Well what a year 2017 has been! As we all settle in for a chilly Christmas break full of mulled wine, pigs in blankets and baby Jesus sausage rolls, it’s that time of year again where retailers take a moment out of the busy Christmas rush to reflect on their performance for 2017 and what learnings they can take into the new year. So let’s do the same and see how well we did on our 2017 predictions – just how right were we?
We said it was all old, but was it new in 2017?
Yes it was! We finally saw the traditional store make its come-back in 2017 as Amazon led the way to develop their physical footprint not just through extending the physical presence of their online shop but also when they sent shockwaves through the retail industry through the acquisition of Whole Foods – indicating to the market that bricks and mortar is here to stay!
The smaller players also had their part to play with Bonobos showing us that retailing can be done a bit differently using a showroom concept, providing customers a modern shopping experience that emphasises on customer service over products. Also, Etsy, a pure online player joined the trend by working with larger retailers, such as Selfridges, to establish its physical presence through ‘pop-up’ stores in order to gain a greater customer reach and an additional channel for its existing customer base.
This shift back to bricks and mortar is certainly causing retailers to re-evaluate the future of their traditional stores in the new digital age and, as we move into 2018, it’s fair to say that this trend will be set to continue although the ‘traditional’ store may look very different to how we once knew it…
What kept running hot?
We placed a number of bets that we thought would run ‘hot’ for 2017 based on what we saw happening in the market and grounded by what we knew or were working on at the time. Let’s look into each one of these in turn and see what happened…
The rebirth of loyalty
Ok, so not quite the rebirth we were expecting however, we saw some movement in this space with retailers such as H&M, Tesco and Bodyshop making some headway to enhance their loyalty scheme offerings to something more meaningful for their customer base, albeit a bit ‘business as usual’.
We said in our original blog,“…the rebirth of loyalty will be about the ability for retailers to craft propositions which create and use a deeper understanding of customers, to engage and reward them at a more meaningful level.” Looking back on this statement it has certainly held true, and maybe suggests why retailers are not all rushing out with new loyalty schemes. They are instead allocating more thinking time into determining how they can connect to their customers on a level that will really engage.
Recent research by Capgemini on Loyalty Deciphered – How Emotions Drive Genuine Engagement, supports this evidence and begins to indicate that customers now want a deeper emotional connection with brands, and that brand owners now need to take a more ‘human-centered’ approach to designing loyalty programs. The report found that 82% of consumers with high emotional engagement would always buy the brand they are loyal to when making purchasing decisions (compared to only 38% with low emotional engagement). If this is the case, retailers will need to invest in data-driven loyalty programmes that can provide true personalisation for their customers which will help trust to be built for long-standing relationships – something to look out for in 2018 maybe?
See now, search now, buy now, deliver now, return now, review now
This year has seen the ‘Amazon effect’ take over the industry, with more and more retailers providing a faster level of service to their customers with the big supermarkets leading the way; Tesco, Sainsbury’s and Morrison’s all now offer 1-hour delivery from point of order. Further indication of this can be seen by the number of merger and acquisition developments, where retailers are looking to strengthen their supply chain operations to support growing customer demands for ‘buy it now, get it now, return it now’, for example, Tesco-Booker and Co-op-Nisa. It’s fair to say things are getting quicker and are showing no sign of slowing down!
Contextual service and sales
Technology continues to improve and so does the service our retailers offer. One major step forward in this space came from Farfetch, the luxury fashion e-tailer, who spent 2017 creating the ‘Store of the Future’.
Farfetch have created ‘modules’ for brands to implement in their stores using various technologies from apps to RFID to ultrasound. They are able to identify customers on entry, creating data on their offline browsing and purchasing data through connected clothing rails, and then pulling this all together through mirrors with digital wish lists and real-time curated recommendations from shop assistants. Recent reports claim they are now the UK’s fastest growing retailer, suggesting these new technologies are far from gimmicks.
We also saw a very clever incorporation of digital and service capability through IKEA’s acquisition of TaskRabbit. IKEA took the opportunity to tap into the so called ‘gig-economy’ by providing their customers the link to freelance workers from handymen to movers to assistants – a great complimentary service for their flat pack furniture!
The launch of the Amazon Go prototype earlier this year sent shockwaves through the grocery sector creating the first truly contactless experience for customers. There were some reports that the concept struggled to handle more than 20 customers which may suggest that this might have been one step too far – either way it is a huge advance and few retailers are struggling to react with anything close.
We instead saw more work continue in the concession space (a trend from 2016) as we saw many retailers and brands team together to fix the ‘space issue’. Sainsbury’s led the charge with their Argos rollout and even more recently we’ve seen Tesco pair up with Next to offer customers something a bit different when they do their weekly shop – but will these concessions be enough alone to continue to entice customers in? As money continues to be tight in an industry where customers expect more, retailers must continue to diversify in this space as relying on customer loyalty alone is just not enough anymore.
Employee experience to the forefront
Employee experience sadly continues to lag behind customer experience and at the beginning of the year we suggested that 2017 could be the year where employees could get some real focus. No major milestones were mentioned in the news, however, we are seeing many retailers investing in their back-end supply chains in order to enable the capabilities for their front end customer experience. This investment will certainly have a positive impact on their workforce, providing employees with the tools and insight to make a difference when these projects finally begin to come to fruition.
Bottom line over top line
In 2017 we were not short of cost-conscious retailers making reductions in their operations giving the looming impacts of Brexit and the national living wage. Some examples were; Asda making 300 head office job cuts to focus on future customer propositions, Sainsbury’s reducing their workforce by 2000 in order to counter impact the discounters price war, Tesco also making over 2000 job cuts across to simplify their operating model, and finally Debenhams announcing the closure of 10 warehouses to re-shift their market focus and become more customer facing. It was some what of a ‘Retail Apocalypse’, and currently doesn’t paint a healthy outlook for the industry.
Did we see anything else round the corner?
In our 2017 trends blog we also noted a few topics that didn’t quite make the short-list due to being in emerging stages, nevertheless we’ll give them a quick check to see how they got on…
- Artificial intelligence – not quite a Terminator judgement day but some great innovation made in digital apps e.g. ASOS search-by-photo app
- Virtual and augmented reality – no one really jumping on the back of the Pokemon Go success as we eluded to in one of our late 2016 blogs, although a really clever AR app was released by IKEA which allows customers to try out furniture in their own home before they purchase – even I’ve used this one!
- No touch and low touch retailing – Amazon went for it with their Go prototype but was maybe a bit too early for this technology to come of age
- Peer-to-peer retailing – nothing seen in 2017, something to keep a watch on during 2018
- Smart Fabric – still in its infancy
- Payment methods & cyber security – use of contactless payments increasing by over 100% on 2016 shows the continued shift towards digital and the need to invest in cyber security to support this
So did 2017 live up to expectations?
Well I think it’s fair to say, we weren’t too far off the mark. 2017 continued to demonstrate that the retail landscape is changing with no chance of stabilising anytime soon and that digital continues to disrupt the industry with new products, services and capabilities.
However, the one thing that stood out for me in 2017 wasn’t the technology but was instead the sear boldness seen by a number of retailers to do something different in order to combat the industry’s demands e.g. 1-hour delivery, mergers, acquisitions, job cuts. These bold moves will put them in a strong position for 2018 as they prepare for what looks set to be another tough year in retail with a whole new set of opportunities to go after – but I’ll leave that for our next blog…