The industry’s continued efforts to compete with online leaders has prompted several major retailers to focus on the digital customer experience. Most recently, Nordstrom’s acquisition of two Seattle-based startups highlighted the steps businesses are willing to take to reach and keep customers.
Like many other retailers, Nordstrom has struggled to keep pace with Amazon and the high demands of customers who prefer online shopping. The resulting spiral for companies has led many experts to declare this age of retail an “apocalypse.”
There is a significant crisis in traditional retail stores. Last year alone, more than 20 notable retailers declared bankruptcy. Moreover, industry leaders announced nearly 8000 store closings, surpassing the more than 6200 store closings reported in 2008. As a result, last year was undoubtedly the worst year for retail store misery in recent memory.
Simultaneously, the industry is growing. Total retail sales rose 4.2% in 2017 compared with 2016, following annual increases of 3.2% in 2016, 2.6% in 2015 and 4.3% in 2014. This growth is modest, but it is growth nonetheless. While the storefront portion of the industry might be taking a pounding, declaring an “apocalypse” on the industry, as a whole, is fundamentally wrong.
As retailers look to capitalize on the success and alleviate the challenges of the last few years, they utilize technology to reverse the model and improve the customer experience.
Since the 1960s, the Wal-Mart growth model has dominated the retail mindset. Under this model, retailers:
- Continually expand the geographic footprint,
- Optimize their assortment to the fullest extent, and
- Ruthlessly control labor costs.
Following this equation, many national brands built a significant and successful national presence. This approach was necessary because the business is competitive with low margins. Unfortunately, expansions commoditized the human resource, which is a crucial component of profitability and customer experience. Furthermore, the model did not take into account rapidly rising technology platforms and a connected customer base.
The connectivity enabled by the combination of Internet and mobile devices has dramatically altered the expectations of customers. Those expectations and the increased access to competitors have allowed customers to hold companies accountable and has made loyalty an increasingly hard trait to find. As a result, brand differentiators are shifting in priority. Analysts predict that by 2020, customer experience will overtake price and product as the leading reason customers will choose a brand.
Like all industries, retail has seen a shift from in-person interaction to digital and remote engagement. While stores will be an essential part of a new retail equation for the foreseeable future, it’s clear that they cannot exist in the same way they once did.
Technology has long been an area of underinvestment in retail operations. Brands now recognize that it must surge to the forefront. To a certain extent, each retailer must choose to either succumb to selling their branded items on Amazon or fight back.
Digital Engagement Technology
Service and customer experience are the best weapons in a retailer’s arsenal. This focus was undoubtedly the case for specialty stores in the pre-big-box era. Experts staffed these stores, and their word in their area was one you could trust. This highly personalized service was lost in the drive to set up thousands of stores in a competitive cost-controlled environment.
Coming back to the future in terms of human capital is vital to the success of retail, and technology allows businesses to scale service and customer experience.
When used appropriately, the Internet is the key to reversing the retail model. Nordstrom’s focus on enhancing the digital experience is not new. These most recent acquisitions merely represent an even more significant stake in the ground. However, this type of customer engagement can be created without purchasing companies and managing the production cycle of software.
Instead, by leveraging an emerging class of Visual Engagement Platform technologies, retailers concentrate expert resources in selected contact centers and make them available to all of their online or mobile customers with the click of a button. These resources are better compensated, higher performing, and better-trained extensions of the next generation customer experience. Businesses cannot feasibly replicate this model in a distributed store environment.
Instead of requiring thousands of “experts,” retailers can employ a few hundred experts with the ability to answer a customer’s most critical questions about products and applications. Armed with a new wave of no-download digital engagement tools, retailers now have the opportunity to regain their status as a trusted advisor without sacrificing scale.
This new generation of hands-on experts will interact remotely with customers in a trusted environment to show them the best products for their needs just as they once did in person. This new focus will make all the difference for both topline revenue and loyalty.