| FUTURE OF RETAIL

Silicon Valley may have an HBO show to its name and be the synonymous home of tech, but when it comes to e-commerce, the UK holds true to its reputation of being a nation of shop keepers.

eMarketer forecasts that UK retail e-commerce sales will top £60 billion this year, cementing our position as the world’s number one for e-commerce on a per capita basis. This trajectory of rapid growth is set to continue, and by 2019, e-commerce is expected to make up 19% of total retail sales.

While e-commerce has transformed the nation’s shopping habits over the past 15 years, we stand on the brink of even greater disruption as mobile threatens to breakdown the distinction between on and offline retail, and to collapse the consumer journey. With the rise of mobile, the digital world is infiltrating traditional stores, and consumers are demanding a seamless retail experience. The physical world around us is becoming ‘shoppable,’ whilst at the same time, pure play digital stores are building real world, pop up experiences.

future_medialab, Mindshare’s futures programme, has undertaken this study into the Future of Retail to examine the forces shaping this brave new world of retail, and explore what it means for communications. We’ve interviewed a series of experts from across the retail world, and carried out primary research amongst a sample of 1019 UK consumers from our future_medialab research community.

The Future of Retail

In this report we identify five key trends:

Control Culture The new, digitally empowered consumer

has gained control from the retailer, accessing information, checking prices and securing deals, anywhere, anytime.

Friction-Free Shopping Technology is revolutionising how we

shop, smoothing out obstacles along the shopper journey and resulting in faster, easier and more impulsive shopping behaviours.

Buying Thin Air Retailers are finding novel and valuable

reasons for customers to step into bricks-and-mortar stores by selling the experience of shopping and creating ‘brand cathedrals’. Immersion is leading the way to transaction.

Personalised Pricing As the mobile helps create a single

customer view across the on and offline worlds, we’re starting to enter a new world of dynamic, personalised pricing and discounting.

Delivery on Demand Advances in logistics and infrastructure

mean order fulfilment is getting ever faster, more flexible and more convenient.

For more, contact us @future_medialab. We hope you enjoy the read.

All stats:Source: future_medialab,

June 2015.N = 1019, UK nat. rep.

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What is it?

The new digitally empowered consumer has gained control from the retailer and is reshaping the face of commerce. Readily armed with multiple devices and access to a plethora of information, consumers are making decisions and buying things on their own terms – anytime, anywhere and anyhow that suits them.

ControlCulture

enjoy having all the product information

they need at their fingertips

67%

Cont

rol

Cult

ure

Consumers empowered by technology take control.

There’s no doubt that retail is going through a huge period of disruption and technology is at the heart of the change. The old borders have gone, geographical borders are not what they were and the boundaries between online and offline are reducing every day. The winners are those who are thinking big, innovating fast, acting like disrupters and behaving agnostically across channels to make it easier for the customer and, ultimately, giving us consumers what we want.

Finlay Clark – Industry Head Retail, Google UK

Driven by the Millennial generation, with its low tolerance for inefficiency, and expectations of a more active relationship with brands, technology has enabled consumers to access more knowledge, data and information about the products they are buying than ever before.

In particular, the rise of tablets and smartphones has given consumers the ability to access this information when and wherever suits, influencing their decision making and giving them the ability to shape their purchase in real time.

Integrated features and technology such as Google maps, GPS, QR codes and social networks not only enrich and organise our lives but also help us connect with each other and open up the potential for closer connection with brands and retailers. Mobile technology has become the provider of instant access to endless information on anything and anyone, accessible anywhere – a gateway for connection and discovery.

Origins and key drivers

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SnapUp is a free mobile app allowing customers to receive automatic notifications when products they want to buy are discounted. Users can create wish lists of products by taking screenshots of items featured on any e-tailer or shopping app, and sort these into curated lists.

use their phone/tablet to research products

whilst instore

23%

Cont

rol

Cult

ure

Customers don’t have a ‘device’ strategy – they have a shopping strategy. They use devices interchangeably throughout the day, according to what’s most convenient for them at the time. We encourage marketers to think the same way – to create holistic experiences and campaigns rather than device-specific programmes. We’ve seen that campaigns spanning more than one screen perform an average of 18 percent better for advertisers than campaigns running on PC only.

Alex Hole – UK Director, Amazon Media Group

Omni-channel shoppingConsumers have developed into omni-channel shoppers with no differentiation between online and offline platforms. Webrooming and showrooming are becoming the norm - people shop in the way that suits them best, driven by convenience, experience and price. Amazon‘s Firefly phone allows consumers to take a picture of a product in a store which then generates a link to that product on Amazon.com.

There are so many points of access, all dictated by the consumer, across all number of touchpoints in the purchase cycle. Technology enables them to evaluate products or services, assessing things like price comparison, ethics, delivery times and stock levels. We can browse at bedtime from our tablets, buy from our phones on the daily commute and collect our purchases from our most convenient store or have them delivered directly to us, that day if we need.

Purchase on their termsRetailers are also responding to the consumer demand for purchasing (or not!) the final product on their own terms. Final purchase is not necessarily the end game anymore. We are seeing a growth in temporary ownership, try before you buy and the number of rental products available.

