In spite of the extreme weather conditions witnessed in February around the country, retail sales in the US grew by a seasonally adjusted 0.3%, reported USA Today. With anticipations of a better pace of job growth, personal and household income is expected to increase, fueling consumer spending further. 2014 will see a 4.1% increase in retail sales, estimates the National Retail Federation; this would be a 0.4% increase compared to 2013. Online retail sales are expected to increase between 9 and 12% this year.
The US retail market is a mammoth money-spinner, contributing USD 2.5 trillion to annual GDP and employing 42 million Americans. As its companies vie for a share of their consumers’ business, they need to ensure that they are with the times with some of the trends that will drive customer expectations, purchase and satisfaction, and, ultimately, growth.
Vision Critical, a provider of insight communities, conducted a survey on social purchasing behavior, with approximately 6,000 respondents over 17 months (from February 2012 to June 2013), in the US, Canada and UK. Titled ‘From Social to Sale’, the research found that 38% of Facebook users bought an item after commenting, sharing or liking a post about it; 22% of Twitter users purchased the item after tweeting or re-tweeting about it; and 29% of Pinterest users splurged on the item after pinning, repining, or liking it on the social network. Evidence like this strongly indicates that brick-and-mortar retail brands need to have an engaging and well-targeted social media strategy in place to be able to drive online and offline sales.
Take the case of Tiffany & Co, the luxury jewelry retailer, which generated the most engagement on Facebook in the first six months of 2013, according to Espino. Using a mix of alluring product shots, photographs of stylish celebrities flaunting the jewelry, and useful suggestions for special occasions, the brand creates interesting content for its followers on a daily basis across Facebook, Twitter and Pinterest. The retailer also makes it a point to reply to queries that its fans ask. As of April 2014, Tiffany & Co has more than 6 million likes on Facebook, close to a million followers on Twitter, and around 2,000 followers on Pinterest.
Deloitte advocates that with increasing smartphone usage, retailers have to think beyond just providing a mobile-optimized version of their site and commerce. With personalization being the new retail buzzword, a more customized and relevant in-store shopping experience centered on the brand’s app or website can result in improved loyalty among customers. Different retailers are experimenting with diverse ideas for the mobile. Patagonia, a designer of outdoor clothing and gear, offers customer ratings, product reviews and carbon footprint information in its mobile app. Retail giant Target Corp allows its app users to make shopping lists and find which stores stock the products they want; in February 2014, Target also released a new mobile app game in partnership with Nestle’s Purina Pathcare Company.
Through mobile devices, geo-targeted personalization becomes possible. For instance, Apple’s geo-targeting micro application technology, iBeacon, detects customers with the store’s app on their devices the minute they enter the outlet. Through the app, iBeacon reminds them of any shared list items, informs them of offers, and also lets them earn loyalty rewards.
As consumers engage with retailers through diverse channels, including in-store, online, social and mobile, a wealth of data about demographics, purchase history, nature of interactions, and other aspects of behavior and trends becomes available. The management of this data is critical to be able to capitalize on it. Data and analytics has, thus, come to play a key role in understanding shoppers better and creating smarter, personalized retail experiences for them. For instance, Forbes.com reports that Vera Bradley, the handbag retailer, was able to bring positive results to its business through big data analytics. After switching from sending blanket email promotions to targeted emails, based on the purchases made by individual buyers, Vera Bradley witnessed a 275% increase in the conversion rates of browsers to purchasers, by sending 63% fewer mails than it did earlier.
Several large companies around the world have turned to the cloud to host their business applications in order to have easy access to data and reduce infrastructure costs, among other reasons. Cloud computing helps retailers to streamline their channel operations; leverage merchandising, marketing and personalization opportunities; manage their supply chains; and enhance sales, service and support. According to KPMG’s ‘Retail Industry Outlook Survey 2013’, out of 101 senior retail executives, 39% of the respondents had already adopted cloud in their business operations, 29% of them were planning to adopt cloud computing, and 32% had no plans or could not use or did not know about cloud computing. The survey also questioned respondents about the potential impact of the cloud on their business model or operations. The findings are depicted below:
Following the trend set by e-tailors like Amazon and eBay, the service of ‘same day goods delivery’ is being used by US retailing giants like Wal-Mart, Home Depot, Barnes & Noble and Nordstrom. While the service does generate additional costs and comes at a fee for customers, it is believed to be useful to keep customers from turning to e-commerce companies for their requirement. McKinsey expects to see third party distribution services expand, and investments in distribution infrastructure could increase as well.
