Author: Journey

Alibaba is the world’s largest retailer, selling more than Amazon and eBay combined to over 200 countries. And yet, it holds no inventory. It does no shipping or selling. Perhaps it’s defined best by what it doesn’t do.

There is nothing new about platforms or marketplaces, but we’re seeing the world of retail start to be less about vertical operations or integration and far more about providing thin, horizontal slices of value.

Even companies touted as being ‘vertically native digital brands’ are rarely such. Rather, they are more like thin, value-adding brand layers. Warby Parker doesn’t make its own glasses and Dollar Shave Club sells Korean razor blades via a third-party logistics company in Kentucky – at a loss. We’re seeing retail becoming a stack of thin tranches of business that seek to specialise in a part of the process, but not all. When you think like this, costs can be reduced, audiences can grow rapidly and profitability seems easier.

Unlimited inventory

The most valuable companies in history have always been those with the expertise, assets, relationships and experience to make or sell, but things are changing. The fastest-growing and most valuable companies ever known are increasingly thin, but sit on top of complex systems and own the customer interface. What does this mean for brands and retail in the modern age?

So far, not much. The weird truth about this age is how little it has changed many industries and, paradoxically, how little value it has created. We may boast of change in the modern world and think that we’ve understood the power of the new, but compared with the change that is coming we’ve seen nothing yet.

At first, new technology is always bolted on to edge of existing companies. We add iPads in-store to show that we’ve understood omnichannel. Tesco home delivery is still closer to its original system of faxes to store managers than an Ocado-like, purpose-built, automated distribution center.

Retail has changed little. It is still limited by physical criteria and assumptions that, frankly, no longer exist.

Inventory has always been limited by both space and money. In the pre-digital age, retailers needed to hold stock which, understandably, limited choice. However, this no longer applies. There is now no reason why every retail brand can’t sell sell pretty much everything ever made.

Amazon makes far more money from being a fulfilment company to other vendors’ stock than it does from its own goods. Walmart is slowly moving in the same direction. Whether it’s through being an affiliate linking to others’ supply chains, or through stock you process yourself, there is no reason as to why your store can’t sell more.

Retail is about audiences

With close to two billion people using it, Facebook is currently the largest media owner the world has ever known. In modern retail, we need to think less in terms of real estate and more in terms of eyeballs. We see businesses clamber over each other to own that interface.

Content makers now rely on Snapchat, Twitter, or Apple News, as well as Facebook itself. This aggregation layer is coming to retail. Google Shopping seeks to make money passing leads onto others in every category. Kayak and Priceline do the same thing in travel; ASOS and Outnet do the same thing in clothing.

Shopping is as simple as asking a plastic device in the living room to confirm the purchase of my new trainers.

Realising that publishers have always been good at building audiences, we see publishing brands move slowly into this space. Gawker once made more than $1m per year on affiliate sales, and Business Insider sure does push the reader to buy. We’re seeing the worlds of publishing and retail combine. Magazines want to sell stuff and retail outlets like Net-A-Porter and Airbnb want to sell magazines.

In this new horizontal landscape, the name of the game isn’t optimising a purchase funnel but shortening it.

We’ve seen ‘buy now’ buttons slowly shift across the web, but this movement will soon rapidly dominate the offline world too. Shopping from ads could be a matter of using fingerprint recognition such as Apple’s Touch ID. Technology like QR codes or Blippar (once it is baked into proper apps and operating systems) will make any physical surface two clicks away from a purchase. Digital six-sheet outdoor screens become large catalogues.

The death of the purchase funnel

The past decade has seen brands go direct and offer ecommerce from their own websites. However, in doing that, many brands have realised that while they can attract more revenue – and profit – from cutting out the reseller, fulfilment isn’t always as easy as it seems. Building a global pick-and-pack network is difficult, and diverts attention and funding from the core brand proposition.

This is why Nike recently realised that going direct isn’t the be-all and end-all of ecommerce. Its somewhat reluctant decision to start selling through Amazon implies that the company realised that although millions of fans were going to its website, millions of fans were also going elsewhere, with that share of wallet being awarded to competitors. When it comes to identifying where the retail action (ie spend) is, it’s always better to be inside the tent.

