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Customer in control: The future of shopping is already here and retailers are battling to keep up
northface Published 07 November 2013 07:53, Updated 07 November 2013 13:38
the north face outlet online sale French retail icon Galeries Lafayette understands the value of theatre in retail.
Photo: Poree Audrey
the north face outlet In the future of shopping, the customer is more right than ever before. Today’s consumers already have unprecedented ability to demand the product they want, when and how they want it – and tomorrow’s consumers will have even more power than that.
north face jackets The forces reshaping the retail relationship are not just about e-commerce or point-of-sale software.
the north face outlet online More deeply, they are about changes in social behaviour, some of it driven by technology but also shifting demographics and economic globalisation.
the north face sale The retailers who will thrive are the ones who understand shopping is an experience, whether that is with in-store events, pop-up stores at festivals or social curation online.
This is why department store Myer has quadrupled its events budget this year.
It’s why online start-up Shoes of Prey is succeeding with its design-your-own-shoes experience.
And it’s why so many businesses are using crowdfunding sites such as Kickstarter to launch new products.
Most recently, global online marketplace eBay has announced its biggest upgrade in five years, as it tries to tap into key consumer trends of personalisation, visual curation and social interaction.
Last week the new country manager for eBay Australia, Jooman Park, spoke to BRW in his first media interview since moving from Seoul to Sydney five months ago.
He lifts the lid on changes brewing at eBay, the differences between the Australian and Korean e-commerce markets and how eBay imagines the future of shopping. eBay Australia’s Jooman Park says the site plans to have experts curating collections for others to follow.Photo: Nic Walker
The good news for savvy entrepreneurs is that society is not likely to kick the shopping habit any time soon – so there is plentiful opportunity for those who get it right.
Retail Oasis director Stephen Kulmar describes shopping as one of life’s core activities that humans have enjoyed forever – even back when it was called bartering.
“Shopping is a bit like sleep and sex, they’re things we all do, along with eating and communicating,” Kulmar says. “Retailers, especially in Australia, have lost sight of that and lost sight of the fact that the consumer wants to enjoy their shopping.”
Shopping should be fun
Successful retailers understand the importance of fun.
Overseas department stores such as Selfridges, Le Bon Marché and Galeries Lafayette use celebrities, fashion parades and art shows – rather than price-based promotions – to lure customers into stores.
Australian retailers are trying to do the same. For example, since Myer’s in-store events budget hike this year , it has hosted a VIP designer shopping night with live music for its biggest-spending customers.
“We want to get that theatre back into stores,” Myer chief executive Bernie Brookes told The Australian Financial Review in September . “There’s no doubt the more we can do of that the better.”
Appliance retailer Winning Group has also embraced the concept . Earlier this year it opened a 1500-square-metre showroom in Sydney’s Redfern to host events such as cooking demonstrations with celebrity chefs.
In-store events can help drive foot traffic into shops, but the rise of the pop-up store means retailers can also take their wares to events.
For example, at the TEDxSydney talkfest at the Sydney Opera House in May, Kinokuniya had a pop-up book store , selling books both authored and recommended by the speakers at the conference.
Because it fitted the context of the event, and there was good crossover between the TEDxSydney audience and the book-buying public, the pop-up store was busy during every break.
The same trend also applies online. The desire for an experience and connection is why adding a social networking layer, curation capabilities and personalisation can work well for online retailers.
Retailers are taking their wares to events, with pop-up shops like this one from bookseller Kinokuniya at TEDx in Sydney.Photo: Daniel Boud
eBay emulating Pinterest
eBay laid out its vision for the “future of shopping” at the eBay 3.0 event in New York in late October.
The online marketplace is taking a leaf out of the Pinterest play book as it adds a social layer and visual curation tools. Pinterest – a visual scrapbooking tool that lets users “pin” images, create collections and follow other users – is one of the fastest-growing social networks and is already used by a number of retail brands to showcase their collections.
US department store Nordstrom has more than 4 million followers on its Pinterest’s boards, which promote items sold in-store.
Australian retailers also recognise the potential.
Activewear brand Lorna Jane has more than 20,000 people following its pins, which are primarily images to inspire a healthy and active lifestyle rather than overt product promotion.
The updates to eBay, which should be available for Australian users within 12 months, will also offer users the ability to create visual collections and to follow others.
