How Technology is Affecting the Retail Industry

IPhone5 Burberry Show

Convergence is here to stay. It is a trend and not a fad and most industries are being affected – some faster than others. Many technologies are converging in the retail industry. The most interesting of all is the Internet, because the Internet delivers the opportunity of access.

Technology and retail operations have been going hand in hand for years. The retailers that are winning today have created advantage by mastering that convergence in superior logistics.

Where fashion, software, and operating systems are constantly in need of update or upgrade, as may be the case, especially in the U.S., the ability to move product has evolved from intuition and experience to transparency into how the product moves on the floor or off the shelf. The retail industry is rich with data from human interaction and algorithmic computations.

We are about to see how the merger of two current trends fares as a top retail performer in the global luxury arena takes the leading role for the digital and retail operations of a top technology performer.

ABCs: Apple, Burberry, and Customer Appeal

Tim Cook's announcement# last October that the company chose Burberry’s Angela Ahrendts to head both online and store operations quickly made the rounds both in the fashion and tech worlds.

Now Apple is getting ready to welcome Angela Ahrendts as its newest head of retail operations amidst the media attention the company (NASDAQ: AAPL) has been getting about its planned stock split during the recent earnings report.

The Motley Fool# highlights the tidbit of news for investors worth paying attention to: Apple had a monster quarter, in which it beat expectations on iPhone sales and generated solid revenue and profit growth. In addition, Apple announced it would buy back more shares and increased its dividend.

Meanwhile, retailers and marketers have no doubt their eyes on what is next for Apple stores because innovators in the space known that the key to win business is to connect hearts and minds – and the human touch is one of the cornerstones of Ahrendts leadership style:

"Technology has given us access to the world and its sea of content, allowing us to never speak to another person if we don't want to," she said. "Computers and smart devices are among the greatest intellectual gifts ever created for man, but if not balanced with human contact, may offer little to develop ones heart. Don't get me wrong, I am mesmerized by this Digital Tsunami, but Google doesn't have all the answers, and are all those people on Facebook truly your friends?"

Design of Experience More Important than Ever

While the path to purchase is no longer linear or one-dimensional, the road to multi device ownership, the desire to own the very smartphones, tablets, laptops, and larger devices for professional use is still paved by experience.

Ahrendts may not be in charge of changing the products that are changing consumer behaviors by putting an ever-increasing abundance of options at their fingertips directly, however she has the opportunity to reinvent the experience surrounding the acquisition of one set of products and operating system vs. another, including when and how to make a purchase.

Burberry Live Streaming Show

During her tenure and since 2006, Burberry’s revenue nearly tripled to about $3.9 billion in the year ended March 31. The brand is widely regarded as one of the most technologically savvy fashion labels in the world.

Apple stores are still popular destinations. However, revenues have been flat.

Why in Retail Attention Alone is not Enough

Driving sales takes more than just driving attention. While retailers have always specialized in getting to know their customers, the increased availability of communication and transaction channels is posing some unique challenges for brands.

Consumers do most of their research at home on desktops or tablets and use mobile devices to make purchase decisions when in store. This isn’t just for large ticket items, but for everyday products, too. The beauty industry offers a good example of this trend.

According to a March 2012 survey of online buyers in North America conducted by A.T. Kearney, people spent 33% to 45% of their monthly beauty and personal care budgets online. Shoppers are using both etailers and brick-and-mortar stores.

The either/or final purchase decision is one of the reasons brands are stepping up their multichannel marketing efforts to reach customers wherever they are buying. However, for retailers, unlocking new opportunities to influence and persuade customers to buy is not just about integrating new tools. It is about understanding people.

Once customers find out about products through search, content, ratings and reviews, what plays a key role in decision making?

Attention may be the currency of the Web. However, it alone does not translate into action. People spend more time online, visit more Web pages, and click on more links than ever before, yet all this isn’t necessarily leading to more transactions.

Today, a Web or in store visit from a mobile user is almost certainly less likely to convert into a purchase just from a click. Brand tweets are seen by ten times as many people, yet they are only half as likely to get clicked on as they used to be.

While attention online seems to go up fast, the amount of interaction it leads to is not increasing at the same rate. Browsing doesn’t equate action, and action doesn’t scale as quickly as browsing.

Speed, reliability, and performance are the baseline. What drives store traffic and conversion is access to a unique experience. This is why design of experience is more important than ever.

Beyond having compelling products, delivering at store level is about creating a differentiated offer. This comes both from a single view into how customers interact with the brand across different touch points, driven by data, and the ability to orchestrate a convergence of the most appealing qualities into one experience compelling enough to be a draw.

Bridging online, in-store, and on-the-go experiences also requires a shift in mindset. Retailers with a tradi­tional sequential or funnel view of how purchases are made need to shift to adopting a more responsive approach – across screens as well as physical spaces – to speak to the market in real time, and both drive and adapt to consumer preference.

The experience needs to learn from the people who engage with it.

