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The Transformation of Retail in a Digital Age
The document discusses the transformation of retail in the digital era, highlighting a decline in UK retail employment and the impact of e-commerce growth on traditional retail. It notes that consumer fatigue with shopping experiences and changing preferences require the retail industry to adapt to new realities. Key strategies for innovation include enhancing customer experiences and leveraging technology like mobile assistance and RFID.
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The Transformation of Retail in a Digital Age
- 1. THE TRANSFORMATION OF RETAIL IN A DIGITAL ERA DOUGLAS M. SMITH - CHIEF INNOVATOR foto by Samuel Mann
- 2. TIME WE SPENDSHOPPING 8.9 BILLION HRS/YR (IN UK) 182.5 HRS SHOPPING/YR/PERSON X 49M (UK ADULTS OVER 16) UK NATIONAL OFFICE OF STATISTICS foto by Emborg
- 3. HOW MANY OFTHESE WE COULD BUILD? 406
- 4. STATE OF UKRETAIL CHANGE FROM ’08 - ‘09 UK RETAIL UK RETAIL EMPLOYMENT OUTLETS DOWN DOWN 145,000 100,900
- 5. RETAIL SALES INDEX Reta il Sa les Index (3 m onths on previous 3 m onths % ) (3 mo. on 3 mo. %) Chart to com pare 1st estim ate w ith 12 m onths la ter Pe rce n t F irst Es timate Value 12 Months la ter 2 .5 2 1 .5 1 0 .5 0 Ma r - 0 4 Sep - 0 4 M a r-0 5 Se p - 0 5 M a r-0 6 Se p - 0 6 Ma r -0 7 Se p - 0 7 M a r-0 8 Se p - 0 8 - 0 .5 -1 - 1 .5
- 6. “LOW GROWTH ISHERE TO STAY” Helen Dickinson, KPMG The market scraped marginal growth in 2009 and I see a low growth environment as here to stay. The combination of a weak economic outlook and a changing consumer means the industry is at a key inflection point as it re-aligns itself to a new reality. What growth there is will be absorbed by online. Like-for-like sales will thus dip in and out of negative territory on a monthly basis. Published by the Source: KPMG/Synovate Retail Think Tank Whitepaper, Feb 2010 BRITISH RETAIL CONSORTIUM
- 7. "Shoppers are tuningout. Worse, they are exhausted by their shopping experience when they should be energized. That's what happens when you force shoppers to think about getting low prices when what they want is to feel good about what they're buying. " Al Wittemen - MD Retail strategy, Advantage Retail
- 8. E-COMMERCE GROWTH B2C E-Commerce Sales* in Europe** 2006-2011 (billions USD and %increase vs. prior year) (15.6%) (20%) 406.8 (25.6%) 357.4 (28%) 307.1 255.7 (37.2%) 196.9 132.9 2006 2007 2008 2009 2010 2011 Source: eMarketer
- 9. PREDICTED TOTAL USRETAIL GROWTH IN 2010 2.5% TOTAL PREDICTED E-RETAIL GROWTH IN 2010 11% EST. GROWTH OVER NEXT 5 YEARS 10%/YR Value of e-retail in 2014 will total $249 billion. Source: Forrester Research Inc. Report, “ U.S. Online Retail Forecast, 2009 to 2014”
- 10. ONLINE VS. OFFLINE BENEFITSOF E-RETAIL BENEFITS OF HIGH ST. • Experience (learning) • Immediacy of • Better choice purchase • Time savings / • Tactile check convenience INTEGRATED • In-store experience (1-click checkout, no travel) RETAIL • Sales assistance • Empowerment (reviews, transparency, recommendations)d • stock
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- 12. Text SPACE FOR KNOWLEDGE & SERVICE 50%
- 13. EARNINGS / SQFT / YR $4032 SAKS FIFTH AVE. $362
- 15. SHOWER CHANGE LEARN DESIGN RENT http://run.i-voce2.com/wp- content/uploads/2009/03/cimg2707- 1024x768.jpg RUN!
- 16. EXPANSION ASSISTANCE INTERACTIVITY CONVENIENCE ENGAGEMENT
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- 19. GROWING USE INFASHION
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- 22. SAMPLE RESULTS MITSUKOSHI BUSINESS RESULTS 90%customer satisfaction 25% savings in staff time 15.8% increase in sales revenue over previous year
- 23. MOBILE ASSISTANTS Allows consumersto scan product bar codes, find online and offline locations where the product is sold and compare prices. Downloaded by over 4.5 million users with an average of 1 million bar codes scanned daily.