Out-of-the-ordinary marketing ideas are as important as they ever were, to engage the interest of consumers who are being flooded with advertising material all the time across different channels. Furniture retailer Coco-Mat showed its creativity when it allowed customers to take a nap in beds for a couple of hours, without obliging them to buy those after trials. This try-before-you-buy campaign enabled the brand to pass on more information to its customers and increase footfalls. In order to enhance the shopping experience for their male customers, US clothing store Hinter added QR codes to their jeans. As a result, the desired size was delivered to the changing room, ready to be tried on, saving the customer time and energy from having to go through racks or piles of clothing while looking for the correct fit. Companies are also putting on their thinking caps when it comes to improving or differentiating their core product itself. In 2013, Levi’s launched the Waste<Less jeans which are made of 20% post consumer recycled material, such as eight plastic bottles, in order to minimize the negative impact of waste on the planet.
According to the ‘2014 Outlet Tenant Report’ from Value Retail News which was released in February of this year, there are 368 outlet chains in the US and 12,796 outlet stores. The report throws lights on the expansion plans of retailers:
1. 158 chains operating through 8,969 stores are planning to expand
2. 59 chains said that they will open 1,843 stores; on an average, 6 new stores per chain
3. 36 chains are interested in adding 20 new stores, the report says that in line with their long-term strategies, retailers find value in allocating capital to the outlet distribution channel which is either the most profitable business unit or amongst the most profitable. Retailers are also experimenting with non-traditional formats of outlets, such as pop-up stores, during the holiday season or as part of their business model to reach out to new customers.
Showrooming refers to customers researching a product in-store and then buying it online at a cheaper rate. Retailer are trying various ways to bring the customer back to the store for the purchase. For instance, Best Buy offers price matching, if its competitor lies within a 25-mile radius.
Capitalizing on the above-mentioned trends requires dedicated focus from retailers, in terms of human resources, skills and technology. The key points of consideration for developing capabilities within the organization are:
1. Looking out for a skill set to match a business requirement
2. How quick the skill set can be developed in-house
3. The costs of implementing the service in-house
Several companies in the retail industry have benefited from outsourcing back office requirements in logistics, finance, marketing, IT and customer care, in order to streamline their operations and get a competitive edge. The particular aspects of the trends that can be outsourced are:
By partnering with a specialist outsourcing provider with proven experience in data management and analytics services, retailers can efficiently process and manage customer information coming from multiple channels such as social, mobile, online, email and in-store. This will help retailers to provide a personalized experience to customers.
To meet the demands of same-day deliveries, retailers can outsource back office operations of the logistics department, like processing of invoices, accounts payable and receivable, and freight bills, to a specialist service provider with expertise in these areas.
Any of the phases of the Software Development Life Cycle (SDLC), related to cloud, custom, web, mobile, SaaS or software product application development, can be outsourced to an experienced service provider.
The additional benefits of outsourcing are:
1. Outsourcing usually costs less than performing the functions in-house. For example, with an in-house team, in addition to paying the internal staff, the company has to take care of the expenses associated with support environment, office space, logging systems and telephones. Since specialist outsourcing providers have sophisticated call logging and reporting systems and telephonic systems, retailers will receive instant benefits from them.
2. Retailers can compete with new entrants in a better way and focus on core competencies by outsourcing their requirement to a leading service provider.
3. Experienced outsourcing companies offer round-the-clock service, which will help in providing a better quality of customer service.
Partnering with a specialist outsourcing provider will help retailers to master dynamic economic conditions and accelerate business growth on the whole.
In conclusion, the trends described above reflect the rapid developments in technology that retail organizations need to leverage, and the evolution of consumer behavior that they need to adapt to.