As well as user-generated content, eBay also plans to employ retail experts to curate collections and to publish an eBay Today page selected daily by an editorial director.
Park says eBay has 100 million live listings, so curation is about helping users navigate their way through such a huge catalogue.
“We believe one of the best ways to leverage the breadth of the collection is to engage more people to exchange their ideas, and that makes sense considering the level of inventory,” Park says.
“We’re focusing on making our site more social and exchange-of-ideas-able. eBay’s ready to bring in social aspects, because eBay’s origin is in communities – we were not a community site, but we had very strong community activities thanks to our origin of [consumer to consumer] business and our feedback system.”
Park says eBay is also involved in existing social media channels, but its main ambition is to make its own site more social.
Customer service is social, shopping not necessarily so
For all the hype a few years ago about how Facebook would be the new frontier for shopping, e-commerce on social networking sites has mostly been a fizzer to date.
“I think Facebook is a social medium for contact and I’m not sure how it’s ever going to migrate from that space properly into the commerce space,” Kulmar says. “Social media is absolutely about marketing, collection of information and knowing more about consumers.”
Staff at Selfridges in London unveil their 2013 Christmas window titled 'Destination Christmas'.Photo: Getty Images
Social media is also about customer service. Research by Social Pulse suggests that one in five Australians has used Facebook or other social media channels to complain and one in 10 has used it to seek assistance with resolving an issue.
The retail sector received over 60,000 posts from consumers in the period from September 9 to September 30 and the companies responded to 90.3 per cent of them, with an average delay of 53 minutes.
Social Pulse named discount department store Target as a leader in using social media as a customer-service channel. Department store David Jones also has nearly 250,000 Facebook fans and generally replies to customer queries within the hour.
However, not all retailers are using the channels effectively. Fashion retailer David Lawrence regularly updates its Facebook page with marketing materials but at the time of going to press had not responded to customer posts since August, and the Australian business does not have a Twitter account.
Jourdan Dunn and Rosie Tapner shot by a 300-strong flashmob as part of a Selfridges advertising campaign.Photo: Getty Images
Shopping is visual
In the offline world, shopping mall designers have long understood how to spark the Gruen transfer, that moment when shoppers forget their original intentions and start impulse buying.
Adelaide-based start-up Thereitis has developed technology to try to prompt the same response online, based on research done on artificial intelligence and visualisation at Flinders University.
Thereitis software creates the illusion of a 3D collection by letting users zoom and scroll to see multiple items from different angles.
It is early days for the start-up but the tool is already being used by a number of customers, including Brisbane-based online retailer Black Milk Clothing.
“The idea is that it presents more items in a standard space and it’s also got an interactive nature because the person viewing the images can spin, zoom and select items,” says Thereitis chief executive Nigel Standish.
“It came out of research about how people find things, about the number of items that should be placed in front of you, where they should be placed, how you interact with them.
“It’s trying to replicate being in a store where you’ve got lots of choices, lots of colour, lots of items that might catch your eye and maybe you go in looking for one thing and you come out with two or three things.”
Brisbane-based online retailer Black Milk Clothing uses Thereitis’ ‘3D’ browsing technology.
Standish says the feedback so far is that when Thereitis is enabled, shoppers are spending more time on the website, looking at more items, and buying more. The average spend had increased 25-30 per cent in some cases and 10-15 per cent overall.
Standish says Thereitis works even better on a tablet or smartphone than on a computer. “Our most recent stats show that 50 per cent of web traffic in Australia is now mobile or tablet, and that’s creating real concerns for online retailers because they’re having to deal with less screen real estate,” Standish says. “All of a sudden retailers have to present their images in a 10 inch or 7 inch tablet and they struggle to get enough items in front of them.”
If a picture is worth a thousand words, video software entrepreneur Sean Knapp says a movie is worth a thousand pictures.
“We’re seeing a lot of those consumer brands invest more in video as a way to demonstrate their product,” says Knapp, co-founder and chief technology officer of Ooyala.
“We have a number of customers like REI and North Face that use video to demonstrate their product in live action, not in a QVC [online shopping channel] style, but up in the mountains as you’re hiking through.
“They’re doing short TV shows and letting you click on a button on the screen to buy what that person is wearing.”
