Written by Andrew Curry, Director, The Futures Company
In our report on The Future Shopper, The Futures Company collaborated with Kantar Retail to tell the story of how shoppers, and shopping, are changing. This story is about how trends in economics, technology, society and values are combining to create a new shopper landscape. Together, these are creating new rules for retail.
The first headline change we see is the shift from ‘e-commerce’ (as in ‘electronic’) to ‘everywherecommerce: the digital device becomes an integral part of the shopper journey and the purchase and post-purchase decision process.
Secondly, in richer markets, the economic landscape has changed fundamentally since the financial crisis. Consumers have seen their incomes squeezed and this has altered attitudes towards both price and value, in particular, and consumption in general. Our research suggests that attitudes were changing from the mid-00s, before the crisis struck. Value is also a recurring issue in emerging markets, overlaid with questions of trust.
As a result, we see shoppers searching for four things: mental space: removing emotional and informational clutter from their lives; assurance: that they will be treated properly and fairly by the companies they do business with; quality: about the lifespan of their goods, from raw materials to eventual disposal (or in the case of services, about the quality of response); and value: which goes beyond discounting to a question about why a shopper should buy from a particular provider.
Retailers and brands need to respond by being excellent at delivering one or more of four things corresponding to these shopper needs: convenience: which is no longer just about time; loyalty: doing the right thing by your customer; experience: creating emotional resonance; and value: sharing value with your shopper.
Together, these create new rules for retail.
The new rules
In this emerging world, where the shopper and retailer interact in more places and also more often, there are some important new ground rules.
1. The shopper context has changed for good
Shoppers have changed for good. Although this is partly about the technology, changing attitudes are at least as important. Shoppers will continue to be concerned about trust and transparency, just as they are going to continue to seek to simplify their lives and free up mental space while also trying to make sure they get fair value from retailers.
2. The shopping process has been disaggregated—and this will continue
The shift from a ‘purchase funnel’ to ‘purchase fish’ model means that different stages of the shopper process are happening in different places, and through different channels, many of which are beyond the control of the retailer. There are also new intermediaries (see Rule 8). This opens up new strategic opportunities for retailers to relate to shoppers in different ways at different parts of the process.
3. The store needs to be extended in time and space
Because the shopping process has been disaggregated, the store needs to extend itself in time and space, beyond a physical location or website, and technology enables this. But the strategic question is how best to optimize the store’s extended presence to best fit its positioning and competitive advantage. Whether by life stage, context, mode, behavior or category, shoppers will engage with retail more or less virtually and more or less physically, in ways that fit their preferences about shopping at any given time. One big change: The store will be able to maintain a relationship with shopper and product after point of sale.
4. If you’re in bricks and mortar, a) you’re in digital too …
Beyond the smallest and simplest local shops, a retail business that has a physical presence will need to have a digital presence as well. This involves rethinking your digital presence beyond the walls of the store, and within them. For example, the Japanese-owned clothes chain Uniqlo uses digitized mirrors in some stores to show customers the item they are trying on but in the other colors in the range—speeding up the selection process for customers while reducing the amount of stock that needs to be returned to racks by staff.
5. … and b) make the most of the physical contact
It’s obvious, but bricks and mortar can do things that pure-play digital competitors can’t match. The physical store has to be more than just a place to buy things. So Whole Foods has its chefs cooking with its fresh ingredients in full view— combining a fresh food market with a café. Similarly, it offers tours of its cheese department, where shoppers can learn about the cheeses and taste them. The future of retail is ‘hightouch’ as well as ‘high tech.’
6. Pricing will be become more personal
The digital and personalized world of the future shopper enables retailers to offer personalized pricing as Safeway has done in the US with its ‘Just 4 You’ proposition. We expect that this will come increasingly commonplace, especially as a way of rewarding regular or frequent customers. But fairness is an essential part of such a proposition. It works only if the retailer can demonstrate that the offers are not arbitrary, and that some rationale sits behind them.
7. If your shopper marketing is being done in-store, it’s being done too late
Much of shoppers’ research and planning is now being done long before they ever reach the store— whether that store is physical, virtual or some combination of the two. The moments of truth tend to happen outside of the store, even when it is still the point of purchase. Shopper marketing needs to move to where the shoppers are. If your shopper marketing budgets are still being spent in-store, you are probably wasting most of them.
8. Manage your intermediaries
One of the results of disaggregation— and we have seen this repeatedly since the arrival of the World Wide Web—is that it opens up spaces for new intermediaries. Typically they position themselves between shopper and retailer, often as a market portal. In particular, they tend to accumulate cross-category information and comparison data. In a world of considered consumption, they can be more trusted than retailers or manufacturers. Engage with them and keep them onside.
One of the recurring stories in The Future Shopper is that consumer needs are to a large extent familiar, but their expectations about how they are delivered are changing.
To generate value, retailers will have to understand more fundamentally what their shoppers need and how best to deliver it. This opens up new business models that were impossible to imagine a generation ago, creating bold possibilities for reimagining retail, reconnecting needs, wants and their fulfillment in different ways.