Store 3.0 TM The store is dead. Long live the store.

Transcription

1 Store 3.0 TM The store is dead. Long live the store.

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3 Contents 4 The store s story continues... 5 Open for business: Store 3.0 TM 9 Tomorrow s customer experience begins today 10 Contacts Store 3.0 TM The store is dead. Long live the store. 3

4 The store s story continues... Where can you buy a hammer? In 1910, the answer was simple: the hardware store. Today, you might purchase a hammer using a catalog, personal computer, telephone, smart phone, tablet or by visiting your local hardware store. Tomorrow, who knows what new shopping options may be available. While no longer the only place where retailers and customers connect, the physical store remains central to many consumers shopping experiences. But to stay competitive, retailers should develop a store strategy that aligns talent, physical space, processes, and technology to meet the changing demands of their customers. Retailers with the foresight to combine the sensory experience provided by a brick-and-mortar store with the extensive information and accessibility offered by virtual stores are likely to lead the way in attracting the loyalty and wallet of tomorrow s consumer. Meet tomorrow s consumer The rise of Generation Y and the confluence of consumer technology adoption create opportunities and risks for tomorrow s retail store. Gen Y those born between 1982 and 1995 is the next big wave of consumers. They are about 75 million strong in the United States, with a collective income of over $1.89 trillion. These consumers are expected to become the wealthiest generation ever, with their annual spending predicted to reach $2.45 trillion by Gen Y consumers are distinctive connected, practical, tech-savvy, and socially aware. Retailers will be challenged to create a high-quality, differentiated store experience to connect with this important cohort and harness their tremendous buying power. But this isn t the only consumer group retailers should worry about. Technology has transformed the expectations of shoppers of all ages. Consumers using the Web to research in-store purchases accounted for $510 billion or 20 percent of total U.S. retail sales in By 2012, this number is expected to rise to $1.2 trillion or 38 percent of U.S. retail sales. 2 Another trend is the consumer s use of smartphones to check prices, locate stores, find promotions, and order products. Sixteen percent of consumers surveyed by Deloitte for its 2010 Annual Holiday Survey responded that they would like to, or already do, access product information in stores by scanning the product s barcode with their mobile phones. 3 The use of mobile devices for purchases is also growing; mobile commerce revenues in the U.S. are expected to grow from $1.2 billion in 2009 to $23.8 billion by Social media provides shoppers with a platform to discuss the products and stores they love or hate. With more people sharing opinions online, Internet-based reviews become more important. This increase in online consumer conversations provides opportunities for retailers to use this platform to gather insights into consumer concerns, and even integrate user product reviews into their physical stores. 1 Deloitte Study: Catalysts for Change: The Implications of Gen Y Customers for Banks (2008) 2 Forrester s The State of Consumers and Technology: Benchmark 2009, U.S. (September 2009) 3 Deloitte 25th Annual Holiday Survey, November Coda Research Consultancy, U.S. Mobile Advertising and E-Commerce Revenue (May 2010). Projected revenue is a compound annual growth rate of +65% over 2009 As used in this document, Deloitte means, a subsidiary of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. 4

5 Open for business: Store 3.0 TM Changing customer expectations and the rapid pace of technology adoption are significantly impacting the store s role and the way it should operate (Figure 1). Tomorrow s customers will demand an in-store experience that is uniquely relevant to them. In a Store 3.0 TM environment, sales associates should be equipped to provide a personalized customer experience. The store s physical space should support that experience with multichannel integration and mobile points of sale. Store systems and operations should adapt to integrate mobile and Web technologies. An effective strategy for the future brick-and-mortar store should align these elements to the expectations of the customer while maintaining the organizational and technology flexibility needed to react to future changes. Figure 1. The changing role of the store Point of Sale Connectivity Store 1.0 Store 2.0 Store 3.0 TM Early 20th Century Late 20th Century Early 21st Century Cash register Pony Express Handheld line-busting functionality and wireless support T1 backbone and wi-fi support for wireless in-store tools Mobile points of service; the entire store floor is the point of sale Store is fully Web-enabled; wireless customer access; 4G connectivity; and cloud based services Staffing Model Shopkeeper and family Staff to support workload Staff to support customer experience Talent Development Multiple Shopping Channels Who has time to develop talent? What s a channel? Hire, hope to retain, hire again Multichannel Footprint Size 10 ½ Bigger is better! Product Information Retailer s Differentiator Brick & Mortar Store s Role Read the label Location The only option Online research Product and service Competitor to online channel Engage, train, develop, promote Omni-channel; in-store fulfillment of online orders; and seamless integration across selling platforms Smaller, strategic, dynamic, less inventory, specialized, agile, and personalized Customized, aggregated data pushed to shopper in anticipation of not in reaction to customer s purchases Customer experience and multichannel integration Critical to brand fulfillment; integrated with all sales and service channels Store 3.0 TM The store is dead. Long live the store. 5

