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Clean up in aisle five: the evolving world of retail

According to the New Zealand Retailers Association (NZRA), spending in 2012 across the retail sector (excluding motor vehicles, parts and fuel) moved up marginally on the previous year to reach $54 billion, a three percent increase on 2011’s figure. So cash registers are ringing louder, and the ways in which retailers grab our attention are growing ever diverse. 

  • See Nielsen's latest figures on online shopping here

Enhanced humans

“I don’t know what the digital retail future looks like, but if we started by designing retail experiences around ‘enhanced humans’, we’d end up with very different and much more interesting store experiences,” muses Y&R New Zealand’s managing director James Hurman. And no, he’s not talking about Doctor Who Cybermen.

It’s a term Hurman picked up after attending a global retail conference, where Kantar Retail’s David Marcotte spoke about ‘marketing to androids’.

“His point was that in your store you’re retailing to ‘enhanced humans’ who have a smartphone and broadband connection permanently glued to their hand.”

And NZRA chief executive John Albertson agrees, stating that without a doubt, “the big game changer in retail is the mobile phone”.

A global snapshot from Cisco’s Visual Networking Index predicts that by the end of this year, there will be more mobile devices on Earth than people. And, depending on who you listen to, smartphone penetration in New Zealand is sittingsomewhere between 45 and 60 percent. According to Google’s Our Mobile Planet report released last year, 46 percent of users accessed the internet every day on their smartphone. 

Smart boredom

That same study revealed 73 percent of us never leave home without our phones and the omnipresent mobile is commonly the first thing we turn to the second we have a moment of down-time. 

Marketers are switching onto the opportunities this downtime presents—turning time-killing into dollar-spending with ‘smart boredom’. Smart boredom refers to how consumers are intelligently converting unproductive downtime into something constructive and beneficial.

Cameron Taylor, general manager of Ooh! Media, which recently rebranded close to 1000 Eye Media sites after purchasing the company last year, says shoppers want to see value more than ever, be that via discounts or even the good old-fashioned gift with purchase. 

“However, we’re seeing that more shoppers are willing to engage with brands to obtain that value-add, and this is where smartphones are key,” he says. “Shoppers can now download a discount, or gift with purchase coupon via a retail poster using their smartphone. They simply redeem the coupon in-store, which drives traffic.”

There have been numerous examples of smart boredom in action, like John Lewis’ 2011 ‘top 30 favourite things for Christmas’ campaign, which enabled shoppers walking past a Waitrose store to purchase QR-coded items with their mobiles. More recently Adidas’ NEO Window Shopping experience enabled shoppers to create their own virtual shopping bag by connecting smartphones to the interactive touch-screen window. Products could be played with and dropped into the window’s shopping bag, appearing seconds later on shoppers’ mobiles, ready to save, purchase or share with friends.

Late last year Countdown employed a similar concept to John Lewis’ Christmas initiative—and to Tesco’s subway-based, QR code supermarket in Korea—by deploying interactive Christmas shopping lists on bus shelters across Auckland, Christchurch and Wellington. Customers with the Countdown app were then able to scan barcodes and get their purchases delivered to their homes.

According to a recent report by Point Inside, retail apps with store mode (which can include anything from interactive store maps, through to creating a shopping list route) generate five times more shopper engagement than apps without store mode. 

We’ll be watching you

But the interaction between a customer and their mobile can go well beyond a retailer’s branded app. In November last year Japanese company NEC unveiled its NeoFace technology, which enables retailers to analyse a shopper’s face, ascertaining information about the shopper including approximate age, gender, and whether that shopper has visited the store before. 

And in the US, shopping malls have tracked people’s mobiles to gain data on the distinct shopping patterns of shoppers when visiting multiple retailers. 

Shoppable media is beginning to come to the fore too, with Grazia in Australia recently launching an issue of its magazine where all items could be bought and The Wall Street Journal launching a holiday gift guide that allowed readers to go from page to check-out instantly with the help of a mobile phone. 

Call me loyal

There are of course less intrusive ways of entering a customer’s life. Reach Media general manager sales and marketing, David Nation, says that as data becomes increasingly important, customer relationship management system (CRM) is “no longer a nice to have, it’s critical”, though he acknowledges it is a big investment that takes time and effort to implement.

“For consumers it means their experience is going to get increasingly better as brands start collecting data about products relevant to them. From a marketing point of view, it’s about optimising your media and ensuring its messages are relevant and you can’t do that if you don’t have the data at your fingertips to analyse.”

Facebook is now bringing real world purchasing data on board in the US and combining that with its social data to get a better grasp on what individuals are buying. And it claims this gives brands—and especially retailers—the chance to better target their advertising to those who may have bought similar items in the past, something usually seen as a good indicator of what might happen in the future. 

