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Customers are seeking experiences and products that reflect the personal brand they promote on social media.
One potential reason for this movement toward less consumption is the growing awareness of how our purchases define us as customers. The trends toward personalization and customer experience are not new. What is new is the level to which we define ourselves by the products we buy and the experiences we have. We can thank social media for this. Customers worldwide are busy “following” celebrities and brands on social media and simultaneously building their own “following”. They are seeking experiences and products that reflect the personal brand they promote on social media. This manifested initially in the travel and tourism sector. Resorts have focused on being “Instagrammable,” with Condé Nast now aggregating data on geotags and hashtags to inform their reviews. Hotel guests, particularly Millennials, value how their trips are perceived on social media as much as the actual quality of the real experience. This is now also playing out in retail. Customers want authentic, sharable experiences to further their personal brand. Retailers that can consistently deliver these moments will likely grow a fiercely loyal customer base.
02. Changing formats: “Retailization” of the world
The maker movement, the sharing economy, and other factors have made it increasingly difficult to define what a retailer is and does.
In years past, it was easy to spot a retailer. A retailer bought and sold goods, either in a store or online. However, the maker movement, the sharing economy, and other factors have made it increasingly difficult to define what a retailer is and does. In 2017 and beyond, market fragmentation in the retail sector will continue to grow. Some are attributing this volatility to “retailization” or the explosive growth of non-traditional retailers developing new models to serve customer needs. This is playing out in the developing world, where large-scape leapfrogging is more common. In China, e-commerce power-players Alibaba and Tmall have competition from Vipshop, which has grown by popularizing the flash-sale model. It sells mid-market clothing and accessory brands, using a time-limited discount model. Interestingly, 90 percent of Vipshop’s sales are outside of China’s Tier 1 cities. In developing economies where customers are gaining purchasing power, there is a greater willingness to rely on less traditional retail models for more purchases.
As disruption and alternative business models persist, retailers will need to reinvent themselves. The Home Shopping Network (HSN), one of the newcomers to our list this year, has done that quite successfully. The HSN was established in 1982 as an American order-by-phone television network and has grown into a sophisticated multichannel global retailer. The company redeployed its assets to build an innovative e-commerce platform, created digital content, and sought out new partners. The HSN survived and thrived in an area of disruption by reinventing its business model to remain relevant.
03. Changing formats: On-demand shopping and fulfillment
Relevancy will be determined by the ability of retailers to meet the on-demand mindset of the modern customer.
Relevancy will also be determined by the ability of retailers to meet the on-demand mindset of the modern customer. Amazon and other on-demand delivery options have forever altered customer expectations for fulfillment. This year Amazon joined the list of the top 10 global retailers for the first time. Amazon’s growth has been significantly driven by its prime service which attracts younger, higher income customers. While Amazon does not disclose data on growth for its prime service, some estimate the number of worldwide members to be 80 million and growing at around 50 percent CAGR. Apparel and hardline retailers have already felt the effect of on-demand fulfillment and the frontier is shifting to grocery, automotive, and services.
Speed alone, however, will not be enough to compete. Consumers have been conditioned to expect a high-quality, on-demand shopping experience. This includes real-time reviews and local partnerships to provide fresh products. Sprouts Farmers Market, another newcomer on our list this year, has partnered with Amazon to provide fresh products for Amazon Prime delivery in the Dallas area. One trend likely to continue is traditional grocers partnering with technology and delivery companies to provide products for on-demand delivery; with grocers effectively almost becoming vendors to technology companies.
04. Changing expectations: Exponential living
Exponential technologies are changing how we live and how we will shop.
The final trend is the arrival of exponential living. Much has been prophesized about the disruption coming from exponential technologies like artificial intelligence, robotics, sensors, and virtual reality. These technologies are no longer futuristic. The most innovative retailers are already using them to enhance interactions with customers and to change the way work gets done.
Expect the use of artificial intelligence or robotics for self-service in stores to continue.
The impact of technology is not limited to the in-store experience. Exponentials are changing how we live and how we will shop. Consider the arrival of driverless cars and the potential impact on behavior. Un-manned cars will allow smaller or hyper-local retailers to afford personal, same-day deliveries. Imagine buying your baked goods directly from the bakery, while they are still hot. Or being able to program your car to run errands to multiple stores and pick up everything on your shopping list. The effects on the customer journey from self-driving cars are endless. The same effects can be expected from the wide-scale adoption of augmented reality, 3D printing, holograms, and other technologies.