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Retail@ the EdgeNew Opportunities for Customers and Retailers
We are surrounded by sweeping trends and volatile swings in customer behavior, technology, and the economic and political environment. Customers are adopting new technologies and communication channels faster than ever. Governments are changing overnight—succumbing to the power of connected people. And new competitors are popping up at every corner, and at rapid rates.
2 | Retail @ the Edge: New Opportunities for Customers and Retailers
Customers have moved ahead. They expect to interact with retailers in new ways. They are shopping around for the right retailers to meet their needs. They are not interested in the methods of yesterday.
Amid the whirlwind of ever-shifting trends, predicting where the customer will land is nearly impossible. So, what can a retailer do? Now is the time to be at the edge, looking out at the digital world, finding opportunities to adapt faster and ratchet up appeal to customers.
Retailers are often hampered by the burdens
of infrastructure, capital and dated operating
models. They are not stepping up to meet the
needs of customers who long for new ways of
doing business. Right now, retailers have the
opportunity to push the boundaries to create
new experiences for their customers and tap new
value streams for their companies.
This shift means out with the old and in with the
new—legacy is over. Leaders will have to rethink
the next dollar of investment, integrate more
tightly within and across organizations, and
open their minds to unconventional approaches
of engaging with customers and employees.
Companies will need shrewd strategies to gain
insight quicker and turn it into actions that truly
impact the customer. Companies also will need to
reconsider platforms, technologies and operating
procedures. And they will need to be prompt and
disciplined about execution.
To envision the right opportunities to seize
in retail, look no further than the “extreme”
customers who are setting tomorrow’s trends.
Who are these customers? They are the ones
fueling the growth of new, small entrants by
flexing the power of their social network. They
are using technology to overturn traditional
modes of shopping. They keep a constant eye on
the digital landscape, looking for new providers
who can meet their needs better than traditional
retailers can.
Pushing the boundaries of the retail experience
Retail @ the Edge: New Opportunities for Customers and Retailers | 3
Opportunities at the edge. Why not?
Through deep research into retail trends, Accenture identified examples of these extreme customers and envisioned the opportunities that they create for
retailers. When exploring these opportunities, ask yourself the same question your customers are asking—why not? Why can’t I get it the way I want it?
Why can’t you offer the same products in store as online? Why can’t you provide me access anywhere and at any time? Why can’t I be rewarded for the
influence I have on your brands? You can choose to stand still and observe the changes or ask, why not create new experiences and new value?
And why not now?
Accenture sees three distinct opportunities at the edge of retail:
The Influence Marketplace
Context Retailing
The Streaming Environment
1
2
3
A world where the cost of building awareness is negligible and a company’s success is predicated on whether its products and services are noteworthy enough for people to spread the word. Influence is the currency in this model.
The context for customer interaction shifts from stores/channels/our turf to their turf: their home, car or social setting. Companies present products and offers within a dynamic kaleidoscope of demand pockets, wherever the customer is at that moment of need. The challenge is to deliver tangible relevance in distributed, varied contexts.
Retailers become the Netflix of solutions, streaming bundled solutions to meet customers’ specific needs. Delivered through a variety of ownership models, goods and services are relevant for the customer across channel, across time and across company.
4 | Retail @ the Edge: New Opportunities for Customers and Retailers
Keeping up with the customerNew technologies, new buying habits and newcomers to retail make keeping
up with the customer an ever-changing playing field. Trends include:
Interconnectivity.
Threat of new entrants.
Digital living.
Connected empowerment.
Loyalty is gone.
Redefining stereotypes.
Changing media channels.
New paths to purchase.
In just 20 minutes on Facebook, more than 1 million links are shared, 2 million
friend requests are accepted and almost 3 million messages are sent.
TV is no longer the primary viewing option for those under the age of 35.
Pinterest drives more referral traffic than Google Plus, LinkedIn
and YouTube combined.2
By 2015, South Korean school children will have access to only digitized
textbooks.
