Change Retail Industry Adapts To

OUTLOOK GUIDE

RETAIL INDUSTRY ADAPTS TO

RapidCHANGE 2018 OUTLOOK GUIDE

INSIGHTS AND PREDICTIONS FROM 17 RETAIL INDUSTRY EXPERTS

Headlines screamed about a “Retail Apocalypse” in 2017, but what was really happening was a highly accelerated period of retail transformation. However, the wild ride isn’t over yet; in fact, it’s almost certain to pick up steam in 2018.

The 17 retail industry experts contributing to the Retail TouchPoints 2018 Outlook Guide paint a collective portrait of an industry undergoing seismic shifts in multiple areas:

• Stores are emphatically not dead, but they will need to be rethought/resized/ remodeled/repurposed in order to remain relevant;

• Voice could radically alter the existing product search paradigm, giving a huge first- mention advantage to the top result;

• Mobile devices for store associates will become the new must-have business accessory;

• Technologies including AI, IoT, bots, AR and even connected cars will start to prove their worth; and

• Customer engagement, via advanced analytics and what one contributor called “right- sized personalization,” will continue to be the ultimate competitive battleground.

Our contributors combine these high-level insights with practical advice and real-world examples. We hope you’ll use this 2018 Outlook Guide to not just survive the big changes rocking the retail world, but to leverage them for the benefit of your companies, your partners and your customers.

Adam Blair Executive Editor

2018 OUTLOOK GUIDE 2 RETAIL INDUSTRY ADAPTS TO RAPID CHANGE OUTLOOK GUIDE Contributors

Bryan Amaral, Clientricity 4

Nikki Baird, RSR Research 6

Brian Brunk, BRP 8

Ananda Chakravarty, Forrester 9

Laura Davis-Taylor, HighStreet Collective 10

Steven Dennis, SageBerry Consulting 11

Leslie Hand, IDC Retail Insights 12

Asif Khan, Location Based Marketing Association 13

Mike Kim, AArete 15

Kamiu Lee, Bloglovin’ 16

Nicolas Maslowski, Aeropost 18

Evan Neufeld, L2 19

Jack O’Leary, PlanetRetail RNG 21

Ernan Roman, ERDM 22

Jerry Sheldon, IHL Group 24

Kelly Stickel, Remodista 25

Deborah Weinswig, Fung Global Retail & Technology 26

About Retail TouchPoints 27 2018 OUTLOOK GUIDE

EXPANDING ENGAGEMENT WHILE SHRINKING STORES

Bryan Amaral, CEO and Principal Consultant, Clientricity LLC

@RetailTechExec

Retail doom and gloom dominated the headlines in Here are a few trends we’ll see in 2018: 2017. Undoubtedly, we are in the midst of a seismic shift Bridging Online With Digitally Enabled Retail Stores in consumer shopping habits, driven in part by changing tastes, economic influences, oversupply and the impact We’ll see new omnichannel strategies and solutions as of “always-on” digital commerce. In the year ahead we retailers acknowledge that blending digital consumer can expect the number and size of retail stores to shrink engagement with physical stores best meets the evolving dramatically while tomorrow’s retail leaders transform malls, needs and desires of their customers. Retailers will continue stores, business modes and organizational structures to to explore ways to “follow the cookie,” tracking online exploit new digital opportunities. behavior and making those insights actionable with mobile engagement and clienteling tools. Retailers will engage In 2017, many retailers watched customer-centric digitally directly with consumers on their devices, enabling interactive native brands like Bonobos, Warby Parker, Interior Define experiences with digital display walls. and others experimenting with creative “digitally-infused” formats. These innovative retailers have discovered how to Brands with the “human touch” will deploy chat tools in their engage, excite and educate shoppers before, during and e-Commerce sites, enabling consumers to engage directly after the visit. We saw retailers testing better personalized with in-store staff, providing better advice and curating communication and curation, elevating service and advice, products to help drive conversion. As brands try to intersect streamlining payment and exploring other technology- with “digital native” lifestyles, we should expect to see exciting enabled practices to improve the customer experience. new “pop-up” concepts and smaller store footprints, where Finally, in 2017 we saw what could be a major inflection point retailers display a representative assortment of products for retail: conversational commerce, driven by connected in- in an immersive lifestyle brand experience. These formats home devices. allow retailers to control their brand narrative while gaining direct consumer feedback, and are enhanced with video, self- In the year ahead, we’ll see high-service direct-to-consumer directed curation and social sharing technologies. formats expanding with small “flagships” while traditional multi-brand merchants close stores. Retail leaders will be hyper-focused on brand engagement and customer journeys, leading to shopping experiences and discovery opportunities that motivate customers to visit. In 2018, we’ll “In 2017 we saw what could be a major inflection also see new retail entry points as connected vehicles, IoT point for retail: conversational commerce, driven and conversational commerce devices expand retail’s by connected in-home devices.” footprint well beyond the store.

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While in its infancy, we also should see more AR and VR One of the more exciting connected commerce initiatives projects as retailers explore, creating a “digital layer” in their for 2018 is GM’s Connected Car initiative. Connected physical store environment. All of these technologies and Car enables riders to engage with an in-dash marketplace initiatives share a common desire to engage customers at containing localized offers from restaurants and retailers, each stage of their shopping journey and to provide relevant with order-ahead and pay-ahead capabilities and integrated personalized communication. with the consumer’s mobile loyalty apps and personal preferences. GM expects its retailer-connected technology to Curation & Personalization be available in two million cars in 2018. With an infinite amount of online choice, consumers demand There undoubtedly will be retail winners and losers in the relevant, personally curated shopping experiences, whether months and years ahead, but those that thrive will do so in-store, online or by subscription. If Spotify, Netflix, by building innovative business models on a foundation StitchFix and Amazon can know what they want, shouldn’t of technologies that meet customer-centric demands of a all merchants? In recent years, retailers have invested in digitally enabled store experience. building actionable back-end data repositories with a single view of the customer, inclusive of all available data “signals.” In 2018 we’ll see them leverage that investment with AI and predictive technologies, analyzing implicit and explicit data, and moving from segmented targeting to true “record level” “If Spotify, Netflix, StitchFix and Amazon personalized 1:1 interaction. can know what consumers want, shouldn’t all merchants?” Pervasive Connected Commerce

As the “physical boundaries” of commerce dissolve, in 2018 we’ll enter the age of “Pervasive Connected Commerce.” In a new retail paradigm where connectivity is ever-present and payment credentials are stored in the cloud, consumers will seamlessly interact with a host of “gateway” devices for digital and physical commerce. Amazon Alexa and Google Home are the early leaders in this area and are simplifying shopping for household purchases. Similarly, we’ll see an uptick in smart appliances like refrigerators and printers, infused with IoT capabilities that sense “inventory levels” and automatically replenish without human intervention.

