5 Steps to Building a Digital Store Consumers Will Flock To
Few have outlined how to create a strategy for digitally integrated retail stores
For 2016, the NRF trade show floor was full of the latest retail tech. From the fantastic Pepper robot, who told me that a dress flattered my hips more so than jeans and a T-shirt, to advanced Scanalytics sensors used to monitor store traffic; from in-store social integrations with Olapic to Salesforce-powered TOMS pop-ups, the potential of what will be the stores of the future were found throughout the halls of Javits Center.
In all my discovery and awe, there was one key thing missing, however: the playbook on how to actually approach the design and build of a digital store of the future.
What’s more, as learned about the fantastic capabilities of many exhibitors, I could not help but think that it wasn’t retail that didn’t understand technology, but it was technology that didn’t understand retail. After all, what good is the technology if it doesn’t enhance customer experience, streamline operations and increase efficiency—thus making more money? What’s more, how can putting technology into a store be smart if the cost of entry is astronomical due to a simple lack of understanding on platform agnosticism? In an effort to help technology and retail better work with one another, I created an outline for how to develop a strategy for an integrated digital store in five easy-to-understand steps.
Step 1: Research Your Store to Understand Challenges and Discover Opportunities
In developing a digital store strategy, a brand or company must take stock of its retail store(s), looking at how technology is and could be used in them, looking at the use of digital technology in competitors’ stores, and observing the use of mobile in stores by customers. From there, the brand then defines what the problems, challenges and possible solutions could be in order to understand how to operate in a digital-to-real-world, multiple-channel environment. It then, leverages that research in order to develop a strategy.
Ray Hartjen, Director of Communications at RetailNext, a comprehensive store analytics company, believes that there are two important steps to being successful in technology assessment:
“First, a retailer has to clearly define what problems it is trying to solve or opportunities it wants to capture. Technology for technology’s sake does nothing, and there are plenty of examples of retailers instituting technology that didn’t move the needle in either shopper experience or operational efficiency. It is a waste of capital investment, and an industry with already thin margins can’t afford it.
Secondly, technology solutions need to be scalable and flexible to accommodate the inevitable advances in technology. A retailer has to build upon a solid platform and not become wed to technology, particularly hardware. Moreover, the technology needs to ‘play well together’ and be easily integrated. A handful of single-point solutions may be effective, but they can quickly drain operational budgets.”
When retailers begin to assess technology in their stores, any solution needs to make shopping easier, more convenient, more enjoyable and/or more rewarding and fulfilling for shoppers. Hartjen shared, “That does not mean technology has to be shopper-facing, as operational efficiencies ‘behind the wall’ can eliminate friction points a shopper might experience on the floor, or they might save costs which then can be passed down to shoppers with lower prices and enhanced experiences.”
By creating exceptional shopping environments, retailers have been able to increase averages sales by 29 percent and increase volume by 31.5 percent.
Step 2: Understand What Your Customer Needs and Give It To Them
Once the brand or company has assessed its technology needs, it will then need to focus on its customers’ wants before buying into any solution. It is important to identify top needs of customers before, during and after shopping, put those needs into the brand’s customer journey from home, life and in-store and ultimately identify the behavior of your customer and their needs against brand objectives. Proper assessment requires digital and first-hand information. According to Stephan Schambach, Founder and CEO at Newstore:
“Let’s say you are promoting the instant payment card. The card is targeted at young, busy professionals with young families. An initial assessment may determine that this is the best market, given their youth and comfort with technology. But convenient payment options are also a huge enabler for elderly people who can’t get out of the house easily and who are becoming more comfortable with online commerce. Retailers have to understand each customer’s problem and then examine how to leverage technology to solve that problem for them.”
According to Todd Harris, Director of Marketing at Celect, data is key to understanding customer needs, “In 2016, data finally has a true place in retail; companies now know they have sitting on a pile of data that—when properly manipulated—can predict what customers will do before they do it. When this data (inventory, transaction, catalog, impression) is analyzed across a population of individuals, a preference model is created.”
In order to align data to customer patterns that provide dimensional information, allowing retailers to build accurate profiles of their customers’ use of the digital technologies, they are going to have to connect some dots. Schambach also stressed the importance of qualitative information, advising that retailers play the role of the customer in one’s own store or elsewhere:
“It is said that everyone becomes a “service snob” once they stand on the customer side of the counter, regardless of the size of store, from mom-and-pop through to big box. The moment a cashier starts asking the customer for payment, customers start to focus a great deal more on the quality of service. This physical activity enhances the awareness of customers’ needs, and then technology enhances the ability to deliver appropriate customer intimacy at scale.”
Understanding of customer needs also extends well beyond the immediate transaction. It also must apply to the entire future direction of a store, whether it exists online, as a brick and mortar, or both.
Step 3: Architect Your Customer’s Store Journey
Once a brand understands its position in the marketplace and feels it can meet customer needs, it can leverage that information to develop a journey customers will appreciate and actively partake in. Once a company understands that an “experience” is not just a feeling, but a physical layout and a positioning of goods designed to meet the needs of their customers, they will begin to see positive results across all aspects of their business. From there, they can then understand what brings a customer back, and focus on retention strategies.
