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Foreword
Dan Valerio
Partner, Americas Director, Retail & Wholesale Sector Ernst & Young LLP
The retail industry is not one unfamiliar with change. New products, new formats and new technologies have always been elements any progressive retailer has had to embrace and successfully integrate into its core strategies. This is done not only to stay current, but to provide customers with the opportunity to rediscover its brands and enjoy an even greater shopping experience. However, it is hard to imagine a time when technology has changed so radically and rapidly as it does today, and where such change has had such an immediate effect on the consumer and retailer alike. In this report, we explore how the internet and mobile technology are reshaping consumer behavior, behavior that leading retailers will undoubtedly need to make the foundation for their strategies for the future. A future that likely will change faster than the hot fashion trend for spring, or the latest cool toy for the holidays.
Introduction
Ten years ago, the internet was barely on anyones radar. Fast forward to today, and its the third-mostshopped channel each week, after supermarkets and mass merchandisers, according to WSL Strategic Retails How America Shops MegaTrends 2012 report. Technology is reshaping the retail environment faster than ever, causing retailers and brands to rethink how they currently do business. Shoppers are doing more research before they buy by using the internet to pre-shop, price compare, read reviews, browse and purchase at any time, day or night. Online access and usage has increased significantly, even in the past year. The number of hours spent online is 23 hours a week, up 7 hours from one year ago. Mobile technology has taken this even further, giving shoppers access to the internet and the ability to shop from anywhere. This has changed shoppers path to purchase, impacting the way they come to, and ultimately buy, products and brands. Todays retail world is virtually unrecognizable from the one a decade ago. Commensurate with the tremendous rate of change, the next five years is expected to look very different from the last five. With this comes significant implications for retailers and brands.
Online purchasing
Incidence
Base: Total women
Clothing Books Travel Fashion accessories Electronics Skin care Cosmetics Office supplies Fragrance Hair care Rx medication OTC medication Groceries
Source: How America Shops From Buzz to Buy 2.0, WSL Strategic Retail, September 2011
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Source: How America Shops From Buzz to Buy 2.0, WSL Strategic Retail, September 2011
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Mobile muscles in
Mobile commerce is perhaps the biggest game changer of all. With the growing accessibility of smartphones and faster technology, suddenly people have access to the internet and internet shopping at their fingertips. Shopping has truly become anywhere, anyplace, anytime. Ten percent of the population has used shopping apps on their mobile devices, be it to secure discounts, find stores or compare prices. Retailers also realize that mobile technology has transformed the in-store experience. IPads are available in several retailers stores for shoppers to view catwalk shows, browse product specifications and to enter their information for customer relationship management purposes and marketing lists. Apps allow shoppers to scan QR (quick response) codes to redeem coupons at store checkouts and collect or use frequent shopper reward points.
88% 87% 1
57% 44% 13
49% 33% 16
48% 27% 21
Source: How America Shops From Buzz to Buy 2.0, WSL Strategic Retail , September 2011
Mobile shopping has enabled retailers to find new places to sell beyond stores. One UK-based retailer has commenced virtual grocery stores in subway stations and airports, where shoppers can view images of products, scan a QR code to add items to their baskets and buy through their phone. The product is delivered to their home, with no need to go to a physical store. By eliminating the need for shoppers to enter a bricksand-mortar environment, or to be at a computer, digital technology appears to have truly extended this retailers reach.
1. Physical (bricks and mortar) stores wont be going away entirely, but they will change. Store closures
are expected as chains no longer need as many physical stores. Store size will also change, as categories go online (e.g., smaller footprints, retailers leasing out space). This will drive leasing decisions, physical layout and merchandising plans.
2. Retailers will find ways to rethink shopper loyalty to create reasons for shoppers to come to their stores.
This will include differentiated in-store experiences, enhanced service models and new loyalty program benefits. Exclusive brands and products will also become important to retailers, as a way to differentiate from the competition. These changes can affect the accounting for many pre-existing loyalty plans, or create newer and more complex structures.
3. Transactions will occur more in the digital space, which means retailers will turn to multi-channel models
including online, mobile and social commerce, and virtual stores, in addition to physical stores. As these virtual transactions occur, retailers will need to ensure that their revenue recognition policies and practices are appropriate and supportable.
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4. Multi-channel retailing will provide a strategic advantage to companies by virtue of the transactional and
behavioral shopper data gained, but with that will come a greater need to mine and leverage this data more effectively. Additional stress may be put on existing systems and the people that operate them. Ability to manage and utilize larger data warehouses of critical information will be imperative.
5. All of the impacts above create massive supply chain implications. The most obvious the inventory
implications of fewer physical stores, less inventory in stores and a multi-channel model. There are also significant organizational implications. Leading retailers will be out in front of the competition utilizing these new technologies to enhance their supply chains, while identifying efficiencies and cost effectiveness as critical components to competitive advantages.
Digital retail | 5
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