Retail Is Now A Customer Experience Economy. What Does That Mean For Retailers?
By Tom Van Soest | Retail Consultant and CEO of Visual Retailing
There’s lots of doom and gloom in the retail world these days. It seems almost every few weeks there’s another article about stores closing, jobs being lost and shopping malls losing shoppers. I don’t believe that means the industry is in danger. Brick and mortar retail is at a more exciting and pivotal time than ever. The brands and retailers who might agree with me are probably the ones who have already found ways to adapt to the ‘customer experience economy’. But what does that term mean? Why is it the new reality retailers have found themselves in? And which brands are adapting to it? Or failing to?
I’ll start this article by referencing an important article I read on NPR (National Public Radio for European readers that might not be in the know) last week about how retailers are scrambling to adjust to changing consumer habits. It cites that 2017 has been an especially terrible year so far for retailers.
Well, sure. For some US retail giants like J.C. Penney, Sears and Macy’s it has been. But I couldn’t help thinking about why some retailers are scrambling to adapt to changing consumer needs now. We’ve known the retail world is changing since Amazon first started selling books out of a garage.
It got me thinking about how retail is different in the USA to Europe. Being based in the Netherlands myself, the first thing I thought about is ‘well there are lot of big stores, and a lot of space inside of them’. Immediately the differences between the densely packed chains occupying the likes of the Nieuwendijk in Amsterdam compared to the big department stores and retail parks dotted across the USA come to mind.
I saw an interesting quote that I think goes a long way in explaining some of the difficulties retailers are having stateside:
“Over the past decade or two you’ve just seen these chains open dozens and dozens of stores and they’ve just frankly overexpanded. We have too many stores in this country…by one count there’s something like 23 square feet of gross leasable space for every person in the country” according to one industry insider referenced in the NPR article.
Of course retail is different in the US market - that’s an easy observation to make. But how different? Well consumer trends are now a little more global in their scope. The growth of retail in the likes of Dubai and the Middle East prove that trends can hop across hemispheres - thanks to the power of a simple hashtag or campaign.
It’s a pretty basic thought that I’m running with here; retailers need to plan for consumer trends and be able to adapt to them more quickly than their competition - all across the world. That trend of consumer trends right now? Clever, consistent, and engaging customer experiences.
For the foreseeable future at least, the ‘customer experience economy’ is something that I think is worth exploring to prevent more journalists writing about the retail apocalypse.
Planning for trends
Social media has exacerbated not only the spread of consumer trends around the world, but the speed at which they come in and die out. Zara, H&M and Primark, as is the norm, lead the way in responding to them. They’re experts at planning their product collections and putting them in front of consumers at lightning speed.
Why do I think these retailers are immune from the doom and gloom in the current retail landscape? When it comes to what I know about, which is mainly large scale store planning, I believe it’s because of a few things:
One, they place a lot of effort on creating rapidly changing product ranges. Two, they are capable of maximising their in-store product density to a scientific degree. Three, they have realised the customer experience is paramount.
It’s always important to be looking to open more stores, but more retailers are beginning to realise they can gain better value out of investing in the customer experience first and foremost - and that customer experience begins with having a product collection adapted to current trends.
So when thinking about planning just one or two stores to thirty, or three hundred - it’s important to group them. Most retailers are beginning to realise the importance of effective store clustering as Sanna Van Hellemondt - retail and VM expert - explained in her recent article. An effective store clustering framework can help to improve the customer experience by allowing each grade of store the flexibility to be planned in a more targeted, relevant way.
I’ll explain without going too far into it: Stores can be clustered based on criteria from size to consumer demographics. These clusters then get sent different amounts and varieties of inventory. Is it a coincidence that you walk into a Primark in the centre of Amsterdam with the latest modern streetwear styles - almost ripped straight out of a Kanye West lookbook - right at the front?
Through an effective clustering framework, stores have the ability to put products in front of consumers that have the highest likelihood to sell through - whilst retaining their wider brand identity. And the brand plays a huge part in the experience.
By planning and turning around collections more quickly (which happens to be a big reason why Zara has proved so successful), stores can keep pulling in shoppers with collections adjusted not just for seasonal trends - but current ones too. New, exciting product collections pull shoppers in, create the desire to buy as well as adding to the experience.
Ultimately, retailers need to be as flexible as possible in adapting to consumer trends. So why do I think some retailers are experiencing a hardship this year? Well, I think it’s down to over expansion based on assumptions that did not hold up over time. They simply weren’t flexible or adaptable enough in their strategy - from board level to buying.
What is the customer experience economy?
Consumer trends make or break retailers. The ‘customer experience economy’ has been coined as the new reality in retail. Some brands have shifted their planning towards it, yet some haven’t quite found the right ways.
The customer experience economy means that retailers need to adapt to creating relevant experiences that actually pull consumers into stores, excite them, and give them a tangible reason to set foot inside. The interesting thing here is, the customer experience can be linked between on and offline.
