I grew up in a retail family when Black Friday used to only be the day after Thanksgiving, a most profitable day according to my favorite retail executive, my Dad. Now Black day/week/month randomly begins and ends when the retailer or e-commerce provider says. Not a bad thing for consumers looking for deals.
Recently, more retail rules changed, chalked up to what industry experts lable—‘because of’. They often cite a shifting landscape of challenges because of COVID-19, because of surging inflation, because of labor shortages, because of supply chain issues, because of new competitive challenges—and my favorite (and most important) because of shifting consumer preferences. Despite the challenges, retailers are using this period as a reboot opportunity, with new playbooks being written on how to re-engage and retain customers.
Digital is often referred to as retail's silver bullet, aiding and accelerating this transformational period. Pre-pandemic e-commerce sales were already growing 35 percent year over year, and today are 30 percent higher than pre-pandemic levels. Moreover, 60 to 70 percent of consumers are researching and purchasing across online and offline brand touchpoints—pushing retailers to adjust and adapt their omnichannel strategies.
Though digital success stories are useful, they are not enough. What else can we learn? There are Reboot Playbook lessons everywhere, like CVS, which is making significant moves into analytics and technology to enhance its health services, JCPenney rewriting its retail playbook and rebooting its status as the leading national retailer, and Walmart, which recently announced a new streamlined shopping experience championing keywords like frictionless, engaging and personalized. Walmart, possibly informed by a previous Target Playbook, also has moved quickly to leverage their 4,700 U.S. locations to compete with Amazon—a smart scalable move. Walmart’s Executive Vice President and U.S. Chief eCommerce Officer, Tom Ward, thinks it is a key competitive differentiator, “The store is becoming a shoppable fulfillment center, and if the store acts like the fulfillment center, we can send those items the shortest distance in the fastest time.” As a personal user of this last-mile capability, I agree.
Though e-comm, retail, and DTC leaders can learn from these moves, they may not have the resources or footprint to leverage them for their brand and customers. Here are four other plays they can consider.
Augmenting the Brand Experience
When Malina Ngai, CEO at A.S. Watson was asked about the future of retail, she said, "Forget physical versus online. It's not either/or - O+O is the new retail standard." O+O stands for offline plus online, and it's about delivering a new retail standard where the retail group creates an integrated experience to serve customers' needs better to shop across any channel, anytime and anywhere they want.
The goal of delivering a seamless shopping experience is that customers feel engaged and heard at every touchpoint in the customer journey and become loyal customers. Mark Polson, former Vice President of Creativity and Business Innovation for Global Management Strategies at The Estee Lauder Companies Inc., agrees and shares that retailers must "Adopt a mindset that focuses on delivering a seamless experience for the entire customer journey from the moment they go online through the in-store purchase to the post-retail experience at home. The future of retail will continue to be about creating experiences for the consumer. Physical stores will be more important than ever as technology creates a more seamless journey and the lines between distribution channels begin to disappear."
Augmenting the brand experience can include everything from turning your stores into experiential hubs, offering flexible payment options, and express delivery service to in-store and online virtual try-on and personalized product recommendations. Mainly, in-store retail must not be forgotten — one-third of Americans still make regular in-store pickups for online shopping. Joe Magnacca, CEO at Next Frontier Brands, emphasized that "retailers still need to create a retail experience for those who chose to shop in-store and continue to invest in technology platforms of partners that drive consumer engagement and brand loyalty."
Personalizing Every Customer Touchpoint
Product discovery and consumer hyper choice have been a bottleneck for retailers—how to surface the right product to the right customer at the right time? Personalization has very positive prospects of becoming the panacea.
According to McKinsey's research, personalization is a crucial driver for brands' differentiation, with more than 70 percent of consumers today preferring companies that deliver personalized interactions and 76 percent of them becoming frustrated when companies don't offer personalized services and products. Personalization brings a full spectrum of experiences to shoppers as it helps to get into customers' mindsets and anticipates their needs. Hence, enriching customer journeys and encouraging shoppers to engage more with retailers by delivering a personalized product discovery and shopping experience is a must.
