Coming of age:Generation Z, the store & the technology ticking clock

3. The clock is ticking...

5. Defining Generation Z

6. How will Generation Z shapeshift the store?

8. What purpose will the store serve for future shoppers?

11. How will Gen Z shape in-store customer service?

12. The critical role of in-store tech

14. How to future-proof store customer service

16. Part 1 key lessons: 5 reasons to invest in the store network now

Contents

2.

Without serious consideration and investment,

the lag between how shoppers behave and what

retailers can deliver within a bricks-and-mortar

environment is only going to get worse, for one

simple reason: digital dependency is growing.

Over the next 10 years, a new consumer group

will come to the fore, which will make or

break retailers’ in-store technology strategies.

Generation Z is the first truly digital native

consumer group; their use of tech is as intuitive

as breathing in and out; they expect their lives to

be digitally connective and immersive.

From this moment, the spending power of

Generation Z will grow year on year, placing

new pressures on traditional retail models. The

only way to reap the benefits of this increasingly

lucrative consumer tribe is to start preparing now.

1Deloitte, Mobile Consumer 2015: The UK Cut, 20153.

Generation Z is the first truly digital native consumer group

The store is up against a technology ticking clock. Already, 90% of the UK population use their smartphones while out shopping, yet most retailers are still struggling to successfully bring digital interaction into the physical environment1.

How exactly will Gen Z change the store’s role over the next five years, and what infrastructural groundwork must be put in place today to enable technology-driven engagement?

That’s what Vodat International set out to discover…

The clock is ticking...

“Brands not only need to give Gen Z shoppers what they want and how they want it, they also need to intuitively deliver on their evolving needs…this will require substantial business and marketing changes. What’s more, companies need to learn to start making such changes more frequently.”- Marcie Merriman, Executive Director,

business strategy and retail innovation Ernst & Young2

2 WWD, Think Tank: Generation Z, the Next Big Retail Disruptor, 20154.

5.

DEFINING GENERATION

Z

Born between 1995 and 2010, Generation Z is categorised by the widespread usage of

the internet from a young age.

They are comfortable with technology and interact on social media websites for a significant

portion of their socialising.

Three key themes emerged, which we will share

across three instalments – starting, in this part,

with the role of the store and its customer

service offerings.

Generation Z will undoubtedly prove the biggest

disrupting force to physical retail over the next

five years. The biggest danger to retailers is that

they are completely unknown; their habits do not

reflect those of their predecessors, the Millennials.

So to truly understand how bricks-and-mortar can

evolve to meet Gen Z’s expectations, we must first

establish what role the store plays in their overall

shopping habits.

Though they are a generation of digital natives,

the store has a firm position in the retail lives of

today’s teenage shoppers. Our research found that

4 in 10 still make most of their purchases in-store,

even if they look up a product online as part of the

buying process.

Generation Z will undoubtedly prove the biggest disrupting force to physical retail over the next five years.

To understand exactly what the fastest growing consumer tribe wants from bricks-and-mortar retail, Vodat International surveyed 1,000 Generation Z consumers in the UK on their attitudes and expectations within retail.

6.

Our research found that 4 in 10 still make most of their purchases in-store,

How will Generation Z shapeshift the store?

Aspirational Browsing

Visibility

FINDING OUT

Access

BROWSING

Reassurance

DECISIONMAKING

Price

BUYING

Fulfillment

SHOW & TELL

The concept of research is incredibly important to Generation Z.

Their purchasing journey is highly considered; retail and brand

consultancy Fitch has identified a 5 step process that includes

‘aspirational browsing’ – a trait not exhibited among older shoppers.

The fact Generation Z is young and on a limited budget can explain

some of this, but not all. Remember this tribe has grown up in an

era of recession and economic instability, and so frivolity is not an

encouraged behaviour among their peers. They are also pioneers of the ‘rental economy’ (streaming

music and videos instead of buying them, to give

an example), so in order to commit to buying something, they have to really want it. 1 in 5 Gen Z

shoppers will do their research in a store before buying online

7.

