There is no mistaking the fact that technology is changing everything from the work environment to the way we vacuum our floors. The shopping experience is also being affected by this ever-increasing phenomenon. While visiting a physical store for everyday needs is still commonplace, more and more we are familiar and comfortable with online shopping via computers and mobile devices. Not only is it a matter of increased purchasing channels and convenience, but we are also more likely to get exactly what we want when we want it. The driving forces behind these changes are advanced technologies and connectivity both playing pivotal roles in changing the shopping environment and experience. Such advanced technologies are not only the luxuries for giant retail chains, but affordable solutions are also increasingly available for small and medium retailers (SMRs).
By definition, “Omni-” stands for in all ways or places without limits. Not just physical stores and e-commerce, but all possible ways of shopping including via mobile devices and marketplaces. As a shopper, I often have trouble finding what I want in physical stores. Almost always my size and favorite color are out of stock or sold out, and my must-haves often become close outs and no longer available. I was either extremely lucky or it was a miracle to find exactly what I wanted. However, now because I am becoming more of an online shopper, I am now increasingly lucky, and I am experiencing such miracles daily. What I was told was “no longer available” in the neighborhood stores can be easily found on online stores or marketplaces and directly shipped to my home without significant delay or high extra shipping cost.
What makes such “miracles” happen is digitally connected supplier networks and centralized inventory management systems in the cloud. In a legacy retail system, warehouses and inventories are separately allocated for physical and online stores. Therefore, physical stores don’t know what their online store has in stock, and vise-versa. Resulting in customers’ bad luck – more likely experiencing an “out-of-stock” situation when they visit one store. Centralized real-time inventory management enables store staff to be able to check inventory and location, so that they can directly ship the merchandise from the closest possible location. This could be from another store in a different location or a central warehouse. It’s also true that an online shopper will receive the desired product from nearest possible physical store carrying the item.
Such systems may sound relevant only for large retail chains that have multiple stores and online outlets. In reality, the rising popularity of participating marketplaces by SMRs has boosted multi-channel commerce across all sizes of firms. Omni-channel inventory management surely benefits even small retailers. A variety of software products designed for SMRs are available for affordable SaaS pricing include Lightspeed, Vend, Veeqo and Clearly Inventory to name a few.
Marketing Strategy – Shift to Individual
The other tangible digital transformation area is marketing. Thousands of startups are now offering marketing tools and apps in various approaches to improve the customer experience. The universe is clearly in an experimental phase – technology vendors and product brands are testing what approaches are effective where and for whom. The ultimate goal for retailers is to sell the right merchandise to the right customer at the right time.
This means strategy is shifting from a product-based marketing campaign to an individual customer’s need/want base. There are roughly 3 types of marketing techniques: macro-marketing, micro-marketing and individual marketing. Macro-marketing is the technique mainly used for branding – improving brand/product awareness and public image. Actual sales boosting is through micro- and individual-marketing. Traditionally, product brands and retailers create a campaign to sell a specific product. Therefore, they analyze and profile customers who are most likely to buy the product and select the most effective methods to reach them. Targets were a group of people who share similar characteristics. But now the strategy is shifting to how to satisfy a customer on an individual basis.
I myself have experienced “individual marketing.” I recently remodeled my 30-year-old kitchen. Looking at the updated kitchen, I felt like getting new dining chairs that fit a modern open kitchen design. I started to explore dining chairs by browsing some online stores to check availability. Soon, I started receiving emails everyday notifying me of “dining chair sales.” Did I looked for dining chairs at the right time when several home furnishing stores were offering discount prices? Clearly that was not the case. Those stores tracked my website browsing history and found out that I was looking for dining chairs. Catching my demand, they created “personal sales” for me.
What made a “personal sales” approach possible are behavioral analytic tools powered by artificial intelligence (AI) and machine learning (ML) technologies. The tools catch and analyze individual behavior on ecommerce sites – from keyword searches, visiting the website and clicking product pages until the visitor leaves the website. Realtime analytic tools can empower chatbots to provide the site visitor with information he/she is looking for using friendly natural language.
From the shoppers’ point of view, it sounds good as it cuts down research time but it is not perfect yet. “The personal dining chair sales” was a good try but I didn’t purchase anything. Their apps were able to understand my personal demand (wanting dining chairs,) but didn’t know what dining chairs – my selection criteria and preferred taste. The discount price was a powerful push but didn’t convince me to take a limited time discount offering at the expense of my idea for new dining room coordination. Personal preference and taste are probably the most difficult and tricky areas in purchase behavior analysis – ideas inspired by a massive influx of information from social media, even mood and weather impact final decisions.
Also, how hard to push is a factor that needs to be considered. Too often multiple pushes impact negatively, but too little doesn’t work either. Yet, overtime along with accumulating data, AI and ML will learn even whimsical personal tastes and act like a personal shopping assistance to strengthen the customer engagement. Retailers, regardless of size, will soon have no choice but to adopt such solutions to keep competitive.
The digital marketing space is now extremely crowded. Theoretically, the market will eventually select winners. At this point, it’s extremely difficult to predict just who those winners will be. What is quite clear is the retail industry is shifting to an individual marketing approach to improve the overall customer engagement.
~ Yuki Uehara, Senior Director