Back to the Past: The Retail Landscape in 2019

In 2019, the CX Exchange team interviewed Natalie Berg , a global retail analyst and top 20 retail influencer about the state of the retail landscape. In this week's newsletter, we revisit this interview, comment on her uncanny predictions for the future, and discuss how, despite the events of 2020 undoubtedly bringing a seismic shift to retail, we are reverting back to normal.

You mention in your book that Amazon have revolutionised retail, and others must follow, otherwise they will go out of business. What has your research shown about what Amazon are doing, that the mainstream can in fact compete with?

Natalie Berg : That’s a great question. I think the number one rule in retail today is that you can’t out Amazon Amazon. You just can’t beat them on their terms. They give shoppers access to millions of products that turn up on our doorsteps within just a couple of hours, and that experience is so powerful, because it’s completely effortless. It’s completely frictionless from the customer’s perspective.

So, in our book, we do have to give Amazon credit, and we very much do in the book, and say that when it comes to things like range, convenience, and to a lesser extent, price, because Amazon isn’t always the cheapest. But certainly, when it comes to product offering and ease, Amazon is uncatchable.

I always say that if Amazon didn’t exist, consumers would be more tolerant of mediocre services, that’s one way to look at it. But I would also say that for all its perks, that experience is also quite functional. It’s transactional. You could even say it’s a little bit soulless.

Amazon has really taken the touch and the feel out of the shopping. And I think this is where there is a fantastic opportunity for retailers to focus on what we describe in the book as what Amazon can’t do, or WACD for short. And in a nutshell, this is experience, it’s service, having that human touch in store, it’s curation, and increasingly, it’s tapping into the local community, as well.

Essentially, it’s really just about creating a sensory, memorable experience in store that just can’t be replicated online. There’s plenty to say, but retail can coexist by focusing on the things that Amazon can’t do. In the book, we talk about the store of the future and how, in the future, stores won’t just be a place to transact or to buy, but they’ll also be a place to eat, to play, to work, to discover and lean, and possibly even to rent products in the future. So, there’s a lot of experimentation, lots of really interesting things happening about how retailers can distance themselves from Amazon.”

Leading on from that, who else would you say is really disrupting retail at the moment that other organisations should actually be keeping an eye on?

Natalie Berg : You hear a lot about the Amazon effect, as you say, but what about the Aldi effect, or the Primark effect? I think there are some very disruptive, very nimble brick and mortar retailers that are shaking things up and they’re disrupting the status quo. And I think what these retailers have in common is that they really know their customers, and they don’t try to be all things to all people.

I think that’s going to become even more important in the future, as we distinguish between the winners and the losers going forward. At the same time, if you look at a retailer like Primark, they just opened their biggest store in the world in Birmingham. It’s 160,000sqft, so bricks and mortar retail is not dead by any means. But interestingly, even they’re recognising that it can’t just be about products. So, in this Birmingham store, they’ve got a Disney café, they’ve got a barbershop, a beauty studio.

There’s this really interesting trend emerging where fashion chains are focusing more on the experience, and almost, in a way, moving towards the department store model, which, in itself, is ironic because of all the troubles that the department store sector are facing when it comes to staying relevant to our customers. But it’s certainly something we should keep an eye on. But related to that, from a customer experience perspective, you have to look at what John Lewis are doing. You can’t fault them, they’ve been really proactive in this space, and I think they’ve recognised the changing role of the store employee and that brand evangelism starts with the employee.

If you take a step back and think about John Lewis’ unique partnership model, that is enabling them to empower their employees and motivate them, and to offer really compelling customer service, which is going to become more important in the future. Just some examples from John Lewis, they’re sending their staff to theatre training. That’s the extreme end of creating an experience in store, sending your staff to drama school. They’re encouraging their staff to engage with shoppers directly through social media, recommending products or services in store.

And that’s also really interesting, because it feels more personal, but it also requires trust, and not all retailers have that level of trust with their employees. Keeping on the topic of John Lewis, they’re democratising services like personal shopping. They’ve got their personal shopping studios in some of their bigger stores, and that’s been really successful for them.

I think the word experience can, at times, be a little bit fluffy and a little bit hard to define, possibly a little bit overused in retail today. But a retailer like John Lewis, in particular, has recognised that at the end of the day, you have to give your shoppers a really compelling reason to ditch their screens and come into the store.

Where Do You See Retail Heading in the Next Five Years?

Natalie Berg : You have to address the doom and gloom first, because there will be more of it. Unfortunately, the sector is going through a seismic and quite a painful transition, so I do think we need to brace ourselves for more store closures, more bankruptcies, more job losses.

We have an oversupply of retail space. We have retail space that is just no longer fit for purpose. So, yes, there will be more short-term pain. But looking on the bright side of things, we’ll see a greater disparity between the winners and losers, and the winning retailers, as I said at the start of the interview, these are retailers that have a very, very clear idea of their customers.

