Consumer insight will be critical to companies as they explore the evolving role of brick-and-mortar retail stores. In the post-Amazon world, many retailers are struggling to figure out how physical locations fit in the picture. The rise of e-commerce is undeniable: according to Forrester Research, web sales will account for 11 percent of total transactions by 2018. That’s an impressive increase from 2013, when only 8 percent of all transactions were done digitally.
But despite the growing importance of ecommerce, retail stores still matter. In fact, retail giants like Under Armour and Disney are expanding both their physical and ecommerce presences. Even the likes of Amazon and Warby Parker—companies that built their brand and business around e-commerce—are opening up physical stores to complement web sales.
“[There are] reasons that people are still going to the store—it’s accessible, people can see and feel product, try on merchandise, see what a room set looks like,” said Steve Barr, U.S. retail and consumer sector leader with Pricewaterhouse Coopers, in Retail Dive. “Retailers are going to need to adapt the physical store to stay relevant and compete with online retailers.”
In the last few years, companies have been in a race to try new technologies in their stores in an effort to bring their brick-and-mortar experience in line with the e-commerce experience. As companies test these technologies, some of which are expensive and time-consuming to implement, consumer insights will play a key role in determining which trends actually improve the retail experience and drive business results—and which ones are nothing more than just gimmicks.
Here’s a look at seven trends in brick-and-mortar retailing and how they’re shaping the customer experience.
- Cloud-based POS technology
Retailers are rethinking every single thing in the customer experience, including something so basic: the way people pay. Natural skin care brand Jurlique, for instance, recently implemented a cloud-based point-of-sales (POS) system to make it easy for people to check out—without the need to go to the counter to pay.
“When we had a fixed point-of-sale, we really were expecting the customer to leave a very comfortable engagement in the store with the team member to then go and line up to pay at a counter,” Ann Donohue, general manager at Jurlique Australia, told CMO.com.au. “This was particularly challenging in our concept stores, where we have a treatment business with separate rooms for facials and body treatments. We were bringing those customers out after an hour of absolute bliss and relaxation back onto a really busy retail store to finish that transaction.”
With its new POS system, Jurlique staff are now equipped with an iPad mini so they can process transactions anywhere within the store. The result: better customer experience and more opportunities to cross-sell related products.
Beacons are low-cost technology that uses Bluetooth connections to transmit messages to customers’ mobile devices. These allow retailers to push relevant, timely and personalized messages. For instance, customers who are currently browsing at a store could get a special notice about current promotions or new items on stock.
U.S. grocery stores like Safeway and Giant Eagle have already seen early success using beacons. BI Intelligence, the research arm of Business Insider, estimates that beacons will influence up to $44.1 billion in retail sales this year.
As we pointed out in a blog post about the rise of beacons in retail, companies will need to use consumer insights to make sure that beacons enhance the experience of customers, since these technologies could easily turn shoppers off.
A 2015 study from consumer engagement technology firm PowerReviews found that 82 percent of shoppers expect wearables to enhance their in-store experience by notifying them of long lines and reminding them of special events and promotions. Nearly 50 percent want their wearable device to help them save time when shopping through things like mobile payments.
It’s still early days when it comes to the use of wearables in retail stores, but there’s huge potential. From location-based targeting to determining shopper intent, wearables present big opportunities to enhance the customer experience and get real-time consumer insights. However, just like with beacons, companies will need to consider carefully how to balance privacy concerns with opportunities to push out promotional messages.
- Augmented reality
At the 2016 National Retail Federation conference in New York City, many speakers and attendees singled out augmented reality as the hottest innovation in the industry. AR enables retailers to add computer-generated sensory input such as sound, video or graphics to the real-world environment. (In contrast, virtual reality replaces the real-world environment with a simulated one.) Retailers are bullish about this new technology because it “adds something virtual to the real world,” noted Yoni Nevo, CEO and co-founder of AR software company Cinmagine Media.
One benefit of augmented reality is the ability to show customers where products could be placed in their homes. Some software companies enable customers to scan a room with their mobile devices, and add a “virtual product, putting the right product in the right place,” said Nevo. CPG giant Coca-Cola, for instance, equips its salespeople with a tablet that lets retail stores envision where new vending machines should be placed.
“The real value is enriching the real world,” Nevo said.
Other potential uses of augmented reality include virtual fitting rooms, interactive window displays and AR-assisted store navigation.
- Virtual reality
VR provides an immersive experience to users and is becoming increasingly important for content creators in movies and TV. But because it’s one of the few mediums that guarantees a person’s complete focus, some experts believe that VR will save retail by helping consumers experience their products virtually.
One company doing interesting things with VR is Lowe’s. The home improvement retailer recently installed a space in some of its stores where customers could view a 3D mockup of the place they’re renovating. The simulated space can be personalized with details like room sizes, equipment and colors. Dubbed the Holoroom, these spaces are equipped with the VR headset Oculus Rift, allowing customers to see how a project could fit together. According to the LA Times, Lowe’s customers can also access Holoroom designs outside the store using a Google Cardboard viewer. The project allows customers to turn renovation projects from something abstract to something more visual, says a Lowe’s spokesperson.
- Mobile apps
While mobile tech isn’t the newest kid on the block, retailers are still finding fresh ways of using it to drive sales. This is particularly true for quick-service restaurants, where sales through mobile ordering is expected to reach $38 billion by 2020.
Starbucks is a leader in the use of mobile tech to drive brick-and-mortar sales. According to the company, almost one in four store transactions are now paid using its mobile app. The company’s mobile strategy is helping it improve customer loyalty by driving use of its rewards program.
- RFID technology
Radio frequency identification, or RFID technology, is now being used by over 25 percent of the U.K.’s top retailers. According to a 2016 study, companies like Marks and Spencer, Tesco and Asda are using this location-based technology. This tech allows companies to track tags attached to objects, resulting to better inventory tracking and loss prevention for companies and a more delightful experience for shoppers.
In the U.S., 57 percent of apparel retailers now use RFID.
RFID is showing potential in helping retailers deliver a more seamless customer experience. Some Ralph Lauren stores, for instance, are equipped with RFID technology in their fitting rooms, allowing shoppers to view other available sizes and colors as well as recommended products through a mirror screen. Ralph Lauren staff also use RFID to help shoppers find the right items since the technology provides inventory info, including where the item is stored.
These experiments show that many retailers still see brick-and-mortar stores as a critical component of their long-term strategy. But most these technologies are not cheap, and not all of them will deliver the results retailers are looking for.
“A lot of these digital technologies—VR, large-format touch screens—can be hugely expensive,” Jason Goldberg, SVP of commerce and content practice at Razorfish, tells Glossy.co, adding that these technologies need to drive sales instead of merely creating buzz for the brand.
As these technologies are rolled out to brick and mortar stores, companies will need to ensure that they enhance—not diminish—the retail experience. In determining which initiatives to keep, companies need to engage with shoppers directly for meaningful feedback. Of course, companies will also need to look at their bottom line to determine if these new technologies are worth investing in. As the brick-and-mortar retail experience is disrupted, companies need shopper intelligence more than ever to distinguish permanent trends from gimmicky fads.