Occupy Wall Street donations increased by 301 percent in a 17-day period,
growing at an average of 17.72 percent per day.4
Eighty-four percent of US employees plan to change jobs within a year.1
Internet users over the age of 55 are driving the growth of social
networking through the mobile Internet.5
Eighty-three percent of shoppers make their purchase decisions before
even entering a store.3
Retail @ the Edge: New Opportunities for Customers and Retailers | 5
The customer experience includes
The role of the retailer is
Loyalty is defined
Investment shifts
Successful companies use
Dramatic change is required
social influence that can be expressed
and accessed at every stage of the buying
decision and in every channel.
to filter feedback and make connections to
relevant influencers that the customer finds
credible.
by “network value,” the degree of influence
on others’ purchases.
from building awareness to creating credible
products and services that generate social
endorsement.
insight from influencers to manage the
business and enable a broad distribution of
social influence.
in retailers’ ability to integrate influence
factors into operations and into marketing
and merchandising decisions, such as
assortment optimization, store locations,
private labels, service offerings and pricing.
1
67% of shoppers spend more when they have received a recommendation from their online community of friends.6
Recommendation
Good Bad
6 | Retail @ the Edge: New Opportunities for Customers and Retailers
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Influence is the currency in this new world
Signals that customers are at the edge
What does loyalty mean to you? It’s time to
rethink the definition. Rather than focus on
loyalty through total number of purchases,
look at the total value of a customer’s influence
network. The customers with the highest network
value will be rewarded through discounts, free
goods and incentives. Retailers might also offer
incentives within the broader circle of influence.
In fact, it’s happening already. The Palms Hotel
and Casino in Las Vegas is creating the Klout Klub,
which will use social media metrics to measure
the influence of each patron. The Klout Score will
allow visitors to experience certain amenities,
not based only on their spending/betting/playing
but depending on the heft of their social media
footprint.7
Influence reigned king when the Dutch airline
KLM was challenged by a duo of filmmakers,
who wagered they could solicit enough Twitter
followers to fully book a KLM direct flight from
Amsterdam to Miami. In exchange, the airline
would comply and offer this never-before,
nonstop route. Forty hours post-challenge, the
airline conceded and 426 tweeters got their seats.
Influence ratings can be used as a key metric in
assortment and space optimization, and even
to drive inventory levels and replenishment.
Based on buzz, retailers can reallocate product
distribution in real time based on what
influencers deem to be the “hot item.”
Customers themselves can use influence in
making decisions about products. Imagine that
as a customer stands in front of a store shelf,
through augmented reality, that person is able
to see the “ratings” of influencers (including
acquaintances and experts) whom he or she
trusts. If your most trusted friends think a
product is great, likely so will you.
Cautious consumers are thirsty for credibility in products and services. Whether it is credibility in products (such as nutrition and usage information) or
credibility in communication (saying the right thing at the right time based on consumer needs). In short, customers want to believe in what they are buying.
A number of wild fluctuations are compelling today’s consumer to be more discriminating:
Consumers are often mistrusting and want to
know a retailer is doing right by them. These
customers may lean on feedback from influencers
to identify the retailers who are delivering
credible solutions. In fact, according to findings
by Reevoo, more than two-thirds of consumers
(68 percent) trust reviews more when they see a
mix of both good and bad feedback. Furthermore,
95 percent of consumers become suspicious
when no bad reviews are evident, believing the
site to be censored or faked.8
With consumers remaining cautious amid high
unemployment rates in Western countries and
with growth remaining weak globally, retailers
are struggling to pass on cost price inflation.
Deflation also affects consumer spending,
as there is a risk in buying today what may
be cheaper tomorrow. According to the 2011
Accenture Global Consumer Survey, with
uncertainty and lack of predictability becoming
the norm, connecting consumers with sources
and information that they can trust can help to
overcome realities like the high rates of switching
and price comparing that we are seeing in so
many markets today.
