RETAIL
TRENDS
— 2017

From mobile payments to augmented reality to drone delivery, retailers have an incredible amount of technology at their fingertips. Customers are now able to find and purchase what they need in a matter of seconds, lifting customer expectations higher than ever. With smart service design, retailers have the opportunity to use smart data and emerging technologies to exceed them.

Retail is speeding up

Customers demand more than ever

The retail sector has changed dramatically over the last 20 years. In the 1990s, desktop computers and internet access first allowed people to purchase products and services from the comfort of their homes. Then came the rise of smartphones, Bluetooth and GPS, all of which streamlined the purchasing process to allow people to find and buy whatever they want, whenever they want it, wherever they are. These abilities have transformed customer attitudes so that most are far more demanding than they were 20 years ago. They expect to be able to pay for anything online quickly and conveniently, using the payment method of their choice.

Now means yesterday

Consumers don’t just want their products quickly, they want them immediately. At the very least, they expect standard shipping to be same-day, and it is becoming normal for this to be provided for free. The service industry has raised the standard with super-fast broadband services like Netflix and HBOGo that provide instant access to a huge library of content, pushing customers to expect physical products to be instantly available as well. This expectation has been met by companies like Amazon, which offer next-day delivery on most products and near-instant delivery on certain goods with Amazon Now. In the not-too-distant future, you could have your pizza delivered by a robot, your TV delivered by a driverless taxi, and your mum’s birthday present delivered by a drone. Time will tell whether drone delivery will really take off, but it’s not outside of the expectations of consumers. With this rising trend of super-fast delivery, physical stores may no longer own the selling point of immediate access.

Companies are integrating tech into brick and mortar

Brick and mortar stores are not just blindly shifting their physical presences to online mediums to compete, however. Trends in retail show that many retailers are trying to find the right balance between customer needs, available technology and existing infrastructure. Amazon, for example, reversed the typical model by first starting an online store and later opening several physical stores. Having a brick and mortar store allows customers to experience Amazon’s Kindle or TV devices and test out new retail technology such as Amazon Go, where sensors track items in a customer’s basket and charge them automatically to the customer’s account upon leaving the store.

Mobile grocery store Moby is another example of innovative technological integration into physical spaces. When driverless cars are allowed on roads, the creators of Moby plan to test its driverless capabilities on the streets of Shanghai, stopping in neighborhoods to provide local communities with easy access to grocery items. Customers can open the doors to the store through an app and order any unavailable items for pickup through an artificially intelligent service.

Shopping is becoming more streamlined

Convenience Achieved Through Omnichannel Experiences

With the average London commute lasting more than 70 minutes each way (according to The Office of National Statistics), consumers are naturally keen to make the most of their time. This has paved the way for some excellent uses of multiple channels that have been seamlessly brought together into one omnichannel experience. My local Sainsbury’s is a good example of this. Customers can use the Sainsbury’s website or app to browse, select and purchase items, which are then ordered and organised for quick pickup. It is the best of both worlds: the convenience of the online store and the immediacy of the physical store. Another company that has mastered the omnichannel experience is Starbucks:

Case Study: Starbucks

Some retail experiences simply cannot exist without physical channels, and food and drink establishments are one of those. Apps and websites that help you book a table or order food have been around for a while, but Starbucks has recently taken the model with their location-based app. As well as providing customers with dynamic direction to the closest store, the app also urges consumers to place their order and pay on the app, allowing them to skip the queue once in store.

Providing Unique In-Store Experiences

Retailers hoping to keep people walking through the doors of their physical stores are now trying much harder to offer customers something that they can’t get from looking at their phone or PC. They are attempting to justify their customers taking the effort to make a trip to their store.

Waterstones, for example, has partnered with Café Nero in an effort to encourage people to come in, buy a book and then have somewhere quiet and comfortable to relax with that book and a hot drink. Argos has also done an excellent job of recruiting customers to its physical stores by creating an omnichannel experience and most importantly, make the physical experience fun. Nowhere does the buzzword ‘Retailtainment’ apply more than Argos:

Case Study: Argos

Ever since I was a child, shopping at Argos has been a magical experience. The laminated catalogues, the little blue pens and a seemingly infinite warehouse of goods. For what was already a pretty unique shopping experience, Argos has always tried to improve on this formula as customer attitudes and technology have moved on. In the early 00’s, they introduced stock-checking terminals in their stores, saving you the disappointment of getting to the checkout and finding out that the plastic patio set you wanted was out of stock. Now the format of shopping at Argos has evolved once again. Gone are the rows of laminated catalogues, replaced now by tablets. You can visit an Argos store and order items in the traditional way via these tablet devices or you can use the app or website to browse for products, determine whether it is in stock at your local store and even reserve it to make sure that it hasn’t disappeared by the time you get there.

Argos’s legacy as a bricks and mortar only retailer has now put them in an excellent position to address modern customer needs. Even if your experience of Argos is entirely online, their physical presence in over 750 stores across the UK means that you are rarely more than a few miles away from an Argos. This allows them to offer something that even Amazon struggles to achieve: same day delivery (Argos teamed up with Shutl, one of the pioneers of same-day delivery in the UK to make the most of this USP).

Just shut up and
take my money!

Credit cards are not always the most convenient

Over the last decade, internet banking has changed the way we manage our finances. And in more recent years, contactless payments, mobile payments and peer-to-peer payment services like paypal have made it even easier to spend. Consumer uptake of these new payment technologies has been strong, due to the speed, convenience and added security of most of these services. The uptake by retailers, then, is likely to continue due to high demand from customers. From the research that Spotless conducts on a day-to-day basis, we have seen first-hand how important the available payment methods are for a prospective customer. We’ve had research participants reject an online retailer just because they don’t accept PayPal!

The rise of the virtual wallet

The most prevalent change to retail on the high street in the last few years is the rise of contactless and mobile payment in the UK. For transactions below £30, many retail establishments are starting to allow customers to make purchases via either a contactless credit/debit card or a smartphone. Customers have now come to expect this speed and ease. (I can report how frustrating it is when a retailer does not support contactless payment and I have to type in my card’s PIN like some Neanderthal.) When it comes to higher value purchases, customers are still required to enter their PIN, but anecdotal evidence from Spotless’s research into digital payment methods suggests that consumers value the extra security when it comes buying high value products.

Retail is taking
on new realities

GPS Technology

Retailers are beginning to utilise the nifty technology in modern smartphones to help make their shopping experience more efficient, effortless, and most importantly, profitable. As mentioned before, Starbucks has started giving people directions using GPS, and Uber’s entire service is based around the use of this technology. Amazon Now allows customers to track their delivery driver in real-time so they can see exactly how far away their package is. For a customer group so demanding of fast delivery, such a feature is likely to be warmly received.

Augmented Reality

At their recent event press event for iOS 11, Apple announced it is making a push towards the using more augmented reality in their everyday apps, taking the technology beyond games like Pokémon Go. Although the use of AR is nothing new, more and more companies are looking at ways to utilise the technology. IKEA has had an AR feature on its app since 2013, which allows users to digitally place IKEA items in your home using their smartphone camera. This gives customers the opportunity to ‘try’ the furniture in their home before they buy, which is something that would not have been possible before.

Virtual Reality

Virtual Reality is coming back in a big way with the recent release of the Oculus Rift and the PlayStation VR peripheral for the PS4. Sony has already managed to shift more than a million units since the product’s release at the end of 2016. But in the future, we could be seeing the application of VR extending beyond video games and into the world of retail. For example, it could be used by customers to ‘try on’ clothes or test-drive a new car. This satisfies the customer’s desire to ‘try before you buy’, but without them having to make the journey to a physical store or showroom. There are also some interesting uses of VR starting to appear in-store, helping the blend the virtual and physical worlds by providing an omnichannel experience. But the use of VR is not limited to customers – some retailers have started to use VR to help with decision making surrounding the remodelling or redesign of a store’s layout.

Bluetooth

Bluetooth beacons are starting to be used by physical retailers with a lot of floor space. The technology allows for personalised content to be pushed to a customer’s smart device when they come into close proximity of a beacon. Content includes discounts, rewards and recommendations, intended to attract customers that spend most of their time glued to their phone screens, anyway. This has yet to take hold in the UK, though some large American chains such as Macy’s have used it in their stores and House of Fraser is beginning to trial the technology.

Cookies aren’t just
for eating

Making data-backed decisions

By tracking the browsing and purchasing behaviours on their websites, retailers are able to gather massive amounts of data about their customers’ habits and preferences. Because online stores usually require the customer to create an account, retailers can acquire valuable data that can be used to make evidence-based decisions and outperform competitors. Relevant products and services can be targeted at certain customers to increase sales, and personalised marketing and discounts can be sent when retailers know more about the customer. (Last year, for example, I received a birthday email from Nintendo with a 20% off voucher for that day, and Pizza Express offered me a free bottle of wine if I celebrated my birthday at one of their restaurants.)

More data = smarter logistics

The smart use of customer data can mean more than just targeted advertising, however. Retailers that understand importance of the data they collect are able to use it to help with inventory management, so that stores are able to cope with demand and reduce wasted shelf space with products that are no longer popular.

Stay ahead of the storm

Personalisation can be used to push customers towards the types of products that a retailer thinks they will be most interested in, but it is also being used in clever ways to predict purchasing trends in general. Consider an example from Helly Hansen, an outdoor clothing retailer. When the company saw that a five-day rainfall period was forecasted for Germany, it immediately placed rainwear at the forefront of the homepage, leading to an conversion rate increase of 170 percent for the period.

Many of the trends discussed in this article use the smartphone or its associated technology in some way. Most people in the United Kingdom own smartphones, which house enormous potential for improved retail experiences. Service design can help unlock this potential by decoding customer attitudes toward these new technologies and showing how they can be incorporated into existing practices.

Written by Tom Knoll