Despite the endless doomsday rhetoric about the end of the physical store, some perspective (read: retailer optimism) is actually in order.
The Amazon-ification of the world isn’t here just yet. First, some fear-busting numbers: Consumers still buy almost 94 percent of all goods and services in physical stores. In fact, by the end of second quarter 2013, e-commerce sales comprised only 5.3 percent of total retail sales, according to the U.S. Census Bureau. Amazon’s annual sales – $61 billion in 2012 – have yet to even vault the chain into one of the nation’s top five retailer slots.
If the Amazon threat is less about industry economics, why do retailers obsess and talk endlessly about the online shopping juggernaut? If sales numbers aren’t what should be keeping store executives up at night, what should?
In short, it’s about Amazon’s ability to shift consumer norms, especially in how, where and why consumers buy. In other words, the Amazon threat isn’t really Amazon. It is Amazon’s outsized ability to change consumer expectations.
That’s why every store – and every store of the future – must compete against the expectations Amazon has built into the marketplace. But what are those expectations? And which ones are worth the investment of meeting? More importantly, how do physical stores isolate and invest in key areas where it’s possible to stake out a competitive advantage, not just keep up?
In our latest research report, Amazon Can’t Do That, we decided to ask a different kind of question we believe retailers must answer: What can’t Amazon do?
In an extensive six-month research initiative, the consumer insights team at WD Partners (Dublin, Ohio) surveyed 1700 consumers and conducted qualitative, in-depth focus groups with three generations of shoppers – baby boomers, gen X and millennials. The findings were extensive, but the strategic imperative was clear: Be something Amazon can’t.
Even though we learned quite a bit, we also isolated the dramatic and nuanced ways the Amazon model remakes consumption habits and views of ownership, especially among millennials. Consider millennial views of ownership – radically changing in a world of unlimited options and next-day delivery. Unlike boomers and gen X shoppers who value the “see and touch” and “instant ownership” attributes of in-store shopping most, millennials rank the “unlimited options” of online shopping as the most appealing.
To summarize additional findings of our research study, I outline three strategic directives below. Each includes a key research finding from our study. Read on to learn why the store of the future must be social, open and captivating to gain and win loyalty from the next generation of shoppers.
THE STORE OF THE FUTURE MUST BE SOCIAL
Yes, millennials spend copious amounts of time being “social” in the non-physical space of so-called social media. Yet millennials desire and crave more authentic interactions. Consider that compared to only 32 percent of boomers, more than 46 percent of millennials ranked shopping with friends and family as high in appeal. Moreover, 38 percent of millennials said it influenced purchase, compared to only 28 percent of boomers. Granted, millennials do value the functional efficiencies of online shopping and the allure of unlimited options, but in qualitative focus groups, they expressed again and again the desire for a more emotionally satisfying in-store experience, especially with friends. And therein lies the opportunity for retailers. This is why the store of the future must be a truly “social store.”
How to translate this finding into innovative store design? For starters, the social store must be more intimate and inviting than ever before. Product is now secondary. To compete with the “unlimited options” of mobile, stores must offer a social experience and environment in stark contrast to the impersonal, cold nature of online transactions. Create comfort, intimacy and a social space where consumers want to be and spend significant time.
THE STORE OF THE FUTURE MUST BE OPEN
Our research also revealed the importance of peer reviews among millennials. Online reviews and peer recommendations ranked as the second most appealing attribute of shopping for this generation, compared to the No. 5 slot for boomers and the No. 4 slot for gen X consumers. The emotional need for real-time peer approval marks a fundamental shift in how millennials approach consumption and make buying decisions. This need for peer approval is better met – for now, at least – within the online shopping model, where there’s no shortage of detail product reviews, from star-based rating systems to social media endorsements. Stores have yet to bring the decision-making power of this powerful feedback loop of opinions into the physical world of the store. That’s where the “open store” comes in and where the opportunity to build a new competitive advantage against online retail brands like Amazon.
The open store fosters voyeurism and emboldens exhibitionism. The majority of human beings are inherently voyeuristic and exhibitionist. Not only is people watching a pleasurable experience, it also drives purchase behavior, stoking the human desire to be seen. Exhibitionism, which defines so much of our entertainment culture today, drives trial and purchase. Store environments that foster and create opportunities for these two impulses win and satisfy, meeting this millennial need for peer review before purchase. Call it peer review in real time. Combine this with the millennial desire to shop with friends and you have a winning formula for store of the future retail design.
THE STORE OF THE FUTURE MUST BE CAPTIVATING
I’ve argued elsewhere that to reinvent the store, retailers must invest in people. This is one of many reasons why the captivating store empowers associates. One thing Amazon can’t do is satisfy the consumer desire for authentic human interaction. Despite millions in spending on Big Data, unless it penetrates and informs the everyday interactions frontline associates have with shoppers, it’s not worth the cost of collection. Associates with information-rich mobile apps drive sales, interaction, superior customer service and ease the payment or financing process. By empowering associates with tablets to walk the sales floor, the banal, deer-in-headlights gaze at slow-loading desktop computers no longer diminishes interactions the way first-generation tech implementation in the store so often did.
Next-generation tech innovations must counter and, remake consumer expectations for customer service and, instead of inhibiting human interaction, enhance it. Even though our research revealed consumers across all generations ranked store associates as low in appeal and low in influence over purchase, qualitative research revealed why: consumers have been disappointed so many times. The expectation wasn’t even there anymore. Yet in focus groups, again and again, consumers said the one thing that trumps the utilitarian, lifeless transactions of online shopping is human-driven interaction inside the store.
In summary, by creating social, open and captivating stores, retailers create environments capable of satisfying the same emotional needs online shopping meets, and doing what Amazon can’t do.
Lee Peterson is executive vice president, creative services, at WD Partners, a global design firm based in Dublin, Ohio. He has spoken on this topic at IRDC. To download the full study, Amazon Can’t Do That, click here.