Radical change is sweeping retail shelves where technology is shaping the shopping experience
How are consumers different today from how they were a decade ago? For one, the consumer had no choice other than to depend on what the manufacturer or service provider offered. Today, consumers have a large impact in terms of being able to shape the services and products they want, thanks to two-way communication, the influence of social media and the ability of manufacturers and service providers to harvest consumer data and understand consumer behaviour at a highly granular level.
There are two ways to look at this dramatic development. One view suggests that businesses are daunted by increasingly demanding customers. The other view suggests that a clear understanding of consumer needs is serving to build products better, tap into markets faster and create more robust businesses.
Technology is changing consumer behaviour, response, purchase patterns and loyalty. And as technology helps tap faster and more accurately into consumer minds, businesses are able to respond faster. The result? Consumers are spoilt for choice. Clearly, it is a win-win situation for consumers and businesses.
However, in a socially-networked world, where attention spans are shrinking and consumers want precise and personalised shopping experiences, technology is being stretched and challenged to respond. Today, in a bid to build customer loyalty, increase wallet share and grow consumption, technology is focusing on three key drivers:
- The ability to predict consumer behaviour
- The ability to improve consumer relationships
- The ability to reinvent the consumer experience
As consumers embrace technology, the response to these drivers is transforming shopping itself. We are moving into an era of smart retailing where technology is able to predict what the consumer wants even before the consumer knows it; where technology is able to shape the shopping experience to suit the customer's personal needs; and where technology is able to deliver the best possible solutions in the least possible time. Social networking, mobile applications, multimedia, RFID, Wi-Fi, Bluetooth, presence technology, location-specific services, data analytics and business intelligence, are redefining the retail experience, driving customer engagement and impacting basket size.
Today's mobile-armed and socially-networked consumer with a rapidly evolving lifestyle is seeking convenient new ways to shop. Companies must not only understand these lifestyle changes but respond rapidly to them. Those that respond quickly to the changes are able to unlock new markets.
Coca Cola, for example, created a promotion using a social gaming platform that rewarded users for submitting photos, visiting shopping malls and attending concerts. The data provides Coca Cola with previously inaccessible consumer insights. This helps them place vending machines better, stock them better, drive consumers to their outlets, create special offers and programs that drive consumption and loyalty across demographic groups rather than create a one-size-fits-all promotion that has low impact.
Everyone, from movie production companies to chocolate manufacturers are revisiting their sales and marketing plans using data, analytics and the ability to reach the consumer anytime, anywhere using mobile technology.
Radical changes are taking place. For example, we have already seen the emergence of dynamic pricing on the web with airlines that adjust ticket prices based on sales. But more radical change is sweeping retail shelves: LED tags on items are able to change the price of items based on variables such as weather, pricing at competitor stores, available inventory, store footfall and the current price of raw materials. Behind this capability is a vast amount of data collection and analytics supported by wired and wireless networks that can communicate and create instant intelligence culled by highly advanced algorithms sitting on top of massive databases.
When combined with technologies such as Augmented Reality (AR) that can, for example, help customers decide on a garment colour without having to visit the change room or Near Field Communication (NFC) on mobile handsets to exchange images and even complete transactions, it is easy to see how consumers are going to benefit. But for retail, this could spell trouble in terms of lowered loyalty.
For the retail business, addressing consumer loyalty has never been as important as it is today. We see offers such as “two for the price of one” everywhere; we see loyalty points that translate into “money off” transactions in stores and special shopping hours where consumers are offered gifts and conveniences such as a free cup of coffee or discounts on future purchases. But all this is set to change as retailers ask themselves the question: “Is building loyalty about slashing prices or is it about getting to know the customer better in order to deliver greater value to the customer?”
Put another way, when a consumer shops with a tap of their smart phone using NFC technology, will the retailer just offer a discount or also gather customer details in a bid to create a better shopping experience in the future - which, in turn, would translate into higher loyalty?
A quick examination of two scenarios tells us which one retailers will gravitate towards in the future. You go to a coffee shop and when you have had six coffees, the café offers you the seventh one free. In such an offer, the coffee shop remains clueless about you as a consumer, your likes or dislikes, your wallet size or your shopping habits, hoping only for repeat business. On the other hand, a retail store that tracks your purchases, the mode of payment you prefer, the geographic locations you prefer to shop in, etc, is able to glean customer insights that can, using analytics, create customer intimacy. The customer intimacy helps create better value through customization. In other words, customer loyalty can be redefined using technology.
Retail is at the cusp of unprecedented change, thanks to mobile devices, the ability of networks to carry data and the capability of data analytics. Will this create more customers or more competition? That's another interesting question retail must answer.
(The author is Head of Alliances, Research In Motion, India.)