Retail: How systematic innovation will change the High Streetby
2015 was a year that saw lots of change in the retail industry – omnichannel went mainstream, service became highly personalised and mobile payments finally took off.
For Danny Bagge, executive head of retail at IBM UK and Ireland, it was also the year we started to see a clear division between the “retail haves and the retail have-nots”, or essentially a widening between those retailers with big budgets and the smaller independents found on local High Streets.
Without a doubt, innovation was the major characteristic of 2015, be it new technologies or evolving business models. No longer a gimmick, the big retailers got serious about innovation labs with many prominent retailers now heavily investing in idea centres to help their brand evolve and adapt as new technologies become available. It may be an overused phrase but, as Bagge explains, 2015 was the year that retailers found new direction for omnichannel in-store by undertaking store-based digital and physical experience improvements.
“We have seen great growth in iPads for employees, in-store mobility for customers and, of course, beacons,” he says. Most significantly, the technology that transformed the shopping experience was contactless and Apple Pay, which gained widespread consumer adoption last year to the point where seamless payment is now considered the norm. But to what effect is this change having on the traditional High Street?
Bagge explains that these changes are widening the divide between the big large chain stores and the tiny independents: “Big brands can use their innovation labs to create an idea, launch it to market, do a whole load of analytics, check that it's working, refine it and then launch it properly – all versus the independent High Street retailer who doesn’t have the resources to compete.”
And this is just the start. He adds: “In 2016 we will see systematic innovation by the big companies. They know how to do it now so that gap’s going to widen, which is a problem because our independent stores are what give us a rich High Street. Without them we'll get, dare I say, an American mall experience. Consumers want to go into the local high street and get those independent shops but we’re likely to be left with just the big chain stores.”
Without a doubt, consumer adoption of technological innovations has been the primary catalyst for change in the retail space. Over the next 12 months, there are a number of technologies that are likely to develop further, from mobile payment solutions to augmented reality (AR), beacons and wearables. “AR is fast becoming mainstream and we’re starting to see clever AR apps from the likes of Ikea auto-render 3D images and immersive experiences to interact with cars and even kitchens. AR will continue to have its place in the lab and we will see some of these ideas mature to real customer experiences,” says Bagge.
Beacons are also gaining momentum and bolster retailer’s analytics capabilities. He believes that we’ll soon start to see beacons used to apply well-established web analytics but in-store, providing detailed time-stamped and journey-mapped foot fall analytics to help retailers finally compare stores, zones, analyse journeys and understand conversion. Until now these skills have helped web retailers continually hone traffic and conversion and will soon be taken up in the same way in store. And wearables, already set to develop as tech manufactures bring in more and more wearable functionality, are now integrated into the retail process for store employees to improve in store operations, explains Bagge.
But it’s not just the small retailers that are under threat from these new technologies; the middle ground is facing challenges of its own. While the large omnichannel retailers are spending serious money making sure all their channels work together to deliver a better customer experience, and the monochannel retailers – like Amazon, Primark and Asos – are sticking to what they do best and also delivering the service that customers demand, Bagge explains that it’s the middle ground that’s getting stuck.
“They've got to do more than the monochannel retailers but they can't do as much as the big omnichannel retailers because they've not got the investment funds and wherewithal to do it. So they have two options: do they knuckle down and do something they're good at – like the monochannel retailers – or do they invest in full scale omnichannel? If they do, how do they do it cleverly so that they don't have to commit the huge funds that other companies have?” he says.
However, while innovative technologies may be adding pressure to the widening divide it can also help the small and middle retailers fight back. According to Bagge, they can harness the power of online collaboration across social content, mapping and search to get themselves heard. As long as they’re investing in this digital content, they will carry on living. And there’s lots they can do in-store, too, which also ties in with another trend that he foresees for 2016 – solutions as a service. Retailers will continue to outsource their processes to the customer, using mobile to drive what they want from this – be it great marketing, search or concierge – and we’ll begin to see a morph of services.
“We’re now seeing that next level of everything as a service, where retailers and consumers will be able to procure on a demand basis, paid for with a new commercial model – maybe paid by advertising, conversion or usage, but not paid upfront by license. And that will mean a total shift in the industry. Cloud and analytics will help retailers understand way more than we ever knew. So we'll see more of ‘as a service’” he says.
But whether you’re a big retailer with a large budget or a smaller independent, there are some factors that affect and dictate all retailers and they’re ability to evolve and innovate. Simple, open communications through Wi-Fi and 4G might be a basic technology to consider but it’s still not a basic offering across our High Streets. Yet, it’s essential for small independents and niche players to create brand new exciting experiences.
“There's a huge ecosystem out there of business partners, technical companies and app developers who can create experiences but they need communication to do it. Until we get reliable mobile comms around the country, we're not going to get the next generation of applications that will help communicate and bring these different experiences to us,” warns Bagge.
So for 2016, Bagge predicts that innovation will be on the agenda for most retailers with the larger organisations investing to transform their customer experiences. Middle ground and small independents can keep up by leveraging the power of the latest tech, deployed in the right way to best resonate with their customers.