interaction and touch point isconnected seamlessly, providing that consistent, quality shopping experience.To drive and maintain growth in this complex and changing retail landscape, retailers need toprovide the superior experiences that customers are demanding – and align these with smarterdecisions and processes. Through its offering of a complete, open, and integrated combinationof software applications, technology infrastructure, hardware and industry expertise, Oraclesupplements retailers‟ strategies and expertise with the tools to create an experience platform.Tuned to each retailer‟s specific business and growth objectives, this experience platformenables retailers to: provide actionable insight to make smarter decisions in planning, forecasting, merchandising, supply chain management and marketing etc; optimise operations to gain efficiencies and economies, align KPIs to eliminate strategic conflicts, and focus on customers; connect customer interactions across all channels and touch points, and every customer lifecycle phase to provide a differentiated customer experience that meets consumers‟ needs and expectations. 8
  • The Future of Retail: Through the Eyes of Digital NativesAppendicesFigure 1. Question: What role does shopping play in your life?Figure 2. Question: How do you prefer to shop? 9
  • The Future of Retail: Through the Eyes of Digital NativesFigure 3. Question: Which of these retail technologies do you currently use? 100% 90% 86% UK 79% Germany 80% 75%77% 77% 76% 76% France 70% 66% 62% 60% 48% 49% 50% 46% 46% 42% 42% 42% 40% 38% 36% 36% 40% 35% 32% 30% 30% 26% 25% 26% 22% 23% 20% 17% 18% 10% 0% Price Products Choice Online The way the Speed I can Sales Seasonal Brand Loyalty offers stores look buy things promotions sales image schemes and feel e.g. BOGOFFigure 4. Question: What is it you like about shops? 10
  • The Future of Retail: Through the Eyes of Digital NativesFigure 5. Question: When you look at retailers online, are you most likely to be…?Figure 6. Question: Why can you see yourself shopping at particular stores in the future? 11
  • The Future of Retail: Through the Eyes of Digital NativesFigure 7. Question: In 2025 which of the following will most impact your purchasing choices?Figure 8. Question: If you were buying trainers from a brand like Nike, would you prefer to…? 12
  • The Future of Retail: Through the Eyes of Digital NativesFigure 9. Question: What role does social networking play in your life?Figure 10. Question: Do you ever share information about products or promotions with your friends via email, text orsocial networks? 13
  • The Future of Retail: Through the Eyes of Digital NativesFigure 11. Question: How do you prefer retailers to contact you?Figure 12. Question: Do you find personalized recommendations from retailers useful? 14
  • The Future of Retail: Through the Eyes of Copyright © 2011, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and theDigital Natives contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any otherSeptember 2011 warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by anyOracle Corporation means, electronic or mechanical, for any purpose, without our prior written permission.World Headquarters500 Oracle Parkway Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.Redwood Shores, CA 94065U.S.A. Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license andWorldwide Inquiries: are trademarks or registered trademarks of SPARC International, Inc. AMD, Opteron, the AMD logo, and the AMD Opteron logo arePhone: +1.650.506.7000 trademarks or registered trademarks of Advanced Micro Devices. UNIX is a registered trademark licensed through X/OpenFax: +1.650.506.7200 Company, Ltd. 0611oracle.com