Retail 2020: Retail Will Change more in the Next 5 Years than the Last 50

Generous Brands Ser ious Bus iness of P lay Joy of Shopping GenZ Reta i l ’s New Rea l i ty Exper ience S ignatures Must Sees Quarter ly t rend reports Kantar Reta i l /PWC Reta i l 2020

Where we got our thinking:

#FITCHRetail2020 @FITCHdesign

@cdaviesFITCH

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Retail will change more in the next 5 years than the last 50

The fundamentals of what a store “is” (its purpose and its function) are in flux.

This change is not just driven by economic, product or industry trends (a l though they remain an in f luence).

Rather, tomorrow’s store is being shaped by new behaviors, needs and demands of shoppers.

In 5 short years…X Y Z

By 2020, Xers will be enjoying the fruits of the peak-earnings decade of their careers.

While quietly freaking out about their ill-planned retirement.

By 2020, Millennials will no longer be the kids in your store.

In fact, they are more likely to be shopping for their kids.

Retail today is “under-delivering against millenials’ expectations.”

Source: Accenture Millenial Outlook, 2013

The brands thriving in 2020 will clearly have solved this challenge.

Happy Millennial

Because lack of engagement with a group this big is not optional

Net effect of bored Millennials

GenZ will be the newbies, but collectively they are retail’s future.

By 2020, they will be the largest group of shoppers worldwide.

And their behaviors will represent our collective norm.

FITCH describes GenZ as “shopping in a constant state of partial attention”.

Source: FITCH Gen Z Future of Shopping Report, 2014

Success at retail in 2020 will only be achieved by embracing this somewhat challenging idea.

So, what will this world look like?

We see 6 trends for retail’s future

1Retail’s role in society will change significantly by 2020.

On every level:

Macro Micro

Global and soc ieta l i s sues Loca l and community i ssues

Both millenials and GenZ believe strongly in the importance of good citizenship. 78% would recommend a company seen as such 74% would be proud to be associated with it 71% say they would be loyal to such a business.

Source: MSL Future of Business Citizenship Report, 2014

On a Macro level this trend will influence the products and services retail brands choose to provide.

Example: CVS

It will drive the way we present those products in our stores.

Example: Original Unverpackt

And will even lead to decisions around the types of stores we decide to build.

Example: Walgreens

It will push us to continue to explore how the act of buying can be a force for good.

Example: Toms

And to explore the part that retail can play to truly make a difference

On a Micro level stores won’t just be located in communities they will be woven into their fabric.

Example: CityTarget

”On average, CityTargets generate double the sales per square foot of larger Target stores.” Source: USA Today, 2015

This is indeed the new Seattle, the post-WaMu Seattle. Here, on Second and Union, you have the feeling that downtown is beginning to rise. The Seattle Stranger, August 2012

Example: CityTarget

“Our stores are integral parts of the neighborhoods we are joining”

N e i l B l umen t h a l , C o -‐ C h i e f E x e c u t i v e , Wa r b y Pa r ke r

IKEA

Hire local Incentivize employees to ride to work Employee housing Promise to improve the site they develop

Generous BrandsWearing your heart on your sleeve…In a world where consumers are becoming increasingly aware of

‘mean’ brands it was time to begin researching the concept of generosity.

Generous brands are those who show more of a heartbeat, take the first step and display a genuine understanding of their customer needs.

This is a long way from 2 for 1 deals and bonus points, but rather a tone of voice and general personality that encourages consumers to warm to their offer and become advocates.

By 2020…

We believe shoppers will absolutely want to know what retailers care about.

How will acting as a “generous brand” define the future for stores?

Stores in 2020 will take many forms.

And ideas like “one size fits all” will seem archaic.2

“Retailers will have to rethink their scalable ―one size fits all approach. Any retail strategy must include a plan to fit the ever-diverging needs of the US shopper.”

Source: Kantar Retail/PWC Retailing 2020 Report, 2014

We predict far fewer retail brands by 2020. But far more variety.

Two trends:

Format Expression

Offer ing, footpr int , locat ion, operat ions

P lanned var iance across the estate

Starbucks.

2008 Militant consistency Corporate driven messaging 1 look, 1 format Mass production of product and service.

2008 8% drop in sales Stock plummeted more than 50% 1,000+ Corporate layoffs Shuttered 600 stores

2015 Exploring new formats Empowering their people Dialogue with their guests Passionate commitment to causes

Format Strategy: Drive Through Express Urban Suburban Premium (Reserve)

Format Strategy: MUJI 5 formats, one city

Format Strategy: Lawsons Not driven by products, operations or location, but by people and niche needs.

Happy Lawson – moms and kids

Lawson Plus – elderly

Natural Lawson – health conscious

Expression Strategy: “The Catalog”

Operational efficiency across format types, but everything else has changed.

What will this combination mean by 2020?

Format Expression

?

No two alike.

By 2020…

We believe the concept of “engineered diversity” won’t just be the norm, it will be mandatory.

The only question will be: what formats, forms and expressions make the most sense?

3The ways in which we speak to shoppers will shift dramatically.

By 2020, absolute transparency will be table stakes.

