The Future Is Here produced this white paper for a major home and personal technology company in 2014.
Technology changes everything. Always has, always does, always will – in ways that are unexpected and unintended. Think of fire, the wheel, the printing press, and now the internet. First, it revolutionised the distribution of data and created a web of information. Next, by bringing people closer through social media, it revolutionised our relationships and created a web of people. Now, as billions of devices in the real-world become connected to this massive, amorphous virtual world, the internet is creating a web of everything. This “internet of things” is set to revolutionise just about everything else – our homes, our health, how we live, and how we shop.
This document briefly lays out a vision for what the future of your retail offer should look like. It does this by examining how the world, your customers, and the customer journey are changing. It considers how a Retailer X store should try to engage with, and sell to, your customers; and how Retailer X should enhance your customers' experience in-store and online. It concludes with some specific recommendations for Retailer X's retail offer in 2015 and by 2018.
The method used by The Future is Already Here is inspired by something an essayist called William Gibson once said, that “the future is already here, it is just not very evenly distributed”. It is informed by a way of reading cultural change that has been applied more than 5,000 times since it was codified by a sociologist called Everett Rogers in 1962. Called the Diffusion of Innovations, this describes how new ideas – which could be new ways of dressing, dancing, or shopping – catch on and spread from the innovators to the early adopters and the mainstream.
The world and your customer are changing
As social development soars, so our expectations of life, products, and retailers are flying ever higher too. Our demand for instant gratification is being matched by smart companies using new models and clever algorithms to deliver goods as quickly and seamlessly as possible: Shutl is the stand-out example. Its fastest time for delivering a product from store to home is a world record 14 minutes 58 seconds.
We all have enough, and way too much, stuff. As a result, it's increasingly difficult to impress others through material goods. Instead, people are finding status in post-material ways. Through their Facebook, LinkedIn, Instagram, Twitter and other social media accounts, people want to show off less what they have, and more how in the know, on the go, and connected they are. One result is that millions – especially early adopters – now prefer considered and collaborative consumption to conspicuous consumption, and access over ownership. Consider Zipcar, for instance: 40% of Zipcar users have given up their cars or decided not to buy a car.
Internet of things
We, and the world around us – our things, our homes, our cars, our lives – are more connected than ever. This change is happening fast: in 2005, there were 2.5 billion connected devices. In 2008, there were more connected devices on the planet than people. By 2013, there were 13 billion. By 2020, there will be 50 billion connected devices – including phones, chips, sensors, implants, and, as internet of things expect Patrick Tucker says “devices of which we have not yet conceived”.
Wearable technology – aka “wearables” such as the Apple Watch, Google Glass, FitBit Zip, and Jawbone Up – are changing how we control our health. Their retail equivalents, “nearables”, are set to change retail too. More on those below.
Smart world, smart people
All these connections have changed the structure of power and information, from the old top-down, pyramid-shaped model, to the far flatter pancake. This means individuals have far more information, and therefore power, than before. For example, even in your store people can find out what your competitors are selling the same item for. Since nine in ten (87%) retailers say consumers could get better deals on their smartphones this could be a cause for concern.
The customer journey of the future
There was a time when analysts could confidently describe the customer journey. That time is gone. There is no “one size fits all” customer journey anymore. Some of your customers research online, and purchase off-line: 90% of US mobile network operator Sprint's customers start their journey online then buy in-store. Some research in-store, then buy online – at home, from their smartphone, and possibly from your competitors. This tweet from @NickSilicon sums this up: “Dear Best Buy, I'm glad you know your place as a showroom. Love, Everyone who shops at Amazon.”
But customers using smartphones in-store are also quite likely to buy from you: only about 6 percent plan to take their commerce to the internet, and only about half are using their phones to price-check. Most are using their smartphones as digital assistants, looking for help, reviews or online coupons, often from the website of the store they’re in.
Since the customer journey of the future will become ever more fragmented, the smart retailer should be set up to inspire, inform, and sell in every single channel at every point on any customer journey.
How a Retailer X store should engage with, and sell to, its customers
To engage with, and sell to, its customers, every serious retailer in the world should be inspired by, and steal ideas from, the big retailer with the most exciting growth: Amazon. That doesn't mean give up your real-world stores: stores are becoming more important than ever as people go to them less, but spend more when they get there. It means you should try to replicate what Amazon does online, in store.