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MOVING FROM ENTERTAINMENT TO ENGAGEMENT

Nikki Baird, Managing Partner, RSR Research

@NikkiBaird

It’s always a tricky business as an industry analyst to enough that it appears to be driving a wave of interest and predict the future and even trickier to go back and evaluate investment in employee mobile applications. It’s not about predictions against reality. I guess I’ve done this long enough customer engagement, it’s about making sure the retailer that I’ve learned how to hedge my bets. When I said that 2017 can keep the promises it makes to customers about whether would be critical to the store — and I had no idea at the time they will actually receive their orders. But the good news just how much store closings would blow up into what has about investing in employee mobile: it’s a platform. One now become known as “the retail apocalypse” — I also said investment is the foot in the door needed to turn employee we wouldn’t see much visible progress in 2017. That remains mobile into the multi-faceted productivity and engagement true. The store is retailers’ albatross, their Achilles’ heel, their tool it could become. challenge — and their opportunity, if they can find the money Another unintended consequence is on store design, and the intestinal fortitude to be bold. especially for the “collect” part of click & collect. Most stores But I’ve learned two things about how the industry is evolving are not designed to house a pickup counter, and back rooms over the last year, and that’s where I’ll start for my predictions to hold goods for customer collection are very inefficient for 2018. — for the customer, who doesn’t want to walk all the way through the store to get their stuff, and for the employee, 1. Omnichannel is starting to have a drastic impact who may have to constantly walk from the front of the store on stores. to the back to get said stuff. I don’t mean in terms of cannibalizing sales or threatening the store’s future existence, though those challenges remain real, especially for retailers who have not figured out how to transform their stores (or how to pay for it). Click & collect “The store is retailers’ albatross, their Achilles’ in stores, combined with ship from stores, has gotten large heel, their challenge — and their opportunity, enough and impactful enough that it’s causing unintended if they can find the money and the intestinal consequences that retailers now have to deal with. fortitude to be bold.”

One unintended consequence has been the impact on employees. A lot of retailers have been paying lip service to wanting to give employees in stores access to mobile devices, but the reality of managing in-store orders for pickup, delivery or shipping has grown large enough and complex

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In some stores, the impact has become so significant that That has to change. I wish I could say that it will happen in it’s actually front-end cash wraps that are impacted. I was 2018, but I know better than to put words in my mouth I recently in a Best Buy where the only register that was may have to eat later. However, this change must come, and open was the customer pickup desk, and the whole front the sooner the better: engaging with customers is not about area of five different cash wraps, along with the impulse buys promoting to them, it’s about becoming essential to their and sodas and gift cards, was empty and untouched — not lives. If you think that’s pansy pseudo-psychology talk that even staffed. is irrelevant to retailers, then I do have one prediction for you: in the fight for retail’s relevancy, you are definitely going But this is good news too. It means the old store design is to lose. getting so dated in its ability to serve customers that retailers are reaching a tipping point where they have to remodel stores just to accommodate more cross-channel behaviors. Then the opportunity becomes: don’t just fix this mess. Make “The good news about investing in employee it right top-to-bottom. So 2018 may be the year where store mobile: it’s a platform. One investment is the change becomes visible, after all. foot in the door needed to turn employee 2. Not Entertainment — Engagement. mobile into the multi-faceted productivity and engagement tool it could become.” In 2017, RSR explored the idea of customer engagement and what it really means to retailers. What we found was hands- down disappointing. While retailers talk a good game about wanting customer engagement, when it comes to tactics, it rapidly becomes all about advertising promotions.

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LET’S MOVE BEYOND THE ‘RETAIL APOCALYPSE!’

Brian Brunk, Principal, BRP

@BRPConsulting

With a flurry of continuing bankruptcies and store closure shops and stores as distribution centers. We expect to see announcements, “Retail Apocalypse” has been a strong the rise of brands as a key theme and a differentiator, with theme throughout 2017. While mentions of “apocalypse” wholesale in some cases representing the new retail. might work great at grabbing headlines, the reality is Cloud Is Paramount To Agility something much subtler and far more interesting. More and more capabilities are being moved out of point It’s true that the current rate of disruption and the solutions like POS and being centralized, or in many cases subsequent transformation is probably the largest many of enabled, as cloud-based services. This move to the cloud is us have or will ever see. While it might be an “apocalyptic” key to accelerating retailers’ vision for a unified commerce outlook for some, the reality is that it is just the ever-evolving platform that is integrated, real-time and agile to support nature of retail and consumers. future scalability and flexibility. 2018 Predictions: With A Shifting Retail Model, It’s All Supply Chain Capabilities & Optimization Trumps BOPIS About Transformation And Agility Consumers would rather receive merchandise at home Retail is rapidly being redefined. With the rapid pace of than drive to a store, but they also want their products disruption, winning retailers are looking to outpace the immediately. According to BRP’s 2017 Digital Commerce competition, and adopt strategies that position them for Survey, the number of retailers offering same-day delivery success as customer expectations and technology continue has tripled in the past year to meet consumers’ need for to evolve. The following are key trends shaping future instant gratification. Retailers are testing different ways to strategies and tactics to survive, adapt and win: effectively execute same-day delivery:Walmart is utilizing store associates to perform deliveries while other retailers Elevated Customer Expectations are using third-party delivery services like Deliv, Postmates Customer journey paths and expectations spanning or Uber. engagement to fulfillment continue to rapidly evolve. The key Disruptive Technology Gains Traction to a successful customer engagement strategy is to focus on a personalized experience that transcends channels and We will see more retailers adopt or experiment with breaks down any remaining channel silos. innovative technologies in 2018 to gain a competitive advantage, or in some cases, just keep up. A few of the hot Blurred Definition Of Retail technologies making inroads include: IoT, artificial intelligence, The retail model is changing at the speed of light with the virtual/augmented reality, voice-assisted ordering, beacons lines between retail, brands and wholesalers blurring. Retail and autonomous fulfillment. formats are evolving to include showrooms, theatres, pop-up