- 24. CONVENIENCE INTERACTIVE WINDOWS Shop 24/7 Accessfull catalog Engage with the brand Data capture
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- 26. EXPERIENCE + INTERACTIVITY + EMPOWERMENT
- 27. INNOVATING THE HARDWARESTORE Courtesy of Ezio Manzini, Francois Jégou of SUSTAINABLE EVERYDAY, SCENARIOS FOR URBAN LIVING
- 28. EXPERIENCE REAL,-THEFUTURE STORE USE THE EQUIPMENT CUSTOM SONIC ENVIRONMENTS INFORMATION TERMINALS
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- 32. RESULTS 15% SALES GROWTH 20%NEW CUSTOMERS
- 33. TOP RETAIL INNOVATIONS Source: TNS Market research shopper insights „08
- 34. TOP TECHNOLOGIES FEATURED RFID Mobile Intelligent dressing rooms Interactive surfaces Environmental enhancement technologies E-kiosks
- 35. IDEAS TO TAKEHOME RULE 1: CREATE AN EXPERIENCE RULE 2: MAKE IT ABOUT THE BRAND RULE 3: EMPOWER THE CUSTOMER RULE 4: THINK OUTSIDE THE BOX
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Editor's Notes
- #2 Samuel Mann http://www. flickr.com/photos/21218849@N03/3475636746/
- #3 In the UK, we collectively spend an estimated 8.9 billion hours a year shopping! That’s quite a chunk of our time looking for stuff we can’t find.
- #4 To give this a bit of perspective, we could build 406 Burj Kalafi towers, which is now the world’s tallest a nearly a kilometre high. You would think with that much time being spent shopping it would be doing pretty well as an industry. Unfortunately, the numbers don’t really agree. NOTES: Burj Khalifa tower in Dubai, the world's tallest building, 22 MILLION MANHOURS EACH TOWER
- #5 Over the last five years, employment in retailing has fallen by over 145,000. This is a decline of 2.6 percent year-on-year compared with a 1.4 percent fall in employment across the UK economy, as of the end of the first quarter of 2009. Consequently, we have shed over a Hundred Thousand stores in the past year alone. Additional notes: In 2008 there were 293,510 retail outlets in the UK. The total number currently at 192,600. Today, nearly a fifth of the country's largest 2,000 regional malls are failing, she says, and according to the International Council of Shopping Centers, and a record 150,000 retail outlets, including such mall mainstays as the Gap and Foot Locker, will close this year. Source" Newsweek 2008 British Retail Consortium The Local Data Company** reports shop vacancies in high streets and town centres were up from 5% in December 2008 to 13% in December 2009. These closures correspond to c£14 billion of consumer expenditure in retail – most of which will have been picked up by survivors.
- #6 According to the government’s own data, UK retail growth is minimal at best. Sure there were some ups and down, but overall, it’s quite flat.
- #7 In fact, experts are predicting this low growth trend to continue indefinitely with online absorbing any real growth that occurs.
- #8 So what’s the problem here? According to one retail strategist, shoppers are tuning out. They’re exhausted by the experience and the battle to find a good price when they should be energized.
- #9 Meanwhile, e-retail is doing quite well, demonstrating consistent year on year growth. NOTES ON CHART: figures are converted at average annual exchange rates (projected for fiuture years); *includes online travel, event ticket and digital download sales; **includes Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK; **based on Euro figures.
- #10 SO while traditional retail will scrape along with 2.5% growth, e-retail will enjoy nearly 4 times the growth at 11% this year and 10% year on year growth to the point where it will become a $249 billion dollar business in the US, and a trillion dollar business globally. NOTES: U.S. Online Retail Forecast, 2009 to 2014 sales influenced by the web that year will reach $1.409 trillion, and that the direct web sales and those influenced by the Internet will account for 53% of retail sales in 2014. The web accounted for or influenced 42% of retail sales in 2009, Forrester estimates.
- #11 Well, let’s see what ecommerce offers that offline retail doesn’t - Ability to create a nice and informed experience - Near limitless choice (Take Amazon. It has 4 thousand types of bags. Over 900 types of women’s shoes.) - It’s fast and generally will save you loads of time. - Most importantly, e-retail actually works to help empowered shoppers buy, giving them instant access to reviews and loads of information on their products. Meanwhile, traditional retail does benefit from - The immediacy of purchase. People do like having something to take away. - It also benefits from being able to touch the stuff you buy. Given how poor the quality of many goods today, this is an important factor. - We also shouldn’t negate the importance of the store experience and sales assistance. So the trick here, is to not to focus on multichannel retail, as all of these factors are important, but to create an INTEGRATED retail solution .
- #12 The integrated retail solution starts with Experience Experience is critical to making retail work better.
- #13 Apple excels in the Experience store concept. Apple gives fully 50% of their floor space over to experience, not sales. As a result people spend long hours in the Apple store doing stuff, like learning new skills rather than just shopping.