Amazon Echo proves that there’s so much life still left in retail innovation. Whatever you think of ambient interfaces, they provide an excellent, lucrative opportunity for retailers. This is where the purchase funnel is not just shorter, but also quicker. Just 30 years ago, to buy a pair of trainers we had to save up enough cash and make a trip to a sports shop – within their preset opening times. Now, it’s as simple as asking a plastic device in the living room to confirm the purchase of my new trainers and I’ll pay off my credit card bill at the end of the month.

While this is phenomenally convenient in a way that couldn’t have been foreseen in 1987, it also presents opportunities for traditional bricks-and-mortar retailers: to make their customer service so high-quality and personalised that it compliments online one-click retail, rather than attempting to compete against it.

Such innovation also lends itself to a further squeezing of the purchase funnel and a world where everything becomes a shoppable layer. In a way, the idea of the old bazaar has gone full circle: rather than visit somewhere where you can be surrounded by every merchant, you are now constantly visited (through your phone’s location awareness and notifications – and, increasingly, domestic internet of things devices) by every merchant surrounding you.

This is the principle behind beacons, but this layer will soon become constant and prevalent. While washing machines that order their own powder are a well-known near-future concept, retailers advertising products to you based on your home temperature pattern or energy usage will also come into play.

Further, anecdotal evidence suggests that retailers are already playing with the idea of physical suggestions: “because you bought Product X, we’ll send you Product Y”. Buy it and keep it, or just send it back. This is certainly the idea behind Prime Wardrobe from – yes, them again – Amazon; there is no better way to encourage someone to buy something than to try it out in their own environment.

We need to reconsider every aspect of the world around us. We need to see everything as a shoppable layer, every password or entry field as a barrier.

Source

“Coffee-shopping” is a trend in China that’s disrupting the traditional brick and mortar retail experience. When customers are coffee-shopping, they peruse in-stock items on a tablet, rather than on the shelves and racks of a retailer. It’s so named for the social, cafe-like, atmosphere that’s designed to entice shoppers to spend time in physical locations.

While it’s making waves of late overseas, it’s not a novel model and not particularly foreign. The cafe-inspired retail space has roots in a company long-known as a vanguard of innovation in the United States. Since the 2001 opening of their first physical store, Apple has made headlines for their disruptive approach to retail that is, itself, more cafe than traditional storefront with a coffee-house table layout and friendly atmosphere. (In fact, before the Apple Store adopted its quintessential modern identity, it was almost literally a cafe.)

And Apple’s not alone. With the rise of coffee-shopping in China, we’ll see more retailers adopt the core of what made Apple’s retail model so successful. Here’s why coffee shopping works, and what we can learn from retailers reaping its rewards.

Coffee-Shopping Appeals To Millennials

Accenture estimates that Millennials spend $600 billion annually in the United States. It follows that retailers are vying to earn their affection – and ultimately their hard-won dollars. But appealing to a demographic that’s more inclined to spend on a rideshare service than a new pair of shoes has proven difficult.

The tendency of Millennials to seek out inexpensive alternatives to owning everything from houses to trendy clothes – which served as a catalyst for sharing economy options like Airbnb, Rent the Runway, and Uber – puts the traditional retail model at risk.

“Retail has changed through the generations,” says Jim Joseph, Worldwide President of global communications firm, Cohn & Wolfe, and professor at NYU teaching Master’s courses on integrative marketing. “Millennials don’t necessarily want to go shopping in the traditional sense of browsing through stores. They don’t want to use their time that way, anymore. They’d rather participate in an experience that’s adding more value to their lives.”

It’s not all bad for bricks and mortar, though. In fact, many Millennials prefer to shop in store and retailers can benefit from understanding the cohort’s shopping habits. Building cafe-inspired showrooms fosters a culture that enriches the shopping experience, which shows Millennials that retailers are willing to invest in what’s important to them.