Fashion retailer GU’s Shibuya outlet in Tokyo encourages shoppers to try on outfits and leave the store to test them in the public for a day. Rental models have developed such as US-based Rent The Runway who have a launched a subscription service where members pay USD 75 per month to receive three designer accessories of their choosing. When they’ve finished with an item, customers simply mail it back and are then sent the next piece of clothing on their list.

Different dimensions

Rent The Runway’s ‘unlimited’ service allows users to pay a monthly subscription fee to receive three designer accessories of their choosing.

1 in 4

will showroom

in store

Cont

rol

Cult

ure

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Power to the peopleAdditionally, it is now easy to turn to others instantly to seek opinions or recommendations. Brands are starting to accept this and build this into their offering. M&S now allow users to see customer reviews on products on their website (good and bad) to inform their purchase decision. Not only can we discuss and review products with our peers but this culture of consumer control is also bringing power back to the people from a collective perspective. Consumers can now club together on a growing number of platforms, gaining power which works in their favour to bring prices down, open up new markets and even influence how retailers and manufacturers have to operate. We are also seeing a growing number of peer to peer retail sites emerge, such as Etsy, where consumers are happy to cut out the middle

man altogether. Online bartering platforms have also developed, such as eDivv.com which allows its members to swap their unwanted beauty samples with other users.

Different dimensions

The OpenLabel app allows its community of people to share their voices about products – i.e. the ingredients used, nutritional value, a company’s regard for the environment, ethics, or any other facts or opinions that demand to be voiced.

often look at product review

and opinion sites

59%

Cont

rol

Cult

ure

Organisations that embrace the ecosystem and realise that the power of their network is only amplified through connection to others will thrive whilst those that cling to the fictional notion of the ‘walled garden’ will fall by the wayside as we have seen with so many brands that were once thought of as permanent features in our high streets. There are no organisational islands in the digital world. Your competitor and all their competitors are in your customer’s pocket as they contemplate a choice in your world.

Mike Lynskey – Retail Industry Market Development Manager, Microsoft UK

As technology continues to develop at a rapid pace, consumer patience will decline and expectations of brands will mount, putting even more control into the hands of the consumer. More immediate tech developments in the area of wearables and cashless payment will open up opportunities for mobile to become an even more sophisticated tool for consumer control. Boundaries will continue to blur between new devices and we will see true omni-channel shopping. The retail process will be much more open, rather than a dictation of how, when and where a purchase can be made. Consumers will dictate the terms of their purchase and as they rarely think about one brand in isolation, we will see more retailers collaborating with each other to offer consumers exactly what they want.

The recent collaboration between Ebay and Argos, offering Ebay products for collection in-store at Argos is a good example. Rather than obviously wrestle back control, retailers will adapt and develop their offerings in response and as a consequence will make Control Culture work to their advantage.

Where next

eBay and Argos have teamed up to trial a ‘click & drop’ scheme, allowing eBay sellers to drop sold items at their nearest Argos outlet for packing and shipping. Customers can then pick up their purchases from their own closest Argos store.

Voyando is a travel booking site which allows users to set preferences for their trips, challenging a network of experts to arrange the most enticing travel package for the user.

61%spend more time

researching productsthey buy than

previously

Cont

rol

Cult

ure

Not only will brands need to use the data and information they have available to deliver what consumers need and want quicker, they will also need to give consumers the tools to interact with them in whatever form the consumer dictates. These tools could be anything from in store digital screens that recognise people’s personal preferences, through to apps supplying real time stock information. Tools might also extend to AI chat bots or RFID tags providing more information for individuals. In-store customer Wi-Fi will need to be a given.

In order to satisfy and connect with this omni-channel shopper, brands will need to invest in technology to understand their complete consumer journey better. Pulling together data from both online and offline sources to create the bigger picture will be the challenge. Plus, we will need to look beyond purchase history to incorporate things like interests, habits, brand preferences, need states and what they do in store in order to predict likely intentions. DMPs integrating all data sources will become a key part of attributing value and understanding this consumer journey.

Consumers will get used to seeing very honest reviews and conversations about products and brands, warts and all. Brands will need to adapt to this, making their communications more honest and transparent in their nature. In turn, consumers are more likely to trust reviews and recommendations from friends on social networks in comparison to more official reviews. Brands will need to embrace the importance of the customer review, being more transparent and placing these right up front and on platforms where consumers can access them easily. Social networks will also become increasingly important throughout the customer journey in terms of influence.

Implications for brands

Cont

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Cult

ure

Technology smooths out obstacles along the shopper journey.

What is it?

The online and offline retail worlds are becoming increasingly intertwined with shoppers now having one shopping experience split across multiple channels. The concepts of ‘showrooming’ and ‘webrooming’ are now well established behaviours in the UK. High street stores are expanding their presence online through social networks, click and collect and the use of new technologies. Meanwhile, online stores are exploring the physical world with pop-up stores, partnerships with retailers and new forms of delivery. Integration and a seamless experience across all these touchpoints are the ideal.

