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Future of Commerce

Retailers, Give Your Customers What They Want

Brian Kilcourse, Managing Partner, Retail Systems Research LLC

Retail is undergoing a massive transformation.

Before eCommerce, retail headquarters could largely decide what they wanted to sell in their stores they chose what was advertised through one-directional campaigns (TV, magazine ads); they chose how and which products went on sale. Today, retail stores are under tremendous duress, because that one-directional model doesn’t fit anymore. Our demands, and the technology that’s gotten us here, have evolved.

We’re all consumers and most of us have shopped online at one point or another. Most of the time, we can find what we need, at the price we want, any time of the day. The Internet has upended retail, and many businesses are taking too long to adjust. It's no longer about what the retailer wants to sell to consumers, it's about what we want to buy and from which retailer we’ll get the most value.

Changing values require options

The two most dominant U.S. retailers—Walmart and now Amazon—built their businesses on mass merchandising and convenience.

Walmart used purchase data to standardize the product assortment, bought in huge quantities, and dramatically lowered prices in the store. Walmart’s customers loved this, but not everyone in the industry did.

When Amazon started, it used the same basic playbook in the digital domain. It reduced the number of variables that define the shopping experience to two—price and availability—and then delivered ruthlessly on those variables. Amazon spearheaded online shopping. It made it possible to search for and find what you need, presumably at the price you want, and then get it delivered quickly and affordably. Not everyone in the industry has loved this, either.

Both retailers have given their customers a reason to shop with them. Convenience, as you’ll read in many of these articles, is invaluable for a lot of customers. What you’ll also read, however, is not everyone is only interested in the efficiency offered by Walmart and Amazon—not for every purchase.

People still love to shop and, increasingly, more consumers are placing even more value in the experience, especially when it is entertaining and personalized. The confluence of shopping and entertainment is relatively new and has created a niche market in which many smaller retailers can compete.

Amazon reduced the number of variables that define the shopping experience to two—price and availability—and then delivered ruthlessly on those variables.

Maximizing the experience

The benchmark is high. It’s difficult, if not impossible, to directly compete with giants, but there are other ways to create value for customers. To compete in today’s market, retailers have to stand out. They must increase the number of variables that define the Brand—maybe it isn’t just price and availability like Amazon. When retailers include value attributes like product and service quality, interesting add-ons, store cleanliness, rich web content, and coordination between the website and store, they create a great shopping experience that is competitive. Walmart and Amazon are great and they serve a purpose, but sometime shoppers want more.

It turns out that most of us don't really buy products. We buy solutions to a lifestyle need or problem. I have to put a good meal on the table for four kids, or I’m going to the opera and want to look great.

Retailers that provide solutions, not just transactions, will win and keep more customers. Retailers need to give shoppers a reason to choose them.

One of the best reasons is personalization, and there two ways to provide it. The first way is to customize the shopping experience based on a recognized pattern. If a new customer is looking for blouses, a smart retailer wouldn’t automatically push a bunch of shoes at her. Instead, the customer would be offered accessories or items that she could wear with the blouse.

The second way is to use the information we know about an existing customer to tailor their shopping experience. When a customer has opted into the brand, there's no mystery about what they want. It sounds simple, but I still get an email every week from an online retailer offering deals that don’t match my profile—just low-cost junk they're trying to offload, and not things I’d ever buy.

People still love to shop and, increasingly, more consumers are placing even more value in the experience.

Making yourself indispensable

As customers, we value our time. Most retailers have the data to create value-add experiences for their shoppers, and that’s what will make a retailer indispensable. For example, an outdoor gear company like REI can differentiate between their members who rock climb and those who do competitive cycling, and serve them up the right products. We want retailers to use our data to show us the things we’ll care about. It’s why we’re on their website or in their store.

Technology is another way to provide a great experience that builds brand and customer loyalty. For example, cosmetics chain Sephora has a mobile app with augmented reality capability, letting their shoppers try on different kinds of make up. That kind of feature will take traffic from Amazon.

But, it’s more than traffic or a one-time transaction that retailers are after. The goal is establishing the Brand as one that customers can trust—one that helps shoppers find solutions with great, personalized, entertaining experiences. That’s a company that can make even routine purchases special.

The disruption in retail is fueled by technology and how it has changed our expectations as consumers. Unfortunately, many retailers didn’t adapt their business model and have either suffered or failed. Disruption is an opportunity. Fighting for survival is a great way to get focused. There’s no mystery about the strategic importance of data, and using it to provide unique customer experiences. We've had plenty of warning.

It turns out that most of us don't really buy products. We buy solutions to a lifestyle need or problem.

Tell Us More

What’s one piece of advice you’d give that you’d follow?
“Eat your own dog food.” If you want to be a good retailer, be a good shopper. Experience your Brand the way your customers do.

What’s something we, as an industry, aren’t talking about that we should be?
My biggest concern is that businesses have a great tendency to think of the retail value “chain" as a chain. It’s really an “ecosystem" (or it should be!). You design a component of an ecosystem differently than a link in a chain.

What’s a product that you now buy online but thought you never would?
Boutique guitars and equipment.

What’s a product that you don’t think you’ll ever buy online?
Any kind of fresh meat, poultry, or fish.

You’re a new addition to a crayon box. What color are you?
Sky blue.

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Brian Kilcourse

Managing Partner | Retail Systems Research LLC

Brian Kilcourse is a recognized thought leader in the United States on how businesses innovate to deliver differentiating and sustainable value through the power of information. Brian is a managing partner at Retail Systems Research LLC (RSR), a company focused on helping companies develop winning strategies with its industry leading research focused on the extended retail industry. At RSR, Brian has authored studies on digital commerce and “omni-channel” strategies, AI & analytics, and the value of big data, pricing strategies, cross-channel fulfillment, supply chain strategies, mobile technology in Retail, and the Internet of Things, among other topics. Brian is a sought-after public speaker on subjects ranging from emerging technologies to IT governance and best business practices, and he is a frequent contributor to news organizations such as Wall Street Journal, Boston Globe, Forbes, ComputerWorld, CIO Magazine, and Essential Retail, among others. He also has led sales training seminars on the subject of "selling technology to retailers" for companies such as Cisco Systems, Verizon, and Hewlett Packard.