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Staying Relevant in Retail in the Age of Data
By Rama Sridhar, Executive Vice President, Digital and Emerging Partnerships, Asia Pacific, Mastercard
In the age of e-commerce, reports of the death of brick-and-mortar retail appear to be peppered across the internet. Walking down high-streets across the world, it seems as if more physical stores are closing shop each day as consumers shift online via their window browsers, rather than window-shop the traditional way. I feel the prediction of the demise of brick and mortar retail may be somewhat premature. Demand for stores still continues, but it is now an evolved version that integrates the physical with the digital. Recent Mastercard data on retail trends showed that e-commerce contributes to just 11 percent of the market. The consumer still appreciates the face-to-face interaction with retail staff and the experience of physically trying out the apparel. That does not stop them, however, from demanding personalization, seamless, secure services, and instant gratification. To avoid being a casualty, retailers need to rethink how to remain relevant. Tapping into big data analytics and new technologies will allow them to give consumers innovative ways to shop and retain loyalty.
Data drives dollar spend
Today’s shoppers are well-informed and do their research online prior to making a purchase. The internet has made it easier for them to communicate their wants, whether on social media pages of shops or through signing up for loyalty programs. A recent Mastercard study on loyalty programs in Asia Pacific revealed that 71 percent of consumers are willing to disclose personal details so they can receive a more targeted and relevant experience.
Proliferation of data means retailers can now cater specifically to each individual consumer’s desires and make smarter, more focused business decisions that will earn them bigger profits. Access to customer insights like spending patterns or the distances a shopper travels, can help pinpoint how online or offline formats would serve them better. For example, an area with a high percentage of online shoppers where customers travel short distances to physical stores would be a strong candidate for an in-store pick-up program.
Despite the rapid growth in e-commerce, the desire to try-before–you-buy still runs strong among consumers especially when it comes to generation Z
Online and offline data analyzed together will prevent fragmented approaches that might bear negative consequences on either in-store or online sales. How different metrics relate to each other must be examined to provide deeper insights to predict changing customer needs and demands.
Enter the smart showroom
Despite the rapid growth in e-commerce, the desire to try-before–you-buy still runs strong among consumers especially when it comes to Generation Z. Online retailers are launching physical stores and big-box retailers are introducing online and small format stores in urban areas to better connect their physical and digital channels. The brick-and-mortar store of the future will encapsulate the best of both worlds with the advent of new technologies.
Retailers are incorporating click-and-collect services as well as in-store online orders accompanied by home delivery to meet customer convenience. They are retraining staff and transforming their stores into spaces focused on educating customers about products, rather than sales. Additionally, some retailers are introducing new trial-and-demo areas in stores, so customers can experience products firsthand. When introducing innovative spaces, retailers must balance the desire to educate and entertain with the ability to convert purchases. Attributing a customer’s in-store experience to a later purchase in another sales channel is challenging, but can be simplified and interpreted using data analytics.
Experiences that fit just right
Consumers seek compelling experiences in all aspects of life, and their spending habits reflect that. In response, retailers are experimenting with new technologies, including the Internet of Things (IoT), to create fresh ways to attract customers.
Late last year, Mastercard collaborated with fashion magazine Marie Claire and launched a pop-up store in New York that showcased how retailers can merge the in-store and digital experiences using IoT solutions. A smart mirror in each dressing room identified products brought in using RFID tags and showed other colors or sizes, also offering recommendations on other pieces to complete the outfit. The shopper could then check out right from the dressing room using a dedicated mobile app, saving the hassle of walking over to the cashier.
Experimentation with such experiences is key to ensuring that new programs are not just driving increased traffic, but also incremental sales and sustained brand preference.
Managing cost efficiencies
However, such experiential programs come with significant costs including capital expenses, labor and training. By deploying such initiatives in some locations and not others, retailers can determine which of these work and which stores in their network will generate the highest return from such investments.
The future of retail looks promising for both offline and online retailers. New technologies have led to cutting-edge ways to buy-and-sell but it is up to the retailers to act - and not react - to these industry changes. Those that do will reap the biggest rewards.