- #14 As a result, apple enjoys the highest turnover per square foot than any other store. Whereas brands like Saks Fifth Avenue are earning $362 per square foot a year.
- #15 Adidas has also recently adopted the experience store concept and created RUNBASE in their Tokyo store.
- #16 Adidas has created a concept Runbase store in Tokyo, which offers: Shower (mens and womens) A changing room with lockers A range of courses by running specialists for people to Learn everything from self-massage to finding one's ideal running style The ability to Design your own shoe And the possibility to Rent Adidas running shoes ( ･ 3 00) and clothing sets ( ･ 5 00) I would imagine that the store smells a bit like a sweaty gym, but perhaps that’s part of the authenticity of the experience. NOTES: At a press conference and preview on February 18th, representatives from Adidas introduced the concept and services behind Runbase. The store itself sells running-themed clothing and footwear, including Adidas' customizable 'mi Performance' line of made to order shoes. Just beyond the shop floor are men's and women's locker and shower rooms, which can be used by members and nonmembers for ¥600 to ¥700 per visit. Adidas running shoes (¥300) and clothing sets (¥500) can also be rented out, eliminating the need for visitors to make any kind of preparations of their own. Finally, running specialists also organize and conduct workshops, clinics and events on a variety of topics from self-massage to finding one's ideal running style. Jonathan Hewitt, chief operating officer at Adidas Japan, said at the conference that the company is "proud to offer a running service tailored to individual needs." With the grounds of the Imperial Palace just 300 meters away, Runbase is ideally located to assist thousands of runners with their workouts. And because of the store's reasonable prices and knowledgeable staff, I can't wait to try it out myself! Source: Adidas press release.
- #17 From the digital side, we can add from these 4 Interactive strategies, which I’ll take you through by example.
- #18 The first is Expansion. In this strategy, you create an instore e-retail solution. This can be either with an e-kiosk as used by the Swedish sports store Stadium or a mobile store or m-commerce solution. The idea of this strategy is to use digital to expand the range of stock you offer. Most stores only carry a fraction of the stock available from their suppliers. With an in-store e-retail solution you could literally make the entire stock range available in any available variation. You could Enable people to order it over their phone. And get it delivered at home. And never lose a sale.
- #19 The second strategy is Assistance which is nicely illustrated by this video by Cisco as showing off their Borderless Network solutions. Notice how the shopper can quickly check what they want. Given that fewer than fewer than 20% of shoppers use changing rooms, and of these, many fail to purchase because they have taken in the wrong size and don’t want to get dressed and undressed again in order to exchange it. You can see where this solution can improve sales. Where customers can quickly find what they want, see what works on them and what doesn’t and order it with a swipe of a card. NOTES ON VIDEO CONTENT FROM CISCO BORDERLESS NETWORKS Through inventory tagging, the dressing room registers the items shoppers take in to try on and produces video and images of the merchandise. A touch screen gives shoppers the option to invite friends. Through their personal cellphone or key pad, they can then send an e-mail or text message to friends. By clicking on a URL and logging on to a Web site, the friends can see the items being tried on and make comments. The site will also suggest other merchandise in the store. The shopper can then click on one of the recommendations, and make it appear in the mirror superimposed over his image, as though he were trying on the garment.
- #20 DIESEL GINZA Store (Japan) Interactive Mirror achieved to become the role as a communication tool between the sales staffs and the customer. It has some functions like recording full-high-vision photos of the customer who try some clothes on from any angles even back shot, also various real-time effects that entertain to customers, without any operation it plays advertising movies and broadcasting runway videos. It displays maximum 6 of recorded photos on the screen at once. Customer can compare those shown items individually and see which item is the best. It is designed with an intuitive touch screen interface. Developed by NON-GRID http://non-grid.jp
- #21 Bloomingdales' New York flagship was one of the first stores to test social retailing capabilities. The system created by IconNicholson was tested in the Nanette Lepore boutique last year and allowed shoppers to connect live with friends and family members as they modeled outfits in front of a mirror. Friends could then comment on the clothing and make suggestions for the shopper to try. The Social Retailing technology uses a three-paneled "magic mirror" in-store that can send photos or videos of shoppers in outfit options to their MySpace page or to friend's emails and mobiles for instant opinions. Friends 'yes' or 'no' votes are then visible on the mirror itself. The interactive technology also allows customers to see what others have purchased, view similar options that are not in stock in the store, check out using MasterCard SecureCode and have their orders delivered to their home.
- #22 Gardeur Shop This men's fashion brand at the Essen Outlet in Germany features "smart dressing rooms," shelves and mirrors that create a new shopping experience. The dressing room recognizes the merchandise a customer takes in to try on and gives useful information such as price, material and care instructions. It also provides complimentary products, like a matching shirt for a pair of pants, as well as available sizes and colors.
