How Disruptive Retailers Are Reinventing the Store Experience
In a highly competitive market where brick-and-mortar retailers are engaged in fierce competition, we can learn a lot from how the most disruptive retailers are creating the future of the retail store.
JDA Software and Retail Systems Research partnered to survey CEOs, other C-suite executives and decisionmakers at more than 100 retailers worldwide, examining why they see themselves as disruptive or non-disruptive, identifying differences in vision, investment and strategy that may help retailers find a competitive edge.
And while conventional wisdom might lead you to think disruptive retailers are laser-focused on e-commerce, we found that retail’s disruptors see physical stores as a key part of a larger unified commerce strategy — with advantages that can help them win at positioning those stores as part of a personalized shopping and buying experience.
This shouldn’t come as a surprise to any of us who work in the retail industry. We know that when properly planned, stocked and staffed, retail stores are the immersive and tactile part of your identity — providing the knowledge and personal service that build loyalty to your brand, and the sensory experiences that win loyal shoppers to the brands you stock.
And this is why it was surprising for us to learn that a large percent of the C-level executives we surveyed — 11 percent at self-identified disruptive retailers, 13 percent at non-disruptors — told us they didn’t know what percentage of their store base would either grow or close in 2018.
Yes, retail is changing rapidly as companies struggle to right-size their physical space and discover the best strategy for competing with other stores as well as Amazon. But are retailers being reactive in the face of this formidable competition, instead of looking at the overall story that the market — and their customers — are telling?
Time and again, research has shown that customers want the flexibility to choose in-store fulfillment as an option. In our survey, even among retailers who don’t see themselves as disruptive, 14 percent of executives reported that more than 70 percent of their online transactions are fulfilled in-store.
When it comes to customers returning items they’ve bought online, 42 percent of executives at disruptive retailers said they’re seeing between 41 percent and 100 percent of those returns being made in stores instead of through other fulfillment channels.
And when asked to predict how their business will change in the next three to five years, 49 percent of leaders at disruptive retailers said more than 40 percent of transactions will involve a digital device, regardless of how those orders are fulfilled. In fact, 28 percent of those retail execs believe that within three to five years, more than 70 percent of their transactions will involve digital devices at some stage in the shopper’s journey.
To adapt to this new reality, about half of the disruptive retail execs we surveyed see their stores moving toward a showroom model — selling out of a centralized inventory pool, and relying on in-store experiences and convenient fulfillment options to help engage customers.
Which means that today’s challenges around rapid fulfillment, inventory management and staffing are going to remain challenges for brick-and-mortar retailers in the future — especially for retailers whose operations are too siloed to give them adequate visibility into those processes.
Disruptive retailers also recognize the ways that artificial intelligence and machine learning will impact retail — helping them identify trends in customer behavior and create more personalized product assortments, promotions and experiences.
In our survey, 34 percent of non-disruptive retailers said they have no plans to implement AI or machine learning technology, versus only 19 percent of disruptors. Forty-eight percent of disruptive retailers reported that they've already implemented AI or machine learning technology in some part of their business, compared to only 38 percent of non-disruptors.
Increased customer knowledge and internal visibility may be the factors that determine which stores and chains survive this turbulent period in retail. Because we know that even when your customers prefer going to stores for inspiration or help with products, they’re still comparing prices and options online.
Brick-and-mortar retail isn’t disappearing — far from it. Retail stores offer many opportunities to curate and enhance the shopping experience and create lasting loyalty. The question is, how will retailers learn from the industry’s disruptors and adapt quickly to changing customer needs and expectations?
JoAnn Martin is VP of Retail Industry Strategy at JDA Software. A veteran of the retail space, JoAnn analyzes trends impacting softlines, fast moving consumer goods and other sectors of the retail market, discovering ways that technology creates efficiency and enhances the customer experience.