De-Emphasizing Merchandise Allows Retailers To Focus On Experience

According to Joseph, the key to coffee-shopping’s success is de-emphasizing merchandise which allows retailers to focus on what’s really valuable to Millennials: an experience.

He points to Bonobos, an online turned brick-and-mortar retailer, as a good example. The menswear line emphasizes e-commerce but has opened physical locations, called “Guideshops,” to allow their patrons to try on clothes which are then sent to a customer’s door.

Typical of coffee-shopping, Bonobos de-emphasizes merchandising in favor of the alluring atmosphere of their physical retail location. Guideshops are not flooded with racks of merchandise typical of traditional clothing stores. They resemble a neat, high-fashion closet and tout one-on-one service with complimentary style advice.

By focusing on an experience, retailers empower consumers to “try on” an appealing lifestyle – just as they do when they rent an Airbnb villa in Italy or spring for an Uber Select – making a storefront a destination for more than just its wares.

Foot Traffic And E-Commerce Are Not Mutually Exclusive

While emphasizing an experience over an e-commerce transaction seems straightforward, it has been hard for physical retailers to adopt. Macy’s, for example, recently announced plans to close one-hundred stores over the next few years in response to dwindling sales.

And while countless articles point to the rise of e-commerce as the culprit, the success of coffee-shopping suggests that the failure of traditional bricks and mortar has less to do with the e-commerce overtaking and more to do with a failure to connect online and offline channels. After all, the core of the model has shoppers using tablets to scroll through inventory.

Warby Parker is an excellent example. Like Bonobos, Warby Parker is an e-commerce first retailer. They make it easy for customers to shop online – even for an accessory as personal as glasses – through a home try-on program that sends five pairs of glasses, for free, to potential patrons. They’ve even rolled out an online prescription test designed to make the eye exam process more efficient, potentially bypassing the need for an optometry appointment for customers that qualify.

With a solid e-commerce strategy, Warby Parker’s physical stores began as a marketing experiment of sorts. But the benefits of the retail destination were quickly unveiled, and Warby Parker storefronts became one of its key growth catalysts.

“Those first few shops were generating nearly unmatched sales figures–$3,000 per square foot, a number topped only by Apple stores,” relates Tom Foster in a recent Inc. Magazine article.

The meticulously depicted beach-club lifestyle conveyed by Warby Parker locations invites customers to participate in a culture, just as Bonobos does. Moreover, while both retailers embrace e-commerce, they use their physical storefronts to build relationships with customers that survive past a digital transaction.

While a significant fraction of the brick-and-mortar retailers are reeling from the incipient wave of change in how consumers want to spend their money, some are embracing the coffee shopping culture and reaping the rewards. The social environment that offers a destination experience — a shared ethos and a de-emphasis on merchandise in exchange for enhancing the value of the customer’s time along with the value of their dollar — can all be gleaned from the way we behave at the corner cafe.

Source

A change is sweeping through retail and it’s not what everyone assumes it is. We may think the internet is changing shopping forever, and it certainly is, but another unspoken dynamic is everywhere – the bifurcation of retail.

Every action has a reaction: a nation high from snacking on six-second videos also needs to binge-watch hours of TV. The consistency of a McDonald’s or Bud Light creates the need that craft beer and pop-up food festivals satiate. Shopping is seeing the same split, moving from shopping as a branded experience and to buying as the ultimate in ease.

Buying is rife

I’m pretty sure no person in modern times has ever been so bored that they went window shopping at Amazon; the spartan CMS, the ugly product shots and the functional taxonomy have all been designed to make buying as easy and seamless as possible. But never fun.

Shopping on Amazon (when it works best) isn’t an experience, it’s a lack of experience. It’s unmemorable. I have bought books twice because I seemingly bought the first one in my sleep. It’s the purest example yet of the act of removing every possible barrier, every piece of friction. The end result of countless A-B tests to optimise for simplicity, speed and efficiency.

