Editor’s note: This blog post originally appeared in Retail Customer Experience, a Mobile Payments Today sister site.
By Tom Chittenden, vice president and general manager of retail solutions, NCR Corp.
Retail is in the middle of the most significant reinvention that we’ve ever seen.
What it means to be a retailer is evolving, just as the definition of a store has been evolving since the introduction of e-commerce. Mobile technology and social networks are changing the way people shop, and influencing consumer expectations in every aspect of their lives. All this is coupled with the traditional market influences of growing competition, cost pressures, and the economy — forcing retailers to simultaneously focus on innovating and improving operational efficiencies.
And let’s not forget about Amazon: frequently selling items online that are cheaper than what retailers can offer in-store, expanding into traditional grocery through the Whole Foods acquisition, and opening the highly-anticipated Amazon Go store in Seattle.
Retail has reached a tipping point
Traditional retailers have the opportunity and the motivation to reinvent themselves and transform the shopping experience inside the stores.
The two biggest question most retailers face are — what’s the best approach towards transformation to better align with changing consumer expectations? And, how do they get started?
Although more than 90 percent of retail sales still occur in-store, consumers expect more from the brands they shop, and need a compelling reason to visit physical stores. And experience is key; according to a study conducted by Capgemini 80 percent of consumers are willing to pay more for a better customer experience. Retailers must respond to stay relevant, earn loyalty, and be prepared for tomorrow.
Retailers face a number of challenges if they transition to their own version of fricitonless commerce.
- An under investment in technology over the past few decades leaves most retailers with legacy IT ecosystems without the flexibility or capacity to adopt new technologies
- The speed of innovation: retailers are faced with an ever-increasing host of new and innovative technologies hitting the market that impact how consumers live their lives. How do retailers figure out which technologies they should invest in that will bring long term benefits?
- Organizational and system silos that cause inefficiencies, errors and the inability to access reliable, actionable insights on consumer preference and demand
- Tighter labor markets and rising wages, making it harder to find and keep good associates
- Retail COOs and CIOs may be hesitant to take action due to the uncertainty of what innovations will come next, not to mention the daunting prospect of replacing legacy systems and infrastructures
- In-store shopping experiences that that don’t meet their shoppers’ demands and have friction points throughout the shopping journey
- Increased pressure to get the basics right: accurate inventory planning, reducing shrink, and having to do more with less
In the wake of growing competition, changing consumer expectations, and technology advances, retailers are looking towards technology to reinvent the consumer experience inside the store.
A media post recently reported that 100 percent of retailers surveyed are currently engaged in a “major digital transformation game plan.” According to The Store Experience Study, overall IT spending for 2018 is expected to grow by 5.6 percent, with store systems spending 5.8 percent higher than 2017.
Much of this investment is focused on “frictionless checkout,” which essentially means technologies that remove the ‘friction’ (inconvenience, frustration, inefficiency) from the shopping journey to provide easier, happier shopping experiences inside the store.
The many preferences of today’s consumer
Consumers across generations hold different values and shop in different ways. Millennials may approach shopping with a self-service, mobile-first philosophy, while baby boomers are more likely to choose assisted POS and prefer getting help from a customer service representative. It’s important to understand and appreciate these distinctions, as baby boomers, Gen Xers and millennials all have relevant buying power. People are living longer, so we’re seeing Boomers still having a strong influence on the retail industry. And millennials are just coming into their full purchasing potential, which means their influence will only grow in the future.
So, what’s the best approach to frictionless checkout?
Quality service is in the eye of each consumer, so retailers shouldn’t take a single-vision approach toward adopting new technology inside the store, or they might alienate parts of their consumer base.
Grab-and-go shopping, most recently represented by the Amazon Go store, is one of the more attention-grabbing paths for achieving frictionless checkout, but it’s only one of the many paths that retailers could consider. Determining the right path involves considering strategic business objectives, understanding the best to serve loyal consumers and attract new ones, taking into consideration the current physical and IT infrastructures, and finding ways to include flexibility and convenience into any new shopping methods.