The web and mobile communications are fundamentally changing the way people shop, and challenging traditional bricks and mortar retailers, according to Manhattan Associates, which has released its predictions for retail shopping in 2012.
The projections forecast an increase in impulse purchases, physical stores becoming experience centres and increased consumer control through the use of smart devices and social media.
“Increasing costs of raw materials, fuel and transport coupled with wage stagnation, the threat of rising inflation and continued insecurity due to the global financial turbulence, will make 2012 a challenging year for the retail industry,” said Craig Sears-Black, Manhattan’s UK managing director.
“At the same time, the opportunities for retailers to serve consumers better will be greater than ever before – thanks to the use of new technologies, smart devices and social media.”
Manhattan has identified nine key trends:
1. All Kinds of Commerce
The future lies in enabling customers to purchase when and where they want to, while getting the same overall experience. This includes traditional (in-store) commerce, e-commerce, m-commerce (mobile), f-commerce (Facebook), s-commerce (social) and v-commerce (video-enabled).
2. Optimisation becomes critical
The starting point for multi-channel retailers is avoiding profit-erosion. Those that are able to optimise inventory deployment will not only be able to maintain margins but improve them. Having pan-supply chain inventory visibility and the ability to fulfil customer orders from anywhere, no matter which channel the consumer makes the final ‘purchase’ through, allows retailers to minimise product markdowns by connecting available products with customers willing to pay full price for an item.
3. Stores as Experience Centres
To compete with e-tailers selling via ‘pop-up’ and ‘product-less’ shops, traditional bricks and mortar retailers will need to offer self-checkouts and move to a more mobile sales-force armed with hand-held devices to check stock availability and price-match when necessary. Retailers will invest more in creating experience centres, which are high-touch, high-tech and designed to get talked about.
4. Changing face of physical stores
The traditional 80/20 retail rule of thumb says that 20 per cent of a store’s stock-keeping units (SKUs) deliver 80 per cent of sales. That rule will be turned on its head. In a digital world with almost infinite choice, shoppers will be drawn to stores with a personalised focus. Physical store concepts will become smaller, better executed and highly tailored. Private labels, localised sourcing and cultural influences will be further differentiators, as shoppers demand simplicity, convenience and closeness.
5. High Street consolidation
To address the consumer desire for one-stop shops and to stave off recessionary concerns, high street shops are joining forces.
6. International expansion
Retailers in the West are finding little growth in their domestic markets and are looking towards the BRIC markets and the Middle East. These markets have been familiar territories in the far-sourcing of manufactured goods but are new consumers of Western brands, pushing retailers to rethink their strategies for locating inventory and order fulfilment.
7. Rise of the impulse purchase
34 per cent of American customers admit to purchasing ‘Daily Deals’, which will only increase with the prevalence of location-aware smart devices. The trend has been formalised through programmes such as Groupon, where stores grant discounts if enough people sign up for them, and Foursquare and Gowalla, which offer price cuts to users who check in at specific locations using their smart devices. Together with flash sales, or time-limited offers via text or Twitter, these trends continue to trigger impulse buying and give shoppers the feeling of having scored a great deal – but it will also put pressure on retailers to have stock ready when needed and to be prepared to handle returns.
8. Mobility driving consumer control
Mobile promises a shift to a customer relationship management model that lets retailers know exactly who their customers are, and allows customers to opt in and define how they interact with the retailer, including what brands, products and locations they want to have specific communications with.
9. Using social media to enhance customer service
In 2011, 52 per cent of organisations used Facebook for reacting to customer issues and inquiries compared to only 29 per cent the year before. Similarly, 50 per cent of companies now use Twitter for customer service, compared to only 35 per cent in 2010, while 51 per cent also use Facebook for gathering customer feedback, compared to 37 per cent the previous year.
“The supply chain will have to support social media initiatives. If a customer is on a Facebook fan page and sees a special promotion running, then the product needs to be available online and in store,” said Sears-Black. “The retailer will need to know the inventory levels in real-time and have the ability to take an order form anywhere and fulfil that order via the channel requested by the customer.”