This is the world of buying. It’s the surgical operation of a system to reduce cognitive burden, to make decisions fast, facile and frictionless, if not automatic. It started off for people who know what they want and want to get what they need without thinking, yet it’s becoming the default way to acquire goods in the age of too much choice and too little time.

So increasingly the world of retail seems to work this way. We have product reviews spreading across retail with quick-to-glance stars to give us confidence. We have the Wi-Fi connected Amazon Dash Button, which allows us to procure items with a nonchalant poke.

We have limited choice retail, reducing the agony of decisions by offering fewer, easier choices.

We have Hotel Tonight showing us a small range of perfectly decent hotels for that evening that you can book in a swipe. From Casper with its one mattress and eco-friendly baby brand Honest with its simple product offering, to US on-demand streaming service Direct TV Now with its four tiered packages with easy names like ‘gotta have it’ and ‘live a little’. Even Maple, the new food service option in New York offers a handful of curated meals each day giving consumers fewer options to think about.

Either systematically reduce complexity at every turn, or add it in the most delightful way. Don’t get caught in the middle.

What’s easier than buying? Not buying. Things arriving magically each month. If the ultimate in luxury is never having to think, Walmart, Target and Amazon, Dollar Shave Club and more have subscribe and save programmes.

The name of the game in buying is making it as easy as possible, and then more. Things like using a PayPal plug-in to save payment details and make checkout easier; using clear, bold interfaces like Polyvore to leverage the instant messaging interface; or getting consumers to swipe with the array of “tinder for shopping apps” or stroke you to purchase via apps like Blynk and Stylet.

New interfaces will continue to advance, buying will soon envelop us, from ordering pizza via voice in the Amazon Echo, to next removing the interface with predictive retail that sends you stuff before you realise you want it.

While it started there, this isn’t just online retail. After years of assumptions that modern retail was about adding screens and complexity, Amazon Go stunned the world with a hyper modern store with technology removed. Gone were iBeacon coupons, or electronic pricing labels, Amazon Go was just a stripped out experience where people did nothing. Or we have concept stores like ‘the store’ in Japan, which just sells the very best one example in the world of about 200 items. The easiest choice architecture being “I just want the best”.

Shopping gets fun

As a reaction to the emptiness of mindless procurement and understanding life is about experiences, not efficiency, we will see the growth of retail as experience.

Even the most ardent M&M’s fan doesn’t believe the 25,000 sq ft of M&M’s World in Times Square, New York is there to satiate the cravings of New Yorkers for chocolate at 11:45pm. Like all flagship stores M&M’s World is there to impart an experience. It’s shopping to be remembered, it’s a journey of discovery, it’s memorable, it’s there to take time and savour. It’s the opposite of buying.

Shopping is most often found in physical retail because it’s the easiest to do with sights and smells. Shopping is the world of adding experiences. It’s the interactive perfume lab in Selfridges, the selfie opportunities in Harvey Nichols, the Hardware Club experiences in Harrods or the extravagant fragrance laboratories of Le Labo. Coffee shops seem to have learned this, it’s the unnecessarily long wait, the drama of the brew, the theatre of the leather-bound menu in Intelligentsia coffee.

There are different takes, the curated journey and raison d’être of a store like Story in New York, with items placed around a modern tale. It’s the smart mirrors and body shape scanners in department stores. It’s the dramatic design of seemingly endless sewing machines in All Saints, or interesting concepts like Bespoke in Westfield San Fransisco that mixes working startups with places to shop. It’s Nike’s flagship stores with fitness equipment and running club events. It’s the Lululemon pamphlets explaining why they made an item and the local notice board. It’s the Uniqlo stores in Japan where you vote for your favourite new products with white dots.

Buying is what drives farmers’ markets and their stories of provenance, the handmade signs and the seemingly added dirt. It’s the lavender oil factory store in Provence, it’s the oddly expensive wine store at the Vineyard. Buying is the tailored suit made from Suit Supply where the consultation is part of the experience.

But it’s not just offline. Sites such as Net-A-Porter thrive with content as commerce, we have editorialised catalogues taking over the top end of the market, and even companies like Nike making TechBook, a tactile, immersive mobile app where the clothing comes alive. We have shop the look – not only are retailers making magazines, but magazines are becoming retailers.