Stores will look very different in the future. In a nutshell, we’ve already talked about the experiential aspect of bricks and mortar space, but I think that stores will be frictionless, experiential, and they’ll also become a hub for fulfilment. There’s a lot to say around all three of those, but the hub for fulfilment piece is pretty interesting.

Retailers are recognising that their stores are actually their best assets, that they can digitise their physical infrastructure and use their stores as mini warehouses to cater to growing demands for things like same day delivery. One-hour delivery will be the norm in cities in the not-too-distant future. And in the future, the parcels will find the customer.

At the moment, when we place an order online, the onus is still very much on the customer to track and to secure that delivery. But that is changing, and already we’re seeing retailers like Amazon, of course, and also Walmart and Waitrose, that are trialing in home or in car delivery.

And around stores being a hub for fulfilment, one area that retailers will be focusing on over the next five years, I’d say, is returns.

Returns are a ticking time bomb, and there is lots to say, but just for the sake of time, I’d say that we will see greater collaboration here. Amazon has a really interesting partnership with Coles, the big department store retailer in the US where you can either shop or place an order on Amazon and if you want to return it, you just bring it right into the Coles store and hand it over.

So, you don’t have to package it or ship it, you just walk into the store and hand it over, and in typical Amazon fashion, its completely frictionless. I think that’s interesting because one of the big reasons for these digitally native brands like Amazon are opening stores is to address exactly this, the rising cost of shipping and returns.

So, I think we’ll see more digitally native retailers, Amazon, ASOS, Boohoo, the list goes on, look to team up with legacy high street retailers to address this, and it’s a win-win for both retailers. It’s bene successful for Coles. They’ve just recently announced that they’re going to roll it out to all of their stores.

And you can see why it works for the host retailer, because you get the benefit of footfall into your stores. When shoppers come in to return a product, they’re probably going to pick up a purchase and spend more once they’re in store, just as we see with the incremental spend that happens on the back of collecting an online order in stores.

I think that’s a really interesting trend to watch, and I think what will be really interesting is how retailers use this to drive loyalty in the future. Could we see customers receive a money off voucher, or loyalty points, if they return an item quickly, for example? It’s really about how retailers go about incentivising behaviour.

Amazon became even more unstoppable, but is the trend reversing?

Unforeseen to Berg, the pandemic cemented Amazon’s reign at the top of e-commerce, with their profits rising by 220 percent in 2021 compared to 2020 . Although online spending has dropped since then, the rise in Amazon’s profits definitely helped them become even more convenient and efficient than they were before the pandemic. The trends Berg mentioned, including AI, personalisation, frictionless stores and the rise in same-day delivery and home supermarket delivery was all massively accelerated by the pandemic.

However, there are signs of the rise in e-commerce shifting. After almost doubling their workforce during the pandemic, Amazon have reduced their workforce by four percent in 2022, with profits falling , signifying that customers are returning to the stores as Berg suggested. The heart of customer experience is still found in-store, as the e-commerce and remote shopping fatigue from the pandemic has caught up with consumer who still value human interactions.

Although online shopping is higher than before 2020, it is falling back towards the pre-pandemic trend according to a census study in 2022 . Retailers are also realising that customers spend 31% more in-stores than online according to a Forbes article , and they are more likely to be loyal to brands when shopping in person compared to online. Brand-loyalty is a current trend that is mentioned in the interview; incentivising behaviour is huge for retailers, as brand-loyalty fell during the pandemic due to the abundance of options, access to reviews, and lack of in in-store personalisation and interactions with staff.

Berg was also correct in pointing out the shift in brick-and-mortar stores focusing on experiences rather than shopping. Just look at Gymshark’s new store in Regent Street , which offers an exercise room and one-to-one personal training space so customers can correct their gym form. Berg also remarks that stores will start digitising their physical infrastructure, a prediction that links to a word which probably didn’t exist in 2019: phygital. The future of in-store shopping is thought by many retail experts to exist in the phygital space, with the metaverse also playing a huge role.

The point about John Lewis is also interesting to note. Employee engagement is vital for customer experience, but currently this is conflicting with the tough economic circumstances during a cost-of-living crisis. At the start of January, John Lewis reported a loss of ￡234m , leading to them scrapping their staff bonus for only the second time since 1953. The boss of the retailer, Dame Sharon White, is facing controversy after reports she was considering selling a stake in the John Lewis Partnership, which is employee-owned, to raise ￡2bn.

How important is employee experience for retailers, and is it the first thing to be scrapped when times are tough? Businesses cannot run on losses, but they are also doomed to fail if their customer experience does not keep up with rising expectations. More experimental and cost-effective ways of improving customer experience will need to be introduced for these retailers to adapt.

Luke Wakeling, Editor

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