Retailers once had a pretty clear idea of who shopped where and how they did it. After all, there were not that many options available for shoppers. Consumers would see an ad or peruse a catalog, and then visit the physical store with the hope that their preferred item was in stock.
These days, retailers understand there is an entirely new kind of shopper. Indeed, since the advent of e-commerce, retail complexity has increased exponentially, and today’s digital consumer navigates a wide range of channels and potential shopping journeys.
As a recent Cisco survey of retail trends discovered, e-commerce has added about 40 possible shopping options for a typical shopper. With the rise of the Internet of Everything (IoE) — the explosion in networked connections of people process, data, and things — potential shopping journeys will expand to 800 and beyond. Some of the new options coming into play could include mobile devices equipped for live Web engagements, checkout optimization, mobile payments, wearables, augmented reality, and drone delivery.
The variety of journeys available to shoppers is growing exponentially.
Source: Cisco Consulting Services, 2015
This sweeping digital transformation has dramatically altered the shopping behaviors of consumers, who now demand experiences that are contextual and hyper-relevant (enabling consumers to receive what they want, when and how they want it), whether in-store or out. As a result, retailers are reinventing their business models and rethinking much of what they once knew, including traditional customer segmentation.
Video: IoE in Retail: Hyper-Relevance through Consumer Context
Increasingly, we are entering a period that has been referred to as “post-demographic consumerism” in which consumption patterns are no longer defined by traditional demographic segments such as age, gender, location, income, family status, and the like. This presents a significant challenge to retailers already grappling with growing complexity in their operations.
For example, Cisco’s research reveals that Gen Y is far from monolithic. On one hand, Gen Y continues to accelerate the shift to online channels (faster than any other group): although 34 percent make more than half of all purchases online as they seek convenience and greater access to information, 54 percent would shop only in stores for the next month if they had to make a choice. Moreover, just as the physical store remains important to Gen Y, many seniors are shopping online or with mobile devices.
In short, consumer segments are increasingly fragmented and ephemeral. The sheer number of potential shopping journeys is growing exponentially, and the change is occurring faster than ever before. For an individual shopper, however, the journeys are also dynamic. Consumers are constantly shifting to other journeys as new innovations emerge —
and faster than retailers can respond. Compounding this, the velocity of innovation is increasing as IoE dissolves traditional barriers (for example, through the low cost of app creation, the Kickstarter-style funding model, and so forth).
Since every retailer is unique, and there is enormous variation across categories, each retailer must define its own target segments, and then be prepared for the rapid evolution of new “microsegments.” Cisco is working with retailers to define target segments and prepare for the evolution of new ones.
To enable the customer outcomes that will determine the winners of the IoE era, most retailers understand that they need to know their customers as never before and, critically, possess the requisite business agility to adapt. Fortunately, IoE and consumer analytics technology provide the platform to truly understand, engage and respond to their customer.
Analytics is a key competitive frontier in the IoE era, enabling retailers to provide consumer experiences, offers, and interactions that are contextual, relevant, and timely. Moreover, analytics empowers the retailer to respond dynamically to constantly changing customer behavior.
To succeed in this area, retailers need a technology strategy that captures data at the “edge” of the network — from mobile devices, sensors, video cameras, and the like — and analyzes it locally, in real time, to respond to fast-moving opportunities. By leveraging analytics and other key elements of IoE such as video and mobility, retailers can drive greater efficiency in each customer journey, offer real-time savings, and create a more relevant customer engagement.
As shopper segmentation blurs, analytics is critical to understanding the new digital customer. Old or young, rich or poor, all customers have value and want to interact with retailers in new, hyper-relevant ways. IoE-driven solutions are the way to do it.
Tags: Anabelle Pinto, analytics, CCS, Cisco, Cisco Consulting Services, connected retail, data, digital, hyper-relevance, innovation, Internet of Everything, internet of things, IoE, IoT, National Retail Federation, NRF, retail, shopping
One customer can be multiple shoppers, and retailers need real-time insight into every shopping journey. Be sure to take a look at Cisco VP Joseph Bradley’s new blog as he shares three retail Internet of Everything attributes that deliver hyper-relevance and build a dynamic infrastructure: http://cs.co/9003xAm3
Be sure to check out Blair Christie’s new blog on winning consumer trust! She discusses how a new Cisco study shows that shoppers are looking for efficiency, engagement, and savings from the store. For example:
- 77 percent of respondents said they would be “somewhat” or “very likely” to use a solution to optimize the checkout process.