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RETAILERS ARE BETTING ON THE DIGITAL STORE

Ananda Chakravarty, Senior Analyst, Forrester

@achakravarty

For the digital store, 2018 will be a year of exciting, emerging So, where will retailers concentrate digital store solutions in technologies like data-driven retail and tools to empower 2018? Retailers with digital stores will: associates with an opportunity to grow in a healthy, fast- Boost associate capability as part of reshaping talent moving economy. Smart retailers will continue to develop and organizational structure. Creating operational their foundational capabilities to enable the holistic customer efficiencies lifts retailers’ bottom lines and frees up journey across physical and digital touch points. associates to focus on their most important responsibility: Two truths about retail are essential to keep in mind: engaging with customers. Efficiency with store associates is a key opportunity. For instance, Best Buy reduces the 1. Key indicators show that the overall retail market time to complete a price match with improved mobile is healthy communication for store managers. Overall, both online and offline retail markets are growing. Embrace inventory management and fulfillment agility. According to the Conference Board and Nielsen, the U.S. In the U.S., the volume of BOPIS orders will overtake orders soared to a 17-year high in consumer confidence in the that ship to the customer. Top retailers will push their pickup- economy and job market for November 2017. Retail jobs from-store options to bring customers to the store, and overall are growing with over 15.8 million workers in retail will use discounts and shipping cost savings as incentives. as of May 2017. Retailers continue to open stores, with new Customers expect products to be available for pickup, and entrants in the market arriving, especially grocery such as retailers will deliver inventory management outcomes to Aldi and Lidl. avoid stockouts. For example, companies like Levi’s and Intel 2. Retail is moving fast, but customer obsession is still Retail are investing to achieve near 100% inventory accuracy. the constant for success Build real-time digital store analytics as part of the shift The key for retail success is an unyielding focus on the to prescriptive analytics. Digital store ecosystems promise customer. Forrester has introduced an entire body of to meaningfully improve operations and growth by allowing research about customer empowerment called “The Age stores to turn real-time data into actions. Combined with AI of the Customer” that shows you why this is important. The algorithms, data will help provide prescriptive results that customer-driven retail industry is evolving at breakneck give solid recommendations about what actions retailers speed, aided by new digital store technologies. For example, must take next. For example, Joann Stores is tracking the leading grocers like Wegmans are retooling store barcode online-to-offline impact of shoppers by identifying in-store scanning to reduce shopper checkout time. customers who have visited online. Joann then engages them with marketing campaigns on mobile and after the store visit.

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RETAIL 4.0: SUCCEEDING IN THE AGE OF INTIMACY

Laura Davis-Taylor, Co-founder, HighStreet Collective

@laura_d_taylor

According to the 2017 Edelman Global Trust Barometer, over-delivering on authentic appreciation. However, there is a global trust is in crisis: just 52% of respondents to their general sense of apathy that has cloaked our store walls like survey said they trust business to do what is right. In a cloud of doom. As Amazon escalates our expectations of contrast, according to a survey conducted by The Verge in retail, it is the people both leading and servicing our stores partnership with consulting firm Reticle Research,Amazon that will make or break us. You see, when we make people is by far the most trusted and well-liked tech brand, beating feel bad giving us their business, they will actively support the out rivals Apple and Google. It found that not only do alternatives. And Amazon is capitalizing on this. consumers trust Amazon with sensitive personal details In the Age of Intimacy, you can fake caring with data — but about what they purchase, their interests and locations, they it’s really hard to do with humans. This year, two things will be trust them almost as much as their bank. They also rank critical: 1. Enlightened leadership that embraces caring; highest in passion, stating that Amazon “has a very positive and 2. Human-centered technology. In terms of leadership: effect on society.” Amazon has raised the bar to heights we never saw coming. Amazon’s edge is their perceived empathy, and delivering Technology can be used to target and track — but it can also the things that people want, then anticipating their needs to be used to transform how we service, how we incent, how deliver against new paradigms. They use data and processes we anticipate and how we make people feel about going that to come across as both human and essential, and they were extra mile to get behind a wheel and drive to a store. smart enough to understand this path to glory early. In doing Maya Angelou’s famous quote sums it up: “I’ve learned that so, they created the evolutionary era we now find ourselves people will forget what you said, people will forget what you in: Retail 4.0 — The Age of Intimacy. did, but people will never forget how you made them feel.” As we enter 2018, the basic desires of our shoppers remain Ask Amazon. the same: for someone to know them, help them, make it easy to shop with them, be there when they need support and appreciate them. “Amazon uses data and processes to This is the year to ask ourselves how we can help mitigate come across as both human and essential, the ‘caring crisis’ almost everyone speaks about in relation to and they were smart enough to understand shopping physical stores and dealing with service. There are this path to glory early.” some shining lights that have always understood the power of hiring right, training well, incenting shopper sentiment and

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THE DEATH OF PHYSICAL RETAIL HAS BEEN GREATLY EXAGGERATED

Steven Dennis, President, SageBerry Consulting

@StevenPDennis

From recent headlines you might assume that sales in E-Commerce is important, but digital-first retail is brick-and-mortar stores must be falling off a cliff. You’d be more important: What’s far more transformative than the wrong. Yes, e-Commerce is growing at a much faster rate, but rise of e-Commerce is the fact that most customer journeys revenues in physical stores remain positive (1% to 2% growth for transactions that ultimately occur in a brick-and-mortar depending on the source). There is also a sense that online location start in a digital channel — and increasingly that shopping is becoming the dominant way most people shop. means on a mobile device. In fact, digitally-influenced In fact, even with a dramatic share shift, e-Commerce still physical stores sales are far greater than all of e-Commerce. represents less than 10% of total retail sales and is expected Many brands’ failure to understand this reality caused them to remain below 20% even five years from now. to waste a lot of time and money building strong online capabilities at the expense of keeping their stores relevant. Nevertheless, it is crystal clear that years of overbuilding, failure to innovate on the part of many retailers, shifting The future will not be evenly distributed: Clearly, there customer preferences and market-share grabs from are brands and retail categories that are being “Amazon-ed.” transformative new models that aren’t held to a traditional There are also sectors that have been in long-term decline profit standard are creating fundamentally new dynamics. (department stores and many regional malls). Still others Physical retail is not going away, but digital disruption is have remained largely immune from the disruptive forces transforming most sectors of retail profoundly. Here are a that are hitting others so hard. Off-price chains, warehouse few important things to bear in mind: clubs, dollar stores and gas stations all come to mind. Grocery shopping has also seen little impact, though that’s Good enough no longer is: Mediocre retailers were likely to change. protected for years by what was once scarce: scarcity of product and pricing information, scarcity of assortment It’s also important to note that some forces that are shaping choice, scarcity of strong local competition, scarcity of the industry have little to do with e-Commerce vs. physical convenient ways to deliver product. Digital commerce has store shopping or the notion that Amazon is eating the created anytime, anywhere, anyway access to just about world. Many sectors are being hit by a fundamental change everything. Traditional retailers’ failure to innovate over the in shopping behavior (a shift to experiences away from stuff, past decade has put quite a few in an untenable position a tendency to trade down to lower price points) that has from which they will never recover. nothing to do with how spending is being reallocated away from brick-and-mortar to online.

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RETAIL OUTLOOK 2018: ADAPTABILITY, SCALABILITY, EXPERIMENTATION

Leslie Hand, Vice President, IDC Retail Insights

@LeslieHand

A Look In The Rear View: 2017 1. Not all consumers are all in with online ordering

and fulfillment; and 2. Even those that would claim to Let’s face it. If you are a retailer that hasn’t already nailed shop online most of the time make occasional stops down how to profitably promote a differentiated consumer in stores for the pleasure of the hunt and the wonder in value proposition, or haven’t checked all of the omnichannel discovery, but also out of convenience and necessity. product availability and fulfillment boxes, then you probably struggled to drive growth in 2017. Analytics were a primary Voice and video technologies parlayed a prominent spot focus in 2017, and will be again in 2018, as they ground all on our radar as the transformative power of checkout-less successful omnichannel revenue management, assortment, buying “in the stream of life” became a reality, in demos pricing, promotion and availability capabilities, and should be from retailers including Amazon and Alibaba. Nordstrom embedded in all state of the art processes. is our favorite poster child for experimental retail, and we applaud the new Nordstrom “Local” store concept, a store Furthermore, if you haven’t replaced your legacy platforms that focuses on service and tailoring personalized consumer so that you can offer your omnichannel services seamlessly shopping experiences. and efficiently, then you had to work way too hard to achieve your objectives. Platforms architected for the future are a Other technologies including AR, VR and robotics are foundational must-have for any retailer planning to be around finding their way into everyday shopping patterns in in five years — so figure out how to fund it, and consider some retail segments. For example, in home, garden and cloud, increasingly the most viable option. furnishings, AR is a great planning and training aid; in long tail distribution scenarios robotics are a critical necessity; A Look Forward: 2018 and in big box stores robots can improve inventory accuracy The future of retail became clear in 2017: it isn’t a with nightly store walks. RFID continues to ease into retail destination; it is in fact a journey! That means adaptability, chains that want to, once and for all, solve inventory accuracy scalability and experimentation are core tenets of viable issues, while meeting near real-time consumer inventory platforms for the future, and a priority in 2018. Also, the fulfilment expectations. fear that physical retail was going to be supplanted by e-Commerce abated, as the reality that converged physical- The bottom line for retailers: Have a roadmap, with an digital retail will be part of our reality for quite some time understanding of the current and future value of the use going forward, for two key reasons: cases on horizon 1, 2 and 3; and find a way to fund the platform for the future.

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WHAT’S IN STORE FOR 2018: VOICE SEARCH, IOT, BOTS, AR AND CONNECTED CARS

Asif Khan, Founder and President, Location Based Marketing Association

@AsifRKhan

A Look At My 2017 Predictions: online and offline presences in 2017. We even saw a 27% increase (LBMA Data) in online ad retargeting trained by data 1. Brands Will Move Beyond Apps To Engage Consumers from the physical world. RIGHT. If we look at the expansive use of AI and chatbots by retail brands this year, brands have definitely moved What’s In Store For 2018? beyond apps. 1. Local Search Will Be Dominated By Images And Voice 2. Bluetooth Will Boom Virtual assistants such as Google Now, Cortana and Siri have RIGHT. According to our latest research, 57% of consumers shortened the path between users and the answers they now have Bluetooth always on. This is an 18% increase (LBMA need. Voice searches now make up to 20% of mobile queries Data) over last year. (Google Research). This coupled with image-based search will put new challenges in front of SEO experts. 3. Your Business Will Go “Live” WRONG. While some brands opened up the inner workings 2. IoT Set To Re-Invent Retail of their businesses with live streaming, we didn’t see the Just as smart devices are being increasingly adopted in marked increase I was expecting. homes, so will IoT technology make more of a mark in retail. The use of sensors and tags on every item will mean that 4. Marketers Will Finally Embrace The Single retailers can more accurately monitor the movement of Persona Identity goods and improve inventory management and achieve NEUTRAL. This didn’t quite go as I expected. Some brands efficiencies rarely seen before. Nearly 50% of retailers did attempt to unite the data sets they have on consumers, worldwide have adopted Internet of Things technology but much more could have been done. One company to pay to some extent, according to a new report from Aruba particular attention to here is Oath (the merger of AOL, Yahoo Networks. Devices that communicate with each other in the and Verizon). store will also bring about a wealth of additional insights into 5. Rise Of Mobile Payments consumer behavior and preferences for particular product NEUTRAL. The mobile wallets like Apple Pay, Google Pay and combinations, or flag ‘tried on, but rarely bought’ articles. Samsung all saw significant growth in adoption; however, the Consumers’ requests for more personalized offers will also integration of sensor networks like beacons and NFC with be supported by the use of IoT in retail. transaction data still has a long way to go.

6. Closing The Gap Between Bricks & Clicks “Devices that communicate with each other in RIGHT. Many retail brands began to use data to link their the store will bring about a wealth of additional insights into consumer behavior.”

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3. The Continued Explosion Of Bots 5. The Rise Of The Connected Car We know that personalization is an important marketing As we wait for the day we are all riding around in self-driving trend for 2018, and bots will be instrumental in achieving cars, the time is now for the connected car. General Motors this. One way bots will be used is for anticipating what the just announced Marketplace, a solution that combines mobile customer would like to see. Take Spotify, for example. It’s not payments with online shopping/purchasing directly from the a human that is deciding what should go in your Weekly Mix. vehicle without a smartphone. Pull into the gas station and fill Bots also will continue to be used for customer service. They up — let the car pay for that. Order pizza on the way home. will be used for responding to customer inquiries and be Your car will let you order and pay for it. In a similar way, IBM incorporated into chat facilities on retailer web sites. and BMW also partnered to facilitate commerce in the car. Other manufacturers won’t be far behind in 2018. 4. Augmented Reality Finally Has Its Day We’ve already started to see some retailers using augmented reality to engage customers emotionally and enrich their experience of a brand. Augmented reality combined with “As we wait for the day we are all riding “location based” services is also making headway by, for around in self-driving cars, the time is now for instance, allowing retailers to push their locations onto the the connected car.” user´s smartphone using a 3D map; or helping customers find stores or particular items they are looking for in the right size and color.

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EVOLVING FROM THE CURRENT STATE OF RETAIL ANALYTICS TO A CUTTING-EDGE FUTURE

Mike Kim, Director of Data Analytics and Head of CODE, AArete

@AArete

Data analytics has proven itself as a major asset for retailers the domains so as to derive more actionable insight from in a wide variety of markets, offering insight and associated this work. These efforts also are bolstered by having the advantages in key areas or domains such as supply chain, right tools. pricing, fraud detection, and customer sentiment and loyalty. The Cultural Shift Necessary For Continued Data However, these domains and the general focus of analysis Analytics Improvement have generally remained the same over time. Another dimension where retailers can optimize their Now, retailers have an exciting opportunity to further approach to analytics has little to do with the specific improve upon the current results of analytics efforts by technology, data and tools used. Rather, it springs from reviewing current processes and making changes that how retailers approach analytics. The most effective and encompass cutting-edge tools, technologies and practices. responsive data scientists aren’t necessarily those who work They also can benefit significantly from considering their the fastest; they’re the people ready to tap into the language cultural approach to data analytics and making a shift that of the business, communicate effectively and contribute emphasizes a holistic strategy and mutual understanding. to organizational success. Put another way, analytics is no Unstructured Data, Open-Source Frameworks, longer consigned to the boiler room. It’s on deck and helping Cross Functionality steer the ship. Technical skills are still very valuable, of course,

but they need to be combined with these other important One of the most pervasive retail analytics trends currently attributes. Similarly, the C-suite needs to view data analytics seen in the industry is the use of unstructured data in as an art and an evolving concept, not a series of discrete, applications like customer loyalty and sentiment. As much disconnected projects. of the data generated by technology like mobile apps is unstructured, businesses have to make vital decisions Although these changes can require major shifts in the about how to store, classify and understand that information. way retailers approach analytics, the results — increased Distributed computing environments allow for the storage of transparency, better insight, more informed action and increasingly large data sets with processing power to mine for greater understanding of analytics as a living, growing insight faster and faster as this solution scales with ease. concept — will add an undeniable edge to the retailer’s game.

Ultimately, the value of data analytics in the modern retail world comes from the specific tools used to build customized, optimized solutions for individual businesses and the specific “Analytics is no longer consigned to the boiler data gathered. A holistic strategy for data analytics and room. It’s on deck and helping steer the ship.” solving problems means finding connections across

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2018 IN INFLUENCER MARKETING: HOW INFLUENCERS TOUCH EVERY STEP OF THE CUSTOMER JOURNEY

Kamiu Lee, VP of Business Development & Strategy, Bloglovin’

@LKamiu

The consumer today has a dramatically different path to influencers as a ‘product placement’ channel, there is actually purchase than they did just a few years ago. That path is a much more holistic value that influencers can bring to the now self-led and supported by a variety of digital platforms table. Digital influencers can: (Instagram, Pinterest, Yelp, blogs and more) so that the • Create trusted, inspirational, SEO-friendly, evergreen consumer can be fully informed to purchase the right content that can then be re-purposed; product at the best value and price. • Tell the story of a brand or a new product through a In Deloitte’s Navigating the New Digital Divide: “70% of personal lens; shoppers are leading their own shopping journey. They no longer turn to retailers or brand advertisements for • Demonstrate via video how-to’s; inspiration. Instead, they look to independent bloggers, friends and family or even strangers for trusted • Drive conversation around a brand or product; information about products — expressly because these • Drive shoppers to in-store events; influencers are not tied directly to brands.” • Promote sweepstakes, offers and coupons; and Today’s consumer spends on average 79 days researching a new purchase. Eighty percent of them start this search • Offer thoroughreviews and feedback. online, usually with social media, where they spend, on With the right technology and the vast base of talented average, more than 5.5 hours per week. More than 75% influencers of all shapes and sizes, this can all be scaled, of consumers interact with brands or products before they targeted and measured. arrive at the store and 67% of shoppers read product reviews while in-store, all the while increasingly avoiding or blocking ads.

Brands Need To Shift Their Strategy To Effectively “70% of shoppers are leading their own shopping Reach Consumers journey. They no longer turn to retailers or brand advertisements for inspiration.” In order to reach today’s shopper, brands and retailers need to effectively engage them on social media. Influencers represent a particularly effective channel as their audience chooses to follow them, across a variety of different social and blogging platforms. While brands typically still perceive

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Leveraging Influencers And Social Media Along The • There are different influencers, channels and tactics to Customer Journey consider for each phase of the customer journey.

Leveraged correctly, influencer marketing can work effectively • Each social platform has its own value — marketers with a broader social media marketing strategy to cover all should consider the mindset and intent of consumers on the touch points on the consumer’s path to purchase. those platforms.

For example, influencer content can be aimed at the With all of this in mind, influencers can be instrumental in ‘Inspiration/Awareness’ stage and therefore should creating emotionally relevant content for each channel and be inspirational in nature and live on platforms where customer journey phase. These are social media natives consumers are in that mindset (i.e. Instagram, blogs and that have built their business on creating content for their Pinterest). Or it can be aimed at ‘Consideration’ stage, audiences on various channels. Marketers just need to where the content may be more practical and informative ensure that they are employing the right influencer/content/ in nature (reviews, instructional how-to videos, etc.). Or it strategy for each phase of their customer journey. can be aimed at driving conversion at the ‘Purchase Decision’ stage (by reminding the customer by repurposing successful influencer content for retargeting ads, or offering promo codes via influencers that are particularly adept at “There are different influencers, channels driving conversion). and tactics to consider for each phase of the All of this should be tailored to a particular brand and its own customer journey.” customer journey to ensure success and drive ROI. The key is to understand that:

• Influencer marketing should not merely be seen as one-off initiatives to create temporary buzz, but rather, something that fits into a broader marketing strategy — we are seeing next-gen brands gather market feedback and product ideas from influencers.

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INTERNATIONAL RETAIL AND CROSS-BORDER E-COMMERCE

Nicolas Maslowski, CMO, Aeropost

@nmaslowskio

Customers in Latin America and the Caribbean allured out for retail is inventory rationalization, or reduction of by online assortment and convenience are shifting their assortment. On the other hand, dealing with different shopping habits by browsing and ordering online. This has currencies entails foreign exchange gains or losses: the longer attracted large e-Commerce players (Amazon, eBay) and inventory is held or the weaker the currency, the higher the created new ones in the e-Commerce landscape. risk. This adds a major reason for retailers to lean towards reduction of assortment and higher pricing. All this customer pressure faces two main regional challenges: lack of trust and a deficient infrastructure of payment and Here is where the Internet kicks in. Convenience was the delivery. Payment methods are fragmented throughout the initial selling point for e-Commerce, but the channel has region and customers in most cases expect financing options evolved toward transparency of assortment and pricing. from retailers. The delivery infrastructure is challenging, from Customers can now shop around sites worldwide and finding an address to the risk of losing a package. At aeropost. increase their expectations towards brands and retailers. com, the largest cross-border e-Commerce operation in the They now demand the same assortment and pricing as they region, 60% of customers prefer in-store pickup, and 50% of find on U.S. sites. This trend adds pressure to local retail and customers pay at stores for orders that were placed online. opens the door to cross-border e-Commerce sites that allow (Yes it’s reverse e-Commerce — using an actual point-of-sale customers to buy in U.S. stores, ship to a U.S. address and get to avoid online fraud!) packages to Latin America and the Caribbean. These direct channels increase customer assortment and in some cases An obvious but fundamental factor in international markets, can lead to lower pricing. and especially in Latin America, is fragmentation, which is resulting in limited assortments for customers. The total Retail Future

Latin America and Caribbean population is double that of the While shopping and browsing have no borders, payments U.S. (624 million vs. 323 million), but it is fragmented into 33 and delivery of packages still do. Different players are nations and 15 territories with different cultures, currencies testing different models in different markets to solve this: and customs (as in duties). large online marketplaces with local inventory in Mexico; This fragmentation creates multiple challenges for retailers, traditional retail’s shift to click-and-collect in Chile; or cross- but probably two of the most important ones are inventory border e-Commerce (U.S. inventory) in Central America and management and currency hedging. Selecting the right the Caribbean. Those that can create a seamless borderless inventory leads to higher turnover (if done wrong, it leads experience for customers will tap into a 600+ million people to obsoletes and write-offs), and fragmentation of markets market quite close to the U.S. makes this process ever more challenging. The easy way

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RIGHT-SIZING PERSONALIZATION

Evan Neufeld, VP of Intelligence, L2 Inc.

@L2_Digital

Digital’s promise of unified data and one-to-one marketing Stuck In Neutral. If consumers are frustrated with the always seems to be just out of reach for brands. There is dearth of personalized digital marketing, so are brands. From always the perceived need for one more site relaunch, one 2016 to 2017, L2 saw virtually no change in the number of more CRM system, or one more vendor. data points (both mandatory and optional) being collected by analyzed brands, illustrating the disconnect between In reality, very few brands effectively deploy data on a brand’s hesitancy around data collection strategies and a consistent basis, and brands may never achieve the consumer expectations for more bespoke experiences. perfect system for storing and leveraging customer data. On the execution level, deployment of basic data capture Even brands that are considered relative leaders in data features like wish lists, diagnostic tools (e.g. store finders), and targeting, like Nike, acknowledge the difficulty of favorite store location and product recommendation consolidating cross-channel data to personalize marketing in generators trend upward, while support for more costly new campaigns. But brands cannot let perfect be the enemy implementations like live chat has dropped slightly. of good: Rather than throwing money at bloated data and targeting operations, brands must focus on incrementally Federated account signups and logins, which allow improving data collection and deployment mechanisms to brands to swiftly collect customer data, represent a great meet the rising tide of consumer expectations. example of the disconnect between customer expectations and a brand’s data goals. Customers like federated logins Less is More. According to L2’s Third Annual Study on Data & because they expedite the account creation process, yet Targeting, brands are bypassing collecting basic data like age only 25% of analyzed brands offer this option. Many brands and gender in favor of more nuanced information like birthday, have held out on adopting federated logins because they phone number and zip code. While about 12% of analyzed add silos to already disparate CRM systems and force brands succeed at offering personalization without collecting brands to hand over data to entities like Facebook that have much customer data, most brands collect and use a slew of e-Commerce ambitions. Nevertheless, CMOs must always data points in their personalization strategies. L2 believes this work to lower barriers to entry for customers to connect is more often than not driven by a brand’s desire to leapfrog with brands digitally. to more complex, localized targeting and personalization. However, L2 observed numerous instances of misgendered or age-inappropriate messaging, suggesting that brands must first lay a solid foundation of basic demographic information before communicating with customers in more “Brands must first lay a solid foundation of basic sophisticated ways. demographic information before communicating with customers in more sophisticated ways.”

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(Lack of) Informed Consent. To effectively engage with Inevitably, the more complex types of personalization brands increasingly over-messaged, frustrated consumers — over attempt, the more data, infrastructure, and by extension cost 75 million U.S. Internet users will use ad blockers in 2017 — is required. The first step is to evaluate appetite for becoming brands must focus on both clearly explaining how they use a data-driven sales and marketing brand, which includes collected data and what benefits accrue to the customer. endorsement from the CMO/CDO and buy-in from teams via A notice of clear value exchange has become necessary skills acquisition, new hires and new systems. and has already become a hallmark of leading brands. L2 As with marketing, one size fits none, and there are versions found that only 22% of analyzed brands provide a notice on of personalization for all brands and budgets. These run the their sites about the use of cookies or other collected user gamut from the mass customization of curating site content information. Hotel brands lead the way — over two-thirds and providing customers with the ability to select navigation provide a notice — while over half of activewear brands and paths based on gender, preferred styles, or events to true retailers do the same. one-to-one marketing seen in many of today’s best in class While 78% of analyzed brands make some effort to explain loyalty programs. the benefits of signing up for an account, only half clearly explain the benefits of signing up for an email newsletter (e.g. exclusive offers and promotions). Once customers make the leap to register for a brand site account or newsletter, they “To effectively engage with increasingly over- are largely unable to customize the content and benefits messaged, frustrated consumers — over 75 they receive. During the account signup process, only 11% of million U.S. Internet users will use ad blockers analyzed brands prompt users for their content preferences, in 2017 — brands must focus on both clearly and only 13% offer the ability to choose the frequency of explaining how they use collected data and what email communications. benefits accrue to the customer.”