Till recently, Amazon's key tools – hassle-free, one-click payment and delivery, and leveraging knowledge of your previous purchases, and the purchases of people like you, through algorithms – has only been possible online. But now, emerging technologies are making this intimate customer data available in the real world.
Know your customer
Thanks to smartphones, wearables, nearables – such as Estimote's Beacons based on Apple's iBeacon technology – and pioneering companies like SK Planet in Korea and Localz in the UK, it is now possible for real-world stores to know the same personalised information about its customers in-store as Amazon does online. When someone enters your store, you can now know who they are, where they've been before, where they go in-store, how long they linger, and you can use all that data to reward, influence, engage better and sell more in-store – almost exactly the same way Amazon does online.
This is not only for a few customers. It's for anyone with a smartphone. Consider: in Korea, a nation of 50 million people, 38 million have signed up to SK Planet’s loyalty rewards program. To make it work, you need customers to download your app. How to do incentivise your customers to do that? Retailer Urban Outfitters encouraged their customers to use their app by offering free delivery on every product purchased via the app. Also, think about content, and the new ways people want status in a world suffering from “Stuffocation”.
Corral your customer
As well as greeting your customers when they arrive at your store, you can corral them at other times too – with digital fences and digital lassos. As well as adding “geo-fences” to its stores, outdoor brand The North Face has put geo-fences around ski resorts. A trainer store in Guatemala called Meat Pack reached out to its customers who had downloaded their app when they went into the store of a brand that Meat Pack sold. When their customer did this, the app – which knew where they were thanks to GPS tracking – offered a promotion that gave the customer the chance to earn a discount on that brand's trainers if they bought them in Meat Pack. The twist that made this campaign especially fun, and turn viral, was that the discount started at 99% and decreased by a percentage point with each second that went by. The countdown discount made Meat Pack's customers hurry to the Meat Pack store to make the countdown stop and claim as big a discount as possible.
Be ready for the 3 speeds of shopping
Your store should engage customers by being prepared for whichever stage they are at on their journey to purchase – that is, set up to help with each of the three speeds of shopping:
Fast, when your customer just wants to pick up and go – as seen in the rise of click and collect. Click and collect sales at John Lewis are up 49% in 2014. By the end of 2014, eBay's customers will be able to pick up their purchases at 650 Argos stores. London Underground and Network Rail are turning stations into pick-up points.
Medium, where your customer wants to browse on their own. Help with an app that works in-store, to help unlock the insights, information and incentives that make your customers buy now. US retail giant Wal-Mart Stores has a geo-fencing mobile app, which recognises when a customer is near or in the store: as a result, 12 percent of Wal-Mart's online revenue comes from customers who are actually in one of its stores.
Slow, where your customer wants to ask questions of a real person. Use in-store experts, like Apple's Genius Bars, and take tips from Zappos, the shoe seller that, thanks to its standout customer service, went from start-up to billion-dollar turnover in 10 years.
How to enhance the retail experience in store and online
Cut the pain of payment from purchase
Remove the pain of payment from purchase by using simple, app-driven pay systems, like PayPal or Stripe. These new systems have multiple benefits for Retailer X and the consumer. They reduce wait times. They give customers a reason to download your app. If you use your in-app payment system in store, it automatically gives your real-world customer a digital – and therefore easily trackable – footprint. Consider Sneakerboy in Melbourne, Australia: as its customers are only able to pay via the store's app – which they access either through their own phones or in-store iPads – the system automatically remembers their shoe size, payment preferences and purchase history, and provides personalised information about new products. By removing the pain of payment from the pleasure of purchase, customers are also liable to spend more.
Deliver instant gratification
Half of shoppers who “showroom” say they do so because they like the idea of goods arriving on their doorstep free of charge. Give them what they want by improving your delivery service options: offer an as-soon-as-you-can delivery service from both your online and real-world store by working with, for instance, delivery company Shutl. The results of Argos working with Shutl have been incredible: 84% of people who have used Shutl say they are more likely to shop at Argos now the brand offers Shutl service.
Treat content as commerce
Follow Net-A-Porter's success by treating content as commerce: that is, create engaging content that gets your customers thinking and talking about your brand, thereby keeping Retailer X front of mind. Consider how Burberry has successfully copied Net-A-Porter's model. As CEO Christopher Bailey once said: “Burberry is now as much a media-content company as we are a design company.” In a world where we all have too much stuff, and the new way to get status is by being in the know, this would be a great way to get your customers to download a Retailer X app.