Retailers like CVS and JCPenney have made strategic investments into personalized experiences, whether simple quizzes or category-specific ones. For example, JCPenney has invested in online quizzes for different categories. For its newly launched JCPenney Beauty experience, the retailer partnered with Revieve to deploy a category-specific personalized digital experience.
Personalization today allows retailers to connect individuals at each touch point in the customer journey by delivering on-demand and relevant experiences with the right messaging at the right time. However, JCPenney CEO, Marc Rosen, comments that “Customers are shopping and excited about finding newness - new styles, trends and products. Where they choose to shop will come down to the experience the retailer can consistently provide. With more options to choose from than ever before, customer segmentation and personalization will be key. We’re committed to delivering style, value and experience and helping customers discover the products they need. For example, through our partnership with Revieve, our online JCPenney Beauty experience includes a virtual makeup try-on and skincare quiz where JCPenney’s Skincare Advisor can use a simple selfie to analyze more than 120 skin metrics to provide an in-depth analysis of your skin.
Enhancing the Product Selection
A retailer's product selection reflects its customer base, changing consumer behavior, and the retailer's values and vision. Costco, for example, runs a product database of around 4000 SKUs per warehouse — few compared to its counterparts. Their strategy is to carry a small assortment of products to be more operationally efficient, sell cheaper and make customers' lives easier with product selection.
In contrast, category-specific retailers usually depend on offering the latest products and building specific concepts to engage a particular type of customer and live up to their company values. For example, Kohl's latest play was to include more private-label brands in its existing adaptive merchandise assortment to advance its diversity and inclusion goal.
As consumers continue to demand products with different benefits and care about sustainability, representation, or ingredient transparency, retailers must be ready to partner with companies that help them deliver. For instance, Walgreens partnered with Revolution Beauty to bring its 100% cruelty-free cosmetics and skincare portfolio to customers. JCPenney launched JCPenney Beauty in collaboration with BIPOC-focused brand Thirteen Lune to foster beauty inclusivity. In 2022, JCPenney also launched Hope & Wonder™, a private label brand that celebrates key cultural moments throughout the year and donates 100% of net proceeds from each capsule collection to a nonprofit selected by their associates. Rosen comments, “This is one way we're celebrating and elevating the visibility of diverse communities so that all Americans can find themselves reflected in JCPenney's core commitments."
Mark Polson adds that in the future, "Product assortments will continue to be more curated and personalized to meet customer wants. The after-effects of the pandemic, social movements, and political division are causing people to seek sanctuary, and retail will reflect this desire."
Retailers must not only develop an optional product mix (whether online or in-store) and expand their product lineups, but they must also help customers with product discovery and guide them through endless options. And they should enable shopping ease, where price groups or ingredients, campaigns, and promotions will be readily displayed and accessed.
Ditching Cookies for Zero-first Party Data
Data gathering is crucial to any omnichannel strategy to serve customers better—and winning in personalization. However, according to SAP research, 70 percent of retailers still depend on cookies for customer insight and marketing activities. Given that Chrome is deprecating third-party cookies next year, retailers must arm up with a strategy to gather rich first and zero-party data at scale to better tailor marketing efforts and understand customer intentions.
However, there are two sides to this: to gather it, companies must entice customers with a personalized experience that communicates what's in it for them when sharing their preferences; to make that personalized customer experience even better, you need to make sense of the data. In addition, gathering this data also requires a company-wide shift — incorporating the right data governance actions to ensure customer data is stored safely and its usage is in line with customers' expectations.
Dee M. Robinson, Author and Retail Executive, agrees that most retailers are not yet making the necessary moves to safeguard access to quality customer data for the future. She adds, "The value of gathering zero-first-party data might not seem monumental today, but consumers are continuously exploring new platforms, such as Web3 or the metaverse, and get exposed to new brands and services daily. Retailers must deploy a data-gathering strategy at scale to ensure their future success."
The future of retail and its competitive landscape will be built by those retailers that embrace change and can adapt to the times—even when that means rewriting your retail playbook. "Disruption is good. It forces proactive, bold decision-making and innovation driven by technology. Courage at every level is mandated; it will drive return on people, profit, and purpose," says Robinson.
