Ten Megatrends Transforming Retail
Based on a survey of more than 2,000 shoppers, we identified ten megatrends transforming the retail industry and strategies to respond.
The "integrated" cross-channel store, mobile commerce and the rise of new influencers such as social networks are transforming the retail industry. To respond successfully, retailers must rethink everything from pricing to inventory strategies and employee training.
1) Shoppers Demand Consistent Cross-Channel Experiences
To save time and maximize convenience, shoppers want a consistent experience whether they are in a store, on-line, browsing a catalog or on the phone. This requires seamless integration of customer service, merchandising, pricing, inventory and supply chain processes.
Retailers must understand and meet the preferences of various customer types. Cognizant's survey found, for example, that male shoppers prefer purchasing online and picking up in-store, female shoppers would rather have products delivered with the option to returning them to the store, and shoppers 65 years and older prefer store purchases delivered to their homes at no extra charge.
2) Distributed Order Management Integrates the Retailer
Emerging models like "order online and pick up in store" or "purchase in store for home delivery" require flexibility in ordering systems to ensure that inventory is allocated correctly. Both retailers and customers require visibility into their business and transactions, and not just online.
The survey revealed that 73% of customers want cross-channel inventory visibility at the store checkout, and 53% want it from an in-store kiosk. Customers want to return products even if they have forgotten their receipt, and that every store accept a return even of an item purchased at another store in the chain.
3) Real SKU Rationalization Takes Hold
Cross-channel order management will enable retailers to rationalize SKU location, shipping slow-moving product to the warehouse or back to suppliers. This can provide continued availability of the items by delivering online or shipping to a store, while increasing inventory of key items in the physical store. Key technologies include centralized item and customer information databases, flexible distribution systems to enable "order from anywhere" and "ship to anywhere" services, and in-store systems, such as kiosks and digital signing.
Figure 1 - Out-of-stock-remedies
4) Sales and Product Information via Mobile Phone
Smartphone apps can already scan the barcode of any product and look up prices and customer reviews, while others will guide shoppers to the exact location of in-stock products within their stores. Mobile coupons are another area of opportunity, as the Cognizant survey found 40% of all customers dislike mailing in coupons and as many as 82% of high-income shoppers want coupons on their mobile devices.
5) Mobile Shopping (Finally) Comes of Age
Shopper acceptance, new technologies, increased network bandwidth and retailer adoption will add to the 50% of customers who studies say already use mobile phones to make purchases. Near Field Communication technology (NFC) will allow customers to use their phones to pay by simply bringing their phone close to an NFC-enabled payment terminal. Retailers must invest in the appropriate infrastructure, but in return can provide shorter lines and need fewer associates at checkouts, freeing staff for customer service, product demonstrations and other services.
6) Taking the Store to the Shopper
With the influx of online and mobile technology, each customer wants a different combination of retailer touchpoints. Retailers should understand the preferences of their customers and serve targeted cross-channel options. For example, Amazon's "no shipping cost on orders over $25" (for qualified items) suggests a good guideline for online shopping, and may be extended to home delivery of in-store orders.
Figure 2 - Checkout Turn-Offs
7) Death of Static (Traditional) POS Becomes a Possibility
Increasing customer acceptance of out-of-queue and mobile checkout will give retailers an alternative to massive, future POS investments. Benefits include reduced employee-based shrink, lower capital expenditures, increased sales per square foot and reclaiming premium store space. Along with mobile checkout, retailers are embracing include digital kiosks, mobile scanning units, and personalized shopping assistants (PSA). Retailers should experiment with the right mix of out-of-queue checkout options.
8) Death of the Task Worker
To deal with the dramatic increase in shopper product knowledge, no-frills, low-cost retailers may abdicate the role of customer advisor while others will seize the opportunity to rebuild relationships and influence shopper behavior. Creating "knowledge-based workers" will require technologies that automate tasks and allow associates to focus on engaging the customer. Examples of "knowledge-based" workers include the personal shoppers and "Genius Bar" at Apple stores, and Build-a-Bear Workshop, whose associates bring enthusiasm and ritual to helping children create their own bears.
9) Social Media and Product Development Collide
Social media and mobile technologies can give manufacturers and retailers more direct and informal access to their customers. Because social media users are self-selected and don't reflect the specific demographic and psychographic balances of formal research panels, caution should be used when evaluating their input. However, social media provides quick, relatively inexpensive, candid feedback that is a benefit to both smaller companies on a tight budget and larger companies where decision-makers may be further removed from end customers.
Examples include Forever 21's Facebook page that includes a reverse auction that allows users to collectively help drive the price of the item down and then buy it when it has reached an acceptable price, giving the retailer insight into price elasticity.
10) Millennials Change the Behavior of All Other Generations
The Cognizant survey showed millennials are most inclined of all generations to use mobile devices for product information, store location and digital coupons, and are most likely to use the Internet and family or friends for product information. As companies seek to tap into or develop new influencers, they must identify the right partners to help them integrate emerging technologies and business models, manage costs and understand return on investment. Find out more about how millennial shoppers are different.
For more information, read the full white paper Ten Megatrends Transforming the Retail Landscape, see a summary (presentation) of the 2010 shoppper survey findings or learn more about Cognizant's retail practice.