FORECASTING EXCEPTIONAL SERVICE

Press enter to search
Close search
Open Menu

FORECASTING EXCEPTIONAL SERVICE

By Ann Meyer - 01/20/2016

Technology's ability to cut to the chase could both help and hinder retailers in the future as they strive to create a more personalized shopping experience.

Retailers and brands are expected to provide more information instantly to shoppers due to advances in technology, but they also will face increasing pressure to be a low-cost provider thanks to the expected proliferation of price-oriented consumer apps and other digital technology. Margin erosion is likely to be a risk, as the apps take on a larger role for consumers.

"The greatest danger facing retailers in the new world of instant price comparisons is a race to the bottom, where market share is protected but margins destroyed," suggests the 2015 Shopper Experience Study from RIS/Cognizant.

In a prototype store at Expo 2015 in Milan, shoppers were able to see information about a product simply by touching it.

As a result, experts predict grocery retailers will invest in more original concepts to differentiate themselves, and behind the new merchandising plans also will be advances in technology. The end goal is a shopping experience consumers will seek to return to again and again.

"It's about customer engagement now," says Matt Robinson, product marketing director at Symphony EYC in London. "If I can identify when a shopper comes into my store or website, and knowing what I know about their previous purchase behavior, how can I engage them? How do I potentially change their purchase behavior when they're in the aisle?"


"How do you differentiate from that customer who was always going to purchase that product versus one who is cherry-picking? How do I really make my promotional programs far more profitable?"

—MATT ROBINSON,
Symphony EYC


As mobile apps and in-store beacon technology improve, retailers will push willing consumers through the path to purchase with personalized promotions sent to their smartphones. But what's personal in a positive way to one shopper might come across as impersonal and Big Brother-like to another, Robinson says.

"There is a need for the retailers to say, 'I don't want to give everyone the same deal or same pricing. I want to have that one-to-one where I can manage the pricing,'" Robinson says. An offer might change according to the time of day. For example, retailers could offer promotions on food-to-go items with limited shelf life.

THE TABLET ALTERNATIVE

As an alternative to mobile apps, Robinson suggests retailers will equip staff members with tablets to access data on shoppers' purchase histories as well as in-stock merchandise, allowing them to offer personalized service to shoppers in the aisle. "Fifteen years ago, most store owners knew their customers," he says. "Given the scale, what retailers are trying to do is gain that one-to-one knowledge of the customers again."

When products are out of stock, customer service reps can suggest alternative items in a dialogue with the shopper, Robinson says. "Directing that knowledge to the employee when they are in front of the customer is another way to drive that interaction through physical talking," Robinson says. "It's where we see the shift from managing customer interactions to using it to engage with the customers."

Forrester Research suggests customer experience was the top priority for business and technology leaders in 2015 and expects it will continue to be a top success factor in 2016, with companies making internal operational changes as they strive to provide an exceptional shopping experience. The findings build on research from a five-year Forrester study suggesting the leading factor in consumer loyalty is customer experience, or a retailer's effectiveness at meeting customers' expectations.


"We tried to make the technology as seamless as possible, to provide people with quick, on-demand information."

—CARLO RATTI,
Carlo Ratti Associati


Design firm Carlo Ratti Associati, which developed a future of food area at Expo 2015 in Milan, Italy, devised an innovative way to display products to encourage more product interaction with them. "We started from the idea that products can tell us their stories, thanks to new technology and big data," says Carlo Ratti, a founding partner of Carlo Ratti Associati in Italy who is also a professor at the Massachusetts Institute of Technology. The firm worked with supermarket chain COOP on the project, and grocers have approached Ratti to replicate the system in their stores, he says.

To stand apart from competitors in an increasingly crowded marketplace, grocers will strive to offer distinct products consumers want, in stock on the shelf or at the hot bar, at reasonable prices within a pleasant shopping environment that provides clear signage, accurate prices and short lines at the register.

NEW IS OLD

But achieving it could be easier said than done. What was novel just a few years ago already is appearing old hat in some markets where fierce competition has resulted in large capital expenditures on new merchandising concepts and innovative store layouts. The Fresh Market reported a 3.7 percent decline in comparable store sales in the third quarter, below the company's expectations, and chief executive officer Rick Anicetti announced plans to invest in improved systems and innovation in the future.

"Today's food retail customer has many more choices available to them than just five years ago," Anicetti said in a conference call with equities analysts. "It's clear that we need to cultivate and restore the unique value proposition that made The Fresh Market so special."


"Like most things, if you're not measuring it consistently or can't even see it happening, you just don't know where the areas of improvement are."

—JUSTIN BEHAR,
Quri


The Fresh Market will reinvest in service, merchandising and price, Anicetti said. Of particular interest for growth is the nonrefrigerated, nonperishable sections in the center of the store, which account for 40 percent of the store's space but generate 20 percent of the sales. "I think in some ways we've drifted more towards appearing and looking like a supermarket, which is not our heritage," Anicetti said.

With a focus on specialty products, including many with an old-world flair, The Fresh Market could take a page from the future of food exhibit at Expo 2015. Ratti avoided the vertical shelving of traditional supermarkets and displayed foods on large tables to promote the exchange of food, "just like in an old marketplace," he says. By adding technology, he has brought the marketplace concept to a new level.

"Moreover, by simply touching the product, the user will be able to obtain augmented information about the food. That is, all the data available today on the Net which does not fit on a traditional-sized label," Ratti says. Information might include the ingredient and nutritional information, its history and its path through the supply chain.

