Spanning seven storeys and 320,000 square feet on West 57th Street in New York City, US retailer Nordstrom’s newest flagship store hit the headlines when it opened in October 2019. Why? In addition to the regular racks of clothing, shoes, accessories and beauty products from high-end brands, there are facilities for in-store beauty and spa treatments, several augmented reality stations for virtually trying on products, a styling lounge with personal shoppers, a martini bar and seven dining venues. Plus, customers can make use of services such as order collection, clothing alterations and customisation, shoe and handbag repairs, stroller cleaning, gift wrapping and much more.
Nordstrom isn’t the only retailer that is curating new types of immersive experiences and convenient services to draw people into its physical stores. Apparel retailer Lululemon Athletica, for example, offers free meditation workshops and yoga classes to inspire and build a yoga community among customers. Kitchenware and home furnishings brand Williams-Sonoma hosts in-store cookery demonstrations and classes to familiarise customers with its products. And many other retailers are following suit.
“Customers can now buy almost everything online and because this option is often the most quick and convenient, they need a truly meaningful reason to continue shopping at physical stores,” says Shanthi Rajagopalan, worldwide retail and consumer packaged goods business strategy leader at Microsoft. “If customers know that they’ll be able to make use of practical services like order collection and clothing alterations, or even enjoy free classes, exclusive beauty treatments and a glass of wine while they shop, they’ll certainly be incentivised to visit a physical store rather than shopping online.”
Rajagopalan predicts that transforming physical stores from transaction centres into experience centres will become a top priority for retailers over the next few years as new services enable their customers to automatically replenish the convenience items they buy regularly – such as bread or toothpaste – without visiting the store. However, she cautions that retailers will need to tread carefully to ensure that they’re offering the types of in-store services and experiences that their customers will find valuable and exciting.
“Retailers can do this by gathering insights into which customer demographics visit their stores, where they dwell, the types of products and displays they interact with most frequently, how often they engage in conversation with store associates, and what items they eventually end up buying or leaving behind,” she says. “Once they have this information, they can learn what motivates their customers and develop experiences to match.”
However, companies must do far more than simply reimagine how they use their physical stores if they want to reinvent the retail experience. They must also go back to basics and rethink every aspect of the way they operate.
“Retailers have been making incremental changes to optimise their operations, but this won’t truly reinvent retail in a way that delivers the unique, personalised and on-demand experiences modern consumers expect,” says Vic Miles, retail business leader at Microsoft. “Now, they have to take bigger (but still measured) risks to reimagine everything from the way they curate product assortments, to how they manage inventory, order fulfilment, POS, supply chains, content marketing, customer interactions and much more.”
As a first step, retailers must determine what each of their individual customers desires from their shopping experience. To do this, they can use internet of things sensors and other intelligent solutions to capture relevant data at every customer touchpoint – in both physical and digital channels – and analyse it with artificial intelligence (AI) and machine learning to turn it into actionable insights.
“AI is probably the single biggest technology that will help retailers to truly reinvent retail by allowing them to hyper-personalise the experience for every customer,” says Miles. “Using AI, brands can learn how frequently a specific person visits the online and physical stores, what time of day they typically shop, which types of products they browse and purchase, their preferred payment and delivery methods and much more. This allows them to create a 360-degree overview of each customer and pinpoint that elusive ‘sweet spot’ for engaging with them. Plus, they can pool together insights about their different customer segments to work out what types of new services and experiences they should implement as part of their retail offering.”
Importantly, retailers must find ways to connect the data they capture across all their different channels if they want to improve elements like their product range, supply chain, pricing and content marketing.
“The lovely checkout lady at my local grocery store always asks me if I found what I was looking for, but it doesn’t matter what answer I give her because it’s unlikely that my comment will ever get back to the store owner and inspire them to change the way the business is run,” says Rajagopalan. “However, if she could capture my answer digitally, the shop owner could analyse it alongside feedback from other shoppers to identify if people are making similar complaints or requests. For example, they could consider adding a new baby product to their inventory if it’s regularly requested by parents who shop at the store. Acting on feedback like this is an easy way for my grocery store to show that it truly understands the needs of its customers, which will ultimately boost shopper loyalty and drive sales.”
Microsoft and its partners are playing a pivotal role in empowering retailers to rethink their operations.
“In the past, Microsoft recommended that retailers implement holistic solutions, but with the prevalence of cloud services we’ve realised that this isn’t the most expedient way of helping them to truly reinvent retail,” says Miles. “Now we take a ‘recipe’ approach – just as you can vary the ingredients to make different types of cakes, retailers can mix together specialised application programming interface-based services and solutions to ensure they have all the capabilities they need to reimagine the way they operate. For instance, retailer could implement Dynamics to manage checkout processes and use Microsoft partner Adobe’s solutions to better understand their customers and improve their targeted marketing strategies. We’re also encouraging customers to apply these solutions across all their physical and digital channels.”
According to Rajagopalan, Microsoft’s vast partner network does a “stellar job” of creating applications and solutions that are designed for specific retail use-cases, such as high fashion or grocery. “All these solutions are supported by Microsoft’s platform, which provides all the foundational cloud, data management, security and other capabilities retailers need to solve their existing operational challenges and take advantage of new opportunities,” she says.
Multiple partners have already used the Microsoft platform to develop innovative solutions that retailers are using to reimagine specific aspects of the shopping experience. “MishiPay’s smartphone-based Scan & Go self-checkout solution is helping retailers to bring the speed and convenience of online payments to their physical stores,” says Rajagopalan. “Meanwhile, Microsoft cloud-based beacon technology from Footmarks is helping them to capture data about customers’ in-store behaviour so they can deliver timely personalised product recommendations and offers via a mobile app. And then there are innovations like Syte’s In-Store Smart Mirror, which uses augmented reality and AI to help retailers bring data and fresh experiences into their stores.
Miles believes that these types of solutions will help retailers to become a lot more flexible and agile – both for retailers and their customers.
“We’ve been talking about omnichannel retail for several years, but now that retailers are starting to transform the fundamental aspects of their business, it will finally come to fruition,” he predicts. “AI, machine learning and other technologies will enable retailers to better understand their customers and accurately forecast product demand so they can move to a just-in-time model for inventory management and reduce stock keeping units. At the same time, their reimagined supply chains will increase product availability by allowing them to fulfil orders in new ways and accommodate the payment and delivery/collection options that work best for both their business and their customers.”
According to Rajagopalan, the successful retailers of the future will be the ones that put customers in the driving seat and redesign every aspect of their business to align with changing consumer preferences and behaviours.
“By repurposing their physical stores, bridging the gaps between their physical and digital channels, harnessing insights from their data, truly optimising their supply and delivery chains, and empowering their employees to become brand ambassadors, retailers will be able to deliver personalised shopping services that are meaningful and enjoyable for their customers,” she says. “It will be a huge challenge, but there are lots of opportunities for retailers to innovate, so Microsoft is very optimistic about the future of reimagined retail.”
This article was originally published in the Winter 2019 issue of The Record. Subscribe for FREE here to get the next issues delivered directly to your inbox.
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