- 79 percent indicated a willingness to take advantage of in-store offers provided via digital signage
- 73 percent said they’d like to receive special offers through augmented-reality solutions
- 57 percent indicated a desire to learn more about products in the store by using augmented-reality capabilities
Learn more about this exciting study!
“Mike” may be an avid golfer who enjoys meandering through the sporting goods section of his local retailer. But he would be a very different shopper the morning his plumbing fails and threatens to flood his basement. In such a context, efficiency rules, and it is critical for the retailer to speed his shopping journey — from product research to fast checkout and payment. Friendly, by-name greetings offering prompts for new golf products on Mike’s smartphone would seem irrelevant at best, and intrusive at worst.
Checkout optimization, in-store sensors, augmented-reality solutions, and real-time analytics at the “edge” of the network are just a few of the capabilities that could give the retailer a clear picture of Mike’s shopping habits in that particular context — time, place, and situation — while helping Mike meet his plumbing crisis in a timely and efficient manner.
In effect, Mike is one customer, but he can be many different shoppers. And retailers need to know them all. Technology — specifically Internet of Everything (IoE) solutions that connect people, process, data, and things — is the way to do it.
To better illuminate the competitive dynamics and opportunities for retailers, Cisco this week shared its fifth annual retail consumer survey. Released at the National Retail Federation (NRF) “Big Show” in New York, the study includes a survey of 1240 consumer respondents from the United States and United Kingdom. Later this year, Cisco will release the complete global findings from 6,000 respondents across 10 countries.
At NRF, we also met with retailers from around the world, who shared their successes and challenges. Technology, of course, can be a headache for retailers. From disruptive innovations to rapidly changing customer behaviors, today’s retailers are challenged on multiple fronts. As the Cisco study found, however, IoE-enabled solutions offer retailers an opportunity to provide their customers with hyper-relevant experiences that blend the best of online shopping with the advantages of the in-store experience.
The key is to gain insight into the real-time nuances and context of the many shopping journeys available to consumers. That requires investments in the right technology. But how can retailers avoid the kinds of investments that have not paid off in the past?
In the Cisco study, we tested 19 IoE-enabled shopping experiences, spanning all stages of the shopping journey and addressing many maturing digital enablers, including video, mobility, and analytics. Overall, consumers indicated that they are very interested in using these applications to get more value. The table below illustrates our respondents’ interest level in the 19 individual concept tests, along with the financial opportunity from each of three value proposition categories: efficiency, savings, and engagement. Our economic analysis revealed that roughly two-thirds of the total potential opportunity (or $208 million for an illustrative retailer with $20 billion in annual revenue) comes from applications that deliver greater efficiency for consumers.
In the United States, disruptive innovators (e.g., Groupon, LivingSocial, Gilt) have successfully targeted consumer savings, which has served to exacerbate margin compression for retailers in some categories. We are now exploring these trends in Europe, Asia Pacific, and Latin America. We find that most incumbent retailers, by contrast, are investing heavily in solutions that engage consumers at all points of their shopping journey, including bringing them into the store and cross-selling and up-selling to them (indeed, this is the underlying strategy of today’s discount wars).
Consumers have always been preoccupied with savings. So
it is no surprise that savings remain the area of most interest to our survey respondents. Efficiency, however, is a close
second in terms of interest. When asked about the areas where they would
like to see improvements, 39 percent of our respondents
identified the process of selecting and purchasing goods, showing a need for greater
ease and efficiency. By contrast, only 13 percent sought improvements that would create a more personalized
In this year’s survey, consumers made it clear that experiences must be efficient, contextual (that is, reflecting a shopper’s individual situation, real-time environment, history, and so forth), relevant to real-time needs, and easy in which to participate. In the retail environment, such situational awareness is essential to creating a better customer experience. Retailers must increase the value to the consumer throughout the shopping journey, demonstrably providing a combination of efficiency, savings, and engagement.
By exploring these solutions today, retailers can begin to realize a new level of innovation and competitive dynamism. And customers like Mike can look forward to getting their plumbing fixed ASAP (and maybe even return to the store later that day to try out some of those new golf products).
Tags: Anabelle Pinto, analytics, Cisco, Cisco Consulting Services, connected retail, consumer, customer experience, digital, hyper-relevance, Internet of Everything, IoE, National Retail Federation, NRF, privacy, retail, shopping, smart retail, trust
One of the hottest topics at NRF this week has been delivery systems. Recent research by Cisco Consulting has found that delivery is one of the top concerns of not only retailers, but of shoppers as well. I now have personal experience of this: Just before the holidays, my husband and I ran an experiment: Living digitally for a few days, shopping online, using only available delivery systems.