Move to one extreme to thrive

So while we’re seeing online and offline shopping start to come together, we see retail move to each extreme. The true successes of modern retailers will be those which understand the divergent nature of modern retail and work to optimise for both. It seems unlikely people want a quasi experience. Quite quickly, you are either looking for fun or for necessity.

Retailers need to establish which type they want to be and work hard to maximise that. Either systematically reduce complexity at every turn, or add it in the most delightful way. Don’t get caught in the middle.

Shopping is getting extreme, it’s time to rethink it all to maximise it for the modern consumer.

Work hard to understand consumers’ changing needs and expectations. Ecommerce has changed buying habits forever: we now expect to find things quickly, to never wait in line, we demand that payments are quick, that suggestions for other items surround us. We expect delivery to be fast and free, we don’t mind a relationship as long as it adds value and is two way.

Old world thinking is not tolerated. We won’t understand if stores don’t know what items they have in stock and have to make a phone call. We don’t understand why a retailer cannot predict a delivery date. Vanity sizing is no longer flattering, it’s deeply inefficient, costing consumers time and hitting retailers’ profit margin. We’re not sure why our relationship is still with retailers and not the brands they sell. If my sister has an ecommerce business, why can’t this up-and-coming fashion label?

So let’s think again. Shopping is getting extreme, it’s time to rethink it all to maximise it for the modern consumer. And above all else, in a changing world it’s time to change.

Source

For the first time in centuries, the role of the storefront is changing. How should companies adapt?

There is no doubt that the Internet is changing the retail experience, and with it how we shop. Beloved stores are feeling the pressure of the prices and convenience e-commerce retailers offer.

An ongoing study by IPG Media Lab reveals that shopper satisfaction at retail stores is declining up to 15% per year. Stores that used to define the diversity of shopping centers, from bookstores and clothing to consumer electronics and home goods, are closing. Small and large brands alike are searching for strategies to react to the change in customer expectation, where online retailers win on prices and convenience. For the first time in centuries, the role of the storefront is changing.

The retail model as it exists now

Times of transformation create opportunities. Retailers must adapt business models and integrate local, personalized services with online convenience. With these opportunities come new roles for the storefront that will redefine its social attractiveness.

The value of the local store for physical goods is continually evolving, driven by changes in distribution infrastructures. Recently, we have witnessed a shift in retail from physical to experiential, where the currency of value is the experience. However, we are only at the beginning of an economy driven by virtual goods. For example, while eBook market share is rapidly rising, Kindle eBooks only account for around 1% of total print sales. Virtual goods still need to fulfill the sales funnel from discovery and comparison to purchase and, later on, rediscovery.

 

Staying in Touch

Products and services increasingly exist within a cloud of information, continuously and dynamically linked to virtual brochure sites maintained by sellers, journalist reviews, consumer ratings, social commentary, and aggregated usage statistics. This cloud can be accessed any time in any place through multiple channels. While retailers traditionally see online and store marketing as competing businesses, customers ultimately care about convenience and perceived value — not the channel through which they are served.

As the “goods” we transact change, so do our purchasing behaviors. What was once a simple transactional process becomes a complex web of value shifts across several customer touchpoints. Now, brands must manage multiple revenue streams, where the retail space may not be primarily devoted to income. Following this trend, wireless service providers such as Verizon have transformed their retail environments into places primarily for customer service, not monetary transaction.

Designing these new shopping experiences is not just about immediate sales but about creating opportunities to facilitate impulse purchases, up-sell, and cross-sell. The challenge is in constructing a seamless shopping experience that integrates the in-store, transactional, and post-sale goals. The experiences must converge to promote discovery in-store and the continuation of the sales process at home or on-the-go. This relies on context. Amazon suggesting a tripod with a new camera may not create more value. However, recommending a guide to photographing wildebeest for a camera purchased for a safari trip is more likely to increase perceived value.