"We tried to make the technology as seamless as possible, to provide people with quick, on-demand information" to help them make more-informed purchase decisions, Ratti says.

LABELS GETTING SMART

The Grocery Manufacturers Association's new SmartLabel program, which makes more product information available by scanning a bar code or visiting a landing page online, is a strategy for returning control of the message to the brands, which a Deloitte study suggests has declined with the clutter of social media. More than 30 brands are participating in the program, and GMA is predicting 30,000 products will use SmartLabel by the end of 2017.

"SmartLabel is a modern technology that will change how people shop and will help them get answers to questions they have on the products they purchase when they want that information," GMA president and CEO Pamela Bailey said in the program's announcement. (For more on SmartLabel, see page 48).

The type of information shoppers want in the future and how they want to access it will depend in part on the demographic segment they represent. Andrew Levy, co-founder and chief strategy officer at mobile app intelligence platform provider Crittercism, forecasts growing reliance on apps to provide instant in-store information, driven largely by the millennial segment's desire for price comparison shopping along with access to social media interaction.

"At Target, customers are served with aisle location information and interactive maps, deals on products, recommendations on nearby items, and the ability to request the help of a nearby team member," he said in a report titled "The Future of Retail."

A retailer's unique proposition will continue to be critical in establishing a destination shopping experience, but it also will be challenged by the growing number of apps and other technology-driven aggregated information assisting consumers in spotting the products they want at the lowest prices. PriceLocal.com is among the most recent entrants, describing itself as a way for consumers to price-shop on Amazon and other online sites while also providing local stores where the items can be purchased in person for the same price.

Local brick-and-mortar retailers might gain a sale when shoppers use PriceLocal.com, but their margins could likely take a hit from the emphasis on price. The low-price trend explains why Kroger sees its private label brands as an effective strategy for the future, along with a unique store experience led in part by consumer data. The company recently expanded its private label line with the introduction of upscale HemisFares, curated imported items aimed at foodies. Private label products can't be price-shopped across competitors, and they return higher margins because of reduced marketing costs.

"For the customer who's more focused on natural and organic products, we have our own Simple Truth brand. We also have many entry-level price point items of excellent quality," said chairman and CEO Rodney McMullen in a third-quarter conference call with equities analysts. "For customers looking for incredibly high quality products like Boar's Head or Murray's Cheese, just to name a couple, we have that, too. Our job is to understand and deliver for our diverse set of customers so that they can save where they want to save and splurge where they want to splurge."

To make shoppers feel special, retailers will offer outstanding deals, be friendly and helpful, solve a problem, provide excellent service and go above and beyond, Cognizant says. Shoppers in the Cognizant study said they go to brick-and-mortar locations to see and touch merchandise, for immediacy, accessibility and to get product information. Product availability is a key consideration, with 90 percent of shoppers saying they would refrain from making a purchase in a store if their preferred brand wasn't available. Pricing also can send a consumer to another store, and more than 90 percent of respondents said it is the top reason spurring them to go to another store for a product.

CONVENIENCE VS. PRICE

Convenience is the top factor overriding price, the study suggests, with 48 percent of shoppers citing it as a reason they don't purchase from the lowest price retailer. Other factors luring them away from a low-cost merchant to another retailer included loyalty programs (32 percent), return policy (31 percent) and unique merchandise (26 percent).

Retailers also should be paying more attention to in-store displays, which can be measured using technology and moved around the store for optimal performance, suggests Justin Behar, CEO of Quri, which works with more than 200 brands on in-store marketing. Quri's research from 1.2 million store visits over the past two years that suggests about 44 percent of promotions are actually displayed in stores as they should be, while 56 percent are not.

"Like most things, if you're not measuring it consistently or can't even see it happening, you just don't know where the areas of improvement are," he says. Through the use of real-time data analytics around the in-store displays, retailers can act on information about where the displays are working most effectively in other stores to improve their performance in their own stores.

Retailers who ensure their in-store promotions are active will pick up incremental sales in the future, Behar says, estimating $33.5 billion in incremental sales is possible if retailers boost compliance. "What we've seen across the brands on the front end of this, through the consistent measurement and sharing the data with the ecosystem, they see improvement on the base execution," he says.

Levy of Crittercism predicts digital displays will increase in prominence, because they could allow for dynamic pricing as well as messages in real time. Technology in many forms will allow retailers and brands to personalize offers in the future, but increasingly, experts are encouraging retailers to consider the return on investment and how their promotional strategy will affect their margins.

"How do you differentiate from that customer who was always going to purchase that product versus one who is cherry-picking?" says Robinson of Symphony EYC. "How do I really make my promotional programs far more profitable?"

Robinson foresees retailers using big data from throughout the supply chain to determine what items consumers are purchasing from a competitor, and providing promotions to get them to buy the item at their store. "It's also about the holes in the shopping cart we can't understand," Robinson says. "Technology that's able to blend the different parts of disparate data allows them to understand, this is the purchasing behavior of customers."

Symphony EYC plans to unveil solutions in 2016 that combine supply chain data and loyalty information with in-store merchandising for an improved store experience.

"When you're in a bricks-and-mortar environment, you've got to get it right when it comes to customers coming into the store," Robinson says. "If a product isn't there, it may put into jeopardy the entire basket they might have bought from you."