Try before you buy

Just as mobile phones can be advantageous to retailers, they’re also a powerful in-store research weapon for consumers, who can walk into a store, find the product they like and then instantly see how much it’s selling for down the road or online through an overseas retailer, a habit often known as showrooming. 

Frayne Cooke, owner of Interetail, recalls seeing a sign in one New Zealand hardware store that read ‘no mobile phones’. 

“If you ban the use of smartphones, you’re just going to piss them off and they won’t come back.”

A recent study in the US by location analysts Placed demonstrated that showroomers who purchase on Amazon are 20 percent more likely to visit Best Buy and 15 percent more likely to visit Target than the average consumer. 

Placed chief executive and founder David Shim cautioned that for retailers, “it’s not a question of if or when showrooming will impact their business,” because “an aisle to Amazon is already in their store”.

Cooke labels Amazon the “five-hundred pound gorilla”, and with good cause. The behemoth online retailer has created a Price Checker app that allows shoppers to instantly compare prices and purchase on Amazon while in a bricks and mortar store.

Best Buy and Target have responded to the threat by instantly matching the price of online retailers like Amazon, but whether the price-matching solution is achievable for New Zealand’s smaller retailers is another story. 

One thing’s for sure, charging customers $5 for browsing without purchasing, as the frustrated owner of one specialty food store in Brisbane recently attempted to do, isn’t going to earn you any fans.

Albertson readily admits showrooming is a reality of the modern retailscape and that there will always be people for whom price is the ultimate driver. But what it does mean, he says, is that “the experience you generate for your customer becomes more important”.

“We’ve got the customer in the store and we’ve got to be able to make the sale. You need to have a compelling reason why they should buy from you and you’ve actually got to expand the debate beyond a price; build a story as to why they should buy locally,” he advises. “If, for example, you’re talking about an electrical appliance, you could be reminding them that there’s no coverage under the Consumers Guarantees Act if they buy it offshore.”

One solution to ascertain what techniques and displays will engage customers in-store was launched in New Zealand earlier this year. Colmar Brunton’s Customer Xperience Simulation (CSX) system allows FMCG companies to replicate almost every detail of the shopper experience, eliciting shopper feedback on everything from packaging to pricing and product placement. Trials in the real world are expensive, and retailers are demanding category growth, not just growth for specific brands. And trials with Fonterra and DB Breweries have already yielded positive results.  

Online dollars

The results of a 2012 Australian and New Zealand Online Shopping survey released by PwC and Frost & Sullivan revealed online sales accounted for just six percent of New Zealand retail sales. That number is expected to grow by 15 percent compound per annum for the next four years, growing to $5.4 billion by 2016. Of those online sales, 35 percent went to offshore websites. 

In October last year New Zealand Post launched its new digital shipping service YouShop, allowing customers to order products online and have them sent to a US address, before being forwarded to a New Zealand address. 

Before the launch of YouShop, New Zealand Post carried out research showing that New Zealanders who shopped on overseas websites were comfortable making purchasing decisions, but felt let down when it came to shipping.

“We see ourselves as offering an ‘enhanced’ shipping service,” comments Simone Iles, head of digital solutions for New Zealand Post. “We recognised that, as online shopping grew, the benefits were being reaped by large international freight forwarders … We’re providing a service that meets an existing demand from New Zealand customers.”

Even with a compelling in-store experience, factors like the high dollar, the mass reach of Amazon and services like YouPost, make it tough for New Zealand retailers to battle. Which is why Albertson says taxing consumption on goods below $400 is necessary, adding that there are methodologies in place that make this possible.

However, Albertson concedes that matching the prices of some overseas retailers will be tough.

“There will always be some categories where you might not get the products here, so the only way you might be able to get it is offshore, but I think the key thing is that New Zealand retailers have to recognise that it’s a fact of life; there’s nothing you can do to stop it happening other than by being really good at what you do.”

Behemoths come to town

But First Star Communications owner Adam Blackwell sees further trouble ahead for New Zealand retailers, with big US retailers like Williams-Sonoma and Pottery Barn getting their online stores primed for mass international distribution. 

“The wake-up call for New Zealand retailers is unless they start thinking about the impact of what that’s doing to do to their business, they will get swamped.”

But instead of running scared, Blackwell suggests a collaborative approach between New Zealand retailers and the international big ‘uns—which are “going to come rolling in like a bulldozer”—might be plausible.  

“Rather than fight them, they should possibly think of some sort of alliance. There’s absolutely an opportunity for that. Most of those brands don’t want to bother with real estate in countries like New Zealand. But they do need distribution partners and that is where the potential might lie.”

Brand on the Run

For all the possibilities offered by this brave new virtual world, it’s hard to imagine a retail landscape void of bricks and mortar. According to Westfield, in 2012 foot traffic in its ten New Zealand shopping centres reached 77 million, with Riccarton alone accounting for 15 million, nearly one fifth of the total annual figure. That number is down on the more than 86 million that traversed its floors in 2011, but there were two more shopping centres factored into 2011’s count.

Along with the interaction between a customer and their mobile phone while in-store, Blackwell says the development and execution of unique branded in-store experiences is the other big kahuna of shopper marketing.

He cites Nike’s interactive wall in Oregon, which allows consumers to design their own shoes and even see what they’ll look like on, as a good example of that interactivity.

“Nike wants people to come back into the store and feel like they’re having an experience that can’t be had elsewhere and the really innovative retailers are looking at putting a lot more investment into that really rich experience delivery.”

Hurman says that with belief in marketing claims declining to almost nil, it stands to reason that customers are now basing their brand preferences and product choices on the actual experience with the company, with the store experience forming the main part of that experience for many brands. 

“That, combined with a growing appetite for more innovative, creative retail means there’s a real chance for a great retail experience to be the defining factor in any category.” 

The “rise of brilliant mainstream retail execution” has been one trend he’s noticed internationally.

“The engagement you feel when you’re in Whole Foods or Topshop is brought about entirely by the extraordinary care and thought that goes into creating, selecting and displaying the product. That used to be the domain of high-end retailers. But today the best mainstream retailers put that amount of care into their experience, creating very exciting yet completely accessible environments.”

Locally, Hurman says stores like Briscoes have great value product and very compelling promotions,  “but the environment is horrible”. Meanwhile the more upmarket retailers “create tidy and even sometimes stylish merchandising, but it tends to be unimaginative and dispassionate”. 

Hurman offers up Mitre 10’s ‘Easy As’ DIY campaign, which won a few golds at the Media Awards, as one of the better examples of an effective experiential campaign.

“I think what Mitre 10 have done incorporating DIY advice into the path to purchase and store experience is really smart and communicates passion and imagination in a very mainstream and relevant way.”

It is product

But for all the gimmicks, marketing speak and projected trends, Hurman believes that the biggest retail successes start with something that people really want to buy. 

“Apple and Nike are famous for great retailing. You can see other brands that have pinched their store experience ideas but because they haven’t had an iPad or an Fuelband at the heart of that experience it falls flat. Creative, engaging product design is so critical and as much as it’s important to think about great retailing, I think we should be putting just as much thought into creating great things to retail.”  

Real and Imagined  Other retailers are using the online domain to create unique interactive experiences to drive spending. First Star Communications owner Adam Blackwell says his team is working on a gaming and advertising concept for an overseas client that enables players to buy real world items, for example a pair of shoes or a t-shirt, which are then worn by the shoppers’ gaming avatars to “power them up”. It’s smart because the client’s core customer base is 16-35 year-old males, the same core market for online gaming. “It’s a bit like the game Skylanders, but this takes it to a different level where it’s everyday apparel items you can use in real life and the virtual life. Buying a pair of shoes for example can help you run faster and perform better against the zombies in the game.”

The digital payment revolution  According to a report by Market Research Firm Markets and Markets in 2011, only five percent of the total mobile phones in the world were Near Field Communication (NFC) enabled. By 2016, that number is expected to swell to approximately 46 percent. NFC has been part of the marketing vernacular for some time now, and in New Zealand the technology is well and truly spreading. Eftpos Tap and Go systems are starting to populate the retailscape, with BP, Countdown, Air New Zealand, Bunnings, Resene, Repco and Kmart among the retailers already offering the service. In April last year Vodafone, Telecom, 2degrees and Paymark announced plans for a mobile payments platform joint venture, and the initiative looks set to be actualised later this year. And MasterCard’s PayPass, which allows purchases under $80 with a swipe of a card or NFC-enabled device, is being rolled out at present with a campaign featuring the All Blacks and its mascot ‘Tim’, the excitable rugby fan. Caroline Ada, Visa country manager, New Zealand and South Pacific, says New Zealand will be a reference point globally for collaboration, much like it was 30 years ago with Eftpos. “They’ve done a fantastic job of getting competitors working together to try and agree on a framework for commercialising the technology. Most other markets in the world have struggled to work together and commercialise technology because everyone wants to outdo each other … Currently we have a stack of payment cards in our wallets and probably four times more loyalty cards. Where they want to get to with this solution is not only embedding the payment solution, but also facilitating loyalty and instant redemption at point of sale for retailers.”

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