Connecting the World of Retail Experience
It’s 2019, and the voice of the consumer travels through technology wavelengths. Customers crave connection with retail brands and their peers. eCommerce is growing. More sales continue to occur online with social experiences and opinions being shared digitally at an exponential rate. Yet the importance of physical spaces isn’t diminishing. In fact, for brands executing properly, they are growing in sync with one another. After all, customers are still humans that seek out engaging social experiences; in 2019 they want the physical and technical to co-exist in a way that adds value to their shopping journeys and convenience to their everyday lives.
“Physical retail is far from dead. eCommerce is not eating the world. Digital-first retail is the growing tendency of shopping journeys. Yet, in most major markets, physical retail continues to grow. Albeit, online shopping is growing at a faster rate. Lots of stores continue to be opened and account for 90% of sales. Brands that harmonize the customer experience can keep the shift from physical to digital within their brand umbrella.” Forbes
A Call for Reinvention
2018 was a pivotal year for retail. High consumer confidence translated into strong retail sales growth. Kiplinger predicts total revenue growth in 2018 to reach a six-year high of +4.9%. This is a big win for retailers who adapted to an evolving market over the past few years and reinvented their strategic plans for a viable future. If you haven’t already, there is no time like the present. Retailers that were once a rich part of cultural history saw their doors close because they failed to translate the elements of their brand into a future value proposition. In contrast, Amazon continues to capitalize on convenience and earned an impressive 49% of all eCommerce sales. But, overall physical stores still hold an ultimate market share with 90% of revenue.
The State of the Industry:
Proceeding along a Path of Growth with Caution
2019’s US economy is marked by uncertainty, but the best antidote is to plan for what you can control. High GDP growth in 2018 is positive for the current state but might indicate a looming corrective downturn. The home furnishings industry sat at the edge of their seat, waiting to see how tariff impositions of imported materials would impact manufacturing. This would trickle down to the consumer as costs of production and the ability to source products became a pertinent business challenge. This threat, though temporarily on hold, leaves a big question mark in the air for 2019 that can impact business investments and consumer confidence. Currently, the reduced threat of a trade war with China is a positive sign for the country and furniture retail at large. (Forbes)
Another encouraging economic indicator for home furnishings is a mini-housing boom. Deloitte’s Economic Forecast believes “there is room for a short-term boom in housing construction, to levels of perhaps 1.35 million units per year.” New homes drive increased demand for furniture and home decor. And as millennials that have yet to leave the nest continue to age and save more, that generation is due to enter the real-estate market and provide an opportunity to capitalize on.
“At 4%, the unemployment rate Is the lowest in decades.” CCN
Employment opportunities equal money in consumer pockets. Consumer spending drives two-thirds of the U.S. economy, which translates directly to retail sales. Logically, if consumers are spending more, they are saving less. But it is surprising just how little they are saving given the economic recession we have all lived through. In fact, it is nearing an all-time low of just 3.2% of disposable income. Additionally, credit card debt is on the rise. This may be because income levels have not grown concurrently with the employment rate, and people are still taking jobs for lower than anticipated salaries. Many retailers are strategically dealing with this challenge by offering lower price points in their assortment and expanding responsible in-store financing options.
“2.1 million jobs will occur in professional and technical occupations, Most in computer systems design, especially mobile technologies and technical consulting. Businesses will need advice on planning, logistics, and implementing new technologies.” The Balance
The US economy has two keys to future success. At the last World Economic Forum, the United States ranked 2nd in the world and led in innovation; “generating groundbreaking new products and research in its vibrant, dynamic companies.” WEForum.org also noted that “female empowerment could be the key to America’s long-term competitiveness. Closing the gender gap could add $4.3 trillion to the U.S. economy in 2025, according to a report by McKinsey Global Institute.” An investment in technology to innovate businesses and empowerment of women can each help retailers contribute to economic growth. Retailers in the industry that invest in technology and technical resources stand to be market leaders. Additionally, by hiring more women, retailers can help shatter the glass ceiling, and subsequently boost consumer spending power supporting their business. Harvard Business Review found that women “make the decision in 94% of home furnishing purchases.”
The State of Home Furnishings Retail
“American retail is back with a vengeance.” Forbes
This statement is a testimony to the retailers that challenged the threat of an apocalypse and, like all strategic businesses, saw an opportunity to reinvent. Early predictions from the National Retail Federation place sales growth for 2018 over 4%, with the same growth anticipated in 2019. This brings revenue of the furniture market to $304,270M in 2018. (Statista)
According to Digiday, retail growth has been positively influenced by innovative fulfillment methods and restructured store formats. The retailers that listened to the voice of the consumer have positioned themselves well. And they aren’t just listening to their voice. Retailers are getting smarter about their use of business intelligence and are using this insight to drive traffic to their stores.