The same consumers are using both online and offline channels and switching between the two, depending on what is more convenient or relevant at the time.
While the past few years have seen bricks-and-mortar retailers scramble to get a credible e-commerce offering, the latest trend is for online retailers to run pop-up stores .
Shoppers frequently engage in “show-rooming”, where they look at an item in store and then buy online.
They also do the exact opposite, “web-rooming”, where they research a product online and then buy in store.
Park says it does not matter which trend is greater – they are both true and they both have the same impacts.
“There is one fundamental common implication, which is that online and offline boundaries are blurring and you need to have an integrated strategy, especially for inventory.
“I have met, so far, five CEOs of Australian retailers and I learned from them that right now not all the offline inventories are available online yet, it’s relatively limited. Considering the trend of web-rooming and show-rooming, buyers generally expect the same level of inventory, so I think we should start from there.”
Whether the logistics strategy is centralised to a warehouse or decentralised to store level is a matter for individual retailers, but Park’s point is there should be a single logistics strategy across online and offline, to enable things such as “click and collect” where consumers order online and pick up in store.
Kulmar says it is important – but rare – for retailers to integrate their activity across every consumer touch-point.
“Really there’s only a handful of retailers in the world who’ve done the full and complete job of identifying all the places the consumer wants to talk to them, shop with them and purchase from them,” Kulmar says.
In the US, discount chain Target has recently joined a select group of retailers offering click and collect, while in the UK, department store John Lewis was a pioneer with the service and is currently implementing an integrated ordering system.
The problem is that a store might have 20,000 unique products or stock-keeping units (SKUs) but 40,000 online, making things such as “click and collect” much more challenging in practice than theory.
Park’s top priority for eBay’s Australian business is to bring more big retailers on board as sellers. A few Australian retailers use eBay to get rid of unwanted stock, but in the Korean market, 22 of the top 30 retailers use eBay as a fully fledged sales channel.
“We have 7.3 million monthly unique visitors [in Australia] so those leftover and out-of-season inventories are good, but I think we have more room to cover full inventories as well,” Park says.
He says a greater willingness to partner in the Korean market has helped grow the e-commerce sector. In Korea, e-commerce is the biggest single retail channel, with 13 per cent penetration – above supermarkets, department stores, convenience stores and discount stores – compared with 5-6 per cent in Australia.
“With that partnership we were able to acquire a higher number of buyers and the benefits were all shared across the businesses,” he says.
“That’s one thing I’d like to accelerate further, and why I’d like to spend as much time as possible with the big retailers and big merchants.”
Kulmar says Australian retailers would do well to take eBay’s approach seriously. “Most Australian retailers tend to use eBay as a ‘quick cycle’; it’s how they dump their stock or they might have a factory outlet.
“There’s not that many that use eBay in a broader context but it fits back into integration. If it’s one of the key touch-points that the consumer wants to use, then the retailer needs to think about it.”
Shoes of Prey offers customers the change to design their own bespoke creations.
Shopping is local . . . and international
At the eBay 3.0 event, the company announced some enhancements to local e-commerce, including the ability for shoppers to choose faster, more convenient delivery times.
One thing that has surprised Park since taking the job is how well advanced mobile usage is in the Australian market.
“In our case almost half of visitors visit from mobile devices,” Park says. “That’s one of the big opportunities I can continue to build on, and one of the related opportunities, thanks to mobile, might be local business.”
Already, in three out of four eBay transactions, buyers and sellers are within 15 to 20 kilometres of each other. Park says the strong usage of mobile technology in Australia can accelerate that because it allows eBay to use the geo-location information to customise the offer to consumers.
At the same time, shopping is becoming more global. This year’s Recommended Retail Practice Report , published by AMP Capital Shopping Centres, includes a white paper by Michael Baker, principal at Baker Consulting, who predicts the invasion of foreign retailers setting up shop in Australia will continue.
Baker says within the next five years, newly established international non-food retailers targeting the Australian mass market can achieve sales of about $1.5 billion and account for more than 5 per cent of the Australian fashion market. Of the top 25 global apparel retailers, he expects 10 to be operating in Australia by the end of 2018 compared with six today.
It is not all doom and gloom for Australian retailers – there are opportunities for export too. For example, Shoes of Prey’s customer base is global, with 60 per cent of its revenue coming from offshore, according to co-founder Jodie Fox.
