Retail In 2019: The Year Of The Third Great Omnichannel Inflection Point

Consumer behavior doesn’t really make right-angle turns. It evolves slowly over time, and moves like a wave through trendsetters to fast followers through to laggards. But the accumulation of changes over time often leads to inflection points where the sum of the changes feels like a right-angle shift, even though the signs of that change were really there all along.

When you strip away all of the evolutionary changes, you can break down behavior shifts into the big rocks thrown into the water, and then all of the ripples from those rocks as the impact spreads through consumers. Hindsight, of course, also helps tremendously.

In that light, there have really only been two major shifts so far in consumer behavior that have fundamentally changed the retailing game since the rise of internet shopping.

Transparency

The first shift came from the transparency that online provided. Early adopter online consumers quickly realized it was more valuable to go online to look for products and prices before ever setting foot in stores. Rather than selecting a retailer they trusted, and relying on that retailer to guide them to the best product, consumers took on that authority for themselves – they figured out what product they wanted to buy first, and cut the retailer’s expertise out of the equation.

The net impact of this shift was a flip-flop in the way consumers buy: before the transparency of the internet, consumers selected a retailer and then went to that retailer to select products. They had to place their trust in the retailer that even if the company didn’t have the specific product they wanted, at least the retailer would have the expertise on hand to help them figure out what they should buy instead.

After the benefits of transparency sank in for enough consumers in order to become an inflection point in behavior, the order flipped: consumers used online research to select the product they wanted, and then figured out, based on price and availability and some other cost/benefit calculations around how to best acquire the product, which retailer they wanted to buy from.

A retailer that did not have an online presence in this shift was effectively invisible to consumers. And a retailer that spent its time advertising on television and in print about how they had “all the best brands” were missing out, because their competitors’ product assortment was merely a tab away in a browser – consumers did not have to be lured into stores in order to figure out if they wanted to buy from the retailer.

There were a whole host of ripple effects from this shift, some of which retailers still grapple with today, including the role of the store employee in a world where consumers know more about the products they’re most interested in than even the most educated employee could hope to match. And retailers, who have extended their transparency to include specific, local in-store inventory levels, are still trying to figure out how to balance maintaining a minimum level of inventory to make stores “shoppable” while also selling every piece of inventory they can to anyone who wants to buy it.

While retailers are still grappling with this shift, this was one of the earliest changes in consumer behavior, and the industry has lived in this world long enough that it’s now the norm, rather than something that feels disrupted. Retail may not have implemented all the ways to respond this shift, but they at least have a pretty standard playbook of things to do to get there.

Which leads to shift No. 2.

Mobile

When Apple released the iPhone in 2007, anyone in retail technology who got their hands on one knew right away it was going to change the way consumers shopped. I don’t think anyone knew really just how much or to what extent consumers would become addicted to using their phones, but by 2010 it was clear that we had reached a new inflection point in consumer behavior.

What happened in 2010? Amazon released their price-checker mobile app, effectively bringing the entirety of the Amazon site into any retailer’s store. Unless a consumer needed something immediately, they could check the price of an item on Amazon, and if it was low enough and they were a Prime customer, they could get it for less with free shipping at a speed that, at the time, was breathlessly fast.

That alone caused store-based retailers to sit up and take notice. “Showrooming” became a term of woe, as consumers would leverage the expertise that retailers paid to staff in stores in order to finalize a product decision, only to turn around and buy it online for less than the store-based retailer could ever hope to match.

But new ripple effects established themselves as well. Personally, I noticed my own change in behavior: If my grocery store was out of stock of a brand I loved, I was no longer willing to suck it up and buy a different brand. My tolerance for out-of-stocks at the shelf fell to zero. Instead, I would pull out my phone and simply add exactly what I wanted to my Amazon cart. When Amazon was really good at subscriptions, they could entice my future baskets away too, by offering 5% off and a promise of recurring delivery.

Grocery was the first place where I noticed this behavior in myself, but it was not the last. You can walk through any store on any day, and if someone is looking for something specific and the retailer doesn’t have it, they are much more likely to pull out their phone than they are to engage with the store or any of the other products on the shelf.

With this shift, it was no longer enough for retailers to win the product research battle – they had to win the product discovery battle, which opened new battlegrounds around paid and organic search and SEO. And the ripples continue through the industry today, manifested in retailers’ feverish activity around personalization, especially in the digital realm.