Day 1 – Now, I order just about everything online except for groceries. However, my husband orders very little online, although he is a fan of eBay. The first question he asked was, “What about groceries?” I said we would order from Safeway (where I used to work before coming to Cisco). His next question was, “Well, that’s great for our basics, but what about the specialty items we get from Trader Joe’s, how are we going to get those?” He solved this problem himself by finding Envoy, a store-agnostic delivery service.
Amazon, Amazon Fresh, Google Express, Instacart, eBay Now!, Deliv… so many delivery options, though not all available in our area. The first order of business was to buy groceries. However, I needed to sign up for a delivery service – up until then I had purchased everything online except for perishables, and I must say that I was a little embarrassed that I had never ordered from my alma mater, Safeway. So, I started there and was pleased to see that my Safeway id/password combination worked as well as giving me the option of free delivery, free water, and paper towels if I ordered within 24 hours. I love promotions and rarely pay full price for anything, but even more I love FREE.
Next, I signed up for Envoy to cover our Trader Joe’s and Whole Foods order, but found that I could only order from one at a time for $10/month each, with a service fee of $10 + 10% of my grocery bill. That seemed a little pricey.
That same evening, the washing machine broke, and my husband proceeded to determine how to best to repair it. Here we had a pleasant surprise, as we found that we could order a new part online for $35 (as opposed to or purchasing it locally for $90). So, that was a no-brainer… he placed the Amazon order with a scheduled arrival of mid-next week, labor not included.
Day 2 – I had scheduled our grocery order to be delivered between 11:00am and 3:00pm, and for my flexibility received a $6 discount. At 4:00pm, after a day of continuous meetings from home, I wondered where our order was and asked my husband to contact Safeway. At 5:00pm, I learned that our very first grocery order was stranded on a broken-down truck with no ETA. Finally, at 6:30pm a very apologetic driver contacted me, indicating that he was picking up all of the orders from the broken-down truck and would be arriving in about 30 minutes or so depending on traffic and the pelting rain. Then, I paused on our experiment to go get a pedicure (can’t order this online, yet).
That evening, all the groceries were delivered as ordered, with the exceptions of one item out of stock (one of the Just for You offers) and the condition of the avocados, which were definitely overripe.
Then we discovered we were out of firestarter logs. A quick check on Amazon found what we were looking for, with a promise of a Sunday delivery. Sunday, really?
Day 3 – My email box was becoming overwhelmed: I had received no less than 126 unique retail offers during the last 48-hour period. The most popular promotion was free shipping by online and multichannel retailers, with discounts on shipping from 20% to 50%. With all the noise, it was hard to tell which retailer or service was which.
Now I needed to deal with a few returns on the holiday presents I had been buying online. The easiest included free returns with a shipping label included in the package or printable online, or the ability to return directly to the store. The most difficult required a phone call, followed up by an email with an RMA (return merchandise authorization), and a requirement me to pay for the return. (I won’t be buying from that retailer again.)
Next, I was ready to mail my holiday cards. I thought since the mail is delivered every day to our house, I would be able to order stamps online. Guess how many days it takes to deliver stamps to your home: 7 to 10 days, plus 1 to 2 days extra due to the holiday season. There is certainly a disconnect between departments at the USPS. I hate to send out my holiday cards late!
Day 4 – Fortunately, I had remembered to order all of the items I needed to prepare my appetizer for a party that evening. And, Amazon delivered on its Sunday promise! Our firestarter logs appeared on the doorstep before noon.
Day 5 – Done! We lived for 5 days entirely digitally (except for the pedicure). How did it go? We found that:
- Living digitally requires planning ahead; even when new services are intended to provide same day service, they are not widely available
- Living digitally needs to be a family affair with extra coordination
- Service and delivery fees vary widely
- Returns can be challenging and time-consuming
- You’re dependent on the selections of the in-store shopper (i.e., the avocados)
Differentiation is still a major challenge. However, I would say that customers want the same thing they want in the store: a friendly, convenient shopping environment. Delivery services need to meet customer expectations on timing, and keep returns simple and convenient. Products ought to be in good condition, and fees need to be minimized. The challenge, obviously, is how to make this work financially.
Other delivery options are increasingly available, such as in-store pickup of online orders, locker-based pickup systems, etc. Keep an eye out for my upcoming paper on delivery systems – Cisco has some exciting ideas coming around this!
In the meantime, check out the new white paper on shopper trends.
Tags: #nrf15, amazon, amazon fresh, delivery, envoy, groceries, NRF, retail, returns, shoppers, trader joe's