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Rules of Engagement for Retail

KPMG’s global consumer and retail report states that 2019 will be a transformational year for retail. Technology will continue to change the rules of engagement; consumers will be more demanding than ever, and getting them to notice a brand amid all the noise in the market will be an even greater challenge. Here are the most significant trends impacting the industry.

#Trend1: From We to Me

Customers with a smartphone have been a source of data for many years. However, this is set to change with hyper-personalisation being the next step in the obsession with data. The new frontier in personalisation will analyse emotional data, eye movements and DNA in addition to searches, purchases and views to pinpoint precisely what customers need in real-time. In 2019, and beyond, retailers will tap into real-time behavioural data to understand consumers on an emotional level and take analytics technologies to the next level. AI, image recognition and mood analysis will help provide deep and detailed understandings of consumer attitudes, reactions and patterns.

Giving retailers access to more and more data, the quest for personalisation will effectively give them an intimate view into the lives of consumers like never before. Data will be exchanged for products and experiences that better meet our needs, and make the experience as personal and unique as possible. Meaningful analysis and security tools will be essential for retailers to pull this off. As the importance of deep retail (to generate hyper-personalisation) continues to grow, some major players have already mastered the importance of tailoring to their customers.

#Trend2: Consumers get Price Savvy

Paying less for more and bragging about it has become a trend in itself. Consumers are educated on pricing strategies and are now prioritising value. With more options and information at their disposal, consumers prefer to do their own product research. 81% of shoppers do online research before committing to the purchase; 89% of these customers begin their buying process with a search engine. In just a few clicks, consumers can gauge whether they are overpaying and explore alternatives until they achieve their missions. 75% of people don’t think that quality necessarily goes hand in hand with a high price.

The proof is in the rise of alternative brands that may not have the cache of their established competitors, but come in at a lower price point or offer another unique selling point. The introduction of smartphones, which coincided with a global financial crisis, enabled consumers to become price savvy and informed than ever before. Modern shoppers don’t want to pay full price, and they aren’t afraid to share their opinions through reviews. Going forward, cost transparency will continue to climb in consumer priorities in 2019. The modern shopper will only be willing to pay full price if her other missions are fulfilled.

#Trend3: The Rise and Rise of Voice

The excitement around Artificial Intelligence (AI) is running high, and its impact is growing. In 2019, AI’s impact on retail will increase substantially in two key areas, smart speakers and chatbots. Consumers, at present mainly in the west, think conversational assistants will make their lives easier. The interactive nature of this experience makes it possible for the smart speaker to become the central technology in our home and lives. Smart speakers and voice assistants are fundamentally changing the way we engage with technology.

2019 will also see a massive surge in the development of chatbots. According to Gartner and Juniper, chatbots will be involved in 85% of all types of business-to-customer interaction by 2020. These specially programmed robots simulate human conversation through AI. They offer businesses the opportunity to provide personalised online customer experience. Brands are taking advantage of existing platforms like Facebook to meet their chatbot needs too. More than 100,000 (and growing) chatbots on the platform help consumers to vet and purchase their products. As the benefits of robots become more evident, we trust and rely on them more. This, combined with the obsession with efficiency, has companies extracting the best qualities from both robots and humans to achieve the optimal customer experience. Humans and robots are due to meet in the middle.

#Trend4: Experiential Retail is Coming to Life

Experiential retail, or retailtainment, is the future. For years, there have been stories of the apparent decline of brick and mortar and the subsequent rise of e-commerce, as if it were set in stone. But as the desire for experience rises, this trend could likely reverse, and millennials would be the driving force behind this shift.

In this changing market, people cherish and are investing in experiences over material possessions. New figures show that consumers continue to spend less on buying things, and more on doing things (and telling the world about it on social media, of course). From theatres to bars to stores, businesses are scrambling to adapt to this shift. By creating a more immersive experience, retailers can drive people to their stores and ensure they leave not just with products but also memories.

#Trend5: Planet-friendly is Due to Arrive

Sustainability is no longer optional in retail. According to new research by Unilever, with the green generation making sustainable shopping a priority, a third of the consumers now choose to buy brands based on their social and environmental impact. Consumers are shopping with their emotions and values instead of just their wallets. One in five consumers says they would choose a brand if its sustainability credentials were made more explicit on the packaging or in marketing.

Some companies have tried to appear socially responsible through smart marketing campaigns without building the cause into the soul of their business. But today’s discerning consumer can see through clever tactics and demand more. Nowadays, retailers cannot just say they have a goal; they need to show the consumer that they are acting upon it.

Retailers are moving away from ad hoc sustainability marketing campaigns and abandoning minor themes that are not integral to the business. In 2019 we will see companies make more meaningful sustainability commitments, where they can have a significant impact that aligns with the values of the company, its brands and its target audiences.

#Trend6: Social Currency will be More Transactional

Today there are more than 2.56 billion social media users globally. One out of every three millennials uses social media as their primary tool to interact with brands and companies. Consumers’ willingness to share on social media – social currency – has great brand-building potential for retailers. More and more, consumers are relying on community and word-of-mouth instead of advertisements for product recommendations. According to Retail Dive, more than 80% of generation Z and 74% of millennials say social media influences their purchases.

Seeing the value in this persisting trend, retailers are turning to social media advertising. With targeted ads, companies reach particular groups based on demographics, interests, behaviour and more. There are over six million Facebook advertisers and two million on Instagram. Social media ad spending has also been on the rise, growing more than 20% annually. Forward-thinking retailers have capitalised using the power of social media to connect meaningfully with customers, swapping out automated coupon codes and bland sales copy in favour of genuine engagement. Instagram has even introduced ‘shop-able’ posts, and Snapchat recently launched e-commerce, or ‘selfie-commerce’, channels for brands to advertise on. In 2019, we will see retailers trading in social currency – the entirety of actual and potential resources which arise from the presence on social networks and communities, including both digital and offline.

#Trend7: From Transaction to Service Provider

In today’s retail economy, understanding the power of platforms is vital. In the twenty-first century, the supply chain is no longer the central aggregator of business value. What a company owns matters less than what it can connect. Platforms that are dominating the retail industry know that selling a service where they can create means of connection results in the provider having all the power.

To be sure, not all retailers have the resources or mandate to develop their own platform models, but that doesn’t mean they can’t participate. For those who are not platform players, the collaboration will be the key. Due to the high risks of adapting core business models, traditional players will collaborate and form partnerships to drive efficiency. We will see companies invest in a business but not get involved directly, consequently witnessing the rise of joint ventures in 2019.

Also Read: Retailers Must Understand Consumer Behaviour

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