The new generations of consumers are shopping radically different compared to their parents. This forces retailers to reinvent themselves drastically. But it’s no reason to be intimidated: there are many opportunities. “Would you think Amazon offers such a great experience, maybe?
“Change while you’re open”
“I would have liked to take a sabbatical, but if you’re out of the business for six months in this industry, you just can’t follow anymore. After all, retail is the most innovative sector there is. This has always been the case historically. So I decided to buy a boat instead,” laughs Gwen Morrison. As CEO of The Store, the retail hub of WPP, the world’s largest advertising agency, she travels the world to keep in touch with the rapidly changing consumer. Last summer she ended up in Ghent, invited by network organisation Global Instore Communication (see below). An opportunity that RetailDetail would not miss.
“We have experienced a real landslide in the past ten years,” she says. “In 2006, Microsoft, General Electric and Coca-Cola still led the ranking of the world’s most valuable brands. Today, the leaders are Amazon, Apple and Google. Brands like Coca-Cola, Walmart, Marlboro or Toyota disappeared from the top ten. They were replaced by Facebook, Alibaba and Tencent. Video libraries no longer exist, everyone is watching Netflix. In the past, there used to be a clear distinction between value formats or price-driven retail concepts on the one hand, and experience concepts on the other. Today, experience is important in all concepts, also at Aldi and Lidl. The expectations are higher, everyone has to add more rock ‘n’ roll to their formats.”
It is indeed a fault line, Morrison emphasizes: “The younger generations will never behave like the baby boomers when they get older. Retailers need to be aware of this. And indeed, today these baby boomers may still be an interesting and important target group, but that really doesn’t last: they will cease to be consumers in a relatively short period of time. Retailers are faced with the task of remaining profitable today, week after week, but at the same time preparing themselves for a radically different future. Changing while you’re still open, that’s the big challenge.”
“It’s not about technology”
As a traditional retailer, how do you change your business model? It’s not impossible, she thinks. “Look at the options that Olaf Koch has taken for Metro: a clear strategic choice for food service, in which the company says goodbye to formats that don’t work. These are painful years of restructuring, but you will come out differently. It’s not about technology. Of the many innovations in the famous ‘Store of the Future’ that Metro opened in 2003, hardly any have survived. We have smart homes now, they couldn’t have imagined that at the time.”
With this, she immediately answers the question about which innovation will have the greatest impact on the retail sector: “Artificial intelligence will connect the shop assistant, the shop, the house and the city. Smart homes and smart retail will form ‘smart cities’ where everything is connected to everything”. This will lead to a new retail reality in which routine shopping missions can largely be automated and shop staff can play the full role of shopping assistants. “The role of people becomes more important as automation increases. Since the introduction of order touch screens at McDonald’s, there are no longer long queues at the counter and employees have time to say ‘hello’ in a friendly manner. Everyone satisfied! Technology helps strengthen the role of the people in the shops. Technology doesn’t destroy jobs, it gives people more responsibility.”
“Take away pain points”
Gwen Morrison admits that she was initially very sceptical about the emergence of unmanned shops, but today she has to acknowledge that Amazon Go does respond to a consumer need. “It fits in perfectly with the flow of busy city life. People quickly jump in and out for lunch or a snack, for example. It leads to happy customers and happy employees.”
The core is always: remove as many pain points as possible in the shopping process. Take out the friction. “Look at China. That country made many thousands of people move to work in factories, in environments where there was no retail. E-commerce became essential to meet their needs. Alibaba saw that opportunity: they created a solution for the consumer.”
A somewhat extreme example is the Ford and Alibaba car vending machine in Guangzhou. “Car dealers are most frequently visited after working hours. Customers don’t want to be bothered by salespeople, but they do want a test drive. So you go online, you register, you choose a model and you make your test drive…”
“The Olympic Games for Brands”
China is at the forefront of the retail revolution, that much is clear. Single’s Day has grown into a global interactive event, which is not only about promotions or discounts, but also about product launches and entertainment. “These are the Olympic Games for brands in the digital age! It is in China that Starbucks has developed its spectacular Starbucks Reserve Roastery flagship stores. Only later did they come from Asia to the west.”
Can we learn more from China? “Everywhere today we see an enormous fascination of people with social media. Everyone walks with their smartphones in their hands, people share stories and selfies. Winners will be the brands that succeed in connecting commerce and content. Social media are becoming a market research tool. You get feedback in real time: are they enthusiastic about your product? Social shopping becomes a reality: everything becomes ‘shoppable’. Is your brand ready for it? You will have to invest.” She refers to Sephora’s Virtual Artist, an app that allows people to try out make-up virtually. Or to Lego’s smart chatbot, Adidas’ use of augmented reality in the stores, and the Google Hardware pop-up stores, which didn’t look like technology stores at all but do present the devices in a domestic environment.
“An exuberant service level”
Can Gwen Morrison give us some inspiring examples of retailers who have understood the challenges? “I admire the way in which electronics retailer Best Buy has reinvented itself. They were almost dead and buried, but they’ve partnered with major technology brands that had the resources to invest. Apple, Samsung and others hired shop space to showcase their latest products. That was a new revenue model. Compared to that, Media Markt in Europe is far from ready, I have the impression.”
The inevitable Zappos is also an example. The company was acquired by Amazon, but there is still a separate culture. “Zappos really delivers an exuberant consumer service. You can call them by phone, imagine! Some people call Zappos just to hear the joke of the day… Amazon doesn’t want you to call at all, just like many other retailers.”
Finally, what we need to understand is that consumer behavior hasn’t changed because of Amazon, but because of a shift in spending: today, more money goes to services, to entertainment, to content, and to the growing sharing economy. “Amazon doesn’t do everything right, by the way. They don’t offer the best shopping experience by a long shot. Search results in the Amazon webshop often provide poor or irrelevant information. This shows that they, too, are still strongly driven by advertising. There are opportunities there.” One last word of advice? “Look for inspiration outside your sector instead of among your competitors. Do something that delivers conversation value. Make people happy. That doesn’t have to cost fortunes.”
About The Store
The Store is the global retail division of WPP, the world’s largest advertising agency. With offices in London and Chicago, the company shares knowledge and best practices from the retail sector to increase the group’s retail expertise and help customers in a rapidly changing industry. The knowledge hub gathers insights on consumer, retail, brand, technology and shopper marketing. The Store spreads that knowledge to a wide audience inside and outside WPP in the form of conferences, articles, webinars, university guest lectures and digital publications. Gwen Morrison has been CEO for both Americas since 2002.
Experts in in-store communication
Gwen Morrison was a guest at the 52nd annual meeting of Global Instore Communication, an international network of experts in in-store communication. The organization has members in 17 countries. They exchange ideas and experience to help brands with their international in-store communication campaigns. The meeting in Ghent was organized by the Belgian member, Pascal Libyn of Mojo Retail Designers.