6 Defining the customer experience Before developing a strategy for your future store, start with a solid understanding of your target future customer, their desired experience and their service expectations. Figure 2 defines seven dimensions of the customer experience in a Store 3.0 TM environment, prior to, during, and after a customer s visit to the physical store. Evaluating your current customer experience against these dimensions can help identify opportunities for improvement and set the tone for your future vision. Talent, physical space, systems and processes should all play a role in creating a Store 3.0 TM customer experience. You ll need ways to measure and track progress toward meeting your goals for improving customer satisfaction, sales, and profitability. Figure 2. Seven dimensions of the customer experience. Prior to arriving at the store 1. Customer initiates the shopping experience online on their mobile device or by arriving at the store 2. Retailer initiates the shopping experience by serving the customer promotions, coupons, or other incentives to drive traffic to the store In-store shopping experience 3. Customer arrives at the store and notifies the selling staff through in-store or mobile technology 4. Customer interacts with the store by browsing merchandise, using a kiosk in the store, or engaging with a sales associate 5. Personalized shopping assistance on the sales floor or in the fitting rooms aided by technology 6. Check-out experience leveraging new technologies and store solutions to expedite the check-out process Post shopping experience 7. Customer is contacted via , phone (text or voice), or regular mail as a follow-up to their shopping experience to encourage repeat visits, purchase from new channels, and expand breadth of purchases within the store 6

7 Developing sales associates who mirror tomorrow s customers A retail store s sales are highly related to the quality of the relationship between its store associates and customers. Deloitte research shows that conversion rates increased nine percent when customers were assisted by employees who possess a high degree of product knowledge and demonstrate strong interpersonal skills. 5 For many retailers, the associate is critical to delivering a consistently strong customer experience, creating competitive differentiation, and driving customer loyalty. Creating a positive customer-associate relationship may require a multi-faceted approach centered on building, managing, supporting, and engaging retail talent. Build the right associate team Your talent management strategy should align with the company s overall strategic plan. Effective associates should represent the brand values, messaging, and even marketing, through their behaviors, skills, and competencies. As customers change, retail associates must change as well. In many ways, the associate should mirror the target customer, in attitude, spirit, interests, and lifestyle. When recruiting, look for potential associates with a willingness to use technology to provide better customer service and more efficient store operations. If you build the right team of associates, you are likely to benefit from improved customer satisfaction and employee morale, better employee engagement, and lower turnover. You may also experience improvement in sales per labor-hour, sales per square-foot, and sales close rates. Provide advanced management tools The store manager s job is more complex than ever. Managing productivity, aligning resources, and executing consistently while providing cost-efficient real-time reporting and analysis can be all but impossible without the right management tools. Commercial workforce management packages have improved dramatically over the last several years, and now can incorporate task management into labor requirements and analysis. Task management packages have also matured into stand-alone systems that can be integrated into existing systems. Both task management approaches can help managers improve operations, so that stores are more focused and aligned. Today s time and attendance systems improve time collection and support manager-employee collaboration for scheduling, time-off requests, and training resulting in more accurate timecards and paychecks. The data generated over a pay period can then be used for advanced analysis to improve your management planning. Support sales and service with technology Meeting the demands of an increasingly fickle consumer can require careful integration of customer and product data. Ideally, information is aggregated across your sales channels to capture the customer s full profile and purchasing history. Easy access to detailed customer information can better equip sales associates to provide a customized experience. Collaboration tools can leverage the entire sales organization to improve customer service. Customers with questions or problems may use two-way video kiosks or camera-equipped smartphones to connect with the appropriate store specialist perhaps the merchandise buyer, supply chain manager, or customer service supervisor. The right technology should extend the store s resources to include support people who may be located anywhere video call-center, headquarters, or a sister store down the street. Engage associates across their career Juggling in-store responsibilities, technology, and multichannel awareness requires associates who are able to rise to the challenge. In return, you should support your talent with training, tools, rewards, and a clear career path to keep them motivated and engaged. Training should not be limited to new employees. Associates both experienced and new should stay up to date on products, promotions, competitors, and pricing. New training technologies can allow you to quickly produce and deliver high-quality, interactive training that helps associates stay one step ahead of their customers. New performance management tools can provide information that allows store managers to provide more effective feedback, recognition, and recommendations. 5 Deloitte Driving profitability through your store associates: The make or break factor for retailers, June 2010 Store 3.0 TM The store is dead. Long live the store. 7