We have to radically rethink how retail businesses earn revenue when sales margins are declining. The challenge is to design user experiences across offline and online environments that focus on different types of transactional values.

We can learn and apply insights from sectors that have made this move already.

1. Think Like an Editor

We are overwhelmed with choice, and most products advertised to us do not match our lifestyle expectations. Too much choice results in confusion and indecision, the stumbling blocks for purchases. Additionally, as products become commoditized, the perceived value must come from the user experience. Nordstrom’s online and in-store growth can be attributed to their innovative approach to handling inventory to match shopper searches. The recent launch of their redesigned website includes editorial features for a magazine-like shopping experience. Online shoppers looking at products can see where they are available nearby and reserve them for pickup. By creating a fluid and personalized online and in-store shopping experience, Nordstrom has increased same-stores sales by an average of 8%.

Brands such as National Geographic are beginning to move into experiential offers by opening highly curated entertainment and educational destinations. National Geographic’s offering has expanded from a lifestyle publication to include a TV channel, educational website, museum, and store that nurture lifestyle interests and offer products that match lifestyle goals. These brands recognize that the competitive advantage lays in differentiating based on audience desires and not the range of products and services.

2. Learn From the Fashion Industry

Fashion stores have radically changed in the past decade. Previously, customers purchased clothes once every season, limited by narrowly managed fashion trends. Now, customers return regularly, anticipating new discoveries as part of the experience. Zara’s secret to success is through encouraging frequent shopping and continuing to inspire by regular reorganization of store layout and rapid turnover of merchandise.

Conversely, e-commerce still lacks browsing and discovery experiences that satisfy curiosity. The current standard for online shopping revolves around instant satisfaction initiated by a specific search. Etsy is one exception, with rich interfaces and interesting browsing options (color, time spiral, local) that stimulate exploration.

Increasingly, online magazines on platforms like the iPad will be directly linked with e-commerce convenience. The fashion mentality must be applied to online stores, improving on discovery.

3. Embrace Hospitality in Your Brand

Brands have the opportunity to become destination spots. Retail spaces can relax customers, offer refreshments, and provide entertainment while creating the conditions to engage in a conversation that builds brand loyalty. Nestlé’s gourmet coffee brand, Nespresso, successfully crafts various types of encounters with their customers. Although the machines are available in several stores, the capsules are only available from the company via mail, phone, Internet, or in Nespresso Boutiques. The boutiques are designed to develop and maintain a continuous relationship, even offering a club for coffee connoisseurs. The boutiques offer complementary coffee, distinguishing the purchase of new capsules from other repetitive shopping rituals.

This new lifestyle showroom for demonstrations and hands-on workshops could be applied to the Apple App Store and its labyrinth of apps. While few people have the time, patience, or desire to spend money to select an app that may or may not provide the expected value, an entertaining demo setting can provide a bridge for product sampling.

4. Own Your Community Network

Brands can extend relationships with customers by providing a community or gathering around shared events. Pop-up stores are the testing grounds for this format. Starbucks was the original force behind the idea that customers should linger and mingle when they made WiFi a coffee shop standard.

On the other end of the spectrum, small pop-up brands are riding the trend. For example, the traveling Rapha Cycle Club pop-up is a combination gallery, cycling shop, and WiFi café. The club organizes events around cycling races, is a meeting hub for biking enthusiasts, and also generates revenue from foot traffic. It is an early example of differentiation in an otherwise saturated market for coffee shops and cycling stores.

 

Design the Experience

As sales margins decrease, business models must change. Retailers must embrace the fact that monetary transactions are moving elsewhere, and often at a different time. As a result, retailers are becoming places that manage customer relationships and form and maintain brand awareness. Designing for customer relationships opens exciting opportunities for up-sell, cross-sell, rediscovery, and consumer advocacy. These relationships can be built using insights from lifestyle editors, fashion, hospitality, and community to create continuous experiences across retail channels.

In a saturated retail environment, one cannot compete on convenience, price, or relationship alone. To remain relevant, retailers must design experiences that merge the physical and online store.

Source