Tuesday, May 14, 2013

Envisioning the Future of Retail Market

Online Stores
Internet has brought paradigm shifts in all the industries. Internet enables companies to increase their connectivity while reducing the overall costs. In retail industry, online stores have an advantage over brick and mortar stores with their lower overhead costs. This makes players like Amazon extremely competitive in cost leadership segment. With the development of internet payment gateways and consumer acceptance over the credibility of stores, online purchases are likely to grow significantly over the coming years.
Even in emerging economies, where credit cards and internet payment gateways are not accessible to mass, “cash on delivery” services enable online stores to foster. E.g.: Flipkart in India.
According to technology and research firm Forrester, we can expect e-commerce to increase (in US) by 13 percent in the year 2013, to a whopping $262 billion.
Mobile Stores
Smartphones have presented a new market to the retailers. Enabled with rich applications[1] and QR code integration, smartphones have fostered the development and incorporation of virtual shopping screens and even robotic store displays in the retail industry[2].
Consumers have been empowered of being able to buy things online straight from their phone and being able to buy things in store with their phone[3]. Companies like Square are further pushing this trend with devices and applications to make purchases from phones a commonality.
Store within a Store
One of the major issues faced by physical retail stores like Wal-Mart is the growing staffing costs. Retailers like J.C. Penney have found innovative concept of “store within a store”. The retailer sub-lets the space to the product maker and the counter is staffed by an employee of the product maker, not the retailer. Whether it is Chanel or Lancome or some other brand, each product maker is “showcased” at its own counter[4]
While competing in the cost leadership segment, reduction in the overhead costs gives an improved competitive edge to the retailers. Thus, acceptance and appliance of this model in the future by more retailers is a reality.
Shopping Experience: New Types of Value for Customers
It is going to very difficult for traditional retail stores to compete with online stores in terms of price. To pull the customers from comfort of their home to the stores, retailers have to create and sell shopping experiences[5]. Strategic alliances with brands to develop retail stores as brand and product showroom could be the way ahead[6].
Online stores still lack browsing and discovery experiences that satisfy curiosity. Retail stores can work on new types of value addition for customers. Retail spaces can relax customers, offer refreshments, and provide entertainment while creating the conditions to engage in a conversation that builds brand loyalty.
As retailers expand across the globe, there will be a need to customize strategies as per the customer’s behavior. Wal-Mart accepted this fact in 2006 and developed merchandising strategy to reflect each of six demographic groups. As retailers plunge into international expansion, one-size-fits-all strategy will not work. The successful retailers in the future will incorporate customer preferences across geographies and ethnicities, and customize accordingly.
Data Analytics
As the world is becoming more and more digitized, there will be hoards of information available for retailers to analyze and better fit their strategies to the needs of the consumers. More insights on consumer behavior and strategizing accordingly will ensure better performance. Use of social media will be a key to the extraction of this information. Retailers will increasingly use omni-channel approach to track customers across all channels.


[1] (Kanada, 2013)
[2] (Silverstein, 2013)
[3] (Phillips, 2012)
[4] (Ganos, 2013)
[5] (Jhonson, 2011)
[6] (Geddes, 2011)

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