- #23 The Japanese department store chain began using "intelligent fitting rooms" in 2006. In conjunction with Cisco, a supplier of networking equipment and network management for the Internet, the fitting room uses a Unified IP phone and LCD screen to allow consumers to check available sizes and styles from inside the fitting room. If a pair of jeans a shopper takes in the dressing room doesn't fit, he no longer has to wait for the sales assistant to check for additional sizes. So you see that stores are using these technologies in limited trials. However, these are already enough to show early results. For instance, Mitsukisho here has achieved stellar customer satisfaction ratings, staff time savings and 15.8% increase in sales revenue.
- #24 If you don’t want to use mirrors or displays, think about adding mobile assistance. The ShopSavvy iPhone app from Big in Japan is actually a bestseller on the iTunes store in the US. ShopSavvy allows consumers to scan product bar codes, find online and offline locations where the product is sold and compare prices. It has over 4.5 million users scanning 1 million barcodes a day.
- #25 The third strategy is Convenience.. here touch based window kiosks are used to provide 24/7 high-street shopping. If you combine this with an automated vending, you can create an integrated store solution that never closes with some customers getting merchandise immediately and others getting it shipped.
- #26 The final is Engagement. This example from Orange uses a motion control based interactive window for enabling people to learn and trial Orange’s range of services. The UI is brilliantly simple, enabling people of any age to learn and trial Orange.
- #27 Now the best approach is to combine the different strategies, Experience with Interactivity and adding some Empowerment to the mix.
- #28 This example from the sustainable Thinktank in Italy, Sustainablilty Everday, illustrates a how interactivity can be used to help the DIY customer. Here the technology facilitates product selection by providing informed choices. Interestingly, the service leverages a better social function by letting customers connect with nearby neighbours who are willing to share their experience, help out on the project or just reuse the remaining materials and supplies. IN other videos, they have proposed solutions where people can cook in the their supermarket, or do DIY projects instore following step by step instructional videos.
- #29 A real world example of the combined strategies currently sits in Germany in the Real,- Future Store by Metro Group. The real,- Future Store offers sports enthusiasts the possibility to test new equipment before buying it. If customers are looking for products such as in-line skates or treadmills, the staff in the sports department will provide competent advice. Furthermore, an Information Terminal is available in a special information corner where details about the selected items, such as bicycles, can be called up. In addition, customers will find information about sports events in the region or fitness tips. One special feature of the sports department is the ambient sound. Ceiling-mounted loudspeakers fill the sports area, the information corner and the bicycle department with different sound backgrounds. Their output can only be heard by the customers in these selected zones so that separate product worlds are created within the department. The overall basis is an in-store radio channel especially developed for the sports department.
- #30 Hear, see, smell Innovative technologies, such as the ambient sound, support the appealing goods presentation in the fish market: loudspeakers are mounted above the counter area and fill a clearly delineated space with the sound of sea waves. In front of the fish market, an Interactive Floor has been set up. This is a projection that responds to movements. If the customer steps on the Interactive Floor, the projected image changes. The comprehensive shopping experience is complemented by an ambient scenting. At the fresh fish counter, a gentle smell of herbes de Provence with lemon is in the air. The fragrance is created with essential oils and natural substances and conveyed to the sales floor through the air conditioning system. This creates a pleasant and stimulating atmosphere.
- #31 A fully integrated mobile application was developed 2008 enabling customers to use a range of mobile shopping services with their phones. The “real,- app” shows customers the nearest real,- store and a selection of weekly special offers. Watch the “real,- cookery show” by renowned chef Armin Auer Enter the recipe ingredients directly into your own “mobile shopping list”. Scan barcodes each time a product is added to the basket. The application keeps a running total of purchases and creates a unique barcode that is scanned at the point-of-sale terminal to enable checkout. Get additional information on products and promotions as you move through the store Pay with your phone using NFC-technology. Only a few days after its launch, this application had already been downloaded more than 20,000 times and made it to rank three within the category "lifestyle" on the download chart in the German App Store.
- #32 Skin care Information Terminal - an interactive application that can be used by customers to determine their skin types and receive corresponding advice. With the aid of a special swab, first the fat content of the skin is determined. Further information, such as age and sex, helps to refine the result. The Beauty Terminal offers a similar service. Here, different makeup variants and hair colors can be tested – either with the aid of the picture of a model or by using a photograph of the customer’s own face, taken at the Beauty Terminal. Comprehensive information is available for each product.
- #33 The results so far for Real have been pretty positive, earning them 15% growth and 20% new customers. Remember, the overall industry average growth is only a few percent a year.
- #34 As you can see, many of these innovations are in their early days of use. However, the majority of customers believe that there will be a widespread adoption of these technologies within the next few years.