The future of retail: the rise of omnichannel marketing and sales
This year I have been drawn significantly into the retail industry, being the lead technology advisor for a major study on the long-term future of shopping centers, and giving keynotes at a number of public and in-house retail industry events on topics including the future of retail shopping districts and social media in retail. We are now considering creating a detailed report on strategies for the future of retail next year.
The current edition of Harvard Business Review includes an excellent article titled The Future of Shopping, which echoes many of the themes we are seeing. Its frame of ‘omnichannel retail’ is a useful one.
As it evolves, digital retailing is quickly morphing into something so different that it requires a new name: omnichannel retailing. The name reflects the fact that retailers will be able to interact with customers through countless channels—websites, physical stores, kiosks, direct mail and catalogs, call centers, social media, mobile devices, gaming consoles, televisions, networked appliances, home services, and more. Unless conventional merchants adopt an entirely new perspective—one that allows them to integrate disparate channels into a single seamless omnichannel experience—they are likely to be swept away.
Most retailers think of themselves as primarily physical or online, with just a few thinking far beyond that to creating a fully integrated approach to the customer experience. ‘Clicks and bricks’ is a highly dated view in a world where there is continual channel proliferation.
The article’s author Darrell Rigby, head of Bain & Co’s Global Retail and Global Innovation practices, points to four factors that are holding back retailers from change:
* Retailers were burned by e-commerce hype during the dot-com bubble.
* Digital retailing threatens existing store economics, measurement systems, and incentives.
* Retailers tend to focus on the wrong financial metric: profit margins.
* Conventional retailers haven’t had great experiences with breakthrough innovation.
I would add a more general issue, which is that retailers not only see themselves as retailers, but also belonging to a particular sector of retail, framing themselves around products, locations, types of stores, luxury or discount, or other mental constraints. Customers are certainly not experiencing constraints in their behaviors, and retailers need to transcend the boxes they put themselves in.
The design specifications of omnichannel retailing are growing clearer by the day. Customers want everything. They want the advantages of digital, such as broad selection, rich product information, and customer reviews and tips. They want the advantages of physical stores, such as personal service, the ability to touch products, and shopping as an event and an experience. (Online merchants take note.) Different customer segments will value parts of the shopping experience differently, but all are likely to want perfect integration of the digital and the physical.
Indeed, as expectations grow on every front, consumers are very rapidly learning to expect more in every buying experience. They expect the benefits of online in their physical shopping, and the upsides of stores in their digital interactions.
For too many people, shopping in a store is simply a chore to be endured: If they can find ways to avoid it, they will. But what if visiting a store were exciting, entertaining, emotionally engaging? What if it were as much fun as going to the movies or going out to dinner—and what if you could get the kind of experience with products that is simply unavailable online?
As I described in one of my keynotes on The Future of Shopping Precincts, Experiences and Community are at the heart of transcending commoditization. The unique power of in-store experience needs to be harnessed far better than it is to beat the convenience of online.
A successful omnichannel strategy should not only guarantee a retailer’s survival—no small matter in today’s environment. It should deliver the kind of revolution in customer expectations and experiences that comes along every 50 years or so. Retailers will find that the digital and physical arenas complement each other instead of competing, thereby increasing sales and lowering costs. Ultimately, we are likely to see more new ideas being implemented as customers and employees propose innovations of their own. In today’s environment, information and ideas can flow freely. Retailers that learn to take advantage of both will be well positioned for success.
The challenges facing most retail sectors are evident today. Yet many have extremely powerful positioning and branding that mean they are in pole position to take large chunks of the value in rapidly expanding spaces. A few will succeed in that.