The old linear shopping journey is no more. The discovery and browsing phases have started to merge into one another; payment has ceased to be something you do at the end of your shop and becomes concurrent and passive, with checkout no longer just an area in store but an action such as putting an item in your basket; and of course, few consumer journeys now end when the goods turn up on your doorstep.

Friction Free Shopping describes how each element of the journey is becoming smoother, simpler and more intelligent – making it easier to both initiate, and complete, the purchase.

Friction Free Shopping

64% of consumers agree

that technology has made shopping

much easier

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The opportunity cost of not having a slick process to get your products into customers’ hands is severe – 44% of people abandon their online carts due to shipping times.

Finlay Clark – Industry Head Retail, Google UK

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The retailer’s desire to guide the customer through to purchase is innate. In this sense, attempts to remove friction from the purchase journey have been going on since we first started shopping. The layout of a supermarket, the ambience and experience of a department store, the design of a window display and so many other aspects of both on and offline retail have all been created with the common aim of smoothing out the route to the end purchase.

Technology, as ever, has been the enabler for this current wave of friction reduction. Online shopping first brought the high street into the home, and then mobile gave shoppers the chance to see other stores’ offerings whilst in store, and to buy anywhere at any time. The next wave of technologically-driven Friction Free Shopping will see media and the physical world around us become ‘shoppable’. Meanwhile, a series of behind the scenes innovations make customer service, payments and delivery smoother, faster and more seamless.

Origins and key drivers

48%can see technology

enhancing theirshopping experience

in the future

Fric

tion

Fr

ee S

hopp

ing

Shoppable WorldA longstanding constraint on purchase is the time, inconvenience or simple effort associated with completing the purchase itself. Time spent queuing, filling out forms online, or simply waiting for a page to load, can lead to frustration and abandoned purchases. While on and offline purchase procedures are becoming increasingly streamlined, we’re also seeing the ability to buy breaking out from its traditional checkout areas.

Digital, and mobile in particular, are starting to make the world around us ‘shoppable’. Mobile has shortened the journey from brand touchpoint to purchase, almost to the point of non-existence. Traditional channels such as TV, outdoor, print and radio can all lead directly to purchase through a number of mobile driven mechanics, whether that be Blippar, Shazam, QR codes or similar apps. Twitter and Pinterest have also integrated buy buttons enabling socially driven commerce. And the physical world itself is increasingly ‘shoppable’ with Amazon leading the way, with a series of innovations that enable consumers to buy objects around them, including Firefly, the Dash wand and the Dash button.

The rise of Friction Free Shopping can be seen at every stage across the consumer journey from inspiration and research through to purchase and delivery.

Different dimensions

of consumers would be interested in

‘shoppable media’

Amazon Firefly makes physical objects shoppable

30%

Fric

tion

Fr

ee S

hopp

ing

Pinterest is rolling out their ‘buy’ button, which allows people to buy products inside the application itself, without ever leaving the site.

Intelligent customer serviceGreater understanding of the customer is no longer just the preserve of the online world. As the ‘single customer view’ permeates both on and offline stores, customer service is becoming increasingly personalised and sophisticated. In the online world as AI and natural language processing capabilities develop, we’re starting to see intelligent virtual assistant shopping bots emerge. North Face are using IBM Watson’s capabilities to help with customer queries online. In the offline world, beacons and similar technologies will empower staff to offer more personalised service. The French shopping centre Klépierre, for example, recently unveiled the Inspiration Corridor, a booth which uses facial and body recognition as well as an individual’s purchasing history in order to make personalised product recommendations.

All of which helps smooth out common customer frustrations along the shopper journey, and move people closer to the sale.

Different dimensions

Fluid’s Expert Personal Shopper is a messaging platform powered by IBM Watson which is to be implemented on The North Face online store.

French shopping centre Klépierre’s Inspiration Corridor uses facial recognition and purchasing history to make personalised recommendations

think customer serviceis constantly improving

due to technology

40%

Fric

tion

Fr

ee S

hopp

ing

Customers reward great experiences, and the best experiences can be really simple. With customer experience at the centre of our strategy, we see mobiles (or any device) as an entry point to Amazon. And once customers are here, we need to provide them with great and seamless shopping experiences. For mobile, our goal is to give customers the ability to go from ‘I need that’ to ‘I bought that’ in under 30 seconds.

Alex Hole, UK Director, Amazon Media Group

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PaymentsNFC, mobile wallets and cashless payments all promise to reduce the time spent queueing and carrying out transactions, thereby reducing some of the friction associated with the current retail experience. The recent introduction of Apple Pay in the UK is likely to kickstart the sector. Mobile payment solutions also allow purchases to seamlessly take place anywhere in the store, rather than at the till.

At the same time we’re seeing more flexible payment models develop including ways of trialling products before buying them, or alternative means of payment.