When it comes to a customer’s individual journey, brands have a host of tech solutions to choose from. From tablets, interactive kiosks, and interactive hangers to the use of augmented reality, digital signage and NFC, there isn’t much retailers can use to “enhance” an in-store experience. “Perhaps the single biggest mistake is investing heavily in one channel while neglecting the others,” shared Hartjen. “That only works if a retailer is missing a channel and needs to invest to get started, like a brick-and-mortar retailer opening its first-ever digital channel.”
Today’s shoppers are increasingly comfortable with technology and navigate through circuitous, multichannel shopping journeys. Shoppers simply have too many alternatives available to them. If an experience isn’t intuitive, easy and of value, a brand is quickly forgotten as shoppers move to one that is more responsive to their needs. “Fundamentally, retailers have to know who their shoppers are, regardless of what channel they are currently in,” said Hartjen. “Knowing ‘who’ allows for customization of service delivery, making shopping more timely, relevant and rewarding. Plus, knowing ‘who’ is absolutely necessary if the goal is personalization of shopping experiences.”
Step 4: Analyze Store Performance
In the last three steps, we have established that technology solutions now exist to better identify shoppers and their needs, and those solutions can impact everything from store design and merchandising to real-time applications like sales associates providing service ‘on the floor.’
So once a brand has developed a successful plan, they can then start tracking and evaluating the effectiveness of all their online and offline efforts as digital influence on in-store sales is steadily increasing. In fact, Deloitte Digital estimated that digital influenced 64 percent of in-store sales in 2015, a 15 percent increase from 2014, and predicts that number will continue to grow. Tracking the performance is extremely important; alignment to brand business objectives should be laid out at the beginning as companies will want to examine and evaluate the return on their investment. According to Mike McMurray, SVP Marketing and Business Operations at Point Inside, tracking return on investment requires strategic thought:
“While it’s clear that digital has a positive influence on sales, it’s difficult to attribute which specific sales were influenced by in-store mobile use at this point in time. However, there are other KPIs that can be used to indirectly track how in-store mobile features impact sales. These include correlating:
- Basket size to branded mobile app use
- Examining whether shoppers’ app engagement increases when new features roll out
- Correlating sales with local store deals and recommendations
- Determining whether at-home app usage influences how often shoppers visit a physical store.”
According to McMurray, retailers can also look at store operation KPIs to determine ROI. For example, does an associate mobile app increase workflow in omni-channel activities like BOPUS, stocking efficiency, and customer satisfaction? If so, then it was worth the investment.
Hartjen also shared, “Shopper loyalty and shopper retention are key metrics to follow. Eventually, retailers need to measure sales per customer over a period of time—month, quarter, half or year—across all branded channels. It’s almost impossible to do that currently, but a starting point is a small segment of shoppers, like a brand’s loyalty program members, et al.”
Step 5: Develop New Strategies
There is a generational turnover occurring in retail leadership that puts some retailers in a better position than others to exploit these technologies. The previous generation often operates on “spider sense”—applying their deep knowledge of their brand and their stores based on gut instincts and historical experience.
“A more modern generation of leadership realizes that technology can now reveal data about business processes in the retail store that has never been seen before,” shared Brian Laney, Vice President of Sales at Alert Tech. “This is challenging the status quo thinking of ‘spider sense’ operators, and empowering technology-centered executives to recognize business opportunities in data, which in turn feed strategies for new technology applications.”
Laney says we’re living in a time when retailers can experiment with different technology applications in their stores, capture customer feedback, monitor outcomes and optimize for performance—all without spending enormous amounts of money. By doing this, it enables retailers to optimize the technology to the business process and customer experience, and mitigate risk before making enormous investments in long-term deployments.
Remember, the reason customers shop is because they want what’s new and next. Trends, design, products—they all fall under this “need” category. Thus, retailers must constantly refresh and provide them with what’s new and next to keep them entertained, engaged and spending. This behavior force brands to continually develop new strategies. By leveraging the insights gained from cross channel initiatives, brands can continually develop new ways to satisfy and bring customers back for more.
How to Succeed In the Future of Digitally Powered Retail
So how do retailers succeed in the future, keep pacing with the dizzying pace of consumer demand? “We are at the beginning of a major revolution in retail. Retailers are only just starting to embrace the opportunities that technological innovations, particularly on mobile, have to offer,” shared McMurray. “To successfully meet this demand, retailers must have a comprehensive underlying infrastructure that makes it easy to layer in new strategies and technologies.”
As an analyst and as a writer, I appreciate the candid answers of all those I interviewed. With that, here’s my takeaway from the NRF show floor:
“There are host of technologies that you can implement into stores in order to make them profitable, but do your due diligence in what you select—platform cross-compatibility is key.
To leverage a little, Serenity humor, remember when Kayley said, “Don’t buy anything with a Capissen 38 engine, they fall right out of the sky!” There’s a lot of great tech on the floor at NRF, but if it is not proven, pass! Or you may be falling out of the sky because you bought a piece of gos se.”
Remember, as a retailer, you have resources. Most companies (like those outlined in this article) know their stuff and their only interest is client success—but don’t sip the kool aid from just one vendor, often you need several. Dependence on just one platform is a no-no. To better educate yourself, you can also check out the PSFK Future of Retail Report for ideas and more insight.