Social networking and digital media can build
awareness for fewer bucks. Social networking
continues to dominate. Across a snapshot of 10
major global markets, social networks and blogs
reach more than three-quarters of active Internet
users.9 The ease with which consumers can share
their views online means that if retailers have
a credible product or service, consumers will
advocate and market it. In fact, social networking
is becoming so ingrained in our daily lives that
even media consumption is becoming social. For
example, Get Glue lets participants check in to
their favorite shows or other media forms to let
the world know what they are watching.
Nonbelievers are not buyers.
Volatility is the norm.
The people have a podium.
8 | Retail @ the Edge: New Opportunities for Customers and Retailers
Moving to the edge of the Influence Marketplace
Retailers tend to dump dollars into consumer and trade promotion. But there’s a better way. The cost of creating brand awareness and generating demand
generation is shifting due to alternative and lower-cost avenues. It’s time to ask, “where can I get the biggest bang for my marketing buck?” Pioneering
companies are looking for ways to capture more value from the influencers that are out there advocating for the brand. They ask, “can we generate greater
return if we identify top influencers, treat them differently and give them something to buzz about?”
Create an influence exchange.
Measure social influence.
Get a return on influence.
How can retailers take steps closer to the edge?
Retailers will need to use sophisticated analytics
enterprise-wide to understand who is the most
influential. Then they can tantalize influencers
by delivering more customized, credible and
relevant messages, promotions and products.
In this marketplace, companies will incentivize
influencers to create buzz about their offerings—
call it an influence exchange—and will reward
those making the most noise.
Social Q&A tools, “Like” buttons and refer-a-
friend discounts are modern-day tactics that
can drive value in the Influence Marketplace. But
you can’t manage what you can’t measure. At
the edge, retailers will measure influence factors
and incorporate social influence measurements
into a holistic influence management approach
that connects back into the organization across
all relevant areas, from merchandising to supply
chain and even to areas like human resources.
To ensure a return on their investment in
influence as retailers tap new channels, they must
have a clear strategy and an operating model
that supports tighter integration of marketing,
supply chain and merchandising functions, and
metrics. Furthermore, as the cost of creating
awareness goes down, spending will shift away
from capturing attention and will be reinvested in
improving the offering itself.
Retail @ the Edge: New Opportunities for Customers and Retailers | 9
The customer experience includes
The role of the retailer is
Loyalty is defined
Investment shifts
Successful companies are able
Dramatic change is required
selecting tangible products with the
option to add intangible elements that are
personalized, based on context.
to use insight into the consumer’s needs
to deliver the most relevant products and
services, based on the consumer’s context.
by the number and frequency of points of
interaction the customer has with the retailer.
from creating environments for sales to
creating insight into the customer’s context
and ways to communicate with the customer
outside of the channel, from distributing to
consultative selling.
to derive value by adding intangible
elements such as “findability,” verification or
personalization, based on the context of the
decision to buy.
in developing communication with customers
that engenders trust and helps to capture or
receive information about their environment.
2
Of the 40 percent of consumers who own smartphones, 70 percent use their smartphones while shopping in stores.10
40 %
70 %use their smartphoneswhile shopping in stores
US consumers who own smartphones
10 | Retail @ the Edge: New Opportunities for Customers and Retailers
use their smartphoneswhile shopping in stores
Retail @ the Edge: New Opportunities for Customers and Retailers | 11
Innovation in context
Customers observe, interact with and decide on
products and services in a variety of contexts—
at home, in the car, on the street and in the
office. At the edge of retail, there is a symbiotic
relationship between customer and retailer: I
scratch your back, you scratch mine. Customers
share information and preferences with retailers,
and retailers respond by delivering a more
authentic, personalized and therefore richer
experience to the customer.
