With the 2017 National Retail Federation’s Retail’s BIG Show wrapping in New York recently, Retailbiz spoke to attendee Dan McMahon, head of retail for ThoughtWorks APAC, about the trends to watch.
While over the past five to 10 years there has been a lot of discussion about what online means for the retail experience, and which retail channel will ultimately win out, McMahon said that this year things have shifted.
“This is the first year where everyone has got to grips with the fact that retail is about being a great merchant, having differentiated product and a differentiated experience, regardless of whether you’re online, multichannel or a traditional retailer.”
The store is fighting back
With the realisation that online retail is more convenient and can offer a wider range, the physical store is staging a comeback by creating incredible experiences.
A lot of this innovation is happening in New York, and McMahon had the chance to visit some of the best stores while in town for the show.
Like Nike’s New York flagship, which offers same day personalisation of goods. Shoppers can choose a pair of shoes, have them printed with designs by a local artist and take them home, all in the space of a few hours
“This is a really differentiated experience than what you’re seeing online,” said McMahon.
Department store Macy’s is also attempting to innovate with its in-store experience, closing many of its stores in order to focus on its most profitable locations.
“When you look at Macy’s flagship in Midtown, a lot of the store is quite old, there’s a traditional department store feel,” McMahon said.
“But you can see where they’re starting to invest in an uplifting experience. There are interactive displays to demonstrate kitchen equipment, high quality sales staff with digital tools, and a really wonderful dry bar where customers can get a blow dry.”
Macy’s new kitchen area.
Physical stores are also a place for consumers to build trust with a brand, and advisors play an important role in this.
“Advisors are really in demand people in the retail environment today,” said McMahon. He pointed to home appliance store Perch, which is designed to be as simple as possible to customers to get advice and test products.
“At Perch, every part of the store is connected and able to be used by customers to get a feel what their kitchen, bathroom or living space could be like,” he said.
“Businesses in the US are doing a much better job of placing high value advisors in high value retail environs.”
Despite this focus on engaging experiences, McMahon said that being able to set your store apart through your product offering is also vital.
“Looking at the profitability of retailers in the market, those who are differentiating on both product and experience have a five year annual growth profit of 12.7 per cent. Those who are only differentiating on experience are seeing growth of 3.9 per cent.
“Those without differentiation in either are seeing a 1 per cent annual profit decline.”
The future is digital
The other key trend McMahon said came out of this year’s Big Show was how automation is transforming retail.
Best Buy, for example, has a concept store where it is testing a mini automated warehouse, which allows customers to select a product that is automatically picked by a robot and delivered through a chute.
The Best Buy Chloe robot.
This lets the retailer trade 24/7 and allows products to be replenished easily. “This isn’t going to happen everywhere straight away, but retailers are starting think about decentralising and taking automation back into local warehouses so they can supply goods to local stores more rapidly.”
In the future, the internet will continue to transform retail, and McMahon said he believes using artificial intelligence to allow people to focus on creativity in their jobs rather than mechanical processes is the next frontier.
“Retail will go through a massive innovation,” said McMahon. “Whether that’s amazing personalisation or a merchandise planner able to use VR to test thousands of concepts like where to place products on a shelf or how to design a store.
“The retailers who are able to use machine learning will be those who scale and win.”
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