Thursday, June 20, 2013

The emergence of seamless retail

The juggernaut of online shopping

It is just to state the obvious that the Internet has totally transformed the world for both the shoppers and the retailers. Shoppers have taken to online shopping with gusto and entrepreneurs and businesses are straining hard to exploit the opportunity. In the early days of Internet, it was common to consider the web as a resource or an aid to shopping, and it was expected that consumers will rely on the Net to look for information about products, to locate a store where they can buy and to perhaps look for advice and assistance on how to make the right choice. It is indeed true and nearly all agree that the Internet has become a very useful resource for shopping. However clearly it has gone far beyond that and has become a gigantic marketplace - consumers are buying everything from luxury goods, shampoo, automobiles and freshly slaughtered chicken on the Internet. 

Online shopping has not just established itself in the developed markets, it has firmly established itself in the developing markets and e-tailing already accounts for 5-6 percent of 2012 retail sales in China and about 5 percent in the United States. In China online sales recorded an astonishing estimated 60% year-on-year growth in 2012 (Source: McKinsey. MGI China e-tailing report)

Last year online shoppers grew by 25% in China, with nearly 50 million new shoppers added to the fold (Source: CNNIC January 2013). The growth of group buying or tuan gou (which actually originated in China), also continues. We also see that consumers are losing their fear on online payments. In the initial era of online shopping, cash on delivery used to be a common method of payment, but thanks to Taobao (the largest online shopping platform in China with more than 6 million merchants listing their products), and the escrow system of payment known as Zhifubao, which protects both the buyers and the sellers, online shoppers are now ready to pay online.

The circuitous consumer journey

For the consumers the two worlds of online and offline shopping are now intrinsically intertwined. In the initial days of online shopping the consumers often looked for information on products online but the then returned to the comfort and security of the familiar bricks and mortar environment to lighten their wallets. While this is still a reality, the other phenomenon is more prevalent and on the rise - consumers today often touch and feel the product in the traditional stores, but come back to their comfortable chair at home, where they sit in front of their favorite computer or the newly acquired tablet and enjoy in-home retail therapy by clicking the "Buy" button.

The fact is that today the Internet is as much a part of the retail scenario, as is the supermarket or the hypermarket. Whether you are a retailer or a marketer of brands, it is no longer a question of developing an e-commerce strategy - the task really is to entirely reshape and develop a retail strategy for the digital world.

Online, offline and seamless..

This juggernaut of online sales has huge implications on the online as well as the traditional retail industry. It is not possible to understand the implications for e-commerce unless we simultaneously look at and compare the respective roles that online retail and conventional retail are carving for themselves. And to understand that we must understand what consumers expect in an online environment and what are their expectations in a traditional store.

Consumers are very clear when they think about what is important to them in an online store – ‘saving money’, ‘more payment and delivery options’ and  ‘better selection and delivery’ top the list. The needs from an offline store are very different. ‘Ability to touch and feel the products’, ‘satisfaction of immediate delivery’,  ‘better service’ and ‘enjoyable experience’ top the list. So the two channels have very different strengths and at this moment at least, it is too early to proclaim the demise of the traditional trade, though some change in its role is definitely in the offing

According to Deloitte’s Store 3.0 Survey among retail executives, it is apparent that the role as well as form of a bricks and mortar store will inevitably change. Today the executives say that he role of in-store employees is largely in providing basic purchase service and assistance and display some product knowledge. But this is expected to be totally transformed five years from now, when the most important skill of the workers will be to be able to leverage technology to enrich the customers' experience. Another important role of the sales staff will be to act as brand ambassadors. In fact retail executives indicated that in five years, providing customers with a compelling brand experience will become the primary role of the store.

So what does it augur for the future of online and offline trade. Online retailers need to clearly understand, that they lag behind the traditional trade when it comes to providing immediate gratification, intimate touch and feel, the immersive experience and the joy of shopping. They need to look at innovative ways of providing that intimacy - can technology be used to provide a better virtual touch and feel of the products, can virtual reality be used to help consumers come closer to the product? Can they collaborate with traditional retailers or can they establish their own limited brick and mortar presence (as some of them are doing already)? 

For offline retailers, the task it to zealously guard and enhance their ability to facilitate human interaction with the consumer. The store's function is not just to act as a convenient transaction center, it is to provide a valuable and important experience to the customer. For brands it is an opportunity to develop a relationship and bond with the customer, which is more of a challenge in an impersonal online environment. The most successful retailers will be those who can offer the best of both offline and online shopping and in fact offer a seamless shopping experience in which the shoppers can effortlessly move from online to offline, back to online then again to offline if they so desire .

This article is based on FutureBuy 2013 - a research study conducted by GfK in 14 markets across the world – which focuses on understanding shopping trends across the globe.

Written by Ashok Sethi

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