What does your customer care about, and how
can you respond in context? For example, your
diabetic customers may want to use their mobile
phone to certify that product ingredients comply
with their dietary restrictions. Your socially aware
customer may want to preview a live feed of the
factory conditions where an article of clothing
was made. Your soccer mom may want to see
whether the rug she is considering will hold up to
her family’s foot traffic or whether the makeup
will last throughout her busy day. It’s all about the
context of daily life. Can your customer see him
or herself using—and enjoying—your products?
Signals that customers are at the edge
Several trends are influencing the rise of context retailing:
Digitization has skyrocketed as tech-savvy
consumers have come to expect information
at their fingertips. The appeal of paperless is
apparent in the popularity of e-readers, such as
the Kindle and NOOK. Furthermore, books are
moving off the shelves in national libraries and
in schools. Look at South Korea. They plan to
digitize all textbooks by 2015. Digital interactions
are becoming second nature for customers who
are hungry for more engaging, interactive and
differentiated shopping experiences.
Consumers’ reality is becoming more blended
with virtual reality as they spend more time
connected to digital devices, playing on
gaming systems and interacting via virtual
communication media. The popularity of Wii and
Kinect is evidence that this trend will continue
to be a part of our daily lives. In fact, in its first
60 days on the market, Kinect sold 8 million
units, making it the “fastest selling consumer
electronics device,” according to Guinness World
Records. The Craftsman Experience Store creates
a branded experience accessible across social and
digital channels by combining hands-on work
stations, a live social media studio and project
demonstrations that showcase the innovation
and performance of Craftsman tools. And new
mobile applications like uDecore, String and
Blipper let users view and manipulate products
in 3-D, such as a replica of a shoe or a couch
they are interested in buying.
The online experience is being replicated offline—
and vice versa. Even while shopping in stores,
customers are going digital. Of the 40 percent of
US consumers who own smartphones, 70 percent
use their smartphones while shopping in stores.10
A budding trend is being able to replicate the
offline world more effectively via digital means
to create new and innovative experiences for
shoppers. One example, Google Streetview, is a
project that allows people to explore a store just
as they would if they were physically in the store,
yet do it all online. Another example, Turnhills.
com, uses crowd-sourced photography to enable
consumers anywhere to window shop in New
York. Yet another, Meijer Find-It app, is fusing
online and offline by knowing what store you
are located in and providing the optimal route to
purchase your shopping list.
Go digital or bust.
Very virtual.
Online and offline collide.
12 | Retail @ the Edge: New Opportunities for Customers and Retailers
Moving to the edge of Context Retailing
In their marketing and merchandising plans, retailers will need to look beyond traditional digital tactics as levers for merchandising and selling. Instead,
they will need to thoughtfully outline in their plans how to manifest the intangible attributes of an offering in ways that are individualized, interactive and
tangible to consumers’ differing needs and preferences. The talent devising the marketing and merchandising plans will need expertise in the innovative
technologies and tactics that can drive value through context.
Understand the tactics.
Take the retail and product experience virtual.
Invest in the technologies.
How can retailers take steps closer to the edge?
Retailers will need to understand the tactics and
methods used in Context Retailing and will have
to train employees in how to integrate these
practices into interactions with shoppers. Also
critical will be educating consumers in how to use
various emerging applications to examine and
compare an offering in various contexts.
By overlaying data in a simulated world, retailers
will gain speed, coordination and the ability to
operate and make decisions within the context
of real market conditions and operating realities.
Companies will increase their visibility into real-
time supply chain occurrences, store conditions
and new market realities. With that insight,
retailers will be able to develop products and
services with a view into how, when and where
they will be used.
Context retailing requires both an investment
in ever-evolving virtualization/visualization
technologies and a test-and-learn model.
Tailoring merchandising and communication
according to an individual shopper’s context
will require advanced intelligence engines that
connect to marketing and selling channels and
that can be manifested easily as the information
or experience appropriate to the shopper.
