As we watch consumer trends and innovative ideas impact industries, we can’t help but wonder what the near future of retail holds. Much of the culture driving change is either directly related to millennials or indirectly related to their influence on older generations who have, in many cases, adopted a ‘millennial mindset.’
Roughly 80,000,000 millennials have more than 21 percent of the current discretionary spending power. Over 10,000,000 millennials over the age of 25 have children, with more than 9,000 new children born daily.
For retailers, rather than attempting to predict the future, we encourage brands to create their best possible future by looking for the intersection of consumer trends and their emotional and participative brand benefits.
There is a fundamental shift in the definition of brand value. I think we all can agree that the old definition of brand value — functional benefits plus emotional benefits divided by price — would give you an accurate brand value. However, because of the millennial-inspired ‘participation economy,’ we can no longer base our brand value strictly on emotions and benefits. We need to add an variable to this equation: participatory benefits.
To succeed in 2014 and beyond, retailers must embrace these four beliefs:
Retail vs. e-tail is a myth
It wasn’t long ago that brick-and-mortar stores were the hub of retail transactions. If a purchase wasn’t made at the cash register, retailers relied on heavy catalogs mailed out to drive out-of-store sales.
Enter e-commerce sites.
E-tailing has changed the way we look at retail. We live in a world where a web presence is absolutely essential. The question is not which is more important but how to create a cohesive experience for your customers, and marketers need to stop thinking of these purchase locations as mutually exclusive. Seamless integration of the overall brand experience must live in both places, making the experience in-store similar to at-home.
Isn’t it odd that some of the things we love about an authentic brick-and-mortar shopping experience are the very same reasons we avoid crowded malls and tiny fitting rooms? For retail brands, this is a tremendous pitfall to overcome. Retailers strive to make the customer experience effortless with different purchase options for different people, so why can’t consumers decide what they like?
The ones who speak best to millennials understand that this group values convenience and choices. While there is high value in the in-store experience, we see that millennials often choose the convenience of making purchases online. That said, the online experience MUST mirror the experience these shoppers had at the brick-and-mortar locations.
Brands that understand this will find opportunities to add value to the at-home shopping experience by creating ways for customers to enjoy the perks of being in the store. With technology that allows customers to virtually try on products and customize their orders, it is clear that e-commerce will remain a focus for retailers in 2014.
The ‘trade-up’ and ‘trade-down’ principles
Millennials are the savviest generation of consumers ever. They can spot fakery a mile away, and their ability to use technology to crowd-source information from their peer network is unrivaled.
The group is highly loyal to brands that embrace the participation economy, have an authentic purpose that aligns to their values, create opportunities for peer affirmation, and sell quality products at a fair price. Millennials will buy from brands that ‘get’ them, and will switch between ‘brands’ and ‘private labels’ based on a variety of factors related to the importance of the product and perceived value of the brand. But they are not buying only brands or only private labels.
Barkley just completed a new study of millennial parents, along with retailers who want to capture their interest. The retailers will need to find ways to inspire consumers and save them time while still keeping prices competitive, because these new millennial parents will demand more selection and time savings than their younger counterparts.
Useful is the new cool
Finding ways to bridge the gap from a brick-and-mortar retail experience to a brand’s e-tail website begins with technological innovation.
For millennials, useful is the new cool. Technology for the sake of technology is no longer interesting — they demand technology that enhances an experience, making something easier than it was before. Considering what customers love and hate about both the online and offline experiences, retail innovators must focus on bringing a seamlessly integrated experience to each purchase point. The goal, ultimately, is to make the shopping experience more convenient for a generation that takes advantage of useful technology naturally.
As emerging technologies transition from novelty to utility, they become the building blocks of transformative retail experiences. These technologies often gain a toehold in retail settings because of their traffic-stopping power, but they earn a sustained presence by providing utility and enhancements to the shopping experience.
It’s too soon to know whether technologies such as augmented reality will take hold in retail, but already some in select categories — such as eyewear — have developed in-store installations allowing shoppers to try on a limitless array of virtual glasses.
Meanwhile, the ‘Internet of Things’ is expanding to include stores, shelves, and products, as retailers and brand manufacturers embed sensors and connected digital signage to provide real-time store analytics and an ability to adapt the environment to individual shoppers. In fact, adaptive environments — brick-and-mortar stores that (almost) transform to the desires and behaviors of individual shoppers — may seem today like an extraordinary experience, but will quickly become expected.
But for all the technologies at our disposal, the most important and transformative ones within the walls of retail environments are likely to be what shoppers bring in themselves. Increasingly, consumers are using smartphones and the information they provide to enhance their shopping experience, wielding their devices for, with, or against the shops they are visiting. While some retailers bemoan the advent and impact of ‘showrooming,’ savvy ones are already finding ways to harness shoppers’ smartphones — increasing conversions, gathering data, speeding checkout and building loyalty.
Retailers who find ways to connect customers’ technology to their stores’ will emerge as winners.
Jeff Fromm is the Executive Vice President at Barkley and co-author of “Marketing to Millennials: Reach The Largest & Most Influential Generation of Consumers Ever.” Mark Logan is General Manager of Moonshot, Barkley’s emerging technology innovation lab, which recently completed a “Future of Retail” project.
Photo by Ross Schultz for The Daily Telegraph.