Today, it is survival of the fittest in retail, and only those who adapt and respond to the environment the fastest are likely to make it long term. In his keynote address at a recent National Retail Federation (NRF) conference, Virgin Group Founder Richard Branson said, “Brands must be entrepreneurial and flexible. If something isn’t working, then change.”
Brick-and-mortar retail is being disrupted as e-commerce continues to grow and become ever-more convenient for consumers, whose attention spans seem shorter than ever.
Here are five actions that we recommend flexible brands undertake in order to reach customers:
1. Brands Should Reach Consumers Where They Are, Outside Traditional Mall Formats
The brick-and-mortar channel is being disrupted, forcing retailers to think creatively about how they can use physical space in a more exciting and cost-effective way to attract consumers to their locations.
Pop-up stores are one trend that is working effectively. With pop-ups, brands can disrupt the more traditional wholesale channel without taking on the significant real estate risk that comes with a long-term lease. Brands also have creative control of the brand experience and how their messaging is communicated to consumers with these formats. Mall operators are receptive to pop-ups, as they bring something new and unique to consumers. Real estate firm Related Companies has used pop-up shops at the Time Warner Center in New York City to provide a fresh feel and add variety for consumers.We have seen just the tip of the iceberg in terms of what brands can do to reach consumers in more creative ways. Retailers and brands can operate retail trucks, temporary spaces and pop-up shops in traditional and nontraditional locations in order to drive sales and traffic.
2. Brands Should Use Marketplaces to Offer Consumers More Options
Marketplaces are platform providers. They enable other companies to sell goods or services, but do not provide anything tangible themselves. Today, Amazon is leading the charge in the marketplace space, and in 2016, Amazon’s annual marketplace sales exceeded those of eBay for the first time. The marketplace landscape is changing, with traditional retailers getting into the game. For example, Crate and Barrel set up its own marketplace structure using RevCascade’s technology to drop-ship selected products directly to customers. Others are following suit.
There are four benefits to the marketplace model that make it attractive to companies that have previously operated only in the direct-retail sector:
- It is highly profitable. Marketplace sites can charge double-digit commissions for simply acting as portals.
- Marketplaces are protected from the risks associated with owning inventory.
- Shoppers like marketplaces because they receive the products they ordered quickly.
- A marketplace model offers an asset-light way of entering new regional markets.
3. Brands Should Use Technology to Empower Store Employees
One area that has lagged behind retail’s digital transformation is the management of store associates, who, in many cases, are still bound by having to use outdated legacy systems and infrastructure. We are seeing more retailers moving in the direction of empowering their store associates with mobile solutions, and we think the trend will pick up significantly in 2017.
In 2016, we saw major international retailers announce moves to empower their store associates with mobile technology. We have identified several new solutions for store associates that are gaining traction in the market, including:
- Theatro communication tool: This voice-controlled wearable for retail employees was recently rolled out to Neiman Marcus Last Call associates. It allows employees to communicate product information quickly and efficiently, helping to improve the customer in-store experience.
- Branch Messenger’s communication tool: Branch Messenger digitalizes the shift-scheduling process, allowing workers to coordinate and exchange shifts. According to the company, its solution reduces employee absenteeism by 43% and saves managers four hours per week. Employees from Zara, J. Crew, Sephora, Walgreens and Gap are already using the application. Branch Messenger was part of the Techstars accelerator program in collaboration with Target.
We expect more retailers to adopt technology solutions this year to enhance the customer experience.
4. Brands Should Use Social Media as a Selling Tool
Another way for brands to directly reach consumers is through social media. Instagram, Pinterest and Snapchat all offer ways for consumers to shop, and Instagram, in addition to allowing users to shop via its platform, allows brands to directly share their brand story and messaging with users. We think this way of shopping will become more mainstream in 2017.
5. Brands Should Use Influencers to Get Their Brand Message to Their Customers, Wherever Those Customers Are
Many consumers rely on influencers’ authenticity and honesty regarding product recommendations, styling options and fashion choices. Influencers are individuals who are not famous by traditional standards, but who have significant clout on social media within a particular market. Many influencers have become celebrities; they have loyal followers and a level of stardom within certain circles.
From a brand perspective, influencers allow a company to identify the correct target customer more effectively, while also saving money on marketing. Consumers follow influencers because they feel the influencers are an authentic source of deep product knowledge and that their opinion is of value. Influencers’ credibility often comes from their knack for recommending a lifestyle rather than just a product. According to Experticity, a firm that connects category influencers with brands, microinfluencers (influencers who specialize in a specific product niche) have 22.2 times more conversations than typical consumers do regarding recommendations on what to buy. And, according to a study by the Pew Research Center, 82% of consumers are likely to follow a recommendation made by a microinfluencer. This is particularly the case among Gen Zers, 60% of which are more likely to believe what a YouTube star says than what a movie star says, according to Econsultancy.