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THE STORE IS HERE TO STAY, BUT RETAILERS MUST RETHINK ITS ROLE

Q&A with Jack O’Leary, Analyst at PlanetRetail RNG

@PlanetRetailRNG

Retail TouchPoints (RTP): How would you describe the retail I also think the Amazon Go “Just Walk Out” technology, landscape going into 2018? although it hasn’t rolled out to the public, is the type of experience that’s going to have a future in store-based Jack O’Leary: The store is here to stay, it’s just going to have retailing, and we should look to projects like that as the next to change. And shoppers are really looking for the store to solutions for long-term retailing. either enable convenient shopping experiences or to enable some sort of interesting, immersive or entertaining shopping RTP: What technologies still fall below the radar for most experience that can’t be replicated online. retailers?

2017 was the year we saw Amazon, one of the top online O’Leary: I’m interested to see how voice ordering progresses. e-Commerce players in the world, reinforce that idea with Amazon has made a big bet here with flooding the market rolling out some of their own formats, but more importantly with these connected voice devices and partnering with third- purchasing Whole Foods. I think a truly seamless online-to- parties to get Alexa out to the market. When shoppers get offline offer is what I’d expect retailers to continue to work on more accustomed to voice shopping, Amazon wants to be the in 2018. e-Commerce platform behind that.

RTP: What technologies should retailers be adding to the When I think about that, the future of SEO for voice is store experience in 2018? something retailers must focus on. There’s a distinct decision tree with how an Amazon Alexa system will present you with O’Leary: Retailers should understand that many physical an item when you make an unbranded random item request. store sales are definitely very often digitally enabled. Mobile If I’m a brand or manufacturer, I want to understand ‘How is the key area to focus on for 2018 — it’s going to be their do I become the item that is selected first?’ That’s a valuable digital touch point in a lot of stores. I think there are some position to be in. retailers that have some great examples of how to optimize the mobile experience in-store. Preparing for a future where voice might be a higher share of total search is a factor that may be slightly overlooked. Lowe’s is using their mobile app to help shoppers guide themselves around their large, somewhat complicated stores. If a shopper enters an item into the guidance system, the phone will superimpose arrows onto the visual in front “When shoppers get more accustomed to voice of them on the screen. It’s a pseudo-augmented reality shopping, Amazon wants to be the e-Commerce technology that guides the shopper through the aisle to find platform behind that.” that home improvement item they’re looking for.

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STOP THE CONDESCENDING SECOND GUESSING. TRUST THAT CUSTOMERS KNOW WHAT THEY WANT

Ernan Roman, President, ERDM

@ErnanRoman

According to the IBM 2017 Customer Experience Index (CEI) So, Step 1 in re-creating your marketing plan is to go beyond Study, “Only 19% of brands offer more than a basic level of simplistic algorithms and buying histories and understand personalization of the online experience.” This doesn’t come how, why and how often your customers want to be close to meeting consumers’ demands for more personalized communicated with. This necessitates that you engage, ask, and human needs-based communications and experiences. LISTEN, provide the ability to set preferences, and then respect these preference requests once submitted. So how do marketers step up and deliver? For 2018 they need to trust that customers know what they want. Marketers must Step 2 is to end generic “spray and pray” marketing end the condescending view that customers don’t know what they blasts and develop true, human-based omnichannel want or don’t tell the truth. personalization driven by consumer preferences. This means trusting that customers know what they want. In our ERDM VoC research, consumers told us time and time again that marketers still don’t get it! They still aren’t providing Additionally, key consumer journey life stage points need personalization that is meaningful or relevant: to be identified, and corresponding engagement actions put in place. • “What we receive is not smart personalization.” Engagement strategies that offer help, advice and value- • “They aren’t personalizing the things that matter to me!” added dialog are required at these key lifecycle points: • “What they consider personalization is so old-fashioned.” • Acquisition • “I want more than just simplistic buying history- • Onboarding based emails.” • Anticipatory responses to decreasing engagement (visits, To provide “smart” personalization, marketers must engage responses, purchases) customers to learn how they define their individual, personal, human needs. Then, meaningful communications and • Immediate resolution of negative experiences interactions must be created, which are not generic, inferential • Surprise and delight and thank you marketing or transaction-based and are more helpful and tailored to self- profiled preferences. • Value added cross-selling and upselling

• Repeat sales and renewals.

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Takeaways:

• Engage customers by providing easy avenues of “Step 1 in re-creating your marketing plan communication at all touch points. Whether it’s an online is to go beyond simplistic algorithms and preference center or opportunity for contact updates during buying histories and understand how, why checkout, chat or phone conversations, give consumers the and how often your customers want to be power to drive their relationship with your company. communicated with.”

• Create the means to fully understand the intricacies of an individualized shopping journey. Engage shoppers to customize their experience — based on a compelling value proposition.

• Identify key consumer life stages and put in place specific actions to acknowledge or respond to situations in a seamless manner, which demonstrates a desire to earn long-term loyalty rather than to expect it.

And, trust that customers know what they want. End the condescending view that customers don’t know what they want or don’t tell the truth.