Automate home shopping 2.0
The arrival of the internet of things will enable our devices to know when they need to be replaced, what else is missing from completing the system of which they are a part, what else is available to upgrade the system – and to be able to buy it direct from your store. Until homes are wired to do this automatically, consider other ways to make it possible for your customers to shop from home, like the idea in grocery brand Peapod's mobile app. It lets customers restock their larders simply by scanning bar codes at home.
The company's chief operating officer, Mike Brennan, explains how Peapod works: “You are finishing the box of Cheerios, pouring your last bowl, and before throwing the box away, you take out your phone and scan the bar code.” Note that this approach does not necessarily mean selling more hardware: upgrade your customers' internet-of-things through software upgrades – and ensure Retailer X sells not only the original hardware, but the ongoing software updates and upgrades.
Conclusion 1: what Retailer X should do now
To be seen as the go-to multi-brand retailer for the “internet of things”, it is essential that Retailer X act like the people who are going to buy into the internet of things first people – the innovators and early adopters who every else follows. So Retailer X should be a retail innovator – and give its customers a taste of the internet of things in its stores.
To do that, be the first to offer the “Amazon experience” in the real world, by installing iBeacons in all stores and work with partners such as Localz to create meaningful data that makes shopping more connected and more fun.
Conclusion 2: what Retailer X should do by 2018
Become a data- and purpose-driven company. There is magic in data – but you need to know how to release the genie, and you need people to share data with you in the first place.
To unlock it, consider working with a company such as Splunk. Dubbed the “Google of data”, its technology excels at sifting large data sets of unstructured data, turning big data into useful information.
To make sure your customers are prepared to share it with you in the first place, Retailer X needs to strike up their own relationship with the customer. The best way to do that is to take inspiration from Simon Sinek – “People don't buy what you do, they buy why you do it” – and have a purpose that people can believe in.
This sense of purpose will ensure your customers are not only prepared to share their data with you, but want to share their data with you. All that data will empower Retailer X both upstream and downstream, with the people you sell to, and the companies you buy from.
By becoming a purpose-driven brand, Retailer X will be well positioned to become the natural champion of the data-driven revolution that is the internet of things.
This document is strictly for internal use.
Some sources mentioned in this report:
As explained in historian Ian Morris's Morris Theorem: “Change is caused by lazy, greedy, frightened people looking for easier, more profitable and safer ways of doing things.”
This document is also informed by interviews with experts in their fields: Jim Whyte, Head of Insights at WPP's Fitch; Lucie Greene, Worldwide Director of Trends of JWTIntelligence at JWT; a senior source at a leading trends agency who preferred not to be named; a source who preferred to not be named at a pan-European digital retailer; and a source who preferred not to be named at a global mobile network operator.
Consider Ian Morris, Why the West Rules—For Now: The Patterns of History and What They Reveal About the Future (New York: Farrar, Straus and Giroux, 2010)
For more on instant gratification, read Rick Nauert, "Desire for Instant Gratification May Be Hard-wired", PsychCentral, 1 September 2011
Source: “Argos and Shutl – Creating Competitive Advantage” (http://shutl.com/blog/wp-content/uploads/2013/09/case_study_argos.pdf)
Consider James Wallman, Stuffocation (London: Penguin, 2015); James Wallman, “7 Rules for Selling in a World That Has Enough Stuff”, Fast Company, 28 January 2014
Sources: Rachel Botsman and Roo Rogers, “Beyond Zipcar: Collaborative Consumption”, Harvard Business Review, October 2010; “All Eyes on the Sharing Economy”, The Economist, 9 Mar 2013; Havas Worldwide's Prosumer Report “The New Cosumer and the Sharing Economy, Volume 18, 2014”
Source: Sarwant Singh, "Future Of Personal Mobility -- Life With Or Without Ownership Of Cars", Forbes, 23 April 2014
Sources: Gartner, Cisco, and Patrick Tucker, The Naked Future: What Happens In a World That Anticipates Your Every Move? (London: Current, 2014)
In case you need more explanation for this simile: “Because of the internet, the direction of influence and the structure of power have changed. Instead of the old system, where information and influence flowed from the top down, now they also flow in other ways, from the bottom upwards, and also sideways. And before, the few at the top held sway over the many at the bottom. You could visualize this system as a pyramid. Today, because of the infinite connections enabled by the web, many talk to many, those at the bottom are more powerful, and the system is far flatter. If you drew it now, the structure of power and influence would look much more like a pancake.” Source: James Wallman, Stuffocation (London: Penguin, 2015).