A quarter (28%) will purchase from a store to avoid paying shipping charges, while, even among those that do tend to buy online, 1 in 5 will do their research in a store first.

Source: Fitch

In fact, a quarter (23%) will go into a store twice before buying,

while 7% will go in three or more times, such is their caution and

compulsion to get it right.

Clearly, the store has an important problem solving role for Gen Z

shoppers. It fills the experience gaps or logistical issues that ecommerce

can’t, and that’s exactly why our survey found that a fifth of teenagers will

visit a bricks-and-mortar venue over and above online shopping.

What problems does the store solve for Generation Z?

The store’s unique role of allowing shoppers to see, try and touch items

is not unique to Gen Z – it’s the fundamental reason that consumers

of all ages choose it over ecommerce – but there are some other

interesting problem solving capabilities that attract teenagers to

physical retail.

The instantaneous nature of digital living can

actually drive traffic into the store, as Generation Z won’t wait for delivery to get an item they

really want. The fine line between lifestyle is also

important here; the store is an important social

hub, and a place to gain inspiration for

future purchases.

Bricks-and-mortar’s role as a research centre has a direct impact on its purpose for Generation Z. For instance, our study found that 37% of teenage shoppers will go into a store to make their final purchase after doing online research, just to make sure the item is exactly what they want before they check out.

8.

The store’s unique role of allowing shoppers to see, try and touch items is not unique to Gen Z

What purpose will the store serve for future shoppers?

For what reasons do you typically visit a store?

9.

68%

43%

42%

31%

27%

21%

13%

13%

13%

11%

9%

8%

Try or see a product

Buy something sooner than I can get it online

Out shopping with friends and family

Avoid shipping costs

Get inspiration

Pick up a click-and-collect order

Get exclusive deals

Take back items bought online

Get advice from a sales person

I don't have a debit/credit card

Research a product before buying online

Take product images to post on social media

Quick summary: 3 most important roles

of the store over the next five years

Validation – physical touch pointswill become vital to reassure evermore cautious consumers

Problem solving – whether that'sgetting something quicker orcheaper, or filling an experience gapthat ecommerce can’t offer

Socialising – the store’s position as asocial hub and inspiration centrewill continue to grow

10.

Gen Z expects the deep level of engagement

they have made online to continue within the

store; more than half (57%) of those we surveyed

think store associates should have mobile or tablet devices, as it enables them to give a

better service.

In fact, equipping front-line personnel with

technology makes them more attractive to

younger shoppers – 47% would rather go to a

member of staff with a tablet than queue at the

checkout.

The ability to assert independence is important

too, as 45% like to use self checkouts and 41% want digital information points. This is not

necessarily indicative of an aversion to human

interaction, but their natural inclination to

look for a solution. “Gen Z is highly educated, technologically savvy and naturally creative and

innovative. They look for solutions on their own

and set out to make things on their own,” notes

Ernst & Young.3

Half of Gen Z shoppers would rather go to staff with a tablet than queue at a checkout

Like all digitally-driven audiences, the volume of research carried out online prior to purchase means Generation Z tends to arrive in the store incredibly clued up. However, this doesn’t make them ‘know it all’ – far from it – and this is where store associates play a pivotal role.

11. 3 Ernst & Young, The Next Big Disruptor: Gen Z, 2015

Gen Z expects the deep level of engagement they have made online to continue within the store

How will Gen Z shape in-store customer service?

8.

Not just that, but they believe that tech strengthens store interactions;

45% of Generation Z shoppers like talking to staff and think arming

them with a tablet or mobile device will enhance their experience. %

Our research shows that, for digital natives, going into the store is the embodiment of omnichannel. It is a truly blended physical and digital

experience, where each channel plays to its own strength to create

a better standard of customer service. The challenge is now on for

retailers to bring digital capabilities into the store to deliver to those

omnichannel expectations.

Whether self-guided or served by a sales associate, our research established one fundamental fact about Gen Z’s expectation of the store: they want technology to be embedded in their experience.

12.