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4 KEY RETAIL TRENDS FOR 2018

Jerry Sheldon, VP of Technology, IHL Group

@JerrySheldon

The year 2017 continued the dynamic and rapid better get one and do so rapidly. Delivery times are beginning transformation of the retail landscape. At the beginning to shrink and consumer expectations will follow. of the year, there were four key themes which were While we’re probably still not at the tipping point around highlighted: mobility, unified commerce, enterprise conversational commerce, we think that more retailers will order management and increasing IT spend to remain begin to examine their strategy here. While beginning with competitive with market leaders. All four have been major controlling the lights and the HVAC system, we can now speak points of emphasis with the retailers we work with and with to them and buy stuff, all sorts of things, and with increasing the vendor community that works to service them. The one ease. In one sense this makes shopping “easier,” but in the area that has probably not advanced as rapidly as needed is other we are now allowing retailers more control over our increased emphasis around technology spending, as most buying process and potentially more insight into the inner retailers still operate in the sub-1.5% of revenue regime. workings of our private lives. It will be quite interesting to see As we look to the coming year, those same four themes will how consumers embrace this technology and how brands continue to be points of emphasis. The key thing they have attempt to fend off Amazon’s war on brand affinity. in common is that all four help support some key aspect of Finally, Artificial Intelligence/machine learningwill customer centricity and the digital shopping experience. continue to get a lot of buzz and we expect to have a lot of I would be remiss to not at least mention the continued conversations with both retailers and vendors around this importance of the store: Retailers plan to open 5,500 subject. This is the next manifestation of business intelligence net new stores in 2018, after opening 4,080 in 2017. While and one of the things that will continue to fuel a very long run headlines might lead you to think otherwise, the store is not of above-average IT investment in BI solutions. dead. The store is relevant, stores are growing, and stores will continue to be a strategic part of the retail experience for the foreseeable future. Our research indicates that there will be healthy investment in both IT and store systems technology “Retailers plan to open 5,500 net new stores in the coming year, at levels above historical averages. in 2018, after opening 4,080 in 2017. While headlines might lead you to think otherwise, E-Commerce wars in apparel and grocery will continue to the store is not dead.” heat up, making a single version of the order more relevant and more critical in every retailer that offers products and services across multiple channels. Any retailer without a concrete strategy around next- and/or same-day delivery

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THE RETAIL CUSTOMER EXPERIENCE REIMAGINED

Kelly Stickel, Founder & CEO, Remodista

@kstickel

Understanding clienteling in-store and measuring sales • Example 2: One retailer is replacing their mirror hardware. associates in innovative ways are important foundations In the new mirrors, RFID reads the products coming in and for reimagining the customer’s experience. This includes the mirror reflects it. This immediately removes the pain measuring and incentivizing the ability of sales associates point of needing to walk outside by pinging clothing needs to acquire new and retain existing customers, as well as to from fitting room to associates equipped with iPads. encourage other loyalty drivers (e.g., cross-channel or multi- • Example 3: RFID included in handbags can be scanned by category purchases). a smart app. Now the retailer knows who the customers are Why? Customers who purchase in multiple ways tend to buy and can target them at home for follow-up to close the loop. three times more. Having a seamless experience allows your • Example 4: Robot helps to take inventory every single customers to follow their buying and exploring journey. evening. Now the company is integrating stores with First, how are you digitizing stores? What challenges are you distribution centers. This creates a map of the store and facing? Two themes that come up repeatedly are customer allows for lookups from a remote location. Also, it provides journey mapping (and making technology selections based the ability to get a picture of what inventory is moving that on high-value customer interactions) and ROI (must prove day, or within a given space. Being able to detect anomalies return! e.g. for RFID). You need a digital use case and user currently, in contrast, takes an employee with an RFID gun. journey mapping to understand different customer segments (e.g., gift giver/bridal).

While companies spend more on e-Commerce it is customer “Customers who purchase in multiple ways personalization that is increasing sales. This requires moving tend to buy three times more. Having a from transactional strategies to customer-focused ones seamless experience allows your customers based on a clear understanding of the customer journey. to follow their buying and exploring journey.”

Here are some examples:

• Example 1: One retailer is piloting kiosks in-store to build a seamless and engaging experience. One challenge is that associates didn’t have access to e-Commerce. Still, the kiosk had a positive impact for the store.

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EXPECT AI TO PAY OFF FOR RETAILERS IN 2018

Deborah Weinswig, Managing Director, Fung Global Retail & Technology

@DebWeinswig

AI is revolutionizing the world and its application in retail is responses when Alexa recognizes a customer’s voice, so transforming the industry. In 2018, AI-powered tools will be brace for a lot of interesting applications on the platform. smarter and more accurate and we expect the technology to Beyond AI, “reality technology,” a term we use to group start bearing fruit for retailers in a significant way, especially together AR, VR and MR (mixed reality), has the potential to for those with sizable digital businesses. disrupt retail by introducing new ways to guide shoppers We already saw AI in action in 2017 and the results look through their journey. The price of VR devices is expected to promising. During Singles’ Day 2017, the biggest online come down with shipments continuing to improve in 2018, shopping day in the world, which originated in China, Alibaba which will likely lead to higher VR adoption and more in- reported using AI to boost businesses results in three ways: store retail applications. Apple’s new ARKit, introduced at its Worldwide Developers Conference in June, should facilitate • The company used its Tmall Smart Selection the development of new augmented reality apps for the recommendation algorithm to help buyers make decisions iPhone and iPad, which will undoubtedly have a retail impact while scrolling online. — think Pokémon Go. • It used deep Q-networks (a reinforcement learning model) 2018 has all the makings of a great year for retail technology. to determine the best fit for products in a package, which Retailers must make the best use of it by embracing AI saved 5% of overall packaging costs. and embedding data collection and analysis at the core of • Alibaba leveraged its customer service chatbot Dian their business models. Retailers should not pass on the Xiaomi, which can understand more than 90% of customer opportunity to work with the numerous startups that are inquiries. The chatbot can serve almost 3.5 million users a bringing digital capabilities to market as a way to experiment day, according to the company. with new technology in a cost efficient way, and achieve organizational learning and digital transformation. Alibaba’s total gross merchandise volume (GMV) on Singles’ Day reached $25.3 billion (¥168.2 billion), up 39% year-over- year in renminbi terms. “Amazon sold millions of Alexa-powered In the U.S., we expect Alexa and its peers to get even smarter devices during the holiday season and all of in 2018. Amazon sold millions of Alexa-powered devices these will turn into new sources of training during the holiday season and all of these will turn into new data for the company’s algorithms.” sources of training data for the company’s algorithms. In November, Amazon announced that developers will soon be able to use the Alexa Skills Kit to build personalized

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Retail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels. The Retail TouchPoints network is comprised of a weekly e-newsletter, special reports, web seminars, exclusive benchmark research, an insightful editorial blog, and a content-rich web site featuring daily news updates and multi-media interviews at www.retailtouchpoints.com. The Retail TouchPoints team also interacts with social media communities via Facebook, Twitter and LinkedIn.

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