On the heels of a holiday shopping season that had varied results for retailers as warm weather plagued apparel and outerwear sales, 2016 is quickly shaping up to be a challenging year given recent downward revisions to gross domestic product growth in the U.S. and ongoing woes in China and its impact on global markets.
But there are also some opportunities in the retail sector.
Businesses are getting hip to the shopping behaviors of today’s consumer, and the resounding opinion is that successful companies will use the personalized shopping experience to their advantage — embracing social media and boosting backend algorithms to speak to the customers’ needs. Shoppers have inordinate amounts of choices on what to buy, and do more online and social research prior to heading into stores. Not only do these social platforms give shoppers avenues to investigate products, they also foster communication with friends online.
This connectivity is essential for U.S. retailers to spread the word on their products and develop strategies that turn clicks into cash. The retail sector is increasingly influenced by technological advances: beacons are being implemented and tested in malls, companies are pouring cash into app development and mobile shopping is popping. But the “digital beast” should not be feared — it can lift sales if done right.
Here, WWD talks with two MasterCard executives on some of the key global trends facing retailers this year, and how companies can leverage these opportunities. Max Chion is group executive of global acceptance products and Michael Cyr is group executive of U.S. Market Development.
WWD: Before we discuss some of the key trends in the market, how has the overall retail landscape changed?
Max Chion: This past decade brought us the iPhone, the maturation of the Internet of Things and the ability to pay with a dip, a tap, a text and a blink. We saw social platforms launch, unify the globe and then surpass 1.5 billion users, more than the population of the biggest country on earth. These innovations and many others have transformed how we live, how we interact and, of course, how we shop.
On the heels of such change and technological disruption, we note six important trends that retailers, large and small, should embrace to find new customers, drive more sales and win the hearts of their most loyal customers.
WWD: Let’s start with the consumer. What are you seeing emerging that is noteworthy?
Michael Cyr: We call it customizing for the consumer. People are hungry for a personalized shopping experience; roughly half of shoppers we recently surveyed say their top frustration is retailers not knowing what they want. Retailers who can articulate to their customers that they have the right product, at the right time, for their needs will win. Enriched customer data provides retailers with the insights to enter a new era — The Personalization of Retail. Retailers who focus on the “micro-moments” of the buying decision-making, leveraging insights from loyalty programs, marketing engagement and enhanced analytics, will stay relevant and ultimately drive sales. Up next is a more curated digital experience with highly relevant, personalized product recommendations and promotions.
WWD: Speaking of a curated digital experience, what is your perspective on convergence?
Max Chion: Yes, digitizing the in-store experience is another important trend impacting the market. With 62 percent of shoppers saying they do more research online than in the past and the average grocery store carrying upward of 42,000 products, it’s likely that customers know more than sales people about any one item. Enter the new technology-enabled retail environment that frees sales personnel to be concierges instead of hard-push spend drivers.
Michael Cyr: Think of it as The Apple Store approach at scale. The growth of beacon technology, for example, lets retailers engage with consumers in a real-time, relevant way that enhances their overall experience. Equally important is focusing on fewer, key efforts and creating a top-notch overall omni-shopping experience.
WWD: What other trends do you see taking the spotlight this year?
Max Chion: We think the socialization of shopping will take on a greater role. Nearly 80 percent of consumer purchases are now informed by a device, giving the shopper near ubiquitous access to information, reviews, prices and offers. While friend and family recommendations are the most important to consumers — so say 83 percent of respondents to a recent Nielsen survey — two-thirds of consumers say they also trust third-party reviews posted online.
Michael Cyr: We anticipate savvy retailers will expand their digital presence via direct sales with buy buttons; savvy P2P product education, and “real-life” product descriptions, driving genuine reviews and inciting sharing.
WWD: At the opening of this discussion, you mentioned the Internet of Things. How is that evolving?
Max Chion: Appliances, wearables, cars, lightbulbs and gadgets of all types are becoming connected. Up to 10 billion devices today, and 50 billion by 2020. In a world where connectivity is a given, convenience will be table stakes. The connected consumer, challenged with shrinking personal time and increasing demands on it, is looking for technologies that are convenient, accessible and secure.
Michael Cyr: We anticipate more launches like Groceries by MasterCard, a shopping app that lets consumers order groceries from the refrigerator with a few simple taps. For the smart retailer, the true differentiators will be interconnectivity and seamlessness in the shopping experience as consumers seek out a family of products and services that work together to simplify and improve their lifestyle.
WWD: As consumers seek out more experiences, does that mean a continued boost to the travel segment?
Max Chion: According to MasterCard SpendingPulse, 2015 saw record spending on airlines and lodging. Consumers are taking advantage of their vacation time to shop, looking to find their trusted and preferred brands and discovering new ones. This is happening within countries but also amplified across borders, particularly for categories like luxury. The threaded development of cities, travel and commerce can be a guiding force for new partnerships — and open new opportunities for retailers.
Michael Cyr: For discerning customers with nearly endless choice, the experience is a deciding factor. Retailers who understand that and take advantage of the latest trends will be poised to deliver the best possible experience — and gain the sale.