Reimagine Retail in the Face of Social and Technological Disruption
With BRI insights, a look at how the retail vertical in China should build relevance.
As we experience the continuing battle against COVID, we have witnessed many new retail trends emerge since the lockdown, specifically in Shanghai. Some examples of this include group buying by communities, the transformation of brick-and-mortar stores and fronted warehousing. The major changes in consumer needs, brought on by new normals like social distancing, are bringing important challenges to the retail industry. In our eyes, change means not only challenges but also opportunities. It’s a chance for previously less-considered brands to connect and reach out to consumers.
As a growth and transformation consultancy, our annual Brand Relevance Index® (BRI) regularly observes the moves and shifts of brands across different industries around the world. This year, we found that successful brands build relevance by appealing to consumers’ heads and hearts. Brands that appeal to the head are ruthlessly pragmatic and pervasively innovative, while those that appeal to the heart are customer-obsessed and distinctively inspired. All-star brands that are relentlessly relevant usually hit simultaneously in the head and the heart.
Right Place: Continuously Optimized Channels
In the conventional retail experience, retailers such as shopping malls focus on maximizing the use of space and creating a comfortable shopping environment. However, the pandemic uncovered a pressing problem. The normally well-functioned channel system, both online and offline, could be overwhelmed by sudden influxes of customers. Retailers thus must reflect on how to improve the stability of their systems across different channels in order to promptly respond to unexpected disruptions.
Amazon Go (Amazon ranked #15 in the 2022 BRI) provides unmanned shopping services, solving the problem of long queues faced by most retailers. A recent survey showed that over 60% of local residents wanted an Amazon Go in their neighborhood. Another example of brands tackling this issue is Walmart’s partnership with Gatik, a transportation technology company. Together, the two successfully deliver orders from warehouses to communities through driverless vans. We expect a brand-new era of logistics to arise in the post-COVID era, and the early adopters will stay ahead.
In addition, new channels have been spawned by the pandemic, for example, the community-based group buying happened on private chat groups. We expect that this trend will stay post-pandemic. Determining how to manage and monitor consumer experiences away from official brand channels becomes a challenge for brand owners. During the pandemic, many businesses launched curated product packages based on communities’ demands and designed branded promotional materials for social networks. Retail managers joined chat groups to answer questions personally. These behaviors are unprecedented, allowing brands to touch their customers directly in the last stretch of their buying journey.
“It is crucial for brands to provide consumers with highly convenient, consistent and reliable experiences at every corner of their lives to appeal to the head.”
Right Products and Services: Innovation Inspired by Real Occasions
The pandemic has also accelerated consumers’ demand for different products and services centering around the home. People’s expectations towards their living space have also evolved – they want a place where they can work, study, play, exercise and live rather than only a place for rest.
IKEA (#40 in the 2022 BRI) has long been a frontrunner when it comes to designing retail experiences based on occasions. Instead of showcasing products based on their categories–as traditional furniture malls do–it created a series of unique home spaces, leaving customers room to be immersed and unleash their imaginations. IKEA captures people’s hearts by creating a microcosm of what people want in their homes, rather than a cold shopping mall – a key reason why IKEA leads in the home retail industry.
Retail stores that create an immersive experience are now gaining popularity and becoming the carrier of service innovations. MUJI, for instance, has launched Muji Infill, a home decoration consulting service at its flagship store in Shanghai. This concept turned a home retail space into an immersive showroom that addresses every home living need.
Some technology brands are also ramping up their retail presence in response to consumers’ home needs. For example, Huawei is opening smart home experience outlets across China to provide all-in-one IoT solutions. As technology giants enter the market, traditional retailers need to think more carefully about the path for innovative businesses, to meet the ever-changing needs of consumers.
Right Time: Seamless Customer Journey
Last but not least, the pandemic has accelerated the transformation of the traditionally linear customer journey (need, visit, browse, select, pay and pick up) to become more dynamic. Customers sometimes come across a new product through online browsing before they even have the need for it. They can complete the purchase online without a visit to the store and may return or exchange the product afterward.
The in-store experience used to be the core milestone of the home shopping experience. When a consumer tries to find a sofa, it is difficult to picture the real product and how it would look in their home just by viewing its pictures online. Responding to this customer pain point, many major retailers have pioneered AR-enabled tools that allow users to see how different furniture fit in their home decors. In the United States, retailers including IKEA, Amazon, Target and The Home Depot, have made the AR-based shopping experience one of the key milestones in the customer journey.
As we welcome web3 technologies, the retail industry is greatly impacted. The way how retailers showcase their products and interact with their customers in virtual shopping will be disrupted. However, this does not mean copying the traditional retail model into the “metaverse.” It requires retailers to rethink their customer journeys and business models in light of new consumer behaviors.
How should retail spaces and products be presented to consumers through web3 technologies? And how will new technologies be used to optimize browsing, shopping and the return and exchange experience? Some retail brands are already leading the way. Walmart, for example, is quietly preparing NFT products like virtual currencies and products, from appliances, and toys to decorations. TYB (try your best) is a “community commerce” platform based on web3 technology, where consumers can co-create with brands to win NFTs and virtual collectibles.
Despite the constant disruptions, the fundamentals of retail remain the same – to provide the right products in the right place and at the right time. Changing consumer demands and emerging business innovations, while posing challenges to retailers, also bring endless opportunities to rebuild their relationship with customers. Perhaps it is the perfect moment to reimagine your retail strategy.