“The retail industry is strong, growing and meeting consumer demand with the products they want at the prices they expect and the shopping experience they want to have, online or in store.” National Retail Federation
Bankruptcies: What We Learned
2018 was a year of growth for many and a challenge for others. Sears filed for an anticipated bankruptcy. The company that once innovated the catalog-model of consumption failed to innovate in the present, showing you can’t rest on your laurels. Most notably in this industry, bedding leader, Mattress Firm, admitted to financial troubles and filed for Chapter 11. This opens a large share of the bedding industry for opportunistic competitors. What we can learn from these two examples is that store, inventory, and promotional saturation are not the keys to sustainable success.
Proving this with a counter approach, Restoration Hardware shows that the lifestyle brand is not going away. RH demonstrated this in grand fashion with the opening of their New York City gallery complete with a rooftop restaurant/wine bar and showroom intertwined with art, architectural inspiration, and interior design. They are even opening a nearby luxury hotel. What’s important is that this strategy solidifies their brand identity and appeals to their core consumer in an out-of-the-box way. It also drives brand recognition for non-consumers through socially-driven marketing.
“While the web has shined a bright light on stores that are dying from lack of innovation, history will demonstrate that the physical manifestation of a brand will be the most compelling way to engage customers.” Restoration Hardware
The State of eCommerce in Home Furnishings Retail
eCommerce continues to be a force to be reckoned with. Though the pace of growth has been on a slow decline, revenue growth of home furnishings websites continues into the double digits at 11.3%. By 2021, it is projected that 27% of total revenue will come from online sales. (Statista) Amazon has the largest piece of the pie right now with 49% of total eCommerce sales. Though not specific to home furnishings, their investment in private label furniture lines influences the competitive marketplace. Retailers can stand to elevate their eCommerce presence and use their industry expertise to diminish this pending threat.
But still, eCommerce is not the preferred purchasing method of furniture, with only 14% of consumers indicating online as their choice channel. Though not the majority, digital channels have an influence on stores. Over 90% of customers start their purchasing journey by browsing online, regardless of where they ultimately purchase. Additionally, 47% of millennials use Buy Online, Pick Up In-Store as a fulfillment method and 51% prefer to visit a store that uses technology in its showrooms. (Euclid)
“To gain profitable growth in today’s highly competitive blended environment, digital has the potential not only to influence but also to capture market share.” Deloitte
Gen Z will account for one-third of the population by 2020 and is a critical reason to prioritize digital initiatives. They have the potential to send the eCommerce growth rate into an upswing as they were born with technology in their hands. There wasn’t a learning curve for mobile navigation and app usage. Gen Z is hyper-informed and digests information quickly, leading to shorter attention spans. Interestingly, surveys indicate that Gen Z is less influenced by price, promotion, and ads. What they do value is uniqueness, experience, and innovation. While they have the potential to account for $29-$143 billion in direct spending by 2020, the oldest “Gen-Zer” is only 21. (Forbes)
“Today Gen Z’s role is influencing their household as the in-house tech experts.” Huffpost
While Gen Z is up and coming, the group that is currently leading buying power remains the Millennials. They account for $600 billion in purchasing power according to Money Inc. The good news is that efforts around mobilization and brand experiences that will become important for Gen Z are winning over Millennials now, so retailers can resonate with both generations. Millennials also care about their identity. Being seen as individuals and having brands deliver personalized service goes far with this generation.
“Digital experience has the utmost effect on Millennials’ engagement compared to other generations, they’re the most influenced by technology.” Inc.
The Evolution of Retail:
In-Store Experiences and Competing in the Age of Amazon
In retail’s past, the loiterer was a delinquent character. Today, retailers are craving store traffic and striving to create a bustling environment where people want to be. Look no further than Waco, Texas where Magnolia Homes has taken a sleepy town to a tourist destination. They have given people a multitude of reasons to spend the whole day shopping and to share their experiences on social media. On websites, retailers are always looking to increase their time on-site and avoid a high bounce rate which indicates that people came, didn’t find what they were looking for, and left. These key metrics should be applied to physical stores.