I want staff to have tablets/mobile devices

I prefer to use a self checkout

I would rather go to staff with a tablet than queue

I prefer to use digital information kiosks than ask staff

I prefer to use my smartphone than ask staff'

I prefer talking to staff with tablets/mobile devices

I don't think staff should rely on mobiles/tablets

17%7%

15%3%

12%2%

10%

40%

28%

32%28

%24%

33%28

%

31%

33%32%

33%34%

38%

39%

8%

16%16%

19%22%

13%19%

3%7%

4%7%

7%4%

5%

How do you feel about technology in the store?

Strongly Agree Disagree Agree Strongly Disagree Niether Agree nor Disagree

The critical role of in-store tech

13.

Quick summary: 3 ways customer service

must evolve over the next five years

Enrichment – store associates arethe all-important human face ofthe business, but they must havetechnology to enrich their capabilities

Flexibility – younger shoppers wantto interact and transact where it’sconvenient for them, not the retailer

Total retail – human and digitalshould come together to provide thebest possible experiences, relevant tothe moment, using best of breed

Speed will be the absolute bedrock for success.

If the technology clock is ticking now for retailers the countdown is only going to quicken as Generation Z’s spending power increases. The reality is that most stores can’t meet the digital demands of shoppers who walk through their doors today let alone upcoming web natives, who have much less forgiving omnichannel standards.

14.

Retailers with a bricks-and-mortar presence have two choices; ignore the needs of Gen Z until they’re the most influential purchasing group, then play a game of catch up once they realise they’ve lost connection, or put the infrastructure in place today to meet their needs tomorrow.

Speed will be the absolute bedrock for success. Generation Z has the shortest attention

span of any consumer tribe; its members have

grown up in the era of Googling information and

superfast broadband.

How to future-proof store customer service

How to future-proof store customer service

The need for instant gratification pushes Generation Z's expectations of the store to incredibly

high levels, and therefore the potential to disappoint them is great. At the very least, retailers must prioritise their store network; no amount of investment in customer-facing tech is

going to compensate for a sub-par network which cannot support the functioning of a growing

number of devices.

Business enterprise networks should be the starting point for all retailers’ store technology

investment going forward. It is not enough to meet the needs of today’s store set-up – a sustainable network must have the capacity to meet the requirements of retail five years down the line, when Gen Z are driving the store into new digitally-led directions.

15.

Gen Z are driving the store into new, digitally-led directions

1. Store technology is increasing, and the success

of all bricks-and-mortar tech strategies will rest

on the strength of the store’s network

2. Most retailers are already behind on blending

the digital/physical experience, and that

disconnect will only increase as Generation Z

comes of age

3. The lives of younger shoppers are led online,

even when they are in the store environment, so

the store must be able to support (and influence)

their constant mobile usage

4. Generation Z craves a retail utopia in which the

strongest elements of digital physical shopping

come together in perfect experiences, which

cannot be achieved overnight

5. Retailers that put a scalable network infrastructure in place can grow and flex as their

customer needs change, putting them ahead of

less prepared rivals

Part 1 key lessons: 5 reasons to invest in the store network now

16.

Future-proof your business network with Vodat International

As the fastest growing supplier of telecom solutions and private, managed networks to the UK retail market, Vodat understands that what goes on behind the scenes is just as important in enhancing satisfaction levels as your customer-facing interactions.

Managed data network Tailored to the needs of retailers with complex,

multiple site estates, our business strength

private networks are managed directly

and securely through intelligent remote

management software. Our own MPLS core

interconnects with major UK carriers, enabling

us to select and deliver broadband connections

by Britain’s major carriers. As we’re not tied

to one Telco, we can mix and match, to bring

you the best bandwidth and reliability within

your budget.

Wireless network Our high performance enterprise wireless network system enables retailers to run the technology

your business needs to engage customers – including PDQs, tablets and wireless devices – at the

same time as providing your customers with speedy, secure WiFi access.

Call us on 0161 406 1820 or visit www.vodat-int.com for a better network solution.