by Brian Solis

The future of retail isn’t what it used to be

Sep 15, 2020
Digital TransformationIT LeadershipRetail Industry

Innovation mindsets must reimagine customer experiences and retail operations for a new world order

Consumer shopper buying Toilet paper [retail, COVID-19, hoarding]
Credit: RealPeopleGroup / Getty Images

The retail industry has publicly endured relentless disruption that’s only accelerating. From the retail apocalypse to the current COVID-19 pandemic, it’s almost impossible not to feel sorry for so many struggling brands.

In 2020 alone, we’ve seen bankruptcies from leading retailers such as Sur La Table, Ascena Retail Group, Brooks Brothers, Neiman Marcus, among many others. Lord & Taylor, the first department store established in the U.S. is closing all of its stores after 194 years in business.

The retail experience we once knew is withering away faster than ever. Some will stubbornly ride it out. But innovators are already reimagining retail’s next chapter of digital, physical, and immersive shopping experiences. The future of retail is not what it used to be.

Among many of COVID-19’s disruptions, McKinsey estimates that the pandemic has accelerated consumer adoption of e-commerce by as much as 10 years within a few months. Even as stores reopen, digital continues to surge. According to Salesforce Global Shopping Index, global digital revenue in Q2 grew by an unprecedented 71% compared to the previous year. E-commerce is only expected to continue to grow as COVID-19 is projected to spread for at least the next 12 to 18 months. According to IPSOS, 61% of consumers fear getting sick from brick-and-mortar retail. As a result, consumers are learning new digital behaviors that will stick over time.

So, what will it take for retailers to survive and thrive in this Novel Economy? The answer is innovation. But innovation in and of itself isn’t the magic bullet to solve all retail woes. Executives have to completely transform their mindsets toward one of growth and possibility, to shed the shackles of traditional retail frameworks, models, and guardrails.

It took a pandemic to finally accelerate retail innovation

Status quo is comfortable, a defined box of norms which defines the parameters, boundaries and capabilities of any given service, institution, or industry. The developments and innovations which we see often are developed within a set of traditional retail boundaries. Rigid corporate cultures and hierarchies staffed by traditional retailers and business executives keep the future of retail rooted firmly in its past. Unfortunately, it took a pandemic to jolt decision-making free from complacency, stubbornness, and short-termism (quarter-to-quarter priorities rather than long-term investments). Now, COVID-19 is motivating brands to make up for years of lost time. They have no other choice, really.

Customer behaviors and expectations are rapidly changing. The pandemic has consumers rethinking how and why they shop. When they do, they’re increasingly digital first. Though we’ve talked about this for years, their mindset is omnichannel, but in a new way. The customer journey is now advanced, integrated, and blurring the line between digital and analog experiences. In fact, customers want digital-like experiences in the real world, too.

Advanced and responsive retailers are demonstrating that speed and agility in these times of disruption are competitive advantages. As they innovate, new standards for retail experience push the industry in new directions.

For instance, Amazon Go introduced the world to cashier-less, grab-and-go retail shopping, and now the industry is scrambling to catch up.

Almost every retail brand is rolling out contactless transactions, buy online and pickup in store (BOPIS), curbside pick-up, and delivery services to compete. Even CarMax introduced contactless test drives and curbside pickup of used vehicles.

According to NRF, Crate and Barrel developed and deployed more processes and standard operating procedures in the first two months of the pandemic than it has in the past two years.

Sam’s Club developed a concierge app that offers quick and contactless shopping for consumers.

Gap opened a state-of-the-art distribution center featuring integrated automation and robotic capabilities to process 1 million units per day.

Pronovias Group launched the first virtual showroom for bridal fashion.

Ideal jewelers converted its brick-and-mortar business to an e-commerce model built upon a live-streaming platform. In-store sales staff have become live broadcasters, with each managing their own live-streamed store.

South Korea is accelerating adoption of robots and autonomous shopping experiences to intentionally limit human contact. It’s part of a movement the government calls “untact,” the opposite of contact.

In Milan, Coop Italia introduced the first “supermarket of the future.” Featuring screens everywhere, the shopping experience is meant to deliver a balance of reality and augmented reality. Shelves are interactive, displaying augmented labels. Monitors offer nutritional and health information, cooking suggestions, and more.

What we see moving forward are a number of emerging trends which will redefine the retail shopping experience and help retailers survive and thrive the COVID-19 pandemic and beyond.

The new stores of tomorrow

Customers are leaning toward digital shopping at an accelerated pace, even in categories like grocery where digital has been lagging. The question is, what could new stores bring to the forefront? The health and safety of customers comes first. The most imaginative retailers will also rethink the concept of brick-and-mortar to introduce new, dynamic, and evolved physical and digital (#phydi) experiences.

In-store experiences

Appointment-based shopping is one key area of immediate opportunity. Initially seen in luxury and higher-end stores, appointment-based shopping balances safety, capacity, and personalized service. It can also serve two needs at once. For example, Best Buy uses appointments for more guided shopping with an advisor.