Source: The Future Laboratory
The confusion of acronyms that have appeared prove this point. There are RoPo and PoRo – “Research Online Purchase Offline”, “Purchase Offline Research Online”. There is RoPis – “Research Online, Purchase in store”. In my view, the fact that none of these has caught on proves that there is no one new type of customer journey. Compare this to BOGOF, which became such a common way to sell goods, it has become an industry standard term.
Source: Scott Zalaznik, Sprint's vice president of digital, via Sameer Samat, "The 3 New Realities of Local Retail", Think With Google, October 2014
Read more about Best Buy's reaction to showrooming in Meredith Derby Berg, "Is Best Buy's 'Showrooming' Campaign Working?", AdAge, 26 December 2013
Sources: “New Research Shows How Digital Connects Shoppers to Local Stores”, Think With Google, October 2014; and research by Columbia Business School and Aimia based on 3,000 shoppers in the US, the UK, and Canada
Of the world's top 100 retailers, Amazon has the highest compound annual growth rate, of 32.3% over the five-year period 2007-12. Source: Deloitte, "Global Powers of Retailing 2014, Retail Beyond begins", 2014
Consider this research from Shoppertrak and MasterCard (it's US data but I think the point holds): from 2010 to 2013, holiday store visits dropped 55% from 38 billion to 17 billion, yet over the same period, same store sales rose – which means that the value of each store visit actually doubled.
Nearables are not devices. Any person or object can become a nearable once a wireless, electronic sensor is attached and starts broadcasting data to nearby mobile devices. Wikipedia has the following note on nearables: “Or a brick and mortar retailer could borrow Amazon’s tactic of showing items a customer recently viewed. If a customer had interacted with items tagged with a sticker in a store, they could be reminded of them while using the store’s app or Web site later. (Of course, this wouldn’t be possible without a consumer having the relevant app and agreeing to sharing their data with a store. So retailers would have to make sure such services were rewarding enough for consumers to download the app and agree to share their location data.)”
This on Localz website sums the potential up neatly: “Think of these like digital cookies...but for the real-world”.
This, presumably, is the reason The Crown Estate is fitting iBeacons throughout Regents Street. With the data The Crown Estate gathers, perhaps, they will start to understand that if someone has visited, for example, the Apple store, they are more likely to spend more than £500 in the Burberry store. With that knowledge, the Burberry store could spend more effort welcoming that shopper, and increase conversion and spend. More: Keith Perry, "Regent Street to deploy beacon technology in shops", The Daily Telegraph, 4 June 2014
For more on geo-fencing, read Lauren Brousell, “5 Things You Need to Know About Geofencing”, CIO, 28 August 2013.
Thanks to the campaign, Meat Pack reported that 600 costumers were hijacked from their competitors. Each time a discount was claimed, the customer's Facebook status was automatically updated.
Source, and more: Sarah Butler, “Click and collect takes off as retailers ready for Christmas battle”, The Guardian, 5 August 2014
Source: Paul Sloan, “How Walmart is going all out with mobile”, CNET, 13 November 2012
Read Tony Hsieh, Delivering Happiness: A Path to Profits, Passion and Purpose (NY: Business Plus, 2010)
This is why people spend more with credit cards rather than cash, as illustrated, for example, by Drazen Prelec and Duncan Simester, "Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay", Marketing Letters, 12:1, 5-12, 2001
Source: research by Columbia Business School and Aimia based on 3,000 shoppers in the US, the UK, and Canada.
Source, and for more information, eg on satisfaction, read “Argos and Shutl – Creating Competitive Advantage” at http://shutl.com/blog/wp-content/uploads/2013/09/case_study_argos.pdf.
Read, for instance, Natalie Burg, "Will All Content Soon Be Shoppable?", Contently.com, 31 March 2014. Note that the founder of The Future is Already Here has been reporting on this trend for a number of years. New technology is simply making it ever easier. Consider Snap Fashion, which makes the world shoppable.
Is data important? Consider this from one of the world's great brand and retail leaders, Angela Ahrendts: “Consumer data will be the biggest differentiator in the next 2 to 3 years. Whoever unlocks the reams of data and uses it strategically will win.”
Simon Sinek, Start with Why: How Great Leaders Inspire Everyone to Take Action (NY: Penguin, 2009); or watch the TED talk.
To read more more on the future of retail, click the links to the articles below.