Delivery on demandFulfilment was once the Achilles heel of e-commerce. But now we’re starting to see greater innovation, faster and more seamless delivery which is taking some of the brakes off the shopper journey. New forms of click and collect are helping e-commerce delivery fit into busy lives - for example Volvo now remotely enable delivery drivers to drop off packages in your car boot. Amazon are also experimenting with ways to cut down delivery times even further, whether that be by ‘anticipatory delivery’ where goods are moved before the purchase is even made or in the longer term through drone or other autonomous vehicle delivery.

Different dimensions

Amazon’s Fire phone gets consumers excited – with 36% interested in its Firefly product-

recognition capabilities.

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We can expect to see increasing strides made inall aspects of Friction Free Shopping over the next few years, particularly amongst those retailers who put the consumer at the heart of the process. In the area of the “shoppable” world, the greatest progress will be made around the increased ability to instantly identify, and then buy physical objects around us, with just one click. Intelligent customer service will be increasingly powered by AI, expanding out of the online world to take on a physical presence in store, in the shape of robots, as is the case in Asia with Softbank’s Pepper. Apple Pay is likely to be the catalyst for the growth in mobile payments, and we can also expect to see growth in the shape of other mobile payment technologies whether that be through wearables, jewellery or stickers (as Barclays have recently launched with BPay).

Where next

of iPhone users are interested in

36%

Fric

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Fr

ee S

hopp

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Apple Pay launched July 2015 in the UK, and with 2 million capable iPhones and 250,000 pay points available, the wider retail world is taking ths seriously.

Retailers should invest in technology that reduces friction in the product selection and purchase process. Ideally this friction should be reduced down to zero. If your customers still have to wait for anything, then you’re not done innovating yet.

Intel Labs and The Store WPP – The Second Era of Digital Retail

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The key features of the trend towards Friction Free Shopping are speed, ease and simplicity.A critical first step for brands looking to benefitfrom this trend is to look at their consumers’journey – where are there still friction points,and how can technology be used to minimisethese and shortcut the journey? Is the experienceintegrated and seamless across all touchpoints?Reducing friction will facilitate instant gratificationfor the shopper, and encourage more impulsepurchasing. As such it will challenge moreestablished brands who may have benefited inthe past from friction in the system that facilitatedshopper inertia, and passive loyalty.

With purchasing becoming increasingly seamless and easy, brands have never been more vulnerableto switching on impulse. Brands need to create‘lock in’, frictionless mechanisms to secureloyalty – building a frictionless journey which isbased around rewarding and retaining more activeloyalty, and encourages repeat behaviours.Equally, they have never had greater opportunityto convert an immediate sale. Ensuring alltouchpoints are joined up, consistent and ofcourse “shoppable” will help brands cope with thechallenges of a world of Friction Free Shopping.

Implications for brands

of consumers think that retail brands will have to keep up with

new technology to improve their customer

experience

Half

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hopp

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What is it?

Driven by the recession of 2008/9, high street retailers have been forced to close their doors because of two key factors; the boom of ecommerce, and the increased cost of owning or renting retail space. This has spawned a new role for retailers on the high street as destinations, resources and entertainment hubs. The boundaries are blurring between leisure and retail. Retailers are creating environments that can’t be replicated online and the store is becoming an experiential centre as much as a space to sell products.

BuyingThin Air

are more likely to buy from retailers

with interesting stores

55%

Buy

ing

Thin

Air

The rise of the in-storebrand experience.

Recession meant that retailers spent a lot of their time focussing on price, rather than their individuality or point of difference. They are now more focused on driving brand loyalty and giving shoppers a reason to enjoy their visit and shop with them. With the growth of pure play internet businesses such as Netflix, Spotify and Expedia, once key residents of the UK high street HMV, Blockbuster and the traditional travel agent no longer play a role for consumers. With the ease of online shopping and price comparison, consumers have started to spend less time in stores and as a result all retailers were pushed to create new, more interesting reasons for consumers to visit, spend longer in store and part with more cash.

The dull retail experience where stores present consumers with a product range and invite them to make a choice, is evolving. Consumers now have much more influence over the in-store experience and they are being offered all kinds of unique experiences, personal service and technology to reward them for their visit. Stores are moving from functional to emotional places in the consumer’s mind, creating desire for the user to not only visit, but repeat visit. Along with this, the importance of customer service in-store is becoming even more paramount. With the rise of functional online purchasing, automated and quick services, people are craving more traditional face to face service, demonstrations of products and advice which they can only get in store.

Origins and key drivers

More than half of smartphone searchers (55%) visit a business to purchase in store — according to ThinkMobile with Google — and now we even see ‘showrooming’ whereby the physical store drives online sales. So physical stores are still important, and becoming increasingly so, as retailers look for a way to engage with their customers and create meaningful, memorable experiences. To do this, there’s a whole new generation of innovations at retailers’ disposal, to help set them apart from the crowd and retain/attract customers.

Nicholas Russell – CEO, We are Pop Up

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Retail evolves into leisure timeStores and the places that house them are becoming popular leisure destinations. What began as simple cafes integrated into Waterstones has now evolved into something even bigger and more sophisticated. Tesco Extra in Watford is now utilising its space more creatively to include not only a Harris and Hoole coffee shop, and Euphorium bakery, but also a Giraffe restaurant and a standalone F&F clothing section designed to feel like a fashion store. The growth and success of destination shopping centres such as Westfield are also a great example of how shopping and leisure time are becoming increasingly intertwined.

Brand CathedralsSafe in the knowledge that the transaction will happen naturally online (or elsewhere), brands are beginning to embrace the physical retail space for its brand building potential. We are seeing an increasing trend for flagship stores that act as ‘Brand Cathedrals’: Burberry, Nike Town, Apple Store, Harrods. People from all over the globe travel to experience these stores and to revel in these brands. These high square footage destinations create beautiful ways for customers to experience their products from fashion shows, to floor to ceiling interactive screens which show off the most recent fashion week catwalk show. Customers carry these shopping bags with pride as they are as prestigious as wearing a Disneyland t-shirt to show off where you have been.

Different dimensions

Apple’s eponymous flagship store in Covent Garden, the largest in the world when it opened, boasts spaces for children, training facilities, and stocks the most kit than other of its stores in the world.

Adidas launched the Homecourt in Beijing, an interactive retail experience which is designed to bring shoppers closer to the ‘passion of sport’ and the brands heritage.

68%think that

flagship storesare a good idea

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Technology enhanced experiencesTechnology is also being used to enhance the in-store experience and provide a point of difference. In-store iPads or digital screens provide access to a wider range of products and exclusive limited edition ranges that are only available in-store. Virtual mirrors, augmented reality and digital mannequins can show us what products would look like on or in our own environments and multi-sensory experiences and interactive displays are becoming more popular.

Brands like Specsavers are embracing technology to ensure their stores are more interactive and absorbing – they are starting to provide digital retina photography with every sight test, and the latest iPad technology shows customers 3D graphics of their new frames and lenses.

Rebecca Minkoff, a high end high street retailer in the US, allows each customer to select items from digital screens to be delivered to their dressing room in their size, as well as any refreshments they might want whilst shopping.

Brands are also now turning showrooming and in-store mobile usage to their advantage and using the technology to create unique experiences for their customers. With the emergence of beacon technology and near field communications, there will be the potential to target consumers with personalised messaging to entice them in-store and reward them for their time there, although this type of communication should be used creatively and usefully or there is the possibility of customer alienation.

Rebecca Minkoff has created the ultimate personalised in store experience, boasting curated collections for each customer displayed on interactive screens.

Different dimensions

45%think technology

enables stores to stand out

from the crowd

Jamie Oliver’s high street cook shop Recipease offers a place for customers to learn how to make his signature recipes (and afterward purchase the means to do it at home at a discount).

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Pop-Up PersonalityAlthough they have been around for a while, pop up shops have also now evolved to become part of this brand building strategy. They offer presence to FMCG brands or other categories for which there is no role for a store front. Pop-ups allow these brands to show off brand personality traits or to align themselves to topics of interest to consumers such as music or comedy. Lynx is a great example which has opened “Black Space” a rich 3 month pop-up experience in Shoreditch where they host exclusive music and entertainment events as well as a traditional male grooming salon to show off their credentials in a way that offers value and appeal to the target audience.

Pop-up culture is likely a precursor to a more transient approach to retail space. Instead of signing a straitjacket multi-year lease, brands are looking at temporary spaces as an opportunity for customers to experience their product in a way not possible online. Or in the case of FMCG, to immerse customers in brands away from the shackles of major supermarkets. For brands, it means less risk. For shopping centres, it means a constant dose of freshness. For customers, it means far more variety and convenience.

Lynx Black Space is a pop-up store showcasing facets of the brands personality that they would be unable to show without a real life experience; music events, inspirational talks and a male grooming salon.

Different dimensions

35%have shopped ata pop-up store

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Stores are becoming more important than ever, demonstrated by the fact that online pure play brands such as Amazon, Google and Ebay are opening their first physical stores to provide consumers with an offline experiential presence. Some brands are relying on technology to enhance that in-store experience and some are relying on heightened exclusivity and member focused rewards. Either way, the future will see the function and role of the traditional ‘store’ as we know it change dramatically.

The amount of actual transactions that take part in-store will likely shrink considerably, fuelled by easier online shopper experiences and innovations in delivery options. Retailers will be using a blend of e-commerce and experience based physical retail. Collection of product in-store will be elevated into the centre of this experience, products will be personalised, questions can be asked, and the consumer will see their purchase demonstrated.

We will see more experiences akin to the current Apple store model – rows and rows of Apple products to play and interact with and knowledgeable Apple staff there to demonstrate and advise.

The format of the store as we know it will also change dramatically. Pop-up stores will become the norm on the high street. Smaller format stores will also thrive. Those retailers with larger store footprints will likely reduce their footprint or redistribute their space to introduce new offerings or brands. With emerging technologies such as cashless payment, customer service and advice in-store will be paramount. The role of the sales assistant will change dramatically. They will need to become more informed about the products they sell, and take on the role of a product advisor. Stores will basically need to offer what the internet does not, but will need to provide this as part of a wider multi-channel offering.

Where next

Unilever-owned Brazilian haircare brand Seda converted a female-only car on the metro into a hair salon, where participants could choose from a range of styles completed using Seda products.

1 in 2

visit stores evenif they have no

purchase intent

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Shoppers are increasingly in different frames of mind when they visit a store, with fast and slow shopping missions emerging. For some purchases, shoppers will want to get in and out of store as conveniently and quickly as possible. At other times shoppers are looking for more of an experience, more of a leisure activity, irrespective of their need to buy.

Being able to recognise, and then connect with these various shopper needs, and the new rituals and routines that surround them, will be key for retailers moving forward. For fast paced shopper journeys in store, retailers will need to provide efficient, friction free processes to get them in and out as painlessly as possible. For more leisurely visits, brands will need to provide more fun, sensory, entertaining and educational experiences that can only be experienced by going in-store.

Brands need to find ways to create experiences in-store that encourage shoppers to share their data and enhance the single customer view. In-store tools that enhance the customer experience, such as Wi-Fi, digital touchscreens and apps will provide these data points. In-store location data will also combine with this to enhance this customer view, helping brands understand what people are engaging with in store and where.

One thing that stores are able to offer versus online, is that face to face contact, help and advice from a sales assistant. This will become an ever more important part of the in-store experience and as a result sales teams will need to be upskilled and supported by technology, enhancing their knowledge of both products, and the consumers that are buying them, in order to offer that personal touch. We will see growth in data driven tools such as wearable tech offering individual customer profiling and also specific training to help demo products.

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Implications for brands

62%value the in-storeexperience just as

much as the productsbeing sold

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Now arguably, retailers have more tools at their disposal than ever before to improve upon even our grandmothers’ hyper local and deeply personalised retail experiences. As an industry, we need to move beyond basic targeting, tracking and demographic segmentation to drive deeper, permissioned engagement with consumers, where we deliver valuable and personal experiences in and out of the store.

Anita Carra – Head of Global Consumer Insights and Advertising Partnerships, Microsoft

What is it?

As digital technologies evolve, brands will be increasingly able to tailor pricing to the value of individual customers. In the digital world, this trend is already established – with airlines such as Easyjet, or e-commerce companies such as Amazon, capitalising on flexible pricing over key periods. However, as the mobile wallet and the Internet of Things evolves, we will see this trend become increasingly personalised and sophisticated.

The connected car will know for example, if you are a dangerous driver, and your insurance premium will be adjusted automatically, or your mobile phone, connected to Apple Pay, will know how frequently you visit a certain shop, and tailor pricing accordingly to reward your past loyalty.

Personalised Pricing

Pers

onal

ised

Pric

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The rise of dynamic pricing in both the online and offline worlds.

The UsherU app allows cinemas to send out alerts when a screening has empty seats, and users will be tempted with a cheaper ticket/free pick ‘n’ mix.

Personalised pricing has long and well established origins. A market trader would size up a prospective customer based on a range of variables such as how they speak, dress or carry themselves, determine the potential value of the sale, and then deliver the line: “for you, five pounds”. In the world of e-commerce, however, the law of one price, is still prevalent – when a product is sold by multiple retailers, it is largely expected that the cost will not vary by more than the differences in shipping, taxation and operational costs. In a free market economy, where supply equals demand, and prices can be instantly checked and compared, if a vendor’s price is excessively high, then consumers will quite simply shop elsewhere.

Origins and key drivers

The UK will begin to see more and more of matching rivals’ prices dynamically, particularly in the grocery and electrical sectors. Real time pricing is likely to affect anything where the product is largely commoditised, and in instances where the only way retailers can differentiate that product is by being really keen on price.

Simon Spyer – Conduit (extracted from Marketing Magazine)

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Pers

onal

ised

Pric

ing

However, we are increasingly seeing online retailers returning to the tactics of the market trader. These tactics have their origin in the first dot com boom. We’ve all experienced it when we’ve checked the price of a flight, only to return 24 hours later and it has increased. This is not new, but the technique has been evolving in recent years. Now, prices do not just rise following the drop of a cookie – brands are also able to profile their customers and adjust pricing based on multiple factors. For example, retailers know where you live based on your IP address. They know where you commute based on the GPS in your phone, they know the sites you’ve visited prior to your visit, and they know your internet access method - are you on your expensive Macbook, or a cheap Android device?

Using data points such as these, it is possible for retailers to predict what products a consumer is interested in buying, when they are likely to buy them and, critically, the price they would be willing to pay. A wide range of retailers are using this kind of data to target individual shoppers with personalised offers and promotions. However it is not a big leap for this approach to be used to similarly determine differentiated pricing in the future, with many of the online retail giants already testing this approach currently.

Take Amazon as an example. Over the Christmas 2013/2014 period, they adopted a flexible pricing approach and were able to increase their revenue by +12%. And as early as 2012, a Wall Street Journal investigation found that companies including Staples, Rosetta Stone and Home Depot were showing customers different prices based on “a range of characteristics that could be discovered about the user.” Staples, as an example, showed different prices to customers after estimating their locations, and working out how close the person was to a competitor’s brick-and-mortar store. In that instance, customers in locations with a higher average income were then generally shown lower prices. As retailers secure a more detailed capture of multiple consumer data points this practice will only increase.

Origins and key drivers

Pers

onal

ised

Pric

ing

As smartphone penetration rises, as people shop more on their mobile devices, and as the mobile wallet gains traction (Apple Pay has now launched in the UK, with Samsung Pay and the Google Wallet hot on its heels), then an additional layer of profiling will be added into the knowledge mix which may help advance personalized pricing in the physical store as well. Smartphones are location aware, and may finally help close the data gap between the online, and the bricks and mortar, shopper identities. Having the ability to create unified on and offline profiles will give new ammunition to retailers to tailor pricing in ever more sophisticated ways.

Given the practicalities associated with showing differentiated prices to a broad audience all in one physical space, personalization is more likely to be steered by mobile led offers or discounts, which adjust pricing discreetly. However, some stores such as B&Q are testing electronic price tags that change the amount shown based upon the profile of the customer, using a chip in their mobile phone for guidance. And developments in smarter shelving led by the Internet of Thing, may make this type of flexible pricing more common in the future.

B&Q tests digital price tags in store, which change via interaction with smartphone devices

Tesco has trialled Electric Shelf Labelling to give its physical stores the ability to employ dynamic pricing on a minute-to-minute basis.

Origins and key drivers

29%have paid for an item using

a contactless card

Pers

onal

ised

Pric

ing

In the UK in 2013, the now defunct Office of Fair Trading (OFT) ran a report into personalised pricing, which detailed disappointment in the level of transparency by businesses about what information they collected and how it was used. It claimed the lack of transparency may harm consumers’ trust in traders and business practices and found that businesses could do a lot more to make their practices more transparent.

“Businesses need to be clear if they are using personalised pricing. If they are using it and it’s not clear, that could erode trust in online markets,” says Chris Walters, economics director at the Competition and Markets Authority (CMA), which absorbed some of the responsibilities of the OFT after its closure in April.

Walters adds: “We wouldn’t be concerned generally with price discrimination, of which personalised pricing is a form, as it’s usually quite benign, but it’s not benign if the losers lose more than the gainers gain.”

For any sustainable long term growth to be achieved in the area of personalised pricing, greater transparency is an essential development required of retailers. Companies need to become far more open about what data they are collecting, and how they are using it. Fundamentally, shopping is about trust, and retailers need to ensure they build and protect the belief that shoppers have in them, otherwise it could translate into destroyed brand value.

Where next

55%think brands

should not vary prices

Uber employs surge pricing to incentivise its drivers to connect to the app, using an algorithm to match supply and demand for its services.

Foot-Trade is a web app which adjusts the price of teams’ jerseys in real-time depending on the progress of each game, encouraging fans to support their club even when they under-perform.

Pers

onal

ised

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The implications here for brands are both positive and negative. Through clever use of these data sets, there is an opportunity to drive the maximum value from each transaction, and accordingly, increase profits. However, the manipulation of what many consider to be personal data is also a political hot potato. With the growth of social networks, brands are now more accountable to consumers than ever before. Personalised pricing will need to be handled with sensitivity and respect to avoid damaging brand value – whilst everyone loves a bargain, conversely no one wants to think they have been over charged.

There will be an increased focus on highly targeted campaigns at all stages of the shopper journey. This will be used to deliver dynamic creative and messaging which is adapted around consumer needs, or particular trigger points, in order to optimise the personalised price offering.

A unified shopper identity across all customer access points will become an increasingly important priority. Improved identification of the in-store shopper identity, and in particular their subsequent in-store location, will open up opportunities for bricks and mortar dynamic offers and discounts in the short term, and with the growth of smart shelving, personalised pricing in the longer term.

“”

Implications for brands

We could move to dynamic pricing and mimic the model used by EasyJet. Yield management techniques are not new - it’s just that they haven’t traditionally been used in retailing.

Ian Cheshire – chief executive of B&Q, owner Kingfisher

Pers

onal

ised

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ing

What is it?

With more people purchasing products outside of traditional retail channels and the improvement of logistical supply chain management, consumers’ expectations of delivery times has rocketed. The mindset of shopping has evolved to encompass an on-demand culture, and retailers are bringing their products and services to consumers at the earliest convenience and efficiency.

Deliveryon demand

38%are interested in

product deliveries toconvenient places

Del

iver

yon

dem

and

Even faster,more flexible delivery.

With increasingly saturated and busy lives, consumers crave instant gratification, and with that, the desire to shop anywhere, anytime and on any device. Assisted by the growing availability of internet access and mobile-friendly sites, delivery capabilities have gained speed and efficiency, matching the desires and expectations of consumers hungry for e-commerce.

The history of Delivery on Demand is a rather straightforward one. Since the emergence of e-commerce, the delay between ordering items online and actually receiving them has reduced. The dawn of e-commerce saw retailers estimating delivery at between 8 to 12 weeks. Streamlining of supply chain management has reduced this to a couple of weeks, to an afternoon, to a one-hour slot. Now, we see delivery at convenient collection points other than households and workplaces. Innovation in delivery methods is also key, with deliveries using the London Tube tunnels and drone technology being developed.

Origins and key drivers

The battle for the final mile has some distance left to run. Google Express, a partnership we’re running with a number of American retailers offers same day delivery to over 7 million people across seven US cities – delivering everything from groceries and alcohol to toys and apparel. Amazon might even be taking it one step further, having registered a patent for “anticipatory shipping” earlier in the year which suggests that the online retailer might take its already efficient supply chain and amp it up another notch by boxing and preparing for shipment orders that customers haven’t placed yet.

Alex Hole – UK Director, Amazon Media Group

“”42%

of consumers make purchase decisions

based ondelivery times

Del

iver

yon

dem

and

Click and CollectThe most visible development in recent years has been the significant rise of click and collect services. By cultivating a network of collection points spanning the retailer’s brick-and-mortar shops, corner shops and commuter stations, click and collect allows consumers to order online and pick up their purchases at their convenience. Click and collect is especially useful to those who may not have the luxury of waiting at home to receive big-ticket items, such as full-time workers. Pioneered by retailers like Argos, click and collect is quickly becoming the norm, aiding the rise of e-commerce and Delivery on Demand.

Shortening delivery timesSince their inception as an online book store, Amazon continue to push the boundaries of sourcing and delivery. The launch of Prime is no different. As part of the annual subscription service, members have access to next-day delivery at no additional cost for a multitude of products. It doesn’t stop there - PrimeNOW offers one-hour delivery costing £7 or same-day delivery within a two-hour slot for free. Although it is only currently available to members with delivery addresses in specific postcodes, it gives us a glimpse into what we can expect in the future. Much like Uber, Prime deliveries also give consumers the ability to track a courier in real-time.

Different dimensions

Starbucks click and collect: the largest coffee chain in the UK now offers people the chance to skip the queue and order a coffee on their way to a store using their Barista’s app

Amazon are rolling out 1-hour delivery across the capital with their service Prime Now. Delivery drivers can be tracked on the Prime Now app and the service covers 27 departments, including electronics.

64%have used

Click & Collect

Del

iver

yon

dem

and

Imagine if courier services could connect to a car’s sat nav via the Internet of Things, and assessed the best point of delivery based on the planned travel route of the consumer. A scenario like this not only allows smooth delivery for consumers, but also maximum efficiency for courier services. Over the next 5 years, we expect to see such examples of how delivery services can be more fluid and resourceful. Vast amounts of consumer data and more useful ways of interpreting it will soon allow brands to begin the delivery process in distribution centres before the product has even been ordered.

Automated delivery looks certain to advance. We’ve already seen Amazon trial delivery by drone, and Mole Solutions are in talks with London Underground about repurposing existing underground tunnels to build an automated delivery network under the city. Mirroring consumers’ lives, in which everything from checkouts to motorway tollbooths are becoming automated, it makes sense that retailers will leverage the expanding acceptance of such technologies and automate delivery.

Where next

Lockers at commuter hubs: network rail plan to put redundant ticket offices on the London Underground to use as collection points for commuters on their way to and from work.

Amazon have already trialled delivery via the drones within the UK. Avoiding the hassle of traffic, they offer faster and more concisely timed delivery.

1 in 4

are interested indrone deliveries

Del

iver

yon

dem

and

Clearly, the first task retailers have to address in relation to this trend is ensuring their own delivery offering is as seamless and slick as it can possibly be. As this area becomes increasingly competitive, consumer expectations will only grow and as a result a more sophisticated, ‘human’, response is required when things go awry. Late deliveries demand explanations on the part of the retailer, as consumers may lose trust in the retailer’s ability to fulfil orders. Therefore, balancing automation with thoughtful customer service will be a key challenge.

As click and collect grows in adoption, retailers also need to consider the consumer experience upon collection. Shop assistants at the collection point at Selfridges, for example, will unbox purchases in front of the customer and allow them to look over the goods. Once customer satisfaction is agreed, the goods are repackaged into the department store’s iconic yellow bags, creating a moment intrinsically about the brand at the conclusion of the shopper journey. This is particularly challenging at points outside of a brand’s brick-and-mortar stores. Whilst they have less control over the brand experience here, there are still opportunities to create brand identity. Branded storage lockers, for example, will give consumers an experience of the brand beyond online storefronts.

“”

Implications for brands

Many large stores could be refitted to become click and collect or home delivery hubs. This could prompt the rise of “drive through shopping”, the ultimate choice for the time constrained consumer.

David McCorquodale – Head of Retail, KPMG

One-third want the option to have

things delivered

24/7

Del

iver

yon

dem

and

Thanks go to all report contributors: Sophie Harding, Irina Lim, Sam Barton, Julia Ayling, Drew Scrymgeour, Jeremy Pounder, Darran Snatchfold, Neil Bruce, Hannah Mahood, Emma Hurst, Lavinia Weir

For more, contact us on: Jeremy.Pounder@mindshareworld.com | Sophie.Harding@mindshareworld.com@future_medialab. http://futuremedialab.com | FUTURE OF RETAIL