For clothing retailers, appointment-based shopping can help customers schedule dressing room visits with the specific items they want to try. With the right digital capabilities, consumers can shop online, select items in various sizes, and schedule a time and room to visit a retailer to experience a personalized trial and fitting.

Making the in-store shopping experience better should include planograms and the ability to look up assortments and stock in a store. Assortment differences from store-to-store mean that shoppers may go into a store looking for a product that a particular location does not stock. Home Depot and Target both do well in indicating if a product is in stock and where it’s located within the store.

Contactless shopping is another area worth further focus. Self-checkout in retail has been available and increasing its footprint for some time. Smart carts and technologies like Amazon Dash Cart and Amazon Go show us what else may be possible. It simplifies and expedites the shopping experience, eliminating checkout lines, one of the biggest shopping frustrations for many.

Beyond store experiences

Supply chain and inventory is another area of immediate opportunity. Stores must update their processes to manage inventory and fulfilment in a more shopper-friendly manner for online customers. Online grocers, for example, can be challenging for consumers if a product purchased for delivery runs out by the time the delivery window comes along. Substitutions are not always possible or acceptable. Customers complain that they have to make a special trip to other stores because they learned on the day of delivery that certain items were out of stock. A way to address this may be earmarking inventory for online orders, so shoppers can be confident in their orders.

But why stop there? Retailers should also allow shoppers to pre-order products that are not in stock, so that whenever they are back in stock, they can get added to the order for pickup or delivery. An “auto-add” could automatically create future orders. Another idea is to adapt stock alert texts to allow customers to reply with a simple YES response to add the item to cart prior to delivery. This increases the possibility that shoppers will get more of the products that they really want without having to shop elsewhere or spend extra time doing so.

Hybrid shopping

Today, retail shopping is largely in-store, online, or via mail. Instead, they can be combined in various ways to better customer shopping needs. For instance, consumers can buy online or in-store and take home items needed immediately, then schedule remaining items for later delivery.

Contactless shopping doesn’t just have to be for checkout. If consumers see a product in store or in a display window, retailers can offer the capability to order it digitally on the spot as well.

John Lewis Waitrose features a window display which allows shoppers to scan QR codes to purchase items from the retailer’s “Top 30 Favorite Things for…”

UK retailer House of Fraser earlier experimented with the concept of a “shoppable window.” Shoppers passing by the store’s display windows were prompted to open their app, from which they could scan the display images generating product content on their device and an ability to buy items straight from the app.

Suit Supply created a digital inspiration wall in its flagship store in San Francisco, which streams a live social feed of customer styles to inspire the shoppers in-store

Luxury menswear brand Zegna introduced virtual, personalized shopping for customers. Retail staff engage with customers over Zoom to share personalized “tables” of clothing picked specially for them. Staff also tour customers through the store to see what’s new.

Experiential shopping-as-a-service: the store as a stage

Retail innovator b8ta is exploring the possibilities of retail innovation as if it was invented for today’s times. Vibhu Norby, co-founder and CEO, believes that one answer might be shifting retail away from buying products to a model of “retail-as-a-service.” The company helps retailers reimagine space based on design and data to showcase goods and create unique, branded experiences.

Stores are designed for the activity of shopping, where each display is a veritable store in its own space. Customers can touch and use each product, learn more about its story, and brands can remotely control the messaging, experience, and pricing in real time using controls and real-time customer interaction data to improve engagement.

With b8ta, retail then becomes more of a medium than a space solely for the purpose of facilitating transactions. “It’s the idea that stores are essentially a powerful form of physical media,” observed Norby.

The end of an era and the beginning of what’s next

Executives have no choice but to innovate, to move faster, and make bolder decisions. But without creativity, invention, and imagination, the future of retail will look a lot like it does today.

If this pandemic has taught us one thing, it’s that disruption is resetting the playing field for everyone equally. “Thinking like a retailer” isn’t going to reveal the way forward. Instead, thinking like an innovator or like Disney’s Imagineers can unleash newfound curiosity and imagination. Allow yourself to see inspiration from other innovators (especially those outside of traditional retail) to inspire new and different possibilities.

Prioritize five key areas of innovation to reinvigorate core retail business models:

  1. Invest in a dedicated track that pursues digital business model innovation (new value and revenue creation).
  2. Support a parallel track that fosters operational innovation (supply chain, services, staff training and roles).
  3. Strive for experience innovation (physical and digital).
  4. Prioritize next-generation #phydi customer engagement and relationship management in existing touchpoints and develop new touchpoints that modernize the customer journey.
  5. Create a culture of cross-functional, real-time data and insights. Plug-into evolving customer behaviors, preferences, and expectations. Accelerate decision-making and rapid testing and learning.

Stores have to be more than just walls and a roof with products on shelves inside. How they serve, what role they fulfill in the shopping process, is up for reinvention. Define new value that sets apart the experience to entice people online and in the store. Innovators inquire within!

This article was co-authored with Kamal Tahir, a global Retail and Consumer Goods strategy leader at Salesforce. Tahir has 20 years of global consulting and industry experience, with expertise in innovation, digital transformation, and solution strategy. He is an inventor, industry speaker, and published expert. Tahir studied International Business at Temple University.