8 Associates can also receive immediate feedback from peers, supervisors, vendors, and customers through the Web, mobile devices, POS terminals, or smartphones. Managers can then aggregate this information to gain a holistic review of an associate s performance, potential, and opportunities. By tying customized training programs into this performance feedback, managers can provide each associate an individualized roadmap to attain their long-term professional goals. Creating tomorrow s physical space The brick-and-mortar store itself will also continue to evolve. Store footprints will likely become smaller, and stores-withinstores will replace conventional departments, providing a more intimate and personalized customer experience. In response to tighter margins, some retailers may edit their store portfolio and reduce store counts. Stores supported by a multichannel supply chain will likely carry less inventory, while continuing to offer buyers a wide selection. Customers will be able to place online orders from the store, and stores will be able to fulfill online orders, creating seamless, integrated sales channels. Mass customization will allow a global retailer to provide a local shopping experience, with customized merchandise mix, pricing, and in-store communications. The stationary point of sale may soon disappear altogether, and in its place will be mobile points of service the entire store floor will be considered the point of sale. Customers may forgo cash and credit cards and pay with their mobile wallet. Mobile devices will allow you to deliver customized product information and promotions to customers while they are making a purchasing decision, rather than after. To create a physical space that will engage customers, you should understand how customers experience your store and what compels them to buy. Traffic counting and dwell time technologies can help you gain insight into your customers as well as test new promotions, displays, merchandising, layout, and selling behaviors. Designing tomorrow s store processes and systems Soon, traditional stationary POS devices may only be seen in high volume, low unit-price commodity stores, like grocery, pharmacy, and convenience stores. Customers of fashion, specialty, and big-ticket retailers will likely expect a higher degree of personalized, mobile service. Rapidly changing consumer behavior and shopper expectations are likely to bring a paradigm shift in the way retailers respond to shoppers. Some retailers are already testing new customer engagement technologies, such as store windows that operate as dynamic media touch-screen monitors, in-aisle advertising, interactive dressing-room mirrors, social media shopping sites, and personalized discounts through mobile devices. Retailers today are improving store systems to provide a richer shopping experience by integrating POS and Web channels, providing self-service kiosks, and allowing in-store use of mobile and wireless devices, just for starters. To gain the loyalty of tomorrow s customers, retailers should anticipate the systems and processes that will allow them to effectively use mobile devices to create a customized shopping experience. Merchant mobility solutions should integrate with real-time inventory systems that recognize when items move from the shelf to the cart. Mobile shopping lists will allow customers to confirm product availability and price, find the product in the store, pay for the item, and create a virtual receipt. Next generation operations One of the biggest challenges store managers face is balancing back-office responsibilities with being present on the store floor. Technical solutions can help by giving managers a 360-degree view of their store, inventory, workforce, and customers, which includes: Full visibility from store and remote locations. Dashboard functionality to give managers easy access to tools and knowledge to handle key activities. Customized alerts with a call to action feature to improve operational efficiency. Immediate, on-the-floor actions and task management instructions delivered to handheld devices in the hands of management and associates. Technology solutions can help store managers do a better job of assisting customers, coaching associates, and merchandising the sales floor. 8

9 Tomorrow s customer experience begins today Leading retailers are already working toward providing a seamless shopping experience before, during, and after the customer visits their physical store. They recognize that transforming brick-and-mortar stores to provide a compelling experience that is innovative, entertaining, and rewarding won t happen overnight. By starting with a smart store strategy and following through with the right talent, physical space, technology, and processes, you can work toward building the store that will attract the loyalty of tomorrow s tough consumers. Store 3.0 TM The store is dead. Long live the store. 9

10 Contacts Authors Advisors Lisa Gomez Senior Manager Chuck Dean Director Chuck Winter Specialist Leader Scott Bearse Director Bradd Craver Director Kasey Lobaugh Principal John Rooney U.S. Consulting Leader, Retail Principal Rod Sides Principal Lisa Fritsch Manager Mitchell Weimer Manager Alison Paul U.S. Retail Leader Principal Visit Deloitte.com To learn more about our services, visit us online at Here you can access our complimentary Dbriefs webcast series, innovative and practical industry research, and a lot more about the issues facing retailers from some of the industry s most experienced minds. 10

11 Store 3.0 TM The store is dead. Long live the store. 11

12 This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication. Copyright 2011 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited