Industry Stories

The New Challenge For Retailers: Delivering Online Convenience With In-Store Personalization

I recently caught up with Anna, a regional manager of a leading retail brand. Over coffee, our conversation steered towards the mounting pressure on retailers to focus on extracting insights to improve in-store experiences for customers. Today's shoppers - the millennials, aging baby boomers and the general affluent population - seek personalization, convenience, accessibility as well as 'shareable' experiences'. It is common knowledge that retailers need to know their customers as individuals, not by segments or even by micro-segments, to provide truly personalized service. One example is Under Armour, the popular fitness and sportswear brand. They created a host of apps, MapMyFitness to track every run, walk, hike, and gym session of a user. Endomondo motivates a user and enables them to reach their goals. And to back this up they also have MyFitnessPal, a food diary and nutrition tracker. With thousands of fitness-conscious users of these apps, Under Armour gathers huge quantities of data on their users habits and wellness lifecycle to personalize their offerings to each apparel customer.

Anna had a question: 'How do we focus on customers while addressing operational challenges?' Let me share what I told her.

While brick-and-mortar stores still account for a lion's share of the industry revenue, more shopping is happening online than ever before. In this scenario, it is imperative for customers to have a superior and personalized in-store experience, which complements their on-line experience. Retailers need to enhance their omni-channel shopping experience. We need to create a digital environment that enhances the in-store experience. It may be the reason why Amazon, the flag bearer of e-Commerce, is investing in Amazon Go, its convenience sans checkout queues and cashier.

Anna wanted to know, 'How does Amazon predict their customers will visit the store?' and 'What will drive Amazon Go?'

The crucial link between a customer's needs and experience is data. We need to accept that a shopping trip begins much before footfalls. Your shopper may have 'liked' a jacket or read reviews about the new protein supplement before walking into the store. And perhaps, has ordered the jacket online and is visiting the store to pick it up. A data-driven store with insights into lifestyle and preferences can enhance the in-store experience by presenting a real-time offer for accessories. Virtual agents can help with the customer's selection, which the shopper may double check with a friend before making the purchase.

Several retail brands are refurbishing their stores with technology since it enables them to engage with millennials while rationalizing costs. Fitting rooms and 'magic' mirrors for virtual trials allow retailers to engage shoppers, with interactive digital technology. Burberry and Sport Chek outlets provide an immersive shopping environment. Crate & Barrel's 'Mobile Tote' blends the in-store and mobile experiences by letting customers use tablets at the store to learn about products and create a wish list of items. Target is in the process of creating several new 'flex format' stores - with a unique store design and relevant, curated merchandise. These flex format stores enable shoppers to order online and pick up the items at the Target store near them, they will be able to access a larger assortment of products, self-checkout and even relax at the in-store café.

The key ingredient to making an omni-channel strategy more relevant and an in-store experience more meaningful is customer data. The best retailers spend a lot of effort understanding their customer demographics and micro-merchandising. Some grocery retailers even change their assortment of products every 3 miles. The 'right' data delivers the right product at the right price to each customer. Costco and Trader Joes have an aggressive pricing strategy and a few stock keeping units but their sales are high volume and it is the right pricing and that element of surprise that keeps them competitive, growing and loved by their customers.

In-store personalization encourages impulse buying. However, to convert an opportunity into actual sale, you should identify the persona of customers, understand their requirements in real time, and offer contextual recommendations while they are still in the store. Advanced analytical platforms with machine learning and artificial intelligence enable hyper personalization. In this case, data is stored on every product purchased by an individual shopper on every trip to the store. This would amount to a huge quantity of data at the product and category level, location where it was purchased, and frequency at which it was bought. It would also require a fair bit of computing power to calculate a brand loyalty score and discount propensity score, but would give retailers invaluable intelligence on each shopper so that offers can be timed and personalized to the day. In turn, retailers can plan sales and project returns.

TJX, Costco and Trader Joes thrive on an element of surprise. Customers don't know what they will find at the store and how long a product is going to be there. This effort of the retailer to stay relevant keeps shoppers returning to their brick-and-mortar stores. Retailers should also integrate the seamlessness of digital commerce with the in-store shopping experience. Physical spaces should deliver tangible value. A counter for return and exchange of products bought online is an opportunity for on-premise personalization, upsell and cross sell. Dedicated space for in-store pick up of online orders is a must until the Amazon Go (no) checkout model becomes a success.

I told Anna that the key to staying relevant would be to combine the convenience of online shopping with the amenities and experiences associated with the brick and mortar retail formats - food for thought until we meet again.