The Corona pandemic is rewriting the rules of retail

Partly due to the pandemic, consumers increasingly prefer the convenience of shopping online. It saves time, gives you access to more products or even the entire collection, and you can easily have your products delivered and returned in a few days.

For more and more consumers, this (online) service level is taken for granted, while simultaneously becoming increasingly difficult for brands, distributors, and retailers to keep up.

Accelerated digitalisation is forcing the entire retail sector to redefine the role of both online and physical channels. The customer expects a "seamless experience". In 2022 this means an omnichannel experience in which all apps, platforms, and communication channels are connected and aligned, making interactions faster, more accessible, and easier.

The New Retail

Is the merging of online and offline in retail a new phenomenon? No, in 2016 Jack Ma of Alibaba (China's largest e-commerce company) introduced the term “The New Retail”.

This refers to a philosophy that aims to redefine commerce by offering a seamless interaction between the offline "Brick & Mortar" and online "Click & Order" worlds.

It is not about converting online customers to offline customers or vice versa. It is about building a retail ecosystem that combines online, offline, and communication channels in a unified way, putting the consumer at the centre, often in new and unexpected ways.

"Today's physical stores must be able to serve the customer both on- and offline."

The Trust Loop

To help our clients with a strong omnichannel strategy, Springbok agency has developed the Trust Loop. This methodology, based on the philosophy of "The New Retail", consists of 3 elements that need to be in balance in order to both execute a successful omnichannel strategy and grow consumer trust.

1. Store: a seamless customer experience is essential

The Trust Loop defines 3 steps, starting with "Store" which is related to providing a synced customer experience between online and offline channels in retail.

As mentioned before, customer expectations for service levels will increase in the coming years. To meet this growing demand, today's retailers need to provide a frictionless customer experience, in which the online shop is seamlessly aligned with the physical shop and all other platforms.

Examples include offering and automating return processes through self-scanning screens in the physical shop, providing QR codes so customers can immediately view online reviews, or offering augmented reality experiences where customers can view, try on, and order products remotely. These are a few examples that fit seamlessly into the philosophy of The New Retail.

Fitting of clothes in a virtual dressing room

A good example is Kohl's, an American department store. Since last year, they have offered a virtual dressing room via Snapchat, where customers can view a combined assortment by means of augmented reality. Customers can try on the products directly (using AR) and order the product online or collect it in store. This new formula is immensely popular with millennials, with these virtual try-ons realising an average uplift of 80% in conversions and a 64% reduction in returns.

2. Distribution: time is worth money

Step 2 is "Distribution" which considers the mental and physical availability of products as it is crucial for retailers that products are in stock and can be delivered quickly.

Due to increasing online orders, retailers have to rearrange their warehouses and distribution centres. According to a recent Mckinsey report, we’ll increasingly see a holistic (rental) model of warehouses. Where many retailers used to store their products in shops, the warehouse is now slowly being used for online orders. The same report concludes that existing warehouses are rented out to store products from external retailers.

Small retailers are outsourcing their logistics to large e-commerce players such as Bol.com (update: Bol.com wants to increase its warehouses from 250,000 to 500,000m2 by 2025), while large retailers are looking for ways to further accelerate their existing logistics (read: delivery in minutes) by seeking partnerships with relatively new dark stores such as Gorillas, Zapp, and Flink.

A concrete example of this development is the recently announced cooperation between Jumbo and dark store Gorilla. The cooperation shows that consumers, especially younger ones, are willing to pay extra for speedy delivery. "Time is money" makes way for "Money is time".

3. Consumer: holistic customer view

The last and most important step is "Consumer". The consumer response to your product or communication is key here. The question is to what extent are brands able to listen to consumers. Can they capture and measure responses and interpret these responses, preferably in real-time and both on- and offline?

Interpretation is essential in this step, because understanding consumer behaviour gives you the opportunity to react in a relevant way. The holistic customer view enables you to do this. In other words, a customer view is an aggregated, consistent, and holistic representation of data about the consumer.

A customer view usually consists of transactional data (what does the consumer buy, how often, and when). The first step is usually bringing transactional data together on an individual level. This type of data is often present in most companies.

However, for personal and relevant communication, contextual data (how does the customer interact and via which channels) and emotional data (why does your customer buy and what are the underlying drivers) are especially important. After all, it is not about what a consumer has already bought, but about predicting future needs.

Closing the loop

In summary, the more often brands guide consumers through the Trust Loop, the more data and knowledge they build up, which is relevant for follow-up and interaction.

This is a learning opportunity for brands, because advancing in the Trust Loop will result in knowing better than your competitor or even consumers themselves, what your consumers want, need, or desire. From the right book suggestion to pre-ordering products and filling shopping baskets for the weekly groceries.

Picnic is a good example. The app is indispensable in driving continuous dialogue and follow up between brand and consumer. The result is a continuous flow of data, which in turn is used in self-learning systems (ML) that quickly interpret consumer feedback and needs, which then improve the app and product assortment.

With the right interaction and continuous follow-up, trust between brand and consumer will grow and consumers will increasingly appreciate the added value of convenience, speed, and the right service. The willingness to share data, perhaps even more than just interaction data around a specific brand, may only increase.

This form of "customer intimacy" is here to stay and it can add enormous value. The cautious expectation is that the brands that realise this and implement it correctly will create 30% more lifetime consumer value (CLTV). This is in line with a more recent calculation by McKinsey that estimates additional revenues of $1.7 to $3 trillion for companies that offer personal omnichannel customer experiences. And retail will take the biggest share of this!

So, let's go and implement the Trust Loop! Would you like to know more or talk about the possibilities? Contact Bas de Kok at Bas.dekok@springbokagency.com.