A Responsive Experience is Social, and Data-Driven

The rapid changes in customer adoption of mobile and social are strong reasons to re-evaluate commerce strategies. Customers are used to starting a task on one device and completing it on another, and there is a renewed focus on retailers’ supporting user tasks and fulfilling orders across channels.

Designing for devices is a zero-sum game – it is difficult to support, too expensive, and takes too long to complete. Given that digital products need to be available everywhere, including in store, design of responsive experiences expands reach.

However, designing for individual experiences without taking into account the power and scale of the connected customer relegates an in-store or app experience to novelty, without it ever tipping over into necessity.

To move up the ladder of social behaviors retailers need to support in-store digital experiences. They can achieve this by building an experience that helps respond to specific need inputs at the very bottom of the scale, giving sales associates the data necessary to make smart recommendations and helping customers make informed decisions tailored to their specifications.

The iPad displays at Kate Spade Saturday’s micro-store in Japan# are a solution in the middle of the range. They serve the dual purpose of stimulating deeper product discovery and a connection to the brand, and help the retailer make frequent changes and updates as they are available without incurring additional costs.

Another example of novelty interac­tive experience in store is the Adidas social mirror. It engages customers through content and the connected world. The social mirror and the new storefront window the company rolled out as part of a six-week pilot test at the Adidas NEO Label store in Nürnberg# both elevate customer engagement to the next level.

Allowing customers to customize products, share fitting sessions with their social circles, and providing easy access to product information via kiosks or iPads while in store enhances the experience and encourages conversion.

More sophisticated, high touch digital experiences tailor merchandizing based on interests and preferences. Sephora demonstrates the single view of the customer within a connected ecosystem by making use of cross-channel integration:

  • ONLINE: The digital experience carries from through to mobile and social media initiatives, including an active Facebook page, a thriving online community, Beauty Talk, a mobile site, and an iPhone App.
  • IN STORE: In-store responsive Scentsa and Skincare IQ touchscreen kiosks offer customers an entry point to research products, email it or scan the QR code with their phone. Beauty Studio iPads are available along vanity mirrors to view how-to videos, access tips, as well as a menu of in-store services and social content.
  • ON THE GO: A next generation iOS app gives customers the most per­sonalized experience ever seen in the beauty industry, and connects customers with Sephora experts in ways that are most relevant to them. The app allows shoppers to tap or scan products while in store and run price and item comparisons, access product ratings and reviews, save products to a wish list, receive sales and discounts notifications, check in when near a store, order, and pay.

Sephora Key Mobile Statistics

Because social conversation has become a primary driver of content engagement, responsive design is part of the answer. Extending the view of the funnel into the social channels to allow this conversation will be vital to understanding the customer at this step of the process.

Understanding and Harnessing the Direct and Indirect Benefits of Creating Experiences

Since shoppers interact with products and services via a multitude of devices and touch points, whether at home, on the go, and in-store, their engagement with the brand will be both direct (engaging with the products) and indirect (like connecting with other shoppers through social channels, or purchasing through other marketplaces).

The lines between these direct and indirect experiences will continue to blur.

As more channels and experiences produce more data, it is becoming more difficult, not easier, to focus on the critical few metrics that define success and to constructively act on that data. Brands that master the skill of efficiently using data properly to make decisions will compete at a higher level than those who don’t.

Selecting key performance indicators and identifying benchmarks that are not just aligned with business goals, but provide the most relevant and correct feed­back, allow retailers to measure what matters. Business competency is also part of the equation. Measuring what matters accurately (not precisely) is about more than buying the right tools – it is about converting data into insight.

In addition, a cultural shift is required; there is no right answer, no best answer that is not sup­ported by the right data. Retailers have always lived by data – but many multichannel retailers have struggled to apply their understanding of the data that informs the store merchandising experience to the digital realm, especially as digital channels continue to evolve.

Back to the Future of Human Interaction

Customers are the driving force behind the increasing need for retailers to integrate digital tools and technol­ogies. The good news for brands with physical stores is that while online has surpassed offline when it comes to researching products, the traditional store still retains primacy for completing the purchase.

The modern shopper uses multiple channels to research products and cares more than ever about value and savings. However, a recent Forrester survey found that while the store’s physical location and web site were ranked equally helpful to fill this need, the store is still king when it comes to closing the sale.

Retailers that improve the in-store – or in the case of Burberry’s – the physical experience, and make it compelling, still have an opportunity to win.

The traditional store still retains a strong appeal for shopping, particularly for beauty products, and cate­gories like apparel, footwear, and potentially technology. Ultimately, finding that special item is still part of the journey and knowledgeable, passionate brand ambassadors continue to be the best guides.

Ahrendts has her new job cut out for her.


[originally posted to LinkedIn]


Valeria is an experienced listener. She designs service and product experiences to help businesses rediscover the value of promises and its effects on relationships and culture. She is also frequent speaker at conferences and companies on a variety of topics. Book her to speak here.

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