By Paula Dootson
Gone are the days where retailers could simply open their doors to heaving crowds. (Giulio Saggin: ABC News)
Today, I cannot say “Google, order more milk, please” and have an Australian retailer deliver it to my fridge.
Nor can I go one step further and have my fridge order my milk without me knowing about it.
Yet this is the kind of retail service that Australians will ultimately enjoy — once our retailers catch up with technology already being used around the world.
Retail is projected to have one of the highest degrees of digital disruption of all industries by 2020. The recent downfall of two of Australia’s largest retailers — Target and Myer — reflects the real risk that Aussie retailers will be left on the shelf.
But retailers can thrive in the digital economy with the right approach.
1. Your customers are now algorithms — design for them
With increasing adoption of Google Home, Amazon’s Alexa, and even Apple’s Siri, algorithms are already making decisions on our behalf. Yet no Australian retailers are ready to scale to the level of service offered by Amazon’s Alexa in the US, where you can order virtually any product with a simple vocal command, which will be delivered to your door with free shipping and returns.
Devices place orders for customers based on their preferences, such as price sensitivity, preferences for premium or locally produced goods, or level of urgency. But this begs the questions:
How do retailers market to robots? How will retailers make their product seem favourable to a device driven by business rules that can’t be influenced by emotions?
While current approaches involve a closed ecosystem (e.g. Amazon’s Alexa only buys products listed by Amazon), we should hope that regulators will step in to ensure equitable access for other providers.
In the future, regulators could prevent BMW cars automatically buying only BMW batteries. This will create a new, effectively parallel market in which most retailers will operate.
To succeed, retailers need to invest in technology to integrate with Internet of Things devices, and shift to a proactive approach to customer needs — don’t wait for the consumer to come to your milk shop, take your milk to the customer where and when they want it.
2. Take inspiration from deviance
It might sound counterintuitive, but pay attention to instances where customers are going against etiquette or laws and you could reap great insights.
The peer-to-peer music site Napster is a great example of deviant behaviour (pirating music) that triggered innovation and cultural change in how we consume entertainment.
Without Napster, we wouldn’t have Spotify, Netflix, or iTunes.
How does theft, fraud, lying or abuse drive innovation? Ask your customers why they’re doing it.
Why are you pirating Game of Thrones? Because it is not accessible when I want it at a fair price. Lesson: make products accessible on time at a fair price.
Why are you stealing from the self-service checkout? Because I can’t tell what kind of banana I am buying. Lesson: don’t leave pricing up to customers.
3. Use technology to design out deviance
Deviant consumer behaviour isn’t going to go away in the digital economy. But we can design out deviance while improving service delivery to customers.
Customers hate queues and rort self-checkouts. Amazon killed two birds with one stone, introducing Amazon Go, a convenience store with no cashier or self-checkout system.
Amazon also reduced opportunities for in-store theft: when an item is placed in the customer’s basket, the purchase is registered as they walk out the door.
One suggestion for designing out deviance is humanising the technology so it triggers an empathetic response from the customer, reducing the likelihood that they’ll steal goods or vandalise stores.
Another is to find ways to remove customers’ anonymity, for example using geolocation to identify them as they enter the store.
A customer looks up at the sensors and cameras used by Amazon Go to tell which products customers have in their baskets. (AP: Elaine Thompson)
The traditional approach to loss prevention (warning signs, bag checks, extra staff) is less important in a digital economy where customers share their private data with retailers. If I am sharing my social calendar with a fashion retailer so that an algorithm brings me outfits to match my outings, my data is more at risk of being stolen than the garments.
Cyber-security ratings will soon be a reality allowing customers to identify trusted retailers to do business with. Retailers will shift from securing their shelves to securing their customers’ data from hacks.
Check out the future, as the future is now
The question should not be ‘how can retail survive’, but rather, ‘how can retailers thrive’ in the digital era, with robots as the customer and technology providing a highly personalised shopping experience.
It is critical that retailers large and small rise to meet the challenges to ensure they capitalise on opportunities rather than being left at the check-out.