David Jones chief executive Paul Zahra told BRW last year he wanted to develop the website to accept international orders because web traffic suggested overseas customers were interested in buying Australian designer fashion. A spokeswoman says this functionality is not yet live.
Nielsen figures suggest that Australia’s retail exports were $5 billion this year but this would grow to $16 billion in five years, and by 2018, 44 million Americans would be buying directly from Australian retailers.
This is an area eBay’s Park wants to accelerate too. “The opportunity is not just eBay, but at eBay alone we have 100 million users, so I think online-based export is one of the huge opportunities for Australian retail merchants,” he says.
“Close to 80 per cent of our existing merchants are exporting online already through eBay, but in Australian retail [more broadly] only about 2-3 per cent of merchants are exporting globally.”
Those exporting merchants on eBay include consumers selling used items and collectables, but Park believes there is business opportunity as well.
He says retailers shouldn’t just think about exporting to established markets but to target Brazil, Russia, India, China and similar emerging economies.
“In the Paddington area I saw so many boutique stores with great curation capabilities,” Park says. “The way they curate the things and the cross-sells is just great, very impressive, and always attracted my attention.”
He says in the capital cities at least, Australia Post has competition for delivery of parcels overseas, and the price of shipping should fall.
Personalisation and participation
Personalisation is usually viewed through the prism of customer data. For example, eBay tracks when users buy infant formula or nappies and then updates the offer every few months as the shopper’s baby grows up.
But personalisation is about much more than that. One of the best examples is Shoes of Prey, which lets consumers design their own shoes using templates on the site.
Another Sydney start-up, StyleRocks, does the same for jewellery, although its website is not nearly as advanced.
Shoes of Prey taps into several key consumer trends – most importantly, the desire to have fun and take part in an experience, not just buy a product.
The website is highly visual and social. Users can view shoes from multiple angles, explore designs by other people, and share their designs on social networks such as Facebook and Twitter.
The desire for something special is also one of the factors behind the popularity of marketplaces for handmade items such as Etsy and Zibbet. Both are also very highly visual sites, with strong communities and curation elements.
Tim Rayner, co-founder of consultancy Philosophy for Change, says social media is increasing people’s design expectations and this benefits sites such as Etsy.
“If you go on Pinterest, for example, you can leaf through a vast range of different designs for large objects, which greatly increases the consumer imagination and expectations for what they can find on the market,” he says.
“I think this poses real problems for the traditional model of large retail stores because they’re all about mass consumption of standardised items, whereas increasingly people are expecting highly customised and unique items, which requires a whole different form of production.”
Rayner presented at the In the Room conference in Sydney earlier this year on the concept of the sharing economy and the rise of giving as social currency. He says this trend is behind the rise of collaborative consumption businesses such as car-sharing club GoGet or peer-to-peer accommodation site Airbnb and also crowdfunding sites such as Kickstarter and Pozible.
“When you’re using crowdfunding and taking part in campaigns on Kickstarter, you’re also feeling like you’re part of a social event,” Rayner says. “Part of what people find enjoyable is that you’re contributing to this movement to create a product or make something happen and there’s an additional layer of personal satisfaction that comes from that.”
One of the other white papers in the AMP report is by Dr Amantha Imber, founder of innovation consultancy Inventium, who reaches many of the same conclusions as Rayner.
Imber says being green and sustainable has shifted from a niche movement to a mainstream concept and many brands are either being built from a sustainability position or are incorporating it as a core part of their brand. Consumers want to know where the product comes from, how it is made and who manufactures it; retailers breaching environmental and social standards will be punished by consumers who choose to engage with competitors instead.
She adds that consumers will increasingly swap and trade with each other rather than buy from retailers, in part to feel they are making ethical choices, which boosts their self-esteem.
A spring fashion show at Myer, which this year quadrupled its budget for in-store events.Photo: Jim Rice
Imber argues that consumers are taking back power from retailers in a number of ways, from getting actively involved in deciding product ranges to banding together to secure competitive pricing through group-buying sites.
“Retailers who will thrive will embrace this consumer power and actively involve them in determining the future of their business and products,” Imber says. “Retailers that refuse to relinquish control will become less and less relevant.”
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