“WSJ reports that retailers could see sales increases of up to 40% from encouraging lingering shoppers.” Vend
Immersive Visual Experiences
Instagram stories are flooded with a rising trend, immersive visual experiences. Consumers are purchasing tickets where the surroundings are the entertainment and the ability to gain post-worthy photos are the reward. The Museum of Ice Cream, Color Factory, and Rose Mansion all demand premium ticket prices. $38.00 tickets to jump in a pool of sprinkles sell out on regular basis. On the technical side, a popular tourist activity in the San Francisco Bay Area includes toursof the Silicon Valley Innovation Center to see technology inventions unfold.
While these examples may be larger than life trends, this trend matters to retailers. If your store still resembles a traditional box with dim lighting and lackluster displays, you’re missing a key ingredient that the consumer is craving. Conceptual experiences can be applied to furniture retailing, inspiring people to visit your stores and translate their desired lifestyle into their homes. Visual merchandising should be Instagram worthy! If it is, you have an opportunity to generate viral marketing and socially shareable content. It also gives customers the sensory experience they want.
“Experiential activities that force us to step outside the digital web and immerse ourselves in the present have become increasingly coveted.” Modern Luxury
The Pop -Up Shop
This merchandising concept capitalizes on consumer demand for unique and creative physical experiences. Mobile POS and endless aisle Kiosks help retailers achieve pop-up shops without having to transport a lot of inventory. Retailers have found success opening pop-up shops in trending markets during peak sales periods to gain a new audience. Brands are also “popping up” in other stores for co-branded opportunities. Given that furniture stores typically have a larger footprint, the opportunity to host related brands through in-store pop-up ventures can drive store traffic to your business.
“Pop-ups can be a powerful marketing tool to drive interest and have customers talking about your brand both online and offline.” Business.com
Social media crosses digital and physical channels. Amazon’s 4-Star stores, that sell top-rated products, are a physical manifestation of social proof. Retailers are marketing their social media in-store to collect unique images generated by their customers. Many eCommerce sites display consumer curated photography on their product pages to add a layer of authenticity. Another important aspect of social media is collecting data points for targeted remarketing. Finding new customers based on common attributes they share with your customer base is a great way to expand your reach outside of traditional pay-per-click ads.
“There is an opportunity to link social intelligence about what customers like to that of what their friends like in aggregate.” Razorfish
Amazon and Its Challengers
Amazon remains the overall eCommerce leader by a substantial margin and continues to outpace the incumbents challenging their rank. Wayfair still hasn’t reached profitability, but their financial losses largely come from getting the consumers comfortable with purchasing furniture online. This can be an opportunity for other retailers in the industry establishing their own eCommerce presence. However, while Wayfair builds those market expectations, Amazon already has logistics in place and has launched two private label furniture lines.
On the search battleground, Amazon exceeds Google in product-related searches. It is often the first place the consumer goes to research products. Amazon is also valued for their in-depth library of product reviews, making Amazon a visited site regardless of where the consumer ultimately purchases. Another reason why Amazon is exceeding Google in product searches is that it is a one-stop-shop, that the consumer can also buy from. As a competitive move in 2018, Google made investments to revamp their Google Express shopping platform. They now offer a convertible shopping cart for a variety of retailers. Wayfair is also gaining in product search, doubling their impression share for furniture keywords in a year.
“Bloomberg found that 55% of U.S. online shoppers search Amazon first and 9 out of 10 online shoppers check Amazon even if they plan to purchase on another retailer’s website.” eComEngine
Home furnishings retailers need to be mindful of competitors across the retail landscape. In 2018, Target and Walmart both repositioned their home furnishings offering and elevated the category’s presence on their websites. Branding private label lifestyle collections is a rising trend across general retail. Additionally, eTailers across all sectors continue to open stores. Wayfair itself dipped their toe in the water by opening their first outlet store. Is this a test of future physical expansion or a way to minimize the impact of returns?
Another change to the landscape is a smaller showroom footprint. Ikea is testing city-center locations to expand the markets that they can service. This is a popular trend to reduce overhead. Spaces become a brand showcase and the use of digital methods enable fulfillment of inventory from cheaper warehouse spaces.