Retail @ the Edge: New Opportunities for Customers and Retailers | 13
The customer experience includes
The role of the retailer is
Loyalty is defined
Investment shifts
Successful companies provide
Dramatic change is required
on-demand access to “streaming” products
and services that are accessed and bundled
as solutions.
to be the connector and access point between
the consumer and entities that provide the
products and services to fill a need.
by the frequency and margin mix of what a
customer accesses and by affiliation with a
specific retailer.
from buying, stocking and selling inventory
to providing visibility and access based on
consumers’ needs.
the easiest access to the most relevant goods
and services, earning income not only from
the margin on goods, but also from the value
of access.
in developing a multidirectional flow of
goods, deriving value from the access
model and presenting relevant solutions in
innovative ways to the customer.
3
Grocery retailers in the US have reduced the rate at which they are adding square footage by 56 percent.
56 %
14 | Retail @ the Edge: New Opportunities for Customers and Retailers
Retail @ the Edge: New Opportunities for Customers and Retailers | 15
Supply and demand—on demand
I want it now. Do you have it in blue? When can
you get it in stock? Regardless of trends, no one
will ever take the me out of customer. Picture
a multidirectional flow of goods and services
that customers access on demand. Retailers will
act as a conduit that brings together offerings
across multiple organizations and makes them
accessible to customers. This constant stream of
goods will be a departure from the push model,
where retailers select a finite set of products and
market them to consumers. In the streaming
environment, retailers will receive input and
requests from consumers and will provide access
to the goods and services to solve the need.
How do you stream products to customers? The
streaming environment will allow products and
services to be sold, provided as a managed service
over a period of time or rented by consumers.
Retailers will pull the desired products from
within their inventory or access them from
others’ inventories.
In this model, customers will receive offers for
solutions at various price points based on the
components. For example, a consumer requests
a flow of goods for a healthy, low-carb diet
to maintain a blood sugar level at or below
110. Retailers will offer products, information
and services that are derived from their stores,
from other retail locations, from restaurants
or from medical agencies to monitor, measure
and manage glucose levels. Options may
include services (food preparation or nutritional
counseling) or credit toward restaurant meals.
Does streaming work? New entrants are finding
success by adopting early iterations of this model.
Look at Mine-for-Nine. This company gives
pregnant women access to designer maternity
clothes. But instead of purchasing items of
clothing and being able to enjoy them for only
a few months, customers of Mine-for-Nine can
rent the clothing until they want a new style
or size. Another example is ShopyCat, created
by Walmart. It is a social gift finder that will
recommend products from not only Walmart,
but its competitors.
Signals that customers are at the edge
The streaming environment is fueled by consumers’ hunger for constant access to relevant products and services.
With urbanization occurring globally, consumers
are living in smaller dwelling sizes and more
confined spaces. In 2010, the average pantry held
369 SKUs, down from an average of 404 in 2007.11
Smaller spaces are driving smaller basket sizes
and on-the-go consumption. Given those factors,
it is no surprise that retailers continue to invest
in smaller formats. In fact, grocery retailers in
the US have reduced the rate at which they are
adding square footage by 56 percent.12
The digital industry has trained the user to think
about streaming (video, music, etc.) access, as well
as usage for a period of time, not for permanent
consumption. That approach has been expanded
to “rent-and-return” models for product
categories that include apparel, handbags, jewelry
and cars. For example, Spark Box is a personalized
educational toy service (available by subscription).
Consumers also want real-time visibility into what
products and services are available—and when.
Consider San Francisco, where an application
provides drivers information on where parking
spaces are available right now. The application not
only helps the city cut down on traffic congestion,
but also provides real-time streaming access to
drivers for less time and money.
Economic conditions, sustainability and resource
constraints are driving consumers to buy in
increments. Customers derive value from new
funding models such as pay-as-you-go and
group funding. Redbox provides customers
entertainment for $1 a day. Groups are buying in
bulk—whether gifts or even consumables such as
organic produce and meat products from co-ops
and farms.
Shrinking spaces.
Temporary access.
Instant gratification.
Bite-size buying.
16 | Retail @ the Edge: New Opportunities for Customers and Retailers
Moving to the edge of the Streaming Environment
For retailers to make this opportunity a reality, they must fundamentally rethink the model by which they supply goods across their markets and invent
a model that thrives on fragmentation. Fragmentation will exist in multiple forms—customers, channels, mode of distribution and acquisition type (buy,
rent, exchange, etc.). Managing supply and demand will be core to differentiation and will require leading-class insights, infrastructure and collaboration
capabilities.
Apply customer insights.
Rightsize.
Create multidirectional flow.
How can retailers take steps closer to the edge?
Do you know what your customers are doing?
Retailers must track, capture and interpret
customers’ behavior across every available
channel and in their life stages. The ability to
bridge structured and unstructured data, and
integrate it across the organization to apply the
insights toward sales of solutions, will become
more critical. To truly stay in tune with demand
patterns and appropriately manage supply,
retailers—going beyond the traditional sources
for customer insights—will need to tap into social
buzz and collaborate with suppliers and maybe
even competitors.
Successful companies will shift investments from
buying and storing inventory to creating new
solutions and access models. They will manage
store size and inventory flow proactively. It will
also become increasingly important to leverage
the network of industry peers, suppliers, partners
and customers to share assets and infrastructure
in order to achieve a truly flexible, right-sized and
fluid value chain.
The future calls for the ability to aggregate
and create dynamic delivery routes and a
multidirectional flow of goods. Standard
merchandising channels become more complex
in the streaming environment because goods are
not coming from or going to one place. Inventory
is coming from multiple places and is at various
levels of use (e.g., pre-owned). Dynamic delivery
can enable better forecasting accuracy and better
supply chain visibility.
Retail @ the Edge: New Opportunities for Customers and Retailers | 17
18 | Retail @ the Edge: New Opportunities for Customers and Retailers
The physical and virtual worlds offer new channels and venues for reaching a wide range of customers. The customer is there at the edge, ready to shop, interact with and advocate your products. Are you there as well, adapting to the digital
consumer, tapping social influence, selling in context and finding ways to continually feed relevant offerings to customers? Get to the edge. Because now is the time to make the leap into the exciting future of retail.
are @ the edge—are you there with them?
The customers
For more information on becoming a retailer at the edge, please contact:
Renee SangAccenture Customer Innovation [email protected]
Allison MullerAccenture Customer Innovation NetworkCo-Lead, North [email protected]
Karen VoelkerAccenture Customer Innovation NetworkCo-Lead, North America [email protected]
1 http://www.mainstreet.com/article/career/employment/more-americans-will-change-jobs-2011
2 http://blog.shareaholic.com/2012/01/pinterest-referral-traffic
3 IRI, Channel Migration: The Blurring of Shopper Loyalty, 2009
4 http://www.dailydot.com/news/new-data-occupy-wall-street-funding
5 http://blog.nielsen.com/nielsenwire/online_mobile/social-media-report-spending-time-money-and-going-mobile
6. Internet Retailer, September 2009
7 http://adage.com/article/digitalnext/marketing-las-vegas-palms-hotel-klout-scores/146189
8 http://www.bizreport.com/2012/01/bad-reviews-good-for-conversion-rates.html
9 http://blog.nielsen.com/nielsenwire/online_mobile/social-media-report-spending-time-money-and-going-mobile
10 Google & IPSOS OTX, April 2011
11 SymphonyIRI Group, New Product Pacesetters: Carving out Growth in a Down Economy, 2011
12 Kantar Research
Accenture Retail Practice
Retail @ the Edge: New Opportunities for Customers and Retailers | 19
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About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 246,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com.