to understand millennials. There is a lot of hype in the market that if people are only focusing on millennials, then they are thinking that there are only jellyfish in the ocean. But the truth is, millennials lead the pack in expectations of retailers’ technological capabilities and social presence. Once millennials’ expectations come to fruition in the mainstream market, they tend to become the expectations of all generations. #Trendsetters is the hashtag that would describe this phenomenon. Social media began as a millennial fad but is now an all-generation fad. As a result, social media has become a critical element to reaching customers of all ages.
Social media sites also have influence on retailer websites. Take, for example, the app Tinder. Tinder is a dating app where people create a profile with information about themselves as well as a couple of pictures. If you are not interested in a profile that appears, you swipe to the right. If you swipe to the left, then you are interested and the app shows additional profiles of individuals who you may be interested in. If you would like to see more pictures of the person, then you swipe up and down to move through pictures. If you swipe to the left and the other person swipes to the left, then you both are able to communicate with each other through messaging. This is ideal in the social dating world because it reduces the number of people who you are not interested in messaging you. I only know all of this from a friend, of course, and you may be wondering what in the world this has to do with retail. I don’t blame you. This style of app is actually influencing the way retailers change the design of their mobile sites. The best websites, software, and processes are ones that tie to how an individual is accustomed to performing a task or workflow.
Forever 21 is a fashion retailer geared toward millennials. The company has redesigned its mobile app to reflect this same type of style. You swipe to the left to see additional products, and you swipe up and down to see more pictures of the product in different angles. It’s genius. It is all about creating a process that already ties to someone’s habits. That is how you create a great customer experience. Ease of use and customer experience help drive customers to purchase as well as create strong customer loyalty.
“Channel” is a term retailers use to describe the mechanism through which customers shop and retailers connect with the customers. These channels include in-store, online, catalog, call center, mobile apps, social media, and so forth. Omnichannel is the means by which retailers and consumers engage with each other across touchpoints through one seamless customer experience. There is truly a plethora of touchpoints, including in-store, website, mobile site, mobile apps, Snapchat, Twitter, Pinterest, Instagram, Facebook, YouTube, and Amazon. The digital landscape also describes the mix of channels.
Due to the increase in channels, retailers are adjusting their business processes and technology to support omnichannel initiatives. Some retailers have separate buying teams for e-commerce versus in-store. In general, retailers are moving away from having separate buying teams to enhance the seamless transition between the channels. If two people are buying for swimwear, for example, it becomes much more difficult to have a cohesive message between in-store and online.
The increase in omnichannel shopping brings its own challenges for retailers. As e-commerce sales continue to grow, store volume declines. We call physical store locations “brick and mortar.” Controlling inventory is one of the top challenges. Declining volume in brick-and-mortar locations results in less of a need for inventory to maintain productivity and profitability.
However, studies have shown that customers still enjoy shopping in these locations. They may walk through a store and then purchase via their mobile phone a couple hours later. This behavior is called showrooming. Showrooming brings large complexities to retailers. Maintaining inventory levels as well as staffing to support an increase in traffic but a decline in sales is a challenge. As e-commerce sales started to increase, retailers invested in fulfillment centers, large distribution centers that fulfill online, catalog, and call center orders.
In the last couple of years, since the rise of showrooming, retailers are transitioning to in-store fulfillment. In-store fulfillment supports presentations for customers walking through the stores and supports the staffing for these brick-and-mortar locations. Of course, there are still challenges with this type of approach. Mainly, shipping costs can become a large burden as multiple items in a customer’s order may come from different locations. In-store fulfillment from multiple store locations can also have a negative impact on customer experience because the customer is getting 20 boxes in the mail, all at different times. For example, the customer’s top may come from store 1, the skirt may come from store 2, and the associated accessories may come from store 3. This creates additional shipping fees for the retailer because the customer only paid one shipping fee, but the retailer had to ship three separate boxes.
To solve this problem, optimization has become a critical piece in the equation. Typically, legacy fulfillment mechanisms were driven by business rules. Business rules are a lot of “if.. then” statements. Optimization, however, is the selection of the best available scenario, which takes into account multiple factors. In this example, these factors may be the locations that have the largest amount of items in the purchase order, the geographic distance to the shipping address, the amount of inventory of each item within the order, and the like.
An additional challenge that has arisen since the explosion of e-commerce and mobile is the competition. Customers have information at their fingertips. They can find any and all information, including competitor product availability, competitor pricing, and even coupons! Let’s face it, who hasn’t Googled or looked on Amazon before making a large purchase? Customers are able to check pricing in the middle of retail locations. There is even a “shopping” filter on Google. Couponing has become a hobby in recent years along with thousands of coupon sites and apps. In order to stay in the game, competitor pricing is a key element when thinking about pricing strategies for digital channels.
The third challenge with the rise in e-commerce and the digital landscape is marketing and personalization. E-mail has been flooded in recent years with offers upon offers. Whether it’s a percentage off, extra off on clearance, or free shipping, inboxes are being flooded with offers, relevant or not. Offers via apps are also a key strategy. But all of these interaction points with the customer add more complexity to the marketing efforts. We discuss the topic of pricing and marketing efforts in more detail in Chapters 5 and 6.
With these added complexities come large amounts of data. Retail data can be sales, product inventory, e-mail offers, customer information, competitor pricing, product descriptions, social media, and much more. Combined, this is described as big data, or large sets of data that are leveraged to make better business decisions. There has been a lot of buzz and hype about the term “big data” in the last couple of years.
Big data can be described in two ways: structured data and unstructured data. Different types of data can support different initiatives within retail.
In order to leverage the insights gained through analytics successfully, structured versus unstructured data in retail is a key topic to understand. Structured data is data that sits in a database, a file, or a spreadsheet. It is generally organized and formatted. In retail, this data can be point-of-sale data, inventory, product hierarchies, and so on. Unstructured data does not have a specific format. It can be customer reviews, tweets, pictures, and even hashtags.
Now that you know what structured versus unstructured data in retail is, let’s talk about how to use it. Customer reviews are a great way to understand why a certain product is or isn’t working. Word clouds are tools to visualize large amounts of customer reviews. Finding keywords that are used frequently can give insight into product features. For example, if “fits small”
is frequently used, then the retailer can be proactive by adding this to the product description or above the size selection. This will reduce customer returns and money lost on shipping fees.
Unstructured data can also be studied for sentiment analysis. This gives insight into whether the customer’s response is positive, negative,