“The power to deliver an endless aisle of products to shoppers without the need for thousands of square feet of retail space is a gamechanger for everybody.” Forbes
9 Retail & Technology Initiatives for 2019
Retail trends for 2019 all root back to this central theme: how to leverage data in creative and powerful new ways to understand and engage the customer.” Insights
Understanding Your Customer
For too long, retailers have not put the most valuable tool at their disposable to good use; their data. “Today’s consumers are quickly frustrated with brands that collect data but don’t use it to create a better experience.” One of the reasons business intelligence programs have struggled in that past is that the analysis was restricted to executives. This led to missed opportunity, as those on the frontlines of their divisions didn’t have the accessibility they needed. These employees can apply the data in context to their daily activities in the retail environment. “That’s driving the retailer’s desire to put that data and computation as close to the point of action as possible.” (Insights Samsung)
In home furnishings retail, business intelligence provides infinite opportunities to understand your target market at a deeper level. Retailers need the ability to extrapolate and synthesize data from a variety of sources in real-time. More importantly, they have to understand what their data means as a whole. Unified Commerce increases the touch points a consumer has with a brand. They are sharing vital data in more sources, such as where they spend time in their homes, what in-home experiences they seek out, and what product categories are important to them. Data allows you to take these industry-wide trends and apply them to the findings that will lead your business’ revenue growth.
“In 2019, smart retail brands know their customers better than customers know themselves.” Trend Watching
Personalization of Merchandising
A direct application of this data is to empower your merchandising strategy. Personalized recommendations apply both in-store and online. Using data-driven recommendations helps direct a more targeted sale and narrow down a curated assortment in a world over-saturated with options. Skilled in-store associates can apply these insights to upsell and increase average ticket value.
On an eCommerce site, feature ribbons for best sellers and product page recommendations such as “customers also viewed” or “customers ultimately purchased” have higher average click-through-rates. They are also more likely to convert. “Customers who click on a recommended product have a 70% higher purchase rate (at 10.5% versus 6.2%) within that session.” (Barilliance) Taking this application of BI a step further, some homepages have sections completely curated for return customers based on their browsing history.
Retailers can also use this data for future selling beyond the first conversion. Using digital design boards and wishlists fosters repeat selling. Further, using retargeting ads and email campaigns are great ways to re-engage the customer.
“Product recommendations account for up to 31% of eCommerce site revenues and personal Recommendations vastly outperform generic ones.” Barilliance
Digital-centric consumers are looking for technology to be present in showrooms. Sales associates using technical resources are more effective at their jobs. Technology in showrooms has widespread applications. IHL Group’s research indicates, “retailers that provide mobile sales tools for staff enjoy 77% higher sales growth.” Customer Experience Management provides retailers context to the relationship which, research indicates, matters to customers. Additionally, the ability to add to a mobile shopping cart as you are walking around the showroom with a customer expedites the checkout process. It also provides a seamless way to keep the sale open for customers that prefer to purchase after sleeping on the decision.
In-Store kiosks are another valuable investment because they are multi-functional devices that foster both independent self-service and social collaboration. Kiosks are a great way to reintroduce website content that the customer is familiar with into the showroom. They can also serve purposes including virtual endless aisle inventory catalogs, hosting online product reviews, and providing vignettes of pieces staged in virtual rooms.
“Effective ‘brick and tech’ blends the best of the both worlds, creating concierge shopping experiences to replicate online customer-recognition benefits, continuing engagement, rather than starting over.” Total Retail
Augmented and Virtual Reality are widely adopted across the industry. These technologies allow for product visualization that once hindered purchases and reduced buyer’s remorse associated with uncertainty. Product modeling for AR/VR environments is now more affordable and accessible. Leading retailers introduced apps that enabled customers to visualize a product in their homes, hitting on their desire for new tech-driven experiences, but also solving a real challenge.
“Sonar suggests 80% of gen Z is more likely to visit a store with AR/VR that allows customers to try products in virtual environments.” Furniture Today
Even Faster Logistics
The least glamorous part of your operations may mean the most to your customer. Often, it’s what happens behind the scenes that wins them over. Amazon has reshaped expectations about fulfillment timeframes and supply chain transparency. All retailers need to prioritize their supply chain efficiency to compete. First, tackle low-hanging fruit slowing down processes and then, further optimize the time from order to delivery. Many times it’s available delivery date and speed of delivery that wins the sale over price. We all know how customers feel about free shipping, and today, even free returns. If you are running a large-scale warehouse that isn’t using barcoding, automated task management, or directed put-away, these are options to consider for efficiency.
Delivery, particularly last mile, is also in the hot seat. Customers don’t take well to a product not arriving as specified, so being able to accurately set expectations is key. The “available before December 24th” filter popped up all over the web this past holiday season. Additionally, providing visibility on the status of a customer’s product through delivery is the new normal. In 2019, fulfillment is not an area to cut costs. In fact, the return on investing in seamless logistics is brand loyalty.