The playbook for dealing with mobile and all of its ripple effects is not as mature as it is for transparency. And a quick spin through retailers’ digital properties reveals there is still a lot of work to be done – even as mobile traffic becomes the majority of a retailer’s e-commerce traffic, and even as mobile sales contribute a greater percentage of total e-commerce sales, mobile digital properties more often than not remain digital step-children, neglected and left for last when it comes to the investment cycle. And mobile is not a panacea – conversion rates are still lower and cart abandonment is still higher on mobile, and retailers have not yet figured out all the reasons why.

But time waits for no one. And in 2019, the third inflection point is already here.

Trust

What it takes for a consumer to trust a brand is shifting. We’ve seen all the elements of it – a demand from consumers for greater corporate responsibility, whatever that means, alongside the rise of Instagram brands and online-only brands that thrive on levels of personality that give cold sweats to chief brand officers and public relations executives at very large brands.

But in 2019, retailers will begin to win or lose on consumer trust at a much more noticeable rate, and specifically on their ability to win consumer trust in digital channels. The big inflection point here: Before this shift, retailers used discounts to entice consumers to do business with them, in the hope of providing a good enough customer experience to earn their trust. Now, retailers must earn consumers’ trust, if they ever hope to gain their business.

Let me say that one more time: Retailers used to gain consumers’ business with the intent of earning their trust. But now retailers must earn consumers’ trust in order to gain their business.  And that trust is won or lost almost exclusively in digital channels – specifically, social channels.

Social media does not drive sales. The amount of sales generated by social traffic for most retailers is single-digit, and it hasn’t budged for years. I don’t believe this will change any time in the near future either. Social channels are for being social, not for selling. A retailer whose social channels focus exclusively on products and promotions is like the multi-level marketer who hands out catalogs at your holiday party , or birthday, or kid’s graduation.

Because social is for being social, it’s no wonder that digital-first brands with relentless personality are winning. Personality is exactly what makes social work. People follow you because you’re interesting or funny or helpful. And when you can demonstrate that you offer value as well as entertainment – valued advice, helpful hints, and yes, even product recommendations – that’s when you earn the mindshare that makes them think of you when it comes to actually buying something. In short, their trust.

This is antithetical to big brands, whose operating mode is to protect and control the brand at all costs. And even when retailers figure out the brand personality in social spaces, they must be able to carry it through to their e-commerce site and into their stores. Moosejaw and Casper and Dollar Shave Club and Glossier – these are all companies that are not afraid to put some people off in order to be true to the people who “get” them – and love them. And then they make sure to carry that through to all of their touchpoints.

The playbook here is unknown. Yeah, you can follow digital-first brands and copy their methods, but if you don’t have conviction and authenticity behind it, consumers will smell that out a mile away. And how to truly bring a digital personality to life in stores – not even digital-first retailers have figured that out entirely.

But one thing is clear, and I have to give credit to Philip Krim at Casper for this idea. The financial crisis of 2008 took out retailers who were financially weak – these were the retailers who were disrupted by the first shift, but didn’t have the money in the bank or the support of investors to enable them to invest like they needed to in order to respond. Most retailers have muddled through the second shift because consumer spending has been in recovery mode. And the ripple effects of mobile have not been fully realized.

This next shift, though. It won’t matter what your balance sheet looks like (though it might fairly quickly). If you can’t win consumers’ trust with something – anything – other than a discount or a search term, then you’re in trouble. To paraphrase Krim, the 2008 downturn took out the retailers who were financially weak. The next downturn will take out the retailers who are experientially weak – the ones who don’t have enough online personality and presence to win the trust of consumers, long before those consumers ever decide to buy.

I am the vice president of Retail Innovation at Aptos, a retail enterprise solution provider. I am charged with accelerating retailers’ ability to innovate. I have been a top global retail industry influencer for several years, with a background in retail and technology. I ... MORE

Nikki Baird is a vice president of retail innovation at Aptos, a retail enterprise solution provider. Her opinions are her own.

Source: https://www.forbes.com/sites/nikkibaird/2019/01/11/retail-in-2019-the-year-of-the-third-great-omnichannel-inflection-point/#d766b5578fcf