HEROES OF RETAIL DISRUPTION – September, 2018
September, 2018 – The chorus of analysts, industry experts, and digital pundits predicting the destruction of the retail industry has officially reached a fever pitch. Each new demise (Toys R Us) is heralded as further evidence of retail’s inevitable collapse. The future, we are told, is Amazon, eBay, Alibaba, and other digital commerce companies that can deliver items to your door in ever shrinking measures of time.
But this prophesied future would also necessarily deprive shoppers of the tactile impact and social aspect of exploring new goods and services in physical retail environments. Imagine never leaving the house to shop or discover new products and vendors; giving up engaging in commerce with friends as a means to socialize; never browsing or picking up a sweater just to see how it looks. This future assumes that we will be satisfied with a shopping experience devoid of traditional means for discovery, engagement, or gratification.
Not only does this sound bleak – it is also unlikely. Physical retail today makes up a staggering 83% of all retail. While digital is growing fast, it is still a relatively small portion of the entire retail ecosystem. But the reason so many digital commerce giants like Amazon and Google have made recent moves into the physical world is not only because they see the fundamental attraction of physical retail, but because they are exceptionally good at things traditional retail struggles with: customer experience, customization, data-driven engagement, and a relentless pursuit of optimization and improvement.
So, how does traditional retail compete and evolve? First, by realizing that you really cannot out-Amazon Amazon. Competing on price and availability alone is a fool’s errand. Second, bolting on standalone digital businesses or buying successful eCommerce companies and hoping that they magically make the rest of the business improve is also unrealistic. To compete in today’s consumer environment, retailers have to use their most valuable and differentiating asset: their physical space. They have to evolve in a way that seamlessly integrates their digital properties and services, and their physical locations. Retailers must create and continually optimize consumer experiences, leveraging both the physical and the digital to create something new and unique that consumers cannot find online.
This isn’t an easy task. But there are companies that are tackling this intelligently, making the smart moves and brave investments, and generally leading the way when it comes to combining the physical and the digital to create something new and innovative. We call those companies “Heroes”, and below is the first-ever list we’ve put together of who is doing this best.
The grocer already delivers three billion personalized recommendations to customers each year, but Kroger isn’t stopping there. Recently, they unveiled a three-year, $9 billion plan, Restock Kroger, with an omnichannel business focus all aimed at redefining the customer experience. This investment plays out big in terms of supporting IoT sensors, machine learning, and AI to increase the efficiency of Kroger’s operations. These personalized efforts will be enhancing the digital content shoppers see and provide “inspiration” through product-related content and recipes. Additionally, the program will allow shoppers to use their phones to scan products as they shop, provide grocery delivery by autonomous vehicles, launch automated warehouses, and suit up stores with smart shelving.
The activewear king Nike recently began leveraging data to create local, culture-specific stores through its pop-up shops. The stores don’t offer low prices or a wider variety of products, but they do let visitors design their own custom shoes. Pop-ups and Nike stores alike all now have robust app capabilities, allowing customers to use the app to scan products within the store and have a salesperson bring that product to the user so that they do not have to wait or look for a salesperson. The app also allows customers to confirm the shoe is in stock and see additional designs as well as reserve a product before even arriving at the store. And to top it all off, the Nike stores offer unlocks for in-store consumers which could be anything from a free one month membership to a wellness app to a 10% off coupon.
Walmart’s been known to focus on the customer experience, what with their in-store greeters and use of Smiley, the face of rollbacks. It comes as no surprise the wholesale giant is also embracing the advantages of a blended approach to the consumer journey. Most recently, Walmart has been streamlining their eCommerce and brick and mortar strategy through the use of pickup towers and discounts for certain items purchased online. They are even taking it a step further with their investment in robotics. Though Alphabot is still in testing mode, it is a great first step to make online order pickup and ship-from-store efficient, ultimately increasing the speed at which customer get their product. On the back-end, Walmart’s warehouses are getting smarter as well, thanks to the Bossa Nova Robotics automated shelf-scanning robot, eliminating expenses related to legacy inventory counting. So what can you expect next from this legacy trailblazer? More efficient sales floor sets and resets the retailer would no longer have to deal with as much inventory on its sales floors as before.
In a recent release, McDonald’s announced that its restaurants will be getting a massive facelift. Most notably, the fast food powerhouse will be adding self-ordering kiosks to 1,000 locations per quarter, meaning by 2020 all McDonald’s will be running on digital. In tandem with this new installation, Mickey D’s will also add designated curbside pick-up spots for mobile pay customers, interior and drive-thru digital menu boards, and expanded McCafe counters with larger displays. In step with this, there will also be remodeled counters centered around new table service. We will have to wait and see if patrons are “loving it” but given how the market is moving the forecast looks good for McDonald’s
Now here is a hospitality brand that is really pushing it- pop-up spaces, temporary retail, and co-working spaces are all coming to this shopping center. But that’s not all; Westfield is really focusing on additional tech-enabled forms of experience. Such initiatives include eye scanners that are able to recall information of a visitor’s former purchases upon entry, which means more personalized experiences for shoppers, recommendations, increased efficiency in fast lanes, and eventually individualized promotions. But the overall experience of shopping is getting a digital makeover. You can expect to see smart changing rooms and smart restrooms that can let shoppers know if they are dehydrated or need to fuel up at the snack bar. The concept is integrating wellness to the shopping experience, and Westfield is going as far as incorporating betterment zones where visitors can join mindfulness workshops, outdoor and indoor green spaces, and a farm-to-table model for food courts where visitors can choose their own produce for their meals.
Clearly, the 4th industrial revolution is an exciting one for the consumer as it is inherently experience based. Convenience, ease and cohesion between digital efforts and those of brick and mortar are going to be the make it or break it initiatives for physical retailers.
The companies we profiled today are not alone. We will be profiling innovators big and small, and in many different commerce verticals, in the coming months. No matter how different their businesses, they will all have something in common: an experience consumers want.