“There’s a big discrepancy between how soon consumers want to receive items versus how quickly they actually receive them. This extends across many sub-sectors of retail and categories.” Supply and Demand Executive
In retail, you aren’t in the race unless your website wins over the consumer. eCommerce continues to grow at a compounded rate and retailers are further innovating their website experiences. Visual experiences entice consumers in the physical world and matter online too. Keeping up with design trends and modernizing user interfaces are key because first impressions count.
From there, its all about product content and helping the consumer along their path to purchase. The easier you can make it for them to find their desired product through advanced filtering and web merchandising, the better. Next, your job is to motivate a purchase through inspirational photography, informative product details, and consumer reviews. Once the customer decides to buy, reduce how long it takes for them to check out. User testing should be done routinely to eliminate steps and boost satisfaction. Finally, for your existing customers, an easy to manage account to track order status, schedule in-home delivery, and pay financing invoices solidifies their investment in your company.
“eCommerce trends need to be analyzed and adopted in due course to truly drive your eCommerce brand forward otherwise, you run the serious risk of falling drastically behind your competition.” Core DNA
Your business needs to be found organically and that task is, unfortunately, getting harder. If your website isn’t mobile responsive and optimized for mobile site speed, your business is at risk. Google rolled out their Mobile 1st index in 2018 meaning their crawler evaluates and ranks your site based on your mobile site performance, not desktop. This is key to another initiative shared by both Google and Amazon; voice search. Both tech giants are infiltrating households with voice-controlled smart devices. With voice search, you can’t just rank on the 1st page, you need to be #1. That’s because Alexa only shares her top answer. While shopping at the product level may not be ready for voice, it’s a key traffic driver for local businesses, making it imperative to prioritize these SEO efforts now.
“46% of voice search users look for a local business daily and 58% of consumers have used voice search to find local business information in the last 12 months.” BrightLocal
Financing for the Future
Consumer financing is a key value-add to the customer experience. Over the past several years, financing options from primary, second-look, and tertiary providers have grown. Financing expands the ability for more customers to purchase and can lead to higher average ticket values. It can turn a potentially negative experience into a positive one. This is especially true with the rise of waterfall applications that allow a customer to opt-in to running their digital application against multiple providers if they were to be denied by a primary lender. Financing has risen in the industry rapidly and has already been made more convenient thanks to technology.
Trends will continue in this direction as consumer-facing credit applications become the norm online and in-stores. This removes the final layer of discomfort that may hinder a consumer from applying for financing. They can input their information privately, either through a web-based application that is handed to the consumer on a tablet or from the comfort of their home via an eCommerce online application.
“The average order size of a Business that offers in house financing can increase by 120%. Plus, nearly 2/3 of customers make a future purchase of $500+ from that store.” FitSmallBusiness.com
Security and Data Protections
As technology wraps its arms around more of your business and more consumer data is collected digitally, security is of the utmost importance. Ironically, our inboxes were overloaded with businesses asking us to opt-in to communications and approve that their sites were cookie tracked to align with GDPR efforts in early 2018. The same customers that want you to use the insights they provide you with to personalize engagements are also vocal about how their data should be protected.
The credit card industry sets high standards for technology systems to safeguard sensitive payment information. If your transactional systems do not meet Payment Card Industry Data Security Standards (PCI DSS) or use EMV Compliant credit card processing, you are putting your business at risk.
On the other side of the spectrum, this data is of supreme value to you as a retailer and your ability to compete in the future. Ensure your technology is protected through proper data storage, backups, and disaster recovery efforts to protect the valuable assets held within your technology solutions.
“Forfeiting market value and squandering brand reputation are risks if your business does not perform its due diligence to protect customer information.” Financial Post
While it may go without saying, it is important to note that strategic retail elements do not work in a silo. How retailers merge these critical trends to create their own connected brand experiences and grow loyalty is worth exploring at the start of the new year. An incredible showroom experience may not be discovered without an attractive website. Retailing, at its core, is about establishing the right merchandise mix for your intended audience. The bells and whistles of customer experience need to be supported by product and consumer insights to successfully grow in 2019.
Retailers that excel at experience and technology stand to gain the competitive edge. How will your business unify these initiatives in 2019? Technology is a top priority for retail’s future. STORIS is a trusted partner with proven industry experience and a commitment to future development to engage today’s customer. Discover our solutions for in-store POS, inventory, logistics, mobile, eCommerce, BI, and CXM to kickstart your strategic plans into action in 2019.