The future of retail is already here

Consumer behaviourist, Ken Hughes, wowed the audience with his sharp Irish wit and considerable insight at the recent Property Council New Zealand Retail Conference, held in Auckland at the end of July.

Central to Hughes’ presentation was the belief that the old argument of bricks and mortar retail vs. online shopping is no longer relevant in today’s environment, nor for today’s consumers.

The new generation of consumers

When most people think of the next generation of consumers, they think of Millennials - some young, entitled, smashed-avo-eating upstart - but with the oldest Millennials turning 37 this year, the time of Millennials being “young” has passed. Millennials are getting old. 

As Ken rightly pointed out, at present we have six different sets of generational consumers to satisfy; Traditionalists (aged 73+), Baby Boomers (aged 54-72), Gen X (aged 38-53), Millennials (aged 24-37), Gen Z (aged 9-23) and Gen Alpha (aged 0-8). Satisfying all of these audiences in one shopping experience can prove tricky even for the most active retail stores.

As Hughes put it, “Gen Z will be the biggest consumer group in the world by 2020. They are the future of everything. Millennials were the warm up act; Gen Z will be the step change…”

Yes, Millennials grew up with computers in their homes. But Gen Z is the first generation born into a digital world. They don't know a world without PCs, mobile phones, gaming devices and MP3 players. They live online, sharing details of their lives across dozens of platforms and dictating what they like and dislike with a tweet, post or status. And Gen Zers expect to virtually engage with their favourite brands in doing so. Brands can't simply "embrace technology" as Millennials have. They must act digitally native, too, creating a seamless and strong overarching brand experience across in-store, digital and mobile. 

A race for relevance

“There is a race for relevance, because if your brand or your business or your shopping centre is not relevant to your future customers, you’ll lose traction. The minute you lose traction you lose profitability, then you’re nothing. This is disruption…”

Hughes cited AirBNB, Google Maps and Uber as prime examples of a new product delivering the same service but in a new way that is more relevant to these future consumers. 

At its essence, this concept makes complete sense; Hughes used the desire to listen to music as an example, saying, “every single generation will take what is needed (e.g. music) and change the product to meet their needs - Baby Boomers had vinyl, Gen X had tapes, Gen Y had CDs, Millennials have the iPod and Gen Alpha have Spotify - it’s the same for retailers, it’s the same for every industry. Every generation brings a new set of values and unless we meet them, we become irrelevant…”

The challenge for retailers is how to meet the needs of this new audience in ways that are relevant to them. Hughes message was for retailers to focus on the consumer, saying, “it’s not about bricks and mortar, it’s not about online, it’s about the consumer and what they want…while the need stays the same, the delivery of the solution may change.”

A shift in how consumers want to be spoken to is leading to better contextual communication, where retailers decide at what point it is appropriate to speak to their customer, then aiming to excite and delight them.

“We’ve been shouting at people for years, but that’s not what people want, they want a conversation.”

Make it shareable

Gen Z will not only require retailers and brands to continually evolve their digital offering, but also to expand the “instagram-ability” of their instore experience.

Hughes touched on the need for brands and retailers to not just evolve their digital presence, but also maintain and improve the in-store experience to ensure they are delivering something worth sharing. We should be thinking, “will people take their phones out of their pockets for this?”.

It is this desire to share and be part of something bigger than themselves that will ensure the future of bricks and mortar stores.

Check out a few brands who have got this right:

Amazon Go

Amazon Go is a store without a checkout. If you’re scratching your head, fear not, there’s still payment involved, it’s just seamlessly synced with your Amazon account via your smart phone, which you scan upon entering the store. Every product you take off the shelves is automatically tallied to your total bill (an taken off should you change your mind) and you can simply pop it in your bag and walk out, knowing the receipt will be emailed to you a short while later.

The pilot Amazon Go store in Seattle opened in early 2017, with a second, larger Seattle store planned to open over the next few months and stores in Chicago and San Francisco expected soon after. Reports that Amazon hopes to open as many as 2000 stores over the next ten years have been refuted by the company.

Sephora

One company that has repeatedly been acknowledged as successfully merging their digital and in-store experience is Sephora. In a move that can perhaps be expected by other brands in the future, the company merged its in-store and digital teams in October last year. The breaking down of this barrier has seen the company rethink how it measures sales metrics in order to trace the behaviour that led up to a sale and reprioritise their mobile strategy after learning that customers who download the Sephora app are the most loyal.

At Sephora, all sales and metrics are tracked within the Omni Retail department, while a subset of the group focuses on experiences that link the two channels together. In-store makeovers, for instance, have gotten a digital upgrade: The Sephora makeup artist working with a customer in stores will make a log in the Sephora app of every product she used in the tutorial. That’s then sent to the customer’s profile, where it can all be shopped later, online or in stores. The Sephora Virtual Artist, an in-app augmented reality tool that lets users try on different makeup looks and products virtually, can either send customers to purchase the products online or tell them where they can be found in a store.

But the biggest goal of the united team is to drive more customer loyalty by blending in-store and online loyalty perks, making better product recommendations based on what was browsed in both settings and sending smarter offers to the right customers at the right time.

Jaffle Chutes

From the random-but-innovative corner comes Jaffle Chutes, a small Melbourne company that turned their food delivery service into a shareable experience by parachuting - yes, you read that correctly - their customers jaffle (also known as a toasted sandwich in these parts) to them. 

It sounds ridiculous, but as Ken Hughes put it, “would you rather say you ate a jaffle for lunch or that your lunch was delivered to you by parachute? I know what I’d be putting on Facebook…”.

Where to from here?

Overall the future is bright. Yes, we can expect disruption to the retail sector as we acclimatise to the evolving marketplace. But there is huge opportunity for retailers to front-foot this change and react swiftly to ensure their stores are at the forefront as Gen Z comes of age.

How relevant your brand, shopping centre or store will be in the future depends entirely on how prepared you are to remain relevant. The future is here – don’t let it pass you by.

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