Retail is on the precipice of a renaissance, which will be characterized by great advancement and economic revival, yet to get there, retailers need to start by acknowledging that no matter where they operate in the world there is a compelling need to exercise commercial discipline. Additionally, a recognition that the metrics of yesterday’s retail will not be sufficient to drive the growth of tomorrow.
Nevertheless, this unavoidable commercial pragmatism must be reconciled with an understanding that, despite the fact that thrilling technological innovation continues to dominate C-suite and lift conversations, the next significant development is the imminent renaissance of hyper-experiential retail.
In February, the U.S. Commerce Department reported that consumer spending increased by the largest margin in a year. Meanwhile, inflation in the United Kingdom was at its lowest level in two years as retailers competed for customers. In an environment where there are more competitors than ever before, brands must perform, and perform well, regardless of whether conditions are favorable or challenging.
Furthermore, consumers may be likened to capricious ones. There are dozens, hundreds, and, if we consider the global market, thousands of other brands that are eager to monetize on their spending if they are dissatisfied with a single experience. Although a significant number of consumers are traveling a great distance to experience the best of the world, TV and content across platforms are redefining what consumers want, need, and expect from brands by introducing them to new lifestyles and methods of living.
Earlier this year, retail was the dominant topic at CES, and the majority of the discussions focused on the use of artificial intelligence (AI) technology to facilitate seamless and frictionless retail, personalization, and other related topics. Technology is enabling user experience that wouldn’t have been imagined a decade ago. Nevertheless, technology should be regarded as a means to fulfil consumers’ desires, rather than as an objective in itself.
The NRF’s Retail’s Big Show this year featured the most advanced technology. However, two significant themes that emerged were that customer interaction in-store is as important as the transaction and that Generation Alpha, despite not yet being financially independent, has a significant impact on their parents. Although these genuine digital natives are technologically proficient, they prioritize physical and in-store experiences. Do not undervalue their impact on their parents for a moment.
Gen Z, the first generation to have had a smartphone their entire lives, is also known to be digitally savvy. Although it is unwise to make generalizations about entire generations, it is generally acknowledged that this demographic conducts online product research. However, it may come as a surprise to those who exclusively concentrate on technology, but 81% of Gen Z prefers to shop in physical stores, with over half of them doing so because they believe it helps them disconnect from the digital world. This information is sourced from global management consulting firm Kearney.
All the indicators are present for retailers who are willing to observe them. Our two youngest generations are telling us what they want. What is the practical application of this? Just six years ago, Amazon introduced its Just Walk Out technology, which was accompanied by cutting-edge algorithms, shelf sensors, and ceiling-mounted cameras. The technology is being removed by Amazon due to the fact that it alienated consumers who perceived their grocery store visits as akin to entering a high-tech vending machine. This directly addresses the desires of consumers regarding their in-store experiences.
The next significant opportunity in retail is hyper-experiential retail, and we are on the brink of this eruption of customer experience that is driving consumer choice and loyalty due to a confluence of a few major forces.
The displacement of tectonic plates
Technology, which is facilitating the development of experiential retail that is both innovative and effective, is the first. Another factor is that as the pandemic recedes into recollection, individuals desire to engage in social activities and spend time with others outside of their residences. Insights from Canvas8 regarding what they refer to as “experience hunters” indicate that 58% of consumers anticipate that immersive experiences will influence their subsequent purchases. In other terms, six out of ten individuals prioritize the emotional impact of retail.
The third is that the boundary between retail and other industries is no longer discernible. Retail is ubiquitous, whether you are at an airport, a fuel station, or commuting. Consequently, there are hundreds of distinct competition points for retailers across millions of distinct journeys. The final significant factor is that e-commerce has entered a state of stagnation. Effective, efficient, and convenient, but boring and predictable. Influencers have taken over product choice even leading the conversations on behalf of brands. However, consumers are in search of a more enjoyable experience; they are pursuing discovery, which is the essence of retail’s past.
This has extremely tangible implications for brands that have established their market presence through legacy retail experiences. In order to remain competitive with pioneers who are consistently elevating the standard of experiential purchasing, they must innovate rapidly. In addition, they will be competing directly with startup brands and businesses that were direct-to-consumer, but are moving into the realm of retail experience without the baggage of the past. This area alone will likely see exponential growth in the next few years.
From purpose to experience
For years, the definition of brand purpose has been a central focus, and this is appropriate because purpose is fundamental. Nevertheless, purpose alone does not provide a comprehensive understanding of the consumer experience with a brand. In light of this, brands will be challenged to define how their brand is experienced across all dimensions. In other words, not just their voice, not just the words that they’re using or their personality and identity, but how they’re physically coming to life, how they’re meeting customers at the important moments across the retail journey and creating value, intrigue, excitement, attraction, and desire.
In a hyper-competitive landscape, this form of discovery is essential for brands to foster long-term loyalty. The initial step is to dimensionalize the brand, which involves considering its appearance, texture, sound, aroma, and flavor. This is the foundation of an experience vision. Once this has been accomplished, a brand must be meticulous in selecting the precise instances at which it wishes to ignite its consumers. A significant portion of this precision will be derived from a profound comprehension of consumer insights and experience barriers, as well as the ability to surmount them. Additionally, it will be influenced by creativity, imagination, and innovation. A true path to differentiation.
Retailers require assistance from agencies and consultants in the development of a diagnostic voyage for consumers. This allows brands to comprehend the consumer’s entire journey, not only within an experience, but also in the moments and decisions that precede it. How do they make decisions, what motivates them, and what distracts or pushes them away from brands? At what point do they make these decisions?
The most effective technology is capable of combining data from a variety of sources to diagnose brand issues and predict the locations and reasons for consumer losses during their journeys. It is crucial for retailers to identify the areas in which they are not maximizing consumer desire during critical moments. Nevertheless, in order to arrive at the appropriate answers, it is necessary to pose the appropriate queries.
The seeds of these questions were sown at CES earlier this year, when some of the world’s largest retailers and technology giants made it abundantly clear that their vision of sustainable, long-term growth was to marry technology with humanity. This signaled a return to appreciating the value of humans and how we feel. Experiential retail is a term that is universally recognized, and there are numerous case studies of campaigns that have been exceedingly successful. Anticipate that this will escalate to a hyper-experiential level. In particular, eight out of ten individuals worldwide are prepared to pay a premium for superior purchasing experiences, as reported by Canvas8 and cited by Unibail-Rodamco-Westfield.
Genuine human connection and personal interactions are going to drive retail growth, innovation, and brand loyalty this year and beyond. Brands need a plan to thrive in this renaissance of hyper-experiential retail. In the new era of modern retailing, where consumers are expressing their desires, the norms of the past will not be effective. Rather, we must listen, observe the surroundings, and boldly enter the premises.