Only 5% of consumers in the US & UK currently believe big businesses are being transparent enough.

Source: Cohn & Wolfe Oct, 2013

“By 2020, apps will proactively inform a shopper regarding specific issues with products or retailers upon entering brick-and-mortar stores or websites.

Managing and manipulating information (rumor control), will be more of an issue than ever as flash truth reports are distributed more frequently.

Brand management by 2020 will need to develop a host of new skills, tools, and communication modes, both nimble and innovative, than are typical today.”


A differentiated voice will be critically important.

But retail brands will also be more tight lipped.

everything’s coming up

spring

$50 everydayliz claiborne handbag

february turquoise cuff bracelet

$225

$12 februarywomen’s gold toe sock 6-pack

$18-$20 everydaymisses’ bisou bisou swimwear

$13 everydayoutdoor pillow

$75 everydaymen’s nike shoes

$17 everydayjuniors’ arizona shirt

$20 everydaypillow pet

$12 februarymen’s st. john’s bay polo

$15 februarymisses’ made for life jacket

$30 februarytwin comforter set

$20 everydayjuniors’ olsenboye blouse

$130 everydayrachael ray 10-pc. cookware set

$14-$20 everydayfloppy hat or thong sandal

$14 everydaymixit bracelet

$20-$25 everydaymen’s j. ferrar shirt or tie

$4 everydayhome expressions bath towel

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The good news? Ours won’t be the loudest, or most important voice at all. .

Millenials and GenZ want to create content, not just absorb it.

And 2020 will be all about dialogue not broadcast

25%A d v e r t i s i n g

70%S t r a n g e r s w i t h p ro d u c t e x p e r i e n c e

90%

F r i e n d s w i t h p ro d u c t e x p e r i e n c e

Source: Edelman Trust Barometer, 2014

Find ways to connect with the crowd.

And then engage it in-store.

Create destinations for conversations.

Example: TopShop Chirp Garden, 2014

Stop worrying about controlling the message and embrace that it can be owned by others

Example: Selfridges #denimlovers

When you do speak in-store, keep it simple - Millenials already over-index on “tuning out noise”.

Example: Primark

Great visual is a draw for them because it signals inspiration. So let the product literally “sing”.

Example: H&M

And they are apathetic to marketing. Clutter is a turn-off for them. So keep it ordered.

Example: Uniqlo

Finally, whenever you speak, tell the real stories behind the product without needless fluff.

Let other people do your bragging.

And did we mention transparency?

“Leading retailers will be classified by those that are the best conversationalists, along with communicating a secure and self-confident image to their consumers.”


By 2020… How will this manifest itself in store?

We see a co-authored narrative delivered with the impact of a tweet, the interest of a pin, and the emotional pull of a post.

Seamless will be an absolute must.4

OMNI-CHANNEL IN ACTION

Consumer Purchase

Multi-Channel Purchase Paths

But while omnichannel implies Seamless, the reality can be anything but.

Seamless is so important because Millenials and Zs don’t think “clicks vs bricks.”

We believe that by 2020, Seamless Interactions “Out Of Store” will be largely resolved

Because the US shopper is insanely demanding

And this demand will simply…

Demands like:Internet of things 20-30 billion “always on” interconnected devices by 2020

Source: Garnett Research, 2014

Same day FREE home delivery: No matter who ends up delivering

And concepts like:

Mobile payment: Which will seem like second nature by 2020

Dominant platforms and conventions around retail out of store will have evolved and will be widely embraced and adopted.

Retail brands en-masse will be adept at managing and supporting these channels.

But one problem will still exist

#retailfailWhether retail can bridge the yawning chasm between “Out Of Store” and “In”

And whether the store can not just create “continuity”, but truly pay off and enhance the OOS activity.

It’s been an interesting month… Remember this?

Example: Piper Lime

And this? With all the hype and the backing, why did they fail?

These concepts had the logistics, infrastructure and tools in place and the support of backers with deep pockets.

We believe they lacked continuity in their in store experience and that will need to be our biggest focus in the future.

By 2020…

What percentage of our in-store media will be dedicated to driving “continuity”?

How can we finally make the physical store enhance our OOS activities?

5By 2020 the entire concept of convenience and value will shift.

Convenience for the new guest will not be defined in traditional terms of time and ease.

And certainly not in antiquated ideas like “one-stop” shopping.

We believe the highest currency for these new consumers will be RELEVANCE.

89% of millenials want personalization when they visit stores, but only 18% see it from retailers today.

Source: Vibes Marketing Personalization Report, 2013

OMNI-CHANNEL IN ACTION

The customer is free interact with the retailer on their own terms. Face to face

Direct/Email

Print

Television

Online

MobileCall Centre

Loyalty

E-commerce

Review

Advice and Support

Search

Social

Bricks and Mortar

Consumer4

3 1

25

1 2

3

Shopper centric path to purchase. How they want to buy, not how we want to sell.

A shift from locating products to locating the best products for me.

Example: Forever21 -‐ ClosetSOS, 2014

And using technology to bring a relevant experience in-store.