In my last article I talked about generational differences in consumer shopping habits and received some interesting comments back. To investigate further, I decided to ask my teen daughter about how she liked to buy clothes. And to my surprise, she said that buying clothes online seemed a little foreign to her - she would rather go out and buy clothes with her friends. I replied by questioning her on the fact I regularly saw her browse online fashion sites and Instagram while she was meant to be doing her homework. She did not take to this line of questioning that well, but I eventually realised she used the internet for inspiration, rather than buying.
It wasn't surprising to me that my daughter was inspired to go shopping in-store by scrolling through her Instagram feed - and less so inspired by her homework. I guess impatience may still be a virtue of the young and internet-savvy.
A recent study I read in Business Insider shows that nearly all of the members of Generation Z - which will number at 2.6 billion by 2020 - prefer shopping at brick and mortar retailers. I was happy to see my amateur investigative efforts validated. But does this study mean e-commerce is in danger? No, it means that the customer experience starts online.
Let’s take Primark for a perfect example. The large sizes of the bags and extreme variety of low-cost products encourage an almost IKEA-like tour. There’s seating, places to charge a phone and even arrows on the floor to direct the flow of foot traffic - and that tour starts the minute a potential shopper checks out their Instagram page for the latest styles. They have adapted their collections so quickly that it becomes part of a day out to see what’s new. Everything is immediately and easily obtainable for a shopping culture that values both convenience and experience.
That’s one part of understanding the experience economy. Shops need to find their place in the high street. At what point are they visited in a day out? Why? How long can they keep shoppers inside? Is it a quick visit to buy - or is it a browse?
The classic argument on why physical retail continues to thrive will be valid for a long time if consumer reports are to be trusted. It’s still a truth that people will always want to touch and feel products. 72% of consumers still prefer shopping in store so they can ‘touch and feel the products’ according to another recent study published on Business Insider.
But retailers can’t just rely on that need to touch and feel the clothes - who knows if Amazon have something revolutionary cooking up in their new apparel ventures? What matters is that all retailers need to keep creating links between the consumer and the experience. They need to keep creating value adds that bridge the gap between on and offline shopping.
New players entering the brick and mortar game
A major part of selling clothes online, and creating a positive customer experience, is the presentation. Amazon has signalled clear intentions to be a major player in the brick and mortar business of fashion. And so has Zalando - Europe’s number one online destination for buying clothes.
But which one will be a bigger hit? I’m leaning toward Zalando. Why? Because they built their business model around the digital customer experience - all the while taking a lot of cues from the apparel industry’s visual merchandising expertise.
Zalando has the ability to translate a customer experience that’s already tailored toward fashion into a physical retail experience with more speed and ease than Amazon. Why? Even already, there’s been some rather less than favourable coverage of Amazon’s clothing. Shoppers have signalled their distaste for the quality of the shopping experience - primarily in presentation. Zalando has that presentation down to a tee (shirt).
The next part of the customer experience is convenience. When I buy jeans, I keep buying the same pairs because of the fit. I personally like Scotch and Soda ones because they’re good quality, fit well, and I like the brand style. But I find the shirts don't fit particularly well on me - although I do like them. Obviously, I would like to buy them because I have an affinity for the brand, but when I’m shopping online, I can’t bring myself to add a shirt to my basket as I’ll probably end up returning it.
But Scotch and Soda could have an ace up their sleeve. By having me as an online customer with a store nearby they know what items I have added to my basket, what items I have looked at, what I have removed from my basket, and all sorts of other rather valuable information about my shopping habits.
So, if I got an email in my inbox that asks me to come in-store for an event where they have sourced a local tailor to fit shirts? Well, I might just find an excuse to visit the local flagship store.
Does this make me a consumer that visits a store just to touch and feel clothes? No, it’s more than that. It makes me a consumer that’s attracted to an experience. By creating that experience, a company can not only enhance my sense of satisfaction, it can up sell me. The presentation of the store added with a heightened sense of convenience and understanding of my wants creates a powerful customer experience.
These marketing wins are there to be had for brands in the new customer experience economy. Some retailers are already adapting to it, many are failing to, and some are just beginning to…
To sum it up…
Players in the physical retail landscape, both new and old, need to focus on what they are bringing to the customer experience economy - whether that’s presentation or convenience. Generation Z have signalled that they prefer shopping in store, and that cohort of shoppers needs to be attracted by experiences. Big stores are closing because they didn’t plan for the change in long term consumer trends. Each player needs to factor in a dense amount of planning from product ranges that can be turned around quickly, to how a store is laid out. To stop the doom and gloom of the retail apocalypse, a consensus and understanding that the customer experience is the number one priority is needed.
About Tom Van Soest
Tom Van Soest is the CEO of Visual Retailing. Having worked in the fashion and retail industry for decades, Tom focuses on empowering brands and retailers achieve a smarter working framework through technology and a cohesive vision.