The American dream is to have a nice house, a big backyard, and a dog! We had it all, then came the inevitable change– our son went to college and moved out of the house. With just the two of us remaining, we decided to move out from the large house in the suburbs to a small apartment in downtown Chicago. The only problem was – we didn’t realize how much things would change, going from a 5000 square feet house, made for a family, to a 1000 square feet apartment, just for two people. We simply had too much stuff!
We left behind or donated as much as we could, but even then, our possessions cramped up this new apartment. I began to wonder if we’d made a mistake but then as much as I loved our house, it was only a home because of the family. And as our family was changing, it was only natural for us to change as well. I was reminded of a quote by Jimmy Dean: “I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.”
The tendency to stay anchored to the old way of thinking wasn’t going to help us live our best lives. It was nostalgic, comfortable, and familiar, but it wasn’t aligned with our ambitions and goals. This change wasn’t just a choice; it was a necessity. So, we began looking for innovative and clever storage options and discovered things I didn’t even know were possible. IKEA became our Disneyland.
My experience of moving from a house to an apartment made me think on how American business was going through a similar transformation. After a booming era in the post-War 20th century, America is now facing new challenges and choices. Constant change has been the hallmark of the American dream and that, is one reality that hasn’t changed.
The Changing Retail Customer
The 21st century is bold and exciting, but it’s also new and unfamiliar. Today, the American dream is not so much about owning possessions, rather, it’s about taking control of one’s own destiny. Therefore, adaptability and the ability to learn have become key priorities for any business striving to survive. And this begins by recognizing what has really changed– the consumer.
The shift from baby boomers to millennials and Gen-Z-ers has paralleled the evolution of American culture as it’s shaped by disruptive technology. These changes have converged to create a new type of customer in the retail industry– someone who is interested in experiences, not products; someone who is agile to changing norms, sensitive to global trends, and responsive to social and environmental issues more acutely than generations past. And as they let go of ownership, consumers in the retail industry now purchase goods on a Just in Need (JIN) basis for Just in Time (JIT) deliveries – abhorring waste, hoarding, and clutter. They simply do not wish to be burdened down by things, rather they wish to utilize things as experiences.
It’s only by understanding the customer and changing with them, can retailers remain competitive and relevant. As consumers become more interconnected via social media platforms, their preferences and values continue to transform. The age of the internet and digital consumer services such as eCommerce, same-day delivery, and easy returns has made instant gratification the standard expectation. Customers today get what they want, when they want it, and faster than retailers think. It’s high time retailers engage with them on their preferred turf.
The Importance of Social Media and Omnichannel Strategies
The omnichannel approach isn’t new to retailers but they’ve been far too slow in embracing the full potential of social media within it. In the meanwhile, consumers, starting mainly from millennials, have accelerated their shift to social media platforms, and begun leveraging them to inform their purchasing decisions. In fact, a PwC report shows that 37% of consumers actively use social media to make their purchasing decisions.
And despite the many scandals faced by social media in recent years, platforms like Facebook remain some of the most widely used desktop and mobile apps across the globe with over 2.3 billion active monthly users. In the US market, Facebook has seen some decline in usage over the last year however it still holds a leading position, with Facebook-owned Instagram coming in at second place in US market with more than 121 million visitors every month. Instagram has surpassed expectations as its customizable feed and new features, like in-app checkout and augmented reality-enabled photos and video, have made it one of the critical touch points in the buyer journey.
Similarly, the popularity of video content has skyrocketed and YouTube has risen through the ranks to become the second largest search engine after Google when it comes to retail queries by customers. And mobile lies at the heart of all this as nearly half of all the content consumed on mobile devices is, in fact, video. There is also the potential of video content being consumed seamlessly via augmented reality and virtual reality within the next few years. The rise of video genres like explainers and unboxing videos exist at the confluence of content and commerce that consumers now turn to when making purchasing decisions.
This shift towards digital also coincides with the phenomenon of digital retail, gaining traction over in-store visits by almost 13%. Much of this growth is attributable to the rise of new business models and technologies. The former includes personalized and customized subscription box services that encompass every product from food to apparel and entertainment to education. The latter includes virtual reality and machine learning (ML). In effect, these factors give customers a convenient, efficient, and affordable means with which to enjoy products as a part of an overall experience.
Reimagining Retail with AI and ML
Along with a renewed focus on the importance of social media platforms, retailers also must leverage smart technologies such as social listening tools which enhance how they engage with customers. 89% of customers use at least one digital channel to engage with brands which makes their data footprint a valuable resource. Enterprises have unprecedented access to user data through social media and social listening tools. These may be through page likes, follows, and even app downloads.
By leveraging the power of social data, companies now have the opportunity to know what the customer wants and the manner in which they want it. And if we take this one step ahead with emerging tools like AI and ML, with applications in augmented reality and virtual reality for instance, we may even know this before the customer does. Social media conversations play a big role in feeding organizations the data that can make this true retail experience a possibility. This is the potential of the new retail experience – to offer customers just what they need, just when they need it, before they even realized they wanted it.
Unfortunately, despite these potentially new avenues for growth, less than 20% of organizations leverage AI and ML solutions. More worryingly, close to 40% of retailers lack the needed tools, skills, and culture to leverage AI and machine learning solutions to their best ability. Organizations need to realize that combining social media and disruptive technologies presents the opportunity to craft holistic omnichannel strategies that factor in everything from inventory to customer engagement.
How to Change: Growth Tactics
Given the importance of social media in online commerce and the changing nature of the customer, it is crucial that retailers proactively adapt to these trends. Retailers need to broaden their approach to use AI, ML, and social media to build hyper-personalized omnichannel strategies. Prioritizing omnichannel and technology investments is of the utmost importance and with the inclusion of new business models, it requires companies to abandon their entrenched way of thinking and adopt new strategies that align with the behavior of their customer.
Most shifts in paradigm happen suddenly and abruptly once they reach an inflection point. The retail industry is rapidly approaching exactly such an inflection point where traditional methods will lose out on new, emerging technologies. The rise of new business models has already given traditional retail value chains something to think, such as Amazon Go’s cashless-check out, but we’re also nearing something entirely new. Imagine augmented reality or virtual reality devices that enable everyone’s home to be a potential store. This is not a distant future.
Organizations need to be quick to adapt to these changes and, in fact, take the leap towards innovating beyond these changes as well. The largest barrier to this shift is usually that of culture and adaptation. Just like moving out of a house challenged us to reassess our true priorities, organizations need to take an honest assessment of themselves and how they use disruptive technology. This will require brave changes but it’s clear to see that customers are embracing it wholeheartedly. It’s time retailers did the same.