Last year, in Apparel’s 4th annual Report taking a look at how digital technology is evolving in the retail store, we started by considering AI and the impact it is having across the retail universe. We noted that one of the common goals of AI — which undergirds the micro-targeted marketing, the deep analysis of shopping patterns on both the individual and aggregate levels, the identification of trends in style and fit, and so forth — is to figure out those fine nuances that serve consumer demand while putting consumers at ease and learning their trust. On some level, we noted, AI is about engineering human intimacy.
And yet, the Report concluded that achieving real human intimacy is still far beyond the capability of AI, or robots, and that, for now, humans — armed with mobile devices, provided with one view of inventory and one view of the consumer — are still your best bet for engaging and delighting the customer. In other words, people are needed to make a human connection.
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When we’re talking about the merging of digital with the physical store, the quest for a human connection — or to say it another way, for talent — is one of the greatest challenges faced by retailers, as well as by the entire supply chain, across industries.
Ask just about any apparel executive, from the retail store to the factory floor, and you’ll hear that finding and retaining good talent has become one of the greatest barriers to running and growing a business.
The causes of this shortage in labor are many and complex. To name just a few: 1) unemployment in the United States currently stands at 3.7 percent, the lowest since 1949, and is as low as 1 percent in some pockets of the country; 2) today’s job openings require new and often greater skill sets, particularly in areas of technology and automation, than their predecessors in the same fields; and 3) indications are that fewer younger people are interested in retail and factory jobs.
“Fewer young people have a passion for retail,” says Jim Thompson, CFO of Cavender’s Boot City, who says his company recently interviewed several people for sales associates positions that it “wouldn’t have talked to three years ago.” With a shrinking pool, the bar to entry is lower.
At the same time as retailers are dealing with a shortage of talent, they’re also reckoning with the ongoing and massive shift in shopping behavior and consumer demand. E-commerce has forever changed the retail landscape, as today’s consumer has 24/7 access to shopping and information, and the ability to browse and shop across multiple channels simultaneously. Today, e-commerce comprises 14 percent of retail sales, a figure expected to hit 17 percent by 2022.
So, if e-commerce continues to grow, and shoppers are happy to receive packages at their doorstep, is a talent shortage such a problem, and do we really need retail stores? The answers are yes and yes.
What’s the deal with brick and mortar, really?
Let’s first take a look at the state of brick-and-mortar retailing. A few years ago, the bell was by many accounts ready to toll for physical stores. Many retailers began downsizing the size of their footprints, both in number and size of stores, and some went bankrupt altogether. In just the past few months, Sears filed for Chapter 11 bankruptcy and will close 142 unprofitable Sears and Kmart stores near the close of this year. Hudson’s Bay, too announced plans to shutter 10 of its 48 Lord & Taylor locations through 2019 — including its iconic New York City Fifth Avenue location. In April, The Bon Ton department store chain announced it is going out of business, while also this past spring J.Crew announced plans to close 20 stores this year, following the closure of 50 stores during fiscal 2017. The list goes on.
But this string of retail failures and downsizings is just one piece of a larger story, and it has belied and overshadowed both the achievements by more established retailers of successfully evolving with the times, and the emergence of new, agile start-up companies that are making a splash not only online, but in the brick and mortar as well. The reality is that the dreaded “retail apocalypse” didn’t happen, and in fact, more retail stores opened than closed this year and last.
“What was visible was the store closings, but stores were opening in different formats, and different types of stores were opening,” says Genevieve Chamard, managing consultant, Digital Retail, Capgemini. “The typical extremely big store format in many cases does not fit the purpose of retail. What we’re seeing now is smaller store formats, which indicates that the physical store has a role to play, but it has a role to play in conjunction with the online experience. It’s less about online vs. in-store, and more about a continuum of experience,” she says.
This experience might start at a shopper’s home, browsing online, or researching product; it could continue on mobile in the car, and then in the brick-and-mortar store, where she touches and tries on product. Perhaps she buys an item in the store, and then later decides to buy an additional product online that she tried on earlier, to be delivered to her home. The shopping journey can unfold in an endless number of ways, but the two channels working in conjunction can serve to “bridge the gap” between the benefits of shopping online (24-hour service, shop from anywhere, detailed product information) and the benefits that brick and mortar can offer, (touch and feel, try on, in-person sales assistance, immediate gratification, social interaction and engaging experience).
Those latter benefits are crucial, which is why we see so many e-commerce startups opening physical stores. Black Tux, which launched online in 2013, later moved into brick and mortar, and soon will be selling its tuxes in addition to renting them. Athleta, Bonobos, ThredUp, Rent the Runway and of course Amazon all launched as online only businesses before opening physical stores.
“Brick and mortar will always be a key part of retail strategy. Successful pure play are opening stores for a reason, says Paula Rosenblum, managing partner, RSR Research. “They are great for getting brand awareness and end up being more profitable than e-commerce operations.”
Studies show that not only is brick and mortar more profitable, but that omnichannel shoppers — those who shop in more than one channel — are the most profitable customers, spending an average of 4 percent more than single-channel shoppers in-store and 10 percent more when shopping online.
The key to this winning combination is to create a seamless experience that allows customers to cross from one channel to another without encountering points of friction and while providing points of engagement.
“The physical store will not go away. The way you insert it into the overall shopping experience will matter,” says Chamard.
Removing the sticking points from the shopping experience
The ease of purchasing online has taught customers how frictionless a shopping experience can be, and that has raised the bar on their expectations when it comes to in-store shopping. Unfortunately, these expectations are often not being met. In fact, many consumers are no longer enjoying or finding value in the physical retail experience. A global survey and report conducted by Capgemini entitled, “Why Physical Stores Need a Reboot,” found that one-third of consumers would rather wash dishes than visit a retail store! That’s telling.
Depending on where a retailer is starting from, it has different weaknesses to overcome. “Brick-and-mortar retailers know store operations quite well. However, they’re challenged with adopting the latest technologies and instead run on dated and ineffective systems. On the flip side, digitally native companies are running the latest agile SaaS software, but they don’t have the strongest capabilities in running store operations,” says Dan Stolarkski, managing director, Pragma Consulting.
To be sure, retailers are working to address these issues, some with more success than others. Even so, more than 50 percent of retail executives do not believe the digitization of their stores is moving quickly enough, for reasons ranging from lack of adequate training for store associates to difficulties in measuring the ROI of digital investments. These are just some of the barriers preventing retailers from eliminating bottlenecks in the stores. Chamard identifies three key points of friction where consumers get hung up. They are: 1) around finding product information; 2) around the register; and 3) around last-mile delivery.
Finding product information. Another finding from the survey: 71 percent of consumers struggle to compare products because it is difficult in the store to obtain all of the product details — such as price, fabric content and provenance — needed to make a decision, which are much easier to research online. It’s worth noting here, too, that voice assistants are gaining traction among consumers for researching and even for purchasing products, with 40 percent of consumers expected to have a voice assistant by 2020, and 35 percent of those consumers expected to use it to purchase products, says Chamard. This is yet another channel that adds ease to the at-home shopping experience, and will further raise expectations in store.
Around the register. Second only to the difficulty of finding product info: 66 percent of consumers identified long queues at checkout as a top frustration. Accordingly, retailers would be wise to focus on eliminating long lines as well as tedious payment processes. Amazon Go has addressed both of these issues with technology, including smart shelves and cameras, that allows customers to simply walk out of the store with their merchandise, automatically charging them for the merchandise they leave the store with.
Other companies, such as Athleta, are busting queues with mobile POS, allowing customers to check out anywhere on the floor by allowing sales associates to be anywhere on the floor, instead of tethered to a fixed POS.
Around last-mile delivery. New offerings such as BOPIS (buy online, pick up in store) have given customers more options that serve their needs, but execution is often subpar. If, when a customer comes into a store to pick up a product, he has to go to the back of the store to pick it up, or has to wait 15 minutes for a sales associate to retrieve it, the retailer has negated much of the benefit of the service, while likely irritating the customer by not delivering on the expectations set. However, when done right, BOPIS can be a double-shot boost to retailers, as they don’t have to pay for shipping and also are given a second opportunity to sell when the customer comes into the store to retrieve his online purchase.
Using technology to engage the consumer
In all three of the areas above, and throughout the other points of the shopping journey, a wide variety of technology can serve to alleviate these points of friction, while also reframing the brick-and-mortar store as an experience hub vs. simply a buying location. With passionate sales people who can help connect the consumer to technology and who can enrich the experience with additional knowledge or guidance, a retailer stands a greater chance of building loyal customers.
Let’s start with the obvious. Your customer likely has a smartphone with her (nearly 70 percent of people in the United States own one), and there’s a good chance it’s in her hand. Your customer needs access to wi-fi. That’s a no brainer, although many stores still are proverbial black boxes when it comes to providing access to the internet. The customer wants to be able to search for product information. She may want to send a selfie in an outfit to her friends and family. And while it’s true that she may also want to price compare or look at product from a competitor, it is compelling product and experience — not a low-tech store where there’s no signal — that you’ll need to maintain her interest.
How do you create that experience? In part by blending innovative technologies into the retail shopping experience. Let’s take a look at a few of the more buzzworthy:
Augmented Reality (AR). Technology that superimposes a computer-generated image on a user’s view of the real world via a smartphone or other digital device. It’s the real-time use of text, graphics, audio and other virtual enhancements integrated with real-world objects. Lacoste, for example, created an AR mobile app that allowed customers to virtually try on shoes, superimposing digital iterations of its products on top of the shopper’s foot, as viewed through his smartphone. The app also created AR experiences with window displays, in-store signage and promotional postcards. More than 30,000 users engaged with 3D products while using the app.
Virtual Reality (VR). By contrast to AR, VR does not incorporate any aspects of the real world; it is a simulated 3D environment that surrounds the user and responds to his or her actions in a natural way. Users typically are equipped with a headset for viewing. There has been a lot of talk about VR at retail for several years now, but the technology may be poised to take a significant leap given Amazon’s recent partnership with Taiwanese-based HTC to sell the electronics company’s VR apps, as well as its opening of 10 VR shopping kiosks across India to promote Prime Day this past summer.
Geofencing. From an in-store, digital experience, many opportunities present. We’ve already established that your customer likely has a smartphone. If she has opted in to receive messages, the retailer has an opportunity to use geo-fencing tools to send location-based texts when a customer is within the vicinity of a store, such as a coupon for 20 percent off any product for that day only, or a text announcing the arrival of new merchandise at that store. That’s a level of personalization that can be very effective, when done right, i.e., if the retailer sends relevant texts and does not bombard the customer relentlessly with messages.
Gamification. Interactive games are a good way to engage the customer, and can be used to draw her into the store as well. The universe of opportunities in this area is limitless, and could include games that ask customers to vote for their favorites among various styles of apparel, to dress their own avatar, or to play a game for a prize such as a coupon or free giveaway. Boardsport apparel retailer Tilly’s combined gamification with augmented reality (AR), partnering with Snapchat and Youtube star Shonduras on a scavenger hunt that allowed customers (who downloaded the app) to use AR on their smartphones in-store to engage in activities and locate “coins” that could be redeemed for prizes and discounts.
Artificial Intelligence (AI). The topic of artificial intelligence often conjures images of smart humanoids like Sophia the Robot, but AI in retail today has little to do with robots and focuses on a variety of platforms and technologies that allow machines to take in vast amounts of data, recognize patterns in that data and perform human-like tasks (think chatbots or personalized product recommendations). Increasingly, analytics are being employed to take data from in-store cameras to recognize store traffic patterns and product traffic patterns. With these tools, retailers can learn, for example, that a specific item is repeatedly selected from the rack and taken to the dressing room, but is never purchased, indicating that it likely doesn’t fit will, and leading the retailer to make slight adjustments to the fit to capture the interest in the style. Most AI being used in industry today relies on deep learning and natural language processing.
Unlike those technologies mentioned above, artificial intelligence isn’t so much a tool that customers interact directly with as much as an underlying technology that works across systems to recognize patterns and provide analysis across a spectrum of areas. AI and data analytics are driving exponential change across industries, and while the capabilities they provide are eliminating some jobs, their larger impact is in augmenting human abilities, not replacing them. AI automates dull, repetitive tasks and allows people do focus on the areas of human strength, such as teamwork, creativity, and social skills. When this is combined with the speed, scalability and quantitative skills of AI, the result is far better than what can be achieved by either alone.
A recent report, “Collaborative Intelligence: Humans and AI Are Joining Forces,” published by the Harvard Business Review states, “To take full advantage of this collaboration, companies must understand how humans can most effectively augment machines, how machines can enhance what humans do best, and how to redesign business processes to support the partnership.”
As AI and other technologies improve, retailers much learn how to tap into the best capabilities of both machines and people.
Creating a digitally enabled salesforce
Which brings us back around to talent. While all of these technologies are growing in popularity and will impact the face of retail, the areas where the majority of retailers are struggling have less to do with edgy technologies and more to do with less glamorous but more important areas. To wit: The gap between the consumer online and the consumer in-store remains pervasive. Seeing two people where there is only one individual prevents retailers from truly knowing their customers. Closing this gap will solve a host of problems. The solution requires technology, and it requires people.
Sales associates have a crucial role to play in stores. They are the most important link between the customer and the product, but only if they are armed with information and, ideally, deep knowledge of the product, the brand — and the customer. Increasingly, consumers seek a personalized experience, and without access to product data (now often including supply chain data such as where a product was made and by whom), inventory information, consumer trends, customer past purchase data and even current customer online activity, sales associates cannot provide consumers the level of assistance they seek.
Enabling store associates involves both the physical accessories — tablets or mobile smartphones — that allow them digital access while freely moving about the store, as well as technology solutions that provide access to the data they need. These include CRM and clienteling for managing customer relationships; endless aisle for enabling consumers to view any inventory in the retailer’s enterprise, regardless of location; order management for allowing them to purchase it; omni-fulfillment, enabling the delivery of that merchandise to any location; and POS solutions, enabling checkout anywhere on the sales floor.
Also crucial: workforce tools such as those that allow associates to complete scheduling and other non-consumer-facing tasks on the fly and with ease, to leave most of their time available for serving the customer.
“I think it’s all about empowering the in-store employee so that she or he can be actually useful to the consumer,” says Rosenblum. From [providing] basics, like a map of the store, to product features and benefits, to task management, enabling the in-store employee is critical.”
What consumers seek is an experience comparable to the one they receive online from the perspective of both ease and personalization. “One of the reasons people like to shop online is that their sales history and online technology allows for a personalized experience,” says Bob Copeland, managing director, RetailChain Advisors.
“CRM and customer loyalty programs can help store associates personalize the in-store experience as well. When you combine well-trained brand ambassadors with good technology, it can enable those special moments that create lasting connections to your brand,” he says. “Adding product customization and personalization and other technologies such as [those that provide] visibility to inventory, and use of mobile devices, supports this approach.”
Serving the consumer across touchpoints doesn’t have to be super sexy. Nordstrom is often hailed as an example of a retailer that’s ‘getting it right,’ despite the fact that its customer is not “blasted by tech” in the store. There are not a lot of kiosks, virtual walls or screens,” says Chamard. “However, Nordstrom did a very good job of integrating [the online-to-store experience].” For example, Nordstrom connected its online-only flash sale site, Hautelook, to its Nordstrom Rack stores, allowing customers who purchased via the Hautelook app to return unwanted items to the brick-and-mortar store. “That gives comfort to the customer to know: ‘I still have an easy way to return the product,’” she says. What Nordstrom found is that 40 percent of customers who come into the store to return or pickup product are likely to purchase additional items. “So they made the return process work to their advantage.”
Even though more than 20 percent of Nordstrom’s sales are consummated online, says Rosenblum, its in-store sales are also doing well. “It strikes me that the channels play off each other. And ‘the book’ has been digitized,” she notes, which most certainly provides speed and efficiency to employees. The retailer also implemented mobile POS technology which has removed friction at point of sale. “It’s not always flashy stuff,” says Chamard.
It’s important to look at your customer profiles and determine the types of experiences you want to provide, and then seek the technology — and provide salesforce training — that enables that experience, rather than buying technology first and trying to make your offering match its possibilities, she says.
As consumers increasingly shop online and as the format and size of stores changes, some retailers are entirely rethinking the retail space. Women’s sustainable apparel retailer Reformation has essentially changed the customer experience by removing most product from display. Instead, one item of each style is on view. Customers digitally select the items and sizes they’d like to try on via app, and a sales associate brings those items from stock to the fitting room, where customers can request additional items, add to a wish list, or make a purchase. Additionally, the fitting rooms are outfitted with phone chargers, speakers and buttons that let shoppers change the lighting to be more flattering. “They make the fitting-room experience, which is a top frustration for shoppers, a more entertaining and enjoyable experience,” says Chamard.
In looking at the role of digital technology within the store, retailers need to get better at understanding the context of the shopping journey, and what experience needs to be offered at each step along the way. Easier said than done. It’s difficult to integrate those experiences together into one cohesive unit. One root of the problem is the organizational structure of most retail enterprises, e.g., the person who ‘owns’ e-commerce is different from the person who ‘owns’ the stores.
“These [people] should be working together,” she says. One of the other main hurdles to creating a more seamless experience between online and in-store is that it costs less to serve the customer in the store vs. online. “Because it’s less expensive to use the store as the place to serve the customer, retailers want the store to drive depth. They still [pit] the channels at each other.
As the cost of e-comm is driven downward with new ways of decreasing the cost of shipping, Chamard expects that we’ll see more integration between both the people and the technology connecting the channels. “They’ll work together better.”
Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected].