In an increasingly competitive retail environment, competition on price, or even quality and mix of goods, will create only transitory wins. Those factors bring customers only until your competitor sees your success and then does the same thing.
Most retailers understand that real success in today’s environment comes with delivering on the customer experience factor. When you compete on price, you will have customers until the next guy sells the same thing for a dollar less – when you deliver a memorable customer experience, you create lasting loyalty.
The question is, how to deliver that customer experience? Creating it can be seen as a spectrum:
Smartphone apps, such as the one used in Amazon’s Amazon Go store, recognize a customer when they walk in the door, and instantly know their preferences. The same technology is already in use in the hospitality industry, with smartphone apps offering concierge services, and enabling the hotel room itself to understand each guest’s preferences, and to automatically adjust the room’s lighting based on the amount of natural sunlight at any given time.
Amazon Go represents the right end of the spectrum, with a high level of artificial intelligence and data analytics serving customers in an almost human-free store. Another example is the startup created by two ex-Googlers, called Bodega, which creates a self-service, tech-driven replacement for neighborhood grocery stores. In both cases, the left end of the spectrum – human interaction – is missing. Bodega received significant pushback and criticism almost immediately, and the jury is still out as to how successful the Amazon Go concept will be.
Amazon is more likely to achieve the right balance with its newly-acquired Whole Foods chain, where the company can successfully blend the personalized service Whole Foods is known for with a technology-enhanced customer experience.
In pure retail, you can’t get any more hands-on than the pop-up retail store, often temporary, small, specialized shops often appearing during holidays and special events. Often staffed by a single person and owned by an independent entrepreneur, pop-ups are often reflect the personality of the owner, or at least of the employee staffing the shop.
“Seventy-eight percent of people still want to touch and feel and engage with a product before they buy it,” said Stephen Brooks, a global consultant who specializes in helping retail pop-up entrepreneurs achieve success. “That’s something Amazon cannot do.”
But that touch-and-feel experience doesn’t always come easy, and according to Brooks, it takes training. “One of the seven secrets of success we talk about is amazing customer service. The more you train and motivate, the better equipped your employees will be to give your customers a good experience. Customers will come back to an environment and seek out the person that sold them their last product.”
The fully-automated approach of Amazon Go and Bodega may use technology – which is an essential ingredient – but they ignore that personal touch. “Customer service makes a difference in any retail environment,” said Brooks. “Fashion retailing is currently losing 21 percent of its sales from environments that don’t have anybody by a changing room when somebody comes out from trying something on. That’s money walking out the door.”
The demise of larger retail chains, evident in massive store closings over the past few years, is less due to the influence of Amazon and online shopping and more attributable to a shift on the part of those large retailers to smaller-format shops which can better serve the customer in a more personalized way, while still leveraging analytics-driven marketing and customer service. Nike for example, has made a decision to not pursue any more shopping mall space. The retailer’s pop-up stores, shaped like a shoebox, represented a brilliant strategy on the part of Nike – giving them the power to use their analytical tools to power a highly individualized and personalized niche storefront. It’s the perfect balance.
We are in the midst of a significant retail adjustment – not quite an “apocalypse,” but a shift, nonetheless – and in the new retail model, large big-box stores are already beginning to shift away from the impersonal environment for which they are often known. There is nothing to fear from automation, artificial intelligence and analytics in a retail environment, and if used right, these innovations will – and already are – significantly enhancing the customer experience and allowing the actual humans working in the stores to better service their customers.
“Smaller retailers and pop-up entrepreneurs are seeing a window of opportunity as the focus shifts to smaller-format storefronts,” says Brooks. “Those smaller retailers who combine the personal experience those boutique stores and pop-ups are known for, with the increasingly affordable analytics that help them better understand their customers, will succeed in competing against even much larger retail competitors.”