Example: Klepierre -‐ Inspiration Corridor

A new service paradigm – where the guest is the focus, not the sale

Example: Bonobos – Guideshops

In 2013, the overwhelming reason shoppers changed brands was poor customer service (66%). In almost every case (88%) the situation could have been saved, but wasn’t.

Source: Accenture Global Consumer Pulse Survey, Nov 2013

And service empowered by technology

Example: Virgin – Google Glass partnership

Part of personalization will be the ability to customize/tailor more and more products.

Example: Creyate

All, of course, executed in a way that is wholly seamless.

Example: Creyate

By 2020… Imagine a 150,000 square foot store that treats everyone in it as an individual.

What will it take to get us there?

Experience will remain king.6

Foot traffic is down.N o v / D e c F o o t Tr a f f i c40 Bil l ion Visits

30

20

102010 2011 2012 2013

1 7 . 6 B i l l i o n

Source: The Wall Street Journal, 2014

The sky is fricking falling.N o v / D e c F o o t Tr a f f i c40 Bil l ion Visits

30

20

102010 2011 2012 2013

1 7 . 6 B i l l i o n

Source: The Wall Street Journal, 2015

2014

There are now less than 50% of the warm bodies in US retail stores during the biggest shopping season of the year than were there 5 years ago.

How many will there be in our stores 5 years from now?

Only in stores delivering truly unique experiences do we see increased visits and footfalls.

And in-store experiences remain the absolute best way to engage and connect with shoppers.

The 19-year commercial Web experiment has shown; you can't hold attention for very long, can't offer a point of view, can't control the experience, and, in a sense, never own your audience — at best, it's a fleeting, utility-like relationship.

Source: Michael Wolff, USA Today, 2013

Stores re-imagined around unique, defensible branded experiences may well be the biggest change over the next 5 years.

And tomorrow’s shopper craves these experiences.

So, what are we waiting for?

The problem? True “experience stores” are expensive, complicated and difficult to scale.

Even when you only have 8 of them

Experience Signatures

An Experience Signature is a distinct collection of brand led moments, totally unique in combination from one brand to the next.

A retailer’s Experience Signature lies at the heart of why we choose one store over another.

They are the things retailers become known for.

They are the reasons we come back for more.

PEOPLE

PLACES

COMMS

TOOLS

EVENTS

SERVICES

WEB SOCIAL

GUEST

Today, these moments of connection are often fractured, and only sporadically effective

PEOPLE

PLACES

COMMS

TOOLS

EVENTS

SERVICES WEB

SOCIAL

GUEST

In an Experience Signature the moments of connection are unified, and brought into harmony

PEOPLE PLACES

COMMS

TOOLS

EVENTS SERVICES

WEB

SOCIAL

PEOPLE PLACES

COMMS

TOOLS

EVENTS SERVICES

WEB

SOCIAL

GUEST

PARITY

DUPLICATION

PEOPLE PLACES

COMMS

TOOLS

EVENTS SERVICES

WEB

SOCIAL

BRAND

DISTINCTION

DIFFERENTIATION

Only with touchpoints in harmony, and infused with a brand’s DNA, have we achieved an Experience Signature

A way to express yourself to the world that feels intuitively right

And which simply couldn’t be someone else’s

By 2020…

We believe the brands who are thriving will be the ones who have crafted the strongest Experience Signatures.

And are well on the road to redefining a bright future for physical stores.

If you’d like to know more…

www.fitch.com

www.slideshare.net/FITCH_design

To finish…BONUS LAS VEGAS THEMED DISCLAIMER!!!!!

No one can predict the future

And listening to data can be dangerous

1977:170

2000: 80,000

# of Elvis impersonators

Time

1977 RIP Elvis

Plot this data trail to its logical conclusion…

We believe that by 2043…

So again, no one can predict the future

“But equally no-one can afford to be unprepared for what does arrive.”

Source:(Wa+s(Wacker,(Futurist(

thanks…

www.fitch.com

http://www.fitch.com

FITCH thinks of Seamless as a palette of touchpoints

Physical: The tangible – from objects that can be touched to settings that can be experienced

Human: Dynamic interactions – with individuals, employees and social groups

Digital: Electronic Tools – technologies that talk to everyone, or just talk to me

PHD

Exploring Purchase intent in the category

Locating Specific product or service

Dreaming No specific purchase intent

Being inspired Learning

Having fun

Browse easily More information Narrow choices

Easy to find Useful reminders

Reassurance

PHD/DEL MATRIX

Physical

Digital

Human

Dreaming Exploring Locating

The Holy Grail of Seamless is true omnichannel retail

multichannel

crosschannel

omnichannel

Shopping using different channels

Several channels, same purchase

Simultaneous use of channels and seamless delivery between them

To achieve that a Holy Grail we have to know what it is…

Crosschannel done well or with more finesseOmnichannel is not:

Omnichannel is:

Continuous Retail:

Interconnectedness between touchpoints everywhere and anywhere

Perceiving all things and creating a true CONTINUITY of experience

Retail 2020: Retail Will Change more in the Next 5 Years than the Last 50

Marketing

Transcript of Retail 2020: Retail Will Change more in the Next 5 Years than the Last 50